How small solutions can solve big electric grid problems

There is a rising chorus of concern across the energy industry that the electric grid is facing a surge in power use that our infrastructure won’t be able to handle. 

Electricity demand is growing and may well continue to grow in upcoming years — we’re experiencing the first manufacturing resurgence in decades, forecasting increased energy demands from AI and data centers and are adding more electric heating and cooling to our buildings and more electric vehicles (EVs) to our roads. 

The historical stewards of our aging electrical grid will tell us fossil gas is the only way to meet this growing demand, despite the known risks of that approach. Indeed, all across the country utilities are proposing massive new gas capacity as their only solution to reliability and cost questions. 

We’ve faced periods of increasing electricity usage before so the question is not whether we can handle a new era of growth. Rather, it is whether we will take advantage of the better, cheaper, cleaner options we have today.  

As recently as the 1960s and 70s, U.S. electricity demand grew by 7 percent each year. The primary tool in our toolbox for meeting that growth was to build new large power plants. 

While utilities’ and regulators’ first instinct may be to pull out their build big infrastructure playbook, in today’s economics, that approach carries many risks. It could raise rates, increasing energy burdens on already-struggling households, and lock ratepayers into decades of mandatory payments on investments that may be unnecessary and environmentally intolerable. 

Fortunately, there are new, effective tools and technologies at our disposal, from economically competitive renewable generation to explosive growth in connectivity and automation. 

The old model relied on large, centralized power plants to generate power and deliver it in one direction across power lines to households and businesses. Utilities typically overbuilt power plants to be sure there would be enough power at every moment and to increase profits. This system was like a hammer — it did the job but in a sometimes costly and clunky way. 

Today, building new, large, polluting power plants and long power lines is not the most affordable, feasible or reliable option. Instead, we can use precision tools to shape the system more precisely and keep costs down while keeping the lights on. 

With commercially available technologies today, we can install distributed energy resources — small-scale energy resources situated close to where electricity is used. These include residential, commercial and community solar, battery energy storage, energy efficiency and management technologies, smart and efficient appliances, and electric vehicle charging — in and around homes and businesses across the country. Amazing advances in computing, AI and connectivity allow us to coordinate these distributed resources to power the electric system. 

These small-scale solutions can function like a large power plant, except they cost less, are built far faster at scale, produce less pollution and are more resilient to disasters that could knock out a more centralized system. Just as importantly, distributed energy resources complement large-scale renewables as part of optimized resource planning.

Over the past 15 years, we have used this type of innovative, cost-effective approach to meet our growing energy needs. Distributed resources have avoided hundreds of billions each year in utility costs since 2005.  The Department of Energy estimates that virtual power plants — the aggregation of distributed resources like batteries, smart appliances and other small generation and energy efficiency — could meet the bulk of new peak demand through 2030 while avoiding $10 billion in utility costs. 

Employing solar paired with batteries could help us meet the next 15 years of load growth while saving Americans as much as half a trillion dollars. Meeting the twin challenges of load growth and decarbonization is possible, and affordable, with an open playing field that lets us invest in deploying the right technologies, at the right time to meet emerging needs.

The vision of an accessible, all-of-the-above approach has a significant wrinkle: Utilities don’t make money selling power. They make money by building new power plants and power lines. Putting steel in the ground is the primary way a utility increases its shareholder returns. 

Avoiding massive infrastructure spending is good for the bills we pay and the air we breathe, but bad for utility shareholders whose wealth is tied to year-over-year growth in utility “rate base.” This future following the same rules as the past will mean more pollution, higher bills and a massive missed clean energy opportunity.

Instead, there’s a win-win for utilities, distributed energy resources and ratepayers alike. Strong policy guidance and appropriate regulatory oversight will encourage distributed resources, on par with centralized infrastructure investments. 

We can and should double down on expanding the transmission and large-scale renewable energy resources imperative to meeting looming load growth while decarbonizing the grid. But meeting the challenges we face will require a balanced portfolio of investments and resources large and small.

We must create market designs and policy incentives that drive the deployment of distributed energy resources and centralized resources, working in concert with each other to match demand and supply. When we do that, we’ll find that doubling down on these distributed and customer-driven resources can meet our goals faster, more efficiently and reliably, and most importantly — more cost-effectively. 

Jeff Cramer is CEO of the Coalition for Community Solar Access. Kristin Eberhard is senior director of policy for Rewiring America.