Written by: Dick Bakker, OREC Board Member
Electricity distribution systems are changing around the world and community ownership is playing a significant part of this evolution.
How are these two trends related? Most people think of an investment in a renewable energy cooperative (like the Ottawa Renewable Energy Cooperative – OREC) as a financial vote for alternative energy; an investment that pays the investor back while building the renewable industry. The growth of community ownership of energy supply is also directly promoting the development of a distributed energy system, an economic change that could be just as far reaching as the creation of the internet.
In the 1970’s, the computer/telecom system was based on large centralized computers (like IBM) and monopolistic telephone companies (like Bell Canada); the concept of a ‘network’ was foreign to most people. Computers were seen to be owned by big corporations, governments and universities. This paradigm has been completely revolutionized into the present wireless internet where everyone seems to be carrying their own network device, and communicating on a ‘peer-to-peer’ basis. This would have been unimaginable to the common person in 1975, but is normal practice today.
The electricity system (the Grid), as originally developed, was meant to have a few large generating plants (nuclear, coal, hydro) and long distribution lines to millions of consumers. Over time, the plants have become bigger, the lines longer and with higher capacity, and the consumers more numerous; but the model is the same – a massive star design, with electricity flowing in one direction, outwards.
Electricity utilities worldwide are now facing rapid changes in how they operate. Large central power plants are increasingly expensive to build and maintain. Centralized Grids by their nature are rigid and inflexible, they are not designed to respond quickly to local changes or input; ownership, control and management is all centralized. The old model of economies of scale do not seem to work as taxpayers are increasing expected to cover project and long term cost overruns.
Changes are taking place on several fronts. Renewable Energy production costs are dropping rapidly and consistently, leading to accelerating implementation of renewables worldwide. Utilities are concerned about how they will deal with all these new ‘unpredictable’ sources of power, when their ‘grid’ is designed for a limited number of centralized sources. Utilities realize that the real issue is how the new electricity sources will be incorporated into a Grid not designed for distributed generation. How do we move from a centralized ‘star’ system to a ‘mesh’ system (similar to the peer-to-peer internet system)? Germany is the country that is furthest along in this regards due to the high penetration of renewables but the utilities in North America are starting to seriously address the change as well.
Companies that participated in the computer/telecom revolution of the last 40 years are closely watching this change in the electricity system; firms like Cisco Systems and Siemens are adapting their products to work in the new ‘smart’ electricity Grid. The switches and routers of the internet are being redesigned to provide ‘electron’ traffic control. There are massive investment opportunities in this change, as well as risks to incumbents that do not adjust.
As renewable energy costs drop, citizens and small businesses will increase their investment in the sector, thereby further simulating the market, improving efficiencies and further reducing costs. This creates a virtuous circle of interest and involvement by small and mid-sized investors (individuals, small businesses and local cooperatives). While this momentum is most developed in Europe, it is spreading to North America, as evidenced by the many new Renewable Energy Cooperatives in Ontario, and across the continent.
As personal ownership of computing enabled the internet to explode, so too will community and private ownership of renewable energy generation enable the growth of distributed power systems. The acquisition of small renewable systems (costing between $20,000 and $40,000) is possible for many private citizens, as witnessed by the explosion of MicroFIT installations by Ontario homeowners and farmers. Medium-sized generation systems require significant capital investments, but is made possible through the pooling of investment through community cooperatives or municipalities. In both situations a key motivator is ownership by citizens within the community.
As distributed ownership grows, the Grid operators will be forced (and encouraged) to redesign the network with distributed production in mind. As with the telecom explosion, it will be ownership of the ‘end points’ that will greatly enable the rapid deployment of distributed electricity. Ownership, as much as technology, will be a disruptive influence on the electricity industry.
Many of the new renewable energy co-operatives are starting out with solar technology because it offers predictable power generation capability with minimal maintenance costs. While expensive to build, the energy generated matches the peak demand needs of the market (summer daytime air-conditioning needs). Building solar projects on rooftops close to the demand ensures that the electricity generated will be used locally. By focusing on solar the co-operatives are producing power that will directly impact the local distributed grid and be seen as community owned. As the co-operatives become stronger and better financed, they will certainly start to invest in a wider range of renewable energy technologies and thereby contribute to a wider range of energy inputs.
Through cooperative ownership, the citizens of a community can have direct input into the placement of energy production facilities and benefit from these investments. Communities that choose to invest in their own generation may make very different decisions than communities that are asked to accept facilities from distant corporations; irrespective of whether they are private or publicly owned.
At the same time, these locally owned generation facilities are accelerating the move to a distributed generation system, providing all users with a more stable, responsive and cleaner Grid.
In a small, but significant way, an investment in OREC (or any local energy co-operative) is an investment in a distributed electricity Grid. How electricity is produced and distributed is changing world wide. Community ownership of power generation offers a chance for a more democratic power system; one where the ownership, and therefore benefits, are more widely distributed.
- Cisco’s smart grid vision
- Drivers for Smart Grid
- Utilities under threat
- America’s Power Plan’ envisions new business model for utilities
- US coops get money for smart grid
- Why Taxpayers serve Nuclear power and not the other way around
- MicroFIT projects
- Newswire: Strong demand continues for FIT program
- Hidden power of local German finance
- Smart grid and energy transition – Germany
- Individual ownership of RE in Germany
- Cooperative Wind projects world wide
- Ontario Federation of Community Power Cooperatives
- Reuters: RE tech becoming cost competitive
- 50% drop in RE costs since 2008
- Solar energy demand spreading around the world
- US Military key RE financier
- Wikipedia: Electrticity distribution
- Wikipedia: Distributed electricity generation