Daily Times

A-century-and-a-half back when electric power industry started, it was small, isolated, and dispersed. Small generators, installed nearer to consumers, served them directly,and were isolated from each other. The first hundred years, however, saw these small systemsmerge and grow into a gigantic business enterprise, both in scope and size, and was termed “the largest and most complex machine in the world”. But a few events, set into motion in the past few decades, not only halted this industry’s further growth buthaveforced it to return back to its original small, granular,and distributed structure, bearing out some theoriststhat small was not only “beautiful” but “profitable” too.

The electricity industry was born with Thomas Edison’s inventing the light bulb in 1879, and establishing 2 thermal plants in the next 2 years, first in London and then in New York. Both plants were small and powered only the lights of a few hundred homes and shops in their neighborhoods using low voltage direct current (dc) supply. The advent of alternating current (ac) and transformer a few years later, rendered the low voltage dc systems of Edison obsolete, and spawned a technological revolution in the electricity business that saw power plants get bigger and bigger and interconnected in a complex web of higher and higher voltage transmission lines to serveconsumers located far away from generators.

Major factors contributing to this business boom included the “economies of scale” in generation, wide distances between major load centers and good generation sites (especially, hydro), and the technical and economic benefits that interconnection among isolated systems offered by way of reserve sharing, energy trading, and reliability improvement. The first hundred years of the industry saw generating unit sizes getting doubled every 6 or 7 years ( between 1955 and 1970, the generating units size jumped from 200 MW to 1,400 MW, a 7-fold increase) and the electricity prices either declining or remaining stable in real terms for almost a century.

Like all good things, this “bigger was better and cheaper” boom of the power industry finally ended in the 1970s when as a result of the OPECoil embargo there was a sharp rise in the industry’s costs of production which regulators were reluctant to pass through to consumers. Growing environmental concerns with mega generation and transmission projects not only made these difficult to approve but finance too.Reforms in the natural gas sector and regulators’ permitting non-utility generators to enter the hitherto monopoly utility business practically ending the golden era of large central-station and vertically-integrated industry as it led to gas-fired combined cycle technology that made small generators, in the 100 to 200 MW range, competitive as well as superior to mega-sizedthermal units.

Encouraged by reforms in the telephone and airline industries and pioneered by initiatives in the UK and Chile in the early 1990s, the power sectors around the world were swept by efforts to reform and restructure the previously monopolistic and vertically-integrated electric utilities to open them for competition in the generation function and permitting choice at the wholesale, and in some cases even retail, levels. Consequently, the electric power industry wasforced to turn on its heels.

Meanwhile, and particularly around the turn of the century, renewable energy technologies (RETs) which were dubbed by utility managers as “exotic”and “heretical”, and thus brushed aside offhandedly, were making inroads quietly into demand segments, previously considered utilities’exclusive domains. The technical superiority of RETs had never been in dispute nor had been their negligible operating costs; the main hurdle to their greater uptake had been their high upfront costs only. That obstacle also evaporated into thin air in the last decade as, spurred by ever expanding demand and mass production, their costs plummeted-80% for solar photovoltaic and 35% for wind systems since 2010-bringing them into a head-to-head competition with traditional supply options.

The utility grid is being strengthened and modernized, not in terms of its capacity alone, but by enhancing its capability to act as the enabling platform for integration and operation of diverse and distributed technologies

The confluence of multiple factorspushed the electric power industry into an unprecedented fit. First time in its history, it was forced to realize that a continuation on the previous path-building large central-stationpower plants and serving consumer demand via extensive transmission and distribution networks was not viable anymore, and in fact meant, financial ruin. It must embrace new realities and return back to its small, distributed, and neighborhoodscale in which its early history was rooted, if it wanted to survive.

Since that realization, electric utilities all over the world have been going through a transformation process to align themselves to new market realities. This transformation process has involved rethinking of the old business model and replacing it with dynamic, flexible, and consumer-oriented approaches. It has also necessitated many technical changes to the way electric power systems were being planned, designed, operated, and managed.

On the business side, electric utilities have been helped by their governments and regulators bycreating policy, regulatory, and market frameworks that encourage investment in small, dispersed, and renewable technology options.The century-old business is now being reorganized along a more open and flexible lines to treat these new distributed supply options as not competitors or threat to the utility business but instead as partners and complements to the utility’s own efforts to serve society with reliable and economic electricity. Many innovative schemes are being used to induce consumers andinvestors to induce them to install small and distributed technologies in the system.

Utilities are also developing appropriate tools and data and information bases and making these freely accessible to potential customers and investors for using these to assess the scope and viability of RET supply options in meeting customers’ own demand as well as contribution to their utility systems. This also includes any technical support customers and investors need for making such assessments.

On the technical side, two major efforts are worth mentioning.First, system and resource planning is assuming a new role by initiating the process at the consumer end to grasp the nature and characteristics ofdemand and then working upward to assess the most feasible option to serve that demand, at source, from a nearby distributed generation site, or through the central-station generation by extending the maingrid, whichever is least costly and adds the most value. Second, the utility grid is being strengthened and modernized, not in terms of its capacity alone, but by enhancing its capability to act as the enabling platform for integration and operation of diverse and distributed technologies.

Our policy and decision makers also need to realize that the era of large-scale, capital-intensive, and fossil-fuel based power supply systems is already over. Continuous reliance on such schemesis fraught with huge risks as evident by the rapidly piling up circular debt(by some estimates, touching 1.5 trillion rupees already) in the power sector. Itis time to recast this critical industry and align it with the emerging trends which call for small, distributed, and renewable electricity generating schemes that are linked with each other through a smart grid to serve the electricity needs of our countryin a secure, affordable, and sustainable manner.

The writer is afreelance consultant specializing in sustainable energy and power system planning and development