A Free-Market Energy Blog

The Smart Grid and Distributed Generation: A Glimpse of a Distant Future

By Kent Hawkins -- April 28, 2011

A smart grid/distributed generation combination could have a large role to play in the future of electricity systems in terms of both supply and use. But it is incorrectly being touted as the solution to our perceived electricity problems in the short term, that is for the next 10 to 20 years. Meaningful fulfillment of a “smart” grid and/or extensive Distributed Generation could be a half-century away, even more. Therefore, early, extensive, and expensive initiatives that claim to be on the “right track” are very likely to be on the wrong track later.

Is the right track (1) upgrading the grid capacity and implementing new transmission lines to facilitate the integration of utility-scale wind and solar or (2) the implementation of smart meters to match (read restrict) demand to the erratic and unreliable supply of these?

Absolutely not. Such ill-advised initiatives will require an unacceptably large investment in grid elements that will likely all too quickly become irrelevant as the  needed electricity infrastructure changes are engineered and introduced in the future.

But first things first: what is meant by Distributed Generation (DG) and the smart grid?

Distributed Generation (DG)

One of the primary purposes of DG is to meet some level of local demand, not feed the grid. The imposition of mandated levels of renewable energy (RES) and Feed in Tarrifs (FIT) with premium prices to incent the deployment of wind and solar creates a “gold rush” for the latter. Industrial-scale wind and solar generation plants are like traditional generation sources in that they produce electricity to meet demand elsewhere, and in the case of wind and solar often at great distances. They are geographically distributed, and this is one element of differentiation from conventional electricity generation sources, but this is because the fuel, wind and sunlight, is dispersed widely. This is not DG.

The correct view of DG involves small-scale generation sources, for example roof-top solar and possibly micro wind turbines (better designs are possible) as well as many other non-utility scale generation means, and this list can be quite long. These will be integrated within micro-grids that contain intelligence to manage local production, storage (which is feasible even today at this level and shows considerable promise for the future) and use, as well as connection to the grid through intelligent gateways. Micro-grids can serve many types of “communities”, for example residential (especially in rural areas), combinations of commercial/industrial/residential communities, and college campuses. Such “concepts” are already being experimented with, for example at the University of California, San Diego, (USCD) including a gas turbine/combined heat and power system, and solar and fuel cell technologies described here and electric cars here. A quote from Byron Washom, the campus’ director of Strategic Energy Initiatives is appropriate.

“UCSD will become a laboratory where technologies can be tested and consumers’ behavior can be analyzed.”

Ignore the hype in the above examples, but applaud the approach as summarized by Washom. Also note the focus on consumer behavior at the same level as the technologies.

Will the “smart” meters being installed today be compatible with this yet-to-be architected and engineered smart grid? It is unlikely and represents potential high stranded costs that will encumber future generations. Today smart meters appear to have the major purpose of providing a means to raise electricity rates through aggressive time-of-day pricing to help fund the large investment needed, primarily for wind plants, and the extra transmission and generation facilities required to support them.

The Smart Grid

In a brochure by the Department of Energy (DOE), short term initiatives, as described in the second paragraph above, are labelled the “smarter” grid, supposedly on the track to the “smart” grid. Even without any knowledge of the issues involved, anyone familiar with unbelievable promises all too evident in some commercial advertising will recognize the warning signs. Here is a quote from the DOE about “smarter grid” initiatives (emphasis added):

  • Ensuring its reliability to degrees never before possible.
  • Maintaining its affordability.
  • Reinforcing our global competitiveness.
  • Fully accommodating renewable and traditional energy sources.
  • Potentially reducing our carbon footprint. [interesting qualification]
  • Introducing advancements and efficiencies yet to be envisioned.

More information on this and the warnings from The North American Electric Reliability Corporation (NERC) have previously been described here.

The reality is no one knows what the smart grid will ultimately look like. It represents a major shift in our electrical energy infrastructure, which will necessarily take a long time to effect, in part because there will be social impacts on any such major restructuring. As previously mentioned, this and a reasonable time frame for the development and extensive implementation of the many technologies involved within a properly engineered architecture is the second half of the 21st century.

Restating this, aggressive implementation initiatives taken today are likely premature and have questionable motives. In the same way no one knows what the likes of transportation, communications, information processing, education, world government, health care, food production and urban development will look like in the same time frame. Effective changes in all of these will be an evolutionary process, not a revolutionary one. Electricity generation and distribution is as fundamental as these and the fervour being exhibited about revolutionizing it in a short time frame is simply misinformed.

An article in the April 2021 issue of Power Magazine, “The Smart Grid and Distributed Generation: Better Together” provides a good background on these issue. Amidst all the detail though, a few matters need emphasizing to properly provide a framework to make sense of this important infrastructure shift.

  • No one knows what the smart grid will ultimately look like, so there should be no early major investment in deploying technologies until this is better understood.
  • One of the primary functions of DG is to meet some level of local demand, not feed the grid.
  • We should not be distracted by discussions about the extensive implementations of concepts (e.g. utility-scale electricity storage, wide-spread impact of electric vehicles), which may only be realizable in the distant future.
  • Cyber security must be a major development initiative and this further emphasizes (1) the need to avoid overly hasty implementations and (2) the importance of the localized nature of the most likely smart grid architecture as opposed to grid-wide approaches.

[Editor’s note: For more commentary on the smart grid click on the Smart Grid sub-category under Policy Issues. The NERC report is recommended reading for a more complete understanding of the issues.]


  1. Ed Reid  

    In all discussions of DG, it is important to acknowledge that simple “net metering” cannot continue as DG becomes more common. Operating the distribution grid involves costs. Simple net metering “steals” a portion of the distribution grid owner/operator’s cost recovery and profit. It requires the distribution grid owner/operator to “purchase” power in uncontrollable quantities at uncontrollable times at prices above the prevailing wholesale market price. It thus imposes costs on both the distributor and its non-DG customers.

    I believe distribution utilities made a serious error in accepting the concept of net metering; and, that it will be far more difficult to terminate net metering than it would have been to prevent it.

    I hope DG customers do not expect their serving utilities to facilitate and integrate their microgrids and accept their surplus power “pro bono”.


  2. Jon Boone  

    Buzz words and PR spin. Shifting definitions to the point of absurdity. Blackwhite bellyfeel. When all is said (although nothing need be done), smart grid argot redounds in Rube Goldbergesque make work for engineers and even more tax sheltering opportunities for the likes of General Electric at ginormous cost to society.

    Yet another fine article by Kent Hawkins.


  3. Charles  

    I can’t see how this can work, when ‘the sun don’t shine and wind don’t blow’ it tends to happen over very large areas.

    It does not matter how ‘smart’ your grid is, when there is nothing to distribute, there is nothing to distribute.

    There is something similar in Australia where they have these ‘smart meters’. They tell you when the electricity is cheapest presumably so you can run your appliances then. Predictably it means doiing everything at about 3-4 am, which is surprisingly not all that convenient for consumers, once those who had paid the $600 or so for their ‘smart meter’ found out.

    Also surprising, is that when the big demand days are on such as in heat waves, not many occur at that time (3-4 am) of day, so disillusionment reigns once again.

    Development of ‘smart grid’ would involve removal of all those stupid ideas like wind farms, solar feed-in tariffs, geothermal, biomass etc, from the system. Then you would have a truly ‘smart’ system.


  4. JavalinaTex  

    Kent, I tend to agree with your thesis that the “smart” grid won’t do all that much in the short term, but was disappointed you didn’t go into it more.

    First of all, I do like smart meters, and the potential to put some demand side controls in. However, that will only work to shift loads (epecially AC) forward up to an hour or so. There is no way it will let off peak night wind be used for daytime peak. Also, the electric load in Texas is overwhelmingly A/C. I can attest that about 80% of my home’s annual electrical usage is for Air Conditioning and virtually all of that is for the compressors.

    The only way you have a chance to shift daytime usage to night i if you do have time of use rates and things like ice storage. I talked to HVAC engineer about this, and he mentioned that in Dallas some churches have ice units that were built in the 1970’s, and were so robust that they are still in use (he said they might have a 25 hp compressor making ice 24/7 all week and using it on Sunday). But some simple math would tell one that the likely savings are insufficient to pay off (say you can save a nickle per kw-hr; a hugely optimistic number – I might save $1,000 per year) . Also, any more, even churches generally have much of their building in use all week . In the case of moving a/c loads around an hour here or there with demand side management, I will seriously consider that, because our house is unoccupied much of the day. However, it is too hot to turn off the A/C all day (as it takes too long a time to catch up) but letting the grid or a provider turn off my 8 HP of A/C compressors for an hour or two when needed would be OK. In fact, I participated in a program by our local utility almost 25 years ago to do that with my A/C unit. That went away with Texas’ “unbundling” which ironically was sold in part that it would make demand side management more prevalent.

    Solar would appear to have some potential for peak shaving, however, when you look at what ERCOT says, the peak power generation is much earlier than peak load (A/C, probably due to the thermal capacitnce of the building). Increasing thermal capacitance in new building design is another possibility, however I just don’t see that because it requires a lot of construciion and acceptance risk to the buyer. Most of the other “high usage” appliances really need to be run when you want to use them. Can you imagine telling your wife she can’t do the laundry until the middle of the night, or run the dishwasher?Further, these loads are simply not that big. That also brings up water heaters. Nothing grieves me more than to hear people who have electric water heaters; terrible, terrible thermodynamic waste (of course if it wasn’t for the wife’s views, I would have a gas cook top instead of electric). We also need to do away with the idea that tankless water heaters make sense (do the power load math on that one).

    Now regarding distributed generation. I really question the viability of it. First of all, one needs a combined heat and power application to really have much of a chance. Very few buildings have such applications, and homes certainly not. Further, the problem with micro turbines is – some quick checks of manufacturers specs will inform one – that the smaller the unit, the less efficient and the higher the heat rate. Compare a 100 KW micro turbine to a small 5 MW Solar (Caterpillar) turbine and you will have huge differences. Further it is possible to put a waste heat recovery unit on the Solar (we do that all the time in the gas patch) and further, you can put a power generator on it (making it combined cycle. If you look at the Fuel Cell data sheets, you will find that they are signicantly less efficient than the larger Natural Gas Combined Cycle units built today. It is about 52% vs. nearly 60%. Although you might get lower criteria pollutant (especially with NOx); it isn’t like NGCC turbines are huge emitters on a per KW-HR basis. Finally you have fuel logistics issues. You will be paying far more to transport natural gas to your building than a large generator does who is building in the country side (where the emissions are not in the air shed). Also, unless you procure your own gas, you will pay huge premiums, and yet the cost to have someone manage this for you is significant. Then throw in scale economies on maintenance, etc. Finally, the cost of money once again favors a “pure play generation company vs. someone trying to finance a small Almost always, the sum of all these costs will more than offset the savings on “the wires” charges. In my opinion a lot of the “story” on distributed generation falls under the meme/fantasy aesthetic of “small is beautiful”… Scale economies are real, and the grid is a great accomplishment.

    One area smart meters will be beneficial is a very granular de facto SCADA system. I was shocked when a former co-worker went to work for a Texas Power company, and he told me how poor their SCADA was… they litteraly waited for people to call to tell them the power was out… Back then, they didn’t have SCADA on the downstream side of major substations. Living through the Ike hurricane outage, it was pretty ridiculous of how little Centerpoint knew about which circuits were out and how many customers were without power.


  5. Mark  

    It seems to me the DG discussion has fallen to regulatory capture in that nothing is mentioned about cogeneration (the original DG). This reminds me of the energy efficiency debate and how the practitioners thereof know their master’s voice.


  6. Kent Hawkins  


    I can’t quite get a handle on what you are saying.

    If you saying that utility-scale wind and solar plants and feed-in-tariffs are not sensible, I agree.

    If you are saying that a smart grid can never exist, including small-scale electricity generation, that is a very bold prediction given the time frame that I am talking about. As I said, no one knows what the smart grid will look like.


  7. KHawkins  


    Like Charles’ comment, I have trouble getting a handle on your comment as well. I turst you are not saying that I did not mention co-generation (aka combined heat and power).


  8. KHawkins  


    I appreciate your wanting to go into the smart grid more, but that was not my point. Our present views of the technologies that could be employed are necessarily distorted by what we know. So we can talk a lot about and/or dismiss almost anything on the basis of our pet ideas, or that it doesn’t work now. Fast forward fifty years and we would likely be very surprised by what has transpired.

    Smart meters are an example. I expect that the smart meter we will need is different from that which is being widely installed today. Not long ago, I supported these to make abusers pay. An example I observed in my city is small stores with air conditioners going full blast with their doors propped open in the middle of a hot day. My opinion has changed, as stated above.

    I expected someone to pick up on my reference to micro-turbines. There is no point getting into a discussion about whether or not these have a role to play in the time frame that I am addressing. I did say as well that there are many other non-utility scale generation means, and this list can be quite long. The broad range of future possibilities should be the focus, not a current view of a specific technology.

    I purposely avoided a lengthy overview of smart grid concepts that are popularly discussed at length today. My purpose was to argue against any preconceptions, and to applaud those that are truly experimenting, versus those that are charging ahead with major implementations at unnecessary and substantial cost.


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