Distributed generation: The new iPhone

In 1994, only 10 percent of Americans had a cell phone. In 15 short years, more Americans had cell phones than landlines. While the rapid adoption of mobile phones can’t be attributed to a single factor, one major parallel exists between the transition from landlines to smartphones and what’s actively happening today in the electricity industry: the transition from a centralized system to a distributed (or decentralized) network.

The electricity industry operates in much the same way today that the telecommunications industry operated 30 years ago. In the 1990s, your telephone company likely charged you a fixed fee for monthly service plus a variable per-minute rate for long-distance calls.

Today your electricity company bills you similarly, with a mix of fixed and variable charges based on how much electricity you use per month and how much it costs to transmit that electricity to your house.

The parallels between the two industries don’t end there. With landlines, your phone service was physically hardwired to a centralized telecommunications system. Similarly, when you flip on a light switch or plug in your toaster oven, you connect directly to an electrical grid powered by large, centralized power plants that may be many hundreds of miles from where you live.

And just as the telecommunications industry of the 1990s experienced a major disruption from the decentralized technology of cell phones, so too is today’s electricity industry on the verge of a major disruption due to the distributed generation of electricity.

Currently, the electric grid is very centralized: Large power plants are connected to electricity buyers through a web of transmission and distribution lines. These high-powered generation resources are designed to satisfy the electricity needs of hundreds of thousands — or even millions — of households and businesses in a given region. With the benefit of a connected grid of transmission and distribution lines, these large power plants do not need to be located close to customers but rather can remain part of a centralized market.

At a high level, distributed generation (DG) — also referred to as a distributed energy resource (DER) — is any source of electricity that is on the decentralized distribution grid. Though this definition includes small-scale wind turbines, hydropower, and even fossil-fuel-powered backup generators, solar energy is the most common form of distributed generation for residential applications.

Distributed generation already plays an important role in the electricity grid. Rooftop solar panels can help defer or avoid large investments in infrastructure upgrades on the electrical system, helping all electricity customers save money. What’s more, solar panels provide a suite of environmental co-benefits beyond the monetary savings, including acting as a source of emission-free, local generation that can improve air quality.

However, while the transition to a distributed telecommunications network is effectively complete, the transition to a distributed energy grid is just beginning. Solar is the most widespread distributed energy resource, but as of 2018, less than 4% of all residential, single-family stand-alone homes in the country had installed solar.

A distributed generation future will likely still rely upon the centralized power grid. Returning to the telecommunication industry as an example, even though nine out of ten Americans own a cell phone, two-thirds of Americans still maintain their existing landline connection.

However, the shift from solar on 4 percent of American rooftops to 20 percent, and especially up to 80 percent of rooftops, would require substantial changes to the way that power companies do business today. Here, too, the electricity industry can learn from the experiences of the telecommunications industry.

For instance, in the past, if you wanted to make a long-distance phone call from a friend’s house — say, to tell your family that you had arrived safely — you might have offered to pay for making a long-distance phone call on somebody else’s phone bill.

These days, there’s no need to offer to cover the cost of your long-distance phone call, let alone to even ask to use a landline. It’s easy enough to text or call from the cell phone in your pocket to provide updates at every step along your journey.

Again, the story for electricity is similar, and envisioning how this may change in the future is full of possibilities. At the moment, if you charge your cell phone at a friend’s house, you probably don’t need to ask to use an outlet or offer to pay for the electricity you’ve consumed. But say that you have an electric vehicle that you want to charge at your friend’s house. Would you offer to cover the incremental charge of charging your car on their next utility bill?

Forecasting what a distributed energy future could look like expands beyond the similarities with a distributed telecommunications network. For instance, as more homes and businesses invest in distributed generation, it will become possible for individual streets, neighborhoods, or entire cities and towns to connect all of their resources into their own sustainable and reliable microgrid.

While these microgrids will continue to need access to the existing electrical grid, they will also be able to place energy back onto the grid to help provide power for other communities running their microgrids, thus creating a “virtual” power plant out of aggregated distributed resources. Instead of relying exclusively upon centralized, large power plants, the electrical grid could become much more flexible as we install more distributed energy resources.