As much as we take it for granted and as simple as it is to flick a switch, no human artifact is more complex than the system that keeps our lights on. In the U.S., 5,800 power plants generate power, transmit it through a quarter-million miles of power lines, and deliver it to millions of U.S. homes, businesses, and factories through one of 3,273 electric utilities regulated by a tangle of organizations from local to national and beyond.
In spite of its complexity, our electricity system manages, for the most part, to deliver reliable, cheap power day in and day out. So if it ain’t broke, why fix it?
In 1976, Amory Lovins proposed a shift in direction for U.S. energy policy in “Energy Strategy: The Road Not Taken?” a landmark article in Foreign Affairs. Lovins challenged conventional wisdom by proposing that efficiency and distributed renewable energy systems could provide electricity services that offered economic, geopolitical, social, and environmental advantages over centralized fossil-fuel-intensive systems. This path would mitigate the system’s massive vulnerabilities and virtually eliminate the threat of nuclear proliferation.
Fast-forward 36 years, and our electricity system faces even greater risks. U.S. power plants and infrastructure are aging and require upgrade or replacement at costs as great as $3.5 trillion over the next 40 years. The electricity sector remains a major contributor to greenhouse gas emissions, and environmental restrictions based on public health needs pose significant risks and costs for coal-fired generation. The reliability and resilience of the electricity system are becoming more vital and valuable, yet our grid is still vulnerable to outages, and new threats are emerging, from bad space weather to terrorist attack. New technologies may offer greater customer choice, but they’re adding players to an already confusing playing field.
RMI’s Reinventing Fire: Bold Business Solutions for a New Energy Era shows how an IT-enabled, customer-centric electricity system that is efficient, renewable and distributed can enable a transition away from fossil fuels not just in electricity but also in all other energy-using sectors of our economy. Trying to transform the greatest engineering achievement of the 20th century, however, is no easy task.
RMI is uniquely positioned to tackle this challenge. RMI’s Next Generation Electricity Initiative is working to accelerate transformation of the electricity system by collaborating with the industry to:
- Identify practical technical, economic, regulatory, and business-model innovations needed to integrate more renewable and distributed energy resources.
- Remove barriers slowing the adoption of renewable (especially solar photovoltaic) generators and electric vehicles.
- Help utilities achieve an unprecedented level of efficiency for their customers—and get properly rewarded for it.
“We’ve had significant influence on the electricity industry over 30 years in different channels at different times, because we’ve identified the most important leverage points for change,” says James Newcomb, RMI program director and founding president and former CEO of RMI spinoff E Source. “While RMI’s work has always been rooted in consistent principles, we’ve chosen our tools to fit the industry need—and address the goals of the time.”
Planting a new seed
In the early ’80s, Lovins led a newly formed RMI in promoting utility regulations that put a greater emphasis on rewarding efficiency programs—an effort later led by Natural Resources Defense Council and regional grantees of the Energy Foundation. In fact, it was in the cramped offices of the Colorado Public Utilities Commission that a term that has woven its way into the world’s energy lexicon was born: “negawatt.”
It was around 1984 or ’85, no one can remember exactly. RMI’s Amory and Hunter Lovins and Michael Kinsley were attending a meeting at the Colorado PUC. A pile of documents was handed out to attendees and one appeared to include a typo: “negawatts” instead of “megawatts.” Where some saw an amusing typo, Amory saw an entirely new term. From then on, he spread “negawatt” across the industry and it soon became standard global parlance for “saved watt.”
“There was a policy shift—first in California—that RMI really influenced,” says Newcomb. “This created a new territory for utilities. They didn’t know a lot about end-use efficiency. But suddenly they had incentives and opportunities to deliver efficiency services, and they had to get themselves up that curve.”
While there was a great deal of information about emerging efficiency technologies, it was fragmented. Enter E Source.
Originally launched by RMI in 1986 under the name COMPETITEK and incubated in the “Banana Farm”—where about a half-dozen electricity researchers produced each year a volume in a monumental series of efficiency encyclopedias—E Source aggregated, analyzed, and distilled a body of knowledge about end-use efficiency in an unprecedented way. Spun off as a for-profit company in 1992, it soon became the world’s leading source of technical information on electric efficiency, which it made readily accessible to hundreds of corporate energy managers and utility strategists worldwide.
“That was exactly the right piece to bring to the table at that time, to support what the industry was launching into,” says Newcomb. “Organizations that have been members since 1986 remain on board because there is no better way to cut through the information clutter and hype.” Sold in 1999 to the Financial Times group, then to Platts, E Source was bought back by its management and is now flourishing under the leadership of Michael Shepard, once head of RMI’s energy program.
A unique niche in preparing utilities for change
As RMI broadened its networks, it also deepened its engagements with utility partners, who saw value in pursuing an alternative to their current system—focusing on how to create win-wins with broader societal goals and with their customers.
In Small Is Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size, a 2002 Economist book of the year, RMI described 207 ways in which the size of “electrical resources”—devices that make, save or store electricity—affect their economic value. These hidden economic benefits of distributed resources—mainly from financial economics and electrical engineering—raise their value, often by manyfold.
Working with electric utilities across the country, RMI found a unique niche. Its expert testimonies helped many utilities and states design more effective efficiency efforts and make smarter choices (including abandoning some uneconomic power-plant and transmission projects). In 2002, RMI wrote, then helped to implement, an Energy Resource Investment Strategy for the City of San Francisco, prioritizing its electricity resources based on cost, performance and environmental impact. In 2009, RMI worked with Duke Energy—the third-largest carbon emitter in the U.S.—to identify options to provide low-cost and reliable electricity while cutting Duke’s dependence on coal and reducing its carbon emissions 50 percent by 2030. Now RMI is working with additional utilities, testing unique problem-solving tools it aims to roll out across the industry.
“RMI’s biggest advantage in working with utilities is that we are one big group of systems thinkers,” says Dr. Joel Swisher, PE, former RMI manager of research and consulting. “By collaborating across RMI’s practice areas, we were able to prepare utilities for changes on the horizon related to buildings and electric vehicles, and how these would eventually transform the system at large.”
In that sense, RMI was a far cry from traditional electric utility consulting practices.
“Our work with RMI has helped us identify key signposts associated with various scenarios,” says Doug Esamann, Duke Energy’s senior vice president of corporate strategy. “That gives us options. We are still laying these options out in an appropriate plan; we have bits and pieces already embedded. Continuing to make it a connected, cohesive plan is the challenge in the face of an uncertain future.”
Doubling down on collaboration to drive implementation
In this uncertain era—in which technological advances, new business opportunities, needed infrastructure investments, and environmental priorities are making business as usual increasingly unrealistic—leading utilities, regulators, and entrepreneurs are trying to thoughtfully realign business and operational processes to guide change and minimize regret.
“Through our analysis for Reinventing Fire, we were forced to ask what really has to happen in the electricity sector to capture the benefits and deal with the risks presented by these changes,” says Newcomb. “We realized the kernel of the problem is no longer today’s technology, economics, or lack of information—it is lack of institutional collaboration and innovation to open the door to apply those technologies.”
Now, RMI is doubling down to accelerate change in this complex sector and work collaboratively to develop a viable pathway forward. RMI’s Electricity Innovation Lab (e-Lab) will bring together key actors from across the sector over several years to develop practical ideas and solutions to overcome complex technical, economic, regulatory, and institutional barriers. Complementary project work will allow in-depth exploration of critical issues.
“We’ve come a long way in 30 years. Of course there are still technical and economic questions to be answered about a transition to an efficient, renewable, and distributed electricity system, but the conversation has changed,” says RMI Principal Lena Hansen. “RMI’s work over the past several decades has been about showing what’s possible, and while that’s still an important part of our work, we’re now equally focused on what it takes to get there. The institutional, regulatory, and implementation challenges are significant—and we’re diving in.”