IEEE Electrification Magazine - June 2017 - 88
VIEWPOINT
Portrait of a DG-Dominated World
By Ghazale Haddadian and Mohammad Shahidehpour
OR OVER A CENTURY, UTILIties have supplied electricity to power-hungry world
economies. This supply in the western hemisphere has come mostly
from large utility companies, whose
rates were set in a regulatory environment to match their costs plus a
fair return on invested capital. This
massive and critically important
infrastructure, which has been called
the greatest government-sanctioned
monopoly, has been slowly but surely
opened to competition by distributed
generation (DG) resulting from the
restructuring of the electricity market. This restructuring has given
consumers the discretion to choose
electricity providers in much the
same way they choose telephone
carriers. The shift from centralized to
distributed systems was generally
recognized as the introduction to
independent power producers and
the beginning of competitive electricity markets, which allowed distributed units to partake in electricity
delivery. The advent of renewable
energy promoted the use of distributed systems and DGs (e.g., rooftop
solar and microgrids). Although DG
traditionally referred to diesel generators that were considered in backup power supply and offgrid applications, we refer to renewable energy
units as DGs installed at the power
distribution level. In this DG environment, the traditional electricity industry
F
Digital Object Identifier 10.1109/MELE.2017.2685898
Date of publication: 31 May 2017
88
IE E E E l e c t r i f i c ati o n M agaz ine / J UN E 2017
is undergoing a major change in the
way it delivers electricity to millions
of households and businesses.
Advocates of competition by selfgenerators have maintained that the
paradigm shift in the delivery of
electricity would institute new business opportunities for utilities in
this heavily regulated industry. They
assert that, ultimately, everyone will
benefit from the production of
cleaner energy, potentially lower
electricity prices, and expanded services, making the power system
more sustainable and resilient and
giving the public a say in who supplies the power that runs their homes
and businesses.
Meanwhile, the energy world has
been subjected to major shocks that
loom over our societies in all directions. Emerging factors include:
severe air pollution in populated
and often wealthy countries
climate-related extreme weather
and the inception of devastating
hurricanes throughout the world
cyber and physical threats in the
wake of technological changes and
the emergence of the smart grid
sociopolitical conflicts in developing countries and growing instability in oil-producing nations
extensive integration of renewable generation that has resulted
in significant variability in electricity supply
commodity price spikes in electricity markets
mandates for policy-related
changes that introduce transac-
tive energy and customer participation in revitalizing the electricity delivery.
In this era of uncertainty, the
power utilities' centralized network
of monopolies, which have been in
place for decades, could crash when
customers become self-sufficient
competitors. Industry experts have
viewed the advent of DG as a threat
to utilities' well-being, as centralized
baseload generation loses its grip
when DG saps the demand for electricity. The massive integration of
renewable energy technology could
also reduce utility power sales and
access to inexpensive debt, prompting utilities to raise rates. Higher
electricity rates make renewable
energy more attractive and spur
more rooftop solar installations,
leading to a downward spiral for utilities. The cost-of-service regulatory
model that allows utilities to earn at
least their cost of capital in the long
run may also break down when
fewer customers pay for maintaining
the centralized network. Hence,
diversity should allow electric utility
companies with large and centralized thermal units to embrace new
opportunities, first at the margin, but
eventually at the core of their power
delivery operations. Most technology
companies have adopted the notion
of diversity as a business practice.
Today, IBM is a services company, and
Apple is a consumer device company.
Asking the question "Where would
(continued on page 85)
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