The most important chart in energy

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There’s a chart you’ve never heard of that perfectly represents how inefficient the power grid is and how much we need more distributed energy solutions. Agencies responsible for the reliability of the grid, including the California System Independent System Operator (CAISO), use what are called Load Duration Curves, or LDCs, to plan investments and monitor efficiency. The area under the LDC (see image below) represents the energy demanded by the system and the curve illustrates the relationship between energy use and generating capacity needs.

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In order to meet California’s peak load in 2011, CAISO had to secure the equivalent energy of 20 nuclear power plants. This level of energy represents what is needed to serve peak capacity rather than average capacity. On most days, California’s electricity demand ranges between about 23,000 MW and 36,000 MW. In 2011, California demand exceeded 40,000 MW for only 0.8 percent of the year, or about 70 hours total (for reference, California hit an all-time for peak energy usage, reaching a total load of 50,270 MW in July, 2006).

Without transforming the power system to include energy storage and other distributed energy technologies, we have to build and maintain enough power plants to meet peak demand in real-time. Utilities will have to build additional generation assets, leading to increased generation investment while using this capacity for very few hours of the year.

stem-PowerStoreWe clearly have a huge opportunity to improve our current electrical power infrastructure since most of our generation capacity is only required a brief percentage of the year.  As the LDC illustrates, satisfying our peak load creates a massive discrepancy between our old generation capacity and asset utilization.  According to the Energy Information Administration, our national capacity factor, or the amount we actually generate vs. the amount we are capable of generating, is at or less than 40 percent. Most hours of the year, a massive fleet of generators sits cold and idle, not providing power to customers or earning revenue for their owners. Even idle, these plants require upgrades and maintenance to stay current.

With the problem of low asset utilization, the more optimal solution may lie on a micro- and not a macro- scale.  Many influential organizations, as varied as the Rocky Mountain Institute and the United States Military, are realizing the promise of smaller scale distributed energy generation and electricity storage as a way to combat the exact discrepancies that the LDC highlights.

This move towards supplementing our power with decentralized capacity has the added benefit of circumventing many of the negative economic and environmental impacts associated with our aging grid. Relying on centralized power systems alone to meet peak load is costly. Power generated from peaking-units (which currently make up around 14 percent of America’s 2,600 total power plants), can cost upwards of $100 more than the typical megawatt-hour.

StemAdditionally, the cost of transmitting energy across an aging grid is increasing and inefficient as well (according to the Department of Energy, around 75 percent of transmission lines and transformers are older than 25 years or older and roughly 60 percent of circuits have been operating for over 30 years, and transmission losses can range from 7-10 percent).  William Pentland of ClearEdge Power points out that “the typical electric utility customer in New York City is charged more for the delivery of an electron than the generation of electron”.

Recent advancements in distributed energy storage technology — including the adoption of lithium-ion batteries similar to those used in electric vehicles as onsite storage — are allowing business owners to dispatch power from the grid at those times that it is most cost-effective to do so.  (Many large automakers, including GM, Chevy and Nissan, are catching on to this potential by developing grid storage units with their used EV batteries.) At Stem we use energy storage systems to provide on-site electricity to customers at times when energy from the grid is more expensive, such as during hot summer days.Stem

It is important to note that even if the cost of energy drops, the LDC problem persists. While many in the energy community are excited by the shale gas revolution, without storage, generators will still need to be sized to meet peak demand and therefore will continue to operate at 40 percent or less capacity factor. Electric utilities and their rate base will still have to pay to build assets that sit idle for most of the year regardless of the mix of energy sources in the future.

Due to their ability to mitigate peak energy usage where it occurs, distributed energy storage systems have the potential to change the way we draw power at peak times. This could, in effect, transform the LDC into a much more efficient rectangle, flattening the load and avoiding generation overbuild.  Distributed energy storage that is implemented as the smart solution will prove that grid stability and grid efficiency no longer have to be treated as mutually exclusive.

Salim Khan is the CEO of Stem, an energy technology company that enables businesses to control their electricity expenses and helps the electrical grid to be more efficient in managing peak usage.

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