The main squeeze: Distributed vs. centralized clean energy
Which is the better path to decarbonizing the power grid: focusing on low-cost utility-scale solar and wind, or building out the policies and technology to also allow distributed clean energy to be at the forefront?
We are often struck by how many policymakers and utilities believe that doubling down on preserving the centralized system is the best way to repair the aging electric grid. Our energy justice campaign has long advocated for a new system that relies on more distributed energy resources spread across communities, but state commissions have lacked modeling tools that show the pathway for local energy resources, such as solar, batteries and geothermal, to benefit our electricity grid.
This long standing and persistent debate between distributed and centralized solar has taken on a new urgency over the past few years, especially in the United States. More than a dozen states have now followed Hawaiʻi’s lead by committing to 100 percent renewables. Though not entirely to be credited for the shift, President Biden has also implemented a few key nationwide programs supporting 100 percent clean electricity standards with focused attention on renewables access for low-income communities of color.
But these recent successes still don’t address disagreements over whether it’s best to swap traditional fossil-fuel plants with centralized, large-scale renewables, or to rely on a mix of large-scale and distributed generation.
The Local Solar Roadmap made by a coalition of solar energy advocates in 2020, attempts to be a game changer on the full benefits of distributed energy. The study challenged three conventional paradigms to justify the centralized grid:
Large station power plants are the most cost effective because of economies of scale
Utility scale renewables are the cheapest, fastest way to meet clean energy goals
Local storage + solar is too expensive and will increase costs and rates
Perhaps the disagreements over distributed solar persist is because of a difference in mission. While renewable energy advocates, solar organizations and companies want to encourage widespread uptake of renewables, the main goal for utilities is to turn a profit. Utilities make money through rate-basing investments. These companies need to put steel in the ground in order to put money in shareholders’ pockets.
The basic financial model of almost every monopoly utility is one where they make additional profit by investing more money. They don’t make any additional profit by opening up to other competitive providers. Hawaiʻi’s Public Utilities Commission is trying to address this by incentivizing the utility through performance-based rates rather than going the traditional route. However, the outcomes of that shift have yet to be quantified.
For now, we will stay strong on our advocacy for a distributed localized energy grid and economy. The Solar Roadmap demonstrates how scaling local solar is actually the most cost-effective way to meet climate goals, while creating millions of local renewable energy jobs from manufacturing to system design to maintenance and operations, and “behind the meter” jobs. Each of these contributes to a sustainable energy economy.
Knowing all that, it just doesn’t make sense to continue investing in outdated, costly, centralized solutions, without considering the contributions from new distributed technologies. The energy transition is too important of an opportunity to end the status quo, that leaves stranded and underutilized investments behind. And, as we all know, stranded utility costs are typically paid for by customers. Let’s put an end to the debate once and for all.