Current Crisis Sparks Innovation

Current Crisis Sparks Innovation

Wholesale electricity prices in California, the West in general, and now New York are skyrocketing, threatening the viability of companies large and small: The costs of a power outage for manufacturers of computer-related products are enormous -- even a few minutes of downtime can ruin a day's worth of manufactured products. Hewlett Packard estimates that a 20-minute outage at a circuit fabrication plant would cost the company a day of productivity worth $30 million. Nationwide, the Palo Alto, Calif.-based Electric Power Research Institute estimates that power interruptions cost businesses $50 billion a year.

That’s the bad news. The good news is that, in the wake of the energy crisis, industrious people and organizations are developing tools and technologies to propel a revolution in energy that parallels that of the telecommunications and computer industries. These technologies -- solar photovoltaics, fuel cells and wind turbines -- are the equivalent in scale to the wireless cell phones and portable laptops that replaced traditional grid-connected phones and huge mainframe computers, respectively.

Our energy supply conundrum reveals the limits of the old transmission and distribution grid, with implications for the growth of the digital economy. Our electricity grid, with its emphasis on large polluting and centralized power plants that send power long distances over transmission lines, is 100 years old, and is pointedly out of sync with modern information technologies. The architecture of the existing transmission grid is the antithesis of distributed networks made possible by the Internet.

A few companies are investigating cleaner and smarter power sources as a way of generating premium-grade clean electricity on site -- without harming the environment -- and upgrading our energy infrastructure to take advantage of 21st century information and communications technologies. These sources are frequently referred to as "distributed generation" as the sources are distributed throughout a given region.

Among the innovators are firms working with owners of approximately one quarter of the nation's commercial real estate: RealEnergy, Inc., which has offices in Sacramento and Los Angeles, has helped mount more than an acre of solar panels on the roofs of City Center, which is owned by Arden Realty, a Los Angeles-based office landlord. The 300-plus kilowatts of solar PV on the City Center reportedly is the largest private installation of solar PV in the Western Hemisphere.

Though solar PV installations involve high up-front expenditures, RealEnergy CEO Kevin Best said he believes the costs appear reasonable when spread out over the 20-year life of the equipment. And with no fuel and no equipment to maintain, “That's a price cap in my book,” Best said.

A recent study by the U.S. Department of Energy revealed why solar PV technologies are logical solutions to the problem of meeting peak power demands: Analysts looked at seven major outages in 2000 from the perspective of the quality of the solar resource during the exact times of the power losses. In all but one of the outages, conditions for optimal solar electricity generation were greater than 90%. Interestingly, solar conditions were close to perfect (99%) for generating electricity on June 14, 2000, the day 100,000 customers in San Francisco lost power and Silicon Valley took a $100 million bath on lost production.

Distributed generation sources, when integrated with sophisticated computerized management and energy storage systems, offer reliability insurance during these times of rolling blackouts. Because the cost of generating electricity from a natural gas plant is at least three times the cost of just a year ago, a variety of distributed generation technologies, including solar PV, look increasingly cost-competitive.

Today, these alternative energy sources are also being installed in "micro-grids" such as the Pleasanton (Calif.) Power Park. This "premium power" park, still under construction in San Francisco's East Bay Area, might be the wave of the future for California. The 18.5-acre installation will incorporate solar PV and other distributed generation sources such as fuel cells right at the campus site. Local planners welcome the development, as the park will allow economic development to flourish at no cost to the regional grid.

The answer to California’s energy mess -- the mess the rest of the country is in for -- could be the transformation our archaic electricity grid into a catalyst for integrating increasing amounts of renewable resources into our fuel mix. It might be time for forward-looking businesses to invest in these power systems to accelerate their introduction into the distribution grid. These businesses, which soon might include the biggest names in Silicon Valley, can offer the rest of the world a model of a smart power generation and delivery system that serves both the New Economy and the environment we all share.


Peter Asmus is author of Reaping The Wind, a new book published by Island Press, and is a senior associate with the AHC Group of Saratoga, New York, a consulting firm offering strategic advice on environmental matters to many of the nation's leading corporations.