A buzzword often used in promotions for small-scale solar PV development is the term “distributed generation”. It’s a broadly defined term, partially because it’s still more of an idea than a tested alternative to centralized power grids common in most communities. Centralized electricity generation typically serves a large and diverse set of consumers from a few far away and massive (usually fossil fuel-dependent) power plants. Residential solar PV creates several nuances to the typical central grid structure we’re accustomed to, and as such falls under the umbrella concept of distributed generation.
But why is this particularly relevant to residential solar PV owners, and more broadly to all homeowners? These nuances introduced to the grid by distributed solar can generate legitimate savings. It used to be that “distributed generation” was a lefty/progressive term that translated to high costs of electricity for pie-in-the-sky energy technologies. And in some ways, detractors weren’t completely wrong. Centralized power grids historically have had a major advantage over distributed generation in costs due to their massive economies of scale.
However, with declining panel costs, government incentives, streamlined permitting, interconnection and inspection processes, and most recently (and significantly) solar leasing, there is suddenly a paradigm shift across electricity grids around the country. What this translates to for homeowners is a more secure and efficient grid that hedges against the inefficiencies of centralized power production.
First, distributed solar ties the physical electricity generation closer to end user consumption. A portion of power is lost just in transmitting electricity over sometimes several miles from the power generator to consumers. Rooftop solar reduces the amount of electricity required from these distant generators, minimizing the losses in transmission. Given that approximately 20% of electricity consumed in the US is in residential buildings, this is a substantial improvement that generates real savings across the grid. Because most utility companies tier pricing for building type and time of use, different consumption demographics can generate savings unique to their individual users (in this case, homeowners, especially those that own solar!)
Another observation on efficiency- utility companies have to always maintain a “base load” amount of electricity. This is essentially the minimum amount of electricity they have to supply the grid at all times to keep the lights on. The higher that base load is, the higher the rates tend to be for electricity. In a centralized power grid, the main factor that drives up the base load is the variability of demand; simply put, the wider the diversity of electricity consumers in terms of geographic location, consumption levels, timing of consumption, and fluctuations in consumption, the higher the base load will need to be to ensure the grid is meeting its demand, literally second by second. In a centralized grid, this diversity is enormous. Just think of how many different places you use electricity in one day. Distributed generation reduces this variability and, with the help of smart grid technology, can lower the base load requirements on utility companies. Again, the result is savings through efficiencies.
A second consideration related to the “soft” costs of electricity – namely costs of land permitting, interconnection and inspection – is part of the paradigm shift as well. A significant portion, sometimes up to 30% of upfront costs of residential PV system, are accrued simply from a patchwork of fees charged for these necessary regulations over connecting a power generator to the grid. However, programs like this one are targeting these costs to streamline the processes. Again, suddenly the burden of complexity is shifting toward centralized power. I couldn’t find a thorough study on soft costs of massive power plants, but at least try to imagine the legal and administrative costs of laying transmission lines across multiple jurisdictions and properties, not to mention the infrastructure requirements of building substations and transmission lines. Localizing these processes provides a simpler solution to reducing the soft costs of generating power.
So if you’re considering going solar, think about all the benefits you can contribute to beyond your own electricity savings…you’re helping the entire grid!
Posted by Stuart Ivy
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