No Strings Attached: The Case for a Distributed Grid and a Low-Oil Future

Co-authored by Rachel Kleinfeld and Chelsea Sexton

Energy policy affects every human activity, from the heating of food to the production of microchips. And because of this pervasiveness and interdependence, energy policy affects a broad set of issues, from national security to international corruption. Pollution, health, climate change, and cost must all be taken into account when devising, as Amory Lovins put it, how to keep our beer cold and our showers hot—and much else besides. Moreover, the demand for new energy solutions worldwide is vast, particularly as the developing world catches up to the rest of the planet’s energy demands. Whatever new energy solutions meet the needs of the two billion emerging consumers will create a huge market, but also a challenge to find available and scalable solutions. Therefore, we believe it is necessary to find answers that at best alleviate multiple problems, and, at worst, don’t exacerbate one problem while curing another.

To help us consider energy approaches in the round, we have conjured a trio of ghosts who represent three crucial positions. The first is General George S. Patton, the hard-bitten standard-bearer for crushing our enemies and ensuring American security, who worries about our weakness and vulnerability to those with malevolent intent. What sort of country have we become, depending on an electrical grid that is routinely hacked by the Chinese (not to mention American teenagers)? And how did we get into a situation where every gallon of oil we buy enables Saudi Arabia to increase a global commodity price that pours money into the coffers of Russia, Venezuela, and Iran—and finances schools for terrorists?

Rachel Carson, our second ghost, woke the world to the fact that the chemicals and pollutants that were creating miraculous new plastics and pesticides were also destroying human health and natural habitats. But from her perch in the afterlife, she has also noticed that although SUV-driving soccer moms surely have nothing against Bangladesh, their carbon dioxide emissions may nonetheless be slowly causing it to sink into the sea. She worries about the unintended consequences that our energy choices have on our health, pollution, and climate. She believes there are “malignant problems,” caused not by malevolent intent, but by complicated, interconnected systems causing inadvertent side effects.

For the third set of problems, those faced by the wretched of the planet, we call upon their greatest spokesman: Mahatma Gandhi. The masses he spoke for live where the energy grids do not reach, or where corruption and neglect have left such grids useless. It is in these regions that farmers struggle to survive as climatic changes undermine the arability of the small plots of land they depend on for subsistence. It is in their villages that girls must decide whether to sleep in the cold and eat unheated food, or risk the chance of rape that accompanies the daily search for firewood. And it is in their huts that women die early of lung disease after years of crouching over the smoke of dung fires. Gandhi is also a spokesman for local self-sufficiency and what it can do for prosperity in the village, as well as against tyranny. His charkha—the small spinning wheel at the center of India’s flag—embodies these goals.

Our energy decisions should answer the threats that anger Patton, the quality-of-life issues that concern Carson, and the cries that woke Gandhi to his life’s mission. Not only is each position important, but they are all often interdependent. Gandhi’s wretched masses can cause security problems, just as environmental degradation can make life worse for the poorest of the poor. We are not searching for a single solution, but for a portfolio of options that together meet the key concerns of our three ghosts, solutions that can begin working immediately, given today’s infrastructure realities.

With regard to electricity, our investigation has led us to conclude that distributed generation—including a disaggregated grid that produces electricity close to where it is consumed and that can “island” to support small communities while securing itself from cascading grid failure—is key to solving the complex mix of energy problems we face. Such distributed generation would rely more heavily on local facilities producing energy from renewables such as solar, wind, and geothermal power, with a significant role for natural gas as a baseload that could “firm” or supplement the other, intermittent sources.

America operates from two almost completely disconnected energy systems: a transportation network that is ninety-six percent fueled by oil, and a largely coal-based electrical grid in which oil plays a measly two percent role. To substitute domestic energy sources for oil wherever possible, we must reconnect electricity and transportation. This can make a major contribution to substituting locally generated electricity and domestic fuel as substitutes for oil. We suggest a shift toward plug-in vehicles complemented by efficiency improvements to remaining internal combustion engines. We also suggest using advanced biofuels, and moving trucks and “fleet” vehicles to natural gas where electrification is less efficient. These changes are relatively simple to make, and some can be accomplished with minor modifications to today’s vehicle fleet and changes in the manufacturing processes—and all within our existing infrastructure. They do not require waiting for major changes or technological breakthroughs.   

The Electrical Grid. Considered from Patton’s perspective, our electrical grid is the security equivalent of a house left with the door unlocked, the windows open, and millions of dollars of jewelry and home entertainment equipment strewn about for the taking. If anyone wished to launch a national blackout, they could coordinate attacks in a few rural grassy fields, where major transformers are located. If enemies didn’t want to bother with the travel, our grid is laughably open to cyber attack. And when the electrical grid fails, it is not only the lights that go out. Our grid vulnerability means that should a failure occur, our water, sewage, phone, and transportation systems, not to mention our medical and most of our basic economic functions, would cease within days to weeks.

Patton’s first move would be to make the grid much more resilient, so it can “island” into micro-grids in the event of an outage, preventing a single failure from cascading into a catastrophe. The vast majority of homes and businesses would stay connected to the grid, but would harness solar, wind, geothermal, and other local renewable energy sources for an important share of their power needs. New policies would force utilities to allow a power payback system (i.e., a feed-in tariff), enabling individuals and commercial enterprises to sell the electricity they generate in excess of their own needs back to the grid and earn money on their investment. We would still have a national grid transferring bulk electric power over transmission lines on steel towers and via large transformers. We would simply build into our existing distribution grid the capability to island and separate when need be. (If the transmission lines are analogous to freeways, the distribution lines on telephones are the on- and off-ramps and local streets and roads.) Neighborhoods or towns would have the ability to cut themselves off from the rest of the grid if a major share of it were taken down by anything from a terrorist attack to falling tree branches. Micro-grids could provide many households, schools, and businesses with enough power to function during even a long-term emergency, rather than forcing populations to face the cascading total failure of lighting, plumbing, refrigeration, heating, and other infrastructure that an attack would cause today. By building resilience into our current grid, we could have both the benefits of a national grid system and the flexibility of distributed, independent generating capacity.

Distributed generation at this scale, however, cannot be fueled by renewable energy sources alone. Even if we could vastly re-scale distributed renewable sources quickly, wind and solar power are too intermittent. Too much wind or too little, cloudy days, and other oscillations cause fluctuations that must be evened out and supplemented with additional power in order to flow easily through the grid. Nuclear power could, theoretically, play this steadying role, forming the baseload power source for a distributed generation future. It would, however, require overcoming a number of obstacles, the most important of which, from Patton’s perspective, is the threat of nuclear proliferation. In a number of countries, domestic producers of nuclear power plants are certain to try to export this technology. Today’s main nuclear energy technology requires the use of light water reactors, which, at the scale needed to enable electricity generation, put the country that possesses such technology just a few cycles away from having weapons-grade fissile material.

Coal is another obvious candidate as a baseload fuel, but here Carson’s concerns come to the foreground. Coal accounts for nearly forty percent of our current carbon dioxide emissions, not to mention the noxious chemicals, mercury, and mountaintop destruction caused by mining and burning coal. Carson, a scientist by training, knows that carbon sequestration technology may, someday, reduce these side effects. But the technology isn’t yet practical or affordable. It can take years to get through the litigation and permitting for a new transmission line, and building a nationwide pipeline system to transmit carbon dioxide (from where it is released to the salt caverns or saltwater aquifers where it may be sequestered) would rival the work that went into our current oil and gas pipeline network.

Considering the problems of coal, and her own worries about nuclear waste, Carson would likely conclude that natural gas is definitely the least of multiple evils when it comes to the required source of baseload power for a distributed generation future. Natural gas does emit carbon dioxide, but for efficient generators, only at about a third of the rate of the average coal plant. And because natural gas shale deposits are distributed across much of the country, and new gas plants can be made to be very small, distributing this source of fuel adds to our resilience. One downside to this option is that the abundance of new gas deposits in the United States have been found in shale rock. To extract the gas from the rock requires massive blasts of three to four million gallons of chemically treated water per well—a hydrofracturing process sometimes called “fracking.” Right now, the environmental costs could be significant. Carson hopes, however, that technological innovation and a cooperative spirit on the part of industry would make gas superior to the coal and nuclear alternatives. Meanwhile, she would want to ameliorate the disadvantages of gas by getting the most out of every cubic foot. For instance, waste heat from burning gas can be captured and used to heat water and generate steam (known as combined heat and power, or co-gen). In New York, for instance, Con Edison uses such steam power to heat more than one hundred thousand buildings, and the same technique supplies about one third of Denmark’s electricity.

Carson would also work to expand renewable energy as rapidly as possible, so that we would only have to extract a minimal amount of gas. Large solar plants and wind farms can be quite efficient at generating electricity, but rapid expansion of renewables is more likely to come from small and medium-sized commercial facilities with capabilities of less than twenty megawatts. To be commercially viable and create a market, utilities would need to allow entrepreneurs who install renewable energy platforms at a small commercial scale to sell their electricity back to the grid. This change requires small infrastructure adjustments and a large legislative hurdle: the establishment of a power payback rule—sometimes known as a feed-in tariff—requiring utilities to pay businesses, farms, and households for the electricity they produce and feed into the grid. Utilities and most public utility commissions—often mired in their ways, with little incentive to change—have opposed such energy entrepreneurship. But Germany and forty other countries have made this financing system work well.

Finally, Carson insists that we invest in energy conservation technologies. Simple changes to today’s building codes could, with today’s technology, reduce the seventy percent of America’s electricity that flows to buildings. And Carson demands that research and development improve energy storage, particularly in batteries, as well as in ultracapacitors, flywheels, and other technology. West Texas, for example, may be the “Saudi Arabia of wind,” but its energy production peaks during the nighttime hours when it is generally needed the least. Solar energy also faces storage challenges, especially as utilities are starting to see a peak in early evening hours when families return home and usage increases.

Some other innovative solutions are attracting research and development efforts. Compressed air energy storage (CAES) is one such possibility, using off-the-shelf technology to provide roughly three hundred megawatts of storage per site. As suggested by the name, the technology involves compressing air and pumping it into a cavern or other storage facility at night, then pre-heating it (either by natural gas or using waste heat captured during compression) and using it to power a turbine during the day.

Gandhi is especially intrigued by what local storage of energy can do for a village. With their flexible format and comparatively minimal size requirements, batteries are uniquely suited for micro-grid support. It’s no longer unusual to see a pallet of lead-acid batteries in a basement to store electricity generated by rooftop solar panels, but new projects of various sizes, and which use newer chemistry, have emerged. A pre-packaged “battery in a box” could provide a single residence with the ability to store either cheaper nighttime grid electricity or renewable energy for later use, while a semitruck-sized trailer of batteries could provide portable storage for commercial needs. Some utilities are planning to fill an entire building with lithium-ion batteries to support either neighborhood or industrial use, avoiding many of the not-in-my-backyard issues and site-location problems of other storage solutions.

While batteries are attractive in their flexibility, they are large, heavy, bound by cycle and calendar life, and traditionally expensive. All of these problems can be ameliorated, however, by more advanced chemistry, cooperative business models, and a decided trend toward distributed generation. Southern California Edison is experimenting with the same types of lithium-based batteries being used in vehicles, which could lead to a mutually beneficial business model: utilities and others placing large orders for new automotive-grade batteries would reduce the cost of batteries faster for both energy storage and vehicles. Further, automotive traction batteries of the type used in electric vehicles still retain sixty to eighty percent of their useful energy at the point at which they no longer contain appropriate power for cars. These used automotive batteries could be deployed into the grid system, allowing the cost of the batteries to be amortized over both uses before they are finally recycled. If, for example, General Motors had a guaranteed buyer for used Chevy Volt batteries at a known price, it could easily lower the price of the Volt itself.

Gandhi is more excited than Patton or Carson by the possibilities of distributed generation. In much of the developing world, centralized grids never developed. Where they have been established, they are often inefficient or plagued with unintended consequences. Coal fuels more than half of the electricity in India and three-fourths in China, where a new coal-fired power plant opens nearly every week. An “Asian Brown Cloud” composed of dense pollution from coal, dung, and wood fires now shadows the landmass. Approximately the size of the continental United States, the cloud not only affects respiratory health throughout Asia, but may also be harming the water cycle and crop growth—serious threats in a largely agricultural continent.

Moreover, in dictatorships, centralized grids can enhance centralized power. As Professor Bruce Bueno de Mesquita points out, Mobutu Sese Seko, the ruler of Zaire from 1965 until his death in 1997, insisted on a centralized power grid so that he could cut off electricity to any region or town that defied him.

The developing world does have one advantage, though: unlike the West, it does not need to be reacquainted with distributed energy. Cow-dung patties and scraps of firewood—self-generation based on burning local biomass, in energy-speak—continue to fuel rural heating and cooking from Indonesia to Equatorial Guinea. The challenge is largely creating the right financing packages, cultural marketing, and political policies to incentivize the switch from subsidized, plentiful, cheap fuels—which are inefficient or have harmful side effects (such as the lung disease caused by the smoke of cow-dung fires)—to energy sources that are often more expensive because they are less subsidized, and may be less understood.

Gandhi takes heart in the multitude of distributed generation initiatives underway, from Kenya (where solar photovoltaic use in rural areas outpaces new grid connections and unsubsidized photovoltaics compose seventy-five percent of the solar market) to inner Mongolia (where China’s government has enabled one hundred and sixty thousand herdsmen to draw power from small wind turbines carried along with their portable dwellings, the venerable yurts). Hundreds of pilot projects need to be designed to enable a broad solution, but they show promise.

That promise is the call of the market. The poor represent a future entrepreneurial opportunity: the worldwide energy market for the poor would be worth about $230 billion. The poor have significant collective purchasing power; they simply do not have up-front capital. Many cannot afford to connect to the energy grid, where costs can run from $50 to $300 for a connection; yet their energy demand is so great that they run kerosene generators and jury-rig dry cell and car batteries at a cost of several dollars per kilowatt-hour—an order of magnitude higher than most electricity costs. In Asia, where the majority of those without electricity reside, energy is the second greatest cost for those at the bottom of the pyramid; only shelter costs more. In India, among those earning less than $1,500 a year, $751—more than half of their income—goes to energy.

This type of financing challenge has been tackled by companies before. Unilever pioneered single-packet household goods to break into poor markets, and in Mexico, Cemex has begun packaging cement in ways that help households build their homes one room at a time, as is common among the home-owning poor. The costs and maintenance must be sustainable by the actual purchasing power of the poor, but that is an obstacle that can be overcome, particularly when energy is focused on commercial uses in the developing world before household ones.

Africa may be the dark continent today, unlit by electric bulbs on nighttime satellite images, but it is also a continent where even though only three percent of the population has landlines, more than thirty percent have cell phones. Distributed energy, Gandhi believes, offers the developing world a similar chance to leapfrog over the centralized grid-based energy development of the West, providing affordable electricity, often for the first time.

Patton, not surprisingly, cordially loathes every aspect of the oil dependence created by America’s love affair with the automobile. Filling our national tanks also pumps about a billion dollars a day overseas. Our oil deficit is a greater part of our national debt than our trade gap with China, weakening our economy and undermining our national strength. Meanwhile, our oil demand accounts for a quarter of the global market, driving up the global price of oil regardless of where we buy it. That means living the American dream is now enriching such friendly governments as those in Russia, Iran, and Venezuela. In 2008, sixty percent of Iran’s budget came from oil revenue, while a few billion dollars a year of the $160 billion we pay for Saudi Arabia’s oil finds its way to the Wahhabi schools they finance, which churn out ideology worldwide in a form that very closely resembles al-Qaeda’s in substantive terms.

And our security worries from oil don’t stop with our subsidizing our enemies. We have also tied ourselves to a vulnerable supply line that, if breached, could destroy our economy. In 2004, Osama bin Laden commanded his followers to try to attack oil infrastructures. Since then, terrorist attacks against oil sites have shot up, from fewer than ten in 1990, to more than ninety by 2004.

Channeling the brilliant Anne Korin, Patton wants to turn oil into salt. As Korin explains, until the end of the nineteenth century, salt was the only means of preserving meat. Nations depended on it, and militaries marched for it. Countries that controlled salt mines wielded power and fought wars to control these strategic commodities. Today, we season our corn on the cob without wondering where the salt comes from, or who owns the salt mines. Electricity and refrigeration broke salt’s strategic importance, and turned it into a commodity like any other.

To accomplish the same alchemy today, Patton wants a simultaneous attack on oil dependence from several directions. His current strategy rests on electrifying a significant number of American household vehicles; converting fleet vehicles that can be fueled from centralized facilities or at large truck stops to natural gas; and using efficiency improvements in internal combustion engines and advanced biofuels to replace much of the oil that is still required. These changes would begin to tie together the now separate electricity and transportation sectors.

As Patton points out, today is a good time to rethink our dependence on oil for transportation. After years of utopianism, plug-in electric vehicles (PEVs, i.e., both plug-in hybrids and fully electric cars) are coming into their own. Batteries have improved tremendously in both energy density and cost, from lead-acid and nicads decades ago, to nickel-metal hydride in the 1990s, to lithium-based batteries today. With so many multiple-vehicle households, it’s becoming clear that an electric vehicle with one hundred miles of range could easily be used for most commuting and daily errands, while a hybrid or other vehicle could be used for longer distances. Most of these vehicles will be conveniently recharged at home, overnight, while electricity is both cheap and plentiful, but even a modest amount of supplemental public infrastructure has been proven to help alleviate the “range anxiety” that potential PEV drivers sometimes exhibit.

Plug-in hybrids (PHEVs) and extended-range electric vehicles (EREVs) provide a different sort of “safety net,” with ten to forty miles of electric range and a liquid or gaseous fuel system to supplement for longer trips or high-speed travel (depending on the configuration of the vehicle). Because the secondary fuel could easily be ethanol, methanol, biodiesel, natural gas, or someday perhaps even hydrogen, PHEVs and EREVs enjoy technological and political common ground with the various alternative fuel movements, helping us avoid focusing on one technology and losing momentum on the others. Larger, non-passenger vehicles present a different challenge in the form of increased weight and mass, which require more batteries to move around, adding cost. Still, there are specific advantages and opportunities to electrifying certain larger vehicles such as street sweepers and other low-range fleet vehicles.

Carson is highly intrigued by the possibility of ending our oil dependence. Where electrification is impractical, she sees biofuels and (reluctantly) natural gas playing a role. She is increasingly pleased that we may be able to move away from feedstocks that have historically been plagued by food-versus-fuel and land and resource arguments. The land use impact of using, say, switchgrass to produce cellulosic ethanol is negligible. In 2004, the National Commission on Energy Policy reported that, with reasonable projections of improvements in switchgrass yield and vehicle mileage, enough switchgrass could be grown on thirty million acres (the size of the soil bank in question, which is already more than half planted in switchgrass) to replace about half of U.S. gasoline usage.

Ultimately, Carson stresses that we need to move into using fuel sources such as waste, grasses, algae, and such that are locally available and thus require very low collection and transportation costs, and would also be fully compatible with the existing fuel infrastructure. The costs of these fuels will be reduced further as the biorefineries that produce them also become providers of specialty chemicals for everything from plastics to food additives—products that have much higher margins than fuels. Carson adds that movement away from oil will make us healthier as well. She shudders at the fact that every gas tank in this country is one quarter full of “aromatics,” which oil companies use to enhance octane even though they are highly carcinogenic.  

Reducing oil demand suits Gandhi just fine as well. In the small number of developing countries that produce oil, rents have spawned dictatorship, corruption, and civil conflict. Commodities that command huge amounts of economic rent, as oil does today (and gold or silver did during the Middle Ages for countries like Spain), tend to solidify any preexisting concentration of power in the hands of a corrupt ruling elite that at best ignores the population and at worst cows it into submission. Autocratic governments that need not depend on taxes for revenue have no need to enrich or serve their people. It’s no surprise that of the top nine oil-exporting countries, only Norway is a democracy.

Oil debt is also a serious drag on developing nations’ economies—spurring Gandhi’s interest in biofuel research. Algae-based fuels show special promise, both for diesel and aviation fuel. At this point, non-photosynthetic algae look particularly promising, but algae that use photosynthesis are also worth further research. Craig Venter, the human genome synthesizer, has now turned his mind to algae-based fuels, while America’s military is investing in algae research as well: by 2012 the Navy plans to have the technology to run several types of surface ships on these biofuels using a hybrid electric drive.

The military is also experimenting with camelina, a flowering plant in the mustard seed family, as a drop-in fuel that may be able to power jet aircraft as well as naval ships. Brazil is already famous for its sugar-based ethanol. Pongamia, a native plant across South Asia, is another possible biodiesel source that appears to produce ten times the fuel per acre that corn can, although the trees take years to grow. Jatropha, a weed with oil-rich seeds that grows wild and thrives on marginal, non-agricultural land with few nutrients, is another possibility; India Railways has already begun using a jatropha-ethanol blend in some of its trains. Most of these seed-based oils are still in pilot projects. However, they can be used with little to no further refining in the diesel generators and engines ubiquitous throughout the developing world, and require only slight modifications to these combustion systems. They can also be grown locally, reducing price shocks that are particularly tough for the developing world.

The portfolio of energy solutions we suggest here is of course not perfect. But taken together, with increased investment in technological development and improvements, these approaches could point America in the direction of an energy posture that would satisfy the concerns of Patton, Carson, and Gandhi alike. Whether it is security concerns, environmental worries, or empathy for the poor that drives us, the shift makes sense. To power our electrical grid, combining renewables with the least harmful option of natural gas improves both security and environmental and health concerns. Retrofitting our grid to emphasize micro-grids and islanding will help reduce the brittleness of the current system. Cars should be electrified when practical, or fitted with greater efficiency improvements and fueled through drop-in advanced biofuels. These changes can all begin now, without the need to wait for major infrastructure overhauls or technological breakthroughs to get started.

Distributed generation of fuels for both electricity and transportation offers America and the developing world a path toward self-reliance, transforming consumers into owners empowered with the means of production. A new energy posture could break the monopoly of oil-based autocracies and corrupt governments, diminish vulnerability to malevolent threats, and reduce the climate change, pollution, and health concerns that harm the quality of life worldwide. Perhaps it is no surprise, and something of a harbinger of the future, that an Indian entrepreneur now markets something that would certainly have brought a smile to Gandhi’s face—the e-charkha, a spinning wheel that generates electricity as it turns.