Deep Blue NRG Group: Renewables and the Utility

There is no question that renewable energy and sustainability have proven not to be a fad, but rather a fundamental shift in corporate responsibility and a source for job creation. Indeed, there is tremendous amount of activity on smart grids, time-of-use metering, energy efficiency improvements and energy conservation. What still remains a subject of much speculation is how these new sources of renewable energy integrate into our current, centralized-utility-based infrastructure.

Two possible evolutionary scenarios for the deployment of renewable energy exist. The first is a “centralized” renewable energy delivery model predicated on a modified utility delivery infrastructure. In this model the utility rate bases the renewable assets along with the distribution system and sells this green energy to the consumer. The second is a “decentralized model” in which each building/home or community is not connected to a utility grid and the consumer is the investor in the renewable assets.

Based on the evolution of technologies and adoption rates of these renewable technologies by consumers, it is pretty clear that the decentralized model has a leg-up. By taking a closer look at the data, it is irrefutable that the energy consumption loads for heating and cooling buildings and residences have been in a constant state of decline, primarily due to energy efficiency measures and building standards improvements. Ten years ago, an average newly constructed home in Southern Ontario consumed approximately 2,300 m3 of natural gas per year for space heating. Today, the same home built according to the latest building code consumes approximately 2,000 m3 of gas per year. As the buildings envelope tightens, it becomes more and more cost effective to go off-grid. Further, much of the technology development in the arena of power generation has been an enabler of the decentralized model. Micro-CHP, geothermal, solar thermal and PV are all examples of technologies that easily fit in the decentralized energy scheme with limited encumbrance from regulatory red tape.

On the other hand, many North American utilities have been looking at deploying district energy systems to serve both their residential and commercial customers. District energy is nothing new; there are over 200 million people, primarily in Europe, that are connected to hot water or steam distribution systems. Electric utilities may utilize a district energy system to offset peak cooling loads by providing their consumers with chilled water, while enhancing their revenues by providing space heating, water heating and distributed generation services. Gas utilities want to integrate district energy systems to facilitate the integration of renewables into their distribution systems and get access to consumer cooling loads diversifying their energy delivery system to a more flexible delivery backbone.

One thing is certain: as the prices for renewable technologies continue to drop, and building envelops continue to improve, the investment profile and role of the utility, as we know it, will need to evolve.