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MICROGRIDS: INSOURCING MORE RELIABLE ENERGY RESOURCES TO CONNECTICUT TOWNS AND CITIES FIRST DRAFT FOR DISCUSSION PURPOSES ONLY CONSIDERING UTILITY COMPANY BUSINESS MODELS TO BETTER ENCOURAGE MICROGRIDS2 From a business model point of view, the utility grid should be considered as an evolving bundle of property rights that, due to technological advances, have been gradually transferring from utility monopolies to non-utility stakeholders A property rights regime regulates relations among users of a resource by allocating certain rights and duties with respect to access and use of the resource. Technological innovations tend to cause changes in property rights regimes over time. Some years ago, for example, advances in wireless communications technologies have caused a change in the property rights regime over access to and management of bandwidth. The Federal Government used to allocate bandwidth with exclusive-use licenses but now bandwidth tends to be managed collectively by its users as a common pooled resource. This change in property rights unleashed new applications of wireless technologies such as cordless phones and wireless home networks. Similar changes in property rights regimes have been unfolding in the US electric industry. For example, technological trends between the early-1900s until the mid-1970s justified the concept of natural monopoly in the generation, transmission, and distribution of electricity. Since 1978, however, a number of federal and state laws and regulations have diluted the rights of natural monopolies to regulate access to the grid and invited new non-utility players and organizations to take a stake in electricity production and high-voltage transmission. By contrast, the technological impediments to interconnecting and synchronizing distributed generation at medium voltage have meant that the rights to access and manage the distribution grid in most areas has remained within the exclusive service territory of local utility monopolies. They should: it comes down to a safety issue where no one would argue about utility control, especially when it comes to protecting the lives of line wokers. Now, there have been advances in microgrid technologies for safely interconnecting microgrids to the utility distribution networks. As noted above, these innovations have coincided with concerns about the reliability, cost and environmental footprint of centralized utility grids. Many analysts now believe that this portends a change of business model for utility distribution companies that resembles similar changes when decentralized telecommunications and computing technologies emerged. 2 Note that this section excerpts from research done at the University of California Santa Cruz and is used with permission of the authors. See the full Santa Cruz research report at www .distributedenergysolutionsummit.com. Page 19PDF Image | MICROGRIDS
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