Business Forum: Regenerating History
By David Morris
Originally published in the Minneapolis Star Tribune, April 28, 2002
In the beginning, companies didn’t sell electricity. They sold power plants.
By 1883, Edison Electric Illuminating Co. had installed 334 generators in cotton mills, manufacturing plants, newspapers and theaters.
When central power plants emerged, they were neighborhood affairs. Edison’s first utility in lower Manhattan served only 59 customers over 12 city blocks.
During the next century, technological advances encouraged ever-larger power plants located ever-further from their customers. By 1980, a single new power plant served more than 2 million people. On-site electric generation accounted for less than 1 percent of the total. High-voltage lines transmitted electricity more than 1,000 miles from power plant to light bulb.
More centralized and remote generation required more centralized and remote regulation. Regulatory authority shifted from the city to the state and, increasingly, to the federal government. Decisions about our electricity future increasingly were made by people far away from those who would feel the impact of those decisions.
Today, we are again debating our electricity future. The crisis in California last year has focused much of that debate on potential power shortages. That is understandable, but regrettable, because it distracts us from a more fundamental question: Who will own the power plants of the future?
Minnesota and most other states don’t face electricity shortages. Supply is not our most pressing problem. Scale is.
Consumer and producer
Technological advances now encourage a more decentralized, on-site electrical system, one in which the consumer also becomes a producer.
Once again, entrepreneurs are selling power plants about the size of those sold by Thomas Edison. This year, more than 5,000 micro-turbines, fuel cells, solar cell arrays and wind turbines will be installed.
Businesses often have been among the first customers. They are willing to pay a higher price for electricity if they can be guaranteed more reliable and higher-quality electricity than is delivered by their local utility.
As the public affairs director of the Building Owners and Managers Association in Chicago says of self-generation, “it’s something we feel that every commercial property owner should look at.”
Collectively, these new tiny power plants generate an inconsequential amount of electricity. But policymakers are learning that every time a household or business installs a power plant, several voters become intense advocates of new rules that benefit small producers.
Already, 34 states including Minnesota have responded to this new and growing constituency for electricity self-reliance by enacting “net metering” laws. These allow on-site producers to spin their electricity meter backward and even sell excess electricity to their local utility.
The electricity battle is shaping up as one between centralists and decentralists.
In the centralists camp
Washington, not surprisingly, is in the centralists camp. Last summer, Vice President Cheney bluntly told the nation’s governors that if their states didn’t accelerate the construction of large power plants and high-voltage transmission lines, the federal government would step in and do it for them.
The Federal Energy Regulatory Commission is forcing Minnesota to join a new regional transmission agency that increasingly will write rules that encourage long transmission lines and preempt state authority.
On the state level, the centralists also dominate, although the Minnesota Department of Commerce is doing a good job of educating residents about the potential for distributed power.
During this legislative session, the Senate energy committee approved a bill that provided incentives for the construction of the largest power-plant complex in Minnesota history. The bill failed in the House.
State agencies have been very supportive of a high-voltage transmission line in southwestern Minnesota that ultimately would transmit coal-fired electricity from the Dakotas to Chicago.
But the decentralists are making inroads. In California, Gov. Gray Davis has directed the state’s public colleges and universities to generate their own power.
In Chicago, the new city energy plan proposes to meet its future power needs increasingly from electricity generated (or saved) inside its borders.
Sharing the benefits
In Minnesota, a consortium of southwestern counties and a private firm, Public Energy Inc., have proposed a network of low-voltage transmission lines that would allow hundreds of landowners to share in the benefits of expanded wind power. And the Metropolitan Area Energy Task Force is actively promoting on-site generation within county-owned buildings.
A healthy electricity future, of course, demands big and small, regional and local, centralized and decentralized systems.
Yet today, federal and state policymakers are focusing their political and intellectual resources mostly on designing even bigger and more centralized systems.
To me and, I believe, to most Americans, an ideal electricity system is one that shortens the distance between those who make decisions and those who feel the effects of those decisions.
It is one that gives homes and businesses the opportunity to gain a measure of energy autonomy. In these days of concern about Middle Eastern oil disruptions and terrorist attacks on nuclear power plants, we would do well to heed the words of one of the wisest of our nation’s founding fathers.
More than 200 years ago, Benjamin Franklin observed, “The man who would trade independence for security usually deserves to wind up with neither.” He was right then, and he is right now.
More information on the New Rules of Electricity at http://www.newrules.org/electricity/