Renegade power users: ditching a crumbling energy system
Look at your electricity bill. It's way higher than the Levelized Cost of Energy (LCOE) you see on Lazard, EIA, or elsewhere. The obvious reason is price versus cost - the utilities and hardware vendors need profits. Fine, but there's more, and it should make us consider abandoning the large centralized grid system altogether. Here's an example from my last bill. The cost of of the electricity is less than half of the bill!
| Item | $/kWh |
|---|---|
| Supply | 0.112 |
| Distribution and Transmission | 0.130 |
| - Distribution Charge | 0.060 |
| - Transmission Charge | 0.040 |
| - Revenue Decoupling Charge | 0.002 |
| - Distributed Solar Charge | 0.003 |
| - Renewable Energy Charge | 0.001 |
| - Energy Efficiency | 0.017 |
| - Residential Customer Fee Average | 0.007 |
| Total | 0.242 |
Price Takers
The first reason prices are so much higher than costs is that you're just a tiny residential nobody with no bargaining power, and the utility can charge you basically whatever it wants. You'll pay - sucks to suck. Sure, it's a regulated company with externally determined prices, but you are the most powerless customer and will take on the burden of supplying most of its profits (haven't verified this). Commercial and industrial customers get better prices, as they have more bargaining ability and often have the option to go off-grid with their own power plants. But it's also a bit cheaper to distribute power to one giant customer than many tiny ones. While the prices are regulated, there's no knowing how much the regulator's price estimates have creeped up over the decades to match the utilities.
Transmission, Distribution, and Administration Costs (TD&A)
The second reason the paid price is higher than expected is transmission and distribution, making up 54% of the price in this bill. There are significant infrastructure costs and power losses needed to deliver energy from large centralized power plants to many geographically distributed end-users. The grid needs transmission lines, substations, and distribution networks, supported by an administrative organization to plan, operate, and maintain the network. Transmission losses in the US range from 2 to 8% (see EIA Table 10 for each state) of generated electricity. And of course, utilities have to make some money on this service and loss as well.
The below TD&A costs per kWh are for US investor owned utilities. It's quite a bit less than the TD&A price charged in the above bill, as the bill has to include some profit margin and the extra residential sucker margin.
![1. Average annual Transmission, Distribution, and Administration Costs (TD&A) costs per kWh for US
investor owned utilities.[1]](/assets/images/average_transmission_cost-e65cc7d74062fa6406e5e830e4572109.png)
Options for Renegade Power Users
These TD&A costs can often be nearly eliminated when an organization goes off-grid by investing in its own power plants. Large grids, run by large regulated monopolies, are expensive and will get more expensive with increasing renewable penetration as the grids are forced to build extra TD&A infrastructure to support intermittent power sources. If you have the demand and capital, you're better off building and distributing your own power without the grid's baggage. Become an energy renegade. You won't be subject to the same political and cultural forces that coerce big utilities to create unreliable or polluting grids. You'd get to make your own choices and save about 0.13 $/kWh! The savings will only get higher over time as TG&A costs increase. And you can use those savings to purchase and operate more capable power generators. For example, zero-carbon power sources that use low quantities land and materials, and produce power on-demand...
The main benefit of big grids is the predictability of power demand when the number of users is large - basically many people's spiky demand curves are averaged into a nice and smooth demand curve. And the utility can harness scale economies with huge optimized power plants and centrally managed transmission networks. Going to a smaller grid means the demand curve is spikier and more intermittent. This requires more capable power generating assets that can change their power quickly and don't lose too much money when they aren't operating - like a diesel generator or an engine. Even a natural gas plant is not quite capable of extremely rapid power changes which a house would demand.
Solar and wind are not the answer. Their expansion will only raise TD&A costs as utilities expand grid infrastructure in order to average out the intermittent power generation. Wind and solar expansion forces the utility to link grids and increase throughput across wider geographical areas. Sunlit panels in LA can power NY in the evening or a bright Sahara Desert can power cloudy Europe. Since 2010, TD&A costs per unit energy have been increasing in the US and it may be related to the wind and solar expansion.
A near-term solution to drive down TD&A costs without sacrificing power reliability is the Micro Modular Reactor (MMR) - a fully contained energy dispatch system for electricty and heat. The unit size of 5 MWe is small enough to accommodate the tiniest users at the very end of the distribution network like a campus or small city, but can be linked with multiple units (dozens) to satisfy very large power users like a factory or chemical plant. Large scale distribution and transmission costs can be radically reduced, and any remaining costs would be locally controlled and managed. Crucial advanatage of an MMR, is its ability to meet rapidly changing demand on the order of minutes or months - a feature no other generating and storage combination has yet achieved. Other nuclear reactors just can't do this. The 100 to 300 MWe Small Modular Reactors proposed by NuScale, TerraPower, X-Energy, and GE-Hitachi - these are baseload behemoths in comparison to the nimble MMR which can change power rapidly to meet micro-grid demand curves. Indeed, these SMRs are only cost competitive in 4 to 6 unit deployments at large power stations, and do nothing to address the TD&A problem.
You might think that abandoning the grid is a reversal of Edison and Insull's first utilities, where decentralized energy gensets were replaced with centralized power stations and electricity distribution networks. Their centralization efforts achieved a roughly 2-4x reduction in electricity costs.[2] But centralziation has gone too far. We now have behemoth utilities and powerplants, servicing entire countries or regions. They are collapsing under their own weight. They can't decarbonize because the large-scale nuclear powerplants haven proven too big and complex to build cost effectively. The power assets they do implement are cheap natural gas plants that emit carbon and pollutantns, or wind and solar that require massive TR&D escalations. Either way, they are not able to deliver zero-carbon reliable energy. This utility behemoths are a far cry away from the original scope of Insull's utilities serving relatively small groups of customers on county and state scale. I believe a utiliity can fully capture scale economies with only a few thousand diverse users.
Decentralized Heat
There is further motivation for the micro-grid trend in that heat applications, roughly a third of greenhouse gas emission from fossil fuels, require on-site heat generation. In practice, today's process heat applications are already micro grids for heat generation.
Process heat is used across industry to create goods and materials. Paper, chemicals, plastics, electronics, engines, cement, metals, food – basically all goods and materials require heat during production. Currently, process heat comes from burning of fossil fuels or electrical heaters at a given industrial site. This adds up to nearly a third of fossil fuel emissions today. IEA predicts that industry will cause 42% of car- bon emissions in 2040.
A nuclear micro grid produces steam that travels through insulated pipes across an industrial site or community and even to adjacent sites or a district steam infrastructure. Steam is widely used for turbines, process heat applications, and district heating. Since the industrial revolution, steam generators have been a mainstay at factories and industrial sites. The nuclear micro-grid seamlessly replaces fossil fuels and electrical heaters as the heat source.
Carbon free alternatives for process heat are not available. Other nuclear heat sources have too large a unit size, with too low temperatures, and lack the ability to scale as the user’s needs change. The renewables route is not very effective at direct process heat applications as it requires electrical to thermal conversions, large electrical storage, the right site potential (sun and wind characteristics), and significantly more acreage which may not be readily available near industrial areas.
Save on Transmission, Spend on Zero-Carbon Energy
We're better off spending money on safer and more capable generating assets than on expensive transmission and distribution infrastructure. Only renegade power users will be able to avoid the coming electrical price hikes and blackouts required to support intermittent energy sources on a large grid. To be a renegade, you have to have the capital and decision making power to abandon ship. Rooftop solar with battery packs isn't gonna do the trick for anything other than a small house where blackouts are tolerated. The rest of us will be stuck paying higher grid prices for worse services.