In February, I pointed out that electric utilities only manage to sell about 30% of the energy value of their primary fuels. The remaining 70% is lost in heat during generation, transmission and distribution. Technical approaches to capture much of this opportunity are well-known, and around the world are many examples of their effectiveness. Locating generation much closer to the likely demand reduces lines losses dramatically, and finding meaningful uses for heat improves fuel productivity.
Locating closer to demand opens up vast new possibilities to use the heat from generation as a saleable utility for district heating and cooling systems serving entire neighborhoods and, down the road, even complete cities. North America, and Canada in particular, are rediscovering the values of district energy systems especially with modern dispatching, metering and network systems. As the overall greenhouse gas footprint of cities becomes visible and tracked, more district energy systems will appear.
We are beginning to see the same irony with district energy we saw with urban trolley systems. Fifty years ago, we tore up the tram tracks, and now we are investing lots of money to put them back. Utilities that work with communities to sell their “waste heat” will not only get ahead of the curve of this trend, they also will find they might actually make money by selling a product — heat — they previously paid good money to get rid of. Clearly, this needs a new kind of dialog between cities and utilities. However, as utilities consider sizing and siting new capacity, maybe they should be actively considering whether heat can be an added product opportunity, and team up to build the strategies that make this possible.
Communities have a vested interest in attracting high-quality industrial employment, and many underestimate the potential value that clean, economic, reliable energy services could bring. By understanding potential investors’ complete energy needs, including electrical quality and reliability, process steam, heating and cooling, compressed air and natural gas, communities could develop new energy strategies that are both highly efficient and much more productive. The recent steps Austin, Texas, is taking in this direction are a good example.
These more integrated approaches to energy services can deliver lower-cost, more reliable multi-utility services along with dramatically reduced pollution of all types, including greenhouse gases. Utilities that get ahead of this curve are likely to be the winners as greenhouse gas reduction measures spread across the country from California and Northeastern states.
This pressure only will increase as cities become more conscious of the value of integrating efficiency downstream and upstream of the meter into their urban energy planning. For example, as increased air-conditioning loads find their way into cities, even in areas that climatically really don’t need it that much, utilities have to invest more in generation and distribution capacity that is relatively lightly used, increasing operating costs and reducing returns on investments. The greatest value of the combination of energy efficiency and renewable generation, such as photovoltaic, is in avoiding supply-side capacity investments.
Unfortunately, this is rarely how they are seen. Efficiency is seen as reducing revenues, and local renewable generation is viewed as competitive generation or an irrelevant nuisance. A utility business plan driven by maximizing long-term returns and minimizing long-term infrastructure investments would logically view these differently, embracing them as a high priority in the mix of their supply strategies.
The sweep of history is making cities, industries and private customers more energy- and climate-savvy. We are beginning to understand the intrinsic lack of productivity in an electrical system that fails to use at least half its fuel effectively. This is affecting industrial customers’ other costs, especially natural gas. This awareness is beginning to change the commercial and regulatory dialogue. Utilities that manage to leap the fence from the one-dimensional, electricity-only model to a multi-utility energy services model will be the winners for the next 100 years.
We can help them by supporting regulation that rewards integration and by seeing utility productivity and returns as the key measures of success. We should become better informed customers and be prepared challenge the way we team up with communities and utilities to get the multiple energy services we need to meet the climate and cost challenges of the coming decades. The days when the traditional meter was an insurmountable barrier between two worlds are, thankfully, numbered.
Peter Garforth is principal of Garforth International LLC, Toledo, Ohio. He can be reached at [email protected].