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Getting Off The Grid

The sun shines just about every day across Puerto Rico, and the trade winds continue to blow as they almost always do. Yet when darkness comes, most of the island remains blacked out, as it has for more than a month since Hurricanes Irma and Maria trashed the power grid.

The short-term solution is to repair the grid ASAP. But maybe the longer-term answer, in Puerto Rico and perhaps nearly everywhere, is to get rid of the grid as we understand it altogether.

Until recently this solution was a pipe dream. Without large subsidies and many regulatory advantages, generating electricity on the small scale of residential or neighborhood installations could not compete with the far lower costs of burning carbon-based fuels in massive central power stations. Even as solar and wind power have taken hold, economics tilt toward the development of large installations that generate many megawatts at a time, notwithstanding the sleight-of-hand that allowed homeowners sell power back to their local utility at retail prices rather than typical wholesale.

There are, of course, individual homeowners who have gone off the grid already. But they are a minority, most of whom are willing to shoulder increased costs because of environmental or philosophical concerns. Some people simply want to live somewhere remote enough that utilities don’t have the infrastructure to serve them. But many renewable energy enthusiasts who generate their own solar or wind power still find it most practical to remain connected to the traditional utility grid; those who don’t will generally need some sort of backup generator. Some private renewable energy systems primarily serve as a backup system in an emergency, such as a major hurricane, with residents relying on the grid for their day-to-day power needs.

This is because beyond the issue of producing power cost-effectively lies the even greater problem that electricity almost always needs to be consumed nearly the instant it is produced. The sun sets every evening, and the wind blows only when it wants to blow. Neither of those schedules necessarily match up with our desire that power be available in virtually unlimited quantities at all times. Today’s grids evolved not only to distribute the power produced by huge central generators, but also to continuously balance the load between supply and demand.

This is the world that was invented in the waning days of the 19th century, and which became practically ubiquitous in the 20th. But the technologies of the 21st century open the possibility of remaking the entire power industry.

The keys may be to couple small-scale power generation with much-improved battery storage.

The Wall Street Journal recently posited that everyday Americans may find themselves living in battery-operated homes in the near future. Companies in Arizona, Vermont and elsewhere are encouraging homeowners, or sometimes home buyers, to consider the idea of investing in batteries designed to ease peak loads on the existing grid system. While such batteries are expensive, they are becoming less so, and utility companies are sometimes willing to offset the cost because of the benefits of lightened peak loads.

What about moving away from the grid altogether? The progress we are making in developing light, cheap, high-capacity batteries for transportation provides a starting point. Scaling up from there, but at the smallest level, a home or office building could install its own solar panels, wind turbines and batteries, and try to generate and store as much power as it needs (theoretically including the power needed to charge electric vehicles). This strategy might conceivably work most of the time, at least in some places. It probably would not be reliable enough alone to meet our exceedingly high standards of dependability, however.

So we would want to connect our facility with those of our neighbors. Instead of borrowing a cup of sugar from the homeowner next door, we could borrow a few kilowatts, automatically, and repay them when production permits. We might connect all the homes on a block, or in a subdivision, or in a town this way.

A version of this is the microgrid, a locally controlled electricity distribution system. Today, microgrids may or may not connect to the traditional power grid, but by definition can function without it at least some of the time. In the future, with improved battery capacity and availability, there may be no reason to look beyond the participating community. Some towns in Japan are already experimenting with microgrid systems in the aftermath of the 2011 earthquake that triggered the Fukushima power plant disaster. Many remote communities in Alaska have done the same.

We might dream bigger, though. We could balance loads over even wider areas by having our utilities evolve into something like the cloud storage industry that the computer business has largely become. Rather than eliminate the large regional grids entirely, we might rent storage space in big battery centers, akin to today’s data depositories, and put our spare power in “the cloud” until we need it. The big regional grid would become a supplement to local generation, not the primary source of our power. Power companies might become something like banks, taking our excess power “funds” as deposits and lending those funds to borrowers who can put them to productive use.

Incidentally, a project in Stockholm is using server farms that house the cloud as we know it today to warm nearby apartments. Creative thinking doesn’t have to begin and end with batteries.

In many places, we already pay more to the local utility for distributing our electricity and natural gas than we pay to the entities that actually supply it. (Sometimes those entities are the same.) Cord-cutting could take on a new meaning as we disconnect from the old 20th century grid. It’s going to take massive upgrades anyway to reverse the grid’s primary direction from the old centralized system to a more internet-like, decentralized structure. Just as the internet’s infrastructure was largely built from scratch, apart from the “last-mile” connections that many of our cable companies provide, it will likely be more effective to just build the new power interconnections as needed.

This change probably is not going to happen completely, and it certainly isn’t going to happen overnight. Certainly there will be big users that cannot possibly produce most of the power they need on-site, ranging from factories to apartment complexes. Some places will still need industrial-scale power production. But the market share of hydrocarbon fuels is destined to fall as the installed base of renewable power rises, and as the batteries we are developing today to power our vehicles scale up to power our homes and workplaces.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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