Assessing the Role of Distributed Power Systems in the U.S. Power Sector

Energy Security Initiative at BROOKINGS Assessing the Role of Distributed Power Systems in the U.S. Power Sector A Report by: The Brookings Institution Energy Security Initiative The Hoover Institution Shultz-Stephenson Task Force on Energy Policy OCTOBER 2011 Energy Security Initiative at BROOKINGS Assessing the Role of Distributed Power Systems in the U.S. Power Sector A Report by: The Brookings Institution Energy Security Initiative The Hoover Institution Shultz-Stephenson Task Force on Energy Policy OCTOBER 2011 About The Brookings Energy Security Initiative The Energy Security Initiative (ESI) is a cross-program effort by the Brookings Institution designed to foster multidisciplinary research and dialogue on all aspects of energy security. ESI recognizes that public and private choices related to energy production and use will shape the global economic, environmental and strategic landscape in profound ways and that achieving a more secure future will therefore require a determined effort to understand the likely consequences of these choices and their implications for sound policymaking. The ESI Policy Brief Series is intended to showcase serious and focused scholar- ship on topical issues in one or more of these broad research areas, with an emphasis on targeted policy recommendations. Brookings recognizes that the value it provides to any supporter is in its absolute commitment to quality, independence and impact. Activities supported by its donors reflect this commitment, and the analysis and recommendations of the Institution’s scholars are not determined by any donation. Contact for the Energy Security Initiative: Govinda Avasarala Research Assistant (202) 797-6231 [email protected] About The Hoover Institution’s Shultz-Stephenson Task Force on Energy Policy The Hoover Institution’s Shultz-Stephenson Task Force on Energy Policy addresses energy policy in the United States and its effects on our domestic and international political priorities, particularly our national security. As a result of volatile and rising energy prices and increasing global concern about climate change, two related and compelling issues—threats to national security and adverse effects of energy usage on global climate—have emerged as key adjuncts to America’s energy policy; the task force explores these subjects in detail. The task force’s goals are to gather comprehensive information on current scientific and technological developments, survey the contingent policy actions, and offer a range of prescriptive policies to address our varied energy challenges. The task force focuses on public policy at all levels, from individual to global. It recommends policy initiatives, large and small, that can be undertaken to the advantage of both private enterprises and governments acting individually and in concert. Contact for the Shultz-Stephenson Task Force on Energy Policy Jeremy Carl Research Fellow 650-723-2136 [email protected] assessing THE rolE OF distribuTEd PO wER SystemS In THE u.S . POwER sector II Foreword The provision of reliable and secure energy to Many energy analysts have noted the potential meet the growing demands of this century, in a for DPS to become a major part of our electric- way which mitigates the adverse effects of climate ity infrastructure. The recent drop in key tech- change, is an existential challenge to the human nology costs has brought this potential closer to enterprise. A failure to meet the challenge would reality. But in this rapidly developing field, the pose grave risks to the functioning of world econ- great progress on the technological front has yet omies, the nature of societies and our endangered to be fully matched by progress in policy making. ecosphere. In fact, the degree of success in this And major questions of affordability, integration, area will be a big determinant of whether this will and security remain to be answered before we can be the best or the worst century for humankind. determine what role distributed energy sources should play in our future energy system. One proposed method for improving the economic, environmental and energy-security per- DPS offers the potential for more reliable, secure, formance of the U.S. power sector is the adoption and green energy. It can encompass everything of distributed power systems (DPS), a combina- from fuel cells providing electricity and clean wa- tion of distributed generation and electricity stor- ter to a remote army outpost in Afghanistan to age technologies. In this inter-disciplinary paper, solar panels on the roof of a home in Arizona. At scholars from the Brookings Institution’s Energy the same time, possible pitfalls related to DPS use Security Initiative and the Hoover Institution’s must be seriously and realistically addressed be- Energy Task Force evaluate the case for greater fore we make a major commitment to a distrib- deployment of DPS. The chapters which follow uted energy future. set out a number of considered conclusions and clear recommendations for all policy makers who This report provides a comprehensive survey of have a responsibility for ensuring the security and the current technology and policy landscape of sustainability of our energy system now and for DPS and offers recommendations for its future future generations. use. As it highlights the importance of an emerg- ing, critical policy issue that has not received the Strobe Talbott full attention it merits until now, we believe the President report will be useful to policy makers and practi- Brookings Institution tioners alike. George P. Shultz Thomas W. and Susan B. Ford Distinguished Fellow The Hoover Institution assessing THE rolE OF distribuTEd PO wER SystemS In THE u.S . POwER sector III Acknowledgements he authors would like to thank a number of people involved in the research, writing and production of this study. First, they would like to thank Charles Ebinger, the director of the Brookings Energy TSecurity Initiative, and George Shultz, chair of the Shultz-Stephenson Task Force on Energy Policy at the Hoover Institution, who conceived of the project. Ebinger provided insights to the conclusions and recommendations, and was a keen reviewer of many iterations of the report. Secretary Shultz of- fered key strategic direction, valuable critiques of early drafts, and an invaluable perspective and insights from his extensive expeience in policymaking at the highest levels. Ambassador Thomas Stephenson has supported the Work of the Shultz-Stephenson Task Force on Energy Policy with both his generosity and his counsel. The authors would also like to thank Yinuo Geng and Caldwell Bailey for their significant substantive contributions to the report and Govinda Avasarala for his input and coordination efforts. Brandon Smith served as intern on this project and was helpful with research assistance. The author’s owe a special thanks to Richard Kauffman, Nathan Hultman, Snuller Price, Bradley Schoener and Ted Piccone for their timely reviews and feedback. The authors are also grateful to the academics, government and industry officials and regulators for responding to various survey requests and for being so forthcoming with their experience and insights. Gail Chalef, Robin Johnson and Chris Krupinski were invaluable in the editing, proofreading and printing process. assessing THE rolE OF distribuTEd PO wER SystemS In THE u.S . POwER sector Iv the Authors This report was co-written by authors from the Brookings Institution and the Hoover Institution. The Brookings Institution The Hoover Institution John Banks Jeremy Carl Nonresident Fellow, Energy Security Initiative Research Fellow, The Hoover Institution The Brookings Institution Director of Research, Shultz-Stephenson Task Force on Energy Policy Kevin Massy Assistant Director, Energy Security Initiative Amy Guy Wagner The Brookings Institution Senior Consultant E3 Lisa Wood Executive Director Pedram Mokrian Institute for Electric Efficiency Principal Nonresident Fellow, Energy Security Initiative Mayfield Fund The Brookings Institution Contributor, Shultz-Stephenson Task Force on Energy Policy The Hoover Institution Jelena Simjanovic Senior Research Assistant, Shultz-Stephenson Task Force on Energy Policy The Hoover Institution David Slayton Commander, United States Navy National Security Affairs Fellow The Hoover Institution assessing THE rolE OF distribuTEd PO wER SystemS In THE u.S . POwER sector v tAble oF contents LIST OF ACRONYMS................................................................... viii EXECUTIVE SUMMARY .................................................................x INTRODUCTION ........................................................................1 CHAPTER 1: OVERVIEW OF DISTRIBUTED POWER SYSTEMS ...........................4 1.1 DPS in context.....................................................................4 1.2 Definitions .......................................................................6 1.3 Overview of DPS Technology .......................................................9 Solar .............................................................................9 Wind ............................................................................10 Combustion Engines ..............................................................11 Microturbines ....................................................................12 Combined Heat and Power (CHP)...................................................13 Microhydropower .................................................................14

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