The Great Debate

– John Kemp is a Reuters columnist. The views expressed are his own —

Households in the United States and the United Kingdom are about to experience a revolution in the way they pay for electricity.

Over the next decade, almost all homes will be fitted with “smart meters” recording the time as well as the quantity of electricity used. Most customers will face some form of dynamic pricing that relates the price they pay for each kilowatt hour (kWh) to the actual cost of generating it.

Smart meters and dynamic pricing are critical to using the generation and transmission system more efficiently while accommodating a growing share of renewables (wind, solar) on the grid without sacrificing reliability.

VARIABLE DEMAND

Power cannot be stored, and the amount demanded by customers (“load”) is highly variable, so system operators hold large amounts of generating capacity in reserve to cope with demand peaks or outages when generating units become unavailable.

Growing power consumption and the U.S. administration’s plan to rely more heavily on renewable generation sources will increase the demand on America’s already overloaded electricity grid and require major investment in transmission and distribution networks.

Upgrading power transmission and distribution systems is likely to cost as much as installing new generating capacity over the next 20 years.

While Congress provided an extra $4.5 billion of funding for grid improvements in the recent fiscal stimulus, federal loan guarantees and other support, far more investment will be needed if the administration’s targets for renewable generation are to be realized.