Earlier this year, Bloom Energy announced their Bloom Box. It’s a solid oxide fuel cell that uses liquid or gaseous hydrocarbons (such as gasoline, diesel or propane produced from fossil or bio sources) to generate electricity on the site where it will be used. Bloom Energy representatives assert that it is at least as efficient as a traditional large-scale coal power station.
The fanfare for the announcement was enormous; enthusiastic approbation from the Valley to the White House. Extraordinary. The genius of John Doerr of venture capital firm Kleiner, Perkins, Caulfield & Byers permeated every aspect of the announcement. And when John wants something to be big– it is big.
The next day after the announcement one of my neighbors called me. “Should we get a Bloom Box for our neighborhood and get off PG&E lines? “ he asked. My immediate thought was how silly, how preposterous. But then I began to think about it. He was right. A Bloom box is likely the wrong technical solution. But his intuition was that we needed to do something about the aging PG&E lines and local storage. He was not wrong.
It turns out that the hard asset capital investment by utilities is approximately 1/3 in generation and 2/3 in distribution. That means that for every dollar invested in building the power plants that generate our electricity, two dollars are spent on the wires that carry the electricity to our homes, offices, and industries. Of the two thirds of electrical utility investment in transmission, about half is spent on the high-powered lines that carry the bulk of electricity around the state and the balance is spent on the power lines that go from the electrical substations to our homes. Those are the power poles on our streets, the transformers hanging off of them and the wires that connect the transformers to our homes. These assets are necessary, precious and represent a staggering investment by our utilities. Frankly, they are too expensive to be replaced.
DISRUPTIVE TECHNOLOGY NECESSARY
Enter the disruptive technology – local generation including both solar and wind. Our distribution systems were designed to be unidirectional. Namely, electrical generation was to be done by the utilities at a few locations and the power transmitted through long-distance high-powered lines to substations and then to the local distribution system to our homes. Now all of a sudden the unanticipated: unidirectional distribution of power is disrupted by tens of thousands – soon to be millions – of local sources of electrical generation. The distribution system simply was not built to do that. And it’s going to break.
One place that’s calling out for new solutions for generating electricity is in Hawaii where electrical prices are extremely high. In Hawaii, 100% of the fuel source for electrical generation is based on fossil fuels that need to be imported. In Hawaii, the justification for solar is enormous. And, Hawaiians have responded. Solar is widespread. But, utilities are complaining that they cannot support local generation. It’s really pretty simple. Weather changes very quickly. In that tropical paradise, when a cloud covers the sky stopping local solar generation at one house it usually covers an entire island. So the very bright and intense sun falling on thousands of solar collectors one minute is completely blocked the next minute by dark, thick clouds: all solar electrical generation ends. Big deal?
Yes. A very big deal indeed. The people of Hawaii don’t like brownouts any more than Manhattanites. No one does. And so the electric utilities must have what are called standby “spinning reserves” which are available to fill-in for the over-shadowed solar collectors. Spinning reserves are usually some form of gas-fired turbine, but could be almost anything. In Hawaii, it they are always fossil fuel driven. Spinning reserves means just that – they’re spinning. They need to be running all the time even though they are generating little or no electricity. They need to be running because it takes many minutes – in some instances hours – to get up to full generation capacity. So to avoid brownouts when the sun keeps darting in and out of clouds overhead these reserves must be running, consuming considerable precious, expensive fossil fuel. The net result? The cost of maintaining the system a reliable steady electrical supply in Hawaii with local solar generation is almost as expensive for the utilities as supplying electrical generation without solar. From a cash flow standpoint it’s much worse. The utilities earn nothing for the generation supplied by solar collectors and yet they have to spend money to maintain the spinning reserves just in case a cloud shows up. The utilities are big losers because of solar and eventually the price of utility generated electricity will have to go up – probably a lot.
On my street in Berkeley, California the energy problem is somewhat different. We rarely have extreme variations in weather, and storms can be predicted well in advance.
We have another challenge. It involves our love of electric cars. In fact I’ll make a bold prediction. Our block in Berkeley will be the first block in the world in which every home has some form of plug-in electric. But therein lies the problem: each of these electric vehicles will demand as much power as everything else in a typical home running most of its electrical devices. So our problem is that our aging electrical distribution system won’t be able to support the amount of electricity that will be demanded by a whole city block in which every home is charging one or more electric vehicles simultaneously. The transformers on the power poles will just melt. There are a number of proposed measures to ameliorate this, some of which are in the works. These measures include intelligent software that provides a “round robin” approach to when your vehicle gets charged, avoiding the problem of multiple vehicles being simultaneously charged in a neighborhood. But even this “round-robin” approach won’t work for us. It takes several hours to charge an electric vehicle and there aren’t enough hours in the night to avoid many cars being simultaneously charged if we expect to be able to drive to work the next day. The demand of sixty or so hungry electric vehicles will overtax our approximately eighty-year-old electric power distribution. And so for us, the problem that we will eventually face is the same as the nations. It is the viability of the existing distribution infrastructure supporting such intensely increased demand.
LOCAL STORAGE PROVIDES OPPORTUNITY FOR INCREASING DEMAND FOR ENERGY
Fortunately there is another alternative. Local storage.
A solar system coupled with local storage enables a kind of self-sufficiency with respect to each home or group of homes. Namely, excessive demand can be buffered by locally provided and previously stored electrical power. In Hawaii, when Oahu is covered by clouds, local batteries can begin to supply electrical power to homes without overtaxing the Oahu utility. While the clouds shade the solar collectors, batteries can provide sufficient power to meet electrical demand without a brownout and if the cloud cover is lengthy the electrical buffer stored in local batteries is sufficient to provide the utility time to start up their generators from a cold start. This completely obviates the need for maintaining expensive spinning reserves.
CLAREMONT CREEK VENTURES IS SEEKING INVESTMENTS IN LOCAL AND NEIGHBORHOOD STORAGE
At Claremont Creek Ventures, we are actively looking for investments in storage, both local storage and neighborhood storage. We are also looking for software and hardware combinations to control and manage local electrical demand. We think there is a huge marketplace and rich opportunity here and welcome the inquiries of companies looking for funding in this area. It is an extremely important part of the future complexion of electrical generation through alternative and renewable energy both domestically and internationally. Claremont Creek Ventures plans to play a role.