Innovations in the way electricity is created and delivered are already under way to transform the electricity system worldwide in the coming decade – and the innovations may be coming from surprising places.

“Other nations understand their success as nations depends almost entirely on their ability to electrify,” said Chris Hickman, CEO/President, Innovari, told GridWeek 2012 in Washington DC Oct. 2. Countries dealing with unreliable or insufficient power supplies are looking at distributed generating sources and microgrids in very different ways than the US does, he said.

For instance, Hickman said, in an isolated village with no access to a central grid, installing one turbine, powering a single building housing multiple refrigerators for shared use, can be a transformative microgrid.

In the US, many people talk of using microgrids to “secede” from the larger power system which functions well, he noted.

Terry Mohn, CEO, General MicroGrids, and head of a UN working group on microgrids, said the whole electric industry can benefit by providing services in impoverished areas. Those areas are innovating in “leapfrog technologies,” he said, and just as cell phones leapfrogged the need for telephone land lines, microgrids are obviating the need for long transmission lines.

Major Industry Transformation Could Lie Ahead

The industry will experience “reverse innovation,” he predicted, where US innovations taken to developing nations will be further adapted and brought back to the US as new – and possibly technologically disruptive – concepts.

What will those innovations look like? No one’s predicting. Speakers pointed to smartphone apps, which no one envisioned 15 years ago, and said the electric industry is about to experience the same magnitude of transformation that the telecoms industry did.

Speakers said smart grid and microgrid innovations in the US are spreading slowly in part because of the current state regulatory system. Regulators want to see proof of value before they endorse investments, creating a risk-averse atmosphere.

In addition, the current regulatory system increasingly doesn’t even address the new services that are emerging as technology enables more ways to create and deliver electricity.

Increasingly, the system is trying to fit irregularly-shaped pegs in round holes, speakers agreed, as new services at both the wholesale and retail level are devised, like various ancillary reliability services and customer microgrids.

A major current dilemma for state regulators is how much to credit owners of small generators and microgrids, especially how to distribute the costs of a central grid.

While microgrid owners typically generate a lot of their power from their own resources, like solar panels, “every microgrid uses the utility grid as a backup,” said Tom Kuhn, President, Edison Electric Institute.

Nancy Ryan, Deputy Executive Director, California Public Utilities Commission, said the concern is that high-income customers can install solar panels and get paid full retail rates for excess power, low-income customers have subsidized rates under state law, and the “struggling middle class” ends up paying for the grid and subsidizing them both.