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Letter to Dr. Steven Chu

December 17, 2008

Open Letter to U.S. Department of Energy Secretary-designate Dr. Steven Chu: Fix the Grid

Dear Dr. Chu:

Your nomination to lead the U.S. Department of Energy comes at a very critical time for America. Recent news headlines focus on reducing dependence on foreign oil — but it is actually electricity that is the lifeblood of our nation’s economy and quality of life, and the key to energy independence and security. Today, advocates are calling for augmenting or even replacing current sources of electricity with renewable energy but our electricity grid infrastructure that carries the power is failing. As the National Research Council, FERC and other industry experts have emphasized, today’s obsolete power grid system fundamentally limits the nation’s use of non-hydro, clean renewable energy.

The nation faces an impending disaster that lies as close as the electrical outlets in our walls — dependence on an obsolete electricity distribution system that is unreliable, inefficient and insecure. It remains a legacy developed in the first half of the 20th century and driven by monopoly regulations created in the New Deal era. And with the power system currently contributing nearly 40 percent of all greenhouse gas emissions in the U.S., the day of reckoning is indeed upon us. We hope resolving this national electricity crisis will be the top priority for your tenure as Secretary. The non-profit, public interest Galvin Electricity Initiative stands ready to help in any way we can.

During his campaign, President-elect Obama emphasized that modernizing our nation’s electricity system is a long-overdue, essential first step toward not only energy security and independence, but rebuilding a U.S. economy that is both sustainable and competitive globally. However, his plans thus far have only hinted at adding smart grid technology to the bulk power system. At the same time, the primary emphasis has been on creating a unified national transmission grid for transporting renewable energy from remote areas to cities and communities, as has been advocated by individuals such as former Vice President Al Gore. But are these infrastructure improvements alone sufficient to insure a clean, sustainable energy and economic future for the United States?

Whether by accident or design, focusing solely on a so-called national grid — which links together the series of regional power grids that carry electricity across the country into one unified, centralized system under federal control — would be the equivalent of building an interstate highway system while leaving the streets in every community as one-lane, unpaved paths without traffic signals. The result would make “gridlock” a profound understatement. Today’s obsolete and vulnerable U.S. electricity grid system remains a legacy from the days when the goal was to electrify the country and to maximize the supply of bulk electricity. Those days are long over yet we are still saddled with the same old “dirt road” equivalent electricity infrastructure. This infrastructure must be transformed to reflect today’s priorities for optimally balancing electricity supply and demand at all times, with minimal environmental impact, and providing the power quality needed by a digital economy.

But the nation’s grid system is mammoth, and upgrading it as a centralized whole is unrealistic. Rather, the key to resolving this crisis is to transform the system locally through the creation of local smart “microgrids” that maximize community and citizen economic and environmental benefits at the lowest cost. To get there involves overlaying today’s obsolete, analog-controlled electricity distribution infrastructure with instantaneous digital monitoring and control technology. The resulting “electronet” will make the nation’s power system much more efficient, reliable, secure and cleaner, while giving all citizens much greater control over their energy destiny. As was the case with telecommunications and all other status-quo monopoly industries, the key to achieving this consumer value-focused disruptive change is to open the door for the nation’s unparalleled innovative, entrepreneurial leadership skills.

Smart microgrids, which can be tailored to the individual needs of communities, universities, office parks and more, are the quickest and most cost-effective way to eliminate the outdated technology that makes outages and wasted energy a way of life today. Smart microgrids will optimally balance electricity supply and demand at all times by tearing down today’s electricity meter “iron curtain” and enabling the complex multitude of devices on both sides of the meter to work together in harmony. Local power generation via distributed renewable energy resources is also built into these microgrid systems, and they stand ready to accommodate any manner of electric vehicle. A smart microgrid is also a green grid.

Locally controlled smart microgrids can jump-start local economies through new job creation and new business opportunities for entrepreneurs in an open, competitive electricity service market. By creating this new electricity business model — one in which entrepreneurs and their innovative technologies are, for the first time, invited to participate as partners — entrepreneurial innovators will step in and produce major long-term savings for consumers, communities and utilities alike. We can no longer afford to lose jobs overseas because we cannot promise companies the high-quality power delivery that their supply chains need. Both developed and developing nations around the world, from England to China, are aggressively implementing smart microgrids as essential links in meeting their energy and economic growth requirements in a global economy, and are leap-fogging the U.S. in the process.

The Energy Independence and Security Act of 2007, passed last December, focuses on many of the essential issues and solutions but remains far too passive in eliminating the red tape and disincentives that block serious investment in our nation’s electricity system. And it still saddles consumers with state monopoly regulations that impede innovation and do not incent entrepreneurial organizations to bring forth the needed technology. To bring smart microgrid distribution systems to municipalities and communities throughout the country, the Galvin Electricity Initiative is calling for federal mandates creating effective national electricity policy leadership, as was done for transportation in the 1950s with the Interstate Highway Act. This national leadership would eliminate the regulatory conflicts that now exist at the federal and state levels impeding grid modernization and smart microgrid development. This national electricity policy framework should reflect the following consumer-oriented fundamental principles:

  • Compensate utilities for efficiency, reliability and customer service, not just for the amount of electricity they sell;
  • Require much higher reliability standards for electricity transmission and distribution;
  • Enact much stricter energy efficiency building standards to conserve power;
  • Change tax codes to foster rather than discourage grid innovation;
  • Incent utilities to provide customers with time-of-use rates;
  • Enable municipalities to access and make investments in the grid infrastructure within their jurisdiction, and give them a say in how public funds collected for improvements are spent;
  • Pave the way for smart microgrids and distributed generation by eliminating restrictions against electrically linking adjacent buildings and private ownership of electricity meters in order to protect monopoly power service; and
  • Allow free, competitive retail markets for electricity services.

Technology and capital are not limiting issues in this electricity transformation if we enable the nation’s innovative, private sector entrepreneurs to actively participate. We need your dedicated and sustained national leadership to advance the technology and policies governing electricity service in the 21st century. With your guidance, President-elect Obama must quickly move beyond campaign rhetoric and comprehensively change the grid to build the foundation for America’s sustainable, secure and clean energy and economic future.


Kurt Yeager
Executive Director
Galvin Electricity Initiative