Are Distributed Energy Systems a Solution for Rural America?

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2 months ago

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By Leonard Hyman & William Tilles – Oct 23, 2024, 5:00 PM CDT

Rural areas affected by hurricanes face long delays in power restoration due to damaged infrastructure.
The disparity between rural and urban customer densities creates significant cost challenges for rural utilities.
Distributed Energy Resource (DER) systems, which include solar, batteries, and generators, offer a long-term, cost-effective solution for rural areas.

After the recent hurricane hit western North Carolina, the local electric utility, Duke Power, said that road conditions in some rural areas were so poor (ie non-existent) that full service restoration could take as long as two to three months. This reminded us that Entergy gave the same service restoration estimates for more remote parts of their Louisiana service area after also experiencing the damaging effects of a category 4 hurricane. Two to three months without electricity, as we’ve said before, places these affected communities technologically back somewhere in the nineteenth century. And it’s not like the utilities are sparing in their restoration efforts. But when all major roads are washed out, there have to be enormous service restoration delays because the utility’s personnel and heavy material all move by truck. Helicopters can only do so much.

The extensive power distribution system we presently have resembles bowling pins. You could say it’s fragile by design. The poles and wires now routinely get knocked over by increasingly severe storms and are quickly “reset” with much assistance from neighboring utilities. Rural utilities with low customer densities in the present environment are at a cost disadvantage. Customer revenues at present levels can’t possibly compensate for what are now almost annual distribution system rebuilds. And if the utility truly charged rural customers the full cost of service, power would be literally unaffordable and state regulators and various political officials would be displeased. The interesting thing to us is that this is an old problem for any electric utility serving a mix of urban and rural areas. Cities by their nature have extreme customer densities of say 25,000 customers per mile of distribution system while rural areas may have only 3 customers per distribution mile especially in areas with large farms.

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Let’s assume a modest storm restoration cost of $1 million in terms of urban versus rural customer impacts. Utility customers in the city might see a cost increase of $40 ($1 million divided by 25,000) probably divided into twelve monthly payments, rendering this incremental expense as negligible. The same million dollar storm restoration expense divided among only three customers would be a financially crippling expense. And now with climate change and recurring weather disasters testing the resilience of our utility architecture, these types of financial issues are likely to continue or get worse. Fortunately fully distributed energy resource (DER) systems (comprised of solar, batteries, and propane or diesel generators) exist and have been implemented in Southern California (Borriego Springs), Western Australia, and to a lesser extent Vermont. These parallel systems are operated and maintained by the utility and for the financial reasons shown, much cheaper to operate in the long run. Our question for now is whether utilities will begin “islanding” more and more rural customers to both improve service and reduce costs.

Lastly, we should briefly ask what systems performed really well during the hurricane(s)? The answer is clearly our power generating plants whether nuclear, gas, or coal fired. By and large, these facilities emerged almost unscathed from recent severe storms. And that’s the problem. A power plant disconnected from its distribution system is like a farmer with a bumper crop and no access to markets. Both have goods but no means to sell them. The question for us is whether this also forces utilities to begin to shrink their extensive distribution systems where possible while locating power plants closer to customers in the name of both lower costs and improved service.

By Leonard Hyman and William Tilles for Oilprice.com