Will PG&E’s Bankruptcy Filing Help Or Hurt The Industry?


The Grid Is Changing

The recent fires in California have had tragic consequences. Thousands of people have lost their homes. Many have lost loved ones too. In many cases, the fires were caused by downed or damaged power lines or failed electrical distribution equipment, and the utility, PG&E, has been blamed.

If PG&E is found guilty of violating mandates set by the CPUC for maintaining their equipment and clearing trees from their power lines, they need to face the consequences of their negligent behavior. Ignoring regulations and risking public safety for the sake of corporate profits is unacceptable and the punishment should be severe.

Utilities Need To Be Accountable

The utility has faced similar accusations before. The company’s lack of oversight resulted in the San Bruno gas line explosion, which killed several people and decimated an entire neighborhood. The final investigation determined that PG&E failed to keep adequate records regarding equipment installation and did not follow established safety inspection protocols. No company should place profits over safety.

In the past two years, California has experienced an unprecedented number of extreme and deadly wildfires. The most recent fire, known as the Camp Fire, virtually wiped out an entire community. Thousands of buildings were lost, the whole city has basically been destroyed, and 88 people lost their lives. Although it has not been officially ­determined, evidence pointings to a failed high-tension power line as the initial source of ignition.

The devastation from these events is hard to imagine. Until you witness firsthand the effects of these events, it is hard to appreciate the scale and breadth of the total decimation that fires have caused. It will be decades until some of the regions are rebuilt if at all. Investigators have concluded that many of the wildfires over the past two years have been started by PG&Es equipment. This means PG&E is currently facing thousands of lawsuits, including wrongful death.

PG&Es Bankruptcy Filing Is No Surprise

Given that it is now facing approximately $30 billion in legal claims, it should come as no surprise that PG&E recently filed for bankruptcy. PG&Es estimated net worth is roughly $25 to $45 billion depending on whose figures you use. Paying out $30 billion in claims will effectively be the end of PG&E as we know it.

At the same time, this bankruptcy filing won’t be the end of this story. As the largest utility in California, PG&E would seem to fall firmly into the category of “too big to fail,” which means that most likely it will be bailed out by the state. Even if PG&Es behavior is determined to be the primary cause of the damage from these recent fires, it’s a safe bet the financial burden of bankruptcy will ultimately land on taxpayers and ratepayers.

This is a dangerous situation and will have long term effects on the industry. If PG&E, by customer count, goes bankrupt because it can’t properly service its vast infrastructure of gas pipes and electrical transmission lines, what does this say about security and future of the energy distribution network as a whole?

Is There An Upside To This Situation?

It’s hard to see past the damage and devastation but perhaps there is a silver lining to this dark cloud.

 Our Electric Grid Is Outdated

Our current electrical grid is well over 50 years old and is based on a model that hasn’t really been updated since the 1960s. Part of the problem is its fundamental design. The current gird was created when generation and distribution were much more straightforward. Large generation facilities provided the electricity, which flowed essentially one way, from the power plant to the end user.

The grid today is much more complex. It includes a broad mix of generation sources, including rooftop solar on homes, large scale renewables such as wind and utility-scale solar, hydro from dams, geothermal and nuclear–all sharing the same transmission and distribution lines. Essentially, we’re using the 20th Century centralized distribution model to support a 21st Century distributed generation reality.

There is no question that the grid needs to be replaced to reflect the way we generate and use energy today. The problem is that the estimated cost to replace the network nationwide is somewhere in the neighborhood of $1 trillion. That’s trillion with a “T.” As you can imagine, changes or upgrades at this scale would take decades to complete. This figure and timeline, however, assumed that we’re replacing the current system with something similar. But what if we didn’t have to follow that road?

It’s Time To Consider A New Approach

Maybe PG&E’s looming bankruptcy will be the catalyst it takes to start seriously considering new methods and approaches for providing electricity to consumers. Recent advances in storage, improvement in the efficiency of solar panels, and the reduced costs of renewables overall mean the electrical grid of the future (Grid 2.0) could be vastly different from what we rely on today.

Grid 2.0 will likely be made up of smaller “microgrids” utilizing local generation and some form of storage. Microgrids have numerous advantages over centralized distribution. In the case of fires caused by high winds, large scale utilities have to power down entire regions to mitigate the potential of damaged or downed power lines. Having an integrated network of microgrids allows power to be shut off in affected areas while maintaining service nearby—including critical support services—at full capacity.

Another benefit of microgrids is the ability to generate electricity at or close to the point of consumption. This means the thousands of miles of high-tension power lines that currently crisscross the nation will slowly disappear and be replaced by smaller subsets of mixed -source energy production facilities. If you produce the energy close to where you use it there is no need for miles of power lines to move it vast distances across the country.

How to Use Excess Production

For example, consider a local school with an oversized solar array that produces more energy than it can use when school is not in session. Technology today allows this excess capacity to be shared with other buildings or homes. This is referred to as community solar. Add a wind generation facility or small hydro unit and combine it with a means to store the energy and you can quickly see how a small local transmission and “sharing” model makes more sense than a centralized distribution system. A series of these interconnected microgrids could provide a clean and resilient alternative to the large centralized systems we rely on today.

In many ways, it’s similar to what has happened to our telephone network. The telephone network was initially based on telegraph lines that followed trains as they made their way out west. Eventually, these were augmented by telephone lines that branched out and went to each of our homes. Large centralized companies controlled the flow of information from one point to the other.

Consider The Changes In The Phone System

Today, cellular phones have completely changed the way we communicate. Telephone lines have been replaced by cell towers. In many cases, the signals are traveling to space and back to providing coverage across the globe. Many homes today no longer utilize “landlines” for telephone services, as individual members all have cell phones. Cell phone and cell towers have allowed entire countries to rapidly deploy communications networks that do not rely on centralized distribution systems.

I anticipate we will see similar advances in the transmission and distribution of electricity in the coming decades. Nikola Tesla envisioned a world where power was distributed wirelessly. In 1891, he demonstrated how it could be done. He likely would have succeeded if it were not for the financial interests of others.

As we move forward, the role of regulated monopolies such as PG&E will diminish. Power generation and distribution will be shared by companies and even individual homes. This means the role and responsibility of a large-scale generation and distribution provider such as PG&E will change significantly or perhaps disappear altogether.

The Current Structure Does Not Match Demands

The current system does not reflect the needs of modern society. Perhaps PG&E’s bankruptcy will send a message to the other large-scale utilities that it is time to start working on the next step in electrical generation and delivery.

Perhaps This Will Drive Change

Electricity has become the lifeblood of productivity. I challenge you to try image a modern world without it. But the way we generate and consume electricity must change to keep pace with our society. PG&E filing for bankruptcy is a huge deal. Maybe this is what it takes to get the masses to consider embracing a new approach to how we provide, share, and consume electricity in the future.

Charles Cormany
Executive Director
Efficiency First California

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