Innovation in electricity: It’s here.

Get ready for sticker shock. Electric bills are going up soon. But Steve Corneli, senior vice president of NRG Energy, says “a wave of creative destruction” is breaking over the electricity sector and what you pay for in a decade may look nothing like what you pay for now.

Bills have to rise – the aging, and usually polluting, power plants that utilities across the country have been relying on are going to be replaced.

The issue for utilities and their regulators, says Duke CEO Jim Rogers, is whether they use this opportunity to just replicate Thomas Edison’s electric system, or embrace new technology that’s already transforming their business model.

And that game-changing technology – that will do for electric grids what the cell phone has done for land lines and personal computers – is being developed now, former Secretary of State George Schultz told a forum on distributed power systems at the Brookings Institution October 31 (http://tinyurl.com/43g3k4d)

Speakers agreed that the federal government and state regulators need to get incentives right to encourage innovation, but much of “getting it right” involves getting out of the way.

Distributed power includes ways to use less power as well as ways to get power locally, lessening dependence on long transmission lines, like solar, small wind, microturbines, and combined heat and power systems. California already counts about 3,000 megawatts of distributed power, much of it solar panels, on its 60,000 MW system, said Robert Weisenmiller, chairman of the California Energy Commission.

Pedram Mokrian, principal of the Mayfield Fund, said venture capitalists only have about $2 billion, of some $211 billion in play, invested in distributed generation now. Rogers and Alexander Karsner, chairman of Manifest Energy and former Assistant Secretary of Energy, agreed that the key is to mobilize that private capital.

The “national imperative” to do so is energy security, Karsner said, and the best incentives will choose outcomes, not specific technologies, in this fast-changing environment.

Rogers said the delivery system of the future will likely consist of “microgrids” with local backup capability and computerized controls. That will minimize the potential for a disruption in one area to cascade into massive regional blackouts, since microgrids will be able to isolate themselves but keep power coming to local consumers.

That capability will become increasingly important as cybersecurity threats to the integrated grid multiply, speakers said, but right now, security isn’t priced when utilities and regulators weigh electric system choices. They said it needs to be.

One sector keenly aware of the vulnerabilities is the US military, which sees lengthy fossil fuel supply lines and aging grid dependence as hindering its war-fighting capability.

Assistant Secretary of Defense Sharon Burke said military bases around the US are dependent on civilian grids and want to partner in making those grids more resilient and secure.

The Navy has been a leader in developing more efficient ships using less fuel and ways to limit the need for convoys of fuel trucks in combat zones, where the Marines experience frequent attacks. The Marines have pioneered in lightweight solar strips, that can be carried in packs and unfolded at remote sites, and one elite Seal team is working on becoming a net-zero energy user.

Rear Adm. Philip Cullom, Navy director of Energy and Environmental Readiness, said the effort also involves “behavior change,” getting everyone to realize the strategic importance of efficient energy use.

Customer behavior is also key to civilian energy saving. Karsner warned “customer value is a cold beer and a warm shower,” and customers tend to become aware of electricity only when those two are reversed.

But Rogers said that’s because electricity is, on average, only 1.9% of disposable income. There’s “huge pressure” from state regulators to keep power costs down, he said, but as age and environmental rules force reinvestment, rising bills will get consumer attention – and encourage more innovation.

For utilities, the issue will be whether to try to lock in the old system, or find opportunities in the new.