The Smart Grid is often described as bi-directional energy and information flows, enabled by a convergence of information technologies (IT) with operational technologies (OT). That’s all true, but the word convergence is getting frayed from overuse, and for the latest trend, it’s not quite the right word. That word is meld, and it is an apt term to describe the combination of Smart Grid technologies. Two stories the past week highlighted how energy storage technologies are melding with renewable energy generation technologies and building technologies. It also signals the future direction of grid modernization.
The first announcement features Solar City and Tesla, where cousins Elon Musk and Lyndon Rive (there’s a fair amount of entrepreneurial DNA in that family) recently announced plans to offer Tesla’s batteries with Solar City’s panels to commercial business customers. This is a batteries-as-a-service innovation, which addresses one of today’s primary concerns about energy storage – upfront costs. It’s a great idea. This business model has proven its popularity to avoid upfront costs of computer, software, and data centers through various as-a-service models. Renewable generation and energy storage naturally meld together, and it’s heartening to see innovative business models leveraging this combination.
The other interesting technology meld was announced by Nissan. They have a unique V2B or Vehicle to Building solution that plugs up to 6 Nissan Leaf electric vehicles (EVs) into a building’s power distribution board to perform smart charging and discharging. The objective is to help the building reduce it’s draw of electricity at peak price periods. V2B is different from V2G (Vehicle to Grid). V2B doesn’t send the electricity drawn from EVs to the grid – it is used within the building. The building benefits by taking less electricity from the grid, and thereby lowers its bills. This type of scenario could be used for pure economic justifications, or also play into demand response (DR) strategies. A combination of power from EVs plus shifts of cooling or heating can give a building additional negawatts to bid in various DR situations. What will this type of charge/discharge cycling will do to the EV batteries? These pilot deployments will help answer that question. However, the melding of EVs to building structures – residential and commercial – will happen for economic and resilency reasons.
These technology melds pose a threat to utilities. They reduce electricity sales – the primary source of revenue for electric utilities. This is the one of the scenarios associated with the death spiral that is feared by utilities around the globe. But those of us with telecom backgrounds have seen this before. It was called the Private Branch Exchange or PBX, which in essence was a privately-owned dialtone generator – and it was very similar to privately owned power generation assets like solar panels. When melded with battery backup, the PBX gave large (and then small) industrial and commercial customers an alternative to the monopoly telephone services provided by the old Bell system.
Back then, the Bell system was a cloud that delivered phone-as-a-service to residential, business, and industrial customers at 99.999% uptime. But customers liked the idea of having control over an essential business service and enjoying fixed telephony costs. Prices dropped as a number of intensely competitive companies rapidly innovated PBX technology and expanded capabilities. Voice mail, call forwarding, and computer-telephone integrations followed.
Had the US Justice Department not been pursuing the Bell system monopoly to its eventual breakup, the PBX would have inflicted significant revenue losses as commercial customers defected to PBXs. That would have precipitated a different existential crisis for the old AT&T. Fast forward to today and the electric utility ecosystem, and small-scale renewables melded with energy storage pose the same possibility of eroding revenues from a profitable customer segment (commercial business) for electric utilities.
So what’s a utility (or utility regulator) to do? Think about changing the electric utility business model, not fighting inevitable technology and financial trends. Leave that futile strategy to the American Legislative Exchange Council (ALEC) as they try to shove the rooftop solar genie back in the bottle. Smart utilities and regulators should seek policy changes that enable utilities to obtain revenues for value-added services, not just basic delivery of electricity. The melding of Smart Grid technologies into energy generation/storage nodes (aka distributed energy resources or DER) embedded within the grid presents opportunities as well as challenges for utilities. Encouraging utilities to evolve can help them leverage these opportunities into business models that maintain the social compact to deliver safe, reliable, and cost-effective electricity for all.