Smart Grid technologies can make our electrical grid more efficient and reliable.  We can add more programs to improve energy efficiency and reduce peak electricity requirements.  But we can encourage much greater consumer participation in being part of the solution through policies that promote distributed generation.  Distributed generation (DG) gives consumers the opportunity to reduce their electricity bills and use “home-grown” electricity.

Distributed generation simply means that electricity is produced close to its point of use.  DG doesn’t need new transmission lines (which can face long and expensive legal challenges) and puts an emphasis on locally produced electricity.  DG can be deployed in urban to rural settings and relies on clean, renewable sources of electricity such as solar and wind.  DG turns consumers into prosumers – Alvin Toffler’s term for a producing consumer.  The practice applies to residential and commercial buildings and microgrids. (For more information on microgrids, read here).

DG is a great strategy to address growing electricity consumption and put money in the pockets of consumers.  All states have the authority to encourage and support DG initiatives within their borders, enabled through net metering and interconnection policies.   Net metering lets commercial, industrial, and residential consumers create electricity and sell it back to their local utilities – basically running their meters backwards.  It differs from Feed-in-tariffs (a subject in last week’s blog) in the pricing arrangement for a utility purchase of this DG supply.  FiTs usually deliver improved returns on investments for consumers than net metering, but net metering is better than no policy at all.  Interconnection refers to the technical and legal procedures required to connect your generation source to the utility distribution network. 

There’s an interesting and very readable report called Freeing the Grid that was produced by the Network for New Energy Choices.  This report examines the policies in the fifty states and assigns grades based on assessment of variables that range from ease of interconnection procedures to economic implications.  Residents in California, Colorado, Maryland, New Jersey, Oregon, Pennsylvania and Virginia are lucky – these states receive high marks.  My condolences are extended to residents of Georgia, Indiana, Iowa, and Wisconsin. Your states make it extremely difficult for consumers to become prosumers. 

DG is good for states – it promotes in-state jobs and economic growth.  It helps resolve the looming requirements for additional energy and the need for new centralized generation and transmission assets.  It reduces CO2 emissions through increased use of renewable energy sources.  It helps consumers reduce their electricity bills.  Why wouldn’t every state want to extend the benefits of DG to their citizens?  That’s a great question to pose to your state utility commissioners.  

The Smart Grid business sector is facing the same skepticism about many initiatives ranging from large-scale renewable energy grid integration projects to smart meter rollouts.  The nay-sayers point to costs of new renewable energy sources versus existing fossil fuel-based sources.  Critics of smart meters focus on the incorrectly installed or inaccurate meters as reason enough to stop deployments.  Yes, utilities must ensure that every customer has an accurate meter, but should car manufacturers who routinely recall percentages of their fleets every year be barred from continuing to produce cars? 

Changes are coming that will (r)evolutionize our relationship with electricity, and some of them are happening with less fanfare.  Perhaps the lack of a spotlight aids in their progress.  For instance, feed-in tariffs (FiTs) are adopted in some states and under consideration in others.  FiTs require utilities to purchase electricity from individual producers of different renewable energy sources at set prices.  There are a couple of variations of  FiTs, but their benefits are generally the same.  First, FiTs ensure that renewable and locally-sourced energy will be added to the grid.  Second, FiTs eliminate costly one-off contracts between utilities and customers – simplifying the producer/retailer relationship for the benefit to both parties.  The term for this is TLC – transparency, longevity, and certainty in this generator/purchaser relationship.  What does this mean for Joe and Jane Ratepayer?  It means consumers purchase locally-generated power, setting the stage for a vastly different grid that has many points of distributed generation instead of reliance on far-flung centralized power sources.  That means improved grid reliability, reduced greenhouse gas (GHG) emissions, and avoided investments in transmission facilities, which often cost $1million/mile to construct.  And that all means more bang for your buck. 

Another change that is frequently in the news is the continued momentum of electric vehicles (EVs).  From the recent initial public offering (IPO) of Tesla stock to the announcements of planned electrification of more existing car models, there is growing interest in EVs and their role in the Smart Grid.   There’s even an acronym for one of these roles – V2G or vehicle to grid, the practice of using stored energy in EVs as dynamic sources of energy capable of discharging electricity back to the grid.  The coming changes apply to new business models and policies too.  For instance, a recent study from Zpryme cites activity from the state of Delaware that mandated something similar to FiTs for EVs.  Their V2G policy requires utilities to buy back energy from EV owners at the same price that those owners would pay to charge their EV batteries.  This means that an EV can make money for its owner.

It’s hard to oppose a change that makes you money, but it illustrates the challenges for utilities, industry associations, policy makers, and vendors face in educating taxpayers, ratepayers, and consumers about Smart Grid changes that have immediate impacts, but may not have immediate benefits.  The education can occur, and should occur, but it will require concerted efforts by all Smart Grid players to ensure that the changes on the horizon are enthusiastically supported by taxpayers, ratepayers and consumers.

What’s wrong with this picture? If you are a utility that gets revenues based on the volume of sales of electricity, then energy efficiency programs that reduce volume translate into reduced revenues. Imagine if a fast food restaurant encouraged you to NOT supersize your meal – although it would be good for American waistlines, it would be bad for the restaurant and its investors.

Utilities that operate in this model face a real dilemma therefore in offering and aggressively promoting effective energy efficiency programs. Here’s where a regulatory concept called “decoupling” helps. It is a ratemaking mechanism that removes the barriers to energy efficiency programs. It eliminates the link between electricity sales and utility profits. The regulatory body guarantees a revenue return through rates that are typically calculated on a per-customer basis, and periodically reviewed to see if the pre-determined revenue requirement is met.

What does decoupling and support of energy efficiency programs mean for utilities and investors? Decoupling provides stability in revenue expectations, reducing risks for investors. According to a recent report released by Ceres, utilities that engage in energy efficiency programs also reduce their risk exposure to fluctuating energy prices.  Utilities that support diversification and distribution of generation assets take risk reduction a step further.  Utilities that engage in energy efficiency and diversification and distribution of generation are more likely to attract low-cost capital, enabling better returns for investors.

What does decoupling and participation in energy efficiency programs mean for consumers?  It means increased and improved opportunities to reduce utility bills.  Depending on the state, the programs can cover replacement of selected appliances with energy-efficient models or rebates on certain building remodeling projects.   Federal tax credits may also come into play and add even more financial benefits for consumers. 

What does decoupling and energy efficiency mean for the environment?  It means reduced carbon emissions reflecting reduced electricity consumption.  And because decoupling also removes a barrier to localized generation – the prosumer model – decoupling facilitates broad integration of renewable energy sources into the grid.

What does this have to do with the Smart Grid?  The Smart Grid is more than an overlay of ground-breaking technologies, it is based on smart policies that provide incentives to consumers and utilities to optimize generation, transmission, distribution, and consumption of electricity.   

For more information, the Regulatory Assistance Project has good presentations that explain decoupling and its benefits to consumers, utilities, and our environment.  

These outages are not a result of cyber attacks – although such attacks would be equally or more devastating to affected consumers and businesses.  These are a result of aging infrastructure, insufficient intelligent monitoring and control of transmission and distribution equipment, and a reliance on highly centralized generation that leaves end users vulnerable to breaks anywhere along the line.  There are many resolutions to these problems using Smart Grid technologies, but most importantly, distributing power generation facilities at many points within the electrical grid, and creating microgrids within larger grids will improve overall reliability.   Distributed energy storage is another Smart Grid technology that promises to improve reliable delivery of electricity. 

Picture this:  My mother’s retirement community is a very nice campus environment located in the heart of the Pennsylvania Dutch country.  It includes a skilled nursing facility and residential housing for assisted living and independent living situations, and that means medical needs for electricity.  The campus is surrounded by dairy farms, some operations devoted to hogs and chickens, and lots of fields of corn.  A bucolic setting, and a rural economy that could leverage the waste products of these operations for distributed generation of at least some electricity well downstream of centralized generation plants.  These farmers could harvest energy in addition to their crops, and store it in batteries – just like they now store grain in silos and corn in cribs. 

If the local electrical distribution system is upgraded with Intelligent Electronic Devices (IEDs) that can sense power fluctuations, the retirement community need never fear a power outage – their electricity would instantaneously switch from the centralized source to a nearby farm source, or even to the community’s own battery backup to ensure uninterrupted power.  The farmers could enjoy another source of income, and everyone would be happier with a more reliable energy supply.  This scenario has further advantages of building a clean and renewable domestic energy industry and creating local jobs – always a welcome prospect in rural America. 

So if you think the Smart Grid only delivers benefits for utilities, think again.  The Smart Grid means distributed generation, distributed energy storage, and distributed intelligence delivering improved reliability of electricity for everyone.  It means my mother will never have to retype and redo a chapter again, and if mama is happy, everyone is happy. 

For more information about distributing generation and energy storage across the grid, click here.

One conference presenter at the EV Summit noted that we’ve already surpassed the point of no return for cheap and easily-extracted oil.  It only gets more expensive and environmentally-risky, and we have only to view the realtime monitor of oil spewing into the Gulf of Mexico to see indisputable evidence of both. 

Much discussion focused on a cynical proposition will appear on the November 2010 California ballot.  This proposition intends to repeal Assembly Bill 32 (AB32) – the California Global Warming Solutions Act passed in 2006 with the goal to reduce the state’s greenhouse gas (GHG) emissions to 1990 levels.  The proposition signature drive was funded by two Texas energy companies – Tesoro and Valero – which also happen to be two of the largest air pollution emitters in California.  However, they claim to want to repeal this critical standard because energy regulations kill jobs.  They recommend that California postpone action on AB32 emission standards until state unemployment drops to 5.5% for a year.

Every Californian should suspect the motives of Texas energy companies.  Remember Enron?  We endured two days of rolling blackouts in June 2000 that were engineered by that company in a fraudulent series of schemes that resulted in millions of dollars of business losses, threats to the health and safety of Californians, and bankruptcy of a major utility. 

Do regulations kill jobs?  Let’s get the facts straight.    

Fact:  Regulations have real and tangible benefits. Because of strict energy efficiency standards for buildings and appliances, California uses less electricity per capita than every other state.  That’s good for our economy and citizens, saving over $56 billion in energy bills and avoiding buildouts of 15 large power plants, paid for by higher electricity rates.   Appliance manufacturers and retailers have not gone out of business as a result of these regulations.

Fact:  During this bleak economic period, clean tech jobs are growing 10 times faster than the statewide average.  A new report by California’s Employment Development Department identifies over half a million green jobs in the state, ranging from blue collar to white collar occupations.  The recession has not been kind to California.  But clean tech businesses thrive in California because of a statewide standard instead of a regulatory patchwork from 58 counties, 480 cities, and 2300 special districts. 

So why do Texas energy companies want to mess with California?  It’s all about protecting an energy infrastructure based on dirty fossil fuels.  It’s about protecting their profits at the expense of a growing clean tech economy and improved air quality for millions of people. 

Albert Einstein said, “We can’t solve problems by using the same kind of thinking we used when we created them.”  Similarly, we can’t solve our energy problems by continued reliance on the fossil fuels or the infrastructure that creates them. 

Building a Smart Grid reduces reliance on fossil fuels in several ways.  First, Smart Grid technologies enable significant integration of renewable and clean energy sources for electricity production.  Second, Smart Grid technologies accelerate the electrification of our transportation system.  Third, Smart Grid technologies enable us to optimize grid efficiency, getting the maximum value for consumed energy.  

California, the epicenter of venture capital investment in clean technologies and often the state leader in energy policies, has an opportunity with AB32 to generate even more advances in Smart Grid technologies and objectives.  California voters have the opportunity this November to tell Texas energy companies – don’t mess with the Smart Grid, don’t mess with clean tech, and don’t mess with California. 

The informal history goes well beyond that.  The SPP came into existence on December 14, 1941 when 11 regional utilities agreed to pool power to deliver 120,000 kW of reliable electricity to Jones Mill – an aluminum plant co-located next to the largest bauxite mine in the nation back then.  Aluminum was needed to build planes for the war effort.  War was declared on December 7, 1941.  It took just seven days, in an age before the Internet, computers, faxes and cell phones for eleven utilities to overcome all technical, regulatory, and organizational issues to make a handshake deal to guarantee the power to the mill.  It’s easy to recognize the motivators for this admirable accomplishment – necessity, national security, resource scarcity, and patriotism.  The origin of the Southwest Power Pool eloquently illustrates what Americans can do when we are motivated to action.

Smart Grid technologies can help integrate utility-scale and small-scale renewable sources of electricity generation and dramatically reduce our dependence on oil and other fossil fuels for power generation and transportation.  Face it, fossil fuels are not renewable and they are definitely not clean – or cheap.  The BP deep water oil spill is merely the latest, and most dramatic evidence that our economy and society go to ever greater risks to obtain a fluid that is ever more difficult (and environmentally costly) to extract. 

Tar sands are a great example of insanely complicated and expensive oil extraction.  The oil-imbued sands must be mined, and then the oil is separated and upgraded to produce oil fit to send to a refinery.  It takes several barrels of water just to produce one barrel of oil, and not all of that water can be recycled.  Where does the unrecyclable (ie thoroughly polluted) water reside?  In toxic containment ponds that kill birds that land in them. 

Even on land, oil obeys the “spill, baby, spill” rule, as the recent Red Butte Creek spill in Utah sadly illustrates.  Another ecosystem damaged – another inconvenient externality that is not factored into the price of petroleum. 

So what about natural gas?  Increasing evidence shows that hydraulic fracturing or “fracking” of the earth to obtain natural gas also has devastating environmental results.  Fracking uses vast amounts of water and chemicals similar to Drano in toxicity to extract natural gas.  In Pennsylvania and New York, reliable and long established household wells are now pouring out flammable water.  Yes, you read that right.  Water that you can light on fire. 

The Smart Grid enables the integration of domestically-produced clean and renewable sources of energy that will reduce our dependence on fossil fuels through electrification of our cars and public transportation systems.  Smart Grid technologies also help us consumers to intelligently manage and reduce our consumption of electricity and therefore retire aging generation plants that use dirty fuels.  Ramping up domestic renewables to integrate into the Smart Grid is a war effort, and the motivators are the same as cited in the example above – we need to confront the resource realities of fossil fuels and do it out of necessity.   We need to recognize that domestic renewable energy sources in the Smart Grid provide the right economic and national security foundations to ensure American prosperity.

Was this evidence of a smart meter backlash or a simple demonstration of that adage that familiarity breeds contempt?    Only detailed surveys will determine that, but it is clear that PG&E needs different advisors in the executive suite and a fresh approach to interacting with customers. 

So, community choice is safe in California, and this is excellent Smart Grid news for two reasons – but there’s a real warning in the poll results too.  (Community choice lets cities, counties, or neighborhood entities purchase and/or generate electricity for residential and business use within their boundaries.  Community choice means local control over energy resources, more renewable sources of energy, plus a lower overall cost of electricity.) 

First the good news.  Community choice should accelerate the integration of sources of renewable energy into the grid.  As the environmental devastation grows from oil spills (even on land – see the Red Butte Creek spill in Utah), it is becoming apparent to even the most oblivious that this is one fossil fuel that we would be well-served to render obsolete.  For instance, communities can band together to create solar gardens and aggressively convert rooftops to solar power to generate local clean and renewable power for their electric vehicles.  

A second benefit is that distributed generation improves our grid security.  Complete reliance on centralized energy generation puts all eggs in one basket.  If you believe the reports about hackers infiltrating the computer networks that control the electrical grid, or even if you only believe a fraction of them, there’s serious reason to be alarmed and deploy solutions that improve the stability and reliability of the electrical grid.  A grid studded with microgrids and CCA-controlled energy sources is a smarter grid, less likely to be completely disabled and able to recover faster from natural disasters or acts of criminality and terrorism.     

However, there is a real worry in the Proposition 16 results.  It is clear that PG&E customers don’t trust PG&E.  This does not bode well for future PG&E efforts to educate their customers about TOU (Time of Use) rates and other measures to reduce electricity needs at peak time periods to save money and reduce carbon emissions.  Enlightening consumers about their energy use and encouraging participation in smart energy programs is a process of complex messaging, and it requires a relationship of trust.  PG&E doesn’t have that now, and the big question is – can they earn consumer trust to be effective in their future Smart Grid solution rollouts?  If they fail in that endeavor, we all lose. 

The second factoid that caught my eye is that an official from the China Association of Automobile Manufacturers (CAAM) reported that China imported 52% of its oil in 2009. By 2030, it is projected that China will import 70% of the oil it needs.  The CAAM members are planning to intensively invest in electric vehicles (EVs) because they predict that EVs and hybrids will be 30% of their auto sales by 2015.  The Chinese government plans to subsidize EVs and hybrids to reduce reliance on oil imports.  Industry insiders indicate that the government is focused on making its domestic manufacturers the global leaders in EV technology.  

We should embrace a similar vision in which EVs are the dominant sources of American transportation fully integrated into the Smart Grid and thereby reducing our dependence on oil, benefiting the environment, grid stability, and consumers.  The recent news that Toyota and Tesla are investing together to build EVs in the former NUMMI plant in Fremont, California may be the beginning implementation of that vision. That’s good news since it means greener jobs – both white collar and blue collar – and it also means a boost for domestic EV technology.

There is however a greater challenge revealed in the statistic about American SUV purchases.  American consumers appear to be unperturbed by the environmental and economic costs of the Gulf oil spill as demonstrated by their buying behavior.   If they can’t make the connection that choosing gas guzzlers over gas-sipping vehicles increases the risks of more devastating oil spills, then utilities, federal and state governments and regulators, and technology vendors have significant communication challenges ahead in getting consumers to understand the benefits of investments in Smart Grid technologies that optimize grid operations and deliver energy management capabilities into consumer homes.   These are sometimes complex messages that don’t always easily translate into sound bites. 

We need national efforts similar to past public service campaigns that educated everyone about the benefits of seat belts and discouraged littering.   American consumers need to understand that their energy behaviors and choices have consequences that impact their wallets, environment, economy, and energy security.  A good start would be to highlight the benefits of investment in domestic EV technologies and manufacturing and the fact that EVs use pollution-free “Made in America” energy.  Over time, a cohesive and coordinated communications campaign enlightens consumers to the fact that the Smart Grid increases use of clean and renewable Made in America energy and ensures their continued support of Smart Grid investments and programs. 

This ongoing environmental tragedy makes the reasons to accelerate deployment of Smart Grid solutions all the more compelling.  The Smart Grid uses renewable, clean energy – and lots of it.  The current grid isn’t designed to accommodate variable (wind and solar) sources of energy, but there are two Smart Grid technologies that make it possible.  First is energy storage.  Utility-scale energy storage generally fulfills one of two missions – it is either long-lasting, or it is instantaneously available.  Advances are being made in both storage categories to drive down the costs of energy storage and make it economically feasible.  (There are a few questions about how to define this asset for amortization purposes, and these are regulatory matters that need to be decided at federal and state levels). 

The second technology that supports integration of clean and renewable energy sources into our electrical grid consists of sensors and actuators that remotely monitor and control the grid at points ranging from generation through transmission to distribution.  These devices are called PMUs or Phasor Measurement Units, and they collect time-stamped data samples at multiple points across the grid to deliver what the industry calls “wide area situational awareness”.  That big picture view of the grid helps the people responsible for electricity delivery to prevent brownouts and blackouts. 

These technologies are in deployment now in pilots and in full-fledged operations.  These technologies accelerate integration of renewables into the Smart Grid, and acceleration of the Smart Grid means a faster adoption of EVs (electric vehicles) in this country.  And that means we can give the heave ho to oil, instead of watching it give the heave ho to the entire Gulf ecosystem (which includes all the humans in it). 

I alluded to the regulatory questions about energy storage, and this is important.  You can do something instead of helplessly watching video of oiled marshes and dead birds.  There is a bill in Congress to encourage investment in energy storage.  It is SB1091, the Storage Technology of Renewable and Green Energy act of 2009 (STORAGE) also known as the Wyden bill.  It provides tax credits and accelerated depreciation for energy storage assets, so utilities have financial incentives over and above the good arguments about reducing carbon footprints and reliance on clean forms of energy.    It will create a standard definition of how energy storage assets should be treated.  It is sitting on Capitol Hill right now.  You may not be able to decontaminate the Gulf waters or beaches, but you CAN do this – you can contact your US senators and representatives and ask them to make this the law of the land.  

It’s not an audacious act, but as a combined effort, it becomes part of an audacious goal – to create a Smart Grid that sustains millions of EVs using electricity coming from clean energy sources.  This should be our future, instead of continued reliance on oil.  Is that too much to hope for?

Electric vehicles (EVs), a key component of the Smart Grid, serve many beneficial purposes.  First, even those that get electricity from fossil fuel power plants still have a far lighter impact on the environment than gas powered vehicles.  The cumulative greenhouse gas emissions from coal power plants powering EVs are still less than the cumulative emissions from millions of gas powered vehicles.

EVs also help shape electricity loads through smart charging, which uses communications and charging control software to manage the timing, pace, and extent of charging loads from utility to EV and manage the load stored in the EV.  It can respond to fluctuations in demand on the grid, so it charges when electricity is readily available and suspends charging when it senses peak load times.  EVs can help stabilize the grid, and avoid grid purchases of expensive peak power, keeping costs down for everyone.

EVs can earn money for their owners through carbitrage.  Carbitrage is defined in the 2^nd Edition of the Smart Grid Dictionary as:  “The capability for an EV or PHEV (Plugin Hybrid EV) or charging station to communicate with the electrical grid to schedule charge/discharge activities based on conditions including pricing signals, tariff agreements, TOU (Time Of Use), DR (Demand Response) programs, and manual overrides by car owners.”  Just imagine – one day there will be an iPhone app that calculates how much money that sweet little EV you’ve been thinking about purchasing will earn for you.  Contrast that to the mental subtraction of a couple thousand dollars we all do as we drive a gas-powered car off the dealer’s lot.

EVs are much cheaper to operate than gas-powered vehicles, and electricity pricing has more predictability to it than barrels of oil.  And then there’s the convenience factor.  I can’t wait to eliminate filling up the tank as one of my chores.  How much better it will be to pull into my garage and plug in the EV – which my smart charging system will juice up when prices are at the lowest. 

But even more significantly, a shift to EVs means the beginning of the end of costly Big Oil.  You can take your pick of studies that calculate the sum total of US federal and state subsidies that go to these companies.  The eye-popping numbers range from $330B between 1950 – 2003, to a mere billion dollars a year.  That’s right fellow US taxpayers, at least a billion dollars a year in subsidies to mature, profit-engorged multinational oil corporations.  I’d much rather see those sorts of subsidies going to domestic, renewable energy  and EV businesses that will make the petroleum spewing a mile deep in the Gulf as obsolete and cringe-inducing a fuel as whale oil.   Wouldn’t you?