There have been some limited residential DR programs here in California aimed at air conditioning (AC) cycling, but these involved targeted groups of ratepayers and required special equipment to remotely control residential AC units.  Utilities are now looking at much more ambitious programs that impact most ratepayers – in the form of new pricing programs that more accurately reflect the time component of electricity generation.  The average Joe or Jane Ratepayer would be surprised to learn that generation of electricity has different costs at different times since this is not typically reflected in their current bills. 

Education is one of the three big challenges to implementing wide spread DR programs for residential use.  It will take time to communicate carefully developed messages that build the foundation of knowledge for residential ratepayers to appreciate the price variations in generation and the benefits of DR and dynamic pricing.  They will need exposure to messages like this one offered by CAISO in their December 2007 eGrid Technologies Help Achieve Environmental Goals report, “Demand reduction is just as effective, and often less expensive, than adding megawatts onto the grid and it doesn’t add a single pollutant.”

The second challenge focuses on the business model.  Proxy DR for residential participation requires new business entities called Demand Response Providers (DRPs) – enterprises that can aggregate enough consumers to represent the amount of electricity that can be bid into the retail market.  There are a few businesses operating in this market, but they are relatively new to the space, and there is much to learn about how to set up the most efficient and profitable model. 

The third challenge is technological.  Consumers will need robust and reliable HANS and easy-to-use HEMS applications to participate in DRP programs.  Their HANs must reliably communicate price signals and/or DR alerts to “enrolled” devices that can either automatically shut off or reduce their electricity use.  The HEMS applications must be simple to use to achieve the widest possible consumer adoption. 

One of the most interesting HAN technologies that promises that robustness and reliability is the Open Source Home Area Network or OSHAN.  Stay tuned next week for some more information about it.

Microgrids within a utility’s grid can collectively deliver utility-scale distributed generation by selling excess energy to utilities.  However, microgrids can also supply what I call “virtual” generation by disconnecting from the utility grid and functioning as energy islands during peak usage times.  This is an extreme form of a Demand Response Program, but it can be done at a scale that eliminates the need for future utility investment in generation assets.  It is quite a shift for utilities to no longer build to peak electricity needs – but the Smart Grid and microgrids in particular – can help utilities evolve planning functions to asset optimization.  And since many microgrids incorporate renewable generation and storage, they are a great way for utilities to add distributed renewable generation and storage management into their asset investment plans.     

I was at the National Electricity Forum last week and asked the panelists discussing a new electricity infrastructure about the assumptions they were making to include distributed generation and microgrids into their plans.  The bad news is that they really aren’t making plans for distributed generation.  They are making plans that assume that all new generation is remote from users, and requires investment in transmission facilities, including new lines and new routes.  That may happen, but it won’t happen quickly, and only at great political and capital costs.  There’s a fast track for the Smart Grid, and it is based on wide scale distributed generation and microgrids.  Distributed generation and microgrids can happen much faster than many other benefits of Smart Grid solutions, and lead the way for an energy ecosystem in which there are many more winners and fewer losers.

To learn more about microgrids, join me at the Sustainable Silicon Valley/Santa Clara University Smart Microgrid event on February 23.  You’ll hear about this university’s project to upgrade their existing microgrid to a smart microgrid and enjoy thought-provoking discussion from a great panel of industry leaders – I’m looking forward to being the moderator.

Mark your calendars for the Metering, Billing/MDM America conference in San Diego on March 7-10.  This is a great show to learn about metering of electricity, gas and water, and the latest technologies to make dumb meters into smart meters.

What does this really mean?  Here’s the bottom line.  Utilities now have power plants that only operate at the times when the need for electricity is greatest – called peak demand.  These expensive assets (also known as “peaker” plants) may only operate for hours – seriously, mere hours – of time, but are required to deliver electricity at the times of greatest consumption, or else we experience blackouts.    The most predictable periods of greatest electricity use are those hot spells in the summer when everyone cranks up their air conditioning.  There are 8760 hours in a year.  Some peaker plants only operate for 50 hours in a year.  Global warming will certainly increase air conditioning use, but even then, it is hard to create a nice Return on Investment for a seldom-used peaker plant.  

However, if utilities and consumers can work together to reduce other electricity usage during these extreme weather conditions that trigger peak demand, it means utilities can avoid adding more expensive peaker plants that sit idle except for those few hours in a year.  If utilities have to build more power plants, consumers usually see rate increases.  So, if we work with utilities to reduce our electricity consumption during these times, we all save money, or at least keep the cost curve under control.  In fact, some programs could even offer money back to consumers who reduced their electricity use during specified timeframes.    

Smart Grid technologies like smart meters and Home Energy Management Systems (HEMS) will dramatically increase the opportunities for consumers and utilities to work together to reduce and shift electricity consumption.  As we’ve already seen with some smart meter rollouts, success is defined by the quality of the marketing and communications plans.  The same will be true about programs that require consumer participation on a massive scale.

The Federal Energy Regulatory Commission (FERC) just closed the comment period for a Discussion Draft titled, “Possible Elements of a National Action Plan on Demand Response”.  This process invited feedback from the public on objectives, strategies, and actions that can ensure the maximum participation and success of demand response programs.  Buried deep in the 76 page document was a question about whether or not the term “demand response” needs some consumer-friendly terminology.  Absolutely and most definitely.  If you need an explanation to understand that demand response really means an opportunity for consumers to save or make money, then you need to change the term. 

In my comments to FERC, I suggested that at a national level, demand response programs should be called Smart Saver programs because there’s no question about the objective.   For many utilities, the greatest Smart Grid challenges are not technical, but instead are marketing and communications.  There will be significant amounts of complex information that must be shared with residential consumers in the next few years about Smart Grid technologies and HEMS solutions as part of well-designed consumer enlightenment programs.   If the utilities’ starting point for consumer enlightenment is talking about demand response, a term that defies intuitive understanding, then the communications challenge is magnified.

There was plenty of “whine” on November 4, or to be exact, at 4:55PM on November 3, when the CEA sent a 91 page document 5 minutes ahead of the 5:00PM deadline for comments on the California Energy Commission’s (CEC) proposed TV energy efficiency standards. In order to review this and other comments that arrived at this 11th hour, the CEC has postponed its hearing until November 18th.

The CEA comments oppose the proposed standards, citing that energy efficiency standards would increase the price of TVs. According to this industry association, the average digital TV uses the same electricity as two light bulbs – incandescent light bulbs. The average 42 inch LCD TV consumes 203 watts, and the average 42 inch plasma TV guzzles 271 watts. The average California home has three TVs. It appears that the CEA is strongly advocating for not only increased operating costs for consumers, but also construction of more expensive power plants and increased electricity rates to pay for increased power generation.

It’s a shame that the CEA can’t take the bold step of working cooperatively with the CEC to reduce consumers’ operating costs of TVs and reduce carbon footprints as well.

Smart Homes and HEMS in a Smart Grid

I attended a presentation by Vint Cerf, often called the “father of the Internet” last week, and part of his presentation covered sensors and actuators in homes, monitoring environmental conditions and sending alerts based on defined triggers. His example was his wine cellar. If the temperature goes above a threshold, sensors note the condition and send an alert to his mobile phone. An actuator could trigger a change in the air conditioning temperature to eliminate that threshold and alert.

This is the type of technology I want to see enabled on the one device I almost always forget to adjust before a trip – my hot water heater. Wouldn’t it be great if I could remotely set it to vacation mode and save energy and money – money that I could use for a future vacation? Wouldn’t it be even more wonderful if I had a powerful but easy-to-use Home Energy Management System (HEMS) that maintained a series of defined “Vacation mode” settings for my entire home? Instead of setting individual lamps on timers, having the ability to instruct my home to turn selected lights in selected rooms on and off on automated schedules would make my HEMS a handy preventive security system.

One way to achieve this is to make devices internet-enabled and addressable – maybe not all of them, but many of them. For utilities, one of the promises of the Smart Grid is the opportunity to expand and enrich their Demand Response (DR) programs. Through these DR programs, utilities can work with consumers to automatically power down pool pumps or refrigerator ice makers, remotely adjust HVAC temperatures up or down, and find other mutually agreeable actions that can pare down electricity demand at peak times. Some consumers are suspicious of any utility reach into their homes, so it will be very important for utilities to structure their DR programs so that consumers can override these automatic and/or remote controls – but at the price of higher peak electricity rates as a result of that ability to override.

There is another very important point about this future vision of a Smart Home in a Smart Grid – and it covers Internet security. Mr. Cerf pointed out that internet security is in definite need of research and development, and he’s right. If we are going to make a home truly Internet-enabled, as homeowners we’ll expect that our homes can’t be hacked with the unfortunate regularity that befalls our computers. HEMS solution providers need to consider appropriate security designs and processes into their software and hardware that consider worst-case scenarios. As we all know, one negative incident in the USA, one highly publicized negative incident, could set back the HEMS industry for years.

Check out the Global Smart Energy Bilateral Trade and Investment Opportunities event on November 13 in Monterey. The agenda is filled with Smart Grid sessions that cover national and global perspectives.

Fortunately, there are very smart and dedicated people working with great speed and purpose on establishing standards for interoperability and cybersecurity.  The National Institute of Standards and Technology (NIST) has a leading role in developing national Smart Grid interoperability standards for the USA.  Working in close coordination with major stakeholders like utilities and industry vendors, NIST has a 3 phase plan to build consensus on existing standards for interoperability and cybersecurity and an interim roadmap; facilitate public/private panels to drive harmonization of standards and evolution of technologies to those standards; and then develop a plan for a test and certification framework.    The interim roadmap was published late last week and is available for public view at http://www.nist.gov/smartgrid/InterimSmartGridRoadmapNISTRestructure.pdf.  It’s an interesting read!

Now on to standard thinking.  We all have great expectations of the technological advances that the Smart Grid can deliver.  It appears that at least some technology vendors and utilities have great expectations of consumers too.  At a recent conference, an oft-cited example of demand response and how price changes will drive consumer behavior concerned laundry.  In this example, it was predicted that consumers will choose to do their laundry at midnight when rates are lowest rather than another time of day (or night).  Hello???? Here are three reasons why this is a really great example of bad standard thinking:  1)  who is getting up at 1AM to move clothes from the washer to the dryer?  Or is that what the live-in maid is supposed to do?  2)  many multi-tenant communities (like my condo association) don’t allow laundry after 9pm because of noise.  3)  Midnight is not the best time to line-dry clothes – especially for consumers who are fortunate to have outdoor lines.  I don’t know about you, but I like to hang laundry outside in daylight hours when I can see what I’m doing. 

So here’s my plea to the technology vendors - get past the standard thinking.  Its not about what the technology can do, its about what people can and will do with the technology.