There’s no single answer to the climate change mess we’re in, but Smart Grid advances will be primary contributors to the most effective reductions in CO2 emissions.  Here are two incremental efforts that can reduce our use of fossil fuels and improve the odds of avoiding the severest impacts of climate change.

Energy efficiency.  Residential and commercial buildings account for 40% of energy consumed in the USA, according to the Department of Energy.  Fossil fuels account for 77% of that energy expended to heat, cool, illuminate and operate those buildings.  Innovative retrofit solutions for building envelopes (windows, walls, and ceilings) can reduce energy consumption, emissions, and energy bills.   But energy efficiency innovations also extend into product designs and operations.  For instance, the USA wisely instituted energy efficiency standards for refrigerators back in 1978, and since then, even as these appliances have increased in size and features, their electricity consumption has decreased by more than two thirds.  The most recent round of refrigerator standards instituted in August of this year will trim another 25% of energy use by 2014.  Similar expectations should be applied to every appliance and electronics component that reside in our homes and office buildings.

Electric vehicles (EVs).   This is truly disruptive in terms of technology, policies, services and even business models, and it couldn’t happen at a more opportune time.  Electrification of personal transportation delivers beneficial impacts that range from environmental to economic to national security.  There’s a good report from the Electrification Coalition that details the numerous benefits that we can enjoy through transitioning to EVs.   This report recommends replacing traditional vehicle fleets to EVs as the first incremental step in that transition.  EVs reduce petroleum products consumption, which accounts for 94% of our transportation needs today.   A transition to EVs would eliminate a $1 billion per day transfer of wealth from the USA to countries that don’t like us.   

While these disruptions are most welcome to securing our energy security and refocusing investment within our borders, the Smart Grid offers strategic new uses of EVs beyond mere transportation.  The most disruptive impact of all is that the energy stored in EVs can potentially be harnessed to modify electricity consumption patterns.  EVs that are plugged into the grid during times of peak electricity use could be tapped to intelligently discharge just enough energy for utilities to ride-out those timeframes without building additional generation facilities or purchasing power at its most expensive price.   Transitioning to EV-based transport will require upgrades to our electric infrastructure, which are needed anyway to support integration of renewables and distributed small to large scale generation.  It will also require new software applications to manage EVs as mobile, temporary, and distributed energy sources.    There are enormous opportunities for entrepreneurs to create innovations in technologies and services to manage what is commonly known as the V2G (vehicle to grid) connection.  Even utilities and their regulatory agencies, typically cautious adopters of innovation, may develop EV business models that continue the focus on delivery of safe, reliable, and cost-effective electricity.  

The UN conference in Durban may not produce the game-changing agreements that we’d like to see, but in the USA we can challenge ourselves to be the leaders in the most dramatic reductions in carbon emissions through innovations in Smart Grid technologies, policies, and services.   

At the GridWise Global Forum this past week, a parade of speakers highlighted the need for a coherent national energy policy.  Silicon Valley venture capitalists are also vocal about the need for market certainty promulgated by federal and state energy policies to aid the flow of investments into Smart Grid technologies and new energy sources.   Jeffrey Immelt, CEO of General Electric, said during a presentation at GridWise, “The rest of the world is moving 10 times faster than we are. This is a great country. But, you know, we have to have an energy policy. This is just stupid what we have today.”  

What we have today in the USA is an extremely fragmented energy ecosystem.  There are over 3200 utilities ranging from investor-owned utilities (IOUs) to municipals and rural cooperatives.  There are 50 state regulatory agencies focused on retail electricity, gas, and telecom, involved in rate setting and consumer issues.  The Federal Energy Regulatory Commission (FERC) has oversight of interstate transmission and wholesale electricity rates.  The North American Electric Reliability Corporation (NERC) has a mission to ensure the reliability of the bulk power system.   There are Independent System Operators (ISOs) and Regional Transmission Operators (RTOs) that coordinate regional power markets and transmission.  In contrast, nations like China and Australia have simpler regulatory structures, and can formulate and enact energy policy on a national scale.

While there may not be any quick fixes to achieve a more rational regulatory structure in the USA, the federal government is taking positive steps as outlined by Secretary Steven Chu of the Department of Energy (DOE).  For instance, overall electric grid security is extremely important to national security, and a natural focus for federal action.  $30 M in funding allocations recently were announced for R&D and coordination between the public and private sectors in cyber security technologies. The Advanced Research Projects Agency – Energy (ARPA-E) funds early-stage, innovative technologies that could be potential-gamechangers.  Recent investments are in energy storage, efficient energy transmission, and advances in cooling technologies for buildings.  As Dr. Chu pointed out in his speech at the GridWise Global Forum, some of the greatest challenges are not technical – they are behavioral.  Getting Americans to change their energy consumption habits will not be easy, and requires outreach and education from a variety of entities and through a number of media channels.   

The progress towards a Smart Grid, especially when contrasted to other nations, highlights the problems with our current regulatory practices, our aging infrastructure, and our lack of a federal energy policy.  Thinking that we can continue as is with the current systems, technologies, and subsidized fossil fuels is not a policy that wins this energy technology race.  Will we do the right thing, as Churchill observed, to succeed in this new global competition?

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An upcoming conference in San Francisco, West Coast Green, will explore themes around the built environment and creating smarter cities and communities.  I will moderate a panel titled Smart Systems for Future Communities, which will discuss technologies and approaches to revising our thinking about infrastructure and better energy systems. 

Utilities and energy service providers will have massive amounts of data on generation, transmission, distribution, and consumption because of Smart Grid technologies.  How will they handle it, and what does this mean for consumers?  A new ebook available for download here covers topics focused on Smart Grid data management, with content reflecting contributions from several writers, including myself.  

First they created a public relations disaster with their smart meter rollout, which now has its own term called “the Bakersfield effect”.  PG&E investment in a sensible communications plan and budget could have prevented this problem.  The impacts of the Bakersfield effect are widespread.  Smart meter rollouts in other utilities are delayed or postponed, and each setback hinders realization of their Smart Grid objectives.

Second, PG&E filed a tariff proposal that would reduce their current 5 tier electricity pricing structure to 3 tiers.   Under the current structure, the more energy you use, the higher your rates.   This provides financial incentives for Californians with high bills to seek solutions like solar panels or energy efficiency investments or simple energy conservation behaviors.  The proposed flattening of this program rewards electricity guzzlers at the expense of energy-conscious consumers.  It is akin to asking drivers of gas-sipping cars to subsidize the gas for Hummers.  Solar companies are already on record stating that this tariff change, if approved by the California Public Utilities Commission, would remove financial incentives for many homeowners to add solar generation and thereby defeat two key Smart Grid objectives – increased renewable energy and more active consumer participation. 

And finally, there’s Community Choice Aggregation and Proposition 16.  Community Choice Aggregation (CCA) is available in several states including California and is an interesting market model to accelerate the introduction of renewable energy into the grid and enable more consumer participation to reduce energy use.  The program details vary in each state, but all allow cities or counties to purchase and/or generate electricity for residential and business use within their boundaries. The local investor-owned utility (IOU) delivers electricity through its transmission and distribution network and continues meter reading, billing, and maintenance services.  The customers in the CCA footprint have the ability to opt-out of the CCA program, but why would they?  A CCA arrangement means local community control over energy resources, an increased reliance on renewables, plus a lower overall cost of electricity. 

For example, a local effort in Marin County projects that adoption of a CCA program for the county and its communities would result in:

• Annual average electricity cost savings of $6.8 million spread amongst it customers
• Increased renewable energy utilization to 51% by 2017 or sooner – double the renewable energy resources provided by PG&E in that timeframe
• Improved rate stability for local residents and businesses because a CCA is responsive to its local customers, not to remote shareholders

Prop 16, misleadingly titled the Taxpayer’s Right to Choose Act, is sponsored and funded by PG&E, which is committing up to $35M to the June 8 campaign.   PG&E would like to kill CCA to protect their monopoly powers.   While this effort pleases Goldman Sachs and other Wall Street investors, it has negative impacts for the Smart Grid and us.   First, discouraging community-sourced generation reduces the resiliency of the Smart Grid.  Communities that have their own sources of electricity could contribute electricity or reduce energy consumption during grid disturbances and thus help PG&E continue uninterrupted electricity service to all ratepayers.  Second, it casts a pall on the number of new market models, products, and services that can be introduced, which is one of the seven characteristics of the Smart Grid identified by the Department of Energy (DOE) to accelerate deployment of solutions that improve our energy security and reduce greenhouse gases.  Third, community-based programs that promote energy efficiency and responsive energy reduction programs have unique, localized value propositions to lower community energy costs that could not be matched by a monolithic entity like PG&E.   See this link for more information.

These PG&E actions, if allowed to go forward, are serious obstacles to the deployment of Smart Grid technologies and services, and in turn hinder the ability of this nation to improve our energy security, reduce greenhouse gas emissions, and reduce energy costs for consumers.  Satisfying Wall Street should not (again) be a financial, environmental, and national security cost to American taxpayers, ratepayers, and consumers.

Exceptional Mission.  Employees in the land-line phone company had an obligation to deliver dial tone – even when the lights went out, and they had their own banks of batteries for back-up power so people could call to report electricity outages.  Failure was not an option.  And telecom resources were ignored and taken for granted– until you picked up a phone and didn’t have dial tone.  This same sense of mission is expressed by utility resources too – no one thinks about electricity until an outage, and electric utilities have an obligation to deliver power regardless of circumstances.  Utility resources have done an excellent job managing today’s electrical grid.   I sometimes see and hear bewilderment, frustration, and defensiveness in utility resources when talking about the traditional grid and the changes the Smart Grid will bring.  Lesson #1 – Change is not a criticism of past performance.  Be excited that electricity is something that will no longer be taken for granted.     

Monopoly Skills.  In 1980 you had no choice for local phone service except Ma Bell.  Phone company practices, policies, and processes were heavily influenced by state Public Utility Commissions and the Federal Communications Commission (FCC).  The price of monopoly is regulation, and utilities are very good at interacting with regulators.  Another price of monopoly is the lack of utility skills in working in any other type of market.  Phone company resources had a steep learning curve to build knowledge about how to effectively communicate with customers and how to successfully introduce and manage a growing deluge of new technologies and services to customers while satisfying regulatory requirements.  It will be a painful climb for some utilities, but it can be accomplished faster and at less cost to ratepayers by learning from telecom industry experiences.  Lesson #2 – Hire outside talent to build corporate readiness for a transitioning marketplace.  Develop and deploy corporate-wide change management plans that address concerns of existing employees.

I’ll continue my observations about similarities next week after attending the ITExpo East Smart Grid Summit.

Let’s give a standing ovation to the Department of Energy.   The DOE’s new energy efficiency enforcement is producing positive results.  The DOE entered into a Consent Decree with Haier America, about a parts defect that caused certain freezers to consume more energy than reported to consumers.  The Consent Decree obligates Haier to notify affected consumers, repair defective units, add one year to warranties, and contribute $150,000 to the U.S. Treasury.  The manufacturer cooperated with the DOE investigation, and I hope that other manufacturers will do likewise, just like I hope that the Consumer Electronics Association (CEA) takes some notes in case it contemplates fighting California Energy Commission energy efficiency standards again.  

The DOE had a huge response to its call for efficiency certification documentation – 600,000 residential appliances in 15 different product categories from 160 manufacturers submitted their data so far. The DOE will review compliance with minimum energy efficiency standards, and those products found lacking will be required to deliver the energy and cost savings required by law. 

This week the focus moves from generation to transmission.  As electricity consumers, we typically don’t think about transmission until there’s a problem.  For example, many Californians were worried a couple of years ago when the wildfires consumed massive square miles of land that were close to high voltage transmission lines.  Had those been damaged or destroyed, a local fire, a disaster by itself, would have become a much bigger disaster if regional brownouts or blackouts had occurred.

The great blackout of 2003 in the Northeast was caused by transmission failures and the inability of utilities and the RTOs (Regional Transmission Organizations) to understand what was happening and why it was happening.   That blackout cost $6B and 11 lives.   Just as management of local highway grids is much improved with cameras and road sensors to plan proactive measures to reduce traffic congestion, the ability to have some awareness about the health of the transmission system is an important characteristic of a Smart Grid. 

Here’s some Smart Grid jargon for you – synchrophasors.   The definition in the Smart Grid Dictionary is “Precise grid measurements (synchronized phasor) that deliver real time data about the power system.  The information is obtained from monitors called phasor measurement units (PMUs).  Aggregating this time-stamped or synchronized data is useful to delivering a comprehensive view of an interconnect system.  These measurements are used for wide area management of grid operations.”   

Synchrophasors use GPS (Global Positioning System) technology to time-stamp their measurements, making them ideal for wide area situational awareness (WASA).  This situational awareness is so important that the federal government’s Department of Energy (DOE), the North American Electric Reliability Corporation (NERC) and industry players are funding a collaborative initiative to improve wide-area power system reliability and visibility through measurement and control using synchrophasor technologies.  This initiative, NASPI (North American SynchroPhasor Initiative), includes large-scale prototypes and regional demonstrations to research, develop, and deploy other uses of this new data.   Some utilities are already using PMUs for their regional real-time grid operations. 

In essence, the NASPI initiative will make the overall transmission system more intelligent because there will be more data about its overall status that can be used to take precautions or corrective actions.  It will also help pave the way for more renewable energy production on the grid.  Two important renewables discussed last week – solar and wind – are intermittent sources of power.  The sun only shines in the day, and only on days of good weather.  The wind is also predictably fickle.  PMUs can also assist in real-time grid operations so utilities can make fast adjustments when the clouds roll in or the wind unexpectedly calms. 

Another problem in our aging transmission system is that the existing technologies typically lose around 10% of the electricity energy in transmission.  Obviously, if we can improve technologies to reduce these losses, that’s a good thing from financial and environmental perspectives.  The Federal government is engaged in RD&D (Research, Development, and Deployment) work to improve power line capacity and efficiency. 

Finally, we don’t have enough transmission capacity, and will need to build more power lines to accommodate growing populations and new sources of generation – such as solar thermal and wind power – which are remote to the populations that will use that electricity.  This will be the subject of next week’s blog. 

 Smart Grid Rule #2:  You know you have a Smart Grid when the transmission of your electricity is thoroughly monitored by PMUs to deliver critical situational awareness and intelligent management of the grid to improve its operations and efficiency, and when transmission lines are updated to the latest technologies to reduce line losses.