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?

Learn more

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.  

I Want To Be A Prosumer

Alvin Toffler coined the term “prosumer” to describe a situation where a producer of electricity may also have a consumer relationship with a utility, aggregator, and other energy provider.

That’s exactly what is happening today.  Consumers can play the role of renewable electricity producers at individual or community levels.  For instance, in California, Community Choice Aggregation offers neighborhoods and municipalities opportunities to join forces to source renewable energy for their electricity needs.  This sensible policy encourages growth of local businesses to build and manage renewable energy production and stimulate local economies.  Unfortunately, Pacific Gas and Electric, the monopoly in Northern California, wants to undermine these policy goals and economic benefits to consumers through its Proposition 16 campaign (See my April 19 blog).

Future electricity production must also consider the “negation” of electricity use.  A negawatt is defined in the Smart Grid Dictionary as “A term that identifies watts of energy saved through a reduction in energy use or increase in energy efficiency.  It is the greenest form of energy.”  It is also called the “first fuel”, and it should be bought and sold like any other energy source.

There are growing numbers of solutions that enable homeowners to monitor and manage their electricity use, and create negawatts.  In other words, a consumer can actively participate in reduction of electricity consumption through new Smart Grid technologies.   Traditionally, utilities or third party aggregators enrolled customers into programs that usually delivered day-ahead notification of requests to reduce electricity consumption.  In the future, maintaining a stable grid with renewable resources will require real-time requests for electricity consumption adjustments (and energy storage too).  That implies low cost, high performance reliability in solutions that homeowners use to manage electricity consumption.  One of the most interesting technology platforms uses open source hardware and software – called OSHAN (Open Source for Home Area Networks).  Why is that important? 

Open source solutions (like Linux, MySQL, Apache –foundations of the Internet) have a solid reputation for top quality, reliability, security, and flexibility.  Open source solutions are created at fractions of the cost of traditional development cycles and eliminate risks of buying products that won’t work together. The OSHAN platform could play an important role in unleashing the creativity of software and hardware developers to create innovative products that manage and reduce energy use, creating negawatt value for consumers.   Just as the Smart Grid enables a broad base of participation in electricity production and consumption, technologies like OSHAN can propel the most cost-effective and easy-to-use energy management products into mainstream use.   I look forward to being a prosumer. 

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.

This is the GOOD about California’s Smart Grid plans – it’s a public process that invites an open exchange of views about the roadmap for a successful and cost-effective Smart Grid in this state, which often serves as a template for other states. It included a great deal of discussion about what is in the average residential ratepayer’s best interests – and the aspects of the Smart Grid that benefit consumers.

The BAD is that decisions have to be made quickly, and in advance of cyber security and interoperability standards recommendations coming from the National Institute of Standards and Technology (NIST). It’s becoming a common theme – everyone is waiting for these standards recommendations, everyone wants state and Federal regulators to establish policies, but regulators are reluctant to pick winners and losers.

The UGLY is a sad, cynical and manipulative ploy by one of the three California IOUs to squash competition from municipal utilities. That utility is PG&E. It is sponsoring and investing more than $25 million dollars in a misleadingly-named “Taxpayers Right to Vote Act” also known as Proposition 16. This proposition requires that 2/3s of voters must approve any local government’s provisioning of electricity through a municipal utility. Why is this ugly? First, it contravenes the proposed California Smart Grid roadmap’s goals of accommodating all generation and storage options. Second, it directly counters another roadmap objective to enable electricity markets to flourish. PG&E definitely does not want alternative markets organized around Community Choice in California that could compete with them. Third, it is blatantly unenlightened behavior from a utility that had the courage to divorce the Chamber of Commerce for its “extreme position on climate change”. Does PG&E have an evil twin that is currently running the show?

Shout out to the EPA and DOE
The US Environmental Protection Agency and the Department of Energy are strengthening the ENERGY STAR program as noted in previous blogs. New testing is underway on six of the major electricity consumers in average American homes, and new ongoing verification testing will ensure continued compliance in addition to the third party testing already put into place. The appliances are freezers, refrigerator-freezers, clothes washers, dishwashers, water heaters and room air conditioners.

In addition, the DOE has been aggressively stepping up enforcement of Energy Star standards, requiring manufacturers to actually comply with these standards, and revoking the ENERGY STAR label from non-compliant products. This is all good news for American consumers, because the ENERGY STAR program is well-known and trusted to guide purchasing decisions. Beefed up enforcement will save consumers money – estimated to be $250 – $300 billion in savings over the next 30 years. Now that’s what I call a good use of taxpayer money. For more information, click here.

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. 

I study HEMS solutions and always ask the HEMS manufacturers about the support model.  There is remarkable unanimity in their assertions that the utilities will take the first support calls – for HEMS web portal software and for IHDs.  The HEMS providers are confident that their solutions are so easy to use that support is quantified as a nominal increase in support calls.  Some of them go to great pains to develop friendly user interfaces.  But I have marketed, sold, and deployed many software applications in my career, and what is “a nominal increase in support calls” to a vendor may be dramatic increases in call volumes to utility customer contact centers.    

Regardless of the success of the introduction of a HEMS solution and associated IHDs, if the support model is inadequate, the end result will be frustrated ratepayers, lagging participation in crucial Demand Response and other energy conservation and energy efficiency programs, and more utility time and expense to fix these problems. 

Utilities that offer HEMS solutions to their customers need to include software and hardware support of the HEMS solution and IHDs into their Consumer Enlightenment Model.  Bring in consulting professionals with experience in contact centers, software support, and emerging technology introductions who are knowledgeable about Demand Response and Energy Efficiency programs.  Work with them to develop a fully integrated Consumer Enlightenment Model that aligns with utility objectives to reduce overall energy use during peak and non-peak times and manages not only the introduction, but the ongoing support of visible, disruptive, and extremely important HEMS solutions and their IHDs. 

Feds Step Up Enforcement of Appliance Reporting Standards

Energy efficiency was proclaimed to be “sexy” by President Obama just last week, and the days of lax enforcement of energy efficiency standards are thankfully at an end.  The Department of Energy (DOE) recently announced that January 8, 2010, is the deadline for manufacturers of certain residential products to submit accurate certification reports and compliance statements regarding energy efficiency.  A 30 day grace period lets the slackers correct their non-compliance without penalty. 

After January 8th, the DOE will begin enforcing these reporting requirements, including leveling civil penalties or fines for non-compliance. This covers reporting and certification requirements – not the actual energy efficiency standards, which are already subject to scrutiny by DOE.  The requirements include a certification report for each basic appliance model covered by the energy standards, along with a signed compliance statement.  You can access the DOE press release and fact sheet, and for even more info, here is the Web site for DOE’s Appliances and Commercial Equipment Standards Program.   To all the appliance manufacturers that have been playing by the rules all along, kudos to you.  To those manufacturers who treated the rules cavalierly, the playing field just got leveled.

This concept is summed up as the Negawatt – defined in the Smart Grid Dictionary as the “watts of energy saved through a reduction in energy use or increase in energy efficiency.  It is the greenest form of energy.” 

California is a leader in Negawatts.  As previously noted in my October 12 blog, the California Energy Commission (CEC) has defined energy efficiency standards for appliances sold and used in California since 1976.  The results of those actions are that per person, annual electricity consumption in California has remained steady at 7,000 kWh while electricity consumption has risen to 12,000 kWh in the rest of the USA. 

What this means is that Californians are not wasting money on electricity-guzzling appliances.  However, 35 million devices are omitted from that appliance list – California TVs.  The CEC wants to remedy this gap in the standards with regulations for TVs sold and used in California.  Docket # 09-AAER-1C Appliance Efficiency Regulations Pertaining to Television Efficiency contains the information about the regulation under consideration.

This standards proposal is facing fierce opposition from the Consumer Electronics Association (CEA).  In keeping with Halloween, they are filling editorial pages with fear and gloom – this regulation will kill retail jobs. 

Could an EnergyGuide label, which would identify annual operating  costs (electricity consumption) for a TV and also rank that TV’s overall energy efficiency on a scale of best to least efficient force Californians to drive across state borders to buy “bootleg” TVs from Nevada, Oregon, or Arizona?  According to this logic, Californians must be doing this already for all of the other appliances covered by CEC EnergyGuide standards since 1976. 

Today I counted 26 appliance stores within a 10 mile radius of my Bay Area zip code, ranging from small businesses to large national chains.  Californians are still buying appliances locally, and perhaps they appreciate that their annual operating costs for these appliances are lower as a result of the energy efficiency standards.

The CEA opposition does raise a couple of questions.  Why oppose it?  Over 1000 TV sets already qualify for the standards that would be imposed in 2011.  Some manufacturers, like Vizio, support the standards.  The CEA claims that an energy efficiency standard would “stifle innovation”.   Wouldn’t it also promote innovation in designs that reduced energy consumption, innovations that could probably be extended to other uses too?

May the most energy-efficient manufacturers win – because it’s a triple win.   It means more Negawatts out there, it means reduced need for more power plants and it means reduced TV operating costs for every consumer.

The Smart Grid takes energy efficiency to new levels of savings, as noted in an October 20 press release.  Manufacturers like GE and Whirlpool are participating in the recently launched Smart Green Grid Initiative (SGGI), a collaborative industry association that demonstrates the role of smart grid technologies and practices in the achievement of climate change goals.  One of the ways to do that is through energy efficiency and smart appliances that can communicate with the electrical grid.  I didn’t see the CEA on that list of enlightened manufacturers and industry associations.

And with Halloween in mind – like many other appliances, TVs are energy vampires.  Even when you turn them off, they are still drawing power.  The only way to cut the power completely is to unplug them, or put them on power strips that have “kill” switches for complete cessation of power draws.  You can buy dumb power strips for as little as $6 and see an ROI in as little as a month.  If you do have some devices that MUST be drawing electricity 24X7, there are intelligent power strips available that accommodate those needs too.  The bottom line is that these are simple steps for residential electricity customers to save some money, generate Negawatts, and reduce carbon footprints.

Here’s a list of products that are not independently tested and certified for energy consumption: 

• TVs
• Computers
• Refrigerators
• Washing machines
• Water heaters
• Dishwashers
• Room air conditioners
• Doors
• Skylights

 At this time, the Department of Energy (DOE) and the Environmental Protection Agency (EPA) have only required a few products to be independently tested, including windows, LED, and fluorescent lighting devices.   However, when almost all of the devices tested qualify for an Energy Star rating, a common occurrence for compact fluorescent lights, then there is something wrong with the evaluation standards too. 

 The Energy Star program is also behind the times in terms of categories of products.  Currently, game consoles are not evaluated.  A 2008 study by NRDC reports that one PlayStation or Xbox powered 24X7 consumes as much energy as two new refrigerators each year.   (Side note:  legislation – the Green Gaming Act of 2009 – was introduced in September with the support of the video gaming industry and environmental groups to require the DOE to study energy usage and determine if energy efficiency standards should be set.)

 There’s great opportunity for improvement in the Energy Star program, which is suffering from a lack of integrity, low or outdated evaluation criteria, and insufficient coverage of consumer devices.  The Energy Star program needs dramatic changes to deliver on its original mission to identify and promote energy-efficient products that reduce greenhouse gases.  A recent agreement between the DOE and the EPA takes a couple of steps in the right direction – these two agencies that jointly administer the Energy Star program agreed to institute testing by independent labs and expand the categories of products that are tested.  That’s the good news.  The bad news is that no date was identified for these changes to be effected.   

 The DOE and EPA need to seriously consider raising the bar on what constitutes an energy-efficient device.  Should all products qualify?  Probably not, since it makes it difficult for consumers to properly evaluate the pros and cons of devices.  The agreement referenced above talks about creating a super star ranking for the top 5% of energy-efficient products.   Huh?  The EPA already spends a significant amount of time and money educating the public about the Energy Star program.  Is it really wise to make the program more complex and complicate the messaging?  Why not use the current Energy Star logo, readily recognized by consumers in the USA, and make it exclusively apply to only the top 5% of independently-tested and certified energy-efficient products in any category?  That action will go a long way to restoring program integrity, raising the bar to manufacturers to design ever more innovative energy-saving features, and really reducing energy consumption costs for consumers.   

 And finally, the Energy Star program should prioritize on the devices that consume the most energy on the electrical grid.  According to information from EPRI, TVs, lighting, and refrigerators have the greatest potential for energy savings.  Doing this will help us collectively reduce overall energy requirements on the grid, and eliminate the need for additional power plants.