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.   

This is the energy reality gap in America, and it’s time for us to close that gap and focus more public and private funding in Smart Grid technologies.  But like Charlie Sheen, many live in an alternate reality where capitalism means the subsidization of mature, profitable oil industries; harmful external costs like pollution to the atmosphere, biosphere, hydrosphere and geosphere should be borne by taxpayers and not the businesses that create them; and we’ll never run out of oil.    

The Smart Grid can change our energy reality in two critical aspects.  First, it integrates renewable domestic energy sources like wind, solar, and geothermal into our electrical supply.   While very little of our electricity is sourced from oil, around 90% of our transportation system runs on it.  Electrification of our transportation system puts energy reliance on domestic energy sources that are not impacted by global political events, and we’ll reduce our trade deficit as we reduce energy imports.  Another benefit is the reduction in Greenhouse gas (GHG) emissions through use of clean renewables.

Second, the Smart Grid adds bi-directional flow of communications and electricity, which disrupts the entire transportation infrastructure in very interesting ways.  Consider that smart charging, which manages the timing, pace, and extent of charging loads of electric vehicles (EVs), is only possible in Smart Grid-enabled networks.  Smart charging lets drivers charge from the grid when demand and prices for electricity are at their lowest, as well as charging up the grid by selling back electricity during peak times.  When is the last time an oil company offered that sort of give and take to consumers?

A strong commitment from the government in increased and long-term funding of the Department of Energy’s Advanced Research Projects Agency – Energy (ARPA-E) and other investment channels can speed the development and deployment of Smart Grid technologies that electrify our transportation infrastructure and give us, at last, energy security that doesn’t require the US military in overseas adventures.  Last week ARPA-E held the Energy Innovation Summit in Washington DC to showcase the progress of investments made in innovative energy technologies.  That’s a great start, but we need to continue the federal funding commitments and focus on game-changing technologies to accelerate progress, as well as increase private sector activity. 

Would political turmoil in Libya or the Middle East have an effect on the cost of electricity that is generated by renewables within our borders?  No.  Would we be shocked by dramatic price increases every time we charge our cars?  No.  Think about that next time you fill up your gas tank.  It’s time to ask your elected representatives these questions, and why they are still subsidizing the past (oil) instead of investing in the future (electricity).  It’s time to stop emulating Charlie Sheen in our energy policies. 

So let’s get creative in identifying and developing some of the benefits that a Smart Grid can bring to us into innovative programs.  For instance, the University of Delaware has been conducting a pilot in collaboration with PJM, the regional Independent System Operator (ISO); PEPCO Holdings, the local utility; and AC Propulsion, an electric vehicle (EV) manufacturer.  Their hypothesis was that EVs could help with load-frequency control, and thus encourage integration of intermittent renewables like wind and solar into the grid.  Increasing our use of renewables decreases dependence on foreign energy sources and dirty fossil fuels, and as an added bonus, builds local jobs.  The grid depends on a steady frequency of 60 KHz for grid stability, and intermittent renewables and today’s dearth of energy storage present challenges for grid operators.  When the wind dies down, for example, it can cause heartburn for grid operators if there are no alternative energy sources to take up the gap.   The team at Delaware experimented with EVs that remain plugged into the grid when not in use, responding to requests to discharge energy from the EV batteries back to the grid.  This is also known as Vehicle to Grid, or V2G, leveraging Smart Grid technologies to enable communications between utilities and EVs.  The pilot included incentives of $10/day/EV to provide frequency-load control services to the local utility.  That works out to $3650 each year to each EV owner. 

What’s an ideal demographic for this type of V2G program?  Senior citizens.  Think about your retired relatives and neighbors.  Living independently or in retirement communities, they often have cars that are infrequently used.  Why aren’t utilities, regulators, EV manufacturers, and the AARP putting together programs that, with financial assistance if necessary, encourage trade-ins of senior citizens’ gas-burning cars for EVs, with enrollment options to sell back EV battery power and earn money?  Many seniors have driving habits that fall well within the EV charge ranges, and they have perhaps more flexibility with their daily schedules than commuters and families with children, so they can be reliable frequency regulation sources.   When they need to use their cars, there’s no penalty for not being connected to the grid, just the loss of that incentive for the day.  Programs like these can make people understand one of the many benefits that the Smart Grid brings to consumers. 

The payoffs of an EV program targeted to seniors for grid frequency-load control extend beyond the participating consumers.  Utilities can add renewable energy sources with confidence and reduce reliance on dirty fossil fuels.  Regulators will see more stability in electric rates as utilities can avoid additional generation investments.  Air quality boards and health officials will like the reductions in car emissions.   All citizens benefit from these positive consequences of an enlightened V2G program.  Yes, Grandma would give up her Buick in a nanosecond if an EV actually earned money for her, and she’d love the Smart Grid for doing that.

For instance, electric vehicles (EVs) can help communities meet carbon emission reduction goals by replacing internal combustion engine vehicles.  However, the community infrastructure must accommodate charging stations to encourage citizen adoption of EVs.  The ChargePoint America Program is a great example of an initiative to construct 4600 charging stations for home and public use in nine regions – Austin, TX; Detroit, MI; Los Angeles, CA; New York, NY; Orlando, FL; Sacramento, CA; San Jose/San Francisco corridor, CA; Redmond, WA; and Washington, DC.

Coulomb Technologies is using a $15M grant from the Department of Energy and the American Recovery and Reinvestment Act (ARRA – or the Stimulus Act).  They are working with city planners to identify the best locations for public charging stations, which can’t be an easy job since there’s just not a lot of information out there to tell us what will be the most popular and convenient charging destinations.  One important aspect of the ChargePoint America project is to collect data about vehicle use and charging patterns, with analysis supplied by Purdue University and the Idaho National Lab.   This information will be eagerly consumed by managers of other population centers to assist them in determining their local policies and plans to encourage EV adoption and charging station placements in their communities.   

But not all the action is occurring in what we think of as the typical Smart Grid – the electrical infrastructure.  I recently attended an IBM SmartCamp held in Silicon Valley, which is one in a series of  program locations set up to identify entrepreneurs in 17 vertical application areas. 

SmartCamps provide access to global thought leaders and business advisors, and exposure to angel and venture capital investors.   There are some interesting applications of sensors to alleviate the serious parking issues that many cities face.  One of the competition winners, Streetline, stated that 30% of traffic congestion in cities is attributed to searching for parking spaces. The use of sensors that can communicate with cars and/or their GPS devices can decrease the time taken to locate parking slots.  This solution delivers multiple benefits – drivers can more easily find parking, commercial establishments get happier customers, and, because the sensors can also communicate time lengths a car is parked in a spot, parking enforcement can allocate resources to focus on the streets with the most “time expired” cars, increasing their revenues.  Well, that last benefit is good news for cash-strapped cities and towns, but not so good for anyone camping out too long in a timed parking spot. 

City planners will be challenged to take the risks of new technologies and find the funds to commit to pilots that involve Smart Grid infrastructure.  Not every pilot is going to be as successful as hoped – as the Smart Grid City project in Boulder has shown.  But as Thomas Edison noted about his research, every wrong attempt discarded is another step forward.   As taxpayers, ratepayers, and citizens, we need to support intelligently planned Smart Grid  and Smart Infrastructure pilots that aim to improve our lives and our environment.  

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.

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? 

For example, I recently attended an EV showcase.  Five manufacturers described their solutions, detailing power trains, their batteries and the pros and cons of these technologies, and other factoids.  I noticed two common elements to all EV cars and descriptions:

1.  Not one car had a purse garage for women.  Apparently we can redesign cars from the engine out, but we can’t think about arranging a car interior oriented to women.
2. More to the point of this blog, every manufacturer mentioned that consumers need to be educated about the differences between owning and maintaining an internal combustion engine (ICE) vehicle and an EV. 

Consumers need to LEARN how to manage an EV.  Think about it.  Remember history because it does repeat itself.  At one time, people had to learn how to manage a car instead of a horse. 

An EV means a charging station.  Most consumers will want Level 2 charging capabilities, which may mean scheduling a visit from an electrician to install a 3-prong plug like clothes dryers use to support charging an EV in a couple of hours instead of 8-12 hours.  Once you have that charging station, you avoid the inconvenience of filling gas tanks, and spend pennies instead of dollars to “refuel”.  And because an EV has fewer moving parts than an ICE, you may spend less time at auto repair facilities.  These are positive changes to lifestyles and wallets.  Are these positive benefits communicated on a broad scale to consumers?  Not really.  Many consumers will perceive an electrician’s visit to be an unwelcome additional expense or inconvenience.  And the majority of consumers suffer from “range anxiety” – figuring an EV could never support the daily distances they travel so they are not going to give it serious consideration.     

Let’s add in some more changes in the form of carbitrage.  The Smart Grid Dictionary (2^nd Edition – June 2010) defines it carbitrage as “the capability for an EV or PHEV to communicate with the electrical grid to schedule charge/discharge activities based on conditions including pricing signals, tariff agreements, TOU, DR programs, and manual overrides by car owners.”  It’s a fabulous concept, and it means that one day my car can earn money for me while it is hooked up to the grid simply by selling back electricity at peak times.  This is a real game-changer, but not easy to explain in a sound bite to consumers. 

No matter the Smart Grid subject, if the technology is anywhere near the consumer, education is required.  We need coordinated communications campaigns to align consumer, government, and industry views of Smart Grid visions, realities, and most importantly, the benefits to consumers.  Consumers, taxpayers, and ratepayers need to understand what values they gain from making what will be some dramatic changes in their lifestyles. 

If EV manufacturers really want to sell EVs, they need to build educational campaigns to instill familiarity and confidence in consumers.  Stop spending marketing dollars promoting gas-guzzling SUVs.  Feature real-life EV owners and how they use their vehicles.  Every EV manufacturer should have a fun, interactive game on their website that engages consumers to enter info about their daily driving habits to learn just how often they would have to charge up an EV, and the cost comparison of their electricity charges versus avoided gasoline costs.  That would open a lot of eyes in the USA.

There seems to be this shared fantasy amongst car companies and industry watchers that since the cost of electric charging will be less than the cost of gas tank refills, these SUVS are “economical” options for consumers.   Well guess what.  Unless you can fully rely on electricity generation through your personal microgrid, sooner or later you will be buying electricity from a utility or an electric charging station, and it is going to cost you money and time. 

Even with Time-of-Use (TOU) pricing and software to program a car to only charge when electricity is cheapest, charging fees will still add up.  At the recent National Association of Regulatory Utility Commissioners (NARUC ) summer session, discussions about electricity prices had a recurring theme – in the future, electricity will cost more in every region of the USA. 

There is also a set of unspoken assumptions made about the drivers of electric vehicles that don’t model real life.  Apparently, EV drivers have no social life because once they are home every evening after work, they won’t drive again until it’s time for that morning work commute.  EV drivers are also assumed to be exceptionally well-organized and always charge their vehicles when the rates are cheapest – model citizens of rational behavior.    

And finally, cars are still seen as consuming electricity, but not as storage devices that could actually sell electricity too.  An electricity-sipping vehicle might possibly make more money for its owner than an electricity-guzzling vehicle, but Smart Grid infrastructure and regulatory policies must be deployed to support full bi-directional electricity flow

We desperately need a new way of thinking about electric vehicles.  A good start would be with new standard metrics.  Using miles per gallon won’t tell the full story of an EV car’s energy costs and potential profits.  What are the miles per kilowatthour (KWh)?  This metric is like mpg – and consumers can determine their costs based on energy prices in their region.  What is the potential amount of KWh that a consumer can negotiate to sell back to a building or utility and still make it to their destination and/or cheapest charging option?  

We also need new market models.  Wouldn’t it be fantastic if you drove a car off a lot, and instead of it instantly losing a couple thousand dollars in value, it was going to earn you money as an energy storage device?  Software that projects these potential earnings could help justify the purchase of an EV, but it needs to be independent of the car manufacturer to be considered credible.   

The bottom line is that real energy economy comes from smaller EV vehicles, not electric SUV behemoths similar to the ones that currently roam our highways and suburban roads.  Exchanging one form of energy guzzling for another isn’t smart and any car manufacturer that bets its product line on electricity guzzlers will be looking for another taxpayer bailout in a few years.  We can’t afford to continue using today’s market models for EVs either.  If consumers have options to make money from the EVs as electric storage devices that can sell electricity during peak demands, they’ll embrace the technology.

I’ll be at the Green Software Unconference on Wednesday, August 19th in Mountain View, CA to facilitate discussions about the Smart Grid.  Join me there to continue this conversation.  http://greensoftwareunconference.eventbrite.com/