California recently was ranked by the World Bank as number eight in world economies, ahead of Russia and Italy and just behind Brazil. Jerry Brown, re-elected as governor, delivered an inaugural address that included an energy policy in the form of three energy objectives for 2030. Given this state’s ability to make markets through its imposing economic and innovation strengths, here are my projections about what this energy policy will mean for California, electric utilities, Smart Grid vendors, and the world.
Energy objective 1: Increase electricity from renewable sources to 50%.
The state was well on its way to achieving the 2020 objective of integrating a 33% mix of renewables into its electricity sources. This new goal puts increased emphasis on energy storage to firm up even more intermittent renewables, so the state market will markedly expand for both utility-scale and distributed renewable generation and storage solutions. Distributed generation, particularly in the form of rooftop solar, will also be required to meet this objective. California utilities will seek regulatory approval to rent customer rooftops and operate solar generation assets on an aggregated scale, as long as these assets count towards their expected renewable investments. Vendors with distributed grid operations management solutions have a bright future in the state.
Energy objective 2: Reduce petroleum use in transportation by 50%. Don’t bank on a focus on technologies that improve miles per gallon in internal combustion engines. California’s strong support for carbon cap and trade markets and climate change initiatives put the emphasis on clean alternative fuels. Hydrogen technologies and fuel cell cars could be part of this strategy. However, the regulated electric utilities have a new leverage point to build EV programs and create new opportunities to explore transactive energy scenarios that firm intermittent renewables. PG&E recently announced a pilot program with BMW. Municipalities will also look at greenhouse gas reduction goals through systemic transportation transformations. Community Choice Aggregation (CCA) initiatives and municipal utilities will adopt EVs for their flexibility in smart charging.
Energy objective 3: Double the efficiency of existing buildings and make heating fuels cleaner. California enacts new building energy efficiency standards every three years that typically apply to new buildings. It’s noteworthy that this energy objective highlighted existing building stock. Building energy efficiency retrofits have multiple benefits – local jobs in communities, and accrued savings from reduced energy bills for residential and business consumers. Since California is one of eleven states that decoupled both electricity and natural gas, regulated utilities won’t see negative impacts on their bottom lines. Expect innovations in programs that encourage energy efficiency retrofits for multi-family and rental properties and more PACE-like programs that focus on energy efficiency rather than generation. With regards, to cleaner heating fuels, most California homes use natural gas, which emits those bad greenhouse gases. However, look for most policy and investment activity in commercial buildings, which can benefit from combined heat and power (CHP) and even more energy-efficient combined cycle heat and power (CCHP) technologies to heat building spaces. The solutions here are much more mature than they are for residential, although this 2030 objective offers significant impetus to future Department of Energy Funding Opportunity Announcements.
The leader of the eighth largest world economy said, “How we achieve these goals and at what pace will take great thought and imagination mixed with pragmatic caution. It will require enormous innovation, research and investment. And we will need active collaboration at every stage with our scientists, engineers, entrepreneurs, businesses and officials at all levels.” The good news is that California has all the ingredients to make it happen, and what happens in California does not stay there.
I made ten predictions in January 2014 about Smart Grid and Smart City trends and changes that will occur between 2014 and 2020. Here is an update on the final five predictions. The first five were reviewed last week. You can review the full predictions here and here, and judge for yourself the quality of my crystal ball.
6. Debates about the future of the social compact for electricity services and the socialization of electricity costs continue. The Reforming Energy Vision initiative includes the objective to “enable and facilitate” new business models for utilities, customers, and energy service companies. This is just the first state activity that will generate significant discussion about how to equitably balance distribution grid investments that accommodate and integrate more distributed energy resources (DER). Since it will take time to implement and then measure results from new business models, this debate is sure to continue for the next decade.
7. EVs advance to 10% of the US car market. The current electric vehicle (EV) penetration in 2013 was just a bit over .5%. The falling costs of gasoline are putting additional pressure on EV manufacturers to reduce prices of zero emission vehicles to increase consumer adoption. However, utilities are now taking a more active role, as Edison Electric Institute members will start investing up to $50 million annually in EV service trucks and charging stations for consumers. The Department of Defense (DoD) is conducting pilots for vehicle to grid or V2G applications. Their first smart charging demonstration are exploring V2G performance, and they will also examine re-purposing used EV batteries for fixed energy storage.
8. Resiliency measures also become part of the definition of a smart building. There are a number of federal, state, and non-governmental initiatives that address resiliency, and some critical infrastructure definitions include selected buildings. The National Institute of Standards and Technology (NIST) is developing standards guidance for community disaster resilience, but this is focused on building materials and codes. Microgrids, DER and Zero Net energy codes and technologies can bridge the gap in existing resiliency initiatives for buildings. Microgrids are already in production as resources to maintain power to critical infrastructure during emergencies – one of the goals of the Borrego Springs microgrid.
9. Nanotechnologies help propel solar harvesting efficiencies past the 50% mark, and by 2020 research scientists are aiming for 75% harvest efficiencies. The number of patents filed for innovations in nanotechnology using graphene have tripled in the past 10 years. The research pipeline contains single molecule thick sheets of graphene and molybdenum that can potentially provide 1000 times more power per weight unit of material than current commercially available solar cells. The fabrication of flexible solar panels is on the horizon, which can be wrapped around curved or uneven surfaces or reduced in scale, expand the possibilities for where solar can be deployed.
10. There’s sufficient electricity production from renewable energy sources that we no longer talk about “renewables.” American grid-connected wind turbines have a combined capacity of 60,000 MW, projected to double by 2020. Solar is enjoying explosive growth. Energy storage solutions will “firm up” the intermittency of wind and solar and thus eliminate the last objections to reliance on renewables. It will just be a cheap and clean source of electricity without the price volatility of fossil fuels.
These final five predictions are well on their way to realization too, although the prediction about nanotechnology advances is admittedly a stretch goal. You’ll note that energy storage has a significant influence on the advancement of some of these predictions. We’ll keep tracking these predictions and bring you periodic updates.
How much can change in a year? When it comes to Smart Grid and Smart City topics, the answer is quite simply – a lot can change. Here’s progress report on my ten predictions about Smart Grid and Smart Cities activity by 2020. The first five are featured this week. You can review the complete predictions here and here, and judge for yourself the quality of my crystal ball.
- California hits and exceeds its RPS objective of 33% renewable sources of electricity by 2020 – the most ambitious of all states with this calendar deadline. As of October 2014, the state’s three investor-owned utilities (IOUs) obtained 22.7% of their electricity from renewables, and are on track to meet the 2016 25% milestone. The California Public Utilities Commission (CPUC) projects that solar alone will contribute 42% of the state’s total renewables generation. The state has about 245,000 rooftop solar PV installed now, and by 2017 the aggregated generation from these systems will approach 3,000 MW.
- Grid resiliency strategies take priority for investor-owned, municipal, and rural utilities. The Electric Power Research Institute (EPRI) has a number of initiatives in grid resiliency, and their clients are utilities. Governmental, commercial and residential interests build microgrids that are capable of delivering a limited degree of building self-sufficiency in energy. NYSERDA announced the first in the nation NY Prize, a $40 million competition to build microgrids and other local energy grids. New Jersey launched the Energy Resilience Bank – the first public infrastructure bank in the country focused on DER for energy resiliency. This bank is capitalized with $200 million for projects that harden critical infrastructure. Utility support for microgrids is growing as utilities like Con Ed see that the Reforming Energy Vision initiative presents an opportunity to redefine utility business models to accommodate new microgrid product and service offerings.
- As utilities consider grid hardening, cities redefine what being a smart city really means. Smart cities aren’t smart if their critical infrastructure relies on fragile transmission or distribution grids. Definitions abound for smart cities, but the lack of consistent standardized frameworks are serious obstacles to development of smart cities. For some states, notably New York, Connecticut, and New Jersey, (states hammered by Superstorm Sandy among other weather events) a city is smart if it upgrades critical infrastructure and deploys distributed energy resources and microgrids for select community buildings and systems.
- Consumer intermediation threats abound for utilities. Investor guidance reports released earlier this year pointed out a number of threats to the existing regulated utility business model, and noted the potential for confrontations between tech giants (notably Google and Apple) and utilities in value-added services (specifically energy management services) to consumers. Consumers are becoming increasingly savvy about solar generation, and companies like Solar City and Sungevity have capitalized on these trends to make it easy for consumers to build relationships with non-traditional energy companies.
- Standards that define how to integrate or grid-tie microgrids and other standalone generation and energy storage assets for bi-directional electricity flows to utility distribution grids are globally adopted. The existing IEEE 1547 standard currently used for DER such as solar PV requires that these assets must be de-energized if they are tied to the grid and it loses power. While necessary as a safety measure, it defeats the purpose of microgrids remaining up to power critical infrastructure or meaningfully contribute power back to the grid. The Smart Grid Interoperability Panel (SGIP) started Priority Action Plan (PAP) 24 for microgrid operational interfaces. This PAP focuses on information models and interoperability and consistency of signals used by microgrid controllers. Another group called PAP 25 will encourage standards that harmonize financial data, as well as forming a new group focused on Transactive Energy. These are all critical steps to develop the standards that will govern bi-directional electricity and realize the full promise of the Smart Grid, as well as power smart cities.
There’s been real progress for the first five predictions and they are well on their way to realization by 2020. Next week I will review progress on the final five predictions.
Most Smart Grid discussions about human impacts address the demographic trends in utility workforces or the influences that Smart Grid technologies and applications have on people in residential and commercial settings. While both are very worthy topics, the subject of job creation doesn’t get the same attention. And that’s a puzzle, given today’s economy. The Smart Grid’s technology, policy, and financial disruptors have happy consequences for the labor market through increased and sustainable local employment opportunities.
Jobs can be defined as direct, indirect, and induced. Direct jobs are the positions created to perform a specific function. Indirect jobs are created in supply chains and the businesses that support those direct jobs. Induced jobs are created based on the savings generated from the results of the direct and indirect jobs.
For instance, one of the most important Smart Grid trends is the growth of distributed energy resources (DER). One important DER asset class is renewable energy such as found in solar generation solutions. The state of California has more than 47,000 people working in this sector – about one third of the nation’s total solar employment. Many of these jobs are focused on installation and maintenance of solar systems – “boots on the ground” or direct jobs that every region of the USA should encourage.
What led to solar generating energy and jobs? It’s not just the natural climate of abundant sunshine in the state. The state renewable portfolio standard of 33% that Governor Jerry Brown stated was a “floor, not a ceiling requirement”; the million solar roofs program, and other regulatory and legislative actions created the business climate, which enabled companies to put certainty to former risks, and led to the establishment or growth of scores of businesses and new direct, indirect, and induced jobs.
Other DER asset classes include energy storage, energy efficiency retrofits, and demand response programs. The California Public Utilities Commission (CPUC) mandated in 2013 that its regulated utilities must incorporate 1.325 GW of energy storage into their grids by 2020, the largest amount of storage in the world today. Energy storage and renewable generation assets go together like peanut butter and jelly – good on their own, but even better together. Like recent solar cost trends, upfront energy storage costs are expected to decrease as deployments increase and benefit from economies of scale. New market entrants with innovations in technologies, processes, and services will bend the cost curves downwards even more. These trends mean more direct jobs for skilled technicians and a labor force that remains in place to respond to maintenance and upgrade requests. Greentech Media estimates that the energy storage market will quadruple every four years, and one of the reasons is California policy, which essentially made a market for energy storage solutions at the transmission, distribution, and behind the meter (consumer and prosumer) points.
Energy efficiency is another promising homegrown employment area. Spurred by the oil embargo and economic shocks of the early 1970s, California has gradually introduced energy efficiency (EE) standards for white goods like refrigerators, electronics like TVs, and commercial and residential buildings themselves. The building standards are updated every three years. Similar policies have been adopted worldwide since then. The latest round of EE building standards will create locally-situated jobs as building owners retrofit structures or deploy the appropriate energy efficiency measures in their new construction. This American Council for an Energy-Efficiency Economy (ACEEE) paper outlines the economic impacts of EE projects in both employment and cost savings. The cost savings benefits of energy efficiency measures are sometimes overlooked too. As less money is needed to pay for energy expenditures, more capital is available to invest in business growth.
There are two centers in California designed to support job training on EE technologies and services. The newest center is a collaboration between the International Brotherhood of Electrical Workers (IBEW) and the National Electrical Contractors Association (NECA). These organizations understand the connection between smart energy policies and sustainable employment. California has often led the way in smart energy policy, although the aftermath of Superstorm Sandy has prompted some eastern states to promulgate innovative energy policies that build and enhance grid and community resiliency. Where these pioneers lead – will other states follow? They would be wise to enact similar energy policies to benefit their regional economies through job creation and reductions in energy costs for citizens and businesses.
The 20th century was a time of extraordinary growth and change. In the first half of that century, relatively new technologies like electricity and telecommunications indelibly altered every aspect of life. In the latter half of the 20th century, computers radically reshaped work and play. Can you guess what were the two most powerful images from the 20th century? If you guessed the mushroom cloud (so well understood it requires no explanation here) and the haunting earthrise photo of our planet floating in space from Apollo 8 – you are absolutely correct.
The mushroom cloud rising from a nuclear bomb detonation signaled the first globally destructive impact of energy. Fossil fuels are the second form of energy to be globally destructive, but the consequences are not as dramatically conveyed as in the photo of one mushroom cloud. The earthrise photo engendered a profound psychological shift in the way we thought about planet Earth. It showed us the relative fragility of our existence – we’re committed to one planet and don’t have extra planets lying around in case we need them.
What will be the indelible images for the 21st century? It’s early in the first 50 years, but I’ll suggest that a battery we haven’t seen yet in commercial form will be one of the most powerful and defining technological influences for this century. The innovations in materials and form factors or designs will rapidly accelerate energy storage technology choices while costs to manufacture, and ultimately, prices, will plummet. And what’s really cool is that some research looks to nature for inspiration and subsequent imitation.
Harvard University is exploring the application of organic molecules found in rhubarb called quinones. It’s the first time that a flow battery* is based on something other than a mineral substance like zinc or sodium. It may not be the last time. This initial research success should impel more investigations into other organic materials that can store energy. After all, plants have had millions of years of evolution to perfect their brilliant photosynthesis of light into stored energy.
Battery technology can change in form factor concepts too. A couple of years ago I chatted with an innovative battery company that mentioned that changing an electrode liquid in a battery could vastly change the range for a battery-powered vehicle. A “fill up” of this liquid could substitute for a more time=consuming plug in charge for long distance trips. Argonne National Laboratory and the Illinois Institute of Technology, with funding from ARPA-E (Advanced Research Projects Agency for Energy) are leveraging nanotechnologies to develop liquids capable of delivering sufficient electrical conductivity ion concentrations that are friendly for transportation uses – like being embedded in a car.
These research directions have promising results that bode well for improvements in energy storage durability and transportability as well as reduced costs. Quinones may be eclipsed by other organic molecules in the future. The model for an electrode liquid exchange may change in time, but the implications are clear. We’re only at the very beginning of a very exciting 5 – 10 years of battery innovations. Regardless of the innovation, batteries will mirror the solar technology trends of increases in efficiencies and decreases in manufacturing costs. And that is critically important to accelerate the deployment of domestic intermittent renewable energy sources for Smart Grid applications in electricity generation and transportation.
* A flow battery is a battery technology that uses an active element in a liquid electrolyte that is pumped through a membrane to produce an electrical current. The full definition can be found at the Smart Grid Dictionary 5th Edition.