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The Smart Grid can be 50% cheaper, and boost our economy 2-3 years sooner than currently planned! How?

I was recently having some conversations with partners who build smart grid devices about why so many Utilities are building their own wireless or powerline networks, vs. using public cellular networks (full disclosure – I work for a company that provides integration and management services based on CDMA and GSM cell networks to OEM’s building smart grid devices). It’s always been a fascinating topic to me- why a power utility would be spending millions to tens of millions of dollars to build a communications network in 2008, heading into 2009. Given that the economy is heading down, consumers are pinched, and electric prices are probably only going to go up, it just doesn’t seem logical to go build a network when there are numerous options in place to use TODAY. Now, I know that some of these projects are historical, started before cell networks were data capable and coverage was ubiquitous, but that doesn’t mean a Utility cannot shift directions and finish out the rest of their smart grid deployments using what is now available and affordable.

Now this topic has been out there for some time, but what caused me to write about it now was that I tripped across three pieces of news and information in the last week or two. One was the Google announcement about using TV Whitespaces to transmit data. It makes me wonder if this is the next Broadband over Powerline (BPL), or private RF radio solutions that are proprietary and don’t scale coverage or throughput wise. The second piece of news was Andy Seybold’s blog about BPL (see http://www.andrewseybold.com/blog.asp?ID=214). It’s the same story as Municipal Wi-Fi networks; the network build costs are too high and the payback is too long (or not viable) to make the overall project a success. The last piece of information I saw was truly amazing to me. I pulled a presentation off the FERC web site, dated Feb 5, 2008 by FERC Commissioner Jon Wellinghoff, entitled Energy Efficient Services, Road to the Smart Electric Grid. On slide 24, it shows a cost/benefits analysis. On the costs side is the capital outlay for smart meters for both residential and C&I. The total 10 year capital needed is estimated at $20 - $30 Billion dollars. Then comes the interesting part. It has a cost line item of $25 - $30 Billion to build out the “Network Infrastructure”. That means that building out a proprietary network infrastructure over the next 10 years to support the smart grid is half to over half of the entire investment. In addition, think about the time delay while these networks are being built out vs. sticking a cellular radio in each meter and getting them installed quickly. If you then look at the payback on these technology investments, the payback per year by 2015 is $14 - $21 Billion/ per year. Just think of the economic boom this would give the US economy, if we could cut $20-$30 Billion of cost out of the investment, and accelerate those payback benefits to start sooner than 2015. So, why wouldn’t we do this?

Part 4 from the article, “GE And Google Announce ’21st Century’ Electricity System”

Everyone is familiar with the Internet. The Internet has driven immeasurable (if someone knows a good site or study that has measured the productivity impact of the Internet, please send me a link) productivity and efficiencies in everything from personal shopping to business processes and supply chains around the globe. The impact is so pervasive to society, business, and social movements that we almost take it for granted. It took the landslide win of Obama to remind everyone of the power of the Internet. Obama was able to raise an unprecedented half a BILLION dollars, mostly over the Internet with almost half of it coming from well over one million individual donors giving less than $200 each. The immediacy of being able to reach millions of individuals, and then to transact with them would not have been possible without the Internet.

Jumping back over to the Smart Grid, it is critical to understand that all the initiatives to modernize our grid across all the areas discussed previously are reliant on smart devices being connected to smart computer systems designed and managed by smart people. Communications are the fundamental underpinning for the large range of solutions in a given area. Yet, in many cases, I continue to see that the network is being taken for granted or being planned project by project instead of having its own focus. Now, I’m not proposing that any one networking technology is a fit everywhere because there clearly isn’t one perfect technology. What I am saying is that Utilities need to have an overall strategy around communications networking, and ensure that their various smart grid initiatives fit into that strategy.

There are many choices out there today around networking; fiber, Broadband Over Powerline (BPL – yes it’s still around), Power Line Carrier (PLC) technologies, Wireless Mesh (a whole variety of choices, typically vendor proprietary), private radio (still offered by the likes of Motorola), and of course public wireless technologies such as GSM, CDMA, and more recently WiMax. There are real tradeoffs among all of these choices. At the very top level, tradeoffs range from building and operating the network yourself (still not sure why so many Utilities go down this path) vs. using someone else’s network and paying for the service and data that you use. Below this top level issue, it gets very technical into speeds and feeds, manageability, reliability, security, etc…

Let’s just examine the build & own vs. rent a network dimension. We are now heading into what just about everyone is saying is a long and deep recession. So, what are most good enterprises focused on? Cash! As a colleague of mine recently remarked, “cash is king”. Now, Utilities are typically pretty resilient in times like these, with strong monthly cash flow coming in (people usually will make sure they have power and heat before other luxuries). That said, there are probably not too many projects that are more capital intensive than building broad wireless networks (other than maybe building power plants or starting a new airline company). While I could go into all the speeds and feeds, and tradeoffs among BPL, PLC, Cellular, Mesh and others, I think that Andy Seybold’s blog has just completed a nice article that makes some key points, albeit specifically around BPL (see http://www.andrewseybold.com/blog.asp?ID=214 ). He obviously is biased toward the use of public carriers, as am I, but he makes some really strong arguments about betting on single vendor proprietary technologies that haven’t hit broad market scale. This is always a risky strategy for any enterprise. Remember Digital Equipment Corporation (DEC)? DEC couldn’t open up and build a big enough ecosystem to scale costs and capabilities to compete with open systems like Unix and Windows. With that said, it’s unclear to me how BPL, PLC, and Mesh technologies will be able to compete at scale over long periods of time. I’m not purely saying Cellular is the only way to go, btw. I think Zigbee will become a very viable short range wireless because it’s open and has a huge list of companies building around it. Zigbee has promise. Find me the same scenario in the Mesh or BPL space.

Part 3 from the article, “GE And Google Announce ’21st Century’ Electricity System”

The third and most talked about component of the “Smart Grid” is centered around the Meter. Let me first say that the meter is the cash register of a Utility, and they treat it as such. Let me also say that ‘smart’ meters have been around for 10+ years. The initial motivation to put in meters that were digital and could send meter ‘reads’ back to the Utility were done with an eye toward eliminating meter readers (reducing manual labor, effort and costs). These early systems, however, were one-way and again one-dimensional. It simply enabled a monthly meter read without a human going out to read the meter. As the Utilities started to understand the benefits of these ‘smart’ meters, they realized that they needed smarter ones. There are a lot of functions that these smart meters could do if they could communicate 2 ways, send more data, and do it more frequently.  Check out Aeris Communications for an overview of Smart Metering.

Key functions that are now being automated through these Gen2 Meters are: Outage Detection (usually they know your power is out when you call them), Remote Connect/Disconnect (when you don’t pay your bill, or move), and more frequent ‘reads’. Utilities plan their power capacity on macro looking, long term contracts, weather forecasts, and recent trendline information. However, since they only do reads once a month, the forecast data isn’t that accurate. If the Utilities could do millions of meter reads, say, every 15 minutes, imagine what better forecasting they could do. Considering that Kwh’s on the day ahead market can be priced many times that of Kwh’s on long term contracts, improving usage data from once a month to 96 times a day can mean much better efficiencies. These efficiencies equate to tons of carbon emissions and wasted energy, costing up to hundreds of millions of dollars (if not billions) per year.

So, all this, and we’ve really only improved monitoring of devices and data to get these gains. Is there even more efficiency to be gained? In fact, there is. The next step is to “control” usage from a central location. This is called Demand Response. A very good website to read about DR is the Demand Response Research Center at Lawrence Berkeley Labs. These are systems that allow consumers to “opt in” to these programs for financial incentives. There are a myriad of models to these programs but essentially the Utility will pay you to reduce electricity usage when they need you to. By you reducing your usage, you are saving them from having to find and buy more power on the short term markets. In addition, under extreme conditions where the reliability of the grid itself is in danger, the ability for the Utility to turn off consumption in some key areas can mean the difference between blackouts or not.

So, whether we are talking about new and distributed Generation capacity sites, the fractured nature of the Transmission and Distribution Systems and substations, or the smart and smarter Metering infrastructures that are being deployed, the theme of data communications runs throughout. Next we’ll dive into the notion of how the communications networks, particularly wireless, is playing a major role in the deployment of this smart grid infrastructure.

Part 2 from the article, “GE And Google Announce ’21st Century’ Electricity System”

In short, our Transmission and Distribution system is Balkanized to no end. Think about America before the Federal-Aid Highway Act of 1956 (Eisenhower). America was a patchwork of state and rural roads, with few interconnected highways. The current Electrical Transmission and Distribution systems are in a similar state. Check out the 2008 FEMA maps located on Wikipedia: http://en.wikipedia.org/wiki/Image:UnitedStatesPowerGrid.jpg

The issues here are many and very complex, and I could probably write a book or two on the full topic but I won’t. Suffice it to say that a good chunk (can’t find anyone with a published number; please let me know if you know of one) of the inefficiencies come from a lack of an integrated and interconnected network. I heard a gentleman from a California Utility talking about new power generation available in Arizona that his company would like to access, but it required new Transmission lines to be built. California’s PUC approved the lines, but Arizona’s did not. Why? Because they worried that by opening up the supply of electricity to California, the competition for demand would drive up prices in Arizona. So, where is the Federal Government in all this? Let’s just say that the topic can’t be heard above the noise about oil independence, carbon caps, and clean energy. What we need is the government to focus on interconnection points across key inter-state corridors relative to new and existing Generation plants. The reality today is that we have major congestion points in the grid, which exacerbate the challenges of trying to efficiently automate the supply and demand curves (flatten out the peaks and valleys). We can optimize within a RTO or within a Utility market, but we won’t really get the economies of scale until the whole country is networked together.

Blaise Zerega says let the energy search begin. In a marriage of old and new economy, Google and GE today announced a partnership to promote sustainable energy. With the ongoing financial turmoil as a backdrop, both companies are coming together to collaborate on new, renewable technologies that could, ultimately, deliver energy independence and help our economy. Read the full article >>

This is an encouraging event - GE and Google getting together to lobby the Federal Government to pay attention to modernizing our Electricity infrastructure. Could there be stranger bedfellows? Regardless, anything and anyone who can bring this topic to the forefront of media and politics is all right by me. If I’ve got the message of this particular partnership right, it goes something like this:

If we invest in the “Smart Grid” then we can use it to flip the transportation industry away from oil based fuels by switching to Electric cars and PHEV’s. Given all the hoopla around gas prices and Middle Eastern oil revenues, I can see how this has come together and is getting great media attention. The fact is, this notion of a Smart Grid has been around for awhile, and is long overdue to get its day in the spotlight. Seeing one of the newest Fortune 500 companies partnering on something this big with one of the oldest Fortune 500 companies has me inspired to write a 4 part series on the smart grid. I’ll try to sprinkle some good articles into this over the next week or two.

Let’s first break the “Smart Grid” down into 4 main parts: Power Generation, The Transmission & Distribution System (or lack therof), Smart Metering & Delivery, and the Communications Network that will connect all these assets and devices into an automated and intelligent control center at the heart of each Utility and regional ISO (is a Federal center needed? I wonder.). Continue reading »

Last week I was fortunate to spend two days with about 50 leaders from the Utility industry at a unique event called The Next Generation Utility Summit. The entire two days are spent in a small group setting of workshops, focused on a variety of topics that relate to the name of the summit. This is the second time they have held this event, and my second time attending.

So, what did I hear and what did I learn?

First off, these people believe in the “Smart Utility” concept. It is critical to their businesses (obviously) and to the overall US Economy. Lest we forget, the “Digital Economy” requires a constant and cheap source of electricity to function.

Second, they have a long way to go. The Electric industry in the US runs at an average 46% utilization of their generation capacity. That’s worse than the airline industry USED to be, by like 25% percent. That’s the bad news. The good news is that the ROI for investing in technology that delivers connectivity, monitoring, control, and automation is easy to obtain. Most of the technologies that would be needed are created right here in the good old US of A.

Third, the amount of capital that will need to be invested to “modernize” our electrical industry is somewhere between $3 Trillion and $13 Trillion over the next 10-30 years. OK, so that’s a big range, and the high end of it is about equal to our national debt. That said, what if? What if the next administration in Washington made this a strategic priority? What if they provided capital to an industry that wants to make itself more efficient and which makes all other industries more competitive? What if they showed real leadership in brokering a national electrical transmission corridor equivalent of the Interstate Highway system, and forced the states to play fair and share generation assets on a national market basis (it’s very balkanized today)?

Fourth, there are real leaders and visionaries running our large (and not so large) Utilities in this country. It’s not that they are some altruistic hippies mind you. These folks have figured out that energy efficiency is good for business, and the globe. Pretty cool.

The last, and maybe most important thing I learned came from the COO of a major Utility on the east coast. To give full credit, he got it from an African proverb. It went something like this: “We did NOT inherit the earth from our ancestors. We are borrowing it from our children and grandchildren.” That’s a fundamentally different starting point for viewing our decisions and actions from here on out. Tell me what you think.

M2M is the basis of advanced building-control systems, industrial machinery, Google News, and Wall Street trading. Is it dangerous? Read the full article >>

This article is a nice contrast to all the mundane ones about regulators approving rate cases to pay for smart meters, and I thought it was a nice change of pace. Totally esoteric, mind you. The notion that Smart Meters sprinkled with smart connectivity will lead to the rise of the Sarah Conner Chronicles (Terminator Reference in case you missed it) is certainly a bit of a stretch. Technology is technology. It can be used (by humans) for good or evil. I am struggling to see how a smart meter managed apartment building will lead to declines in the stock market, but at least the author acknowledges energy saving and efficiency will result and lead to better costs savings. Now that part I hope we can all understand! I’ll be back!

DETROIT, Aug. 27 /PRNewswire/ — DTE Energy today announced it will launch an advanced metering program to provide customers with more accurate meter reads every month, information about their energy usage and a system for recognizing power outages without customer input. Read the full article >>

Great job, DTE and Itron! This is clearly one of the better articles out there regarding a smart metering initiative because it takes the time to explain to end customers (in plain English, I might add) the real benefits of the program. Having the Utility know about an outage before customers start calling is something that phone and cable companies did in the 90’s. It’s about time, right? They also touch on something near and dear to all of us, our pocketbooks. The ability to read and monitor energy use in near real-time (which needs a communications network behind the scenes, don’t forget), can greatly improve estimated energy bill costs to help with monthly budgeting. If my Utility could help me understand the best time of day to do laundry, run the dishwasher, or schedule our pool filter, and could tell me how much money I’d save, chances are I’d make those changes in my household. If I’m saving money, and using energy at a time when the Utility has extra to spare, they then don’t have to start up a coal fire plant on short notice to crank out extra Kilowatts, I’m reducing carbon emissions…it seems like an obvious choice. Now, if we all do this, it will really add up. I also really like the part about working with the Unions and having a 6 year plan to re-deploy meter readers into new skill areas of work. Not enough companies have the foresight to do that sort of thing these days.

The Obama for President Campaign today released a comprehensive viable energy plan. It could be more aggressive but it is better than we have seen before and far superior to The McCain plans which relies on expanding the production and burning of fossil fuels. Senator McCain’s plan would actually subsidize Oil Corporations with 5 Billion U.S. Tax Payer dollars. The Republicans are trying to put themselves in the light of fighting for lower fuel costs, but what they are really fighting for is to keep the fossil fuel suppliers as the only energy source for Americans. Read the Obama plan below as published by the Obama for President Campaign for a real beginning to changing America’s Energy Future. Read the full article >>

I’m not one to publicly endorse candidates, and I’m not doing so here, but there are some very cool parts of the Obama Energy Plan that I think are really relevant to what’s happening around the movement toward Smart Utilities, Smart Grids, etc… In particular I’m talking about the section titled “Invest In A Clean Energy Economy and Help Create 5 Million New Green Jobs”. First off, I like the idea of the Government creating a funding source and imperatives to be invested in the Energy industry domestically. The combination of government mandate coupled with the availability of capital will undoubtedly speed up the adoption and deployment of smart technologies. The feds could really shorten many of the state level conversations between Utilities and regulators and get the train moving. This not only speeds up energy efficiency programs, which are good economically and environmentally, but it will have a real positive impact on the domestic economy in a number of ways. First of all, smart technologies are largely being delivered by domestic technology firms. One of the key areas of advantage we have left from a global competitiveness standpoint is in high technology, communications, and high tech manufacturing. I love the example of Itron, who is arguably one of the top 3 meter manufacturers in the world. Itron manufactures all its equipment here in the US of A! Most of the software and telecommunications technologies that go into these solutions are from US companies. If you really look at just the equipment side of a smart grid and smart metering, there are probably somewhere north of 500 Million to 1 Billion dumb devices that need to be replaced or retrofitted in order for the US to have a ‘digital grid’ across homes and business. Think about that economic stimulus package! Capital spent at home, jobs created at home, new tax revenue generated…what am I missing? Now, I’m not sure about some of the other parts of the Obama plan (like the Oil company windfall tax for example), so I’m not going to comment on those.

As previously discussed on Andy Seybold’s blog on SMS Alerting Falls Short, Just Ask Obama.

There is a new law that says FEMA will decide when to send SMS messages to people who need to be alerted to a problem. However, Obama just proved beyond a doubt that SMS is NOT a mission-critical service. Thousands of SMS messages announcing Obama’s running mate were sent, but many people did not receive them until the next day and many newspapers awaiting verification of his selection missed the front page placement of the news because the alert arrived after deadlines passed. Read the full article >>

8/25/2008 6:44:48 PM This is why for enterprise applications and embedded systems, Aeris has implemented our SMS Direct service which carries and delivers with priority, acknowledgments and retries, SMS in a mission critical manner. We talk about SMS’s lack of reliability all the time, but customers just don’t believe it well enough. This is such a great example. Thanks, Andy

8/27/2008 1:41:40 PM I won’t argue math, but to say that not all carriers have implemented the same allocations for SDCCH channels, etc… Regardless of volume, latencies around consumer SMS is not reliable for mission-critical anything. Continue reading »