The Coming Smart Grid Boom -- and Bust

Jack Ellis | Apr 08, 2010

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Smart Grid is the power industry's version of the legendary dot.com boom. It could bring some long overdue innovation and excitement to the industry, or it could leave enormous disappointment in its wake. There are certainly some interesting parallels -- legions of starry-eyed entrepreneurs with big ideas chasing venture capital; a whole cottage industry of newsletters, seminars and conferences; and lots and lots of hype. In 2000, every company was a dot.com company. Today it seems announcements for every new device and every new service in the power industry claim they're either Smart Grid ready, or an essential building block of the Smart Grid.

It's no secret that our nation's power grid (and the power grids of most countries) is a bit antiquated. System operators rely on estimates of power flows, phase angles and voltages at critical points on the grid rather than real data. Transmission line ratings are overly conservative, in part because accurate state measurements and granular temperature and wind speed data are not available in grid control rooms, so operating margins are padded accordingly. Lack of remote diagnostics and communications at substations means the nature and location of equipment outages at both the transmission and distribution levels are difficult to isolate and identify without sending someone to investigate, which in turn leads to unnecessarily long service interruptions. These are some of the critical issues that a Smart Grid strategy should be addressing.

The problem is, installing phasor measurement units (PMUs), putting wind and temperature sensors on transmission towers, and spending money for remote substation monitoring are not the kinds of things that resonate with politicians, regulators or the public. These are parts of the power grid infrastructure that few people see and even fewer people care about, at least until something goes wrong. But they're damned important. Just ask the men and women who monitor and operate the grid every day. Better yet, just ask FirstEnergy.

Likely in an attempt to build broad public support, Smart Grid has evolved into a strategy that focuses on the customer side of the meter. "Smart Meters", which are little more than interval meters that can communicate wirelessly or via some wired medium (telco or utility power lines) and may have two-way communications, are one part of the strategy. Another is in-home displays that allow consumers to monitor energy usage. And then there's the enormous interest in electric vehicles, which presents a sizable new sales opportunity for utilities and power producers, offers a potential source of flexibility to accommodate the variability and difficult-to-predict output of renewable energy projects, and urgently requires innovative solutions to the problem of charging batteries so millions of vehicles plugged in at the same time don't overload the grid. Sometimes explicitly and often times not, there seems to be an underlying assumption among smart grid proponents that customers will allow their local utility or the regional grid operator to control end use devices over this Smart Grid infrastructure.

In this author's view, any Smart Grid strategy must focus on and be limited to those elements of the grid that lie upstream of the customer side of the meter. PMUs and better weather data are particularly worthwhile targets for investment because they could increase the capacity of the transmission system at relatively modest cost and without the headaches of permitting and building new lines. Moreover, all of this upstream infrastructure is owned by the utility and it is the utility's responsibility to maintain and operate it. Modernizing it will require a large investment of time, money and effort that should not be diluted or slowed down by well intentioned but misguided attempts to reach into customer premises.

The customer side of the meter is and should be the customer's responsibility, with perhaps a select few exceptions. It makes sense to require programmable thermostats in new home construction, because they save money and they're cheap. It makes sense to impose appliance level energy efficiency standards if regulators insist on keeping electricity prices artificially low while trying to encourage energy efficiency and demand management. However, home displays and devices that could potentially be used to extend the reach of a utility into homes and businesses are largely a waste of money. If consumers perceive there's value in installing these devices, they should be able to buy them at a local hardware store or electronics retailer, bring them home and plug them in. Standards development efforts currently underway to facilitate interoperability should ensure that this happens. If customers don't perceive any value in displays and intelligent appliances, then allowing utilities to install expensive, sophisticated hardware in homes and businesses, and then recover the cost in rates is foolish and wasteful. Moreover, even if most customers were willing to allow their local utility to control appliances and electric vehicle charging, it's simply not practical at the scale and level of granularity that is going to be required as renewable energy makes up a larger and larger fraction of our power supply. Current Demand Response programs are not up to the task of providing the kind of flexibility grid operators will need in a few short years and even if they were, there simply isn't enough computing power on the face of the earth to control thousands, let alone millions, of electrical devices in an efficient way that also avoids inconveniencing customers2.

It is for these reasons that the more mundane elements of Smart Grid will move forward and likely be highly successful, albeit with little public notice. The sexier elements will likely follow in the footsteps of so many dot.com companies, though perhaps with a twist. This time, companies large, small and mostly tied to the traditional utility industry supply chain will pour substantial amounts of money into R&D, pilots and small-scale demonstrations, only to find out they've misjudged consumers and don't really understand where and how to tap that flexibility. The true fortunes will be reaped in a second incarnation of Smart Grid by clever consumer products companies that can develop simple, easy-to-use devices and a compelling value proposition that gives rise to Grid Smart consumers.

References:

1. Electricity rates are typically linked to historical costs, which is why customers typically have a hard time justifying energy efficiency improvements. This is one of the reasons residential-scale thermal storage that costs $1,000/kW can't compete with a new peaking plant that costs $1,000/kW.

2. The "prices to devices" concept is a much cheaper, simpler and more practical way to harness demand-side flexibility, but the power industry has not yet embraced the different way of thinking about electricity pricing and power system coordination and control that's required for this concept to work.

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Comments

You are treading on dangerous ground, Jack. That expression 'SMART GRID' is enough to rein in the....curious. (I almost said 'suckers.) It has a near-magic lilt. I've seen a few things on the smart grid, but unfortunately I tune out before getting to the nitty-gritty. I do the same thing where CCS is concerned, although I agreed to go to a seminar next week where that topis will probably be mentioned. I just hope that I don't lose control until I get out of the building.

Well, a fairly decent investor newsletter for the traders with a two-day horizon.

Jack,

Your article is a potently written and largely a TRUE account of how many utility people view Smart Grid. They avoid and prefer not to get involved with the public's use of electricity beyond their meters unless they are forced to by regulators or government programs.

The adoption of smart meters is primarily to help automate meter reading, more efficiently detect and manage power outages, and ultimately enable TOU billing. Beyond these things, there is little else AT THE CUSTOMER END of the grid that utility companies desire to become involved in, or fund with higher rates for all their customers.

"The true fortunes will be reaped in a second incarnation of Smart Grid by clever consumer products companies that can develop simple, easy-to-use devices and a compelling value proposition that gives rise to Grid Smart consumers."

You are right on Jack with this statement at the end. With some exceptions where it gets forced onto utilities, most successful cleverly designed new hi-tech tools and products for consumers will be widely successful only if they can be sold directly to the consumer markets, and not involve the utility companies. In the meantime as you say we will see utility companies put most of their Smart Grid implementation efforts into adding more technology up-stream of their meters. Sadly, it will sooner or later become more obvious that consumers are being left out of the Smart Grid picture by their utility company except for ever increasing utility bills to pay for these efforts.

Jack,

Incidentally there are consumer in-home displays on the market that are totally independent of Smart Grid, or a utility company. BlueLine Innovations PowerCost Monitor family of displays and Energy Inc.s' The Energy Detective (TED) are two pioneering ones that consumers can purchase and install completely independently of their utility's involvement.

The PowerCost Monitor employs external sensors for the optical watt-hour pulse outputs on the customer's smart meter, and sends them wirelessly to the remote display which calculates everything. The TED uses its own metering sensor electronics on the main power feed of the home’s utility panel, and sends that information to its remote display unit over the home's power lines. Neither product depends on any communication with a smart meter or the utility company, but both depend on the home owner to program the display and keep them updated with TOU rate information for bill tracking.

Both of these products are examples of pioneering in-home displays now on the market for several years but neither have enjoyed many millions of units sold, yet. However I predict they eventually will see commercialization in the millions as utility energy bills skyrocket over time and consumers become much more interested in managing their utility bills; because monitoring is a basic first step in managing and automating energy uses. Future generation models of displays will emerge with added interfaces to computers and home-automation smart controls. As their commercialization increases into the tens of millions, their prices will fall from high-volume manufacturing, and of course more competition will emerge too as usually happens with successful consumer products.

"because monitoring is a basic first step in managing and automating energy uses."

I should have qualified this statement by adding "where the CONSUMER determines control parameters for their own energy uses, not their utility company". The last thing the majority of consumers would want is their utility company directly controlling their in-home appliances and lifestyle choices.

In today's hi-tech world full of gadgets, computers, and internet access for consumers, most consumers have become accustomed to seeing personal detailed financial information at their fingertips. Anyone today can go on-line and view their historical detailed banking, credit card, and utility bill statements. Financial planners have powerful software tools to predict and coach consumers on their savings and investment strategies as well.

In light of the above, what is sorely missing for consumers is the convenient and economical ability to monitor, review, and potentially automate their detailed energy consumption. This should be a huge future opportunity for my electronics industry to develop and market new hi-tech gadgets and systems for consumers.

I once asked my next-door neighbor what he would love to have in his house for energy management. He said Bob, a killer product would be a wall-mounted LCD computer display that tracks in real-time all your utilities. It would monitor total household consumption of natural gas, water, electricity, cable-TV, and phone usage, particularly for tracking their bills. A more sophisticated system would be able to track individual household appliance data, and have wireless interfaces to the internet and home computer, and wireless interfaces to smart controls that can automate at least some appliances in response to utility energy prices in real time.

Such a dream system is not science fiction, it is technically possible with technology today. The secrets to it becoming successful with mainstream consumers, as Jack alludes to in this article, are being easy to install, easy to use, and be affordable for average consumers to buy into without the need to involve their utility companies.

When I worked with several utilities on ARRA Smart Grid stimulus funding proposals (which were all funded), it was clear that the utilities were well prepared for the T&D side of smart grid. By "well prepared," I mean: their executive leadership identified the specific operational savings and quality improvements they were seeking; their engineering staff had identified proper milestones and progress measurements to ensure successful implementation (and had plans in place to re-tinker if they were getting the wrong results); and everyone, from installers to substation engineers to supply analysts at the PUC, was tuned in to the ways that a more responsive or automated grid would help them do their jobs better. I was encouraged by that.

Unfortunately, it's hard for politicians and the public to get excited about reclosers or OMS upgrades, even when it guarantees the resource availability and power quality we all take for granted. I do understand the interest in the consumer side of the grid. We can't help ourselves, it's just more accessible, and it is tantalizing to think about the potential (well-discussed elsewhere).

The killer app Mr. Amorosi describes is already being produced for mainstream consumers, most notably by GE's Ecomagination, and is no longer vaporware. My concern is that this kind of scenario still only makes sense for early adopting types; frankly, the only people I've seen excited by such devices are white, male, affluent engineers... But it's not because the rest of us aren't energy-smart or enthusiastic enough about making technology more ubiquitous. For a good article on this subject, which may open your eyes to other constraints beyond utility gateways, go to http://portal.acm.org/citation.cfm?doid=1620545.1620583 : "It's Not All About 'Green': Energy Use in Low-Income Communities" (Dillahunt, Mankoff, Paulos, and Fussell, for UbiComp 2009).

"My concern is that this kind of scenario still only makes sense for early adopting types; frankly, the only people I've seen excited by such devices are white, male, affluent engineers".

Of course this is true Ms. Talbott. Anything average consumers have never seen before that merely provides information is not going to get mainstream attention at first. Widespread adoption by average consumers needs lots of marketing and media exposure, and to become a huge success like for examples cell phones have, it must provide some kind of increasing value to consumers. The latter will surely happen over time as electricity and other utilities and home services grow more expensive causing more pain in our pocketbooks.

In any case I salute GE's Ecoimagination for developing products on this idea. Just goes to prove new ideas are often thought of by many people and companies, sometimes simultaneously, but the bravest and most commendable ones are those who take the risk of developing and commercializing the first products for it.
BTW my neighbor and I happen to be white, male, but not that affluent, and I am an engineer too, so the interest in this idea has at least gone somewhat beyond the affluent in society.

I rather like a term pick up on recently, intelligrid, for the smarter grid. It nicely differentiates the largely unrecognized useful ideas for greater intelligence on the grid from the dumb gird of expensive smart meters connected to customers who can do little useful with them by a utility that has no idea of how to justify the large cost.

Dean,

"expensive smart meters connected to customers who can do little useful with them by a utility that has no idea of how to justify the large cost."

Largely true statement. Here in Ontario our provincial government had to force all our distribution-only utility companies to provide smart meters to enable TOU billing for all 5 million Ontario customers by the end of 2010. If not for the legislation, our utilities would never have implemented them for lack of cost justification. The government did not fund the meters either with any handouts, so Ontario's regulators are permitting our utilities to add a smart-meter charge of a around a few dollars per month to every customer's bill to amortize their total smart-meter system debt costs over 15 years. It’s also too bad that most electronic smart meters are expected to have only a 10-year average service life in the field before needing replacement, so that added smart-meter charge to Ontarian’s bills is never likely to disappear.

There are of course some things customers could use smart meters for to their economic advantage if they only had real-time access to the metering information held inside them, like with an in-home display that communicates directly with the meter.

A transmission line can be loaded above its static rating with the installation of small weather stations along the line. The line is then operated much closer to its “true” rating, limited only by conductor annealing or ground clearance violations, whichever comes first. Such “dynamic” ratings can be effective in solving a specific local overload problem. If used systemwide, this method will result in system operation closer to the point of voltage instability, with possible consequences of widespread cascading and voltage collapse. It would be misleading therefore to suggest that increasing the utilization of existing infrastructure can be used systemwide without an enormous and unquantifiable reliability cost. The mechanism and dynamics of voltage instability are still not well understood. Power flow simulations fail to converge at the point of voltage instability and cannot provide meaningful information on the state of the system during the time between the onset of instability and eventual voltage collapse. The author states that “operating margins are padded accordingly”, but this is a necessary substitution of analytical deficiency with engineering judgement.

Sharon you are so right. It is indeed wealthy white males that seem to get excited about such gadgets. The rest of the population doesn't care - they just want a reliable inexpensive supply of electricity and all these smart grids/monitoring gadgets/time of use meters appear to be doing is increasing the price.

For all the things I am able to do with electricity it is one of the cheapest and most versatile products available to me and since my bill averages only about 110 bucks a month I think that is really good value and I am certainly not going to buy some gadget that allows me to look at the household electricity consumption - I have much better things to do with my life than that and I am one of those "wealthy white males" so we are not all tarred with the same brush.

Malcolm

Another point that is missed is that bubbling under the surface of technology is high temperature superconducting power cables that will render the smart grid obsolete before it even gets started. These cables eliminate line losses over long distances, since there is no I squared R loss. Cables can also be overloaded without major damage so the need for elaborate protection schemes is diminished.
They will allow grid control systems to be much more forgiving. These types of cables are being used in cities right now and as the technology develops and matures and new superconductors enter the picture I think the grid as we know it today will be a thing of the past.

Malcolm

Malcolm,

I'm sure most average consumers and I agree with you that electricity has been such a great bargain, and we don't really want to be bothered with monitoring its uses in great detail. We have all been conditioned for decades blessed with cheap plentiful supply of electrical energy on demand. The problem I see is that this will change over time because the days of cheap reliable supply are slowly fading away as prices will continue to rise.

I wonder how you would feel if your $110 monthly bill were to double or triple down the road. This is not unthinkable given all the expensive renewable source generation our governments are fostering with lucrative incentives. It is new generation that all of us ratepayers will surely pay for in spades down the road, not to mention the smart grid technologies that have nothing to do with in-home consumer devices that we will also be paying for with higher rates.

Save your pennies Malcolm, and get ready for more conservation and efficiency pushes in our lifestyles, we're going to need them unless you have deep pockets.

Malcolm,

Is that really true about the superconducting cable? The longest installation I've read about is a 2,000 foot cable in New York. Is there anything out there now that is longer?

"The mechanism and dynamics of voltage instability are still not well understood. "

Fair enough, but given the public's intense opposition to building anything, it may make more sense to become better educated about the voltage stability phenomenon that to blindly build more transmission.

"The problem I see is that this will change over time because the days of cheap reliable supply are slowly fading away as prices will continue to rise. "

Which is the principal reason regulators are so adamant about energy efficiency - it's perceived as the least expensive way to control rate increases. I'm not sure keeping prices low while pursuing energy efficiency represents an economically rational line of thought, but then again regulators are not always economically rational.