Mega-Industrials Fear Smart Grid Costs
John Anderson is the energetic president and CEO of the Electricity Consumers Resource Council, or ELCON, which represents 20 top industrial companies, mostly multinational corporations in manufacturing.
ELCON formed in 1976 as the nation addressed electricity issues, in the run-up to passage in 1978 of the Public Utility Regulatory Policies Act, or PURPA. Anderson has led the organization for 26 years.
Anderson is adamant that ELCON doesn't oppose a smarter grid, but he said the trillion-dollar cost - he does not attribute this figure - begs for a cost/benefit analysis. In that sense, Anderson argued, his multinational constituents and your Aunt Millie are in alignment: they both want upfront, verifiable cost/benefit analyses before they lend support.
(ELCON's members include E.I. DuPont, Monsanto Company, ExxonMobil, Chevron, Alcoa, Chrysler, Honda, Occidental Chemical, Eastman Chemical, Praxair, Shell Pipeline Co. and Air Liquide. According to Anderson, his constituents' aggregate, annual electricity consumption is confidential, but some spend millions of dollars per month on it.)
Clearly, ELCON and its members face a world in flux and they are making their voices heard, meeting and filing positions with the Federal Energy Regulatory Commission and staff, working with other trade groups and courting public opinion.
Anderson has questions. Lots of them. (Check his GridWise Alliance presentation.) Most of them make hay out of the ill-defined term, "smart grid," and most of them focus on the cost of electricity to his constituents. One gets the sense that electric utilities and his constituents have always had an uneasy alliance.
"My bottom line point is that utilities will spend anything because of guaranteed cost recovery," Anderson said in a conversation with me last week. "As long as you guarantee them cost recovery, they'll spend anything."
Beyond electricity prices, Anderson argued that demand side management programs have been in place for decades among industrial and residential users and all is well.
"For most major facilities, the large industrials are already on time-differentiated rates of some sort," Anderson pointed out. "They have interval meters. They've had 'interruptible rates,' which have been around for over 30 years. Load reduction by utilities is nothing new and it has worked, still works and will continue to work."
He lauded the recent decision by the Maryland Public Services Commission to send Baltimore Gas and Electric Co. back to the drawing board on the latter's proposal to recover costs on a smart meter rollout.
ELCON's statement on that decision began: "Hallelujah." It read, in part:
"From the consumer perspective, the PSC exhibited simple common sense when it recognized that 'the proposal asks BGE's ratepayers to take significant financial and technological risks ... all in exchange for savings that are largely indirect, highly contingent and a long way off.'"
(The organization's position, indeed, was echoed by Mary Healey, president of the National Association of State Utility Consumer Advocates.)
Finally, Anderson predicted that no carbon-related legislation would pass this year, nor would the utility industry support a bill that capped carbon emissions only for the utility industry - even while Senators John Kerry, D-Mass. and Joe Lieberman, I-Conn. reportedly amended their American Power Act yesterday to focus only on carbon emissions by electric utilities.
Yet Anderson appeared to recognize that the world won't stand still, regardless of ELCON's apparently rational and logical positions.
"We don't want to come across as opposed to a smart grid," he said. "What we say, however, is that if tremendous expenditures are to be made on something called a 'smart grid,' we'd like to know what it is we're going to get from it. There's a cost/benefit analysis that's not being done."
Of course, one conversation with a utility executive chosen at random could clarify the difference between sensors and controls for upgrading grid reliability and optimization, the addition of communications networks for granular data and analysis on power flows and demand and business transformations that call for widespread use of dynamic pricing.
But as with any trade association qua lobbying organization, Anderson's job is to project a sense of unease over changes his constituents are uneasy about.
Mandatory participation in smart grid programs - particularly real-time pricing - will lead to "a tremendous backlash," Anderson predicted. "It's just that consumers really haven't woken up yet. The expenditures are just now beginning to get really significant."
Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757
Comments
Cost/Benefit Analysis Versus An Emergent Transformation
Hi Phil,
This is again the situation of the National Association of State Utility Consumer Advocates (NASUCA). Behind the consumers concerns about the smart grid there is one relative to the restrictions imposed by a broken regulatory system. The underlying assumptions of the century old mandate to state regulators no longer hold for the new economy. With a lot of respect for the leadership of the Electricity Consumers Resource Council (ELCON), cost/benefit analysis are insufficient when there are non-trivial matters involved, like demand response investments to be made by customers.
With the article Who ‘Believes’ In Smart Grid?, you first reported about a very long dialogue in the Smart Grid Executive Forum (SGEF) group in LinkedIn to the general public and because of the work I have been doing got me very interested in the story. Seen it as a generative dialogue, the issues of the smart grid have gone well beyond those of smart meters and into the discovery of a lack of a transformation effort which has considered the customer as an unforgiving afterthought.
Customers should have the full right to choose whether a smart meter or any other gadget, with the ability to choose in the emergent world in accordance with the Technology Adoption Life Cycle. As you can see next, state regulators need new mandates that transform the power industry to the emerging world.
After reading all the posts on that LinkedIn dialogue, I added three posts to it. Then, I followed your lead and made them available to the general public in the EWPC Blog with the serial article Initiating the Smart Grid Transformation Part 1, Part 2 and Part 3. The summary of the three posts and that article says:
“By following John Kotter’s suggestions about why transformations efforts fail, it becomes crystal clear that the smart grid undergoing process lacks a clear vision as it was not designed as a transformation effort, but to make use of the financial opportunities given by the stimulus package. A vision that puts customer first is urgently needed to initiate a transformation process. The emerging vision leads to two systems that mutually reinforce each other: the regulated Smart T&D Grid and the competitive Smart Enterprise that put customers first. The vision integrates the two systems into a smart grid only at real-time operation.”
The valuable dialogue that followed on the SGEF since then, led me to write six posts on the LinkedIn generative dialogue, which then became the second EWPC serial article A Strong IEEE Coalition Might be Required to Start Transforming the Power Industry Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6. The summary of those six posts and the second article says:
“Applying the IEEE tagline Advancing Technology for Humanity to the power (and maybe gas and water) grids is the mean to propose the need for a strong coalition to initiate a transformation for Advancing Grids for Customers. It is very urgent and important for the IEEE Smart Grid Group of LinkedIn to start a practical coalition in every way, as soon as possible, to advance this technology for humanity, since “IEEE is the only organization able to thoroughly provide the diversity of expertise, information, resources, and vision needed to realize the Smart Grid’s full promise and potential.” Relative to humanity, we IEEE members able to contribute should go the IEEE Code of Ethics to reflect if we like the person we have become.”
Best regards,
José Antonio Vanderhorst-Silverio, Ph.D. - LinkedIn