SMART GRID -- Education + Information + Knowledge = End of Monopoly

Joao Gomes | Jan 04, 2011

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The break in the Monopoly in the area of Electric Power Distribution is closer than we could imagine, education, information and knowledge is a combination similar to an avalanche, know how it starts, but not when it ends.

With the entire "Transmission Network Interconnected", the end of the Monopoly will ultimately depend on some regulatory rules. The consumer can choose which Utility to buy energy and what energy source will buy. For example, Consumers, Community, Cooperative, City or State located in the area of distribution of a utility, you can buy electricity from any Utility. If the "Tariff Structure" of a Utility is cheaper than that of its region, it can make the choice of which is cheaper.

The trade in energy will have changed their rules to allow "all classes" of consumer access to what we call the "Free Market". Consumers can buy power in the market through a contract or auction, the Utilities sell their energy in this market and the "consumer or group of consumers" will buy the energy by the lowest bidder. The contract of sale shall contain the amount of energy, its source and will have a specified period, which would be renewed or not.

These auctions were held from time to time, Regulatory Agencies set the rules and duration of these contracts.

If the purchase is renewable energy, even if the Utility in your area delivered to your home energy from fossil, you'll know that somewhere a consumer is receiving power from renewable sources -- We recall that the entire transmission network will be connected.

The local Utility in which your house is connected will be responsible for delivering energy and do any service requested, the Utility that sold the energy, put in the "Transmission Network Interconnected" the amount of energy purchased -- Fossil or Renewable. The Utility that sold energy will pay the operator of the network, and the Utility of their region a "Toll" for using their network, the energy bill Consumer be paid to the Utility sold energy.

This possibility is easy to implement and gives consumers the power to choose who to buy the energy that is being used in your home. In the beginning we have some confusion or unforeseen situations, but with time things will work fine.

This model is already used in some countries for consumers of High Voltage and with demand above a certain value.

Prepare for an electric system that is cleaner and more efficient, reliable, resilient and responsive -- a Smarter Grid.

The Smart Grid transforms the current grid to one that functions more cooperatively, responsively and organically smart. Open architecture, Internet protocol, Plug and play, Common technology standards, Non-proprietary and Interoperability.

Fine concepts all, yet one of the reasons the electric industry has been slow to take advantage of common technology standards -- which would speed Smart Grid adoption -- is a lack of agreement on what those standards should be and who should issue them.

The role of the Regulatory Agency is to act as an objective facilitator, allowing the best ideas to prove themselves. Smart Grid efforts are well underway on several key fronts, from forward-thinking utilities to world.

We will offer the consumer some smarter choices, in addition to changing habits and behavior. Surely, this is the least that we expect of an intelligent network?

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Comments

[quote] The trade in energy will have changed their rules to allow "all classes" of consumer access to what we call the "Free Market". [/quote]

That's a key concept which needs to get through to regulators and customers. The reasoning used historically to limit the free market to only very large customers has been transaction costs, since billings needed to be totaled up manually, or by very slow computers. Modern computer systems can eliminate that cost, reducing the redundant storage of a years 15 minute interval billings for a customer to $0.002 . Modern database and communication technology, ebilling, etc. can open up the "Free Market" for all customers, thus enabling all the benefits of authenticated demand management, flattened load profiles, high proportionate integration of variable renewables, etc. etc.

A paradigm shift, from "supply must match demand" to "demand must match supply", resulting in much greater efficiency and economy for generating entities.

Hmmm, well in the US anyway many markets have become deregulated and you will witness the splitting of the traditional monolithic electric provider into three distinct vertical entities; Generation, Transmission & Distribution (T&D), and Retail Energy Providers (REP).

So two of those segments will lend themselves to competition; Generation and the REP's.

However the T&D segment (IMHO) is unlikely to change within the next millennium for the very same reasons that the various Telco's and Cable companies hold virtual monopolies in their respective markets; it has been cost prohibitive to provide competition using the same technology/infrastructure. Even if it where technically feasibility to offer an alternate (cheeper) delivery method, I would question the type of reception one would get from all the various Federal, State, City, and community regulators with anything that would require laying down what would be (at minimum) perceived as redundant and or overlaying utility infrastructure.

IMHO T&D needs to remain the one regulated sector of this puzzle; after all isn't it what is the critical infrastructure?

Cheers!
Eric

Generation, Transmission and Distribution in almost every country being divided into separate companies, for obvious reasons.

Power - Generation/Transmission/Distribution - are services of "public utility" and should be regulated by state and organs of society.

But they should not continue as monopolies, the main concept of the Smart Grid is precisely the opposite of the concept of monopoly.

Information and knowledge can break any monopoly!

Joao. Monopolies for delivery (distribution) make a lot of sense, and that is what all present utilities should be restricted to. However, in generating the electricity which they deliver, monopolies are a foolish outdated concept now obsoleted by modern comunications and computerized billing technology.

Len, I think that monopoly does not make sense in any area of energy, at least from the standpoint of the consumer.

The technological backwardness in the area of energy is based on the lack of competition.

Joao,

I must agree with Len. With only one set of local distribution wires feeding customers, it makes it very tough to come up with a good competition system because only one utility company owns those wires.

I suppose one could devise a scheme like they do in the telephone landline business where multiple service providers compete for customers, where one company (typically a Bell company) owns the wires. My understanding however is that this doesn’t work very well because the company owning the wires must be kept a strong a viable company to maintain reliable service. It ends up being biased against the competitors who don’t own the wires.

The real competition for local electricity distribution companies in the future, in my view, will come from customers themselves who choose to make their own power on their own property for their own use. If there are enough of them someday, and their capacities can technically power multiple customers, governments may even decide to allow them to produce power for themselves plus set up small local grids to sell excess capacity to their closest neighbors. Maybe this is dreaming a bit, but I see it happening in time, especially if rates from the main utilities skyrocket much faster than inflation, and anger many customers into setting up their own generators.

Bob,

To have competition in the area of energy we do not need to create local networks.

In Brazil for over 5 years high-voltage consumers buy their energy from the utility that he likes.

The utility that sells energy, pays the local utility - which delivers energy - a service charge for this service.

As the transmission system is integrated whole, the utility that sells energy contractor, put that energy into the grid.

This has worked very well, with well-defined regulatory standards, and bringing the competition to this market segment.

If we are talking about "Smart Grid " because we can not carry this same philosophy to other market segments.

Does all the intelligence, flexibility and technology that we're adding to the grid, could not also add competitiveness to all customers.

Joao: What you are describing in Brazil, above, is exactly what Bob and myself promote. The company owning the wires which deliver the energy the "last mile" to the customer is a separate entity from the one which generates and markets the electricity. It is only logical that the "last mile" distribution be done by small regional monopolies.

Your choosing to call the generating entity "the utility" is where the confusion enters. Here, we would typically think of the distribution entity as "the utility" and promote making it the only monolopy, with generation/supply done by competing free-market companies.

Exactly Len. Competition should be from the generators, but the last mile of wires would continue to be owned and controlled by one local distribution company.

Joao, Len has proposed exactly such a wide-open competitive market system between generators for all customers in his IMEUC proposals on detailed this website. Under such a system there would be no restrictive regulations in the way of technology in the hands of customers, because they would own and control the technologies necessary to participate in such a market.

Corrections.... IMEUC proposals detailed and provided on this website.

and...

...., because customers would buy, own, and control the technologies from anyone selling them, necessary to participate in such a market.

Technology developments occur faster where there are economic opportunities. With an open grid self-generation by an advanced (ie. economic) solar technology, mass produced micro turbines, and/or mini nuclear plants could create some real interesting competition for the distribution monopoly. This could be most interesting if economic sales of extra generation becomes widely acceptable. Cogen could be optimized to heat loads, not some fraction of electric loads. Net metering of solar would have to include some fee for the connection. Lots of changes.

By the way, one of the major values added for solar is unavailable today according to the best information I can obtain. Living in earth quake country I am especially cognizant of the value of islanding solar generation when the grid is unavailable. Current home inverters cut output to the grid when the grid goes down, but no one seems to have seen the obvious next step. Namely send output through a port that could be connected to the home through a break before make double pole switch like those that are coming into use with Honda generators to island some or all of house circuits. Or have I missed something?

I think we are proposing the same thing - with some regional characteristics - which is very good.

The greater number of people talking and thinking the same thing about Smart Grid, is a sign that we are trying to make things right.

I'm not sure that you've completely explored the potential for a free transmission and distribution system. The way I understand Joao's point is that if I have an alternative way to deliver the power, I should be able to avoid the Transmission congestion contracts ("TCCs"), and if I don't (and I want to be able to call on the Transmission owner for back-up Transmission of remotely generated power), I shouldn't have such an option. However, I should always have the option to wheel AND pay TCCs, without some intense and ingrained Transmission rights payment that, in practice, makes a geography's Transmission owner a defacto monopoly. Back-up transmission contracts? Fine. We can debate the cost effective optimum solution all day--a well designed open market will answer the question of whether it's cost effective to build alternative power routes into an area!

The real value of smart grid is improved efficiency, reliability, and resiliency; plus more customer options and interaction (demand response, renewables, etc). I have never before heard the argument that smart grid will lead to improved competition - already prices are rising; this is not the worst case scenario since our Generation and T&D infrastructure has been ignored for many years, or kept the same architecture from 100years ago. When it comes to policy and competition, hows do electricity markets compare to LNG, Petroleum, or even Telecom? I think these like healthcare are public utilities and must be regulated, but what should it look like? REP's are going to perform like insurance companies (middle-men) and increase cost. What value is added? There was an interesting article about electric markets in Power & Energy Magazine recently - have to revisit...

Mike. In my IMEUC design, I propose that ownership of transmission is split between the generating entities and independent private transmission companies. Generating entities (sellers into the market) who need transmission in order to deliver to their end customers are responsible for arranging whatever transmission facilities they require, and are subject to very tough financial penalties for non-delivery of contracts. The regional ISO is responsible only for computing predictions of loads for each critical transmission line in the system far enough in advance to be able to organize necessary load reductions on congested lines by PAYING THE CUSTOMER a compensation for the reduction and CHARGING THE SELLER (generating entity) enough to cover such payments.

Eliminates gaming (eg. generators / sellers will be very wary of exposing themselves to the charges), strongly encourages required new build of transmission.

matthew: Might I suggest reading my articles on this site IMEUC Independent Market for Every Electricity Customer

Agreed regarding the usless overhead of middlemen. That's why I propose having every customer directly negotiate with private generating entities directly for supply on 15 minute intervals. (Handled by computer software embedded in each smart meter). To now, this is only done by large industrials, because the transactions are all handled manually. IMEUC automates the entire process end to end, effectively eliminating the transaction costs and allowing ALL customers to purchase at wholesale prices.

Dean. IMEUC's meters include a powered breaker which can isolate the local site from the grid on power failure or on command from central. Customers can optionally purchase a meter sub-base which plugs into the meter socket below the meter, and into which the meter then plug, which provides connection for local generation, and another breaker to disconnect the local generation. Various logical operation modes including islanding operation are then possible.

SMART GRID combines intelligence, creativity, competition, choice option and other similar characteristics.

But the government monopoly or not, in the area of energy has a direct cause for the delay of technological development in the use of our natural resources, in all countries of the world's energy sector has linked to monopolies, governments and big money and this ratio varies from one country to another depending on their democratic freedoms.

The area of communication and information has reached a level of development and innovation, just to escape the shelter, sometimes easy to monopoly.
Communication and Information has a unique characteristic, which is the capillarity, them there should be no surprise that the revolution would bring to the area of energy.

They say that consumer participation is essential to develop all the tools associated with the SMART GRID, but until now, the only option given to the consumer is changing their consumption habits and behavior in energy use.
The relationship between the Utilities and the Consumer may become increasingly difficult, with more information and the possible increase in their energy bills consumers are more aware of their rights.
Switching suppliers or sources of energy are not even discussed, and are not priorities, because the consumer is captive and trapped underneath the basket.

The modernization of infrastructure in the area of energy is “extremely necessary” in the world and should be treated in a globalized way, only the solutions must be local and targeted.

Of course, the fly in the ointment is state regulation. Maybe I don't understand the set up in the US very well, but what happens to "free market choice" when California wants to ensure that the citizens of that state only purchase electricity that promotes or subsidizes "clean" sources of generation?

There's a reason why Californians pay the highest electrical rates in the US, and it has very little to do with monopolistic practices of the generators...or as I say, maybe I don't understand the set up in the US.

Paul Stevens

Under IMEUC who would assemble large damage repair crews after enormous disasters due to hurricanes and ice storms?

Kent: The distribution monopoly would take care of distribution, just as now. Transmission would be the responsibility of whomever owned it, and their contracts with generation would give them a great financial incentive.

Bob, Len, et. al, useful thinking and organization of things. I've been skeptical of efforts to de-reg the T&D element, as any reasonable person must accept this is the 'least easy' bit of the 3-part problem. UK system, and getting it better / right, must be a sensible place to start?

In any event, you might be interested in a proposal for a 'franchise concept' on T&D put forward in one LinkedIn group I follow,

John

Link would have been helpful, sorry, but LinkedIn doeesn't make this easy (need to work that one out), even with open groups. It's "Changed Utility Business Model " in AMI/HAN group.

John