Oil guru: smart grid hoopla outpaced reality
IT likely to play ever-larger role in running grid
Oil industry expert—some would say cheerleader—and acclaimed author Daniel Yergin spoke last week with my colleague Marty Rosenberg, editor of EnergyBiz magazine. Because Yergin touched on grid modernization and placed the power industry in a larger energy context, I offer coverage of that conversation here. It's a two-part column, so tune in tomorrow as well.
Replay the webcast by clicking on "Harnessing Disruption: A Conversation with Daniel Yergin."
"Harnessing Disruption" is also the theme of the 2012 EnergyBiz Leadership Forum set for March 19-21 in Washington, D.C.
One hallmark of Yergin's work—he authored The Prize: The Epic Quest for Oil, Money and Power (1991), which won a Pulitzer Prize, and The Quest: Energy, Security and the Remaking of the Modern World (2011)—is his use of key statistics to tell a story.
Rosenberg noted one such statistic from The Quest—that global consumption of electricity has doubled since 1980—and that Yergin endorses projections that consumption will double again by 2030. The latter expansion of demand will be enabled globally by about $14 trillion in investment. In fact, electricity consumption will grow much more rapidly than oil consumption, Yergin said.
"The world is becoming more electrified," Yergin told Rosenberg.
Readers, do the math. In the past 30 years, global consumption has doubled. The forecast is that doubling will happen again (quadruple 1980 levels) in only 20 years, despite being tempered by efficiencies. While much of that growth will occur in the developing world, the current sluggish U.S. demand probably will rise as well. That means that bringing all parties to the interactive grid will be a generational opportunity won or lost.
Yergin's prediction that IT's role in the grid specifically and technology innovation around carbon emissions in general are major factors shaping the future. This translates directly to increased influence—technologically, economically and politically—to whichever country leads in sustainable energy innovation.
What impact does Yergin see a smarter grid having on investment and consumption patterns? Rosenberg asked.
"The whole notion of integrating the homeowner with the utility has proved to be more difficult than anticipated," Yergin responded. "Nevertheless, a lot of information technology capacity increasingly will be integrated into running the whole electric power system, from smart meters back to generation. But the hoopla got ahead of the rollout."
Would it be possible for the global economy to cut greenhouse gas emissions by 2050? Rosenberg asked. (Remember, believe it not, greenhouse gas emissions as driver of global warming continues to be a major factor guiding utility investments. You don't have to like it, but money talks. See: renewable energy portfolios, consumers' environmental motivation, etc.)
"It's hard to see how that can be achieved," Yergin said. "People are going to have to go back to the drawing board and find a bigger role for natural gas as a bridge fuel, as a growth fuel. You see countries like China, like India, very interested in more natural gas, which would balance out coal in their systems. I say in The Quest, looking to the future, based on what we know today—and we always have to be prepared to be surprised—is that the energy mix in 2030 may not be very different from what it is today. Meeting CO2 objectives in the future looks very challenging. The answer, inevitably, will have to come not from regulation, but from heavy duty technological innovation."
That means scrubbing coal-fired emissions, for example, is an interim if necessary step. Integrating renewables is a solution. Thus Yergin sets the stage for a forward-looking, clean energy approach. I'd suggest that the U.S. is uniquely poised to do that, unless fatally hobbled by the media-enabled noise that precludes honest discussions and the development of solutions.
In the power industry, the lack of clear direction on a price on carbon emissions is making investment a dart-throwing exercise driven by a jumble of competing factors. Consumers, used to a lifetime of cheap electricity, partly due to the invisibility of externalized costs to human health and the environment, must understand the cost of inertia. Politically, as a nation, we have to pursue common goals or perish. It's that simple.
In short, building a "smarter" grid is a laudable exercise in the near-term. In my view, consumers will seek energy management at home and in the enterprise when cost or reliability becomes a challenge. But if alternatives to the utility relationship present themselves—either in energy management or distributed generation, for instance—consumers will grab it.
Tune in tomorrow for Part II.
Intelligent Utility Daily