Smart Grid: Digging The Foundations

Because today’s energy efficiency and renewable energy technologies lack connective infrastructure, they provide only first steps toward climate change mitigation.

Quantitatively they only make dents. This applies to building efficiency methods, such as improved lighting and insulation, and transportation efficiency methods such as higher fuel economy standards. The same for onshore wind and concentrated solar thermal, the first (after hydro) competitively-priced renewable technologies. In almost all cases, they lack integration with long distance or even local distribution systems to reach their markets.

These limitations are the main reasons a “smart” electrical grid, empowered by $4.5 billion in federal stimulus funds, is starting to graduate from R&D into products and services.

It’s not an easy transition, though, as it surfaces large technology challenges as well as the positions of competing business sectors, technologies, and interests, and the less Machiavellian problems of industries that are working together for the first time. Splashing around now in one pool are the electrical utility, energy feedstock, information technology, building design and management, transportation, and electrical devices and appliances sectors.

With so much taxpayer money involved, President Obama’s energy team is mandating up-front standards to ensure that what is built by these disparate forces works and is efficient.

The initial results illustrate the technology and business challenges, but also, a culture of innovation and the experience in business and industrial reinventions of the IT sector.

Driven by these conflicting agendas, and perhaps by IT’s preferring to move fast, competing models of the smart grid are emerging. In one, the smart grid grows out from the center, conquering a transmission and distribution infrastructure comprised of 3200 utilities and over fifty regulatory bodies. In the other, it grows in from the edges: that is, from innovations in building energy efficiencies and in newly-emerging “microgrids” that are loosely coupled to the grid.

The National Institute of Standards’ Roadmap

In June, the National Institute of Standards (NIST) published an interim report on the Smart Grid Interoperability Roadmap, prepared under contract by the Electric Power Research Institute (EPRI), a utility industry think tank.

The report defines a first dozen of what will eventually be hundreds of standards. It also begins to define the stakeholder groups, their self interests, what they know and don’t know about smart grid issues previously outside their interests. In one paragraph, it summarizes the opportunities and the difficulties:

The greatest benefit from the smart grid will be interoperability that will open up every aspect of the generation, distribution, and use of energy to innovation. Innovation will create change, and change will increase diversity. Diversity is always, and always will be, one of the greatest challenges not only to initial integration, but to maintenance management and to operational integrity of the grid.

That is, the grid has thus far been reasonably reliable and safe because it is under centralized control. Yet innovation will distribute energy potential throughout the grid, much as PCs and the Internet distributed information and communications potential to individuals and distributed groups. The management and security challenges in this reinvention are striking. Interoperability refers to the many domain systems (electricity distribution, buildings, electric vehicles, factories, home networks, etc.) being able to work together automatically, effectively, and securely. Interoperability’s medium is information technology.

Drawing upon analysis by the Modern Grid Initiative, the paper defines the smart grid in terms of what it can do above and beyond what the grid accomplishes today. This includes enabling active participation by consumers, enabling all generation and storage options, and enabling new products, services, and markets. Added, on the grid management side, are optimizing efficiency, self-healing capabilities, and security. In contrast, today’s grid excludes consumers except as rate payers, and it limits decentralized activities.

Dry, multisyllabic words, maybe, but unleashed efficiency and generation opportunities, combined with open participation, are the gateways to tomorrow’s maximally clean and efficient energy systems.

NIST had taken ownership of smart grid standards (rising above EPRI, Gridwise Architecture Council—a DOE-industry partnership, and other thought leaders) as a condition of the stimulus funds. It has established domain expert working groups, teams of technology experts that are pushing forward with standards for the smart grid integration of buildings, factories, homes, and vehicles. Some standards exist and some must be forged, but most will ultimately be certified by the engineering guild IEEE, so it has become involved. As has OASIS, the standards group for Internet operations and commerce.

The NIST mandate is to deliver an initial roadmap, standards set, and certification framework in 2009, and start implementations in 2010. The broader standards sets will begin to impinge on stakeholders’ self-interests, so resolving them could be a struggle.

Anto Budiardjo, a building technologies pioneer and organizer of ConnectivityWeek, a conference that intermingled every stakeholder group just as the NIST report was being published, observed:

"The term ‘perfect storm’ has been used many times recently in the Smart Grid and Building Automation communities. Utilities know their businesses will change significantly, creating risks but giving them a chance to recreate themselves. And many in Silicon Valley liken today to 1992, a couple of years before the Internet went mainstream, when all of the technologies and drivers were in place for what was then to follow."

Reinventing The Electrical Utility Industry

Speaking at ConnectivityWeek, Michael Oldak, senior policy director at Edison Electric Institute (which represents investor-owned utilities), remarked with some heat:

“Generally utilities won’t make smart grid investments until their regulators are convinced benefits outweigh costs.”

Implicit in this perspective are established utility industry business, technology, and regulatory systems that the smart grid threatens to upend. Regarding ratepayers, for instance, regulations say that the main job of utilities is to give customers reliable, low cost power. Other issues are external: for example, climate change. So unless laws and regulations change, utilities will only be able to invest in smart grid mechanisms—from utility-side and customer-side efficiencies to renewables—that make power cheaper or more reliable.

One result of this regulatory guidance—guidance not wholly neutral, as the utilities set up the often politicized state regulatory bodies themselves, to fend off accusations of monopoly—is that for a century utilities have delivered mostly low cost and reliable power.

A second result is that they’ve rarely had to compete in free markets, are bureaucratized, and until recently spent little, relative to other technology sectors, on R&D. A third is that they equate their responsible, bureaucratic view of the power sector with the views of their ratepayers. A fourth—deserving expansion—is that this entrenchment makes them cautious.

With some exceptions, the low-investment approach that utilities are taking to smart grid development is to piece apart the smart grid and iteratively move one piece at a time from building the business case to piloting to deployment. The discussions of pieces now on the table—AMI deployment and pilots for demand response (DR) and dynamic pricing—are specific and framed by the needs of utility business managers, regulators, and ratepayer groups. (AMI is an essential digital metering infrastructure, DR the AMI-enabled ability to gain efficiency by unobtrusively cutting local energy use during peak usage periods, dynamic pricing a DR application that shows customers time-based energy costs with they hope that this will lead them to use less energy in peak times, when it costs more.)

Ahmad Faruqui, principle at the consultancy Brattle Group and convener of a track on DR and energy efficiency, said of dynamic pricing pilots:

"Utilities and commissions now have the evidence they need to evaluate the costs and benefits of dynamic pricing…. Where there is continued uncertainty, more pilots should be conducted."

Implied here is that pilots for every part of the smart grid will have to be conducted, and then studied by (3,200) utilities and (50) regulatory bodies as each considers deployment. Their guidance will come from the degree to which a smart grid element improves the central grid—comprised of the utilities, their regulators or governance commissions, and what they see as their ratepayers’ best interests.

Not that Edison Electric or the respected Brattle Group miss the potential of a fully fleshed-out smart grid for the utility industry. Faruqui estimates it will account for $568 billion in benefits to the utility industry over the next forty years. Edison’s Oldak says that with energy demand and costs both rising and with climate change challenges, the utility industry needs every solution that the smart grid can provide.

Reinventing Energy Users (IT’s Trojan Horse?)

A different, in fact, decentralized, view of the smart grid is emerging at the edges of the energy system—that is, among the building, industrial, and transportation sectors, which collectively use most of the developed world’s electricity and fuel. Advocates believe that they can build semi-autonomous energy ecosystems at the edges of the grid. These ecosystems, like a centralized smart grid, would be built on IT. A difference is that the IT industry may have a freer hand to innovate working in from the edges.

Two related movements work at these edges: building efficiency (evolved from a building automation industry), and microgrids.

The building efficiency model has IT providing real time governance over every energy using system and device and every energy producing apparatus in a building, from air conditioning units to refrigerators to factory lighting, and from solar panels to electric car batteries. Such governance—when combined with a new generation of governable devices—will wring out maximal instant-by-instant efficiencies.

IT will also enable market signals: a building programmed to know its usage needs will buy energy when it is cheap, lower usage when it is expensive (both financially and environmentally), and sell energy it produces when it can turn the highest profit.

The microgrid model expands these ideas from individual buildings to local aggregations of energy using and producing entities—university campuses, industrial parks, shopping centers, residential neighborhoods. It also decouples even further from the local distribution arm of the power grid. A microgrid would interact with the grid, buying or selling energy, only as it needed or wanted to. It might also be designed to be wholly self-sustaining … that is, off the grid.

Steven Pullins, director of the Modern Grid Initiative for DOE’s National Energy Technology Laboratory, said:

"Consumers need the resources and active controls to solve power issues locally. As energy costs rise, so will the use of local renewables. When grid distribution systems support two way power flows, local distribution will become resources [reducing demand and providing power] for our transmission systems."

The central role of IT in smart grid efficiency and renewable integration efforts is not lost on the IT industry. Cisco, Google, and Microsoft, along with a host of smaller companies and start-ups, have begun investing heavily in energy sector opportunities. IBM and others are working with the utility industry; others, like Google, are developing for energy consumers and so innovation at the edge. Google, which undermined the advertising industry by going directly to consumers.

Some IT leaders even think IT will come to dominate energy, as it now does the information, telecom, and supply chain sectors. Juval Lowy, Microsoft Regional Director for Silicon Valley, said at Connectivity Week (speaking, he noted, for himself):

"Buildings use 68 percent of our total power and 39 percent of our total energy, yet with today’s grid building managers are essentially dumb. The solutions to these and other grid problems are based in IT. … What I call the EnergyNet—putting connected intelligence in buildings, meters, vehicles, grids—is IT’s next killer app."

Preceding Lowy as a speaker, Bob Metcalfe, co-inventor in 1973 of Ethernet local area networking and now an energy technology venture capitalist, gave the name “Enernet” to what he saw emerging:

"The killer lesson energy can take from the Internet’s history is: go distributed. As software and hardware remake the energy infrastructure, the smart grid or Enernet will become distributed—more peer-to-peer, multi-vendor, standards-based. I see an Enernet that is distributed, layered, symmetric, and asynchronous—with networked intelligence extending to trillions of leaves of the smart grid, with energy harvested and stored off, on, and in the grid."

From a mitigation perspective, the question may be: can these contending smart gird models challenge and complement one another, or will they be driven by infighting—over standards, regulations, federal investment dollars, etc—to waste more opportunity and time?

See also:

House Testimony Undermines Wisdom of Massive Electric Grid Expansion

China’s Smart Grid Ambitions Could Open Door to US-China Cooperation

Cisco Officially Enters Smart Grid Market: Why It Matters

What’s Next in Smart Grid? IBM Picks 5 Companies to Watch