Bottom Line – Distribution grid automation will continue, at an accelerating pace. But for those who can enable energy efficiency they have a market place today.

The energy industry is facing an uncertain future. According to the International Energy Agency, worldwide energy demand will increase by more than 50 percent by 2030. This is an opportunity for innovative entrepreneurs. However, the huge sums being invested into Cleantech[1] notwithstanding, technology invention in and of itself is not sufficient. Rather, technology is an enabler of innovation. In many cases, the technologies that may help solve energy and environmental issues are not new. What's new is how mature technology, often developed for solutions in other industries, may be used to generate tangible benefits for energy providers and consumers.

Little needs to be said about the growing demand for ways to incorporate clean energy. The challenge for any and all clean energy technology stakeholders, both those with the solution and (in most cases) their willing prospects is that the energy industry is heavily vertically integrated.

In the US for example, 50% of the power comes from coal. Coal, it is estimated, accounts for 40% of the World’s CO_2. The resulting power is carried on a transmission infrastructure from its source to near its point of delivery, where the power flows into a smaller network. This distribution network delivers it for use.

Energy flows one way, information about the use of that energy, except how much, is barely collected and any innovation has to meet monolithic requirements, since it would have to offer a near replacement solution to some part of the power grid.

Thus, for renewable energy to thrive the generation industry must change from a model of integrated power creation to delivery to one which relies on the efficient accurate exchange in intelligence to match supply to demand without compromising the quality of the power rendered.  The challenge for utilities is where to begin? 

While most utilities will agree that the smart grid is the networked application of digital technology to the energy delivery and consumption segments of the utility industry. And that it incorporates advanced applications and the use of distributed energy resources, communications, information management, and automated control technologies to make the grid self-healing, and thus more reliable. The sequence in which they make investments is as not as well articulated. Most, being for profit corporations, begin with considering how to protect shareholder returns with the result that they look at projects that protect the return on their existing business model first, leading to a broad range of projects all of which are which will eventually enables the use intelligent meters and devices to empower customers to use electricity more efficiently. And, make the grid self-healing, and thus more reliable. The question is when?

For an early stage or growth stage entrepreneur to rely on the utility industry reach the “tipping point” where they could usefully apply SaaS solutions to leverage their smart grid provided data is to invite frustration and delay! Instead, the entrepreneur should look at solutions that either do not rely on the smart grid to perform, or can deliver a tangible benefit without a substantial utility investment. In practice that means either enabling active participation by consumers in their energy consumption. Which might mean direct load control and where the incentive exists shaving peak loads in response to a price signal.

In practice, as this EIA study of residential energy consumption illustrates,

that means taking control of heating and cooling (38.5% of power consumed). If incentivized by time of day pricing, there maybe a small additional benefit (6%) from running dryers when the cost per KwH is at its lowest.

In summary, the opportunity that is both immediate and plays to the application of information technology to improve the efficiency of energy consumption is offering easy options for consumers to manage their electricity use and costs.

An additional value added service would be power quality monitoring. A typical household has invested more than $30,000 in durable goods powered by electricity. The effective useful life of these appliances is reliant in equal measure on how they are maintained and the quality of the power they consume. The characteristics of the power delivered by the utility can affect the total monthly cost of power by upto 10%. Voltage surges and lags as well as frequency fluctuations will impact the durability of a household’s appliances. These factors are multiplied when the consumer is broadly defined. Businesses with multiple commercial locations have few options to centrally measure power quality and appliance performance, making it impossible to plan for timely repair and replacement.  Thus, reducing appliance lifetime ROI and creating the potential of customer dissatisfaction due to appliance failure.

In conclusion. The opportunity today is a platform which analyzes power consumed at the point of consumption sold because it keeps control over the consumer durable out of the hands of a utility while still enabling the ratepayer to opt in to responding to the price or supply of power. If the entrepreneur wants to partner with the utility, by taking away direct utility control over large appliances, this solution can be implemented in such a way that it complements existing utility investments in AMR/AMI, and any meter data management solution already implemented. And, so will face fewer hurdles to widespread adoption.

The power transmission grid today is in reality three separate high-voltage electrical transmission grids. These grids cover the contiguous 48 states and parts of Canada and Mexico and are known as the Western Interconnection, the Eastern Interconnection, and the Electric Reliability Council of Texas (ERCOT) Interconnection. The three grids operate independently for the most part but are connected in a few places by direct-current lines. All United States power utilities, except those in the states of Alaska and Hawaii, are connected to other power utilities through the national power grid. Dispatch centers maintain and control the flow of electricity over the grid, supplying electricity to meet the demand. 

Little needs to be said about the growing demand for ways in which use can be made of clean energy. The challenge for any and all clean energy technology stakeholders, both those with the solution and (in most cases) their willing prospects is that the energy industry is heavily vertically integrated. In the US for example, 50% of the power in 50% of cases comes from coal. Coal, it is estimated, accounts for 40% of the World’s CO_2. The resulting power is carried on a transmission infrastructure from its source to near its point of delivery, where the power flows into a smaller network. This distribution network delivers it for use. Energy flows one way, information about the use of that energy, except how much, is barely collected and any innovation has to meet monolithic requirements, since it would have to offer a near replacement solution to some part of the power grid.

The National Renewable Energy Laboratory found that it would be possible to make wind 20-30% of the power mix for the East coast of the USA.

But, not without dramatic changes in how the transmission grid operates. The findings of their study, published in January 2010 can be retrieved from here. For example, assuming the power were available for delivery to the eastern region, it would require cooperation between these 8 independent system operators. Something they have not historically been responsible for.  Furthermore, as the report states, "a 20% wind scenario relies on a major national commitment to clean, domestic energy sources with desirable environmental attributes. Furthermore, it is probable that to leverage the best sources of wind would require adding substantially to the existing transmission infrastructure

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The 864 distribution cooperatives are an attractive opportunity for private licensed wireless networks. Together they serve around over 14M power customers. They operate in excess of one hundred billion dollars of assets, including 2.5 million miles or 42% of the nations electric distribution lines, which is identically constructed as a result of the conditions of funding put in place by the USDA's RUS in the 1930s. They deliver 10% of the total KwH sold in the United States each year and also own mostly coal fired generation facilities to produce half of this energy sold through 66 generation and transmission cooperatives.

Furthermore, they serve communities where the cost of spectrum is relatively low and availability relatively plentiful. Finally, they are struggling with the triple problem of:

1.     Low meter density, which means solutions that rely on unlicensed wireless to harvest data, will not work effectively.

2.     Power demands growing at 6% annually, compared with the US overall growing at 1.5%.

3.     A scarcity of power supply options. And, an over reliance on coal based generation, driving a need for line loss elimination, distributed generation and utility directed load shedding to broaden the supply of power.

These three issues are making coops predisposed to deploy the full suite of power grid management solutions as illustrated by the broad range of software applications in use today.

(To download see attached). And therefore a private wireless network solution to connect it all together.  It would appear the the Department of Energy shares this conclusion. In the most recent round of federal stimulus funding for the smart grid, the coops received $300M.

Without a telecom plan the smart grid will become more complicated to deploy and cost more to operate while enabling few of the uses of data Google et al envision. It is therefore a critical first step for every utility committed to a smart grid and a good candidate for every investor looking for the investment at the epicenter of smart grid deployments.

It is capital inefficient and dramatically complicates the purpose of the smart grid to utilize three different telecom networks , presented in the preceding post, or http://bit.ly/ScRAu provided by at least three different operators to effect the smart grid - in the home (HAN), distribution between transformer and meter (LAN) and electron carriage from substation to transformer (WAN). WiMAX because of the propagation characteristics of 1.8 - 2.5GHz and the ability of base stations to exchange without meaningful packet loss data with low power clients (else it would not work as a solution for cellular handsets) is a perfect technology to enable a utility to control the flow of data regardless of who makes the investment to collect and harvest (Google, Microsoft Hohm, Tendril, Trilliant, etc).

1. For most utilities the a smart grid investment will:
1. Improve resilience to attacks, natural disasters and operator errors which in turn will result in near-zero wide-area blackouts and greatly reduced local interruptions.
2. Deliver High-quality power for sensitive electronics and complex computer applications and the means to differentiate the power and therefore bill appropriately.
3. Give easy options for consumers to manage their electricity use and costs.
4. Enable the plug-and-play integration of renewables, distributed resources and control systems.
2. The implication is annual savings of tens of billions of dollars from reduced interruptions, reduced congestion and reduced need to build expensive plants and lines.
1. Thus the distribution grid plays critical role in the pooling of power sources broadened and degree to which existing dominant sources of power can be made to reduce their carbon emissions.
2. Success relies in large part on extending the microgrid to serve the median meter - a residential consumer whose peak load is 12kWh that will require an inexpensive microgrid that is integrated with the utility’s communications infrastructure for monitoring and control.
3. Rural utilities recognize that they must embrace a comprehensive integrate approach to CO2 and other harmful emissions.
1. Capped ability to add coal fired generation
2. Existing RPS incentives tailored to IOUs
3. Existing DG, Price led DR focused on the largest consumers of electricity which yields the best return on the considerable investment required to make the heavy user (300MWe) independent of the grid.
4. Predominance of residential load with attendant dramatic changes between base and peak load.
5. High penetration of AMR. Leading to a desire to avoid any solution that would result in investment being reclassified as a stranded assets
4. To be successful, electric utilities need:
1. Broad range of cost effective generation
2. Make changes in generation, transmission to make more efficient use of the power supplies
3. Enhance the role of communications to connect the data and decisions at each stage of the transaction that begins with consumption of electricity and ends with its generation.
5. Broadly deployed microgrids will mean a proliferation of inverter-based generation within the distribution grid the need increases for auto-synchronization with the grid; this is the most complex problem for microgrids that contain numerous generators that all must be in phase for successful synchronization. Microgrids are likely to need three levels of control-internal, external and asset:
6. If the microgrid is controlled via a central controller (as opposed to relying on local generation control) sophisticated algorithms would need to be developed to accommodate a wide range of load and generation output scenarios and power flow constraints created by line constraints and generation availability.
1. For its external control system, generators in the microgrid must also be able to rapidly respond to changes in load to maintain voltage and frequency.
2. Microgrid fault current interruption is particularly challenging as microgrids require an ability to provide coordination of protection devices in both standalone and grid parallel modes.

The smart grid is the networked application of digital technology to the energy delivery and consumption segments of the utility industry. It incorporates advanced applications and the use of distributed energy resources, communications, information management, and automated control technologies to make the grid self-healing, and thus more reliable. It enables the use intelligent meters and devices to empower customers to use electricity more efficiently.

Functions of a Smart Grid

The four functions of the smart grid are:

1.    Enable active participation by consumers

2.    Enable new products, services and markets including

a.    Direct Load Control

b.    Appliance efficiency monitoring

c.     Transmission and distribution asset monitoring

d.    Peak load shaving and Demand Response Management

3.    Provide power quality for the digital economy

4.    Increase generation asset utilization transmission operations efficiency

a.    Accommodate all generation and storage options

b.    Anticipate & respond to system disturbances (self-heal)

Value of Digital Grid Development for Utilities

Utilities Smart Grid Related Objectives:

1.    Save tens of billions of dollars from reduced interruptions, reduced congestion and reduced need to build expensive plants and lines

2.    Improve resilience to attack; natural disasters and operator errors that in turn result in near-zero wide-area blackouts and greatly reduced local interruptions

3.    Deliver high-quality power for sensitive electronics and complex computer applications and provide the means to differentiate the power and therefore bill appropriately

4.    Give easy options for consumers to manage their electricity use and costs.

5.    Enable the plug-and-play integration of renewables, distributed resources and control systems

 

Utilities further recognize that they must embrace a comprehensive integrate approach to the reduction of CO² and other harmful emissions. Because of:

1.    Capped ability to add coal and gas fired generation

2.    Pressure to reduce CO² emissions from existing plants

3.    Existing RPS incentives which encourage greater use of renewable resources.

 

However, the enormous capital cost and time required to add renewable generation assets as well as, in many cases, the need to build additional transmission infrastructure leads the utility to elect to build local plants within the distribution grid. In so doing the utility disaggregates the distribution grid into a series of microgrids[1].

 

Research commissioned by the Department of Energy-Office of Electricity Delivery and Energy Reliability (DOE-OE) and the California Energy Commission found that microgrids could provide six complementary value propositions:

 

1.    Reduced cost - reducing the cost of energy and managing price volatility

2.    Reliability - improving customer and system reliability

3.    Security - increasing the power delivery system’s resiliency and security by promoting the dispersal of power resources

4.    Green power - helping to manage the intermittency of renewables and promoting the deployment and integration of energy-efficient and environmentally friendly technologies

5.    Power Delivery system - assisting in optimizing the power delivery system, including the provision of services

6.    Service differentiation - providing different levels of service quality and value to customers segments at different price points

 

For these benefits to be realized, microgrids must be able to auto-synchronize with the grid. The language, form and frequency of communication must be established before the distributed generation plant is commissioned for use. However, a microgrid also places enormous importance on reliable communications for successful synchronization.

Figure 1 - Role of Communication in the Smart Grid

Renewable power’s need for reliable communications (Figure 1) creates a cost effective path to realizing the full potential of a smart grid. The use of a single communication path reduces the data relationship task to the management of data inputs and command and control outputs. The method for which need be defined only once. Eliminating these two implementation barriers leaves the utility to add grid management for line loss reduction; remote connect, disconnect; transformer, capacitor, monitoring and transformer load management as commercial opportunities and resource capacity dictate. All the while secure in the knowledge that the path to exchange the data, the smart grid’s digital grid is ready and capable.

Today’s electric grid has none of infrastructure with which to provide a feedback loop to capture data and apply the resulting decision. Adding this bridge has been held back by confusion about the exact functional requirements of a smart grid platform and utilities’ desire to reduce their exposure to proprietary standards by seeking interoperability between manufacturers’ devices. Determining the purpose, collection method, and application of that data is the underlying purpose of the ARRA stimulus money. Especially since the money was granted in chunks large enough to undertake smart grid projects of sufficient size to reach a definitive conclusion about the way distribution grid automation should be implemented in utility power delivery systems regardless of size and service area topography. Put another way, the stimulus will demonstrate with "shovel ready” scalable robust reliable solution that has been tried elsewhere that it is possible to add intelligence to the electric grid. Taken with the additional federal dollars being applied in a concerted effort to set standards, the stimulus has lowered barriers to extract and analyze data.

 

Those who win the grant funded RFPs must already have the ability to harvest and analyze data from thousands of endpoints. Fortunately for companies like Silver Spring Networks or Current Technologies, they were able to draw on private equity to develop their solutions. For those companies whose offering is at an earlier stage of maturity, the conditions for private equity have, for now, tightened. Only those whose cashflow is positive have a prospect of securing substantial venture capital. So, what is the innovation opportunity for those with a solid value proposition and access only to personal resources?

 

The stimulus has lowered barriers to evaluate applications that apply intelligence to data extracted from the grid. But, it has not changed the desire of utilities and those that regulate them to maximize the use of existing infrastructure. Public utility commissions, in particular, have shown themselves to be eager to avoid approving write-downs of electricity distribution assets well before the end of their useful life. Incumbent Automated Meter Reading (AMR) and Automated Meter Infrastructure (AMI) providers like Itron or Landis and Gyr are understandably keen to show receptive utilities and regulators that staying with them is a robust path to the smart grid. Thus, data analytics providers would be well advised to see how to leverage the efforts of meter data toolboxes like MADRI (http://tinyurl.com/qekefv). Or the Energy Central meter data portal - http://tinyurl.com/ot55st.

 

Alternatively, the opportunity that is both immediate and plays to the application of information technology to improve the efficiency of energy consumption is offering easy options for consumers to manage their electricity use and costs. A typical household has invested more than $30,000 in durable goods powered by electricity. The effective useful life of these appliances is reliant in equal measure on how they are maintained and the quality of the power they consume. The characteristics of the power delivered by the utility can affect the total monthly cost of power by upto 10%. These factors are multiplied when the consumer is broadly defined. Businesses with multiple commercial locations have few options to centrally measure power quality and appliance performance, making it impossible to plan for timely repair and replacement.  Thus, reducing appliance lifetime ROI and creating the potential of customer dissatisfaction to appliance failure. Finally, the majority of the utility industry measures household consumption manually, meaning the benefits of efforts to reduce total power consumed may not be reflected in their utility charge for several months. A platform which analyzes at the point of consumption has the benefit of keeping control over the consumer durable out of the hands of a utility while still enabling the ratepayer to opt in to responding to the price or supply of power. By taking away direct utility control over large appliances, this solution can be implemented in such a way that it complements existing utility investments in AMR, and the distribution grid from transformer to substation. And, so will face fewer hurdles to widespread adoption[1].

 

In conclusion distribution grid automation will continue, at a faster pace with the consensus on standards to follow and the grant awards. But, the stimulus has not changed the desire of utilities and those that regulate them to maximize the use of existing infrastructure.

In Development:

1. Replace baseload
2. Loss of predictablity of supply requires greater control over demand
3. Requires both the ability to link price to the current price to generate the power
4. Requires the ability to shed demand should supply not be available

See How Renewable Energy Becomes Part of the Energy Supply Mix

Today’s electric grid has none of infrastructure with which to provide a feedback loop to capture data and apply the resulting decision. Adding this bridge has been held back by confusion about the exact functional requirements of a smart grid platform and utilities’ desire to reduce their exposure to proprietary standards by seeking interoperability between manufacturers’ devices. Determining the purpose, collection method, and application of that data is the purpose of the ARRA stimulus money. Especially now that the money was granted in chunks large enough to undertake smart grid pilot projects of sufficient size to reach a definitive conclusion about the way distribution grid automation should be implemented in utility power delivery systems. Put another way, the stimulus is only for those whose solution is "shovel ready” i.e. scalable robust reliable solution that has been tried elsewhere. Taken with the additional federal dollars being applied in a concerted effort to set standards the stimulus has lowered barriers to extract and analyze data but has not changed the desire of utilities and those that regulate them to maximize the use of existing infrastructure.

 

Those solution providers who win the grant funded RFPs must already have the ability to harvest and analyze data from thousands of endpoints. Fortunately for companies like Silver Spring Networks or Current Technologies, they were able to draw on private equity to develop their solutions. For those companies whose offering is at an earlier stage of maturity, the conditions for private equity have, for now, tightened. Only those whose cashflow is positive have a prospect of securing substantial venture capital. So, what is the innovation opportunity for those with a solid value proposition and access only to personal resources?

 

The stimulus has lowered barriers to evaluate applications that apply intelligence to data extracted from the grid. But, it has not changed the desire of utilities and those that regulate them to maximize the use of existing infrastructure. Public utility commissions, in particular, have shown themselves to be eager to avoid approving write-downs of electricity distribution assets well before the end of their useful life. Incumbent Automated Meter Reading (AMR) and Automated Meter Infrastructure (AMI) providers like Itron or Landis and Gyr are understandably keen to show receptive utilities and regulators that staying with them is a robust path to the smart grid. Thus, data analytics providers would be well advised to see how to leverage the efforts of meter data toolboxes like MADRI (http://tinyurl.com/qekefv). Or the Energy Central meter data portal - http://tinyurl.com/ot55st.

 

Alternatively, the opportunity that is both immediate and plays to the application of information technology to improve the efficiency of energy consumption is offering easy options for consumers to manage their electricity use and costs. A typical household has invested more than $30,000 in durable goods powered by electricity. The effective useful life of these appliances is reliant in equal measure on how they are maintained and the quality of the power they consume. The characteristics of the power delivered by the utility can affect the total monthly cost of power by upto 10%. These factors are multiplied when the consumer is broadly defined. Businesses with multiple commercial locations have few options to centrally measure power quality and appliance performance, making it impossible to plan for timely repair and replacement.  Thus, reducing appliance lifetime ROI and creating the potential of customer dissatisfaction to appliance failure. Finally, the majority of the utility industry measures household consumption manually, meaning the benefits of efforts to reduce total power consumed may not be reflected in their utility charge for several months. A platform which analyzes at the point of consumption has the benefit of keeping control over the consumer durable out of the hands of a utility while still enabling the ratepayer to opt in to responding to the price or supply of power. By taking away direct utility control over large appliances, this solution can be implemented in such a way that it complements existing utility investments in AMR, and the distribution grid from transformer to substation. And, so will face fewer hurdles to widespread adoption[1].

 

In conclusion distribution grid automation will continue, at a faster pace with the announcement of standards to follow and bigger maximum grant size (http://bit.ly/mSIYf). But for those who can enable energy efficiency they have a market place today.

Everyone knows what the smart grid is, or at least they think they do. The smart grid matches demand with an ever-increasing range of electricity sources. It will employ tools and techniques developed for Internet access to connect how much and when power is consumed to the cost of power, and in so doing change the model of power delivery that has been essentially the same since Edison.

Once the basic problem of matching demand and supply is addressed there will be a proliferation of revenue streams that mine the collected data and help consumers and businesses get the most from the energy they purchase. Hence finding the fastest way to make it happen will be a major economic stimulus. Think for a moment about what the access to information would have been like if the personal computer had not displaced mainframes as the principle computing resource. Without the democratization of computer processing power the Internet would not exist. Now imagine how an electric grid designed to funnel electricity from a few a few very big power sources (coal, hydro electric, oil and nuclear) that have similar power characteristics and distribute it to mostly small users would cope with increasing the number location and characteristics of the power supply. The short answer is that it will either not do it effectively or more likely at all!

It is wildly unrealistic to imagine that this is a new problem, or that enormous efforts have not gone into securing accurate, timely information about the way in which power is consumed. The electric industry however has scarcely moved past its reliance on a model that tries to match the source of power’s characteristics to the demand type. I.E. coal, hydro and nuclear work best delivering baseload. Gas fired generators work best delivering peak load. Utilities across the world have embraced smart meters that at a minimum can be read remotely and at the upper end of their functionality can send price of power information to the customer so that s/he can time-shift their power purchase. The challenge for those that want to employ innovation to increase the proportion of power consumption that employs clean technology is how to make it possible to reflect the cost of power generation in the cost paid by the consumer. The questions are:

• How would a smart grid make that easier?
• What does the way the grid is made smart, matter?