Posts Tagged ‘smart grid’

Great Video on the Smart Grid From PBS

Wednesday, March 2nd, 2011

I have long contended that too many proponents of the smart grid, as well as too many reporters and analysts, focus on the savings available to customers who appliances off-peak, which causes the public’s eyes to glaze over. But this PBS video explains, in language the average American can understand, that the main benefit is in increasing the efficiency of the grid as well as providing electronic notification of problems. This results in fewer outages, and being able to pinpoint problems much quicker, thus decreasing the downtime when outages occur. I cannot cite any sources for my opinion, but I believe most customers would gladly pay higher rates for better service (although the outage savings would not be measurable other than by comparison to previous years and length of downtime, since you cannot measure events that do not happen).

Watch it: http://video.pbs.org/video/1801235533. You’ll be glad you did.

HEK

http://econpolicy.com

Smart Grid and Broadband Over Powerline

Thursday, November 12th, 2009

On November 9, 2009, the Brookings Institution held an event titled “Improving Broadband Innovation and Investment.”  A transcript as well as a video of the event may be found at http://www.brookings.edu/events/2009/1109_broadband_innovation.aspx.

The event is described on the Brookings website as follows:

Broadband and wireless technologies are key elements of our nation’s economic, social and civic development. With the Federal Communications Commission’s stated goals of bringing broadband access to all Americans, it is crucial to determine how to be innovative when investing in broadband infrastructure. How will infrastructure development be funded? What is the proper mix of financial resources? How can we identify emerging technologies that will serve citizens and businesses?

The Participants were:

Moderator

Darrell M. West, Vice President and Director, Governance Studies

Featured Panelists

John Horrigan, Consumer Research Director, Omnibus Broadband Initiative

Federal Communications Commission

Robert Shapiro, Senior Policy Fellow

Georgetown Center for Business and Public Policy

Thomas Z. Freedman, President, Freedman Consulting

Author of A Kindle in Every Backpack: A Proposal for eTextbooks in American Schools

During the Q & A session I asked why broadband over powerline (BPL) had dropped off the map even though it is a byproduct of the smart grid (that everybody including some of the panelists say we need and it would provide competition in the broadband market. Only Mr. Horrigan of the FCC attempted to answer and he emphasized that he could only repeat what he had heard, since it is not within his area of study or expertise.  His answer was that he had heard it was a technical problem due to the current architecture of the electrical grid.

Let me emphasize that this is not meant to be an attack on Mr. Horrigan or anybody else on that particular panel.  The Smart Grid concept covers a lot of territory and it is quite difficult to pin it down.  People cannot be experts on every subject about which someone might question them.  But I am rather puzzled about why BPL has failed to gain traction in the US.

The electric power industry was instrumental in wrestling control of the telecommunications industry from Ma Bell in the 1960s by providing their own internal communications system to their workers using microwave towers on electric rights-of-way.  As I recall, they successfully argued before the regulators that electric service was essential and power utilities should not be at the mercy of the phone company to handle outages and power emergencies.

As best as I can understand, the smart grid will operate by broadband communications, likely using both wired and wireless technologies, to monitor the grid and provide smart metering to the home.  So is the current grid architecture a huge barrier to the building of smart grid technology?  Will the smart grid as envisioned not reach into homes and the meters not transmit information in real time through hard wiring or wireless?

Answers… answers… who has answers?

HEK

“Renewable Electric Power-Too Much of a Good Thing: Looking at ERCOT”

Monday, August 10th, 2009

This article by Mark Lively, published in  the US Association for Energy Economics August issue of Dialogue (http://www.livelyutility.com/documents/USAEE-ERCOT%20Aug%2009.pdf), is a bit technical for me, but you might find it beneficial.  It addresses some pricing issues that may become prevalent as utilities add generation from wind, solar and other renewable sources. I tend to believe that even if you get the pricing correct at the wholesale level, it still becomes distorted when every kilowatt to the final commercial and residential customers is priced the same as every other one, with “rolled-in” pricing that doesn’t reflect the actual cost of generation at a particular time.   This is not an argument for inefficient wholesale pricing though, and the problem may eventually be fixed as we smarten up the grid.

HEK

Dominion Pilot Smart Grid Project in Charlottesville, VA

Monday, July 6th, 2009

According to Dominion:

Charlottesville is the first city in Virginia and one of the first in the nation where homes and businesses will be equipped with “smart meters” that will make the delivery of electricity more efficient and less costly and will lay the groundwork for a “smart grid.”

On June 16, 2009, Dominion Virginia Power executives joined Gov. Timothy M. Kaine and local officials to announce the company is launching an approximately $20 million program – SmartGrid Charlottesville – to install about 46,500 “smart meters” in the city of Charlottesville and Albermarle County by the end of the year (http://www.dom.com/about/conservation/smartgrid-charlottesville.jsp).

My reaction is, “it’s about time,” having seen that there was the technology to provide such metering in the 1970s, albeit at a much less advanced stage than current capabilities.  There are some interesting rate base and pricing issues that I will cover in another post.

HEK

“Getting Real on Wind and Solar”

Monday, May 11th, 2009

This is the title of an op-ed piece, by James Schlesinger and Robert L. Hirsch, which appeared in the Washington Post several weeks ago (http://www.washingtonpost.com/wp-dyn/content/article/2009/04/23/AR2009042303809.html).  I have been pondering their words for several weeks now.  I believe their main points are correct, but their analysis is incomplete. Of course, an op-ed column is not a manuscript or treatise and not all can be said within the word limit.

In describing our demand for electricity, Schlesinger and Hirsch say,  “We expect the lights to go on when we flip a switch, and we do not expect our computers to shut down as nature dictates.”  And since the wind does not always blow, the sun does not always shine and storage is still very inefficient, we will continue to use hydrocarbons.  In their words:

“The United States will need an array of electric power production options to meet its needs in the years ahead. Solar and wind will have their places, as will other renewables. Realistically, however, solar and wind will probably only provide a modest percentage of future U.S. power.  Some serious realism in energy planning is needed, preferably from analysts who are not backing one horse or another.”

It is good to be reminded that we do expect electricity on demand.  But this is not the end of the story.  Some consumption can be shifted to when the wind does blow and the sun does shine.  It can be done through time of day pricing, i.e., peakload pricing.  This is hardly a new concept, but the electric industry has always been reluctant to try it.  We now have better technology to accomplish this goal through the “smart grid.”  Peakload pricing is not Nirvana.  It makes it harder to set rates and may create shifting peaks, which requires further rate analysis and correction.  It may be a cliche, but a journey of one thousand miles still starts with the first step, and the first step has been delayed by at least a half  a century.

Also, leaving the economics aside for a moment, the reason we use coal is that we can stack it up in a big pile (or leave it in railcars) and burn it when we need it.  Natural gas molecules are “stacked up” in a pipeline to be used as necessary.  So we can have our energy when the sun is not shining and the wind is not blowing.

However, there is no technical reason why we cannot pile up a supply of biomass for the same purpose.  Or waste products such as plastic bags.  Here the economics does really matter.  Although some would argue, probably correctly, that the price of our hydrocarbon fuels does not cover the cost of the negative externalities, they are currently cheaper than the biomass and waste alternatives, which also create negative externalities.  These alternative solutions are capable of being transported, stacked up and burned just as is done with coal and natural gas.  Reject them on economic grounds if you must, concern yourself with their negative externalities as you should, but do not exclude them from broader consideration as a potential part of the energy equation.

Nuclear power should be considered also.  In a broader sense it is “stacked up” and used when we need it.  I have seen much written about the spent fuel costs, but almost nothing on the environmental costs of mining uranium, which certainly cannot be zero.

As the authors say, some serious realism is needed.  That requires looking at all aspects of energy planning.

HEK

AES VP on Smart Grid and Discussion of These Issues

Tuesday, May 5th, 2009

I recently  attended the AES annual stockholders’ meeting.  I should duly note that I am a small shareholder and have been for more than a decade.  Nothing I write here will affect my wealth very much, given that I do not own that many shares and AES is not a huge presence in US power markets. Most of its operations are international.

Ned Hall, Executive VP, answered some of my questions on why utilities are not rushing to invest in the smart grid, but are happy to allow the US government to provide funding.  If I misquote or otherwise mangle his responses, he or any AES representative is free to respond.  I have no transcript of the conversation.  I am writing from memory.  I am seeking answers, not either promoting or casting blame on power companies.

His first thought was that with the steady rise in energy prices prior to the sharp drop last fall, utilities were looking for ways to cut costs in order to keep sales from falling, rather than increasing their investments and rate bases.  I can easily understand this concern. People are in business to sell products, not create barriers to sales.

His second claim was that there is no incentive for utilities to become more efficient, because that might also cause them to lose sales and the public utility commissions did not offer ways to compensate for these losses.  I am somewhat skeptical of this answer, especially since many state commissions have offered incentive regulation and demand side management programs for years.  Let me break things down into smart grid functions to get a better grip on the problem.

The first function I would mention is the use of the smart grid to improve path efficiency on the grid, discover outages faster and with greater accuracy,  reroute electricity along the most efficient path and improve system security.  In other words, to increase reliability.  This saves the electric company money in the long run, while not affecting demand.  If anything, it improves sales, because when electricity does not flow to the customer, it cannot be billed.

Another aspect of the smart grid is time-of-day metering.  Half a century ago, Ma Bell and the baby Bells were capable of breaking long distance service into 3 billing periods, with day rates being  higher than evening rates, which were in turn higher than late night rates. The company seemed to be able to do this  noticeable loss of revenue.  Yet the nation’s electric utilities (which were instrumental in the break-up of the phone monopoly when they were allowed to build microwave stations on their own rights-of-way for internal company communications) are not capable of doing this?  Granted that separate meters at every location are not necessary for telecommunications billing as they are for electricity useage billing (is there no feasible way to use the smart grid for billing and eliminate meters on the home or business forever?).  Current meters may need to be replaced at considerable cost.  However, when the telephone monopoly was broken up, new equipment was added to each home and place of business, and this did not bankrupt phone companies.

The third function I would mention is the most problematic for electric companies and I understand why they would want to move slowly or even balk at this use of the smart grid.  That is, there are proposals that homeowners and other users of the system be allowed to add electricity to the grid from their renewable sources such as solar, wind and perhaps co-generation.  Imagine if Walmart were required to accept products from its customers on demand for it to resell, regardless of supply and demand conditions.  Even if the products were made in accordance with specific standards, the coordination problem would be tremendous.  So I would expect and even advise a cautious approach here.

I still believe that much of the problem is simply electric company management inertia.  I believe many were burned seeking to make big bucks on fiber optic cable along their rights-of-way,  but during the era of deregulation, little data were collected on this issue by those willing to make it public.  Mergers and other factors decimated white collar employment. Also, if Uncle Sam is providing free money, why not sit back and wait for it like an orchard pig waiting for an apple to drop?

But which public utility commission is going to allow a rate of return on free money?  That is my concern for the long run health of the industry.

HEK


More Musings on the Smart Grid

Saturday, April 25th, 2009

DrakNet Web Hosting

As is well known amongst those who try to define this area, there is no simple definition of a smart grid, no national standards for operating the grid such as those established for the natural gas pipeline grid, and no consensus as to how the  grid should operate.  Over the years FERC has proceeded one step at a time to tie 48 state fiefdoms together, at least for buying and selling wholesale electricity in interstate commerce.  I do not know the particulars of each rulemaking, but there is extensive documentation on FERC’s website. Legislation has given FERC more power in interstate transmission siting and it seems to be taking a major role in implementing the smart grid, but intrastate matters will continue to stay within the realm of the state public utility commissions.

DOE (http://www.oe.energy.gov/smartgrid.htm) lists the following characteristics of a smart grid:

  • Self-healing from power disturbance events
  • Enabling active participation by consumers in demand response
  • Operating resiliently against physical and cyber attack
  • Providing power quality for 21st century needs
  • Accommodating all generation and storage options
  • Enabling new products, services, and markets
  • Optimizing assets and operating efficiently

This is a rather useful list of functions for examining smart grid policy.  Note that the list refers to end results or what the smart grid should accomplish, not which technology makes up the grid.  Since it is focused on provision of electric service, it does not mention potential sales of broadband over powerline to wholesale and retail customers as a means to offset some of the costs.   This is a byproduct of certain smart grid technologies.

I will return to this list from time to time when discussing smart grid policy.

HEK

Smart Grid Financing

Sunday, February 22nd, 2009

I have been asking people why the utility industry is seeking government funds to implement a smart grid instead of using traditional utility financing.  Below are my thoughts and questions.  Anyone who reads this may feel free to jump right in with their opinion.

Everybody seems to be talking about smart grids this year. Much of the capability was there when I was in grad school, especially time-of-day/peak load pricing, although the technology to do such things is much more advanced these days. There is much talk about government funding and how the government absolutely MUST fund this upgrade to the power grid (not to mention that there is $11 billion or more in the stimulus package to fund the smart grid, but I have not really dug into this yet). Two things I do not really understand and I cannot seem to find any information on so far:

1) Why do the power companies not use traditional utility financing? After all, this is an addition to rate base if they do. I know capital markets are in terrible shape right now, but I believe using public money was the game plan even before the current difficulties.  Is there an argument that the smart grid is a public good, because benefits to ratepayers in other states cannot be captured by the investing electric company?  What are the
other arguments?

2) How will FERC/PUC’s treat public funding? I don’t think FERC has rate incentives for efficiency or DSM, but the PUC’s generally do. What if government money improves efficiency? Will any of this smart stuff impact supply competition?

There’s lots and lots of articles and even local presentations about the “oh wow!” aspects of the smart grid. But so far, nobody can tell me the regulatory and pricing implications other than the assumed advanced peakload pricing capability.  This has been rejected by most electric retail sellers for decades, even though the technology has been there in simpler form than the “smart grid.”

In response to a hypothesis that regulators and utilities
might be reluctant to invest in something with a fast moving technology that could be obsolete sooner than they might wish, I replied:

“These guys had microwave along the grid in 1967, when I had a summer job with Georgia Power. They loaded their rights-of-way with fiber optic prior to Enron.  I did a little research on this back around 2000-2001 (National Academy of Sciences white paper) and figured many utilities thought they were going to make unregulated profits and wound up with unregulated losses instead after Enron’s broadband market proved to be a fraud.

However,  “lighting up the grid” is rather simple, and there is a
potential broadband over powerline market. Everybody, including the power companies, buys laptops even if they might be obsolete next year. They keep obsolete meters forever now. Why would it bother them to get brand new soon-to-be obsolete meters if it is an addition to rate base?   Decades ago the telcos were able to put in new metering to separate the lines such that the customers were given control over inside wiring.

It’s not like they have to lease right-of-way, build new transmission lines or do any of that really expensive stuff to create a smart grid.  In fact, Dominion just won a court battle to do some heavy duty investment in new transmission and they will use traditional financing.  It makes no sense to me at all from an investment standpoint.  Is it that there is just no profit to be had in a smart grid investment, since it reduces the need
for new generation/transmission?”

I was kicking this around a bit further today and found an article titled,  “Electric Stimulus Crunch? Generating Utilities May See 10% Revenue Declines” by Nick Gogerty (http://seekingalpha.com/article/115196-electric-stimulus-crunch-generating-utilities-may-see-10-revenue-declines).”  Is this part of the reason why the industry does not wish to pay for the smart grid itself?

More to come as I find answers.

HEK