Special Report: 9.24.2009

Posted by TED Magazine on Wednesday, September 23, 2009

DAY 3 @ GRIDWEEK:  DECOUPLING

What's going to happen to power companies?

By Joe Salimando 

One of the key words mentioned frequently at GridWeek  is decoupling (See the 9-22 blog here  and the 9-23 update here). 

Folks are using this word as an "inside baseball" term. People in the utility business know what it means. Now you'll know, too.

Here's the key: Up until this very day, and including tomorrow, too, electric utilities make business by selling more. They sell X electrons (or X kWh) = some group of customers pay Y. If they sell X + 3, they get paid Y + something. "Plus something" is what we in a capitalist economy live for; it's the key to increasing GDP. What's more, in the history of electricity in America (see: Edison, Thomas Alva), the key to utility company success has been selling more and more kWh.

But, it is widely thought, this is going to have to end. Utilities will have to make money despite the fact that power use in their service area may remain static (or, even, decline slightly over time). Customers will become more efficient, it is thought. Customers will be charged based on different rate structures, and thus be motivated to reduce energy consumption at peak times, it is thought

This is DECOUPLING. Utilities will become less attached -- over some unspecified time period -- to the need to sell more and more electrons. Or, at the very least, local regulatory bodies (where utilities are still regulated) will make it unattractive for utilities to stay only in the business of selling more and more kWh.

So how, precisely, will utilities make money in the future? How will they post increasing earnings, quarter after quarter, year after year? The idea behind decoupling is that utilities will find new ways to make money from helping customers make better use of electricity. They will, in other words, get into the "energy service" business.

Are you skeptical? You're not alone. "How many utilities are going to be incented to reduce demand for their products?" one speaker asked, at Wednesday's plenary session.

You might have another question: What does THIS have to do with The Smart Grid? Quite simply, TSG could be the vehicle -- although probably not standing alone -- through which customers (even residential users) get "services" from their local utility.

WHAT WILL THE WASHER SAY TO THE FRIDGE?

Yes, they're going to converse.

Here -- based on what I've heard here at GridWeek from several speakers -- is a scenario that integrates you (as a homeowner/electricity user), smart appliances, a home energy network, and TSG.

1. Let's assume your utility has introduced Time Of Use rates for residential customers. It costs a lot more to use electricity during a summer day's peak (a hot afternoon) than it does in the middle of the night.
2. The utility's Smart Grid connection into your house is communicating the actual rates, instantaneously and constantly, to your house.
3. You have a smart refrigerator. It "listens" to signals from TSG. Perhaps you have specified to the fridge what an acceptable electricity rate is for you. In other words: You don't want the fridge consuming more electricity when the prices exceed 15 cents/kWh.
4. Today is Thursday. It's hot. Air conditioning use is thru the roof around the area. Yet you and your family are NOT home (something the utility can tell -- and perhaps your home energy network can tell -- by your energy use patterns).
5. Your fridge senses the need to make ice cubes.
6. If the fridge makes ice cubes now, electricity consumption WILL go up.
7. Via TSG, your fridge finds out it's going to cost 45 cents per additional kWh to make ice cubes at this time, but it will cost 12 cents to do that at 3 in the morning.
8. So your fridge DELAYS MAKING ICE CUBES . . . until 3 a.m.

Let's take this four steps further:

1. For some reason, you've come home at 2:50 a.m. and decided to run the washing machine. Crazy you!
2. A display on the washer tells you that the electricity rate at this moment is acceptable, under the parameters you previously specified. The machine gets to work.
3. BUT the washer also sends a signal to the fridge: "I'm working now. This might be a bad time to add electricity consumption and make ice."
4. Based on your pre-specified electricity maximums and what TSG is telling your fridge about the cost of adding consumption in the next half-hour, the fridge reschedules itself. Now, it has "decided" to make ice at 4:30 a.m.

Is there a way for electrical distributors -- and/or their customers -- to get in on this? I believe so. For years, there was a running joke that I had once heard from Brooke Stauffer ( NECA's code and technical expert, now deceased): "Home automation is the technology of the future, and it always will be." It was a running joke because the first time he ran a phrase like that by me, Brooke had said it perfectly. The next 15 times, he couldn't precisely repeat the phrase (I'm pretty sure I don't have it right, and I never did). We'd sit around trying to recreate his quote, which had -- that once -- been perfect. We laughed about it!  

But at this particular moment, I'm thinking it's possible that the future may finally be here. There's something for a home energy network (or home automation network) to do! And it's something that will deliver real value.

ANOTHER OPPORTUNITY, MAYBE, UNDER DEVELOPMENT

Will The Smart Grid be more fragile than the one we have now?

I've not tuned in to all of the talk (and there's a lot of it) about cybersecurity and TSG. The reason is that I don't see a way for electrical contractors to install it, and for distributors to sell it. But I've managed to listen to people talk about this issue anyway (when GridWeek gets into TSG, it really gets in deep!).

Here's my opinion which, I think, is backed up by the facts:

1. You can't do TSG without a heck of a lot more communication on the grid. Individual transformers will have sensors. Relays will be digital. There will be more phasors and sensors all over the place. They'll all be communicating, two ways.
2. And they'll be addressable.
3. Speaking at the Wednesday plenary, an IBM executive and ABB's chief reminded the audience that we'd have to take on more risk to do this and that it wouldn't be practical (or affordable) to eliminate all of the risk.
4. Therefore, my conclusion is -- in the future, as individual utilities go more and more in the direction of TSG, the grid is going to be more and more hackable.

Will hackers cause significant local grid downtime? Will they cause disruptions for local utilities? I don't know. I don't understand people who send me spam, create viruses to infiltrate computer networks, and so forth. I haven't tried. If there are people out there creating viruses to send to computers of millions of perfect strangers -- really turned on, somehow, by the prospect of making folks miserable -- won't there be hackers who will get really excited by turning the electricity off in, say, Boise?

My thinking is that there will be. It will take precisely two of these events to build an enormous market for back-up generators for those distributors who sell them. I don't know how many years away these hacker-grid disruptions might be, but I'm not sure how they can be prevented.

ARE THE DOGS REJECTING THE DOG FOOD?

About Xcel's Smart Grid City in Boulder

One of eight experts on the plenary panel was Dick Kelly of Xcel, a utility. This company decided to try out a Smart Grid in Boulder, Colo.., which is small enough -- and forwarding-thinking enough, apparently -- to be a good place to give the ideal a trial. Kelly described some of what's happened so far (very early in the game). There have been success stories.

But then his remarks, which were brief (there were seven other people who had to talk!) took a left turn. It turns out that TSG experience with customers in Boulder hasn't been what Xcel might have expected. Customers "are simply not interested," Kelly said. He claimed to have received a letter along the lines of (and I swear he said this): "All I really want when I get home is for the TV to work and the beer to be cold."

Not everything the guy said about his customers was as interesting as that. But Kelly made it clear that:

• The customers don't want the utility in their house.
• The customers don't want the utility to help them.
• Xcel didn't expect this and, it seemed, doesn't really know what to do about it.

The discussion shifted. The IBM exec noted that it is "the industry's" job to figure out "who is the customer going to trust?"

Bob Gilligan of GE T&D noted that a mind shift of sorts might be necessary for both the utilities and the customers. The shift will involve rethinking things along the lines of the Decoupling section above, if Gilligan is right: "We have sold kilowatt hours. But now we will sell services."

WHO'S ON WHICH SIDE OF THE METER?

Utilities aren't going to limit themselves (maybe)

It was at GridWeek a few years ago that I first heard a utility executive (Jeff Sterba from PNM -- of New Mexico) say into a microphone that utilities might have to think about going into houses (to the other side of the meter) to do their jobs of getting customers to use energy more intelligently.

Now, here we are, in 2009, and Xcel is finding out that customers don't want the company there. And an IBM executive who specializes in the electrical utility biz is saying "who will they trust?"

In listening and thinking about this later yesterday, I got to thinking about Lightfair. I sat in a session there (May 09 in NYC) in which Willard Warren, a lighting expert, noted that 105 million T-12 replacement bulbs were sold into the market in 2008. I couldn't believe it, but I checked later, and his info is correct.

Warren was a bit frustrated; why would customers fling money out the window, when the payback on replacing T-12s with T-8s was so outstanding? He didn't precisely say this, but my thinking after he said the words was -- gee, if we in the electrical industry can't sell these people on this simple retrofit, how are we ever going to get to the more sophisticated stuff?

No one should be overjoyed that the Kelly of Xcel ran into the same brick wall -- so to speak, sorta-kinda -- as did Warren in his Lightfiar presentation.

One thing that is clear from listening to speakers at GridWeek is that these dedicated experts, vendors, utilities, consultants -- all of them -- expect power user buy-in to TSG. This goes for commercial and industrial users, of course, but also for plain old homeowners and apartment building residents.

But it isn't going to be that easy. As one speaker pointed out (I can't find it in my notes, so I can't give you the "who" here) -- average folks, perhaps including those in the commercial/industrial world, don't spend a moment thinking about electricity. They don't have a relationship with their utility company. Every month, they get a bill and, as the speaker said -- they look at two numbers on the bill, the amount due, and the date due. That's it.

Folks are in love with what electricity ALLOWS THEM TO DO -- everything from scrolling through e-mails on their crackberries to blow-drying their hair, to putting up an invisible fence in the yard for the dog.

Along these lines, the IBM exec presented, in brief (he had the same five minutes as the other seven speakers at the plenary), results from a survey of 5,000 electricity consumers around the globe. One fact that stuck out: 90% of the respondents said they would not pay 5% more for "green" electricity. People may say they are green, but when you threaten to increase the $ figure on that monthly bill from the strangers at the power company -- even conceptually, in a survey -- they balk.

It's going to take a lot more work. For what it's worth, I don't think "educating the consumer" is going to work -- although that's been bandied about by various speakers here.

My opinion is stupidly simple (and simply stupid), and thus will probably never happen. But here it is:

We need to greatly increase the price of electricity to get the attention of that guy who just wants his beer cold and his TV to work. Short of something on the order of $1.00 per kWh (vs. the national average of about a dime today) . . . it's likely to remain very much like bashing watermelons into brick walls -- on TSG, in terms of turning green talk into action, and maybe even on the T-12 replacement front, too.