Navigant Research Blog

Power Sector Buzzes with Jargon

— October 2, 2014

As a utilities analyst, I encounter a number of buzzwords –  terms that seek to broadly and catchily define the multivariate technologies and approaches that have been developed to modernize the electric grid.  The most common are “smart grid,” “grid 2.0,” and “utility 2.0.”  In this post, I’d like to assist myself, and any interested reader, in better understanding these terms and how they differ.

Supposedly, the term smart grid was coined in 2003 by Andres Carvallo, then the CIO of Austin Energy, to explain the Electric Power Research Institute’s (EPRI’s) Intelligrid – an electric grid that was monitored and managed remotely and incorporated data analytics into processes.  The term didn’t really stick until 2009, when the U.S. Department of Energy (DOE) awarded 99 American utilities a total of $3.4 billion dollars as part of the American Recovery and Reinvestment Act of 2009 (ARRA)-funded Smart Grid Investment Grant.

So what does smart grid mean?  According to the DOE,  it means “computer based remote control and automation … made possible by 2-way communication technology and computer processing.”  Let’s just call it the foundational definition for all of the technological innovation that exists to modernize the electric grid.

One for the Shredder

As for the second, newer term, grid 2.0, it turns out that this buzzword didn’t really pick up that much, and as far as I could ascertain, it’s used synonymously with smart grid.  So we can just throw that one out right now and stop confusing people.

Utility 2.0, on the other hand, is an important conceptual extension from smart grid.  I’m pretty certain I first saw this word last year in reference to microgrids, in a Public Utilities Fortnightly article that explained how different technologies can enable grid resiliency and lessen the impacts of outages.  The term has also been used to describe the concept of utilities revising their decades-old business plans to take advantage of increased renewables generation, distributed energy penetration, advanced demand-side management, and customer engagement.  Last spring, the state of New York introduced its Utility 2.0 plan, which seeks to introduce regulatory incentives for utilities to fundamentally upgrade their business models, operations, and infrastructure.

Ignoring Complexity

The problem with the term utility 2.0 is that, in most cases, it’s used only in reference to how utilities do business, not to the technological and infrastructure considerations that enable this business.  In that sense, it indicates that utilities and regulators and customers are all going to work together, take some financial hits, and pay for and install a smart grid, and it’s all going to be great.  That simple definition ignores the most difficult parts of the process.

We’ve moved past the simple understanding of the smart grid.  We need to better understand the complexity of enabling different systems within the electric grid to function as a cohesive architecture.  This will be a different process for each utility because each system is uniquely configured to adapt to different constraints, and because there are so many different types of offerings out there that are targeted at similar issues.

So, to me, the term utility 2.0 is not just about reshaping business practices and integrating new technologies, such as distributed generation and demand response; it’s the systematic integration of diverse systems that allow for each utility to realize its own transformative goals.  This concept, also called interoperability, might be the single most enabling aspect of updating our electric infrastructure.

 

Bill Gates: How to Fund Energy Miracles

— August 21, 2014

Through the Gates Foundation, Bill Gates has taken a stand on improving global public health, investing in programs focused on basic advances such as developing a next-generation condom to prevent the spread of sexually transmitted diseases, creating a standalone vaccine cooler for communities that are stranded without electricity, and inventing a toilet that can solve sanitation issues by pyrolizing human refuse into something more usable (using solar power, no less).  Meanwhile, Gates is also challenging U.S. energy policymakers and their funding practices for energy R&D.

In a June blog post titled “We Need Energy Miracles,” Gates called for the United States to look hard at R&D allocations, potentially redirecting funding from the military and healthcare sectors toward energy research and pilot projects (presumably renewable ones).  Given the imperfections (intermittency, inefficiency) of existing renewable resources, Gates argued, this research is necessary to establish an equitable energy mix, both in the United States and abroad – especially in developing nations that must increase energy use to grow their economies.  He stressed the need to invest in projects that are “high risk/high reward” in order to achieve the sort of miracle needed to support growing demand and limit climate change.

Memo to Bill: DIY

Responding to Gates, Solar Wakeup (republished by Clean Technica) noted that Gates has been active in investing in energy storage with Aquion and LightSail but challenged him to be the major financer of the next energy miracle.  Why?  Simply put, it’s unreasonable to expect increased investments (private and public) in risk-agnostic energy R&D, and if one of the world’s richest men wants it to get done, he should do it himself.  Payoffs are slow for energy projects, the uncertainties many: macroeconomic conditions, volatile energy and resource markets, policy reversals, infrastructure needs, and high operating and maintenance costs.  Solar Wakeup’s challenge is based in reality.

But the cleantech and renewable energy sectors are already substantial in countries all over the world, and growth is accelerating.  China has recognized this.  In recent years, China’s public and private investments in cleantech, both at home and abroad, have explodedReports by Azure International explore the drivers for increasing investment in cleantech in China.  Risk is inherent in investors’ strategies for expanding their energy-related portfolios, and intangible values, such as technological and innovative prestige, sometimes compete with return on investment (ROI).  Encouraged by the government, Chinese investors have become increasingly willing to fund energy efficiency and conservation projects such as smart grids and smart buildings.

The topic of investment in renewables and smart grids is thorny, with many caveats and nuances that tend to shape the potential for ROI – but it’s safe to say that with China’s example, maybe Gates has a point in his stance against being risk-averse toward investing in potential energy miracles.

 

With Thread, Nest Targets Wireless Energy Devices

— July 29, 2014

It’s been a busy year for Palo Alto, California-based Nest.  In January, the firm was acquired by Google.  Last month, Nest announced that it would acquire Dropcam, which offers a Wi-Fi-enabled portable camera that pairs with a cloud-based video monitoring service.  Days later, the company launched the Nest Developer Program, enrolling early partners Mercedes-Benz, LIFX, Whirlpool, and Jawbone.

More recently, Nest introduced Thread, a personal area network (PAN) specification for device interconnectivity.  This specification will be regulated by the Thread Group, of which Chris Boross of Nest will be president.  Competing with other wireless specifications such as ZigBee, Wi-Fi, and Bluetooth Smart, Thread is a low-power mesh-based solution that follows the IEEE 802.15.4 and IPv6 standards.

Much of the coverage (see here and here) of the Nest/Thread announcement has asked whether we really need another standard for networking in-home devices.  Thread, though, has some advantages over Wi-Fi and Bluetooth.  Wi-Fi uses a lot of power, which makes it impractical for low-power battery-operated devices such as thermostats or smoke alarms.  Bluetooth Smart is already installed in most smartphones and is low power, but its range is limited.  ZigBee has encountered problems with vendors making proprietary adjustments to the specification, making it impossible or very difficult for devices to interoperate.

Looking for Options

The burgeoning number of entrants in the networking protocol space signals increased competition and perceived high value to be found in the market for connected devices.  For retail consumers, this means better products at lower prices that are easier to integrate into their connected life schema.

Unfortunately, for utilities looking to integrate energy-saving devices such as smart thermostats and lighting controls into their energy efficiency and demand response programs, multiple network protocol alliances present problems.  In order to implement these programs, utilities are subject to numerous technology restrictions and standards from state public utilities commissions or regional independent system operators.  OpenADR and ZigBee Smart Energy Profile are among these standards, and the further that protocol competition pushes the retail device market away from these, the narrower the options will be for utilities.

Sacramento Municipal Utility District (SMUD) has engaged in extensive research on different models of smart thermostats, hoping to identify those that are easy to use and will yield a stronger customer experience (as well as meet energy efficiency and curtailment goals).  However, any model that the utility looks at is subject to a number of technical requirements.  Since these are set by regulating bodies, it’s unlikely that requirements will remain in stride with developments driven in the commercial market.  As it is, the economics of utility deployments are not always favorable to vendors, particularly in programs where more than one thermostat option is offered and sales volumes are uncertain.  It remains to be seen whether vendors will offer devices and platforms that can be used by the organizations that will require them to meet energy efficiency directives and load curtailment needs.

 

With Developer Program, Nest Raises Questions

— June 30, 2014

This week Nest Labs introduced its Nest Developer Program, which integrates smart devices for both home and lifestyle uses.  The results suggest that energy efficiency is going mainstream without most people even knowing it.  This program, which has already enrolled partners such as Mercedes-Benz, Whirlpool, Jawbone (UP24 maker), LIFX, and Logitech, allows communications between smart devices in order to influence and optimize their overall functionality.  For example, the Nest thermostat could receive better information on a homeowner’s sleep/wake cycle, whereabouts, and habits from data transmitted through the UP24 bracelet.  It can then incorporate this information into its intelligent algorithm for determining household heating and cooling patterns.

But that’s only a small part of it.  Nest has already taken a stab at utility-scale demand response (DR) through its Rush Hour Rewards program for climate control, but the program can now enroll other energy-heavy appliances, such as washers and dryers, in the same DR events.  Following device trends in electric vehicle charging, where smart communications are increasingly integrated and relied upon, it’s fair to speculate that this type of developer program has the potential to solve a lot of the problems utilities are currently facing as growing renewables penetration causes instability along the distribution grid.

Privacy Pushback

The potential to optimize energy usage will grow significantly as cloud-based home energy management advances technologically and adds functionality.  But the market is likely to experience setbacks as privacy issues are raised.  Nest and Apple have both created privacy guidelines for data as it is communicated between devices, but protection and control over this information will still be an issue for customers.  As public utilities incorporate software platforms for managing connected devices, it’s unlikely they will be able to avoid the type of pushback (seen here, here, and here) that has hindered the deployment of smart meters.

Another question inherent in this move to a connected life is how the interaction between devices and software will take shape.  Nest and its associated partners have built value propositions off the premium quality of their networked thermostats and the software that controls them.  But competitors like EcoFactor and EnergyHub build value off the ability be flexible in the devices they connect to – asking if premium devices are really all that necessary to realize the same gains.  When you involve multiple customer demographics (with different levels of income and values) and budget-conscious public organizations, different needs and limitations will require different solutions.  There’s no denying that people become emotionally connected to well-made, well-designed hardware – and they will pay a premium for it.  But, as the cellphone industry has shown, there are limitations in terms of hardware development.  So how long will the novelty last for thermostats?

 

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