Navigant Research Blog

Transformative Winds Moving Electric Utility Industry in New Directions

— February 13, 2017

AnalyticsThere is a new wind of transformation blowing through the North American electric utility industry, and this change was palpable during the recent DistribuTECH conference in San Diego.

Evidence of a transformation came during numerous conversations I had with technology vendors and utility representatives at the conference. There has been similar talk of change at past D-Tech events, but this year the words have action and momentum behind them. Granted, the transformation taking place now remains at a relatively early stage in certain domains—microgrids and energy storage, for instance. Furthermore, some of the shifts currently taking place might still be struggling to gain traction 10 years from now. But as whole, changes in the industry are tangible and are moving beyond theoretical talk and pilots.

Among the innovations on display at D-Tech:

  • Microgrids: Schneider Electric and Duke Energy jointly announced the deployment of two advanced microgrids in Montgomery County, Maryland. The two systems will provide service to the county’s public safety headquarters and its jail. The goal is to ensure these facilities have more reliable and efficient power and to improve resiliency in the event of major storms or natural disasters. Perhaps the most unique aspect of this project is its microgrid as a service (MaaS) financing model. This arrangement eliminates many of the upfront costs to the county, making the microgrids more affordable to the municipal entity.
  • Customer-centric grid: Utilities are starting to more fully embrace the concept of customer-centricity. Oracle unveiled its new Network Management System version 2.3, which enables a utility to aggregate data from distributed energy resources (DER) like solar PV, EVs, customer-sited storage systems, and connected home devices. Oracle is not alone in providing tools for a deeper view of these customer energy resources, but the announcement does point to the demand the software vendor is seeing from utilities that recognize the shift taking place and the need to comprehensively manage the two-way data flow from grid-tied customer assets.
  • Demand-side solutions: Companies like Powerley and Tesla used the conference to demonstrate their solutions for enabling utility customers to better control their use of energy. Tesla, for instance, did not showcase its famous EVs, but rather its new Powerwall 2 residential battery system. The Powerwall 2 has 14 kWh of capacity, a significant increase from previous versions, and can enable a four-bedroom home to power lights, plugs, and a refrigerator for a whole day. Powerley’s solution helps utilities integrate the smart grid with smart home technologies, thus enabling residential customers to be more efficient energy users and save money.

Part of the transformation on display at D-Tech is being driven by regulators, which see the new technologies as helpful to a more efficient use of energy. But many of the new technologies on their own are driving the change, having been tested and proven to help solve utility business issues and demonstrate a positive ROI, either in real dollars or in softer benefits (such as increased customer satisfaction scores and greater engagement).

We at Navigant have seen this transformation coming for several years, as noted in our Energy Cloud report. Now those forces of change are closer to reality and catching some new air. The coming years should continue to move the industry forward, though some turbulence is to be expected.

 

Alexa Steals the Show at CES 2017

— January 16, 2017

CodeVoice activation took center stage at CES 2017, with Amazon and Alexa as the leading stars. I spent several days at the annual geek fest, and the device kept coming up in multiple conversations with industry players.

Alexa, formally called the Amazon Echo, is not new. The $180 device was first available exclusively to Amazon Prime members in November 2014. Since then, the device (along with its smaller clone, the Dot) and its cloud-based data service have been made available to anyone, steadily gaining a solid foothold in the smart home-Internet of Things (IoT) market. It has become a surprise hit, and vendors across the spectrum now clamor to include Alexa functionality in their devices. Companies like LG, Whirlpool, Samsung, Mattel, Lenovo, GE, and Ford have (or will soon have) products with Alexa voice technology.

From an energy standpoint, Alexa has already made inroads with smart thermostat makers to work directly with their products. For some months now, Alexa has enabled users to simply say a command, and a Wi-Fi-connected thermostat will alter the temperature to a new setting on a Nest, ecobee3, Honeywell Lyric, or Sensi product.

Waiting in the Wings

Even though Amazon’s Alexa is the clear leader of the voice activation trend, Alphabet’s Google Home device was waiting in the wings at CES to carve out its share of the market. The Home device has only been available to consumers since its launch in November 2016, but a number of vendors I spoke with already have products that can work with Home or are planning to add Home integration to their products in the near future.

While Amazon and now Alphabet are competing head-to-head for voice activation in the home, conspicuously absent in the space at CES were Apple and Microsoft—though that could soon change if rumors about Apple are true. Rumblings out of Cupertino indicate Apple is developing its own competitor to Alexa. Microsoft has its own voice-activated assistant engine called Cortana, but it is still unclear what the software giant’s strategy is in this part of the market and whether it wants to join a competitive hardware-cloud battle where it would likely start out as the number four player.

Other Connected Things: Mostly Incremental Gains

I saw mostly incremental advancements for smart thermostats, smart appliances, and numerous connected-smart lighting products on the show floor, which is not meant as a criticism. As manufacturers hone their skills, I would expect to see steady energy efficiency gains among these products as more sensors and data analytics combine to improve energy consumption. This kind of effort is difficult to achieve and takes time to develop.

Nonetheless, there was one notable product in terms of energy efficiency called LaDouche from French startup Solable. LaDouche is a residential water heater, and it was named as a CES 2017 Innovation Awards honoree for its heat exchange capability, which ostensibly can lower an electric hot-water bill by up to 80%. That is impressive (if it can be verified).

Voice Technology as Transformative

The 2017 CES was a showcase for voice technology as a transformative trend, and one that Navigant Research has pointed out as a key new input for the IoT and computing in general. This was CES’ 50th anniversary event, and the show remains one of the few places where transformative technology gets a megaphone and where one gets a glimpse of what potentially lies ahead in coming years—maybe even in the next 50. Flying cars—are you with me?

 

US Government Struggles with IoT Vision, but Opportunity Exists to Get It Right

— December 21, 2016

CodeThe US government needs to up its Internet of Things (IoT) game, according to a new report that calls efforts so far uncoordinated and lacking a strategic vision. I tend to agree. The report, produced by the Center for Data Innovation, does, however, credit the government for having initiated an array of activities in support of IoT action in the private sector.

Report authors Daniel Castro and Joshua New note the many potential benefits of IoT technology across a variety of economic sectors, such as manufacturing, agriculture, transportation, and healthcare. Noticeably absent, however, is energy (which could be a mere oversight). Nonetheless, the authors characterize current government IoT projects as relatively small scale and one-off.

The report joins a growing number of voices opining about what should be done by government in the wake of the October 2016 Mirai botnet attack. A letter from Senator Mark Warner (D-Va.) to outgoing Federal Communications Commission Chairman Tom Wheeler raised legitimate concerns surrounding wirelessly connected consumer devices. (Warner is a cofounder of the Senate Cybersecurity Caucus.) Wheeler’s response points out the need for postponing next steps until the Trump administration is in place.

Security experts like Bruce Schneier have also told Congress of the imminent need for oversight of the IoT because of the potential for serious dangers if left unchecked. Schneier said the recent botnet attack illustrated the catastrophic risks involved, and he has urged action now while there is time to make smart decisions.

Blockchain to the Rescue?        

Others are suggesting Trump and his advisors consider blockchain technology. The idea would be to leverage the consensus mechanism inherent to blockchain that enables all of the computers in a system to agree on which new data is valid and which is a threat. My colleague Stuart Ravens explored the blockchain concept for distributed energy in a recent report, and the technology could be useful for multiple industries.

While there is ample evidence to be concerned about the federal government’s role in regard to the IoT, officials are at least struggling with the issues and are not clueless to its significance at this point. They see the economic value of IoT technologies and the opportunity to get it right with regulations, especially with a new team in place come January. There is reason to believe the IoT will get the attention it deserves in the coming years, or they could blow it. But at least they are on notice to seize the chance to provide a framework for success, from both a security and an economic perspective.

 

Congress Steps into the IoT Security Fray

— December 15, 2016

Cyber SecurityCongress stepped into the fray surrounding Internet of Things (IoT) device security (or the lack thereof) recently when it held a hearing on how to combat distributed denial-of-service (DoS) attacks, which exploit connected devices as a means of thwarting web activity. The most glaring example of such an attack came on October 21. An IoT botnet called Mirai was directed at web services provider Dyn, which then spread from there to paralyze numerous well-known Internet sites like Amazon, Netflix, and Reddit.

Members of the House Energy and Commerce Committee heard testimony from experts like Bruce Schneier, a renowned cybersecurity expert, who said during the hearing he thinks a new federal agency may be necessary to regulate IoT, despite what may be the incoming administration’s reluctance toward more government oversight. “I don’t see the choice as being between government involvement and no government involvement, but between smart government involvement and stupid government involvement. I would rather think about it now,” Schneier said.

Slow Down, Offer Support

Another participant in the process, Craig Spiezle, executive director and president of the Online Trust Alliance (OTA), attended the hearing and submitted a written statement to the committee. Spiezle sees two main issues that need resolving. First, IoT manufacturers should embrace basic cybersecurity principles when designing new products and avoid the tendency to move too quickly to launch products out of expediency while sacrificing security. Second, IoT vendors need to provide adequate ongoing support for their products throughout their lifecycles and not security updates out of the equation. His organization is also recommending that retailers pull IoT products off shelves if those products do not meet certain minimum security standards.

Nothing was resolved during the hearing, though new legislation or rules are likely to be promulgated at some point, given the potential harm from these kind of attacks. Meantime, there are other governmental and industry efforts to thwart attacks that exploit IoT technologies. For instance, the National Institute of Standards and Technology (NIST) has created a framework that outlines IoT security standards. Also, the Z-Wave Alliance recently announced new security requirements for all of its certified IoT devices. Lastly, computer scientists are working on a style of software programming called formal verification that is ostensibly hack-proof and could one day be used as a method for enhancing the security of IoT devices and systems.

There are real efforts underway to fight back against IoT attacks. Nonetheless, the vulnerabilities of a connected society are not going away soon, and efforts to stay ahead of nefarious actors has to be ongoing. What seems clear is that business as usual in this regard is no longer acceptable, as Spiezle and others argue, and fundamental changes are required in how IoT products are developed, sold, and supported. I could not agree more.

 

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