Customer push back on smart meters in regions of the country such as California, Colorado and Texas will likely be a short-term phenomenon. Unless utilities don’t learn from their mistakes and start thinking more about how smart meter technology can serve their customers, and not just themselves.

In the San Francisco Bay Area, several communities – the most recent being Fairfax in Marin County – have successfully stopped Pacific Gas & Electric (PG&E) from installing smart meters pending further evaluations about accuracy, security and public health.

Some market participants estimated that roll-outs of “virtual power plants” based on demand response (DR) programs could likely be delayed by one year until these consumer resistance issues are worked out. Without smart meters, one cannot build a VPP, whether tapping generation or DR resources.

The majority of consumer opposition to smart meters is based on complaints of higher electricity prices. A social concern is “Big Brother” monitoring individual customer’s energy use patterns and habits – and even controlling devices in one’s own home. A “wild card” issue stems from emerging science. Just as cell phone technology and other wireless devices are coming under attack from public health advocates worried about links to cancer from exposure to electromagnetic fields (EMF) and radio frequencies (RF), these potential health risks may also pop up with any business model dependent upon wireless communications, including smart grids.

DC-based electric systems are less susceptible to these issues, so DC-based microgrids may have an advantage over VPPs in this regard. Any VPP or microgrid dependent upon wireless signals may fall prey to this criticism. Inverters used to convert solar and wind from DC to AC may also suspect.

There are filters to address these concerns about this kind of “dirty electricity,” and the military has been relying upon these filters for years. Forward-looking component manufacturers selling into the smart grid market could incorporate these filters at a price premium. Another approach, which is being deployed in Japan and much of Europe, is relying on fiber optic networks instead of wireless signals. Google has reportedly purchased large swaths of “dark fiber” – unused fiber optic networks – and could ultimately become a purveyor of ultra-premium smart grid technology, infrastructure for VPPs that would then be immune from the perceived health threats possible with the current explosion of EMF and RF permeating society.

Yet another advantage of fiber optics is this: the potential security threats associated with a large-scale reliance upon wireless networks, an issue currently being examined by state regulators in Colorado and California.

In the long run, the push to empower consumers with more real-time information so they can reduce electricity consumption when prices are high is inevitable, and a logical evolution of technology trends.

Still unanswered is consumer acceptance of the idea of taking more responsibility for on-site energy management. A few VPP advocates offer a contrary view. The current consumer push back is good for this market since utilities will not be able to get away with saying they installed the smart meters, and they are now done. “We need to hold the feet of the utilities to the fire, to really open up the market and create a level playing field and leverage the current CDE base to provide a variety of grid services,” said one representative from one leading developer of VPPs.

I’ve just returned from co-chairing the “Electricity Innovation Smart Grid Conference” in Seoul, Korea. This conference gathered very diverse speakers and topics, representing deployments across a good percentage of the planet, including Korea, USA, The Netherlands, Japan, Australia, Italy, India, UAE, and the Philippines. Despite missing the African and Latin American continents, and a perspective from China, the conference afforded an opportunity to compare notes on the motivations, expectations, and status of smart grid developments around the world.

This thing we call the “smart grid” is happening everywhere, at least to some extent. While fundamental motivations may differ, the concept of applying modern computing and communications to the electrical grid is universal. In North America, we’re motivated to improve reliability and efficiency, especially as we ponder adding more renewable generation to the grid. Europe is similar, perhaps sharpened by clearer conservation and carbon reduction targets. Japan, with the 2nd most reliable grid (just behind Korea, and six times better than the US), was thinking they didn’t really need a smarter grid – until they considered the flood of PHEVs planned by the all-important auto industry.

In other areas, the motivations might appear more basic, but are perhaps more urgent. Both Middle Eastern countries and India are wrestling with matching tremendous demand growth with generation and transmission capacity. While India has made good progress in reducing non-technical commercial losses (i.e. delivered power that is never paid for, which was over 50% in some regions), smart metering promises to help reduce a still unacceptable gap. Similarly, smart metering will help Middle Eastern countries provide more accurate and timely billing. This will help avoiding the high cost, both financial and physical, of manual meter reading in the heat of the summer.

Despite these different motivations, there were striking similarities. Most are considering the very same technologies (smart metering, renewable generation, distribution and substation automation, etc.) to address their different goals. But perhaps most interestingly, many spoke about the importance of the everyday consumer within the smart grid equation. Goals will not be met unless the consumer is adequately served, informed, and motivated to use electrical energy wisely.

One final observation is that whatever the goals are within a specific region, they are extremely important to the broader society. Whether the “smart grid” project was the ambitious Beach Cities Microgrid at San Diego Gas and Electric presented by co-chair Steve Pullins from Horizon Energy, or a simple microgrid that delivers independent power generation and management for a currently unserved remote rural village, the results will be critically important.

And this is true motivation for those privileged enough to be building the smart grid!

The new energy bill introduced by Senator Harry Reid on July 27 has the potential to boost demand for natural gas vehicles (NGVs) thanks to generous purchase tax incentives. The current vehicle purchase incentives have recently been extended through 2010, but are all scheduled to expire by the end of this year (some have expired).

In a nutshell, Senator Reid’s bill provides $3.8 billion for encouraging NGVs with vehicle purchase incentives based on the size of the vehicle, refueling station incentives, and manufacturer reequipping loans. There are two key items that NGV advocates are likely to see as missing from this legislation. First, is a continuation of the federal alternative fuel tax credit. This provides a tax credit to the refueling station owners of $0.50 for each gasoline gallon equivalent (GGE) of CNG or LNG sold. This tax credit is currently in place through the end of 2010, so it seems likely that it will ultimately be addressed by another bill. Secondly, the $2,000 home vehicle refueling apparatus purchase incentive that exists as part of the Energy Policy of 2005, but is also scheduled to end at the end of 2010. Ironically, there are not currently home vehicle refueling appliances available in the marketplace, but they are expected to come available this fall.

Senator Reid’s bill is a much more comprehensive than the NATGAS Act (H.R. 1835) from the House, and is more often compared to the Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act of 2009 (H.R. 3534), which now includes oil spill response legislation, off-shore oil and gas whistleblower protection, as well as carbon caps and renewable energy incentives. However, the NATGAS Act appears to be much stronger in terms of incentives for NGVs, thanks to higher purchase tax incentives, inclusion of home refueling incentives, and manufacturer tax incentives of up to $4,000/vehicle.

The NGV provisions of these bills seem to be getting support from both the senate and house, but how these provisions are reconciled between the senate bill, the CLEAR and NATGAS acts is likely to be fly in the ointment for NGV advocates. Senator Reid’s new bill leaves out many of the key provisions of the CLEAR Act including carbon cap and trade and was introduced to bring in more bipartisan support. While it isn’t clear his bill will end up with that bipartisan support, there does seem to be momentum in both the senate and congress to address the incentives for fleets to purchase NGVs and use more CNG or LNG.

First Solar turned in another remarkable performance in 2Q 2010. Production of 344 MW exceeded last quarter by 7% and 2Q 2009 by 19%.

Additionally, First Solar’s 2Q revenue of $588 million also beat last quarter’s sales by 3% and that of 2Q 2009 by 12%. True, their first quarter gross margin (48.3%) was a little lighter, as was their net income of $159 million. No doubt, a $23 million hit that earnings took as a result of warranty repair/replacement costs caused some trepidation in the minds of stockholders. Despite this, First Solar’s earnings per share (EPS) of $1.84 caught Wall Streeters by surprise (they were expecting $1.60).

More importantly, First Solar’s annual capacity per line increased again to 59.0 MW, and its manufacturing cost per watt breached the $0.80 barrier and set an industry leading standard of $0.76/W.

Finally, First Solar increased its guidance for gross margin in 2010 to 44-45% (from 41-43%). With such substantial performance, we expect First Solar to continue to gain market share. In fact, we believe that reaching 20% market share by 2012 is a realistic possibility.