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Sunday, November 20 2011

Are We Stressing the Environment?

Two major global concerns are the price of oil and level of carbon emissions. The US DOE makes a conservative estimate that oil will be consistently between $110-120 by the end of the decade. Population is the key driver as evidenced by the chart to the left comparing growth in population from 1900 to the production of oil.  Note in particular that despite conservation efforts in the mid to late 1970s, production has matched population growth over the past 25 years. Supporting the general trend up in demand and hence prices, the UN expects population to continue to expand for the forseeable future as shown in the below figure.  From there we see that population will rise from current 6.5B to between 8-10B by 2040.  That would imply production exceeding 100 million barrels per day.

Additionally, and perhaps more alarming is the increase in CO2 levels and average temperatures from the late 1800s through the present in the figure below.  The critical number for long-term environmental sustainability is 350 ppm of CO2.  As can be seen from the chart, that level was surpassed around 1990 and now exceeds 370; up 110 ppm over the past 130 years. 

Electricity production accounts for 1/3 of all CO2 production.  The 2011 U.S. EIA Energy Outlook Report states that electricity currently accounts for 40% of total residential delivered energy consumption in the U.S., with projections for both residential and commercial consumption expected to increase 1.2% annually from 2010 to 2035 (not including significant electric vehicle penetration). This growth will require over 200gW of additional electrical energy capacity. With 40% of this capacity already under construction and assuming current construction costs for a gas turbine plant with transmission facilities are $700/kW, additional electric generation costs will approach $90 billion in today’s dollars or $750/U.S. household.

This represents both an energy problem and opportunity for utilities, their customers and society as a whole.  Electric utilities and their customers need to focus on conservation and smart grid solutions to offset the rise in prices and take advantage of new technologies making alternative energy and electric vehicles more economic. The incremental costs for power generation of $750/HH can instead be invested in home energy management systems, at the same time reducing the total amount of CO2 that is generated.

Related Reading:

Map of US showing locations of renewable energy production

Map of US showing over 6400 facilities producing most CO2

 

Posted by: Michael Elling AT 08:00 am   |  Permalink   |  Email
Sunday, November 06 2011

Would gamification work in the smart grid?  Possibly.  Others have asked the same question.  But some would ask, why do you need to incent people to save money?  Because people’s self-interest might not be aligned with the smart-grid as currently envisioned by vendors and utilities. 

Gamification’s value is to do something against one’s self-interest without realizing it.  At the same time, people play games to accomplish something aspirational.  How can these two, somewhat contradictory, precepts be applied to the smart-grid? 

People resist the smart grid because of its perceived complexity, expense and intrusiveness.  They are acting in their self-interest.  Secondly, the smart-grid is supposedly about giving the end-user controls over their own consumption.  Unfortunately, utilities are scared by this future, since it runs counter to revenue growth.

Enter gamification where everyone might win.  If introduced into the design of smart-grid solutions from the get-go it could have a fundamental impact on penetration, acceptance and ultimately revenue and profit growth for the utility industry.   Why?  Because the demand for electricity is potentially unlimited and the easier and more efficient the industry makes consumption the greater the growth potential.

So what might gamification of the smart grid look like?  It would need to satisfy the following conditions: personal growth, societal improvement and marketing engagement.   Right now solutions I’ve read about focus on individual rewards (see Welectricity and Lowfoot), but there is a growing body of evidence that people respond better when their use is compared to their neighbors.  So why not turn efficiency and production into a contest?  Research is already underway in Hawaii and Chicago.  Small, innovative app-driven solutions are entering the market; even supported by former US Vice Presidents.

To get as much participation and ensure wide-spread rewards smart-grid gamification contests should be held at home, neighborhood, city, county, state, all the way to national levels.  It should provide for both relative and absolute changes to provide ALL users an incentive to win; not just the largest users.  And not just individuals, but groups as well.  Contests could also get down to the appliance level and ultimately should include contribution/cogeneration (here’s another example). 

Utilities have done a poor job of getting customers to look at their info online; less than 10% on average.   Playing games with customers and following recipes like this might be a way to change all that.  Win, win, win.

Related Reading:

Gaming across all industries

 

Posted by: Michael Elling AT 11:45 am   |  Permalink   |  0 Comments  |  Email
Sunday, October 23 2011

Even though the US has the most reliable electric system in the world, utility companies are not schooled in real-time or two-way concepts when it comes to gathering and reporting data, nor when it comes to customer service. All of that changes with a “smart-grid” and may be the best explanation why so many smart-grid solutions stop at the meter and do not extend fully into the customer premise. Unfortunately, utilities are not prepared to “get” so much information, let alone “give” much to the customer. Over 20 million smart meters, representing 15% penetration in residential markets, have been deployed as of June, 2011 according to IEE.  They forecast 65 million (50%) by 2015, at an average cost of $150-250 per household.  While these numbers are significant, it will have taken 15 years to get there and even then only 6 million premises, less than 5% of the market, are expected to have energy management devices by 2015.  So while the utilities will have a slightly better view of things and have greater controls and operating efficiencies, the consumer will not be engaged fully, if at all.  This is the challenge of the smart-grid today.

Part of the issue is incumbent organizations--regulatory bodies, large utilities and vendors--and their desire to stick to proven approaches, while not all agreeing on what those approaches are. According to NIST, there are no fewer than 75 key standards and 11 different standards bodies and associations involved in smart-grid research and trials. The result is numerous different approaches, many of which are proprietary and expensive.  As well, the industry breaks energy management within smart-grid into 2 broad categories, namely Demand Response Management (DRM or the side the utility controls) and Demand Side Management (DSM or the side the customer arguably controls), instead of just calling it “end-to-end energy management;” which is how we refer to it.

Another challenge, specifically for rural utilities is that over 60% have PLC meters, which don’t work with most of the “standard” DRM solutions in the market, necessitating an upgrade. This could actually present an opportunity for a well designed end-to-end solution that leapfrogs the current industry debate and offers a new approach.  Such an approach would work-around an expensive investment upgrade of the meter AND allow DSM at the same time. After working with utilities for over 10 years, we’ve discovered that rural utilities are the most receptive to this new way of thinking, not least because they are owned by their customers and they can achieve greater operating efficiencies from end-to-end “smart” technology investment because of their widely dispersed customer base.

Ultimately the market will need low-cost, flexible end-to-end solutions to make the smart-grid pervasive and generate the expected ROI for utility and customer alike.

Posted by: Michael Elling AT 08:13 am   |  Permalink   |  Email
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Information Velocity Partners, LLC
88 East Main Street, Suite 209
Mendham, NJ 07930
Phone: 973-222-0759
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contact@ivpcapital.com

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