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Sunday, December 11 2011

Look up the definition of information and you’ll see a lot of terminology circularity.  It’s all-encompassing and tough to define.  It’s intangible, yet it drives everything we do.  But information is pretty useless without people; in fact it doesn’t really exist.  Think about the tree that fell, unseen, in the forest.  Did it really fall?  I am interested in the velocity of information, its impact on economies, societies, institutions and as a result in the development of communication networks and exchange of ideas.

Over the past several years I have increasingly looked at the relationship between electricity and communications.  The former is the number one ingredient for the latter.  Ask anybody in the data-center or server farm world.  The relationship is circular.  One wonders why the NTIA under its BTOP program didn’t figure that out; or at least talk to the DOE.  Both spent billions separately, instead of jointly.  Gee, why didn’t we add a 70 kV line when we trenched fiber down that remote valley?

Cars, in moving people (information) around,  are a communications network, too; only powered by gasoline.  Until now.  The advent of electric vehicles (EV) is truly exciting.  Perhaps more than the introduction of digital cell phones nearly 20 years ago.  But to realize that future both the utility and auto industries should take a page from the competitive wireless playbook.

What got me thinking about all this was a  NYT article this week about Dan Akerson, a former MCI CFO  and Nextel CEO, who has been running (and shaking up) GM over the past 15 months.  It dealt specifically with Dan’s handling of the Chevy Volt fires.  Knowing Dan personally, I can say he is up to the task.  He is applying lessons learned from the competitive communications markets to the competitive automotive industry.  And he will win.

But will he and the automotive industry lose because of the utility industry?  You see, the auto industry, the economy and the environment have a lot to gain from the development of electric vehicles (EV).  Unfortunately the utility industry, which is 30 years behind the communications and IT revolution “digitizing” its business model, is not prepared for an EV eventuality.  Ironically, utilities stand in the way of their own long-term success as EV’s would boost demand dramatically.

A lot has been spent on a “smart grid” with few meaningful results.  Primarily this is because most of the efforts and decisions are being driven by insiders who do not want to change the status quo.  The latter includes little knowledge of the consumer, a 1-way mentality, and a focus on average peak production and consumption.  Utilities and their vendors loathe risk and consider real time to be 15 minutes going down to 5 minutes and view the production and consumption of electricity to be paramount.  Smart-grid typically means the opposite, or a reduction in revenues.

So, it’s no surprise that they are building a smart-grid which does not give the consumer choice, flexibility and control, nor the ability to contribute to electricity production and be rewarded to be efficient and socially responsible.  Nor do they want a lot of big-data to analyze and make the process even more efficient.  Funny those are all byproducts of the competitive communications and IT industries we’ve become accustomed to.

So maybe once Dan has solved GM’s problems and recognizes the problems facing an electric vehicle future, he will focus his and those of his private equity brethren’s interests on developing a market-driven smart-grid; not one your grandmother’s utility would build.

By the way, here’s a “short”, and by no means exhaustive, list of alliances and organizations and the members involved in developing standards and approaches to the smart grid.  Note: they are dominated by incumbents, and they all are comprised differently!

 

Electricity Advisory Committee
Gridwise Alliance
Gridwise Architecture Council
NIST SmartGrid Architecture Council
NIST SmartGrid Advisory Committee
NIST SmartGrid Interoperability Panel
North American Energy Standards Board (NAESB)
SmartGrid Task Force Members (Second list under Smartgrid.gov)
Global SmartGrid Federation
NRECA SmartGrid Demonstration
IEEE SmartGrid Standards
SmartGrid Information Clearinghouse


 

 

Posted by: Michael Elling AT 10:52 am   |  Permalink   |  0 Comments  |  Email
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, 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
Email:
contact@ivpcapital.com

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