The country's gas and electric companies may need to take a page right out of the telecom industry's playbook if they are to best manage and control the so-called "smart grid."
Smart grid networks are built and operated over existing power lines and distribution grids, thus creating new high-speed communications networks that touch homes and businesses. But while delivering power has never been a problem, most of these control and management networks are incomplete. Utilities like San Diego Gas & Electric and Pacific Gas & Electric are among those hoping to fundamentally shift how they operate by using application development and delivery, along with applying new software and hardware technologies to better monitor peak demand times and help customers choose better times to run the dryer or air conditioner.
The answer could be as simple as using enterprise-class business process management (BPM) software widely deployed in the telecom and IT industries. Such technology could enable better two-way communications with consumers, provide more insights into the state of network operations, and accommodate emerging alternative sources of power generation like solar and wind.
This is creating an opportunity for software players like Oracle Corp. (Nasdaq: ORCL), IBM Corp. (NYSE: IBM), and Hewlett-Packard Co. (NYSE: HPQ) and other system integrators to expand their horizons, though smaller companies are expected to benefit as well.
Much of the recent buzz in smart grid initiatives comes as the federal government in November allocated $3.4 billion in grants to various smart grid projects. The grants were matched by private investments of $4.7 billion, bringing direct investment in smart grid technologies to $8.1 billion this year alone. The Electric Power Research Institute (EPRI) -- an independent, non-profit company performing research, development, and design in the electricity sector -- estimates that for the U.S. to fully realize a nationwide smart grid build-out it will cost $165 billion over two decades, equaling approximately $8 billion per year. The topics were hotly debated this month during "The Networked Grid," an industry conference sponsored by Greentech Media.
"The challenge is a spatially distributed grid that has a hard time linking sensors on the grid that are not networked," says Erfan Ibrahim, a technical executive for EPRI. Critical issues for the industry include adopting interoperability standards, security of networks, and management of wide-area and home-area networks.
And while Ibrahim notes that a simple layer of the Internet Protocol (IP) on the smart grid would not be a best-case scenario, Andrew Tang, a senior director of PG&E's smart energy Web division, says the utility has been deploying foundational communications and IT infrastructures since 2006, using an unspecified protocol.
"We're starting with our residential customers because they have the simplest use model," says Tang. "Our business customers will want to tap into these cost savings, but one building may have several intricate power contracts. But we'll get there soon."
In the short term, Tang says, PG&E will be rolling out an automated home energy management system and is looking forward to integrating local power generation and energy storage as well as improving its methods of demand-side management. All of these, the utility says, are being helped by its enterprise software partners, which are implementing BPM controls that range from the power station to the power pole, and finally to the home.
But can the energy industry adopt as cohesive a plan as the telcos can? Could the utilities adopt a single monthly bill instead of charging per kilowatt? Probably not any time soon, as it takes money to make energy.
But by using BPM software, these utilities say they have already networked some 200,000 advanced transformers, 850 transmission centers, and 700 substations. And being able to manage those nodes effectively has become a priority for utilities jumping on the smart grid.
— Michael Singer, Senior Editor, Internet Evolution. His focus includes executive issues... What's top of mind for CEOs, CIOs, and CTOs?
I am reasonably familiar with Greentech Media. I have read their excellent The Smart Grid in 2010 report, but I can not imagine that they would ever suggest that:
''Half of those querried said their deployments are more than 2 million meters in distance. More than a quarter noted that they have pilot projects in place, while another quarter said they were investigating and planning."
This is just ridiculous.
I think you are confusing the meters, as in smart meters (the meters that sit on the side of your house and measure power usage) with meters, as in a the popular metric for measuring distances (popular in the EU and many other parts of the world).
Bancroft, thank you for the fact check on that last paragraph. You are correct that these numbers are the EXPECTED deployments over the next few years. How fast they are completed depends on many factors. But these are upgrades the utilitis have deemed very important.
Some 75 percent of energy companies surveyed by Greentech Media said they consider smart grid projects their highest priority to their core business going forward to 2015. Half of those querried said their deployments are more than 2 million meters in distance. More than a quarter noted that they have pilot projects in place, while another quarter said they were investigating and planning.
As for BPM, distribution, automation, and grid optimization were also identified in that survey as very necessary for making smart grid sucessful. Does this have anything with installing next-gen transformers or upgrading transmission networks or substations? You bet. The mere fact that companies like IBM, Cisco, Oracle, and Hewlett-Packard are getting involved should be indication enough that utilities need help in networking their communication and control systems for power.
"But by using BPM software, these utilities say they have already networked some 200,000 advanced transformers, 850 transmission centers, and 700 substations. And being able to manage those nodes effectively has become a priority for utilities."
I should point out that none of this is actually true. Those numbers are actually the DOE/OE's smart grid stimulus numbers for projects that WILL get funded over the next 2-3 years. Not one of those transformers, sensors, substation upgrades has actually been deployed/installed, and what in god's name does "BPM" have to do with installing an advanced transformer. Yes we will need use enterprise software to integrate systems across multiple systems and applications, but I just find this piece so far off the mark it's hard to know where to begin.
I doubt any utilities have claimed to have networked all of this equipment.
Michael Singer and Amy Rogers Nazarov are right on the money. By offering variable billing rates, telecommunication companies have effectively reduced peak hour usage.
The cost-savings on their infrastructure is several times larger than the cost of special offers to customers. Meanwhile, customers are getting a deal as well. Electricity companies have much to gain by following this model closely, but there are some major differences.
Telecommunication companies have very concise, crisp, and easy to follow pricing models. “Free nights and weekends” is easy to understand. But electrical peak hours vary by season, day, and even hour, so they have to constantly communicate the latest rates to consumers.
If it’s not easy for consumers to access and understand the rate and usage information being generated by smart-meters, then the system will be too complex and the influence on consumer behavior may be minimal at best.“
I absolutely agree that changes need to start at home. The utilities are turning to smart meters to help them understand their customers and their customers can help understand how much they are using.
One conversation I had with some students at Cornell Univ. about this recently centered on home use models and changing people's behaviors.We debated who had the right to monitor the on-off switch when it came to power to the home.
I said that the homeowner had the right to keep the lights on all day long and the dryer runing 24-7 as long as they were willing to pay for it. The students felt it was in the interest of the untility to at least notify customers when their power needs peaked in unexpected amounts - somthing similar to what the credit card companies do now.
This may turn into a bigger issue when electric cars become mainstream. Whereas your power needs are lighter after 9 pm, imagine plugging in your electric vehicle overnight. Great for you, but a huge headache for the utilities who must now deal with a power spike that used to be reserved for lighter duty.
Mike, at the micro level, there's also the matter of training the home consumer of power--or the enterprise user, for that matter--to think about performing tasks at different times of day, to get those smart-grid cost advantages.
I still try to make calls after 9pm when I have unlimited LD minutes on my phone; it took a while to become habituated to this, but it's in my noggin for good now. (I am sure this mindset will outlast the terms of my and many other typical aging cell phone contracts!)
Same thing with separating the recyclable stuff from the trash, or shutting off the lights when you leave a room.
Changing human nature is going to take some time, but there has to be a trickle-up piece of the larger smart grid goals. Networks manipulating how and where the juice flows will be supported by the actions of the human user at the other end of the chain.
Too often we try to build in too much functionality in all parts of the system and end up customizing the whole system.
As you point out, if we would utilize the functionality that is already in the system and then customize the parts that deal with the utility and power distribution, we could eat the elephant a bite at a time.
Far too often we fail to take advantage of the wider applications to technology and end up with the mentality that if we did not build it ourselves it can't meet our needs. Smart Grids need to be built in collaboration with other systems to make them both feasible as well as effective.
What's facinating is that after 10 years of looking at the telecom industry, that it's only now that utiliites and energy companies are considering this type of software to help monitor and control their customers' usage models.
And this problem is not limited to the US. I mean, look what happened in Brazil today. Sure, there will be financial incentives coming from governments, but getting energy companies working toward greater efficiency should be easy enough now that telecom companies have proved it's value.
What will be interesting to see is how this home area network model will be applied to the enterprise. Utilities should keep their eyes open for chances to reduce costs for their enterprise customers in short time or the smart grid movement may fizzle out.
The concept of smart grid is closely aligned with any other kind of business intelligence and analytics. It's a perfect example of how data is being used to generate actionable information, IMO.
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