Michigan GREEN - Smarter Decisions

June 08, 2009

Talk of intelligent utilities and smart meters is hot these days -- things that the American people never pondered before. And while the descriptions may be arcane, the purpose of the technologies is rather simple: to get consumers to use less energy and to minimize power outages.

How's that? Utilities that have adequate capacity generally concentrate on the tools to increase grid reliability while those with tight supplies focus more on trying to cut consumption. As such, many regulated utilities try to optimize their networks whereas several unregulated ones center on the meters that link right into homes.

"It's cheaper to change out the network than to change out the meters," says Gary Paul, vice president of the utility practice for Capgemini. "Utilities are concerned over investing in meters that can become obsolete. Most clients are coming to the conclusion that they prefer to change things upstream in the network and software applications rather than downstream at the meter." Even when utilities must send signals to consumer devices to cut consumption, he says that the communication can be moved away from meters and to pole tops that have wireless devices to talk with multiple homes.

No matter the business strategy, the first step is to lay out a design and provide the details as to how it will be implemented. That includes researching and selecting the vendors as well as the network and metering technologies. And then the disparate pieces must be able to converse -- all so that the technology can remotely read meters, send price signals or automatically turn off electronic equipment.

It's the type of evolution that has taken place in industry after industry. For the most part, consumers have grasped the power of the web -- a skill that will affect everything from newspapers to utilities. Newspapers, for example, are finding their paper products less relevant than ever before and are forced to adjust their business models. Utilities, similarly, will have to rethink their commercial strategies.

Duke Energy, for example, has a save-a-watt program. It therefore needs those technologies to determine the exact energy savings that come with implementing things like weatherization and solar rooftops. San Diego Gas & Electric, by contrast, has been mandated -- along with all California investor-owned utilities -- to install demand response programs. Such smart metering allows those utilities to get accurate energy reads for the purpose of cutting consumption during heavy usage periods.

Xcel Energy, meanwhile, is in the midst of installing a "smart grid city" in Boulder, Colo. For the time being, the utility operates in a state that does not have dynamic pricing programs. But the pressure to cut consumption is palpable given that Congress is expected to soon enact formal carbon controls.

The Choices

With that, Xcel expects by 2010 to begin a dialogue with its regulators and customers that might entail the use real-time pricing. Such a mechanism tells homeowners and businesses when it is most expensive to consume energy. In any event, the utility is now installing the communications infrastructure to make it all possible -- the integration of technology all the way from the grid to specific appliances inside of homes.

"Xcel's vision is not just the meter," says Sandy Simon, director of utility innovations for Xcel. "We do not advocate the meter. It is just one small piece. The communications infrastructure is the key."

The Obama administration is sold on intelligent utilities. It's all part of its plan to modernize the nation's electricity grid and in doing so help create the next generation of American jobs. To get there, the president has infused billions into the concept.

But the outstanding balance on those projects must be paid. And that decision is in the hands of state regulators. Much education is needed -- not just to bring those policymakers up to speed but also to give consumers the information they require to make smart energy choices. So then it becomes a matter of whether utilities can place their investments in intelligent utilities -- whatever they are -- into their rate base.

While the states are mulling over that one, the utilities are deciding which technologies make sense. For years, utility folks have heard about advanced meters and the benefits they can bring -- everything from automated meter reads to home area networks. Now, though, the emphasis is shifting to intelligent networks.

At least one utility analyst says that whatever the focal point, it is consumers and not utilities that should hold the power. Roger Levy, president of Levy Associates in Sacramento, Calif., says that while utility controls should be part of any mix of demand response options, customers should be provided with price signals and allowed to decide for themselves what, when and how to control their energy use.

"Customers do have the intelligence," says Levy. "If they are provided with the right automation tools and given the proper education, it will then produce a reliable response. When customers determine what happens, they will produce bigger demand response and energy reductions than anything utilities can do directly."

Toward that end, Levy says that the utility of the future will broadcast a price. Consumers will have devices inside their homes that can receive such messages. But only they will have the ability to respond. It's about giving better information and more choices to customers. That, he maintains, will drive greater long-term efficiencies.

Views differ. And so do the regulatory structures that impact such thinking. In some cases, the meter is the major catalyst to change. In others, it is the network. But it all highlights the importance of utility automation both in the boardroom and in Washington.

More information is available from Energy Central:

Respond to the editor.
Ken Silverstein EnergyBiz Insider Editor-in-Chief
Read Ken's Blog