March 30, 2009
It had been termed the Brave New World -- the one where electricity restructuring would revolutionize business models, technology development and consumer behaviors. But it has yet to happen. With the newfound emphasis on climate change, however, the energy sector may be jolted in ways that advocates of deregulation had only dreamed.
It centers on controlling energy use, which in turn limits emissions, helps preserve the environment and increases grid reliability. It will take an holistic approach. That will entail scheduling the most economical fuels and building of a digital network that extends to meters, which can then send signals to consumers or their automated appliances so as to cut usage. High hopes now exist as the cause is supported by national public policy that is enabling pilot projects to become commercialized.
"To be good stewards of the environment, we have to do things differently," says Jon Arnold, managing director of Microsoft's utility program. "The fact is that technology is critical across the whole value chain. Our vision is that the technology and the subsequent change that it brings will actually span across the entire ecosystem. The grid is the centerpiece. But if you are really going to make a change, then you need to make this difference by looking at fuels and generation -- all the way inside the home."
All utilities are under pressure to limit their emissions and produce energy savings. And many power companies are already making investments somewhere along the value chain in the intelligent utility. Now that the federal government is more involved, it should expedite the progress.
According to consulting firm Energy Insights, the recently passed national stimulus plan sets aside about $4.5 billion to modernize the grid -- an endeavor that can involve increasing reliability or curtailing consumption. It's all coupled with the push to limit carbon emissions and to increase the use of renewable energy.
Utilities are therefore under the twin pressures of managing their fuel mix while keeping down costs. The technological changes start with the power plants, which traditionally have been unsophisticated. Now, though, they can become equipped with the tools to analyze and monitor efficiency and emissions processes. Such technologies can also evaluate market and environmental conditions as well as fuel costs and then compile that information so that utilities can operate their plants as a fleet.
At the same time, the grid is changing. With or without national renewable portfolio standards that mandate green energy usage, such sustainable fuel forms will grow. It then becomes a technical question as to how to integrate those renewables into the system, particularly as they expand from 2 percent of the portfolio mix today to as much as 20 percent. It involves optimizing the performance of power plants and the transmission grid while also communicating with customers so that they can participate.
"Managing this environment will make putting a man on the moon look like child's play," says Arnold. Microsoft is involved throughout the value chain and working with Alstom, for example, to allow power plant operators to tie in their real-time plant scheduling decisions with wholesale power and carbon markets while also joining Itron and Infosys in preparing 4.5 million smart meters for prime time.
Holistic Approach
It's easy to be skeptical. After all, consumers were told in the 1990s that utility restructuring would cause power companies to streamline their processes and usher in new products and services. While onlookers can debate the types of policies enacted to achieve those goals, the bottom line is that the results have been dubious.
But the ultimate fate of the intelligent utility may be different. That's because the Obama administration is committed to the technologies, rationalizing that the rollout is both necessary to limit emissions and to control consumption as well as to create the next generation of American jobs. The starting point: The smart metering programs that have already received regulatory approval and which are "shovel ready," says Rick Nicholson, a vice president at Energy Insights.
For now, much of the effort will go toward helping homeowners and businesses reduce their carbon footprint by giving them a greater understanding of how energy is consumed. Eventually, though, the popularity of prevailing technologies will spread.
Consider Microsoft Germany and its partnership with Yello, an energy provider there: The goal is to get consumers to reduce consumption, saving as much as 10 percent of their electricity costs. Online software will chronicle their consumption patterns and provide continual updates, tracking such appliances as refrigerators, hi-fi systems and water heaters. It makes note of those devices that are energy hogs -- something that the two partners say provides a practical way to ensure environmental protection.
To succeed, a comprehensive approach is necessary -- one that increases the productivity and efficiency of everything from power plants to distribution grids to consumer appliances. The tools to achieve higher standards are, in fact, emerging and are partly driven by consumer concerns and partly by global initiatives meant to minimize emissions. It's a powerful one-two punch.
"Everyone is on a mission to help sustainability and emissions," says Microsoft's Arnold. "Our company has been through it before with the Internet and putting a personal computer on every desk. We will invest $9 billion in 2009 in total research and development with a significant amount going into energy and environmental research. The power of software can help everyone reduce their impact on the planet."
The know-how and the skills to get it done have existed. But the public will and the financing have not. Changes, now, are coming -- the kind that may indeed transform an industry and in doing so, change the way energy is consumed. ###
More information is available from Energy Central:
Respond to the editor.
Ken Silverstein EnergyBiz Insider Editor-in-Chief
Read Ken's Blog
