August 06, 2010
The transformation may now be gradual. But it will gather steam and change the way utilities produce and deliver their electricity.
If done properly, the smart grid that enables such progress could have profound implications. The movement is just now getting its legs. But just how it stabilizes and gains footing is a matter of debate: Some say it will be consumer demand. Others say that regulators must lead while some say it must be a collective effort.
"If the technology is there and is made available for some consumers, others will buy it even if their utilities may not be able to support it," says Howard Scott, managing director of the New Jersey-based consulting firm Cognyst Advisors. "To level the playing field, it is likely that utility commissions will then force all utilities to offer smart grid services. Thus, the marketplace will begin to influence the rules governing how electric utilities will operate."
A smart grid, for example, can make possible greater integration of renewable generation resources and more deployment of plug-in hybrid electric vehicles. A more efficiently run system would make room for alternative energy sources as well as any additional burdens that would be placed on it from newer innovations. It's all about reducing costs, maximizing efficiency and empowering consumers -- all of which increases a nation's environmental and economic stature.
According to Scott, who participated on the EnergyBiz Leadership Series webcast, A Smart Grid Comes Together , the advanced metering industry that permits those advances grew by 40 percent from 2008 to 2009. That was in large part because of $4.5 billion federal stimulus monies -- an endeavor that Scott says will lead to 40-50 million smart meters getting deployed by year-end 2011. That would be a third of all meters in this country.
Many issues remain unanswered and ones that center on both public policy and technical innovation. Which ideas will get federal help and what are the tax implications for business developers? What will be the standard protocols for running systems and what incentives will utilities have to participate in this new energy paradigm?
Achievement requires collaboration, says Katherine Hamilton, president of the GridWise Alliance that advocates for the smart grid. The state of Vermont and the city of Austin, Texas have succeeded because all stakeholders discussed their goals and concerns up front, she says. Building out a smart grid and wishing for the best will not work.
"We are just learning," says Hamilton, also a panelist on the webcast. "We are at the very beginning and we have a long way to go. There will be a variety of outcomes. We are doing this by trial and error. If you have a 100 grant projects, some will be successful and some will face challenges. We will have to learn as we go. We will learn a lot from the stimulus grants."
Exercising Restraint
The smart grid's relevance is becoming increasingly clear as Congress grapples with renewable portfolio standards, climate mitigation strategies and energy efficiencies goals. Indeed, the Electric Power Research Institute in Palo Alto, Calif. says that deployment of a highly automated system could severely cut carbon dioxide releases while at the same time limit electricity consumption by reducing sales by 1.2 to 4.3 percent by 2030.
For their part, state utility commissioners, generally, feel they must exercise restraint: Rushing headlong into something that is unproven and so expensive might later be regretted. Their concern is that smart meters that can facilitate energy conservation have yet to bear fruit. And if those meters are unable to do so, then it would be consumers who pay the price for any failures.
Kurt Yeager, executive director of the Galvin Electricity Initiative in California, disagrees with that apprehension and says that regulators hold the keys to progress. Utilities are now rewarded based on the amount of electricity they sell. Instead, they should be rewarded on the quality of service they provide, he says.
To that end, smart meters are critical and provide the price signals to consumers to tell them when to cut their energy usage. The technologies are already working and would only improve as more technology providers jump in.
But those utilities with monopolies over their electricity markets are reluctant to evolve, meaning that today's innovators are being shunned away, says Yeager, who adds for every dollar spent on the smart grid, $4 or $5 is returned. That's not just from the marginal savings of electricity. It's also from job growth and productivity.
Yeager says that regulators cannot just wait and see how consumers adjust, maintaining that such a strategy will keep key technologies at bay and prevent the United States from winning a competitive edge. Collaboration is instrumental, although Yeager warns that some interests can deflect progress because they are unable to set aside their agendas.
"We have to change policies to enable innovation," says Yeager, a panelist on the webcast. "Utilities will not do this by themselves. They will want more power sources and to make more money. They have no incentive to empower consumers. Until the incentives for utilities change, they will block the door and the public utility commissions will keep the status quo."
He likens it to the days before telecommunications reform: Innovation will remain pent up in a regulatory model that has no motivation to change. And nothing will happen unless regulators force utilities to adopt those smart grid technologies.
All utilities, though, are now forced to cut their emissions and to increase their efficiencies. As such, they are making investments in the smart grid. More needs to be done, but whether that comes as a result of consumer demand or a regulatory mandate is still up for discussion.
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