Is smart grid the next green-tech bubble?

WASHINGTON--Here at a conference on the utility of the future, the starring players are Google, IBM, Cisco Systems, Intel, and smart grid start-ups. The reason? Data.

Modernizing the grid isn't just about installing more transmissions lines and smart meters. It's a giant information challenge as well, said attendees of consulting firm Kema's Utility of the Future conference here on Thursday.

The heavyweight IT companies are seeking to capitalize on initiatives around the world to upgrade the power infrastructure. The U.S. Department of Energy is expected to soon announce how billions of dollars in stimulus money for smart grid will be allocated.

Smart grid has also become one of clean-tech venture capitalists' favorite areas, spawning dozens of start-ups with ways to make the grid run more efficiently and integrate more solar and wind power.

Altogether, it's a combination that could end up creating a bubble, said Diana Propper, a clean-tech venture capitalist at Expansion Capital Partners.

"I worry that there's so much money being sloshed around, whether it's venture capital or corporate or government money, that it will be spent inefficiently," she said during a panel. "The risk of a bubble is real."

People have been talking about the smart grid for ten years but a combination of factors is pushing the vision closer to reality, she said, citing the need for reliability, the need to reduce carbon emissions, and the emergence of more technology-savvy end users. "We've passed a tipping point. I think we're going to see a tremendous amount of capital in this area."

Venture investors in the past two years poured hundreds of millions of dollars into thin-film solar technology companies, many of which aren't expected to survive. Smart-grid technology (and energy storage) is generating a similar excitement level this year, but there are some differences to the solar bubble, said Ben Koch, managing director of investment banking at Southwest Securities.

"With smart grid, there are fewer companies and they are more mature," Koch said, noting that demand-response company Comverge had 500 utility customers before it went public.

On the other hand, a rush of available money tends to mean more risky ventures will get funded. "We won't have irrational exuberance...but there could be some bad investments," he said.

Koch added that the stepped-up presence of IBM, Cisco, Intel, and Google in the utility industry could stiffen competition for smaller firms.

Data overload
To understand the interest of the major IT companies in the smart grid, consider Duke Energy's program.

It has 5 million meters installed in its territory and each customer has a few major appliances, such as water heaters and refrigerators. Each one of those devices--in addition to hundreds of thousands of sensors on the distribution grid--could be networked.

To collect and make sense of the mountains of data these devices produce requires a robust network and sophisticated IT systems.

"Just the number of devices to be connected and the volume of data that needs to be processed--it's enormous," said David Mohler, the chief technology officer of Duke Energy. "We realized early on that we needed to create an information architecture. That's not a utility's sweet spot."

Instead, the utility contracted with Cisco to build that data communications network. Duke is already testing smart-grid technology and plans larger-scale deployments in Ohio and Indiana starting at the fourth quarter of this year.

Home energy management is another important piece of smart-grid programs. Microsoft and Cisco as well as telecom companies, such as Verizon, have said they expect to make energy monitoring an extension of existing home networks.

Yet, there's some concern that the majority of U.S. consumers won't act to lower electricity consumption even if they do have more detailed information or they won't be willing to allow utilities to control devices in the home, executives said.

The main elements of the smart grid have been touted for many years. Will it finally start to take shape?

(Credit: Department of Energy)

Power at the edge of the Net
With its smart grid programs, Duke plans to do as much processing near the edge of the network as possible, rather than at its data centers, executives said.

For example, substations servicing a neighborhood could collect data from devices such as street lights and plug-in electric vehicles to signal to the utility what the demand for electricity is. Rather than sending reams of real-time data back to a utility employee, Duke envisions equipping the substation with controls capable of some low-level processing to, for example, spot when an outage might occur.

Transmission line owners are investing in IT and control systems as well so they can better manage the flow of electricity, particularly with an expected increase in wind power, said Terry Boston, the CEO of grid operator PJM.

"Today our communications is very siloed. We need a steady flow of data from the generator to the customer and the grid operator," Boston said, adding that the company is developing a services-oriented architecture with a unified data bus.

Google's director of climate change and energy initiative, Dan Reicher, was a speaker here as well, where he talked about Google's plan to develop products in energy, particularly those that cross IT and ET, or energy technology. "Information technology can make a major improvement to the smart grid we're all talking about," he said.

[rmva]

Are we concerned the smartgrid bubble will burst before the oceans rise 6 inches. If the oceans win, a little smartgrid bubble will be the least of our worries.

[fredtheviking]

You guys at CNET seem overly concern about bubbles. A Smart Grid Bubble? I would define a bubble and industry that is load with companies in the space that are not really adding value to trying to do something different. Internet bubble is a great example, where almost all companies were making money on ad revenue (where you got as much as $.15 per-click imagine that!).

I don't see that here. There is a lot of work and opportunity in Smart Grid technology. Sure they may be alot of start-ups trying get in, but who can blame them when the business opportunities are there. Also, I am not convince that value of Smart Grid technology is overblown (which would be required for a bubble to occur). Will some start-ups go belly up and money be loss? Sure, but that risk in venture capital.

Smart Grid technology also has a way to go and more business opportunities are abound.

[carlhage]

Personally, I see that lots of these "smart grid" or even energy tracking companies as not really adding much value to otherwise obvious technology. For example, I stumbled across an issued patent to measure energy usage and show on a remote display. Come On! Isn't it obvious to measure electric use and display? (Seems like this already existed before the patent was issued anyway.) Likewise, how hard is it to come up with a message broadcasting price/credits or a message like "Hey, all you devices with controlled load, will 10% of you turn off for 5 minutes randomly over the next minute?"

The technology needed for "smart-grid" is either obvious or already existing-- nothing really to invent. The only thing of significance is getting everyone to agree on a standard. Having 50 companies all trying to push proprietary technology is working in the opposite way. The Internet worked because of the simple RFC process and an open-source model-- patents didn't get in the way. The real trouble and internet bubble happened as the 'net was turned over to commercial use and companies tried to insert their proprietary solutions. I think we are headed for analogous wars the way things look for now.

Yes, the concept for real-time control of electric demand (and supply) are really worthwhile and add a huge value. We don't need some proprietary patented solution-- we should be going back to the RFC process, develop a patent-free set of standards, easy to take an implement by a refrigerator manufacturer, etc., not some third party proprietary add-on.

I hear lots about proprietary smart grid "solutions" but little on open standards.

[iptofar]

No one has ever defined what a "smart grid" or in any way defined how it would save energy.

There is a green bubble coming because sooner or later, people will realize that not only are many green ideas not cost effective, they don't reduce energy consumption or increase production.

[freemarket--2008]

"many green ideas not cost effective" Name five. These are things that can be easily measured or calculated.

One of the things you can't predict is what new tech will be MORE effective a few years from now. That's where the risk lies.

[iptofar]

Corn based ethanol. Most wind turbines. Underwater turbines. Solar cells. Hydrogen powered cars.

All exist because they are subsidized and only a very small part of overall production. If they were a larger portion, people would scream.

Every time i fill my car up with up to 10% ethanol, my mileage drops and i pay 20 cents/gallon more for the privilege.

[shldvebnacwby]

Lots of people have defined the "smart grid," but those definitions differ between people. You might be better to say that there isn't a universal definition of the "smart grid." From what I understand of it, it would save energy because (in some definitions of the smart grid) the grid would be able to turn off items wasting power (say somebody at their office forgot to turn off a light bulb at home, they might be able to remotely shut the lights off.). Plus it would keep the consumers more informed as to how much electricity they are using, and might convince them to use less.

More importantly it would allow the energy companies to more accurately predict load. As it is right now, they produce a substantial amount more than the current demand, because they want to make sure that they have enough energy for whatever comes up. If they can more accurately predict and measure load, they can reduce this excess waste, and in theory would be able to react more quickly to a spike in energy consumption. Even if this was only a 2% savings in energy, on the scale that we are talking about, that would be a large amount of savings for the companies, consumers, and the environment.

[BogusBasin]

Typical Republican. Not only do you offer no solutions, but you refuse to admit there is a problem in the first place. Go drill for oil and leave the future of our Country to the adults.

[iptofar]

If you meant me by "typical republican" (I'm a registered dem but really independent): Nuclear is the solution but the Dems have their heads buried in the sand. There are some really nice reprocessing methods that drastically reduce radioactive by products. Hopefully fusion is the future. If we really had smart leadership, that's where we would be looking. Instead we have ivy league lawyers who graduate from schools with nearly 100% graduation rates.

If we had spend a trillion dollars on nuclear plants, we could have reduced our CO2 emission far below 1990 levels. And if you're like me and don't believe in such things, it still would have paid off down the road. Instead, we just got useless projects and a bunch of debt.

The load issue is incorrect. The utilities always know the load since they are producing the supply and there is no storage device. I think the real issue is control. I'd like to see the payoff for cost of implementation vs. real life savings. I suspect you will never see realistic nos.

[freemarket--2008]

@iptofar: If you add in all of the hidden costs of fossil fuels I would say that most of those green technologies look pretty good. Corn based ethanol is probably the only obvious one. Though when gasoline goes through the roof again even that may look good.

[iptofar]

freemarket--2008 : The whole point is that the other "green" methods pricing are directly linked to fossil fuels so that as soon as fossil fuel prices go up, the cost of solar cells, windmills etc. go up as well. Think of all the energy required to make pure silicon or 5 MW copper generator windings or steel. I researched windmills, it looked good until you realized the pricing was based on installed power and not produced power. It's 3x more expensive than any current method. Also, none of the windmills in the study were over 5 years old.

[mishmash0101]

We already have excessively high priced tiers of usage here in California and its done nothing to change consumer behavior. I could care less about my electricity use and the resultant bill I receive every month. What ever it is, I pay it, and even if it doubled or tripled or quadrupled, it wouldn't matter. And I believe that I am in the vast, vast majority.

[gilbob]

Nuclear??
Get real. Three gigantic obstacles:
1) Why create an easy & devastating target for terrorists? (Do you really believe a large plane would just bounce off?)
2) Uranium is scarce - there is not enough on earth to fuel much more than we have now.
3) There is still no place to put the hazardous waste - is radiation hazard for a few thousand years worth a few years of energy?

Nice try. The answer is wind, solar, hydro, wave power and other sources of energy produced by nature every single day.

[RannXerox]

1) You are thinking of nuke tech from the 60, which is about the only we have in the US since we do not spend money to invest in it. Mostly the French and South African states have cont. to improve this tech. in the past 50 years with things like pebble bed reactors, better breder reactors, etc. It would be easier to use a bio or gas weapon then to try to affect a result from one of these types.
2) There is enough uranium along with reprocessing to provide all the power the world would need for 100 years at least (barring even more advances in the tech within those years).
3) France has reduced the size of their wastes to about 1000 X 1000 sq. That is ALL of their waste and they get about 80% of their power from nuke.

Wind, solor, wave, bio, etc have a niche place but they will never be able to provide all power needed esp. when we go to electric cars.

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The inventor, Ralph Bergstresser, said that in 1978 the Canadian Government ran tests on this device: "They found that by placing the 'Fridge Freshener' in a home refrigerator, a saving of $4.00 per month on electrical consumption resulted from its use," he said. "This was an added feature that was never anticipated. Most thermostats must be raised on home refrigerators, otherwise the food will freeze and, of course, this saves energy."
The 12? by 12? square) is placed on the center shelf of a home refrigerator. Should there be any odors, they will gradually disappear, but do not expect this to happen instantly - several days may be required.

Amazingly, the Canadian government tested this device almost 20 years ago, and found that the fridge freshener has the innate ability to reduce the internal temperature of the refrigerator in which the energy cube was used. This resulted in a savings of $4.00 per month in electrical

[mscritsm]

SmartGrid at the residential level is years or even decades away. I live in Boulder, CO which is the first city in the nation to have full SmartGrid technology installed. What did it take? First of all, it involved installing fiber to the door, which took about a year for the entire city. I don't know why fiber data speeds are required, but none of that will be available for accessing the internet. Apparently my toaster will be able to access the SmartGrid network at 20 Mb/sec, but it won't help me get on the internet any faster. And I don't know if having one fiber network installed will affect the installation of another fiber network such as FIOS for internet access. Is the SmartGrid fiber installation in our sewer pipes of the type which allows the installation of another fiber network?

Once the SmartGrid data network is installed, you have to put in smart meters which cost hundreds of dollars each. And every appliance which you want to monitor and control has to have some kind of SmartGrid data node added, probably using some kind of Powerline technology which transmits data over your home's power lines to a SmartGrid router (presumably built into the smart meter) which talks to the fiber network. Ideally this would be built into your major appliances at an extra cost of tens of dollars retail, but since very few people will replace perfectly good appliances just for SmartGrid, I expect there will be a market for external boxes which connect between your appliance and the wall, which might cost as much as $100 each to start (ultimately this should go down dramatically).

The upshot is that consumers will have to pay hundreds if not thousands of dollars to make full use of SmartGrid in the early years between increased utility fees and purchasing SmartGrid home technology. It will take years for the average consumer to make that upfront investment back in energy savings and I suspect many people will delay making that kind of investment for as long as possible, especially since you can do almost as much with a $25 Kill-a-Watt meter. Over a year into Boulder's SmartGrid trial, only one or two demonstration homes in the city are fully wired with appliances that talk to the SmartGrid network. Right now the emphasis in on installing smart meters, but not going any further into the home.

The net effect is that any company investing tens of millions on SmartGrid software is just pouring money down a rathole. The number of households which can fully take advantage of such software and be willing to pay hundreds of dollars for it will be minuscule for at least five to ten years.

[ecacofonix]

When lots of people are trying to define a concept, I know that one of the three is usually true of the concept: (1) the concept is phoney, (2) is a concept that people don't fully understand and hence is unlikely to hit the stores anytime soon, or (3) it is already existing in some way so a re-defining is required.

Smart grid is not a phoney, we can leave that out. It does not exist, at least our electricity grids cannot be by any stretch of imagination be called smart.

Which leaves me with the third - it needs more defining and its benefits clearly spelt out before many investors are willing to open their purses

NS @ Alternative Energy Profits - http://www.altprofits.com/blog

[Bill_I]

Since about 50% of generated power is wasted in the grid, it will take an awful lot of smarts to improve it. --- Every time you walk past a loudly humming transformer in the motel parking lot, consider that regulation by magnetic saturation is standard practice. Those big fins on the sides use an oil-cooling scheme to dissipate all those wasted kilowatts, so the transformer does not overheat. --- You can change all the light bulbs in the world to those complex and weird CFLs, and not make a dent in the power wasted just trying to get it as far as your electric meter. --- Reliable, yes, efficient, NO WAY !

[jason_hanna]

Hi Bill,

By your own logic, 1 kilowatt saved by consumers results in 2 kilowatts of avoided electricity generation.

You're right about transmission losses in the grid, but to suggest end user behavior doesn't have an effect is inaccurate. Our behavior matters, and we should always be looking for ways to do things more efficiently.

Regarding definition of smart grid - I'd suggest there are so many varied definitions because it touches every aspect of one of our most important and vital industries. When we use the term smart grid we're talking upping our investment in generation, transmission, distribution, efficiency, storage, renewables, information technology, etc.

Certainly there are segments which are over-hyped and many technologies (and companies) won't pan out - that's the nature of innovation. If we're to move forward, however, we must continue to invest, both privately and with our tax dollars.

Most of the greatest accomplishments of the last two centuries wouldn't have been possible with government-sponsored investment. Hopefully we do it wisely this time around.

Cheers,
-jmh