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)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.
Duke Energy detailed on Tuesday a smart-grid program that pushes power generation and storage to edge of the transmission network.
The company is testing what it calls a "virtual power plant" at a substation in Charlotte, N.C., that it hopes will allow it to use electricity more efficiently.
The substation--where electricity is distributed to a local neighborhood--is equipped with a 50-kilowatt solar array, enough to supply at least five homes when operating. The 213 solar panels either feed electricity directly to the grid or to a 500-kilowatt zinc bromide battery.
About 100 households in the McAlpine Creek area have been equipped with a home energy management system that lets consumers view electricity consumption in real time and participate in energy-saving programs.
Utilities in general are seeking ways to curtail electricity at peak time, such as the middle of a hot summer day, when they may need to fire up expensive and polluting auxiliary power plants to meet high demand.
Rather than bring on new power capacity during peak times, the McAlpine Creek substation will draw stored electricity from the battery. Duke also expects to be able to level off demand through the residential energy management system.
Consumers can volunteer to have their air conditioner thermostat adjusted or drier heat turned off for a short period to reduce energy usage. The information about power reduction--aggregated across the different homes--is communicated back to Duke via a network so the utility can supply electricity to meet adjusted demand.
Duke earlier this month said it has contracted with Cisco Systems to build out a smart-grid infrastructure in a build-out expected to cost about $1 billion over the next few years. At the McAlpine Creek substation, there are both smart meters and sensors along the power lines to transmit information back to Duke's retail energy desk.
That information on electricity supply and demand creates a deluge of data that requires sophisticated data handling and analysis.
Duke has designed a system to analyze the information in real time using data analytics supplier Integral Analytics and event-processing software company Aleri, Anuja Ratnayake, Duke's manager of strategic initiatives and technology assessment, said during a conference call last week.
Competition to supply gear to modernize the power grid is heating up as utilities Duke Energy and ComEd named their expected smart grid suppliers on Tuesday.
Duke said that it has chosen Cisco to supply an array of equipment for a planned smart grid program estimated at $1 billion over the next few years. Cisco, which unveiled its smart-grid initiative last month, is expected to supply in-home energy monitors as well as networking hardware for Duke's substations, the utility said.
North Carolina-based Duke aims to provide a digital upgrade to its 11 million customers in the five states it operates.
"Replacing our analog electric grid with advanced digital technology to create a 21st century electricity delivery system largely involves data, networks, and communications--all of it Cisco's expertise," Todd Arnold, senior vice president for smart grid and customer systems at Duke Energy, said in a statement.
Chicago-based ComEd on Tuesday announced its recommended providers, including General Electric for smart meters and Silver Spring Networks, which provides wireless communications and software.
If approved, the smart grid program would bring real-time information on electricity usage and rates to consumers by installing 141,000 two-way meters in 11 Chicago suburbs.
Several utilities are investing in smart-grid technology, such as in-home energy monitors and smart meters. By presenting consumers with up-to-the-minute information on usage and changing rates, utilities hope to cut their peak-time electricity usage and avoid outages.
There are dozens of providers angling for business from utilities in these smart-grid programs.
Seven-year-old Silver Spring Networks has emerged as one of the most successful providers, having secured deals with a handful of utilities, including Florida Power & Light.
Cisco, meanwhile, is making a concerted push around energy efficiency and grid modernization, developing a full line of communications products for utilities, consumers, and building managers.
Some utilities are thinking small when it comes to solar power.
Utility Arizona Public Service on Monday submitted a proposal to install and own solar power systems on customers' rooftops in Flagstaff. Customers will pay today's electricity and hot water heating rates for the energy those systems produce over a 20-year period.
Duke Energy last Thursday gained approval for a $50 million project in North Carolina with a similar model. The utility will install and own solar electric panels at 100 to 400 locations and pay a rental fee to property owners.
By owning the systems and the power produced, the utilities can treat the distributed solar resources as a power plant that they can control.
The electricity production of solar panels tends to coincide with peak times of electricity demand. Instead of building a new power plant, or turning on costly and polluting auxiliary plants, utilities can partially meet peak load with the distributed solar systems.
Customers, meanwhile, can get solar energy systems without having to pay the large upfront cost, something that a number of solar start-ups are also doing with varied financing options.
"The project eliminates upfront costs of more than $10,000 to each customer, which we know from our experience has been a major deterrent to distributed solar systems here and elsewhere," Arizona Public Service CEO Don Brandt said in a statement. "We want to make solar energy affordable to everyone."
The $14.7 million pilot, called Community Power Project, is expected to generate 1.5 megawatts from 200 to 300 participants in Flagstaff. The plan also calls for about 50 solar hot water systems to be installed.
The electricity from the panels will be fed directly into the grid and be part of the utility's smart-grid technology program to efficiently manage the flow of energy across the grid. Arizona Public Service already has a few utility-scale solar power plants in the state, but distributed solar power could help the utility meet state mandates for renewable energy production, it said.
The solar panels from Duke's program, which had been scaled back from the initial $100 million proposal, are expected to collectively generate enough electricity to supply 1,300 homes. In a statement, Duke CEO James Rogers said that it's part of the utility's long-term strategy to diversity its power generation.
"We believe the future is a low-carbon world. The 21st century mission of our company is to decarbonize our energy supply and provide universal access to energy efficiency," Rogers told shareholders in a meeting last week.
Duke Energy on Thursday said it is seeking bids on a planned $100 million solar energy investment, a program to assess whether distributed rooftop solar panels can collectively function like a virtual power plant.
The utility said that next year it plans to start installing solar electric panels at 850 locations in North Carolina that would be capable of generating 16 megawatts of electricity, or enough to power about 2,600 homes.
Part of a distributed "solar power plant"?
(Credit: SolarCity)Like other utilities, Duke Energy is purchasing electricity from large-scale solar power plants, where hundreds of photovoltaic panels generate tens or hundreds of megawatts of electricity.
Duke's distributed energy plan amounts to a solar power plant, spread out over many locations.
The utility will install, own, and maintain the equipment and get all the electricity the panels generate. Consumers are paid a rental fee for allowing Duke to install the panels on their rooftops or land.
The goal of the program is to measure whether distributed energy can make a significant dent in the overall power generation mix, while offsetting power demand during peak times.
At 16 megawatts for $100 million, it's significantly more expensive than a traditional power plant, but the utility will use the pilot project to gather data, according to a Duke Energy representative. Longer term, thousands of panels on rooftops could be cheaper than building a new power plant, he said.
It's also much smaller: a nuclear power or coal plant can generate between 800 and 1,100 megawatts. One megawatt is enough to run a large retail outlet.
Duke chose North Carolina for the effort because utilities that operate in that state need to generate a fraction of their electricity from renewable sources, a policy called a renewable portfolio standard. It still needs approval from the state's regulatory agencies.
So far, both consumers and businesses have voiced interest in participating in the program, which would have the panels installed by 2010.
"There is an enormous number of people who really believe in renewable energy. It's not just the so-called green crowd," the Duke Energy representative said. "There are a lot of big believers."
Since homeowners or businesses are not paying for the panels, the electricity they generate will go straight into the grid and not offset Duke Energy customers' bills.
Another utility that plans on a similar distributed solar plant design is Southern California Edison, which said earlier this year that it plans to spend $875 million over five years to get electricity from over two square miles of flat commercial rooftops.
CAMBRIDGE, Mass.--The chief executive of Duke Energy, James Rogers, is an unlikely advocate for policies to restrict greenhouse gas emissions. But the man who is building two new coal power plants is just that.
Rogers delivered a keynote speech at the MIT Energy Conference here on Saturday where he called for policies and technologies to bridge the fossil fuel-based energy industry of today with low-carbon alternatives.
Duke Energy CEO James Rogers at the MIT Energy Conference.
(Credit: Martin LaMonica/CNET Networks)Rogers heads a company that generates 90 percent of its electricity from burning coal or nuclear power to serve its 4 million customers. So it's not surprising that he says that "coal is not a four-letter word."
But even with his company's marriage to fossil fuels, the potential influence of Duke Energy and its like over the future of the energy industry is undeniable: Duke's capital budget to invest in technology and infrastructure is $5 billion this year.
Meanwhile, the total amount of venture capital that went into clean tech start-ups last year was in the range of $3 billion to $4 billion.
Rogers is one of several industry CEOs calling for regulations that put a price on polluting carbon dioxide and Duke Energy is a member of U.S. CAP (United States Climate Action Partnership), a consortium of large corporations trying to influence policy.
Technology research should be funded now without waiting for carbon regulations, which he expects to come into force in 2009 and 2010 followed by a transition period.
"A vision of a low-carbon world is a hallucination without technology," Rogers said. He said the U.S. federal government is funding research and development in energy at 50 percent of the level it was in the 1970s.
Energy efficiency technology, such as smart grids, should be adopted immediately. But policy makers need to create the same incentives for energy efficiency as they are for renewable energy, like wind and solar, he argued.
He called for "decarbonizing" the electricity power grid. Once plug-in hybrid vehicles come online, a cleaner power system will effectively address cleaning the transportation sector as well, he said.
"I think the technology can do it. We just need to spend the money," he said, complaining about a lack of focus on climate change among policy makers. "Where the hell is the sense of mission? The mission is solving climate change."
At the same time, Rogers cautioned against policies that will dramatically raise the price of electricity for consumers.
In particular, he said that certain states are at a disadvantage to one policy proposal that is the equivalent to a carbon tax because they generate power from coal, which is a dirtier form of power generation than natural gas or nuclear.
"If you have a consumer revolt, one, it will never get passed and secondly, even it does, it gets repealed. So it's very important for us to get that right...
(Policy) has got to be affordable, it's got to be a transition, it has got to make sense, and we need a political consensus to go forward. We can't afford to get started and stop. And we can't delay. We need to get started even faster," he said.
Rogers also called for a fundamental change to utility regulation that does not tie the company's revenues to the amount of power it sells.
Instead, the utilities that can run their power networks most efficiently through software should be the most successful financially, he said.
"I want to change my model so that I create value not by building power plants. I create value by optimizing those networks," Rogers said.
Duke Energy and smart grid company GridPoint said on Thursday that they have found a way for people to charge plug-in hybrid cars in a way that won't bring the power grid to its knees.
The companies said that they have completed a test using GridPoint's SmartGrid Platform device to charge up cars after 10 p.m.
The timing of when during the day plug-in hybrid cars are charged is crucial.
One of many plug-ins, Chevy's Volt due in 2010.
(Credit: Martin LaMonica/CNET Networks)Oak Bridge National Laboratories earlier this month released a study that found that timing is everything when it comes to plug-in hybrids.
In the worst-case scenario, the United States would need to build 160 new power plants to accommodate plug-in hybrids. That's if people charge their cars at 5 p.m., at the tail end of the daily peak power demand on electricity grid.
But if cars were charged starting after 10 p.m. using smart grid technologies to stagger the timing, the U.S. would need between zero and eight new power plants, according to the study's author, Stan Hadley.
Duke Energy engineers did exactly that. Using GridPoint's technology, they started to charge plug-in hybrids at 10 p.m., rather than the moment car owners plugged them in.
"Smart charging is an essential capability for Duke and all electric utilities as PHEVs (plug-in hybrid electric vehicles) enter the market. Through this capability, we're able to reduce stress on the grid during peak periods and keep rates low," said David Mohler, chief technology officer of Duke Energy, in a statement. Mohler joined the board of GridPoint last October.
In a previous interview with CNET News.com, GridPoint's Chief Operating Officer Karl Lewis said that U.S. utilities are not at all prepared for the stress that the anticipated growth of plug-in hybrids will put on the grid.
"If suddenly you have 20,000 or 30,000 rechargeable cars--with maybe 50,000 in a few years--plugging into the grid at night, utilities have to react to that or you'll have serious problems," Lewis said in an October interview. "You see plug-in hybrids becoming a big issue; it's a tidal wave coming at utilities."
Separately, GridPoint announced on Thursday that it has raised $15 million from Quercus Trust and has expanded its board with prominent people, including Robert Danziger; Paul Feldman, chairman of the Midwest ISO; T.J. Glauthier, former deputy secretary of energy; R. James Woolsey, former CIA director; and Daniel Yergin, chairman of CERA.
To date, GridPoint has raised $102 million.
Most Americans now agree that something needs to be done to reduce our greenhouse gas emissions. Hopefully most Americans now appreciate that this is not a small, but even more so, not a simple problem. I am a big believer that the playing field for our low carbon future should start level, and the market should be structured to allow our major power and energy companies a chance to lead the way, instead of simply dishing out punishment for our combined historical choices. Carrots and sticks work well together, but sticks alone are not going to solve our global carbon problem. I think it is also important to ensure that our carbon legislation does not result in a higher cost to consumers in middle America, just because the Midwest happens to have been historically coal fired, than the cost to those of us living on the coasts. Jim Rogers of Duke Energy puts this much more eloquently than I do.
Duke Energy (NYSE:DUK), one of the largest power companies in the U.S., has been a long supporter of energy efficiency, and known for being forward looking when it comes to a low carbon future, smart metering, and advanced energy technologies, despite having a generation fleet that is 70 percent coal fired. Cleantech Blog is delighted to welcome Jim Rogers, CEO of Duke Energy, to give us his thoughts on the devil in the details from their perspective. It is heartening to see a major power company take on the carbon issue full force, and like Duke has done, push energy efficiency in a big way.
- Neal Dikeman, Cleantechblog.com
By Jim Rogers Chairman, President and CEO of Duke Energy
As we debate our differences on how to address the challenge of global climate change, surely we can agree on the end-goal--a secure, sustainable and affordable supply of energy now, and for future generations.
Most Americans also agree that we must act now--and begin building a bridge to an energy-efficient, low-carbon economy.
As the third-largest coal consumer in the United States, and one of the largest greenhouse-gas emitters, Duke Energy has a responsibility to be part of the solution. That means looking at not only how climate change affects our business today, but also the implications for the future.
We support federal legislation to address global climate change by putting a cap-and-trade system in place. The U.S. Senate is in the process of vetting a cap-and-trade bill introduced by Senators Lieberman and Warner in October. This bill is well-intended, contains some good points, and appears to have bipartisan support.
But on closer examination, questions arise. Who really stands to gain, and who stands to lose? What are the real costs to average Americans?
You would expect the bridge to a low-carbon economy to have a cost, just as you might pay a toll to cross any bridge. But should some of us have to pay twice? With the Lieberman/Warner approach, that's exactly what would happen.
Lieberman/Warner proposes to auction a large number of emissions allowances to the highest bidder. In effect, an auction becomes a carbon tax, levied on consumers in the 25 states that depend on coal for electric power--primarily the Midwest, the Great Plains, and the Southeast.
Electric power customers in those regions would have to pay for the auctioned allowances upfront, and then pay again later to upgrade power plants, or build new ones, as carbon-control technologies become available.
A better approach is to allocate allowances at no cost to generators who emit greenhouse gases--and reduce the number of allowances over time, while new carbon-control technologies are being developed and put in place.
Some say that an auction is the only way to take action to reduce emissions, but history tells us otherwise. Allowances were not auctioned under the 1990 Clean Air Act Amendments; nearly 97 percent of them were allocated at no cost. Since then, new technologies to reduce sulfur dioxide and nitrogen oxide emissions have been developed and implemented. Those environmental controls have reduced emissions by more than 40 percent since 1990, and they continue to decrease, without dramatic rate hikes. In fact, the nation's average electric rates have declined.
In contrast, some estimates put the Lieberman/Warner bill's cost to the average family at more than $1,000 per year, while emissions traders would stand to profit greatly from a volatile market for carbon allowances. According to Bloomberg, the Lieberman/Warner bill would create a potential $300 billion annual carbon-trading market by 2020.
So the question comes down to this--are we interested in protecting consumers or enriching emissions traders?
Customers who live in the Midwest, the Great Plains, and the Southeast did not choose to get a large portion of their electricity from coal--it was a matter of economics, geography, and geology. They should not be punished for decisions made decades ago, in good faith, using the best and lowest-cost technology of the time, with regulatory approval--and long before anyone knew about the impact of carbon emissions on climate change.
And before we dismiss coal as a viable energy source for the future, consider this: The U.S. is sitting on more than 250 years of coal reserves, more than any other nation in the world. This rich natural resource has untapped potential for ensuring our country's energy security. The challenge is primarily technological--to find smarter and cleaner ways to use it, such as carbon capture and storage. Until those technologies are available, we must continue to use our existing coal resources and protect the interests of consumers who rely on coal.
The goal for carbon legislation should not be to punish utilities for building coal plants to keep the lights on in the past. It should be to create the incentives to put new clean technologies in place for the future--not just clean coal, but also nuclear and renewable energy, natural gas and the fifth fuel--energy efficiency.
Under the Lieberman/Warner approach, electric power customers in half of our states will carry a disproportionate share of the burden. We need to pass climate legislation that is fair to all consumers and protects the economic interests of all states and regions. Our climate is at stake, and so is our economy. By allocating most allowances, following the precedent set by the successful Clean Air Act, we believe both can be protected.
Jim Rogers is the CEO of Duke Energy, writing as a guest columnist on the Cleantech Blog.
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