Changing the energy game with the ‘power of one’

By Elisa Wood

May 23, 2012

Who among us has not eagerly described the smart meter to a non-energy person only to be greeted by a blank stare, or worse the retort: “Why would I want to track my electricity costs all day?”

You try to explain the profound applications: smart appliances that talk to the power grid, consumer clubs that sell energy savings, your car serving as a power plant. But the conversation then becomes one about fascinating toys, not a world change.

A new paper by Joseph Stanislaw, independent senior energy advisor at Deloitte, eloquently gets to the real meaning of smart grid. Moving beyond the gadget talk, he describes the bigger picture, how new energy efficiency and smart technologies will democratize energy.

Energy efficiency could have “a greater impact on the global energy picture than any other development,” according to the paper, titled Energy’s next frontiers: How technology is radically reshaping supply, demand and the energy of geopolitics.

“The breakthroughs have been stunning, and often elegant in their simplicity. Among the least appreciated technologies are those that empower companies and individuals to understand and manage—and thus significantly reduce—their energy consumption. Last year, venture capitalists invested $275 million—up 75% from 2010—in start-ups that make software and other technologies to manage energy use,” the paper says.

Stanislaw explains how smart technologies are bringing about ‘the Power of One’ in the energy game.  No longer passive receivers, consumers and businesses become active choosers; hence they influence the kind of generation plants we build – or if we build them at all – simply by the way they use electricity. Our market signals, not central planning, shape the infrastructure we build.

The Power of One idea often gets lost in political discourse about energy. Debate tends to focus on wind power tax incentives, solar trade wars, the pros and cons of hydraulic fracturing and access to public lands to drill oil.

But when it comes to electricity, it will be the Power of One that changes the playing field most by giving the individual control over energy, much the way the Internet gave us control over information. As a result, even if governments fail to act effectively, corporations and individuals now have the ability to “make a radical difference in their own consumption—and thus to materially influence the broader energy game,” the paper says.

More specifically Stanislaw explains: “The new energy-related software and hardware on the market and in development—smart meters, smart appliances, demand management programs, and so forth—liberate individual actors from being at the mercy of broader forces.” This liberation, or shifting of control over energy decisions from nations to individuals, transforms what has come to be known as ‘the Great Game’ – the wrangling of nations over energy supply.

While the Great Game previously focused on oil, technology is the new prize.

“The ‘Great Game of the 21st Century’ is the technology continuum driving along the development curve from 1.0 to 2.0 to 3.0—with each version coming faster than the one before. The future is one of continuous research and development, informed investment job creation, and greater energy security—without sacrificing the environment,” the paper says.

Rapid-fire technology change heightens the need for sustainability planning by businesses, he adds. And the ability to collect and understand data  about energy becomes increasingly important. Whether the company makes shoes or semi- conductors, energy is part of its business. All companies become energy companies in a smart grid world.

Stanislaw describes a “virtuous energy cycle” that occurs for households and companies that pursue efficiency: They save money and protect the environment. Moreover, “the consumption of energy is no longer just an economic act—this is becoming a conscious act and an act of conscience. This will likely intensify in the coming years.”

Stanislaw’s paper is a good read. See it here.

Pink on Green: How to ignite the second electrical revolution

By Elisa Wood

April 4, 2012

The electric industry is good at building things. That’s how it solves problems. Is there a threat of blackouts? Develop a new natural gas-fired plant. Worried about climate change? Build wind and solar power. Does electricity cost too much? Install a transmission line to import cheaper power.

But build-to-solve represents only half of the equation in the new world of smart grid. The other half, the part that stumps the industry, is solve-without-building.

Rather than adding more energy, smart grid tries to wring maximum efficiency out of the system by changing the way we consume electricity. But it turns out, trying to direct human energy behavior makes cat herding look easy. To get people to pay attention to their energy use, utilities and private companies are experimenting with alluring gadgets and social motivators. So far, success has been minimal. Thomas Edison’s light bulb has been such a smashing success for the last 100 years, none of us want to turn it off.

So what will it take?

The Edison Foundation recently looked outside the industry for some answers, inviting Dan Pink, best-selling author of “DRIVE: The Surprising Truth About What Motivates Us” to speak at last month’s Power the People 2.0 conference in Washington D.C.

Consumer motivation has become a common conference topic. But Pink’s talk was different. He stepped back and took a broader view and asked: How do we motivate the people who are trying motivate the consumer? Pink calls this “the science of how people do extraordinary things.”

The power industry’s creative thinkers need to bust out of their intellectual silos to ignite the “second electrical revolution,” according to Pink. But smart grid represents a particularly difficult problem for them because the industry is trying to invent gadgets consumers are not demanding. The electric grid needs the gadgets and needs consumers to use them. But consumers would rather think about their next iTunes download or where to buy the tastiest strawberry. How do you get consumers to want a smart plug or home energy display just as much? Some in the industry say smart grid is doomed because it not born of household demand but of the power industry’s need.

Pink has another view. He asked members of the audience to raise their hands if they own an iPad. Half did. Then he asked how many of them knew they needed one two years ago. Only one hand went up.

Therein lines Apple’s genius; its ability to give the world something it didn’t know it was missing. Can the power industry do the same with smart grid? It must first recognize that this is a skill more likely to be found in artists than engineers. “I think the cognitive skills of artists today are the most important cognitive skills in the economy,” Pink said. “We need scientist that think like artists and artists that think like scientists.”

The electric industry also needs to reconsider the way it motivates creative employees. “It turns out a lot our intuitions about motivation are not quite right,” according to Pink. In fact, it’s downright “Newtonian” to assume that “when you reward behavior you get more of it, and when you punish behavior you get less of it.”

So forget the big bonus for the genius idea. While people need to be paid reasonably to perform well, big bonuses only motivate them to achieve short-term goals, like making a sales quota. “Igniting the second electrical revolution is not simple, is not short-term, but is complex and long term,” he said.

So what gets creative thinkers moving? Free time, as Pink tells it. He cited studies and examples of artists doing their best work without a commission and inventors achieving Nobel Prize-winning work off the clock. The business community is beginning to catch on to this idea, and some are offering a regular day when their inventors and problem solvers are encouraged to stop their required tasks and just work on anything that intrigues them. Many of these free hours have produced astonishing findings, some that the companies have been unable to achieve any other way.

“Complex industries, likes yours, complex ecosystems demand this kind of complex, silo-busting thinking. You’re going to get it, not through an elaborate system of incentives, but by hiring talented people and getting out of their way,” he said.

Perhaps, if Pink is right, and the electric industry listens, he’ll be able ask audiences in a few years how many own some amazing energy-saving device that no one has yet conceived, and many hands will fly into the air. Perhaps then the light bulb, as we know it, will finally be replaced.

Elisa Wood is a long-time energy writer whose work can be found at www.RealEnergyWriters.com

A Green Cloud is a Transparent Cloud

By Eric Woods
Pike Research
Guest Blogger, Energy Efficiency Markets
June 22, 2011

At Connectivity Week in Santa Clara, recently, I took part in a series of panel discussions on data center energy efficiency. The discussions covered a wide range of issues from the practicalities of infrastructure optimization to the possible role of data centers in demand response schemes. There was a particular focus on the importance, and also the challenge, of making a closer connection between overall data center efficiency and the effective work being done by IT equipment. A more general theme was the sheer complexity of the changes happening in the data center industry. It seems everything is in flux, from changes in the power grid to the impact of smart devices on IT demand. This is the context in which operational changes like the move to more dynamic management of power and cooling infrastructures and the introduction of virtualization are taking place.

In the midst of these changes, it was a pleasure to hear what some of the leading companies are doing in terms of increasing the energy efficiency and lowering their environmental impact of their data centers. An important point was made about the benefits of sharing good ideas, experience, and best practice. The data center professionals at the event, which included people from Cisco, NetApp, and Sybase/SAP, were generous with the insight they provided on what they are doing in their data centers and the challenges they face. The question was also asked why some data centers are less willing to talk about the specifics of their operation. While commercial sensitivities are often cited, the issues that are being addressed in terms of cooling efficiency, for example, can hardly be seen as business critical. More importantly, lack of transparency makes it harder to assess the real environmental impact of a given data center.

This discussion came back to me as I read the latest Greenpeace report on the environmental performance of the IT industry. In the report, “How Dirty Is Your Data?“, the organization takes a critical look at the environmental impact of the growth in data centers. Greenpeace is largely positive about the role that IT can play in reducing carbon emissions and other forms of environmental damage. It also recognizes the impact of the move to cloud computing on demand patterns and on how the industry operates. However, the report makes the case, that cloud computing will only be as green as the data centers that support it. We have made a similar point regarding how realizing the potential environmental benefits of cloud computing depends on how the model is actually instantiated. One of Greenpeace’s strongest criticisms of current practice is that there is still a tendency among some of the biggest players in the cloud space to build data centers in low-cost energy regions that are largely dependent on coal-powered generators. The organization’s bust-up with Facebook over this issue is well-known, but it points out that other major cloud providers have also shown inconsistency in their location planning for data centers. The irony, of course, is that these decisions are often being made in parallel with much-lauded moves to use more renewable energy in other data centers or to improve the energy efficiency of operations. On the positive side, Greenpeace sees some signs of more considered and transparent strategies for data center location emerging, with Yahoo! cited as a pathfinder in this regard.

However, the strongest point made by the Greenpeace report and the one that connects back to the discussions in Santa Clara, is about the general lack of transparency on these issues. As the report says, “much of the information that would allow us to assess the net benefits of the cloud by measuring the true environmental cost…is missing.” The role of data centers as “the factories of the Technology Revolution” means that we need to develop greater visibility on the choices being made about their energy consumption and their energy sources. Any company has the right to keep its operational data private, but customers, investors, and employees have a right to know how well it is living up to its own ethical claims and how it compares with its competitors on the sustainability of its operations. If cloud computing is to live up to claims of being a greener solution, then we need more open reporting and standard metrics on energy use in data centers to enable an objective assessment of how well providers are performing.

Pick up a free copy of Energy Efficiency Markets newsletter at RealEnergyWriters.com.

Looking forward to the day smart grid dies

By Elisa Wood
May 25, 2011

The title of this blog might strike you as kind of weird, especially this week. After all, the Electric Power Research Institute made the news with a study showing that smart grid is going to be far bigger than we first thought.

Smart grid in simplest terms brings to the electrical grid the digital intelligence of computers and the Internet. Just seven years ago EPRI expected smartening the grid to cost $165 billion. But its new report says that the 20-year investment may be nearly three times as high, $476 billion. That’s a lot of new business for utilities, information technology companies, smart grid vendors, engineering firms, demand response providers, and the myriad of other enterprises that can help with this massive rebuild and reboot of the US power system.

Most important, the benefits to society will far outweigh the costs, possibly amounting to $2.028 billion, EPRI says. To put that in perspective, if we do not smarten the grid, the average electric bill will probably rise by 400 percent over the next two decades; if we do, it will likely go up by only 50 percent, according to Clark Gellings, EPRI fellow, quoted in a Fox News article.

Smart grid will bring enormous efficiency and new function to the way we generate, distribute and use electricity. I won’t go into details here but imagine (if you are old enough) the capabilities of today’s home computers compared with the typewriters they originally replaced. That’s the kind of technological leap smart grid promises for the entire electrical system.

So why has EPRI pushed up its estimate of smart grid costs? Inflation played a role. But the larger reason is that smart grid, well, just keeps getting bigger. Initially energy planners envisioned smart grid bringing better efficiency, reliability, security and other features to power production and delivery. But they’ve realized that smart grid can do a lot more than that. Smart grid can help integrate renewable energy, cut our electricity use, exploit full potential of the electric car and create new power storage opportunities.

Smart grid even appears to be paving the way for consumers to manage their energy use through energy home automation – should it take off. Skeptics say it won’t. They doubt any but hardcore conservationists or Scrooges will want to get into the nitty-gritty of aligning their home energy use with the rise and fall of power prices daily. But again, going back to the home computer analogy, the common refrain 30 to 40 years ago was that few people would bother buying a home computer. Maybe a computer would have value for writers, engineers or those with home offices. But otherwise why spend the money? And today, of course,hardly an American is without one. Most of us did not envision how much the computers could offer us back then; we may be short-changing smart grid the same way.

So now that I’ve explained the wonders of smart grid, why do I say I look forward to its demise?

Not long ago I listened to a Green Builder Media’s webinar with Guy Kawasaki, a VC and author of Enchantment: The Art of Changing Hearts, Minds, and Actions. Kawasaki talked about the kind of customer service and marketing that makes a business ‘enchanting.’ One word of advice, he said, is that builders should stop marketing themselves as ‘green.’ Why? Because being green, he said, is no longer a service that is above and beyond customer expectations. Its commonplace; the perception is that every builder is green or at least should be. (Note that he lives in California.)

Some day this will happen to smart grid. The big box stores will stop slapping ‘smart’ on appliances, since they will all be smart. Utilities will no longer install smart meters. Just meters. Studies will no longer appear measuring the size of the smart grid. Its intelligence no longer an oddity, we’ll drop the ‘smart’ adjective. When the smart grid simply is the grid, then this industry will have arrived.

See “Exporting US Energy Efficiency,” by Elisa Wood and Lisa Cohn athttp://www.realenergywriters.com/products/.

May the Force be energy efficient

By Elisa Wood

March 9, 2011

It was hard to get excited about IBM’s Watson besting two humans in the TV game show Jeopardy and walking away with a $1 million prize last month. After all, thanks to the entertainment industry, we’ve seen robots and computers win in all kinds of ways, from HAL duping the smart astronauts in2001: A Space Odyssey to R2D2 disabling the Death Star. What’s the big deal about racking up some trivia points?

Stay tuned because Watson’s got bigger plans. This computer system understands natural language and can use that ability to solve problems and answer questions precisely. As IBM tells it, Watson can use this ability to bring us beyond smart grid into genius grid.

If you’re an energy company looking to hire something that appears to be aGoogle/C3P0 hybrid, consider Watson’s curriculum vitae. IBM says that Watson can:

• Assist energy personnel working in the field and educate consumers about their energy use – a distribution line worker and marketing specialists all in one.
• Help with decision-making in energy control rooms. Watson where were you in August 2003?
• Be on standby via cell phone (no lunch breaks) to answer queries from field personnel who need help with troubleshooting. Watson can suggest the correct action to fix a power disruption and identify causes of certain problems in the field.

At a more personal level, Watson can teach humans about their energy consumption, according to IBM. Watson’s a quick study and can assimilate energy best practice databases. Consumers might query Watson on how to improve their energy management. Watson would answer by drawing on deep knowledge of smart meter data, weather and historical information.

Watson, it appears, may put our robot heroes from Star Wars and 2001 to shame. I’ve always wondered how much energy The Force used, especially when theJedi were all using their lightsabers at once. Maybe Watson can offer them a little advice on peak shaving.

This blog is open source & copyright free with attribution to www.realenergywriters.com.

Your electric meter: A villain or hero?

By Elisa Wood

February 23, 2011

Before energy became a hot topic, no one cared about the electric meter. It was the box on the house we all ignored except the guy from the utility who dodged the barking dogs to take a reading from it once in awhile.

It is a sign of our times that this box now inspires enough emotion for people to take to the streets. Protesters gathered outside the California Public Utilities Commission last week claiming that new metering technology not only makes people sick, but also violates their Constitutional rights.http://stopsmartmeters.wordpress.com/2011/02/18/feb-16th-protest-at-the-ca-public-utilities-commission/ Such opposition has been going on in California for months and has spread to other states.

On the other end of the spectrum, new or ‘smart’ meters are hailed as the addiction counselors that will save us from our dependence on foreign energy. Thus, utilities are rapidly replacing our ignored ‘dumb’ meters with the new smart version. North America and Europe will replace 45% their meters with smart ones by 2015, according to Pike Research. http://www.pikeresearch.com/research/smart-meters

So it is not a surprise to see that the Electric Power Research Institute weighed in recently with a study on the safety of smart meters. The study concluded that the radio-frequency (RF) exposure levels from the meters – at least the type examined by EPRI –are too low to be any danger to human health. In fact, the study found smart meter emis sions, even at the maximum point, are about equal to emissions from WiFi routers and radio and television transmission. They are far lower than exposure fields from cell phones or microwave ovens, according to EPRI.www.epri.com

Known as advanced metering infrastructure (AMI), the new wireless meter uses digital technology to allow for two way communication between the household and the utility. Used optimally, the smart meter provides price signals from the utility so that consumers can choose when to do laundry, cook dinner or undertake other energy-consuming activities. The idea is to discourage use of the electric grid when it is under strain. This allows us to cut back on the number of peaking power plants we must build. These plants, which use fossil fuels, emit harmful pollutants.

So whichever side you take, whether you think of smart meters as hero or villain, there are health issues to consider. Smart meters increase RF exposure; lack of smart meters over the long term increases emissions from power generation.

No doubt we will hear much more about this issue. Indeed, EPRI sees its study as just the first step in responding to public concern.

But one thing is for certain, the meter is no longer the ignored box on the house. Like much in energy, its significance is rising in US policy, economic and health debate. Energy is front and center in the public psyche. That’s a good thing, since smart boxes will only get us so far in energy planning; smart consumers are the key.

This blog is open source & copyright free with attribution to www.RealEnergyWriters.com. Visit Elisa Wood at www.realenergywriters.com and pick up her free weekly newsletter and podcast.

Smart Grid needs a Facebook

By Elisa Wood
We think we know how smart grid technology will change the utility industry. But do we really?

Take a look at this documentary made in 1969. It’s a view of how the world perceived the coming Internet (It’s also a pretty amusing look at how sexist our society still was at that point.) http://andrewsullivan.theatlantic.com/the_daily_dish/2010/04/before-the-internet.html.

While the film gets some concepts right, like online banking, it misses the Internet’s most world-changing benefit, the democratization of information — the production, distribution and consumption of data by everyday us, free from gatekeepers.

The film also misses the pizzazz and the fun of the coming Internet. There is no You Tube, no Google, no Wikipedia. And look at the kids. They are playing with physical toys. Why isn’t the Mom yelling at them for being on Facebook all day?

The Internet’s emergence – and our misunderstanding of what it would become – may provide hints about the future of smart grid. After all, many parallels exist between the two.
The Internet offered up democratization of information; smart grid promises democratization of electricity, giving consumers the ability to control at their fingertips power production, distribution and consumption. Indeed, if smart grid’s vision plays out to its fullest, you in essence become the power plant. Your in-home generators produce power that is stored by your plug-in electric vehicle, and your home computer controls the electricity distribution. The end game is energy savings and lower costs.

Some argue that the smart grid revolution will have a more profound impact on how we live than did the Internet. The megawatt, after all, is more powerful then the megabyte. Without the megawatt, the megabyte could not be.

Forty- years ago we had a pretty bland vision of the coming Internet. Had we been worried then about getting people to use the Internet – the way we now worry about getting them to use smart grid devices — we probably would have plumbed the depths of behavioral psychology for strategies. We would have asked: Can we get people to use the Internet if we show them that their neighbors do? How about if we demonstrate to them how much money the Internet will save them? Will they shop on the Internet if we explain to them it is better for the environment than driving to the store?

And, of course, all of that hand-wringing would have been a waste of time. What did it take to get people to use the Internet? Some really smart kids in dorm rooms with bright ideas: Bill Gates, Larry Page, Sergey Brin, Mark Zuckerberg and the like.

The electric power industry needs its own crop of dorm room geniuses that will find ways to make the smart grid irresistible to the consumer. If they emerge, maybe the next generation of parents will be lecturing their kids to get off the kilowatt zapper and go outside and play. After all, you can’t spend your whole day eking energy savings from the house.

Elisa Wood is co-author of “Energy Efficiency Incentives for Businesses 2010: Eastern States,” available at www.realenergywriters.com.

Energy Efficiency and PV: Together Forever

By Elisa Wood

We have seen a marriage of the energy efficiency and solar energy industries as the US has worked to green its buildings. In fact, some financing programs require that all cost-effective efficiency be pursued before solar panels are installed.

Here Elisa Wood interviews Liz Merry, owner of Verve Solar Consulting, about how the solar industry views energy efficiency and the outlook for companies that tackle both EE and PV.

What do solar installers think of the idea that a building should be made energy efficient before solar equipment is installed?

I’ve heard some solar leaders say “Energy efficiency eventually, sales first.” That makes complete sense in some cases, where the solar installer has recruited the customer and the customer already has an energy efficient home. If the customer has to call another contractor to come in and get the building 5 percent more efficient at a high cost before the solar project can go forward it is going to kill the solar project.

But, in the cases where the home is older and simply leaking energy out of its thin windows and walls, the solar company that recruits this customer has an opportunity to sell a bigger job by doing the energy retrofit project, or partnering with a building performance contractor. I picture the energy efficiency first requirements as a mandate for smart contractors to become energy service companies, not just solar, not just efficiency.

Energy retrofit work isn’t always easy, and sometimes it is hard to find energy contractors. Can solar installers always find contractors to the work if a home must be made efficient before solar is added?

It’s not easy, but it’s possible. And where there is challenge there is opportunity. The building performance contractor business is about to get very busy, and the entire trade will become more efficient and standardized with experience, just has it has developed in the PV and thermal businesses over time. We’re just in that rough spot between initial demand creation and plenty of supply available.

The EE industry seems more mature than solar in the United States. Will it create as many new job opportunities as solar?

You’re right about the energy efficiency industry being more mature than the solar PV industry. Efficiency technology and energy management controls has been a big business since the early 1990s, and in my state of California we’ve had ratepayer energy efficiency programs since the early 1980s.

But growth is continuing in EE. As utilities begin meeting mandates to change their energy mix the need to reduce and then control energy demand becomes highly profitable.

The new job opportunities are for engineers of every type as more engineering and construction firms begin to tackle retrofit services and energy management. But not just engineers. There are thousands of program managers, analysts, customer service representatives, and marketing-related positions behind the effort to get billions of dollars of energy efficiency rebates out the door. These jobs are usually with consulting and contracting firms that actually implement the efficiency programs on behalf of the utility.

We see a lot of discussion about smart grid and home energy use. But shouldn’t policy focus on the big energy users, commercial and industrial buildings?

You said the magic term: smart grid — the elusive king of all change agents in terms of merging megabytes (of data) and megawatts (of energy demand.) People focus on what they know best, and as we all live in homes, the residential market will get the most buzz on and off line. When smart energy management technology infiltrates our homes, it will be accelerated in our businesses and institutions.

The vision for a smart grid is to provide users the information they need to really manage their energy use, and enable grid operators to balance the grid when there are millions of energy producers, not just a hundred thousand. So, no, I don’t think it helps to focus on just the largest energy users. The energy grid will be the basis of a sustainable economy when both the largest users and the majority of users can intelligently manage their own usage.

Liz Merry will lead a half-day workshop, “Solar Industry Primer,” October 11, 2010 at Solar Power International in Anaheim, Calif., http://bit.ly/cKb60F.

Elisa Wood is co-author of “Energy Efficiency Incentives for Businesses 2010: Eastern States,” http://www.realwriters.net/rew/rtlnkpr.htm

Smart meters: Truly a cure for energy blindness?

By Elisa Wood

July 1, 2010

And now for a dose of reality.

No doubt smart meters are a good thing, but even their most ardent fans must admit that a degree of hoopla surrounds these little digital boxes. We hear that if consumers can just see how much power they use in real time, and what it costs, our energy woes will be no more.

Smart meters will even cure the blind. The energy blind that is.

“It can be difficult to separate the hype from legitimate claims,” said the American Council for an Energy-Efficient Economy in a new report that evaluates what works – and what doesn’t – when it comes to smart meters.

ACEEE points out that we no longer load the stove with coal and wood for our primary energy. Instead, gas and electricity flow unseen to take care of our needs. Since we see only a monthly bill, we have no idea what energy costs in real time, how much we use, or even the acceptable social norm for energy consumption.

Thus, most people in the US are “among the energy blind,” says the report. Asking us to save energy based on our monthly bills alone is like asking a dieter to lose weight without a scale. “Perhaps it can be done, but the task is a lot more difficult,” the report says.

But seeing how much energy we use is one thing; acting on it another. Smart meters will not do their job if we rely on the technology alone. The consumer needs good reason to act, according to ACEEE.

These findings are important because the US and other nations are making a huge investment in smart grid technology. Smart meters represented only about 4.7% of US household meters in 2008. But their market share is expected to grow to 40% over the next five to seven years, according to the report.

The report looked at 57 studies, three decades of research in Europe, North America, Australia and Japan, and found that smart meters can be effective. In fact, households using them have reduced electricity use 4% to 12%.

But much depends on how the meters present information and feedback and how we respond. Ultimately, the smartness of smart meters relies on utilities understanding human psychology.

The report offers several interesting insights about our energy behaviour. For example:

• We are less apt to respond to programs that focus on reducing energy at specific times (peak periods when costs are high) than reducing energy all the time.
• We need to feel our actions truly make a difference.
• An energy crisis is more likely to motivate us to conserve than arguments about climate change, especially if we live in the US.
• Smart meters may be unnecessary. We like our cell phones, and if only 20% of US consumers used them to manage household energy use, we could significantly reduce energy waste.
• We need feedback on a long-term basis to continue to save energy.
• When we receive feedback on energy use, we tend to change our habits and make small changes like installing weather stripping. To a lesser degree, we replace appliances, although they offer the most energy savings.

There has been a lot of talk about how smart grid will marry two giant industries: energy and information technology. True. But the ACEEE study makes apparent that a third field needs to play a big role: behavioural science.

“The bottom line here is very simple: Smart meters in and of themselves are just not ‘smart’ enough to get the job done for consumers and our economy. While advanced metering provides a useful tool to save energy, cut consumer electric bills and reduce greenhouse gas emissions from power plants, utilities need to use these advanced meters to provide consumers with information on their consumption in ways that grab consumers attention and encourage them to take action,” said John “Skip” Laitner, ACEEE’s director of economic and social analysis.

The report can be found at http://www.aceee.org/press/e105pr.htm

Visit www.realenergywriters.com to pick up a free Energy Efficiency Markets podcast and newsletter.

The utility of the future? Think shopping mall

By Elisa Wood

April 1, 2010

The energy world is about to turn upside down. With the coming of smart grid, the electricity consumer becomes the electricity seller; the passive home appliance becomes the active energy manager; the grid repairman becomes the grid itself.

Such an upheaval means that the energy world needs to start thinking about a new business model, says a recent report by IBM Global Business Services Energy and Utilities.

The fact that IBM is advising the energy industry is itself a point of interest, yet another signal of the new market opportunity emerging within the energy arena for information technology. This opportunity has drawn the attention of not only IBM, but also CISCO, Google and many others.

So how does IBM see the energy business model changing? First consider what it has been for the last century: a grow-and-build model. This model brought universal electrification to the United States. Utilities encouraged more and more consumption, and they built power plants and transmission to the far corners of the nation to serve the growing demand.

“The success of this strategy was remarkable. In the United States for example, from 1920 to the mid 1960s (excepting the period of the Great Depression), usage increased at seven percent annually – about five times the rate of usage of all forms of energy combined and three times the rate of economic expansion in general,” says the IBM report, “Switching perspectives: Creating new business models for a changing world of energy.”

But today we no longer need such expansion. The grow-and-build model is obsolete, yet continues to be used by utilities. As a result, utility stocks, which in the 1940s-1960s significantly outperformed the Dow Jones Industrial Average, now lag well behind.

Instead of expanding their territory, utilities are being called upon to change their product — to offer energy that is more efficient and clean and service that is more consumer-friendly.

Smart grid technology can help utilities meet today’s imperative. But it brings with it a new and complex relationship between customer and utility. This is because smart grid allows consumers to control energy usage via a home computer. Heck, their appliances can control energy usage without the consumer doing anything. And with increased use of solar energy and other distributed technologies, the home also becomes power plant and storage facility for the electric utility.

“Companies willing to tackle industry model innovation and sit at the nexus of new complex relationships among business partners and customers will be well positioned to create and capture new demand for emerging products and services. Strong growth in revenues and profits – albeit accompanied by some risks – is achievable in multisided business models because of the embedded network economies of scale (i.e., margins increase with network size),” says the report.

IBM calls this new business model “a multisided platform.” What does it look like? Think shopping mall.

“Manufacturers, retailers and shoppers all benefit from having a single location where they can meet and transact business. A wider variety of stores and services brings more shoppers; more shoppers bring higher sales volumes for manufacturers and lower costs for retailers (and, in theory, also lower prices for shoppers). Thus, some element of network economy is bundled into the shopping mall value proposition. The platform owner (the mall operator) extracts some of this value in the form of rent to store owners and, in some cases, service fees to shoppers,” says the report.

If indeed this is the future, it won’t be embraced quickly or easily by utilities, which are notorious for their caution. For those who do move forward, here is some of what IBM advises.

Be sure your current customer base is sizable enough to ensure that you get a meaningful head start.

But don’t hurry. History has shown that later movers may actually benefit from standing back from the first wave.

Time the announcement of your new business model carefully to avoid shocking long-time constituencies or alerting rivals too soon.

Consider corporate culture changes that will ensue.

What might this new model mean to the utility business? A new kind of grow-and-build. Except this time the industry will not conquer the frontier with power plants and transmission, but information technology. See the full report here: http://www-935.ibm.com/services/us/gbs/bus/html/ibv-electric-utility-innovation.html?ca=rss_bcs

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Efficiency “sweet spot” for investors

By Elisa Wood

February 18, 2010

Energy efficiency appears to have married rich in partnering with smart grid. Yet another report shows that together they have formed what has become today’s most appealing clean tech sector for venture capital.

Ernst & Young, using data from Dow Jones VentureSource, recently reported that financing rounds grew 11% in 2009 for energy efficiency, this as deals for the clean tech sector as a whole dropped by 16%.

The findings echo recent conclusions by Peachtree Green Advisors that found money pouring into the efficiency sector last year, pumping up total deal values by 664.7%. (See Elisa Wood’s January 21 blog, “Investors and public back energy efficiency.”)

What’s attracting investors? Ernst & Young – which incorporates smart grid into the efficiency category — points out that these technologies require little capital and can be commercialized quickly — characteristics of special appeal in an economy still nervous about high risk. While not exactly the stuff of dorm room startups, they are more akin to dotcom inventions than capital-intensive power plants. Smart grid revolves around digitalizing the electric grid to achieve greater efficiency in energy use.

“Energy efficiency is in the sweet spot of many venture capital investors in terms of skill sets and funding parameters, particularly given its basis in information technology. Consequently, we may see investor participation in clean tech broaden,” said John de Yonge, Ernst & Young, associate director, Americas Cleantech Network.

Energy efficiency’s share of total financing activity in 2009 rose from 24% to 32%, Ernst & Young said. The category raised $593.3 million for 2009; of that $252.8 million came from fourth quarter 2009.

The report cites the $105 million investment in Silver Spring Networks as the largest deal of the fourth quarter. The Redwood City, California company provides smart grid networking and services for Florida Power & Light, Pacific Gas & Electric and Pepco Holdings, among others. Institutional investors led the financing round, including several repeats: Google Ventures, Foundation Capital, Kleiner Perkins Caufield & Byers and Northgate Capital.

Government policy is clearly playing a big role in energy efficiency’s appeal. The areas of the country with the most clean tech investment have strong clean energy policies: California and New England.

What’s in store for 2010? The picture, so far, is good for efficiency companies looking for customers. Ernst & Young found that half of the major global corporations with more than $1 billion in revenue plan to spend $10 million on clean tech products and services in 2010, with 22% spending at least $100 million.

More details here: http://www.ey.com/US/en/Newsroom/News-releases/Venture-capital-2009-investments-in-cleantech-fall-50-percent-to-2-billion-dollars-as-investors-shift-focus-to-energy-efficiency.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Hot sectors for energy efficiency

By Elisa Wood

February 4, 2010

It’s clear that the energy efficiency industry is undergoing an unprecedented boom, spurred by state and federal support and movement toward a smarter grid. But for those in the industry, where exactly can the new business – and the jobs – be found?

Two new reports by Colorado-based Pike Research shed some light.

After years of focusing on bringing efficiency to manufacturing, policymakers are turning attention to deep retrofits for the home. Tax credits, low-cost financing, and other incentives make it easier for homeowners to install efficient heating systems, replace windows and insulate attics.

Thus, if you are a home energy auditor – or thinking of becoming one – you are in luck. The report forecasts that the energy auditing market will triple from $8.1 billion in 2009 to $23.4 billion by 2014. And from those audits will come recommendations that spur home improvements. Pike Research predicts a $50.2 billion market in the installation of new electrical systems, appliances and major equipment, HVAC systems, roofing, windows and doors and other efficiency improvements by 2014, up from $39.3 billion.

The more efficient homes need more efficient appliances, so the Energy Star appliance market also may see revenue growth. Under a business-as-usual scenario the industry is expected to generate $21.9 billion by 2014. But the market could see the addition of another $11.3 billion under a high-penetration efficiency scenario, says the study.

“Energy efficiency is stepping into the light after a long period of obscurity,” says Clint Wheelock, Pike Research managing director. “A number of factors are converging to make energy efficient residential products and services a hot sector over the next several years. These drivers include increased environmental awareness among consumers, government incentives, utility energy efficiency programs, and new offerings and rebates from product manufacturers.”

Meanwhile, the US also is realizing that a smart grid must be a safe grid. Increased attention is being placed on cyber security, measures to protect the electrical grid from attacks by terrorists and hackers, natural disasters, equipment failures and human error.

Companies that offer services and equipment to secure the grid are seeing a rapid increase in demand for their wares. Pike Research forecasts that from 2010 to 2015 about $21 billion will be invested globally in cyber security for the smart grid.

“No utility wants to be the weak link in the chain,” Wheelock says “The concern over grid vulnerability is driving utility technologists to work closely with systems integrators, infrastructure suppliers, and standards bodies to develop a robust framework for smart grid cyber security across multiple domains.”

The report finds that equipment protection and configuration management will experience greatest demand. Among smart grid applications, the firm expects that the greatest investments will go into cyber security for distribution automation (DA) and transmission upgrades, followed by security measures for advanced metering infrastructure (AMI) smart meters.

See www.pikeresearch.com for more details.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Smart Grid: The Game

By Elisa Wood

January 14, 2010

In his best seller “Outliers,” Malcolm Gladwell shows that it is not equipment failure or storms that typically cause planes to crash, but wrong decision-making. Much the same can be said for the power grid crash that took down a large swath of the Northeast in August 2003.

The emerging smart grid is supposed to make our power system more reliable. The bad news is that it also will add complexity to North America’s already byzantine power machine. So smart grid will only be as smart as the people who operate it.

The solution seems obvious: job training. But to hear Matt Sadinsky tell it, it’s not that simple. And he should know.

Sadinsky’s company, System Operations Success International www.sosintl.com, develops computer simulation and training programs to help workers operate the bulk power grid within standards set by the North American Reliability Council. The North Carolina company has provided NERC approved continuing education to thousands of engineers and grid professionals in the United States and Canada since 2002.

Operating the electric grid is not matter of flipping pages in a manual. Given the rapid and complex turn of events that can occur on the system, operators need gut understanding, according to Sadinsky. These are already very smart people. But how do you train old dogs new tricks, so that they can gain the same gut understanding of the latest rules and technologies? And how do you help them teach the pups?

Gladwell in his book says typically it requires at least 10,000 hours on the job to attain a proficiency that brings success. The utility industry, unfortunately, tends to rely on what Sadinsky calls “tribal learning,” a very slow process that can stretch training out far longer. Sadinksy describes it as the “some-guy-named-Joe-taught-me-everything-I-know” approach. After years of operating the system alongside Joe and experiencing various emergencies, the student gains the same gut instinct as the mentor.

However, utility tribal leaders are getting ready to retire in mass numbers and may leave before newcomers have their 10,000 hours or more of training. So SOS Intl has figured out a way to hasten the learning process, using a medium the up-and-coming generation can appreciate – electronic games. Through computer simulation the trainee gets hands on experiences in grid events and emergencies that it may take years to witness in real time. Rather than tribal learning, this system uses what Sadinsky describes as more rapid-fire “Huh?” and “Oh…” cognition (or in Canada “Eh?” and “Oh…”) The student has a chance to see the problem, test choices, and grasp the solution in the virtual learning-by-doing setting – without any real world crashes.

SOS Intl wants to bring this gaming method to the emerging smart grid. Thus, the company has applied for a $4.7 million federal stimulus grant with several partners — among them the University of California Los Angeles; George Mason University’s Center for Smart Power Grids; City of Burbank, California Department of Water and Power; Cleveland Public Power and the Southern California Public Power Authority.

They will use the money to study development of what they are calling Smart Grid — the Game. The simulated program will help operators learn how to handle issues involving solar and wind integration, storage, grid additions of plug-in electric vehicles, and other aspects of smart grid.

This project was proposed under the Smart Grid Workforce Training segment of the US Department of Energy Workforce Training for the Electric Power Sector Grant. Sadinsky expects to hear by January 31 if they won funding. Stay tuned to see whether or not the proposal creates a “Huh?” and “Oh…” for the DOE grant evaluators.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Is green energy our new plastics industry?

By Elisa Wood

December 17, 2009

If The Graduate were written today, Mr. McGuire’s career tip to Benjamin probably would have been “green,” rather than “plastics.” But it’s likely Benjamin would have responded in the same quizzical way: “Just how do you mean that, sir?”

It was difficult to envision the vast number of new products, businesses and careers that would emerge from the plastics industry following World War II. The same is true for the green energy industry today. A report issued December 16 by PricewaterhouseCoopers sheds some light.http://www.pwc.com/us/cleantechrevolution

To know where the business opportunities will be, watch the unusual alliances forming among industries, according to “Cleantech Revolution: Building Smart Infrastructures.” We see hints already as automakers, utilities, battery makers and communications providers ally in preparation for an expected $165 billion smart grid build-out. The report cites several examples, among them:

• Nissan’s partnership with San Diego Gas & Electric to build electric vehicle charging stations
• Echelon and T-Mobile’s deal to create wireless networks connecting utilities to smart meters
• Cisco assisting Duke Energy in building a smart grid

“As the build-out gains traction, it has the potential to support a proliferation of new businesses across sectors, much like the evolution of both the semiconductor industry and the Internet,” says Tim Carey, PWC U.S. clean technology leader.

Don’t be surprised, says the report, to see a national retail store chain partner with an electric battery maker to install charging stations nationwide for plug-in electric vehicles. A new wave of corporate mergers and acquisitions also could be in the cards. The opportunities are vast, especially when you consider the size of the smart grid. The US has 160 million households awaiting installation of smart meters. These new devices will require changes in the way we operate our electrical infrastructure, which encompasses 3,100 utilities, 10,000 power plants, 5,600 distributed energy facilities and 157,000 miles of high voltage transmission wires, says the report. How many better mousetraps can a system of this size support? More than we can imagine.

The clean technology, boom, however, depends heavily on consumer acceptance. If consumers find smart meters too complicated or plug-in hybrids unreliable, the game is over. To avoid this problem, organizations like the American Council for an Energy Efficient Economy are focusing on understanding customer motivation.http://www.aceee.org/conf/09becc/09beccindex.htm.

Use of smart grid technologies must become “pervasive and ingrained,” says the PWC report. Sunil Sharan, of the Center for American Progress, sees the smart meter becoming like the Blackberry, “with all sorts of applications.” Indeed, energy industry insiders often describe the next game changer – whatever it will be – as the cell phone of energy. But given how integral electricity is to our everyday lives, clean technologies need to become everyman products. Out of the corporate alliances, the mergers, the breakthroughs and the investment deals, maybe it’s not energy’s cell phone that will make fortunes, but its plastic wrap.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.