Intelligent Utility NovDec2010 by Springboard Creative

» DISTRIBUTION OPTIMIZATION

VOL 2, ISSUE 6 » NOVEMBER/DECEMBER 2010 » WWW.INTELLIGENTUTILITY.COM

Where smart grid meets business—and reality.

CAN ONE SMART GRID FIT ALL? ©©

Resilient organization

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Venture capital directions Smart money & smart grid

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The generation equation Streamlining financial functions

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Utility insights » ARIZONA PUBLIC SERVICE » AVISTA » BLUEBONNET ELECTRIC CO-OP » BURBANK WATER & POWER » CENTERPOINT » CLARKE ELECTRIC CO-OP » CONEDISON » GLENDALE WATER & POWER » NV ENERGY » OWEN ELECTRIC CO-OP » PSE&G » UNITED REMC » WASHINGTON-ST. TAMMANY

AN E N E RGY CE NTR AL PU B LICATION

Boeing Global Services & Support is a world leader in delivering value-added support solutions, with proven expertise in complex systems development and integration, performance-based logistics, cyber security and more. Ideal for the Smart Grid, renewable energy facilities, and utilities large and small to enhance efficiency and energy assurance. Maybe itâ&#x20AC;&#x2122;s time to put our power to work for you.

A t D T E E n e r g y, I t r o n i s p r o v i d i n g s m a r t g r i d technologyâ&#x20AC;&#x201D;for both electricity and gasâ&#x20AC;&#x201D;that t r u l y b e n e f i t s o u r c u s t o m e r s a n d o u r c o m p a n y. It provides consumers with more accurate information about their energy usage so they can track their consumption and demand via the DTE Energy website. The system aids us operationally through remote monitoring of our distribution system and by eliminating the vast majority of our estimated bills. A smarter future for our customersâ&#x20AC;&#x201D;thanks to Itron.

CONTENTS S PECIAL REPORT DISTRIBUTION OPTIMIZATION

36 Big tools for the

distribution network Distribution management systems provide holistic view of the system

DEPARTMENTS

4 6

FEATURES // NOVEMBER/DECEMBER 2010

Can one smart grid fit all?

Resilient organization APS builds flexibility into its smart grid definition

18 Doubling up

10 36

GWP to deploy smart electric and water meters

21 Solid footing for a smart grid future

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For Bluebonnet Electric Cooperative, it’s all about the services

Venture capital directions

24 Smart money + smart grid

Venture capitalists seek opportunity in the land of five 9s

27 Securing the grid

Intelligent financing creates new options for grid modernization

The generation equation

30 Streamlining financial functions

ConEdison’s ETRM software system changes business processes

Drawing the line Transmissions 6

Letters from readers

Intelligent utility defined

10 The big picture

10 Top 11: 2011 projections 12 Living test laboratory

38 Grid(un)lock

38 Enabling the promise of smart grid

40 End of the line

40 EVs not so easy

42 4D

42 Creative innovation

44 Connections

44 Wi-Fi vs. WiMAX

46 Out the door

46 Generating electricity from excess heat

47 Beauty in the wires

42 46 Vol. 2, No. 6, 2010 by Energy Central. All rights reserved. Permission to reprint or quote excerpts granted by written request only. Intelligent Utility® is published bimonthly by Energy Central, 2821 S. Parker Road, Suite 1105, Aurora, CO 80014. Subscriptions are available by request. POSTMASTER: Send address changes to Intelligent Utility, 2821 S. Parker Road, Suite 1105, Aurora, CO 80014. Customer service: 303.782.5510. For change of address include old address as well as new address with both ZIP codes. Allow four to six weeks for change of address to become effective. Please include current mailing label when writing about your subscription.

BUILDING A WORLD OF DIFFERENCE ®

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D R AW I N G T H E L I N E

Let the fun begin BACK IN OCTOBER, AFTER DAYS OF INDUSTRY DISCUSSIONS AT GRIDWEEK,

I was in a thoughtful mood as I walked down New York Avenue to gaze upon the north lawn of the White House in the deepening dusk. As I waited for a traffic light to change, I glanced down at my feet. Etched there in the newer cement of a curb repair was the question: “When do we get to have some fun?” In the past year, the mood of the industry has been by turns concerned, excited, anticipatory and worried. There’s been little that could truly be described as “fun.” But with the winter of 2010 coming on, I’m sensing a new mood in the air, and there’s definitely some fun woven into it. The last of the Department of Energy’s smart grid investment grant contracts has been signed, some AMI pilot projects are showing intriguing results beyond what was expected of them, and strong strategic partnerships are being announced throughout the vendor community. While we saw some consumer and regulatory pushback in some areas, we’re also seeing numerous project success stories. Without question, there’s a trace of fun in the air. But it’s not all play. In this issue, we turn our thoughts to the basics, as well: ??

The definition of “smart grid” differs from one utility to the next, depending upon customer needs. H. Christine Richards visited Arizona Public Service, while Cate Meredith checked in with Glendale Water & Power and Phil Johnson reviewed Blubonnet Electric Co-op’s approach to building more intelligence within their utilities. An IOU, a muni and a co-op, and three completely different success stories. [See pp. 16-22.]

Distribution optimization is coming to the fore in even more smart grid discussions. Christopher Perdue checked in with Avista, and its use of a distribution management system to drive automated outage management, voltage optimization and AMI efficiencies. [See page 36.]

There were some notable venture capital investments in electric utility technology this year. Phil Carson cast an eye upon some of

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the biggest hits of 2010. [See page 24.]

Creativity and innovation are often fuelled by a little bit of fun and a lot of “what if we could do this with that?” questioning. The waning of 2010 saw a lot more “what if” coming into technology innovation and solutions. In the coming year, I invite you to more fully engage in the conversation and, as Aneesh Chopra, the Chief Technology Officer of the United States, so succinctly put it in his GridWeek closing comments, “separate the noun of the smart grid from the verb of the smart grid.”

Kate Rowland Editor-in-Chief, Intelligent Utility magazine krowland@energycentral.com

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TRANSMISSIONS

Letters from readers EDITO R-I N- CHI EF Kate Rowland

the big picture

Committed to success ++Westar is serious about customer engagement by H. christine richards Ah, I love my home stAte of KAnsAs. the rollIng hIlls

Project background Before diving into Westar’s customer engagement efforts, let’s quickly review the SmartStar Lawrence project. The project will install 48,000 smart meters in Lawrence—a town about 40 miles west of Kansas City that’s home to the University of Kansas. On top of the smart meter installation, the project will deploy distribution automation, smart gridenabled outage management and supporting IT infrastructure. Even though the meters only cover a portion of Westar’s service territory, the project will build out the entire IT infrastructure needed to support a systemwide deployment of smart meters. The three-year project will cost about $40 million. The U.S. Department of Energy (DOE) will cover about $19 million of that through the Smart Grid Investment Grant program from the 2009 American Recovery and Reinvestment Act (ARRA). “We knew a smart grid initiative was going to be undertaken at some point,” said Hal Jensen, who has worked with Westar for nearly 20 years in various roles and currently serves as director of SmartStar programs. “The ARRA presented an opportunity to move forward, and Westar looked at the opportunity very diligently. We had to understand the rules of the game. We became comfortable with them and ultimately made an application.” On March 26, 2010, Westar signed an agreement with the DOE to move forward with the project. testing the unknown Through the SmartStar Lawrence project, Westar will work to prove the assumptions it laid out in its business case, but some will be more difficult than others. “We generally know how many truck rolls we’ll save and other business items like that, but what we don’t know is the customer reaction,” said Jensen. “How do we promote the project? How do we attract and engage customers? How will customers accept it?” A first step for engaging customers was rallying community leaders around the project. “We didn’t want the project to cover just a portion of a town. We wanted a communitywide effort,” Jensen said. “To that extent, we’ve worked very

project specifics and generating the excitement and enthusiasm for what we’ll be able to offer customers.” In addition to Westar efforts, the company is working on joint marketing with the city, the county and the chamber of commerce—all in the spirit of building total energy awareness in the community. This includes linking the SmartStar project with other energy projects that have been going on for a while. By tying many energy projects together, Westar expects to build a broader customer understanding and awareness of energy. Although the initial messages about SmartStar will be consistent across the service territory, Westar realizes that customers will have more sophisticated needs as they learn more about the smart grid. “Customer engagement is going to evolve and we realize that customers won’t move monolithically in the same direction,” said Ludwig. “We’ll have to build out those customer segments as we go,” added Peggy Loyd, Westar’s vice president of customer care. “Right now, as a traditional utility company, everyone’s the same. We have to spend a lot of time developing those segments and understanding the best messages and offerings to put in front of them.”

Community-based marketing Immediate interactivity with smart meters

Employees as smart grid ambassadors

“We want to make sure there is intrinsic value for the customer and that we can effectively serve as an energy

”

advisor for the customer. Community-based marketing For customers to accept smart grid, they have to know what the term means. “It’s not a known entity we’re rolling out here,” Jensen said. “As we plan our communications effort, we realize it must start with a very fundamental message about smart grid to build awareness. Once we get past that, then we can start explaining the

Immediate interactivity Westar realizes that true customer engagement won’t come through just a slick marketing campaign and a smart meter. Customers need opportunities for immediate interactivity with the new technologies. Ludwig pointed out that “it’s just not satisfactory for customers to say that their memory of a smart grid experience was Westar showing up at their house, inconveniencing them while they got a new meter installed, and then nothing else happened. That’s not a good customer experience.” Westar customers will be able to access information through a web portal shortly after their meters are installed.

krowland@energycentral.com 720.331.3555 CHI EF CO PY EDITO R S Martha Collins, Joe Kovacs S EN I O R CO NTRI BUTO R S Phil Carson

Editor-in-chief, Intelligent Utility Daily pcarson@energycentral.com 303.228.4757

The portal may not offer all the information customers could ever want, but it will help them track daily energy usage, cost information and their carbon footprint. The information offerings will evolve over time, based on customer demand. “We want to determine what information will have value for customers and that it’s something they’re interested in. If that’s the case, then we’ll look at what format they would like it in,” Jensen said. “It is important to understand that before we go too much further in deployment. We want to make sure there is intrinsic value for the customer, and that we can effectively serve as an energy advisor for the customer.” employees as smart grid ambassadors Another key customer engagement component is Westar’s employees. “We’re a service territory of small towns,” Ludwig said. “So when consumers want to know something about us, they typically ask one of our employees. They’re our ambassadors.” Westar has numerous efforts under way to educate employees. Those employees not directly participating in the SmartStar project are getting smarter about the smart grid so they can better inform customers. These education efforts include everything from a SmartStar quiz with the opportunity to win prizes to SmartStar weekly updates to in-person employee presentations. In addition to education, the company culture is focusing more on the customer. “I’m a technical guy, and I’m looking forward to the technology,” said Kevin Heimiller, who’s been with the company for 36 years and is director for advanced metering infrastructure. “But I’m also becoming customer driven. I’m really pumped about it. I think it’s really good stuff, and it’s going to be really good for our customers. We need to do it right.” The push for the customer is also driving better cohesion within the company. “Not they we haven’t had challenges working together, but everyone is on board,” Heimiller said. “It’s like ‘let’s talk about this, let’s concentrate on the customer.’” All in all, Westar’s focus is not only on building a smarter grid, but also on truly engaging the customer, which is proving to be another reason to love Kansas. “It’s been rewarding and a lot of fun because it’s a new frontier for us. And really, in many ways for our industry and our customers,” Ludwig said. H. Christine Richards is a researcher and writer based in Colorado.

Christopher Perdue Vice President, Sierra Energy Group cperdue@energycentral.com 310.471.7396 Ken Silverstein Editor-in-chief, EnergyBiz Insider ksilverstein@energycentral.com 304.345.5777 FE ATU RE W RITER S Mike Breslin, John Johnson,

Phil Johnson, Joe Kovacs, Laurel Lundstrom, Elizabeth w w w. i n t e ll ig e n t u t i l i t y.co m

www.intelligentutilit y.com /// Septem ber/october 2010

(yes, Kansas has hills), the Wizard of Oz, the tasty barbeque—and the laid-back Midwestern humor. The folks at Westar Energy—a utility headquartered in Topeka, Kan., that employs 2,400 people and serves more than 684,000 customers in east and east-central Kansas—not only understood my humor, but also understood a critical factor in the success of smart grid projects: customer engagement. I recently visited the utility’s office in Lawrence, Kan., and learned that Westar Energy is serious about making sure that customers matter most in their smart grid project—SmartStar Lawrence.

closely with city and county officials, the chamber and other key organizations—like the University of Kansas. We’ve been actively engaged with all of them from the very beginning.” “I couldn’t ask for a better response from the community,” added Jim Ludwig, who’s been with Westar for 20 years and serves as the executive vice president of public affairs and consumer services. “Whether it’s elected officials, the chamber or community leaders, they’ve been very supportive and accepting.” Westar has successfully rallied community leaders around SmartStar Lawrence, but what about rallying everyday customers? Community building was key, but Westar realizes it has to go further. Other ways Westar is engaging customers include:

McGowan, H. Christine Richards, J. Ian Tennant V ICE PR E S I DENT, I NTELLIG ENT UTI LIT Y DI V I S I O N Mark Johnson

mark@energycentral.com 303.228.4721

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SEN I O R V ICE PRE SI DENT, M EDI A Betsy Kominsky

Committed to success (September/October) As a Kansan and +35-year veteran of the power business, I read the “Committed to Success” article concerning Westar Energy’s smart meters and am baffled. “Intrinsic value for the customer … customer engagement” … huh? What in Sam Hill is the benefit for the customer? Consumers understand very well what is going on. The only reason to deploy smart meters is to charge higher rates during peak demand periods, thereby making the utility more money. Politicians are aiding and abetting the whole nefarious scheme under the delusion that they are saving the planet from greenhouse gas emissions by raising prices, thereby curbing power demand. In the words from a famous Midwestern movie (The Outlaw Josey Wales): “Don’t piss down my back and tell me it’s raining.” Mike Keller

Bold move, brilliant alliance (Sept. 2/Intelligent Utility Insights) I work for a small municipal utility near the Twin Cities area in Minnesota and your recent article’s timing was perfect. Hopefully Itron follows through on their promises because the industry desperately needs some open protocols or we’re never going to have “smart” metering. We’ve been looking at fixed system AMR options for over a year now and hit the wall every time we try to find something that will work with both water and electric meters and our existing citywide Wi-Fi system. Every time we try to find a solution we run into proprietary systems and ones that will only work with electric or water not both. It’s very frustrating, so I hope your news rings true. We need a solution now! Dan Geiger To contribute to the Transmissions department, please e-mail your submission to

bkominsky@energycentral.com 303.228.4762 V ICE PRE SI DENT O F S A LE S , M A RK E TI NG SERV ICE S Jennifer LaFlam

jlaflam@energycentral.com 303.228.4752 DI RECTO R O F M A RK E TI NG A N D PRO DUCTI O N

Sarah W. Frazier M A R K E TI NG CO M M U N IC ATI O N S M A N AG ER

Brenda Roode M A RK E TI NG COO RDI N ATO R

Casey Bohannan ACCOU NT E XECUTI V E S

Todd Hagen, Alexsandra Lemke, Ken Maness, Jean Micketti sales@energycentral.com 303.782.5510 x100 A DV ERTI SI NG COO RDI N ATO R S

Stephanie Wilson, Eric Swanson EN ERGY CENTR A L w ww.energycentral.com PR E S I DENT/CEO Steve Drazga CHI EF O PER ATI NG O FFICER Steven D. Solove

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B PA M EM B ER SHI P A PPLI ED FO R, J U N E 2010

TRANSMISSIONS

What is an intelligent utility? + Itâ&#x20AC;&#x2122;s all about delivering information-enabled energy.

Energy Central examines the possibilities of the intelligent utility in terms of: ??

People The knowledge, skills and abilities required in an informationenabled environment

Process & technology Business objectives and their

An intelligent utility applies information to energy, maximizing its

impact on process and smart

reliability, affordability and sustainability from generation to end users.

technology deployment ??

Economic models The challenges and opportunities of new paradigms

Finance Investment trends associated with smart technologies

Public policy The impact of politics on energy

CONTRIBUTE We welcome your voice, and your thoughts, as we all contribute to the emerging intelligent utility. Here is how you can reach us:

INTELLIGENT UTILITYâ&#x20AC;&#x201D;THE DIVISION Intelligent Utility is the divisionâ&#x20AC;&#x2122;s flagship, bimonthly magazine. Within its pages, we explore the strategies and realities of delivering information-enabled energy and building a smart grid, focusing on people, process and technology, economic models, finance and public policy. But Intelligent Utility is also a daily e-newsletter, a Web site, an annual summit bringing

Kate Rowland editor-in-chief Intelligent Utility magazine

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krowland@energycentral.com

together utility leaders to network with their colleagues, and a research, analysis and consulting services division. Beyond the boundaries of the magazine, we provide:

IntelligentUtility.com: A companion for Intelligent Utility magazine, this Web site provides

720.331.3555

a deep look at the smart grid and the systems, processes and people necessary to delivering

Phil Carson

Intelligent Utility Daily: This daily e-newsletter offers insight far beyond the news of the

editor-in-chief Intelligent Utility Daily pcarson@energycentral.com 303.228.4757

information-enabled energy.

day, delving deeply into the issues facing the electric utility industry as it moves to implement smart grid/intelligent utility projects and processes.

Sierra Energy Group, a division of Energy Central: Sierra provides information technology and smart grid research, analysis and consulting services to leading electric and natural gas

Christopher Perdue

utilities and vendors to the industry.

vice president

Knowledge Intelligent Utility Executive Summit: This annual event brings together

Sierra Energy Group cperdue@energycentral.com 310.471.7396

Mark Johnson vice president Intelligent Utility Division mark@energycentral.com 303.228.4721

leaders in utility operations, IT and customer service, allowing them to come together in a constructive forum to share the lessons they are learning and avoid the costly stumbling blocks that create barriers to success. In a relaxed environment, these leaders can network with their colleagues, learn of new solutions from their peers (both inside and outside of the utility industry) and walk away with high-impact knowledge takeaways.

Intelligent Utility Reality Webcasts: This series of monthly webcasts provides realworld perspectives on how energy providers are building intelligent utilities to deliver on the promise of information-enabled energy. These webcasts examine the challenges and opportunities utilities face in implementing smart grid initiatives and focus on topics such as distribution automation, metering, demand response, asset management and more.

The credible alternative Bigger isn’t always better. If it was then an independent software solution could never set the standard for ontime, on-budget delivery, and be heralded as one of the most intuitive, flexible and powerful CIS solutions in the market. Yet Hansen Technologies has just done that, with its global support and expertise, it has been servicing the simplest residential electric customer to the largest multi-product commercial accounts for over 30 years with proven success in over 40 markets worldwide. Hansen Technologies – The credible alternative.

• The original CIS vendor • Proven implementations worldwide • Modular, scalable solutions

THE BIG PICTURE

Top 11 projections for 2011 ++A new year begins with a new approach By Kate Rowland THE CRYSTAL BALL IS ALWAYS A LITTLE MURKY AS WE

approach December and attempt to peer into the foggy depths of the year to come. It’s always that way, despite our best efforts to define what the future will bring. It reminds me a lot of those coastal California “I can see for miles and miles” days, when the marine layer abruptly rolls in, and even seeing across the street (or, in the case of the industry, into next month) becomes nearly impossible. Some trends, though, have become more clearly evident as we move from the Year of the Smart Grid Funding into the Year of Many New Deployments. The year 2011 will bring with it many new challenges with ties back to 2009 and 2010, but the era of the intelligent utility is clearly evolving, being fuelled by information gleaned both from past successes and past mistakes. All would agree, prognosticators and historians alike, that there’s a lot of change coming down the pike in the coming year. Some of it is in response to consumer/regulator pushback on the consumer-engagement/consumer-cost front, and some is directly related to new technology being added on the end of the line (electric vehicles and distributed solar generation) to a one-way distribution grid not yet ready, in many cases, to take the increased push and pull of electricity involved in these new applications. Here’s what the coming year is likely to bring:

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Increased consumer education focus. This year brought with it some

negative press about consumer pushback in early smart meter deployments. Unfortunately, the negative coverage of the pushback gave little room for focus on a growing number of utility success stories. In the coming year, both utilities deploying smart grid technology and those who aren’t yet doing so will focus their efforts on increased consumer education. Oh, and the general media will stop focusing so much on the negative and focus their efforts on the positive. (Yeah, right. Well, industry media, at least, will do so, and hopefully this will extend its reach to the general mass media.)

Electric vehicles begin to push the limits of distribution transformers by the end of 2011. Utilities across the country in early-adopter

areas are already well aware of the potential for neighborhood-by-neighborhood electric vehicle (EV) adoption to strain the limits of some distribution transformers. Already, a handful of utilities are launching EV pilots with consumers in an attempt to determine what incentives (or disincentives, such as time-of-use price variations) will drive off-peak charging activity, whether daily travel needs and lifestyle make time-of-use pricing irrelevant, and whether concentrated charging of EVs will lead to an increase in transformer degradation.

Intermittent renewable generators test the limits of stable, reliable power. Similar to

the impact of electric vehicles on the demand for power from the grid, the “push” of distributed photovoltaic systems is seeing tremendous growth in states such as California, which has incentivized it. But with that kind of growth comes evidence that the distribution side of the equation is going to see circuits with voltage fluctuations as a result. As Lee Krevat of San Diego Gas & Electric told a conference audience in October, “Fluctuation of the voltage on the primary is very, very bad—it is not good electricity at all. It’s not the kind of electricity our customers want to have, and not the kind of electricity our equipment wants to have.” Energy storage on the

age and its use? I see the industry answering some of these questions with pilots in the coming year.

Some utilities realize they don’t need AMI, and AMR will suit them just fine, with better back-office systems. For a good example of

this, see the story about Bluebonnet Electric Cooperative in this issue’s “Can one smart grid fit all?” feature. One smart grid doesn’t fit all utilities. Some are finding unique solutions to unique needs, within a budget that works for them.

As the economy begins to turn, venture capital and other investment will continue to increase. There’s more than one way to skin the

financial cat, as Michael Ebert and Joseph Fichera have noted in this issue of the magazine in an article about smart grid cost mitigation bonds. While there is no question that stimulus funding was a welcome boon to the industry, it was also without doubt a double-edged sword, slowing the industry down to a crawl while it waited with bated breath to hear which projects would receive government funding and which would not.

New interoperability standards will begin to flow more quickly, now that NIST has broken the dam. I also believe that we will begin to

see cyber security standards flowing more quickly to the fore.

FERC will continue to move forward aggressively in the demand response arena. Perhaps I’m cheating by adding this one, as it’s a bit of a

no-brainer. FERC Chairman Jon Wellinghoff is clearly deeply committed to the demand response issue and will shepherd it through to fruition.

Social media will continue to play a growing role in industry communication. Twitter and Facebook are playing an increasing role

distribution circuits could resolve the issue, but who pays for it? The utility? The entire rate base?

Energy storage becomes a front-and-center, immediate need. We all understand that energy

10|

Strategic vendor partnerships will continue to grow and offer more comprehensive solutions. Late 2010 brought with it a number

of all-out company acquisitions, but it also saw a number of strategic partnerships, such as those between Cisco and Itron, Lockheed Martin and Tendril and many more. As vendor solutions become even more comprehensive, we will see an increase in these partnerships in the coming year.

11|

Utility business processes will get more scrutiny as utilities determine how they will deal with the massive influx of new

data. The credit for this particular bit of crystal ball gazing goes to David Elve,

vice president of industry solutions for Sensus. From toaster to turbine, Elve says, each utility “needs to have a summit, if you will, of all stakeholders” to define what the asset is, whose asset it is, and how it will be handled. “You need to flesh out where these assets reside, and then figure out what standards apply.” This will truly be a major shift in the utility company’s processes. These are but a few of the changes we see in store for our industry in the coming year. Distribution will be high-visibility via a more honed-in focus on distribution optimization, distribution management systems, distribution automation and more. It will have to be, given what we’re about ready to add to it.

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storage can mitigate the integration of renewables, and will work well as a firming resource. But there are still so many questions to be answered. Do we need to solve the intermittency issues at the transmission level, the distribution level, or point of use? Is a battery more valuable near the load rather than at, say, the wind farm itself? Can substation-sited storage become a reactive power supply and therefore a reliability asset for the utility? And, equally as important, what will be the payment mechanism for energy stor-

in utility and vendor communication, both to consumers and with each other. LinkedIn, too, has lively and ever-growing professional networks in which industry issues are debated in an extremely active fashion, building collective industry knowledge and providing safe spaces in which to toss new ideas into the mix for others to digest.

THE BIG PICTURE

Living test laboratory ++NRECA launches massive smart grid demonstration project By Phil Johnson

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PROVIDING A “MEMBERSHIP TEST BED” ORGANIZATIONAL

capability, the National Rural Electric Cooperative Association (NRECA) is today actively helping to advance its electric cooperative members’ technological footing through a voluntary nationwide smart grid demonstration project involving more than a dozen NRECA-affiliated co-ops. The project was assembled by the NRECA on the strength of a $33.9-million matching grant (federal stimulus funds) from the U.S. Department of Energy (DOE)—and the NRECA then solicited its organizational membership for volunteers to participate in carrying forth specifically targeted, thoroughly delineated smart grid efforts. Just enough, just in time From the NRECA’s viewpoint, the research and development aspect of the smart grid demo project is nothing new. “NRECA runs a research program called the Cooperative Research Network,” said Martin Lowery, NRECA executive vice president for external affairs. “And we do lots of basic research and development in conjunction with our members. The phrase we use for it is ‘just enough—just in time.’ So it’s very practical kind of work we do with our members at all levels: generation, transmission, environmental, end-use.

“We knew the whole arena of smart grid technology was not only moving very fast, but would require, on our part, some work with our members to determine how one cost-effectively implements the new technology— and from the perspective of a co-op, does it to the benefit of the member/ owners. Since all of our members are co-ops, it’s a member-owned system, a community-based system. “So all of the strategic thinking goes to: What’s the return going to be for the consumer?” With this smart-grid demo project, the NRECA is effectively extending its already well-developed R&D philosophy, organized in tandem with its member co-op organizations. “We try to work, as much as possible, with other R&D programs,” said Ed Torrero, executive director of NRECA’s Cooperative Research Network. “That includes some very, very large R&D programs—the national labs, for example. “And we present ourselves as, frankly, a national ‘living test laboratory’— with utilities from coast to coast, every load a generation and every business a marketing opportunity. “Co-ops are uniformly very agile, resourceful, place a high value on technology, and see it as the one thing under their control that they can use to improve services and put the brake on rising costs. So it’s a very fertile area to test out new technology ideas.” Testing smart grid hypotheses NRECA approached the task of initiating this wide-ranging demo project and securing the DOE grant to help fund it with a sense not only of enlightened purpose but of industry leadership. “The entire proposal was put forward on the basis of a serious look at testing various hypotheses about smart grid,” Lowery said. “And it really fits in two categories. One is:

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THE BIG PICTURE

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How can smart grid technology help improve overall system performance and system efficiency? “We’re talking primarily of the distribution system—from the substation through the meter—but in addition, it goes beyond into the transmission and power markets, and beyond the meter to the house or the small business or industry. “And that’s the second piece, which is testing hypotheses around what advantage does smarter technology give to the consumer in terms of energy usage, peak-demand reduction and an affordable electric bill.”

Owen Electric and United This is precisely what Jim See, vice president of technology at Owen Electric Cooperative in northern Kentucky, regards as a byproduct of his co-op’s extensive participation in the NRECA demo project. “We want to be able to use more of this information,” said See. “And we want to be able to approach our members with options—at least give them choices to be able to better manage the inevitable rate increases. We’re definitely looking into the future.” Owen Electric’s participation in the NRECA demo project involves elements including a consumer web portal, demand response with AMI technology, and technological study of advanced volt-VAR control and “self-healing-system” aspects of smart feeder switching. Rob Pearson, the “shared” CEO at United REMC a few miles south of Fort Wayne, Ind. (he’s also CEO of Wabash County REMC, a smaller neighboring co-op), said United’s participation in the NRECA smart grid demo project revolves around capabilities including load management and remote disconnect. Buy-in for the project on the parts of the co-op’s member/owners is essential. “The feedback we’ve had that I’ve heard about has been positive,” said Pearson. “They like the fact that we’re putting in new technology, and that we’re trying to stay ahead of the game in the technology arena—and to provide them reliability.” Reliability—critical for any electric co-op, particularly a co-op with extensive rural service areas—relates very closely to self-healing aspects of the grid, an element many of the NRECA-demo participating co-ops are working with. Clarke Electric Co-op That includes Clarke Electric Cooperative in south-central Iowa, where one part of the co-op’s NRECA-demo participation—like several of the other participating electric cooperatives—involves smart-feeder switching. “The big thing for us is reliability,” said Bill Freeman, Clarke Electric executive vice president and general manager, who also highly values co-op capability to communicate effectively with member/owners. “This program will succeed or fail by the ability to communicate with the membership, in my opinion.” Washington-St. Tammany A self-healing transmission grid (or “intermediate” transmission, at 69 kilovolts) is the focus of the NRECA-demo efforts of Washington-St. Tammany Electric

Cooperative in eastern Louisiana (north across Lake Pontchartrain from New Orleans). “We’re planning to use the smart grid-type scenario to isolate faults on this transmission grid, without affecting other areas,” said Charles Hill, CEO, general manager and manager of engineering at the co-op. “Using the smart-grid technology, we’ll have the relays and software determine where the switching needs to be done, and where we can switch load to and avoid overloading other areas when a fault occurs. “And all of this will be done without human intervention, and should result in just, at most, a ‘blink’ for the members—sometimes not even a blink.” Washington-St. Tammany Electric is especially sensitive to reliability issues, having had its system shut down in 2005 by Hurricane Katrina. “That’s one of those things that my therapist has told me not to recollect,” Hill said. “Katrina came right through the middle of our system, and just totally devastated us.”

“So all of the strategic thinking goes to: What’s the return going to be for the consumer?

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While self-healing aspects of the grid still wouldn’t be capable of standing up to the major-hurricane-level impact of another Katrina, they represent welcome potential future additions to the co-op’s capabilities. “With the smaller storms we’re susceptible to, being right here in the Gulf Coast area, it should mean a lot of difference,” said Hill. Phil Johnson is a freelance writer and speechwriter.

one all?

Can smart grid fit Resilient organization ++APS builds flexibility

By H. Christine Richards WITH MORE THAN A MILLION RETAIL CUS-

tomers and 7,200 employees in 2009, and more than 42,000 square miles of service territory, Arizona Public Service Company (APS) is certainly no small fry in the utility world. But APS proves big doesn’t mean slow—particularly when talking about smart grid. For APS, smart grid comes down to being a resilient organization with the flexibility to adapt to technology changes rapidly coming its way. Let’s look at what smart grid means to APS and its customers, and how the concept of a smarter grid will change for APS. Defining smart grid for APS At an industrywide level, Ken Bohlen, vice president and chief information officer for APS, thinks that the smart grid

ILLUSTRATION BY BRIAN EVERETT

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into its smart grid definition

definition is still evolving for everyone. “Smart grid is one of those terms that’s like what cloud computing was several years ago. Everybody wants it, but nobody knows what it is. We’re still in that evolutionary state where, in some cases, smart grid refers to smart meters, in other cases it could be much more comprehensive.” Definitions can certainly vary by utility, so what does smart grid mean to APS? “The way we’ve defined it—we’re still working through some of the details—is taking the existing infrastructure as we know it today and adding on top of that a level of intelligence, thus qualifying it as smart,” said Bohlen. A simple enough definition, but for APS this can include numerous complex components like smart meters, electric vehicles, intelligent homes, smarter operation centers and renewables. “In our definition, all of it plays into the smart arena,” he said. Another key component in APS’s smart arena is the data analysis, which is critical for the success of these other new components. For example, APS has installed about 500,000 smart meters to date. According to Bohlen, these components “clearly bring with them a whole new realm of opportunity to think about analytics. We’re still in that infancy stage of ‘now we got the data, what does it tell us?’” As APS collects the data, it is working to remain flexible with how it analyzes it. “We’re trying to be very open-minded so we don’t get ourselves into the trap of saying ‘this is what we’re looking for,’” said Bohlen. “Oftentimes in ana-

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CAN ONE SMART GRID FIT ALL?

lytics, things come to you in ways you weren’t expecting or weren’t aware of.” Whether dealing with data or integrating renewables, what sets APS apart in terms of smart grid is comprehensiveness and flexibility. “We are in some ways more holistic than other utility companies that may focus on a particular component,” said Bohlen. “We’re also working to be flexible in our approach. We’re trying to allow the We had a lightning new technology that’s coming—because strike on the system, it’s rapidly coming at us—to help us define and the self-healing what the future could be. We’re not trying technologies were to impose a specific vision of smart grid able to reroute power on the future. Smart grid will continue to within three seconds. change and evolve.”

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Smart grid for customers APS’s view of smart grid may not radically differ from many other utilities, but APS sees significant differences between its internal smart grid definition and how the utility defines it for its customers. As seen with examples such as SmartGridCity, if the focus is on the technology, and the technology doesn’t work exactly as planned, smart grid can leave a bad taste in customers’ mouths. So instead of focusing on the smart grid technology, APS focuses on smart grid benefits for its customers. Dan Wool, corporate communications consultant for APS, pointed out that the utility is looking at smart grid benefits in a number of different ways. For instance, APS is running a pilot project in Flagstaff, Arizona, that uses self-healing grid technologies. APS is letting customers know about the project through its benefits. “For instance, we had a lightning strike on the system, and the self-healing technologies were able to reroute power within three seconds, preventing what would have been a 40-plus minute outage around noon in downtown Flagstaff,” Wool said. Bohlen added, “We don’t go to the community and say ‘oh boy, we know you’ve been waiting for smart grid and here it is.’ We’re very cautious. War stories get out there and people will interpret what you say the way they want to hear it. “In Flagstaff, it is self-healing technologies that helped prevent the blackout, but we talk about it in terms of benefits to people and not try to label it as smart grid. If you oversell it and you hiccup, then customers are going to say ‘smart grid did this to us’ and its going to be ‘big bad utility companies don’t understand us.’”

Will smart grid disappear? As utilities adopt smart grid technologies and business practices, will smart grid just become part of everyday utility business? Essentially, will smart grid become the norm rather than the exception, and we can just go back to calling it the grid? Bohlen doesn’t see that happening any time soon. “One driver that’s going to keep it in the limelight is security. Smart grid provides a lot of opportunity for a lot of smart people to interact with this grid. That arena is going to continue to increase.” Barbara Lockwood, APS’s director of smart grid development, agrees that smart grid will stick around for a while. “New technology becomes business as usual, which I think is true, but the caveat to that is, in the meantime it’s going to fundamentally change our business and how we work,” she said. “So it will become our future, but along the way it will fundamentally change our job.” Is there a better term for it? “No, not really,” Bohlen said. “The nomenclature is simply the fact that we have this aging analog environment and the technology was bound to catch up with it. With smart grid, I think a key term is that you need to develop a ‘resilient organization,’ so if something new comes along, we can readily put it in our environment and figure out how to use it.” H. Christine Richards is a researcher and writer based in Denver, Colo.

Doubling up ++GWP to deploy smart electric and water meters By Cate Meredith THE FIRST ELECTRIC UTILITY IN THE NA-

tion to receive a Smart Grid Investment Grant (SGIG) from the U.S. Department of Energy (DOE) under the American Recovery and Reinvestment Act, Glendale Water & Power (GWP) is embarking on an ambitious demonstration project it hopes will lay the groundwork for a city run entirely on smart energy. The City of Glendale AMI-Smart Grid Initiative is a $51 million project, supported to the tune of $20 million by SGIG funding. A key step in the project is the deployment of nearly 85,000 smart electric meters, which will provide GWP’s customers with real-time electricity usage data to help them save on their bills.

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Critical Event for System Designers

Grid-Interop is designed for interoperability and standards leaders in the full spectrum of Smart Grid, from utilities to network infrastructure to the energy consumer arena. System architects, technology vendors, electric appliances, and related professionals will find Grid-Interop to be an especially critical venue to discover trends and direction within the immense opportunity that is the Smart Grid.

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CAN ONE SMART GRID FIT ALL?

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Simultaneous water and electric deployment Craig Kuennen, smart grid project sponsor for Glendale Water & Power, is responsible for planning and executing the project. In addition to deploying new smart meters for GWP’s 84,500 electric customers, the utility is simultaneously deploying 33,400 smart water meters within its territory. The project will use a private distribution wide-area network to deliver high-speed communication between the utility and its individual meters. As well, GWP will deploy leak-detecting sensors that will continuously monitor its water system and alert staff to possible inefficiencies. The new infrastructure will bring everyday appliances like heating, ventilating, air conditioners and even pool pumps online to the smart grid. The smart meters will display kilowatt-hour information, which can be read by GWP meter readers with a handheld device. Data and messages can be sent to customers over the network and delivered via Zigbee radio to in-home devices. Data can also be sent via web portal, SMS text, phone applications, e-mail, voice mail and snail mail. GWP believes that by showing customers exactly where they’re spending—and, in many cases, wasting—money, it will be empowering them with an understanding of how to consume less energy, which, in turn, will mean lower bills for the customers.

Three-phase implementation The project will be implemented in three phases, according to Kuennen. So far, the project team has created some of the infrastructure, such as the communications backhaul, laid the fiber optics and upgraded the information technology infrastructure. The second phase will be the more exciting one, when actual customers get to test the system. GWP expects to have in-home displays installed along with a web portal so that users can monitor their usage anywhere and at any time. In addition, the project team expects to complete a thermal energy storage facility to enhance on-demand responsiveness. By the end of this phase, GWP will determine how to charge customers. The municipal utility also hopes to develop other smart grid applications such as distribution automation and power outage management. The third phase is a fully functional smart city—an idea that doesn’t seem as farfetched as it did just a few years ago. The utility is not yet sure how it will select customers, whether it will be a lottery, and whether the lottery will be voluntary, but Kuennen says he expects to have a couple hundred customers in the project before the end of the year. Presently, GWP has a test group of 10 to 20 homes that are using the AMI in-home display. So far, he says, the response has been good.

But energy customers are not the only people the utility has to impress. As a requirement for the federal funding, Glendale Water & Power has agreed to total transparency and will submit to stringent reporting obligations to ensure that federal dollars are well spent. The utility must prepare numerous plans for cyber security and project management that detail how the project will unfold. Once all those formalities are completed, the utility must then submit progress reports every month to the DOE. According to Kuennen, GWP’s report on metrics and benefits has already been submitted.

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The project seeks to Job creation The project is expected change the way human to create about 40 jobs in Glendale for installbeings interact with ers. But, as Kuennen points out, there are their utilities and the many other jobs that may or may not be cities they call home. counted in the official numbers because, as he says, every government agency requires the city to count the jobs differently. The project will spur additional new employment as it delves into the next phases. Kuennen expects the smart grid project to supply 600 jobs nationwide at the peak. The benefits of modernizing the infrastructure go beyond technology for technology’s sake. The project will enable GWP to be more responsive to customer issues, increase the reliability of service, and save money for the utility. But it will also potentially be a significant stride in reducing greenhouse gas emissions. The GWP project meets the guidelines set forth by California Senate Bill 17, the nation’s first state smart grid law, which was signed by Gov. Arnold Schwarzenegger in October 2007. The project models the law’s objectives to reduce carbon emissions, improve system reliability, enhance security, detect and deter electricity theft and support smart appliances and electric vehicles. At its heart, the project seeks to change the way human beings interact with their utilities and the cities they call home. The end-game is not just a slick monitor that shows you didn’t shut the refrigerator door all the way—it is an attempt to change the spirit of the city and the behavior of customers into living a more responsible, eco-friendly existence.

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Managing peak demand For instance, while utilities have struggled to ease peak demand, GWP’s smart grid initiative will use a distributed energy storage solution to help manage peak demand and more efficiently enable the utility to deliver reliable, affordable electric service to customers in a sustainable and

environmentally sensitive manner. It’s a simple idea that can have a huge impact. The distributed energy storage system absorbs off-peak load and dispatches it on peak. In so doing, it can reduce energy usage by as much as 95 percent. Since the unit is incorporated into a building’s air conditioning system, there will be no decision required, no action on a customer’s part at all. But that customer will reap the benefits of lower costs and a lighter carbon footprint. In its final phase, the project engineers also seek to have electrical car chargers installed as a standard in every home. With that support in place, it becomes easier for consumers to make the choice to buy a smart car. By making it easy for customers to support such lifestyle changes, GWP hopes Glendale will be a model for all city utilities and the first to reach a new, smarter future. Cate Meredith is a freelance writer based in Houston, Texas.

(AMI) to the fore as today’s metering system of choice, with its many forward-looking capabilities.

Solid footing for a smart grid future ++For Bluebonnet Electric Cooperative, it’s all about the services By Phil Johnson IN 2003, WHEN CONTEMPLATING THE RU-

Back-office focus proved fruitful To make a long story short, Bluebonnet took the occasion of not receiving a DOE grant to examine where it stood:

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ral utility’s options for sustainably moving forward, the management team at Bluebonnet Electric Cooperative— headquartered in Bastrop, Texas—came to a decision that, over time, has proven its wisdom in placing the utility on a solid footing for a fully functioning smart-grid future. But things didn’t necessarily look quite so rosy at the time, when Bluebonnet moved forward and began to deploy automated meter reading (AMR) equipment, which at that time represented the technologically elite choice. Since then, of course, lightning-quick technological development has brought advanced metering infrastructure

Everything happens for a reason Yet Bluebonnet feels it’s getting a more-than-reasonable return on its original AMR investment, which involved full AMR deployment across Bluebonnet’s sprawling territory (stretching from the eastern suburban areas of Austin to the far western reaches of living space within commutable distance to Houston). In fact, it’s one of those anecdotal stories of “everything happens for a reason”—because Bluebonnet, like a myriad of other utilities, applied in 2009 to the U.S. Department of Energy (DOE) for a stimulus grant to fund near-term deployment of AMI technology across its service territory. Bluebonnet’s DOE grant application, however, was not successful. “Oh, I was outraged when we didn’t get a DOE grant,” said Bluebonnet chief executive officer Mark Rose. “I was just outraged—because I thought, ‘This is an insult.’ It was ego, you know—and I’m thinking, ‘We’re ahead of every rural utility in America by my book, yet we don’t get one of the grants.’ “Sure, I was furious at DOE. But now I thank ’em for passing me up, because they forced me to get out of the ‘meter race,’ and look at what my true needs are.”

CAN ONE SMART GRID FIT ALL?

fully deployed with more than 80,000 AMR meters across A revolving relationship with customer-owners its 11,000-mile line length, but with a deficiency of back- Rose waxes almost poetic when he philosophizes about the office capacity to assimilate and fully utilize the volume of evolving relationship between electric utilities and custominformation that could be derived even from its admittedly ers—customers who are actually owners in the case of an limited-capability AMR system. electric cooperative. And the co-op’s more-or-less antiquated back-office “One of the biggest challenges we face as the ‘average’ operation would certainly be deficient if it were to be forced leadership of a retail or distribution utility is that we often in the future to handle the burgeoning informadon’t really understand what it is we do tion volume that would come with eventual (and for a living,” Rose said. “We do not sell It’s a new inevitable) AMI deployment. kilowatt-hours—that is not what we do. “Our density only averages about seven “We perform the service of providing economic meters per mile of distribution line,” said electricity.” Bluebonnet chief operating officer Matt Bentke. And in that regard, Rose sees a clear equation to “That makes it a different animal completely in road ahead, although technology may recovering cost, compared to highly dense metdevelop so swiftly and thoroughly that no think about ropolitan areas. one can tell just what electrical systems “So in our case, we said, ‘Okay, we have our will look like within a relatively few years. in electricity. AMR technology in place. It’s reliable—and we’re “Our entire approach to this program deploying some relatively inexpensive technolis based on customer demand and conveogy to get hourly reads from those meters. And we want to nience and rights—the fundamental right of the customer maximize the life of our AMR deployment.’ In order to do to know and have access,” said Rose. “And it’s based on ecothat, we began to focus on our back-office systems.” nomics: We’re going to bring a package to the consumer that makes sense, has no surprises and is attractive to their needs.” Putting information in customers’ hands Having now upgraded its back-office operations with a Electricity’s new economic equation highly capable meter data management (MDM) system, “I think you’re going to see a rate structure in electricity very Bluebonnet is interacting better than ever with its mem- similar to your cell phone—like, here are these basic packbers—who today can log onto the cooperative’s member ages, and you’re in this class, or this class, or that class, based Web portal (trademarked as Bluebonnet’s “Net Energy on your consumption, based on your needs, and it can give Market”) and get previous-day updates on their accounts. you some certainty,” said Rose. Those updates include a day-by-day accounting of the It’s a new economic equation to think about in electricindividual member’s energy consumption, the member’s ity. And between here and there—today and tomorrow—the patterns of consumption, current costs in the billing cycle, elements of the smart grid are being devised, developed, a projected bill based on current usage and many other assembled, deployed, tweaked, improved and eventually useful items. completely reinvented. “We have all that information here,” Bentke said. “Our “I will predict right now that by the time we get really goal is to put that information in the hands of our members. ready to fully deploy the AMI meter, we won’t be talking “We’ve had such overwhelming positive feedback from about an AMI meter,” Rose said. “We’ll be talking about our members on the Web portal and Net Energy Market. another technology. Members have contacted us and said, ‘I always had a feeling “We’ve begun to say that our shop is not about the meter this was happening in my energy consumption, and now I that the utility wants—it’s about the services the consumer know it and I can do something about it.’ It’s all about the is going to actually use.” information we can provide.” And that’s all about the smart grid, which revolves around Phil Johnson is a freelance business writer and speechwriter. the free flow and exchange of information. Bluebonnet sees its operations and the information it can make readily available to its members in terms of a “sustainable grid,” another term the cooperative has trademarked. “You, the consumer, have a right to know everything about your account that we know—when we know it,” said Rose. “Everything is based on information.”

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Venture capital

Smart money + smart grid ++Venture capitalists seek opportunity in the land of five 9s By Phil Carson VENTURE CAPITALISTS PURSUING SMART

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Snapshots of 2010 Analysts of venture capital activity provide somewhat hazy snapshots of the landscape, as they too take varied approaches to how they classify and analyze smart grid technologies. Some think of smart grid as “clean energy,” some as “clean tech” and others call it “energy efficiency.” A few snapshots of the first half of 2010 provide a picture of venture capital interest. According to London-based VB/Research’s Clean Energy Pipeline, which classifies smart grid companies under

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ILLUSTRATION BY COLIN WALSH

grid opportunities are so varied in their approaches they might be said to mimic the proliferation of species in the Galapagos Islands. Success in their endeavor depends on a Darwinian adaptation to the market, as they seek unexploited niches and nascent or overlooked opportunities. That said, venture capitalists obviously focus on thriving, not merely surviving. Their intent is to fund innovative technologies destined for the mainstream and cash out on relatively short timelines, when a company succeeds in being acquired or launching an initial public offering (IPO). Beyond that simple observation, generalizations about the venture capitalist approach are difficult to make, perhaps because venture capital firms often depend on “domain expertise”—that is, the academic backgrounds and industry experience of their partners. They tend to pride themselves on

what they consider to be their hard-nosed, unique perspectives. Still, venture capitalists belong to one of two basic classes: high-tech corporations with venture capital arms that tend to support technology breakthroughs relevant to the parent’s business model and independent, private partnerships. Survey a handful of venture capitalists, however, and you’ll find a plethora of animals of different stripes. Some venture capitalists say that software supporting consumer energy management applications has the best chance to catch fire; others abhor what they call a herd mentality. Some venture capitalists may scour the world’s laboratories to seed ambitious ideas, while others don’t invest until a company is producing a steady revenue stream. Some say a national Venture capitalists energy policy, with a price on carbon emissions, would obviously focus bring clarity to the market; others say their investments on thriving, not are made regardless of government action. merely surviving.

VENTURE CAPITAL DIRECTIONS

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“energy efficiency,” notable deals in Q3 2010 included Trilliant (hardware and software for communications networks), which attracted $109 million, and Nexant (software for grid management), which won about $75 million. Mercom Capital Group specifically tracks smart grid venture capital funding and for Q3 added Grid2Home (HANs) and eMeter (energy information management) to that list. According to Dow Jones’ VentureSource, the big “clean tech” deals relating to smart grid in Q2 2010 involved EV charging infrastructure (Better Place Inc.), grid storage and EV batteries (Boston Power Inc.) and home energy management (Consert Inc.). Mercom Capital Group for Q2 added Xtreme Power and Prudent Energy in grid storage, and Intamac, 4Home Inc., EcoFactor, OpenPeak and Energate in home energy management.

HEMs, HANs and storage “What you see this year is a lot of focus on connectivity inside the home,” said Gil Forer, global clean technology leader for analyst firm Ernst & Young LLP, referring to software for home area networks (HANs) and consumer-facing, home energy management (HEM) displays. “Everyone in this space knows that energy storage is the Holy Grail of clean tech,” Forer said. “Whoever succeeds in energy storage will be the Google of clean tech. There is a lot of investment across the globe in storage technologies that could lead to a breakthrough, both in utility-scale storage and in electric vehicle batteries.” As for hits and misses, wins and losses, it’s a bit too soon to tell, according to Forer. “A lot of smart grid-related technology is in the pilot stage right now, so we haven’t seen a critical mass of deployment yet,” he said. While the typical venture capital timeline for investing and cashing out has lengthened across all investment sec-

tors, that’s particularly true in smart grid, according to the venture capital analyst. “In the U.S., the mean time from investment to payout in the overall venture capital space is about eight years now,” he said. “In historical terms, four to five years would be typical. Eight years is a long period of time. It requires different investment strategies in the allocation of capital, lots of communication with your limited partners.” Varied market views Beyond these generalities lie individual venture capital partnerships with specific interests in the market, often based on the cited “domain expertise” of their partners. “Our emphasis is in information technology and its two pillars, software and wireless communications networks,” said Sam Kingsland, a managing director at Granite Ventures, which just led Series A funding for Grid2Home. “For the smart grid to work will require lots and lots of connected devices, so standards and protocols are needed for that inter-communication.” Kingsland said it was too early in smart grid deployment to name any venture capital-funded “hits and misses” and noted that investing in smart grid is a bit different from other technology areas. “We expect smart grid deployment to take time, though regional markets in Texas and California are moving ahead,” he said. “Still, IT investments need to be made well ahead of deployments and there’s pressure to be ready now.” Venture capitalists must understand that utilities—the customers of venture capital-backed technologies—are driven by the need for reliability, Kingsland added. “This space is different from other markets because it’s critical infrastructure,” he said. “Utilities must meet the ‘five 9s’ of reliability. You’ve got to get it right the first time.” Bandel Carano, a managing partner at Oak Investment Partners, offered that his firm abhors “slideware”—ideas that exist only in marketing presentations—and instead prefers to invest in relatively mature companies with established revenue streams. “Our view of the world is much narrower than most venture capitalists’,” he said. “We back businesses with the potential to grow from real businesses to big, multi-billion-dollar businesses. Only a fraction of venture capitalists really know about the areas they’re investing in. The best scenario is when your partners have been participants in the areas they invest in.” Oak Investment Partners recently led a Series B round of $43 million in financing (with Intel Capital) for Nexant, upped its ante in Boston Power, Inc. with $60 million in Series E funding (with Foundation Asset Management) and increased its stake in Airspan Networks Inc., a public company that swapped 200,000 shares of Series B preferred stock for $29 million in cash and the return of 73,000 shares of Series A preferred stock from the partnership.

Brother, can you spare a million? Though some venture capitalists will tell you that consumerfacing software opportunities are over-subscribed, Forer at Ernst & Young begs to differ. Opportunities in the For the smart grid to venture capital space are perennial, should you have work will require lots a few tens of millions of dollars to risk. and lots of connected “I don’t think there are any areas you could call devices, so standards ‘saturated’ [with venture capital funding],” Forer and protocols are said. “On the other hand, there are no areas suffering needed for that interfrom lack of capital. If the technology has a significommunication. cant value proposition, that is, solving a major pain and creates a major market, there will always be venture capital to invest in it.”

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Phil Carson is editor-in-chief of Intelligent Utility Daily.

Securing the grid ++Intelligent financing creates new options for grid modernization By Michael E. Ebert and Joseph S. Fichera IMPROVING THE DELIVERY OF ELECTRICITY

over the existing strained electric power grid through grid modernization—“smart grid”—is a national priority, but it is in danger of becoming another victim of the financial crisis. Federal economic stimulus funds from the American Recovery and Reinvestment Act (ARRA) directed toward the goal of smart grid will soon be depleted. The recent burst of investments and implementations will likely slow once the 50/50 federal-to-private sector costsharing comes to an end.

“We need partners that

understand our vision for the Smart Grid.”

Aclara leads. Create Your Intelligent Infrastructure™ Find out more at Aclara.com 1.800.297.2728 | info@aclara.com

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Aclara understands that utilities need to do more than collect data. We are driving a future that integrates AMI, SCADA, distribution automation, and more into an Intelligent Infrastructure™ with the capability for communications and control. With the strength of our solutions for electric, gas, and water utilities, we understand your vision. With our network we will take you there. Aclara Leads.

VENTURE CAPITAL DIRECTIONS

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Yet from the financial crisis, certain lessons have been learned about raising private capital at a low cost to electricity consumers. Smarter financing techniques have been developed and proven that could be applied to securing the smart grid. Utility financing for hurricane and storm recovery in the South and environmental upgrades in the Midwest have saved hundreds of millions for ratepayers versus traditional financing methods. A new application of this financing technique—smart grid cost mitigation bonds, or SGBs—has a number of potential benefits.

Smart grid implementation an expensive undertaking Because our economic recovery has been anemic, proposals to increase investment in smart grid technologies— indeed, most infrastructure investments not considered “urgent”—have met opposition due to concerns about increasing costs to already burdened consumers. Smart grid implementation is an expensive initial undertaking designed to pay for itself over time through energy cost savings and greenhouse gas (GHG) reductions, whether or not the U.S. puts a price on carbon. Much of the costs will be incurred in the more complex distribution segment of the grid’s three-legged stool of distribution, generation and transmission. In rate-regulated environments, utilities and other smart grid industries must gain approval for investments made in grid modernization from state public service commissions (PSCs) if they want cost recovery for investments from rate-paying customers. Even with ARRA-financed 50/50 federal cost sharing for smart grid implementations,

cost recovery from consumers has not been easy; in fact, in many cases there has been pushback from consumers in all customer classes, from powerful consumer advocacy groups and from PSCs. The current fragmented U.S. regulatory paradigm will not undergo radical change anytime soon. Nor should we expect shareholders to volunteer to bear the entire cost of improving the grid. Ratepayers will continue to pay for PSCapproved smart grid investments, meaning higher electricity prices at a time of high unemployment, flat incomes and increasingly risk-averse investors. Electric power utilities will, for most jurisdictions, continue to be rate-regulated entities, which at the state jurisdictional retail level may only recover grid modernization costs when PSCs deem that the investments meet the classic tests of reasonable and prudent, used and useful. In the context of smart grid, meeting these tests—especially used and useful—has been difficult for utilities because utilities and commissions struggle to qualify and quantify consumer benefits and any potential savings, particularly for the residential customers. Proven financial techniques can reduce consumer burden Investments in smart grid can continue, if not accelerate, even without another round of economic stimulus aid from the federal government. What can drive the pace of private investment is the use of proven financing techniques that can reduce the burdens on consumers while still attracting large sums of increasingly risk-averse private investment.

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Benefits are clear The benefits of SGBs are the same as those found in the research project conducted four years ago in which states provided cost-recovery options for storm bonds. These are: Lowest-Cost Financing. Special state statutes or PSC financing orders based on the statute required ROC bonds

provide the lowest customer cost through the sale of AAArated bonds to private investors. Credit Enhancement thru Bond Charge True-ups and True-Downs are reduced from cumbersome commission procedures to simple, mathematical calculations. Accelerated financing for long-term investments. Using traditional approaches such as short-term surcharges, utilities must wait two to three years after PSC approval of allowable, recoverable costs to recover investments; storm bonds provided more immediate infusions of cash. SGBs have the same potential. A more logical cost recovery strategy. The transformation to smarter, greener and more resilient power grids will occur over decades. Spreading the costs of state jurisdictional electric utility investments using SGBs with maturities (for example, 10 to 20 years or longer) is more logical, matched to life cycles of assets, and less onerous to the consumer than trying to recover such investments in a few years. Some might argue that making analogies between storm bonds in the financial markets of 2006-2007 and SGBs in the context of today’s financial markets is a stretch. The facts are contrary. ROC bonds have been one of the few successful financial innovations of the past decade. A recent study by Standard & Poor’s entitled “The Recession Hasn’t Been Hard On ‘Ratepayer Obligation Charge’ Bonds” substantiates this. Despite the upheavals of the recent past, not one of these types of bonds ever was downgraded or even considered at risk of a downgrade. SGBs make even more sense in today’s economy—that is, in the contexts of the credit crisis and costs of raising capital. Today’s cost of AAA debt capital (between 3 and 6 percent) versus the 10- to 12-percent cost of a mix of debt and equity in normal economic times makes the use of these new financial instruments even more attractive. If utilities are willing to accept less than a full return to shareholders as part of a political and technological balance since the consumer benefits in the near term for smart grid, investments seem difficult to quantify. The savings to all parties can be substantial. But will investors have sufficient appetite for smart grid bonds in our current and likely near-term future economic and policy environments? Yes, provided that policymakers carefully create environments that allow SGBs to be implemented correctly to achieve the greatest financial benefits for investors, consumers and utilities alike. Michael E. Ebert is a principal research associate at the Center for Infrastructure Protection & Homeland Security at George Mason University, as well as research project manager and lead researcher for the storm cost-recovery project funded by the DOE. Joseph S. Fichera is CEO and senior managing director of Saber Partners LLC, and also contributed extensively to the storm costrecovery project.

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This option emerged from the mega-hurricanes of 2004 and 2005. Electric power infrastructures in Gulf Coast states from Florida to Texas incurred catastrophic damages. Operating under a grant from the U.S. Department of Energy, the Center for Infrastructure Protection at George Mason University studied how the states confronted cost recovery for storm losses that ran into billions of dollars. The traditional approach would be for utilities to recover the costs of restoration and recovery through customer surcharges that recouped losses over 24 to 36 months. But in this instance, the losses were so substantial, and the underlying state and regional economies so devastated and frail after being hit hard by back-to-back storms, that traditional cost-recovery approaches were not economically or politically feasible. Several Gulf Coast states responded by passing legislation that specifically authorized the option of “securitization” of storm-related utility costs. Securitization means that new or amended state authorities are created where a specially authorized charge is placed on electric consumption that creates a specific cash flow that can be packaged and sold as a security to private investors. The special class of utility tariff bonds (UTBs)—in this case called storm recovery or hurricane bonds—would be sold to private investors. UTBs more generally are called ratepayer obligation charge (ROC) bonds. The laws created a unique and powerful form of credit enhancement for the new Smart grid bonds to achieve the highest credit rating (AAA) and to be sold at the implementation lowest interest rate. This combination significantly mitigated increases in is an expensive customers’ electricity rates by using a long-term approach. initial underSecuritization has great potential to finance grid modernization costs taking designed at an accelerated rate because this approach—carefully and correctly to pay for itself implemented—has many benefits for consumers and utilities. It imposes over time. the smallest possible price increases for electricity for all ratepayers while not imposing any additional risk on utility shareholders or using the utility balance sheet.

Th e

generation

e quation

++ConEdison’s ETRM software system changes business processes By John R. Johnson UTILITIES OFTEN PREFER NOT TO BE ON THE

bleeding edge of new technology, opting instead to be fast followers when it comes to game-changing, hightech innovations that can change the face of the industry by introducing new efficiencies. That’s not the case when it comes to New Yorkbased ConEdison. The utility recently implemented an energy trading and risk management (ETRM) software system designed to improve business processes and front, middle and back-end office functions associated with the buying and selling of energy commodities.

“I’d say we’re days ahead” of others in the industry, said Jonathan Hirst, a project manager in the energy risk management department at ConEdison, of his firm’s decision to embrace the new technology. “Return on investment was not an explicit factor in this decision. If you are in this business, you need this.” Streamlining trade confirmation process The software, which went live in 2009 after nearly two years of testing, has helped to greatly streamline complicated financial functions such as month-end closings, which typically took until the fourth business day of the next month to complete.

ILLUSTRATION BY DANA LECHTENBERG

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Streamlining financial functions

been able to take our business process, layer it into the system, and have them work together.” Although the system went live in January 2009, Hirst and his team ran different nodes of the software for 12 to 18 months before ConEdison turned the software loose to become the “system of record,” meaning that the data from the system was officially being relied upon to produce mounds of data for ConEdison’s financial statements. Going from push to pull Hirst says that the biggest process change since deploying the system is that all of the information regarding energy pur-

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With ETRM software in place, ConEdison routinely meets its reporting obligation two days faster. The new system has also streamlined the trade confirmation process at ConEdison, which provides electricity to most of New York City. “Our confirmation process is a very important part of what goes into the ERMI [electronic resource management initiative] system,” Hirst said. “Trades are entered, confirmed at the management level, confirmed by contract administration, and then risk management locks the trade down. So there are several levels to the process. Prior to installing the software, this was all being done through diverse systems. So we weren’t talking to each other departmentally. But we’ve

THE GENERATION EQUATION

chases—physical or financial—is now housed in one system and is available in real-time 24/7. “It has changed our business process from being a push to a pull system,” said Hirst. “Before when we did end-ofmonth closing, we’d send all of our reports to our accountants. We no longer have to do that, since they can access the system and pull the information they need at any time.

departments that the software touched, and as many as 45 team members. By the time ConEdison was ready to submit its request for proposals, team leaders knew exactly what they wanted out of an ETRM system. “Our spec was probably much wider than most companies,” Hirst said. “Most companies go in with the idea of doing some module and building off that in the future, but we did it the other way around. When we went to system vendors with an RFP, we could specify in great detail what we wanted to see. We had a complete picture of what we wanted and asked, ‘Can you build this?’” ConEdison’s spec contained 13 major business categories and objectives, with security being chief among them. Some categories had two or three items, while others had 20 or more. The ConEd team looked for a vendor that could handle all of the items. Robust with room for new apps “It was a fairly strict grading system,” said Hirst, who notes that the vendors were narrowed to three finalists after an exhaustive evaluation period. “We were much more deliberate about it than anybody I’ve spoken with. We sat down every day for a couple months with every user who would be impacted and every department group. We plotted what our needs were, how we were doing things and how we’d like to do them in the future, so that when we were ready to put together a spec, all business groups would be represented.” Although ConEdison deployed a fairly robust system to begin with, The silos that there is still room for additional applications and future productivity might have existed enhancements. For example, because of current system constraints beyond before kind of the ETRM software, data does not flow directly from trade entry to the finango away with cial function. Right now, information coming out of the ETRM system goes this, because all to accounting, which then makes the appropriate entries. the information “That’s not what we had initially envisioned as where we wanted to go with is accessible to this, but at some point we will be there,” said Hirst. “That information should every user. flow, but it will require a fair number of interfaces to be built into our existing systems, which are older and diverse. But we expect, as part of another major company effort to update other systems, that at some point we will have that interface built and it will take trades from inception to the financials.”

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“It’s a more productive use of labor. There are certainly some things that take less time.” Hirst notes that ConEd is still responsible for “blessing” the information and making sure it’s correct, such as that all trade entries are included. But instead of waiting for the information, the accounting team can access it instantaneously, not just at month’s end. “The information is always available to them for however they may want to analyze it,” he said. “And the silos that might have existed before kind of go away with this, because all the information is accessible to every user. That’s been the biggest change.” Preparation paved the way What made the ConEdison deployment go so smoothly? The answer can be found in the prolonged preparation that the company undertook, including the eight different

”

John R. Johnson is a Boston-based freelance writer specializing in alternative energy and technology topics.

[CASE STUDY]

Putting the Smart Inventor to Work at Portland General Electric In a “green” state like Oregon, it should come as

along the right-of-way at the interchange of Interstate

no surprise that the largest electric utility, Portland

5 and Highway 205 in Tualatin, a suburb of Portland.

General Electric, now generates nearly 10% of its elec-

The state, through the leadership of its governor, has

tricity with renewable resources. Such an aggressive

plans to build the world’s largest Solar Highway with a

posture puts the utility well on its way to meeting the

total capacity exceeding 3 MW.

Oregon Department of Energy’s Renewable Portfolio Standard of 25% by 2025.

During the SEGIS demonstration project, PGE will evaluate different techniques for overcoming chal-

Although most of the utility’s renewable capacity

lenges in two key areas: unintentional islanding and

was in wind energy in 2009, PGE already ranked 8th

grid instability, particularly when caused by voltage/

in the nation for total installed solar capacity, accord-

frequency sags. According to Osborn: “We’ve found

ing to the Solar Energy Power Association (SEPA).

that inverters are rather benign when generating be-

As a pioneer in distributed, renewable energy resourc-

low 15 percent of the load on any distribution feeder.

es, PGE knew it would eventually face some challeng-

But as the percentage approaches 30, there can be

es integrating wind and solar power. “What we didn’t

significant problems if the utility fails to implement

know, is just how soon we would need to tackle these

some means of monitoring and control.”

challenges,” says Mark Osborn, PGE’s Distributed Resources Manager. Osborn attributes the rapid growth in solar power

A particular problem PGE wants to solve is one that results from the now common practice of inverters disconnecting during a voltage or frequency sag.

to a convergence of several factors, including the

“Sags usually occur during periods of peak demand,

state’s aggressive renewable energy standard, gen-

just when PV power is normally needed the most,”

erous federal and state grants and tax credits, the

Osborn notes. “Two-way communications with the

emergence of new business models for both utility

inverters, combined with constant measurements

and customer-owned generating facilities, and the

from the synchrophasors, should enable us to use the

continual decline in the cost of PV power. Osborn also

inverters to mitigate against sags and flicker much

notes the growing risks posed by coal-fired plants

more effectively.” The two-way communications will

with the likelihood of future restrictions or taxes being

also enable PGE to remotely disconnect and recon-

imposed on carbon emissions.

nect the inverters.

Rather than resist the inevitable, PGE is taking a

If time and resources permit, PGE will also explore

leadership position by fully embracing PV power.

two other advancements: using inverters to export

“Most utilities look at distributed solar as just negative

VAr power and integration with the utility’s GenOnSys

load,” Osborn explains. “We view solar as the future

distributed generation and demand response control

of renewable energy, and are aggressively pursuing

system. GenOnSys, which was custom-developed

its adoption under several initiatives.” Among those

by PGE, is the first such application to implement

initiatives is the partnership with PV Powered under

the International Electrotechnical Commission’s new

the SEGIS program.

distributed resources standard (IEC 61850-7-420).

Under this initiative, PGE is installing an enhanced

“The goal with GenOnSys is to make solar power more dispatchable by treating all inverters, whether owned

ing demonstration along the Oregon Solar Highway

by PGE or our customers, as a sort of ‘virtual power

that utilizes measurements from synchrophasors

plant’ possessing significant capacity. With this ap-

manufactured by Schweitzer Engineering Labs. The

proach, large-scale, distributed PV power can become

Solar Highway, the first of its kind in the U.S., is a pho-

more of an asset than a problem,” Osborn explains.

tovoltaic proof-of-concept demonstration conducted by a collaboration of PGE, US Bank and the Oregon Department of Transportation (ODOT). The 100+ kW system contains about 8,000 square feet of solar panels extending about the length of two football fields

1-541-312-3832 | WWW.PVPOWERED.COM

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prototype of a PV Powered inverter in a smart island-

A Message From SEPA’s President and CEO

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For the past century, little has changed in the way electricity is generated and delivered in the United States. Today, however, as an industry, we are at a crossroads. Technology advancements, innovative new business models, renewable portfolio standards, and greater attention toward the environment promise to transform the industry.

Julia Hamm, President and CEO

“If Alexander Graham Bell were somehow transported to the 21st century, he would not begin to recognize the components of modern telephony – cell phones, texting, cell towers, PDAs, etc. – while Thomas Edison, one of the grid’s key early architects, would be totally familiar with the grid.”

Growing solar energy markets is one of the forces that is driving change in the energy industry. For 18 years, the Solar Electric Power Association (SEPA) has been helping utilities navigate the latest solar trends, technologies, and business models by providing educational forums for learning and utility interaction with the solar industry.

- from the U.S. Dept. of Energy report The Smart Grid: An Introduction 1

“State of the Markets Report 2009.” Federal Energy Regulatory Commission. + THOUGHT LEADERSHIP

SPONSORED BY SEPA

» DISTRIBUTION OPTIMIZATION

Big tools for the distribution network ++Distribution management systems provide holistic view of the system By Christopher Perdue TODAY’S ELECTRICITY GRID IS DESIGNED BASED ON A VERTI-

systems, although important parts of managing an effective distribution operations business, lack the ability to analyze and subsequently operate the distribution system in real time, for optimal performance with respect to reliability and electrical efficiency. A DMS provides a more holistic view of the entire electric distribution network. With the advent of new, cheaper communications and IP-based networking technologies this holistic and total view will become more important. These technologies are bound to extend the utility information network downstream from the feeder, and eventually all the way to the house meter and in-home control systems on the residential side.

cally integrated supply model with dispatchable centralized generation and distributed consumption with no generation resources on the distribution network. Distribution networks tend to be radial with mostly unidirectional power flows and “passive” operation. Their primary role is to deliver energy from the transmission substation to the end users. The design and operation of the distribution grid has not changed much over the past three to four decades. A business case for DMS While distribution operators have always faced challenges from both regulatory There are a number of business facbodies and consumers to improve the reliability of electric service delivery while tors that can drive a utility’s decikeeping costs in check, new developments such as utility smart grid investments, sion to implement a new DMS. For the advent of electric vehicles, more distributed generation, the aging of utility example, Avista recently completed a infrastructures, more demand response and greater capacity of intermittent gen- major DMS initiative and had muleration on the grid means a major change in the way tiple drivers that made distribution operators manage the system. the business case for the The smart grid of As a result, the smart grid of the future will need project, according to Curt to accommodate more intermittent and decentralKirkeby, senior electrical the future will need ized generation, and support bi-directional powengineer at Avista. er flows. Additionally, distribution systems may “Avista has a fairly to accommodate require standby capacity, which could be called sophisticated outage sysupon whenever the intermittent resources cease to tem based on GIS technolmore intermittent generate power. ogy that models the electric network,” Kirkeby said. The DMS offers holistic treatment and decentralized system has been continuUtilities are examining tools to help them address ously extended since initial these challenges, and one such tool is a Distribution generation, and efforts began in 1999. Management System (DMS). A DMS makes the “This outage manageinformation from utility network assets available to support bi-direcment tool is tremendously enterprise operations and business processes. It helps capable for managing oututilities collect, store and analyze data from hundreds tional power flows. ages and provides detailed of thousands of data points in distribution networks, statistics. One of the key perform network modeling, simulate power operation, pinpoint faults, preempt outages and participate in energy trading markets. objectives of reliability is to examine Reliability and quality of service in terms of minimizing outages, maintaining how to impact the fewest customers acceptable voltage and reactive power profiles, reducing outage times and slowing possible. We can develop a business down the growing cost of system operations have been important incentives for case by assigning a value to every hour a customer is without power, makdistribution operators to consider acquiring a DMS. Traditionally, distribution operators have relied only on IT information system ing a determination what that cost or solutions to manage their distribution business. IT solutions such as geographic value is and validating that cost with information systems, outage management systems, and customer information the customer.

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“This system has allowed us to collect complete statistics around our reliability indicators, so we know quite accurately what our current performance is. The goal for the DMS is automatic restoration of more than 80 percent of the outage minutes that customers currently experience,” he said. Another important business driver for utilities is voltage optimization. “From voltage optimization we obtain a constant, ongoing savings,” said Kirkeby. “Because the system is constantly receiving measurements, it’s not static—it is adjusting voltage regulators and capacitor banks to save system losses and reduce loads, which then frees resources to supply other customers.” Utilities can expect numerous operational efficiencies. “Once an outage condition has been recognized, the DMS performs restoration in two stages: upstream followed by downstream,” he said. “Right off the bat we know the exact section of line that has a problem, whereas in the past a crew might have had to drive around for an hour to find where on the circuit that problem might exist. With the DMS and other supporting technologies, we could potentially reduce the trouble investigation to one section that might be only a quarter mile long. We are able save valuable crew time and may also have knowledge beforehand about what kind of fault occurred, so the crew has a better idea of what materials and equipment to take with them to the trouble location.”

smart grid concepts and the communication options that allow smart grid to happen, utilities were forced to estimate distribution losses. “You can do research out there, but it says it’s anywhere from 2 percent or 3 percent up to 8 percent or 9 percent—nobody really has the exact numbers. Avista wants to understand and calculate the baseline value of the distribution system losses and then apply remedies to reduce them to minimal values. We’re going to strive for maximum efficiency savings, optimizing the system for least loss costs.” Effective management of the distribution network will be critical in achieving the goals of a smarter grid. DMS is increasingly becoming a vital part of modern power networks and enabling the development of a smarter grid, as the smart grid will have to incorporate and manage distributed power generation, intermittent sources of renewable energy like wind and solar power, allow consumers to become producers and export their excess power, enable multi-directional power flow from many different sources, and integrate real-time pricing and load management data. With a DMS, utilities can optimize the efficiency and reliability of their power delivery system and the returns from significant smart grid investments. Christopher Perdue is vice president of Sierra Energy, a division of Energy Central.

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Providing AMI efficiencies “An AMI component also provides Avista with an additional level of opportunity with respect to our meters,” said Kirkeby. “We may get a customer reporting that the power is out when it’s only a breaker in the customer’s house, and the customer doesn’t have the knowledge to determine the reason for the outage. Frequently we send a crew out to assist assuming a utility problem.

With the ability to ping the meter for power status, the service trip to the customer’s home can be avoided and we can assist the customer by phone with resetting the breaker, reducing the outage time. Those are very real savings.” As well, there are many additional efficiencies. “You can calculate vehicle miles not travelled, identify carbon emissions not excreted, use a service switch in the meter to turn meters on and off for account opens and closes, and access the meter for on-demand reads to detect a problem with the meter or investigate a theft issue,” Kirkeby said. “Additionally, we can reconcile customer loads with transformer loads to analyze the loss components all the way down to the customer. As a result we have a very good idea of the loss elements on the whole distribution system. Prior to

GRID(UN)LOCK

Enabling the promise of smart grid ++Blazing the path for interconnection standards By Dick DeBlasio

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THE PROMISE OF THE SMART GRID IS TIGHTLY ENTWINED

with its ability to engage renewable energy sources on wide scale. The smart grid’s great potential benefits—to enhance the reliability of electricity delivery, to reduce the net costs of power for consumers, to support more stable and sustainable national energy strategies, to lessen the environmental impact of humanity’s power needs—all depend, to varying degree, on distributed generation of renewables. There is plenty of important work to be done to ensure that potential is realized. But even to get us to this point of being able to imagine the challenges and innovations that the next decades hold, a lot of important work had to have been accomplished already. Enabling interconnection Interconnection, for example, has been an ongoing point of focus among utilities, power producers, manufacturers and governments. Transparent to the distributed-generation source itself, interconnection is vital to the future of renewables’ penetration in the smart grid. Questions concerning how distributed sources of power can be safely, efficiently and smoothly connected to the grid and how utilities and power producers can fairly share the costs of interconnection continue to be explored. In the United States, the Public Utility Regulatory Policies Act (PURPA) is regarded as the milestone legislation for interconnecting independent power producers and, indeed, it was indisputably a breakthrough. PURPA—part of the U.S. National Energy Act of 1978—defines how utilities can buy power from independent generators (or “qualifying facilities”). The price of the transactions is set at

“avoided cost,” a calculation of what the utility would have invested in producing the same amount of power itself. The impact of PURPA was muted, however, in that authority for interconnection applications was left to individual states. Lengthy application queues formed, as utilities and public utility commissions (PUCs) understandably scrutinized the ramifications of interconnection on overall system reliability and public safety. Development continued around distributed-generation technologies (for solar, wind, combined heat and power, reciprocating engines and diesel, as examples), and, in 1988, IEEE 929 was published. Just below the status of a formal standard, IEEE 929 established the first recommended practice for interconnecting portables to the grid. IEEE 929 contains guidance regarding equipment and functions necessary to ensure compatible operation of photovoltaic (PV) systems that are connected in parallel with the electric utility. This includes factors relating to personnel safety, equipment protection, power quality, and utility system operation. This recommended practice also contains information regarding islanding of PV systems when the utility is not connected to control voltage and frequency, as well as techniques to avoid islanding of distributed resources. Expanding scope With the federal and many state governments moving to deregulate the utility industry starting in the late 1990s, many independent power producers sought to seize the opportunity and move forward on addressing additional business and technical barriers to distributed generation. This was the germination of IEEE 1547, fueled by U.S. Department of Energy funding to research interconnection methods. Fast-track processes were initiated to yield a national stan-

dard that would go beyond IEEE 929’s recommended practice and narrow scope and produce a standard-level document that would cover all distributed-generation technologies and their impact on the grid. Published in 2003, IEEE 1547 “Standard for Distributed Resources Interconnected with Electric Power Systems” addresses the performance, operation, testing, safety considerations and maintenance of a grid interconnection. In the years since, IEEE 1547 has emerged as the de-facto national standard for interconnection; 80 percent of state PUCs have adopted the document, and the U.S. Energy Policy Act of 2005 stipulated that interconnection services would be based on IEEE 1547. Extensions have emerged since ratification to address issues not covered in the original standard. IEEE 1547.3, for example, detailed techniques for monitoring distributed systems, and IEEE 1547.5 addressed

“Storage is the next area that will demand substantial research, because of the nonconstant nature of renewable sources

”

themselves.

Smart grid’s spur The rollout of distributed generation in the United States slowed from 2005 through 2007 thanks to general economic sluggishness, especially in California, and spikes in fuel prices. Activity rallied near the decade’s end, as political enthusiasm for the smart grid gathered. The American Recovery and Reinvestment Act of 2009 allocated $4.5 billion to fund “regionally unique demonstrations to verify smart grid technology viability, quantify smart grid costs and benefits, and validate new smart grid business models, at a scale that can be readily adapted and replicated around the country.” Though much of it went toward metering, the funding also helped reignite innovation around distributed generation. Wind power capacity was expanded, and funding increased for a variety of renewable technologies (most notably photovoltaics). Modeled after the effort that yielded the IEEE 1547 standards, the IEEE P2030 Working Group formed in March 2009 to enlist communications, information technology (IT) and power engineers in drafting a guide defining the smart grid’s necessary elements and functional requirements. The P2030 Working Group has already identified more than 70 standard interfaces that will be required for linking utilities with end-use applications and technologies such as those for distributed generation. The guide is scheduled to enter sponsor balloting in March 2011. Plans are to continue building on the base with application-oriented guides based on the P2030 interface model. P2030.1, a guide for electric-vehicle interoperability with the grid, and P2030.2, a guide for electric storage systems, have been approved for development and will build on the P2030 base. National RPS would accelerate rollout Until now, the bulk of research around distributed generation and renewable energy sources has been devoted to improving the efficiencies and reliability of interconnection and related processes. Storage is the next area that will demand substantial research, because of the non-constant nature of renewable sources themselves. We are seeing the development of electric vehicles that would provide storage/generation capabilities; substation, transmission-level storage must be bolstered in the United States, as well. Beyond answering the remaining technical questions surrounding distributed generation for renewable energy sources, what would accelerate rollout in the United States is a national standard establishing that all U.S. states would, say, produce a certain percentage of their energy from renewable sources by a particular year. Renewable energy policy targets exist in dozens of countries around the world, but right now there are only five or six U.S. states with such mandates. The political/economic incentives will have to be there. Key evolutionary steps in distributed generation and renewable technologies have brought us to the point that the smart grid’s promise is clear. So are its challenges. The next decades figure to be busy ones across the smart grid’s technical, political and economic fronts. Dick DeBlasio is chair of the IEEE P2030 Working Group, a member of the IEEE Standards Association Board of Governors and chief engineer with the National Renewable Energy Laboratory.

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distributed sources of greater scale than 10 MegaVolt Ampere (or MVA). IEEE P1547.8 responds to the U.S. National Institute of Standards & Technology Priority Action Plan. It’s intended to extend the current framework to emerging storage technologies, intermittent renewables, plug-in electric vehicles and the inverters found in devices such as home solarpower systems.

IEEE in 2010 reaffirmed the base IEEE 1547 standard for another five years, which will help provide valuable industry stability in what figures to be a period of rapid rollout of smart grid standards.

END OF THE LINE communicate with the vehicles or at least with the charging infrastructure. They might need the ability to shake that load loose for short periods of time. “Another big challenge is multiNV Energy will measure transformer loads family residences and what we’re By Phil Carson calling ‘orphan’ locations, which aren’t necessarily associated with a home,” TRAVIS JOHNSON GREW UP IN AN ENGINEERING FAMILY AND Johnson continued. “They’re not remembers living at the base of Grand Coulee Dam. Later, he lived going to be easy. You can imagine the near Hoover Dam, where his father worked as an electrical engineer. “I thought load and the metering racks are not engineering was pretty cool,” Johnson said. in the best position to accommodate Johnson earned his own electrical engineering degree and has spent two decharging stations.” cades in various roles at NV Energy, which is headquartered in Reno, Nevada. NV Another issue is determining Energy serves about 1.2 million electricity customers. That’s a 55,000-square-mile the “right size” of public charging service territory serving 97 percent of Nevadans and a bit of California. infrastructure. Two years ago, reading the tea leaves on electric vehicles (EVs), Johnson “We don’t want to over-deploy,” pressed for and received his current role as manager of electric transportaJohnson noted. “You don’t want to tion and emerging technologies. Now, EVs are here spend a lot of money on and NV Energy is ready. It will offer its residential infrastructure that may If gas goes to four customers with smart meters a chance to opt in on not be necessary.” time-of-use (TOU) rates, with a one-time chance to While most charging dollars a gallon, that opt out after 12 months and return to the traditional will be done at home, flat rate. NV refers to this TOU plan as “an experiJohnson echoed concould dramatically mental program.” ventional wisdom that TOU rates will become available to residents as somewhat ubiquitous change consumer NV Energy rolls out smart meters throughout its charging stations may territory over the next couple of years. The smart have the psychological interest. meters also enable NV Energy to serve EV owneffect of reassuring ers. Rather than track the location of EV owners, as drivers with “range Southern California Edison is doing, the utility will map its smart meters to the anxiety” that they won’t become transformer that serves them and monitor load at that level. stranded if they miscalculate the “That’ll give us a chance to see how heavily loaded these transformers really length of their drive. are,” Johnson said. “The beauty of it is that these cars are going to move around “A colleague of mine said, ‘People town. People move. People sell cars. What you care about is avoiding having your want to see charging infrastructure facilities overloaded. So, as long as you have a way to keep an eye on that, you in their community,’” Johnson said. should be in good shape.” “’But they don’t need it.’ It’s like Any attempt to forecast EV uptake in NV Energy’s service territory? a pacifier.” “That’s really tough,” Johnson said. “It’s a function of what gasoline prices What about the costs and benefits are going to do and where EV battery costs go. We’re hearing some incredibly of preparing to serve EV owners? low figures for next year, from pretty good sources. And gas prices could be all The load factors at electric utilities in over the map. If gas goes to four dollars a gallon, that could dramatically change the desert Southwest are not very high, consumer interest.” he said. Load factor equals your average Nevada drivers, like their counterparts across the country, are eligible for a load divided by your peak load. $7,500 tax credit for an EV purchase. “One benefit of EVs is to improve So, what internal, IT-related changes must take place to prepare NV Energy your load factor, if they charge at for EV adoption? night,” Johnson said. “They’re an ideal Johnson serves as co-chair of the Edison Electric Institute’s infrastructure work use of system capacity.” group, which has identified seven or eight issues that must be resolved. Phil Carson is editor-in-chief of Intelligent “One of those issues is load management,” Johnson said. “With all this load out there, utilities would be remiss if they didn’t consider having the ability to Utility Daily.

EVs not so easy ++

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4D Blows dealt While the advanced loop scheme is primarily intended to improve reliability, the smart grid implications of intelligent circuits have not escaped the utility. Last year, PSE&G pursued $76 PSE&G identifies faults with advanced loop scheme million in stimulus funding through By Joe Kovacs the Department of Energy’s Smart Grid Investment Program. Unfortunately, PACIFIC SERVICE ELECTRIC & GAS (PSE&G) HAS LONG BEEN the bid was unsuccessful. proud of its reputation of delivering reliable electricity to 2.1 million “Reviewers may have been searchcustomers throughout New Jersey. So when industry reliability metrics SAIFI ing for key words and concepts more (System Average Interruption Frequency) and MAIFI ( Momentary Average commonly associated with smart grid Interruption Frequency) started to decline about 10 years ago, PSE&G started such as advanced metering [AMI] ,” looking for a solution, which Dick Wernsing, PSE&G’s reliability-centered Wernsing said. “Our bid articulated maintenance expert, attributes to weather, tree interference with power lines the benefits of intelligent infrastrucand aging infrastructure. ture to improve reliability and, oh, by “PSE&G customers demand reliable electric service, driving the utility’s datathe way, we provide a communications driven approach to improve system performance,” said Wernsing. “We owe it to backbone for smart meters, too. We customers to continually improve our performance. To do so we were looking may not have brought front-andfor a methodology to markedly improve SAIFI and eliminate MAFI (flickering center what reviewers expected.” lights) while simultaneously preparing for future AMI system growth.” Despite that disappointment, Wernsing is still happy to expound Improving communications among reclosers the benefits In early 2008, PSE&G developed a concept to improve of intelligent A fault anywhere along performance through intelligent automation, called automation and the advanced loop scheme (ALS), which builds an how it enables the circuit can then be intelligent infrastructure using high speed communicommunications cations between reclosers in a distribution loop circuit. opportunities quickly identified and A traditional loop scheme incorporates a circuit including adbreaker at a substation, a feeder recloser halfway vanced metering isolated by means of through the circuit and a tie recloser at the end. A fault infrastructure, in the first part of the circuit trips the breaker and opportunities local reclosers speaking initiates a reclose attempt which, if unsuccessful, opens for distributed the feeder recloser to isolate the fault. The tie recloser generation from to each other in a will feed alternative power to the second portion of wind turbines the customers. But that’s still a lot of customers experiand solar panels, smaller area. encing a momentary or a longer power outage. and an intelligent ALS increases the number of reclosers on a loop SCADA system. circuit and breaks customers served by a particular segment of the circuit into smaller sections. Microprocessors installed in each recloser are connected via a Asset management benefits fiber optics network, which can automate communication capabilities between PSE&G is particularly suited for an them. “A fault anywhere along the circuit can then be quickly identified and advanced loop scheme because of isolated by means of local reclosers speaking to each other in a decentralized its location in the New York-New manner,” Wernsing explained. Such a strategy can significantly reduce the Jersey metropolitan area. The number of customers impacted by an outage. distance between facilities is only Isolating power outages so they affect hundreds of customers instead of six to 10 miles and fiber optic several thousand would seem an obvious benefit, but few utilities have thus communications upgrades are less far adopted it. “Our means of isolating an outage is considered unusual in the cost prohibitive than they would industry,” said Wernsing. “We close the tie point before opening the faulted be for another utility in a less consection, which works for us because of the speed at which we clear faults, elimicentrated region with stations and nating the on-off flicker that people hate.” customers further apart.

Creative innovation ++

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“We remain vigilant in both the advanced loop scheme and AMI areas. When AMI starts to be deployed, the fiber optic communications of ALS will be cost justified,” said Wernsing. “Fiber optics is also part of PSE&G’s system upgrade, including serving as replacement cables as older static wires are removed.” Wernsing finished by emphasizing reliable power delivery. “The more electronic our society becomes, the greater the inconvenience of even a momentary outage. Households and businesses have to reset clocks, computers, etc.” But soon he was musing again about the asset management benefits of an intelligent automation systems and the smart grid. Author’s note: As a Bronx-born New Yorker familiar with the region, I am personally fascinated by the idea of the smart grid setting a foundation hp-ad-1.qxd

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for windmills in Newark (where PSE&G is based). Who could have predicted an intelligent utility even a few decades ago? And who could have thought that smart grid would have happened ‘oh, by the way’ as a utility follows some other goal? But that is what PSE&G is moving toward as it emphasizes power reliability as the primary driver for advanced loop schemes and an intelligent infrastructure. Joe Kovacs is a freelance writer based in Washington, D.C.

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CONNECTIONS

Wi-Fi versus WiMAX ++Smackdown, or merely a matter of choice? By Kate Rowland

W WW.INTELLIGENTUTILIT Y.COM /// NOVEM BER/DECEM BER 2010

IN THE SAME WAY THAT ONE SMART GRID DOES NOT FIT

the needs of all utilities, neither can one communications network do the job for all. There has been a lot of buzz around Wi-Fi and WiMAX. Some say it’s akin to comparing apples to oranges, and I would have to agree. It all comes down to the business case for each utility, and what type of telecommunications protocol— direct client connections over fiber or wire, or wireless mesh networking (and if wireless, what type)—best suits the utility’s distinct needs. Point-to-multipoint wireless mesh networks, whatever their flavor, generally offer reduced infrastructure costs, improved wireless coverage and high resiliency. Different forms of mesh networks have been introduced for smart grid applications such as advanced metering infrastructure (AMI) or home area networks (HANs). Wi-Fi for HAN Without delving deeply into the technical differences between the two protocols, Wi-Fi and WiMAX are both open standard, though the cost to deploy the technology is lower, at the moment, to deploy Wi-Fi than it is to deploy WiMAX. Wi-Fi Direct, expected to be launched by the end of this year, will most certainly introduce new ways in which to support smart energy in the home. A peer-to-peer technology, it will allow communications from device to device. Greg Ennis of the Wi-Fi Alliance told me that it “can be essentially like a dedicated network for the utility within the home.” Wi-Fi is, therefore, going head-to-head with ZigBee within the home, there’s a lot of room to play for both parties. Some utilities are adopting the low power ZigBee communication standard, while others are opting for Wi-Fi, given its already widespread use. And Wi-Fi, as we know, is applicable not only in HAN, but also in Neighborhood Area Networks (NAN) and Wide Area Networks (WAN). Ennis

says the economics of scale are driven by cost-effectiveness. Wi-Fi is being used by some utilities not only for their AMI networks, but also third-party applications like Google PowerMeter. Licensed versus unlicensed spectrum There are some who say that Wi-Fi will take a back seat to WiMAX, however. One reason proffered is that, while Wi-Fi has been shown to be a secure technology, it is unlicensed. WiMAX, on the other hand, offers a secure connection over a licensed spectrum, something utilities may consider a more comforting option, despite the studies and documentation noting Wi-Fi’s level of security. (The reasoning, while not scientific: If it looks like an apple, it must be an apple; if it looks like an orange, it must be an orange.) As well, WiMAX offers a long-range, high-bandwidth wireless option, also attractive to the specific needs of some utilities. Until recently, WiMAX has not been a communications option for utilities building their WANs. But, as earth2tech’s Katie Fehrenbacher pointed out late last year, with the incursion of new players in the WiMAX arena and the subsequently growing WiMAX network, the costs to employ should start to drop in the near future as economies of scale push them down.

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Utility choices There are utility examples on both sides of the Wi-Fi/WiMAX board. The City of Burbank Water & Power, for example, chose a secure Wi-Fi mesh network for its smart grid upgrade project (financed in part by a $20 million Smart Grid Investment Grant by the U.S. Department of Energy). And in 2009, Silicon Valley Power (SVP) purchased the Santa Clara Wi-Fi assets to pioneer a meter reading program using the existing Wi-Fi access points. (The system also offers free outdoor Wi-Fi service to the surrounding neighborhood.) For SVP, it was a matter of cost: when it purchased the Wi-Fi network last year for $205,000, SVP felt that purchase price saved the utility half a million dollars and years worth of time, as opposed to starting from scratch. On the other hand, CenterPoint Energy decided it needed more bandwidth for distribution automation, and turned to WiMAX, opting for a self-contained, utility-owned WiMAX system, rather than a public one. In fact, according to Rick Nicholson, vice president of research for IDC Energy Insights, CenterPoint was the first utility in the United States to “put a stake in the ground” around WiMax. (Two utilities in Australia, SP AusNet and Energy Australia, are testing WiMax smart meters using public WiMAX networks.) Oklahoma Gas & Electric and Pennsylvania Power & Light are also working on WiMAX-based smart grid networks. San Diego Gas & Electric and Southern California Edison also plan to use WiMAX for part of their smart grid networks. What is comes down to is a matter of cost, choice and need. While the Wi-Fi/WiMAX war may wage on in wireless communication circles, utilities will continue to choose the network that best suits their needs, and the needs of their consumers.

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OUT THE DOOR

Generating electricity from excess heat ++Capturing a use-it-or-lose-it source By Ken Silverstein

W WW.INTELLIGENTUTILIT Y.COM /// NOVEM BER/DECEM BER 2010

THE POWER SECTOR MAY HAVE ANOTHER TOOL IN ITS

arsenal to meet tomorrow›s energy demand. Scientists say the recycling of wasted energy could supply much-needed generation capacity while also limiting the release of heat-trapping emissions. Consider that for every BTU of coal or natural gas burned in a combustion turbine only 35 percent of that is converted into useful power. The other 65 percent is lost forever in the form of waste heat discharged into the environment. Interestingly, the technology exists to modify that waste heat—a tool that could gain ever-increasing credence if natural gas and coal prices turn volatile. “Generating electricity from waste energy is similar to renewable generation because it is a use-it-or-lose-it source, much like catching wind, sunlight, or falling water,” says Melissa Mullarkey, a public policy associate at Recycled Energy Development, in a formal paper she authored. In the end, she says that while the process does not require the use of any more fuel it does boost the efficiency levels to at least 65 percent. At the same time, far fewer greenhouse gas emissions are released, although the government has expressed concern that more nitrogen oxide will be created. With the U.S. Energy Information Administration saying that the expected demand for power will rise by 50 percent over the next two decades, the country will need every resource possible. Along those lines, the Oakridge National Laboratory issued a study that says an expansion of co-generation could provide 20 percent of the nation’s generation capacity by 2030. Doing so would also generate $234 billion in new investment and create 1 million new jobs.

Recycling energy falls under the category of combined heat and power, which generates and uses both electricity and thermal heat—a technology that is now eligible to receive 10 percent investment tax credits from the U.S. government. Combined heat and power units produce about 12 percent of all electricity in this country. Because the recycling process requires no added fuels, there’s a huge window of opportunity to capture energy in those refineries and industries where the wasted heat is released at 300-700 degrees Fahrenheit. Put simply, it is like boiling water and then using the steam to power other things in the house. But for all practical purposes, the steam is just released and lost forever. Consider ArcelorMittal Steel USA: It says that international competition has caused it to find ways to drastically cut its energy consumption, and that it will continue to do so. To that end, it has implemented a process at one of its steel plants in Chicago whereby it re-uses heat to make electricity and thereby saves $100 million a year. This is a practice popular among European industrials with many of them producing as much as 20 percent of their power this way. But Mullarkey says that there are some regulatory barriers to overcome in this country before businesses here could achieve such results. For starters, she points to the New Source Review provision under the Clean Air Act. That rule is intended mainly to prevent older coal-fired power plants from equipping those units to produce more energy so as to minimize pollutants. Tough enforcement of the law, in fact, has resulted in a number of settlements with utilities—deals that have required them to spend millions to modernize their coal facilities. But according to Mullarkey, some power operators fear that that they will get sued if they equip their facilities

so that they could capture excess heat. She writes that these projects could alter the generation process and thus violate the New Source Review. Even though the technology may cut carbon levels it could increase nitrogen oxide levels as more energy is generated. Furthermore, cost is a deterrent. Central generation last year was reported to be notably less expensive per kilowatt than that of local generation, which is at the core of the recycling process. However, with a big plant, there’s a need for transmission and distribution — all of which adds to the expense of building a central power facility and which makes onsite power more attractive. Energy is wasted daily. And a marketplace void now exists to recapture waste heat and to apply it to create electricity. Proponents of the concept say that the technology is available today to do just that but that high costs and regulatory impediments stand in the way. If the federal government gets more involved, then they say that fewer power plants will ultimately be necessary and that the air will be much cleaner. Ken Silverstein is editor-in-chief of EnergyBiz Insider.

Beauty in the wires IT’S EASY TO FORGET, IN DRIVING FROM PLACE TO PLACE

across the country, that there’s true beauty in the wires up above. But when the sun is glinting through glass insulators as stunning as these, in the crispness of early morning in the Kootenay District of southeastern British Columbia, it becomes extremely difficult to keep one’s eyes on the road.

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