EveryBody's Talking Smart Grid

04/21/2009

Climate change, cap and trade, and carbon taxes seem to be "dirty words" to be avoided, but there's one term everyone seems to like - Smart Grid. Among the multinationals jumping on the smart grid bandwagon are IBM, GE, AT&T, Intel and Google, which are developing in-house technologies as well as investing in leading development stage companies.

Check out GE Energy's online ad, which promotes its Smart Grid wind turbine technology. Activate your computer's webcam and face it toward the solar panel or wind turbine icon, and the smart grid opens on your screen. Blow into your computer's microphone to make the turbines spin faster.

GE may be getting a little ahead of what the smart grid can do at this early stage, but clearly there's a lot of excitement about it. Jeffrey Immelt, GE CEO calls the smart grid one of the company's most important growth initiatives.

The development of the Smart Grid is being compared in importance to the transcontinental railroad, the interstate highway system and the Internet, and is expected to spawn companies that rival Microsoft and Google.

What the Smart Grid Will Do

When we talk about a smart grid, we're basically talking about modernizing the electrical grid of the 1960s and 70s into a network that uses microprocessors and software to work efficiently and to connect to renewable energy generation. A true Smart Grid works much the way the Internet does, enabling multiple applications to operate over a shared, interoperable network. The challenge is to create an intelligent, efficient network among our 14,000 transmission substations, 4,500 large distribution substations, and 3,000 public and private owners.

After two-way meters are installed, wireless sensor networks and software will show utilities how much and where energy is being consumed, and where there are problems or blackouts in the network. Homeowners and businesses will see their energy use in real time and be able to adjust their consumption habits accordingly.

This will pave the way for real-time pricing - energy use will be priced at different rates based on the time of day and the amount of electricity demand. Utilities will be able to manage electricity loads more efficiently and homeowners/ businesses will be able to reduce their monthly energy bills.

Once transmission lines are built, the smart grid will deliver renewable energy from centralized plants to where it's needed and it will feed energy from distributed sources like rooftop solar and wind systems to the grid, while compensating power generators accordingly.

Stimulus Funds for Smart Grid

The U.S. Department of Energy is handing out about $4.5 billion in cost-shared grants for smart-grid technology development under the American Recovery and Reinvestment Act. It plans to disburse grants of $100,000 to $5 million to deploy grid monitoring devices, $500,000 to $20 million for smart grid technology, and $615 million for regional demonstration projects on smart-grid storage, monitoring and technology viability. A 20-day public comment period just began on the draft plan; the DEO will use the feedback to finalize the grant program structure and subsequent solicitation.

In early May, the Departments of Commerce and Energy will convene industry stakeholders at a Smart Grid meeting in Washington D.C. They will begin the all-important discussion of setting industry-wide standards - a key to making the smart grid a reality. Participants are expected to commit to a timetable for reaching a standards agreement.

Commerce Secretary Gary Locke said, "A smart electricity grid will revolutionize the way we use energy, but we need standards in place to ensure that all this new technology is compatible and operating at the highest cybersecurity standards to protect it from hackers and natural disasters. The Recovery Act will fund the development of those standards so the exciting technology can finally take off."

Although the stimulus funds will jump start the modernization of our grid, it will cost $100-$200 billion for full build-out. The Obama Administration's goal is to install 40 million smart meters and 3,000 miles of transmission lines.

Europe, China and Australia also have smart grid initiatives. China's State Grid Corporation, which distributes power in all but five of China's provinces, announced it would invest RMB 250 billion ($36.5 billion) in 2009 for ultra-high voltage transmission lines to upgrade its electric grid and improve the flow of electricity from energy producing regions to densely populated areas. The European Parliament announced a policy that would deploy smart meters in 80% of homes by 2020, which is expected to become law by the end of 2010.

Early Action

As of 2006, only 6% of U.S. homes have a smart meter - the first step toward a smarter grid - but that may begin to change by the end of this year. Energy monitors could quickly become the latest addition to phone and cable company packages that combine TV, phone and Internet service. In Europe, Italian utility Enel alone has installed triple that of the U.S. (27 million meters).

Florida Power & Light (NYSE: FPL) just announced a $200 million "Energy Smart Miami" program, which, in partnership with General Electric (NYSE: GE), Cisco (Nasdaq: CSCO) and Silver Springs Networks, will bring over 1 million smart meters to just about every Miami-Dade County home and business, creating an automated grid in the next two years.

The partners are looking to the federal stimulus to provide the initial investment, which they estimate will create 800 to 1,000 jobs. FPL says it eventually plans to expand the network to its entire 4.5 million customers in Florida through an additional $500 million investment. FPL also plans to integrate solar plants at several universities and government sites into the network, and will add 300 plug-in hybrids to its Miami-Dade fleet and install 50 charging stations. GE supplies the smart meters, Cisco provides the networking software and Silver Spring provides the wireless communications.

Silver Spring Networks was also selected by Pepco Holdings (NYSE: POM) to provide networking solutions for its 1.9 million customers in Delaware, Maryland, New Jersey and Washington D.C. And Silver Spring is a partner in Australia's government mandated advanced metering infrastructure rollout. The program, which begins September 1 and is scheduled for completion by 2013, will network about a million homes and businesses in Victoria. Silver Spring has networking contracts with U.S. utilities representing 20% of the US population, such as Pacific Gas & Electric (NYSE: PCG), Oklahoma Gas & Electric and Florida Power & Light (NYSE: FPL).

Earlier this month, utility National Grid (NYSE: NGG), announced it will install smart meters in 15,000 Massachusetts homes, providing real-time data about electric use. Funding for the $57 million project will come from an additional 50¢ a month on customers' bills. Last week it filed a similar proposal in New York, which would involve 40,000 customers at a cost of $240 million; National Grid hopes to raise half through stimulus grants.

Texas utility Texas-New Mexico Power (TNMP) plans to put smart meters in 10,000 homes through a partnership with smart meter manufacturer SmartSynch and AT&T. The meters will connect to utility control stations through AT&T's wireless network. SmartSynch and AT&T have already connected smart meters at commercial and industrial locations to about 100 utilities. Verizon and other phone companies are also creating smart grid partnerships.

It's a win-win for utilities and phone companies to work together. Utilities can rent space on phone companies existing networks rather than building their own network, while phone companies get an additional, steady revenue stream for the wireless networks they've paid billions of dollars to build. The traffic - mostly real time prices and perhaps demand response events - would also be much smaller than wireless video streams.

But whether the phone company/ utility relationship works depends on how much the rental costs. Unmeshed Wi-Fi firms like Tropos are already attempting to undercut phone carrier prices.

IBM (NYSE:IBM) is incorporating its IT architecture into 50 smart grid projects across the world. In a AU$3.2 million ($2.2 million) deal with EnergyAustralia - Australia's largest electricity distribution network - IBM's architecture will connect 12,000 fiber optic sensors throughout the network.

In February, Google entered the smart grid arena with the launch of PowerMeter. There's a push for smart grid technology to adopt Internet Protocol, which would undoubtedly benefit Google. Google hopes to convince smart meter manufacturers to allow energy consumption information to be collected and displayed by PowerMeter on the Web. Google's blog says, "open protocols and standards should serve as the cornerstone of smart grid projects."

International consulting firm Accenture (NYSE: ACN) formed the Accenture Intelligent City Network to accelerate the development of smart grids around the world. Members, which include utilities and city authorities, will exchange knowledge and experience in planning and implementing smart grid technology.

Accenture says the Network will help create blueprints to deploy smart grids, including how to integrate them with broader investments in intelligent infrastructures, such as smart buildings and transportation. Charter members include Xcel Energy (NYSE: XEL), which is working with Accenture on its SmartGridCity project in Boulder, Colorado; East China Grid Company, a Chinese transmission company; Russian Interregional Distribution Grid Company of Centre, which is creating an "intelligent" city in Belgorod; Dutch utility Alliander N.V. and the City of Amsterdam.