So I find myself in a refurbished Cold War bunker just north of Philadelphia where the future of the long-haul electric business is on full display. Literally. Massive data flows are collected, analyzed, modeled, forecast and presented on displays the size of several Imax screens. This is a nerve center to manage electricity coursing across thousands of miles, transporting as much energy in equivalent terms as two Keystone pipelines.
The stakes are high. Its a $35 billion annual market serving 55 million people. Physical and cyber security are critical, explaining in part why were underground. Never mind hurricanes and ice storms, this baby will be around after the apocalypse. But why here and why now? Lets back-track to the underlying fundamentals.
Start with an important universal fact: growth in electric demand outpaces that of all other energy forms. Kilowatt-hours are just a whole lot more versatile, not to mention that they serve as the sole fuel of the infrastructure of the entire Internet.
This energy trend looks the same in every country, including mature ones. In America, electric demand rose almost 10% since 2001; an increase equal to Italys entire annual use. That wasnt supposed to happen. Were an efficient ever-more digital economy. Besides, over $20 billion has been spent since 2001 to promote and implement programs to stop electric growth. Add to that the fact that we have just slogged through the deepest recession of the past eight decades.
If its any comfort for the no-growthers, non-electric energy use did decline, about 1%, since 2001. Put those two trends together and we find that roughly the same amounts of energy are now delivered in the form of electricity and oil.
According to Energy Information Administration forecasts, electric use will rise another 12 percent in the coming two decades. Meanwhile, even with economic and population growth, transportation energy demand is forecast to stay flat. Soon the majority of our economys energy will be delivered not by the gallon in pipelines and trucks, but by the kilowatt-hour in long-haul wires.
The challenge of course is that energy in any form is generally not co-located where it is consumed, whether its oil from Albertas tar sands or Arabias sand dunes, or kilowatt-hours from Illinois coal plants or Iowa wind farms. So supplying energy at civilization-enabling scales always faces two challenges: production and delivery. In these two we find deep differences between electricity and other energy forms.
Despite all the debate about Keystone, the essence of the oil challenge is not in the supply chain but in the supply itself, and the fact that so much of our supply is foreign. The technology challenge with oil is finding more of it, not so much in transporting it. Keystone is about politics not technology. The electric business is the polar opposite.
Electric supply is an almost entirely domestic business, and any shortage is a political/legislative choice, not a resource constraint. (Therein a subject for another day.) The fuel and technology options for making electricity are hugely varied and abundant. But shipping kilowatt-hours is the most daunting supply-chain challenge on the planet.
In delivering energy in large quantities, inertia is your friend. Electricity doesnt have any. High-inertia systems are easier to monitor, predict and control. Oil and natural gas move from source to market, in pipelines or ships, at around 10 to 20 mph. Ironically, coal moves faster on 60 mph unit trains. Electricity, by comparison, moves essentially at light speed, an incomprehensible 670 million mph. Instantly. Utility-scale engineers long ago figured out this presents unprecedented operational, safety and control hurdles. And thats only half the delivery problem.
Storage is a central feature of any supply chain. You warehouse to build in resiliency and hedge against short-term price swings. For coal, oil or natural gas, about two to three months of annual deliveries are in storage at any given time. Compare this to electricity where we have less than one weeks supply in storage, and in only a few parts of the country at that, all of it in the form of kinetic energy from water pumped up a hill, not spread out in the supply chain like other commodities.
The fact is electricity is devilishly difficult to store. Virtually nothing at national levels is stored as electrons, not even at your iPad level where watt-hours are stored in batteries in an intermediate form as ionized chemical molecules. If you count up all the batteries everywhere, you havent stored enough electricity to meet even a few minutes of national demand.
So what to do? Up until now, engineers have had to overbuild the electric supply-chain in order to meet this challenge. This national network costs trillions of dollars and demand keeps rising, not just for more power, but importantly for more reliability. Simultaneously both tolerance and capital are in short supply for building more long-haul electron pipes.
Now comes a new paradigm for delivering huge quantities of electrical energy to society – back to the Cold War bunker, home of PJMs nerve center.
The PJM Interconnection, an obscure entity (well, obscure to anyone outside of the utility world) has built this bunkered data-centric command center, and is demonstrating an energy miracle. It uses information technologies to double the capability of their existing network of long-distance wires to move energy. Remember were talking here about flows equivalent to two Keystone pipelines of energy.
And while the Keystone Pipeline will cost $7 billion, PJM spent $280 million to achieve this feat without digging a trench, laying a pipe or stringing a wire. Terry Boston, PJMs enthusiastic CEO, properly brags that his 21st century machine generates $2 billion a year in savings over the legacy business-as-usual system. In a for-profit world, the kind of economic leverage PJM has created would be an IPO waiting to blast off. Boston calls it their Advanced Control Center, which is a modest utility-centric language for what we have here — a supply-chain software business (known in the IT world as SaaS, or Software as a Service) for Big Electrons.
PJM is the supervisor, the operator, of the biggest of the nations ten Regional Transmission Authorities (or Independent System Operators), enabled by the Federal Energy Regulatory Commission "to satisfy the requirement of providing non-discriminatory access to transmission," while maintaining critical reliability. PJM covers the territory from Chicago to Washington DC and Manhattans border with 56,000 miles of high-power long-distance lines, and some 6,000 substations.
This massive electric enterprise SaaS collects real-time data from almost 100,000 controls points. These are in utility jargon, Remote Terminal Units … yet another demonstration of old-speak vs Internet language for information nodes. The heart of the PJM SaaS is a new information- and data-centric control system. The dual-redundant control rooms look like something dreamed up by a Hollywood special effects team — each with their own enterprise-class data-center.
PJMs SaaS, this control center, accomplishes what every business on the planet wants to do with an expensive high-cost supply chain – wring more, a lot more, out of what youve already built.
Terabytes of data, analysis and modeling allow real-time optimal use of supply across a vast territory, matching it with demand – to approach what PJM terms "Perfect Dispatch," the match-up of available generation and transmission to meet demand at the lowest cost, while maintaining reliability. In so doing, Boston figures PJM members save up to $0.5 billion a year just in dispatch optimization, a big chunk of the total $2 billion in value/savings annually. All this for an investment of $200 million.
Electric markets have crossed a Rubicon of sorts: information about energy is now more valuable than the energy itself – meeting demands, peaks and growth without laying much more pipe. Utility-scale spending on communications, software, and automation controls is a bigger market than for wires and poles. Heck, spending on utility data analytics alone will be a $4 billion a year business in a few years according Pike Research.
The implications for Big Data in these power markets has not escaped the attention of hundreds of companies, small and large. Siemens [NYSE:SI], SAIC [NYSE:SAIC], Tibco Software [NASDAQ:TIBX] and Arking Technologies (for visualization) helped build the PJM SaaS. No surprise then to find lots of other players here too, like Accenture [NYSE:CAN], IBM [NYSE: IBM], Microsoft [AMEX:MSN], Oracle [NASDAQ:ORCL] and Teradata Corporation [NYSE:TDC] (the latter a big data favorite; see my earlier column on oil).
All of this is part-and-parcel of the broader trend thats been labeled "smart grid." And while much hoopla has surrounded the installation of millions of smart meters on homes, not to be unkind, but thats childs play in the world of electrons. Big Electrons and Big Data are where well move the meter on really improving the electric energy supply chain. (For a thorough map of the 200-plus vendors across this landscape, Groom Energys analysis is particularly useful.)
Want a prediction? The emerging mega-power SaaS networks are short-term bullish for wind, and long-term bullish for coal. Information-centric horsepower leads to better grids, moving more power more easily, absorbing the challenges of episodic sources like wind and solar, and enabling virtual storage (so-called demand-side management).
SaaS power networks also unleash the economic value of underutilized assets, especially remotely sited cheap power plants. Well see more natural gas plants built given the current gas glut. And eventually, as demand inexorably rises, coal again. (I know this latter prediction is out of phase with energy fashion; well return to it anon.)
In general though, unleashing more value from existing assets means that in the short term many mature economies wont need to build much in transmission lines, or even power plants for a while. In the longer term, markets will migrate to capturing and moving around the cheapest energy networks can touch. All this is bullish for the American economys primary fuel source — electricity.
Countries that have lots of electricity long ago lost fascination with the strange phenomenon of delivering huge quantities of energy invisibly, electromagnetically along wires. (For a look at how the dawn of electrification once captivated Americans, see David Nyes exquisite classic 1992 "Electrifying America.") But PJMs SaaS epitomizes something we should be excited about again. People in the know are.
My colleague Ake Almgren has been around the big electron business for a long time, as a former exec at ABB, and a PJM Board member and advisor on their SaaS. To quote Ake, a master of the understatement: "its a big deal." Indeed it is. This is the first secular transformation of electric infrastructure since Edison and Westinghouse duked it out over AC versus DC transmission.
Original Source: http://www.forbes.com/sites/markpmills/2012/03/19/information-technology-unleashes-the-electric-equivalent-of-a-free-keystone-pipeline/