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Smart Grids Highlight Innovation's Promise and Where America Leads the World, Even China

August 15, 2011

By Mark P. Mills

The electric grid of the future? In a word, smarter.

The smarter electric grid is interactive. It knows what power you need, when and where, and what flavor you’d prefer; green, or cheap, or both if possible. It is adaptive, balancing the difficult-to-manage peaks in demand arising from the normal diurnal cycles of social behaviors and nature’s vicissitudes. It can gracefully accept episodic solar and wind energy. In a word, it will be more useful. Oh, and it will save energy and money too.

With a smart grid we would produce, move, manage, and use the electrons that comprise electrical energy not the way we handle oil, but the way we distribute the electrons that comprise the information on the Internet. This will be as fundamental an architectural transformation of the electricity business, as it was for the communications business.

And electric outages would become as rare as, say, no gasoline available at any local station in a hundred thousand square mile radius. Unimaginable.

Today’s electric grid most strongly resembles yesterday’s broadcast TV industry. Video circa 1960, what our parents quaintly labeled "tele-vision" back in the day, was pretty much one size fits all, with limited variants in content, or how and when you could receive anything. A handful of generators of video content sent their offerings to a controlled group of local monopoly distributors — broadcasters — for consumption. It was a top-down distribution system. The limited selection of products was available, well, when it was available, under the dictates of the top-down suppliers who optimized delivery for the maximal common good. Sounds familiar, doesn’t it? Rather like your electric company.

The Internet changed all that for video. It shifted from one for all, to all for all. Interactive, on-demand, storable, flexible. The technology of the new communications infrastructure unleashed an explosion of content and options. That revolution changed forever how we create, produce and use video. And that revolution required more than a trillion dollars of new technology investments over the past several decades in a radically new and "smart" telecommunications infrastructure.

But electricity has important differences. While the production and delivery of electricity is more akin to oil, its physical nature is more akin to information … but we are talking about power here, not bits and bytes. That’s the rub. In a communications system a coherent stream of electrons, or their quantum cousin in photons, is measured in fractional watts, or at most watts of power. In power systems, that electron or photon stream is a thousand or a million fold more powerful – at such levels you can weld metal, create a weapon, even quite literally a ray gun. The types of hardware that can manage such power at all, safely and interactively, are in an entirely different league.

Returning to the Broadcast-to-Internet analogy, the technology pieces that made the Internet possible are also essential to the inelegantly coined "electrinet" — new and interactive ways in which the core commodity can be generated, transported, switched, routed, stored, monitored, and then managed with software.

Smart meters are the first and most expansive step toward smart grid thus far deployed. They provide an overlay of information systems on top of the power system. Millions have been installed. That technology has already evolved from innovation to near commodity.

The players in the smart meter space are generally familiar companies like GE, Siemens, Itron [NASDAQ: ITRI], and the venerable Landis+Gyr (on track to be acquired by Toshiba). There are nonetheless venture-backed and start-up companies like Sensus Metering and SmartSynch to name a couple still bringing innovation to this corner of the smart grid market.

It’s a start. But putting smart meters features on top of the electrical system is the equivalent of giving everyone an electronic TV Guide without a channel changer. Or to use an energy analogy: it is the equivalent of installing a speedometer and gas gauge without incorporating brakes and a steering wheel.

The goal is not just to add information about the grid with better meters, but to have the grid operate like a communications network. The latter is technically much more difficult, but finally possible.

The smart revolution will begin once the distribution of power itself, the product, becomes interactive, dynamic, and reactive — the functional analog to what enabled the Internet. In order to achieve that level of dynamic control with power, look to companies that provide the three enabling classes of technologies that make networks possible — switches and controls, storage, and power-centric software.

Reasonably intelligent software and power control systems are already widely deployed on the customer side of the meter in thousands of buildings. Building-automation is a mature and growing multi-billion-dollar per year global industry. It is a relevant first step in the implementation of a smart grid. But to continue our analogy, building-automation systems are not much different than the pre-Internet age of stand-alone computing. Smart grid requires moving that intelligence and control upstream, onto the local loops.

Utility engineers will be quick to tell you that they do in fact have monitoring and controls on their distribution systems. The Supervisory Control And Data Acquisition (SCADA) industry has been around for decades, pretty much since the dawn of the electrical age, and is another multi-billion-dollar a year global business. Engineers knew early on that speed-of-light power requires an entirely new paradigm of management. But much of that ’management’ came from elegant design, and over-design, rather than active control. And what control there is, is semi-automated at best and electromechanical, not true solid-state, electronic and interactive.

SCADA is fundamentally a monitoring and safety system. Today’s electricity is still delivered in a top-down ’broadcast’ from power plants over power lines that reach into devices in homes and offices. Along the way the switches and gates are used only episodically, for safety or emergencies, not for the interactivity envisioned in a smart grid. SCADA is also used for oil, natural gas and water distribution. They are all, including today’s electric system, well-monitored pipelines — monitored broadcast systems.

To create a smart grid then, start with the software, Internet-class software. Software is needed at all levels of a network’s hierarchy. Not surprisingly, Internet veterans are deeply engaged in the smart-grid, from Oracle [NASDAQ: ORCL], Cisco [NASDAQ: CSCO], Microsoft [NASDAQ: MSFT] and Hewlett-Packard [NYSE: HPQ], to IBM [NYSE: IBM]. For cognoscenti, watch as well an array of relatively newer, smaller companies including Comverge [NASDAQ: COMV], EnerNOC [NASDAQ: ENOC], and many venture-backed companies like Silver Spring Networks (teed up for an IPO), Trilliant, Tendrill, GridPoint, , eMeter, BPL Global, and our own Power Analytics (where, full disclosure, I am on the Board).

Software in the smart grid faces all of the operational and security challenges that are present everywhere else – with the added dimension of safety. But in the end, the software will unleash capabilities heretofore unimagined in the use of electrical energy. But it cannot do that by merely analyzing data from smart meters. Active control within and around the networks is essential and comes from the other two foundational network technologies: switches, and storage.

Think about how many places, and in what fashion, storage plays a vital role in the Internet, in layer-upon-layer of devices from the content creators and data centers, through the networks and into consumer devices. Content on the Internet is stored always and everywhere – with the exception of a few "live" events. Then consider that 99 percent of all electricity used on the grid is essentially stored nowhere. Today electricity is produced the instant it is demanded. Storage technology is essential for the ascendant smart grid.

I’ve earlier explored the grid storage paradigm on these pages (Smart Grid Revolution Starts With Big-Electron Storage). Suffice to say that you can make the grid smarter, but without storage you can’t get to Internet-like smart. There is an array of relevant technologies and emerging suppliers. The demand is so enormous that there is ample room for many to succeed. A Sandia National Laboratories report puts the total cumulative requirement for U.S. grid storage in the $200 billion range. (Here too, full disclosure, we are a player in a relevant company, International Battery, on whose board I sit.)

The third enabling and emerging grid network technology is the high-power switch — or in Internet parlance, the router. With electronic switches and routers you can really control things. But, as earlier noted, switching and routing weapons-grade electrons is done today largely electromechanically, or even just mechanically. Doing it with solid state devices requires a whole new domain of technology, of high-power power electronics.

Fortunately, power electronics are on the verge of entering a golden age, courtesy of the relentless progress in silicon technology itself. An important bellwether: ABB’s [NYSE: ABB] emerging solid state transformer, which ABB properly refers to as a power router. Today’s ubiquitous transformer is an oil-filled box with a wire-wound core that converts electricity from high to low voltage, or vice versa, and distributes the building-suitable power. It is a fundamentally passive — dumb — but essential analog component in the broadcast power network. Also emerging now after years of development, are power electronics based on the new classes of high-power semi-conductor materials — silicon carbide (SiC) and gallium nitride (GaN) — that will in due course make power routing as easy as video routing.

The power semi industry is served by companies like Fairchild [NYSE: FCS], International Rectifier [NYSE: IRF], Vishay [NYSE: VSH], Infineon and Toshiba. Keep an eye on Cree [NASDAQ: CREE], known for its SiC-based light-emitting diodes, which has quietly pioneered and has introduced a new class of ultra-powerful SiC-based power electronic devices. Companies like Sumitomo and Sanken Electric have developed GaN power devices, as has American’s International Rectifier amongst others. There are as well other smaller and start-up companies advancing GaN technologies such as Transphorm, and Kyma. (Wherein, in the last, once more we are investors.)

First light for what the new smart grid architecture will look like is already visible. While there are projects, proposals and partial trials aplenty around the U.S., the Arpnet moment for the electrinet is arguably at University of California at San Diego where the 40 megawatt campus is the first fully operational smart micro-grid. There, Byron Washom, Director of Strategic Energy, proudly calls his project "beyond BP… beyond Power Point," where so much of the community still resides.

A recent survey by Microsoft yielded a glass-half-empty headline "Smart Grid Still Stuck in Hype Cycle." noting that barely one-tenth of utilities are moving past planning to implementation of smart grid. Imagine for context, it’s 1984 and a survey found that 10 percent of the telecom industry had started moving from planning to implementation.

Utilities programs are unkindly labeled "glacial" by eager vendors of new paradigms — but there is a logic, and necessity, to the initial caution and qualification period. But once a secular shift in the utility sector is underway and picks up pace, the glacier will move like it was greased. The scales of technology and spending are gargantuan.

All of the enabling technologies will, according to new Electric Power Research Institute (EPRI) estimates, lead to cumulative spending of $340 to $480 billion in the coming two decades. The more relevant fact that explains why this spending will happen – EPRI estimates the technology investment will yield from $1 to $2 trillion in consumer benefits.

Hundreds of billions in tech spending. A trillion in benefits. That’s the mix that quickens the heart of any Silicon Valley denizen. And that’s for the U.S. alone. A Google or Bing search of the words "smart grid" yields a flood of conferences, summits, reports and ideas around the world. The White House recently released "A Policy Framework for the 21st Century Grid," noting:

•Much of the traditional electricity infrastructure has changed little from the original design and form of the electric grid as envisioned by Thomas Edison and George Westinghouse.

Ironically, first movers in this transformation could come on military bases. The Department of Defense’s (DoD) eager embrace of smart micro-grids is driven by the current climate of fiscal austerity, not just security, operational and green considerations. Smart grids will save money. The trend, and the promise, is explicit in last week’s joint announcement by Boeing and Siemens to form a strategic alliance to deploy DoD smart grid technologies

In America and the West’s mature electric grid, the smart transformation will come fast once it’s rolling, just as it did in telecom, because it will wring much more value out of a huge embedded infrastructure. And looking to China, now the world’s largest energy consumer, smart grid will ease the challenge of building to accommodate torrid growth. The players who are in China offering, and exporting, innovation for the smart grid are a who’s-who of American technological might including: GE, IBM, Oracle, Cisco, Accenture, and Hewlett-Packard.

America drove Internet innovation. And it is driving innovation once again in the electrinet, the smart grid.

Both in China and here, the script that is played out by tech companies looking to seduce investors and utilities to invest in a smart grid is the same: it will be more capital-efficient, more energy-efficient, and essential to enable greater use of episodic energy from the sun and wind. All true. But not the point. The world changes when you stop broadcasting electricity and let it function the way video does.

The world already had an enormous, sophisticated and successful telecommunications industry when, over a few short decades, that mature and sprawling infrastructure was turned upside down, expanded and morphed into the Internet.

That lesson is directly analogous to where the sprawling electric infrastructure sits today. In Internet terms, it is 1984 for the electric industry. Fortunes and businesses are yet to be made. Start-ups will blossom and more will emerge. Some of today’s giants will prosper, morph, and some will disappear. History will repeat itself. It’s nice to know America is in the lead.

Original Source:



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