Can the Smart Grid Save the Economy ?  

Posted by Big Gav in

Wired has an article on Eric Janszen's new book about the vital changes needed to shift to alternative energy and deal with the faltering economy - "Clean Tech Is Only Hope for the Collapsing Economy".

As the mortgage and financial crisis continues to notch more victims, the question on many economists' minds is not whether a recession will happen, but how deep it will get and how long it will last. But one prominent voice thinks the high-flying finance industry isn't going to bounce back -- and that we'll need to look elsewhere to set the U.S. economy back on firm footing.

Eric Janszen is an angel investor and founder of the contrarian market website iTulip.com, which The New York Times credited with "accurately predicting that the [internet] bubble would pop." Now Janszen believes the American economy needs a fundamental restructuring away from its foundations in finance, insurance and real estate. His prescription: a new bubble based on green technologies.

In a widely discussed Harper's article in February, "The Next Bubble: Priming the Markets for Tomorrow's Crash," Janszen argued that clean tech is the only sector that could create enough "fictitious value" to replace the losses from the housing bubble, if only temporarily. Neither a clean-tech skeptic nor a booster, he wrote, "Given the current state of our economy, the only thing worse than a new bubble would be its absence."

Wired.com recently spoke with Janszen to discuss the state of the economy, his plan to pay for alternative energy with a tariff on oil, and how running fiber to your home is good energy policy.

Smart Grid News is asking "Can the Smart Grid Save the Economy?".
No one has been more involved in thinking through energy solutions this century than Spencer Abraham, former Secretary of Energy (2001-2004). ... Abraham's high-level experience gives him a comprehensive view of the Smart Grid and how it fits into the larger world of energy. SGN recently sat down one-on-one to get his thoughts on the future.

An early Smart Grid advocate

As Secretary of Energy, Abraham inherited a severe energy crisis that included the California blackouts and declining domestic energy supplies. Yet even then, he held forth an optimistic scenario. He began a 2001 speech to the San Francisco Bay Area Council by stating: "I would like to describe a different world – a more optimistic world – in which energy is seen as the fuel of our survival and success, rather than the cause of our demise.”

Abraham went on to describe a world of cleaner, smaller and more efficient power generation. He predicted individual choice, more competition and a closer approximation of a true energy market. And he thought all of this was possible with increased reliability, increased supply and lower prices. He was one of the first leaders to advocate what we now call the Smart Grid. Early in his tenure, he described a move “...away from a transmission system in which power only flows one way – from a plant to your home – and, instead, contemplates a two-way electricity grid where homes or businesses can sell their surplus power back to the grid."

States are the key

Fast forward seven years to January 2008, when Abraham keynoted Distributech 2008. Today, he states firmly, technology is not the problem. With the Energy Policy Act (EPAct) in 2005 and the Energy Independence and Security Act (EISA) of 2007, the federal government set the foundation for building the Smart Grid. Now the states must accelerate adoption. Always practical, Abraham says energy can only fuel our survival and success if we challenge our current assumptions. To this end:

· States need to set rates in favor of deployment.
· States need to follow the lead of California and decouple utility profits from power generation.
· Voters and public policy makers need to understand that conservation is not enough.

Conservation is not working

On the latter issue, the Secretary cited research that shows consumers are using more energy despite millions of dollars spent on education about energy efficiency. He pointed to a recent Washington Post article (see link below) documenting how energy usage in Northern Virginia is exceeding all projections. Despite this evidence, some people still preach conservation. Abraham makes a distinction between conservation (people taking active steps to reduce energy usage) and energy efficiency (built-in devices that passively save energy). Abraham believes that voluntary conservation efforts will produce positive results, but they must be coupled with major energy efficiency initiatives. SGN notes that experience in California supports his contention.

Economic stimulus built around energy efficiency

Secretary Abraham believes that we can climb out of the current economic downturn, reduce our dependence on foreign oil and build the Smart Grid all at the same time. He proposes:

· Fully funding existing DOE programs. Existing programs such as Energy Saving Performance Contracts (which led to the ESCO industry) and the budget of DOE’s Electricity office need to be fully funded.

· Emphasizing “smart, green buildings”. Although there has been some emphasis on passive energy measures, Abraham suggests third parties and utilities combine to fund energy efficiency measures that convert new and existing buildings into "smart, green buildings." Those buildings would then be the engine for demand response programs selling negawatts back to the utilities. The revenue earned by building owners would pay back the loans used to build or retrofit. Once the loan is paid back, the building owner has a new source of income.

Government would set the policy and requirements. Private money would be used to (i) reduce energy consumption, (ii) restore small business, (iii) create jobs, (iv) provide a return to investors and (v) implement demand response (a core element of the Smart Grid.)

Such a program could reverse the current economic climate by revitalizing the real estate construction business and aiming it towards creating smart, green buildings for demand response. As a point of reference, more than 400 Energy Savings Performance Contract projects have been awarded by 19 different federal agencies in 46 states. And $1.9 billion has been invested in U.S. federal facilities, saving 16 trillion Btu annually, equivalent to the energy used by a city of about 450,000. Harkening back to his 2001 speech, the Secretary continues to articulate an optimistic future – if we can but act.

Technology Review has an article on Xcel Energy's smart grid rollout in Boulder Colorado - A Power Grid Smartens Up.
Boulder, CO, should soon boast the world's smartest--and thus most efficient--power grid, thanks to a $100 million project launched last week by Minneapolis-based utility Xcel Energy. The project will equip homes with smart power meters that help people reduce demand when electricity is most expensive. Substations will also use information from the meters to automatically reroute power when problems arise. Among its other benefits, the project should help Boulder residents take better advantage of renewable power sources.

In today's power grids, a steady but essentially blind flow of electricity is all that links power plants, distribution systems, and consumers. Mike Carlson, Xcel's chief information officer, says that Boulder will test how much more reliable, cleaner, and cheaper grid operation can be when each element communicates with the others. If the benefits prove as great as Xcel expects, Carlson says, the Boulder experiment could unleash rapid investment in "smart grids." The equipment is ready, Carlson says. "We're not talking the Jetsons or Star Wars here. If we can get the right standards and the right incentives and the right financial structures, it's viable technology today."

Rob Pratt, who runs the Pacific Northwest National Laboratory's GridWise program, agrees that Xcel's project should--if fully implemented--provide the best test to date of smart-grid benefits because it will make Boulder the "densest concentration" of smart-grid technologies. "You can't have one smart-grid customer in Boulder and two over in Fort Collins and a few dozen in Denver, and have it mean as much as having all those people on one street," says Pratt. "Here we're talking about a whole city, which would be amazing."

Carlson says that Xcel chose Boulder for its relatively isolated electrical distribution system and its population of roughly 120,000 (including students). Xcel plans to install 50,000 new smart meters serving about 100,000 of those residents, a large enough pool that the company can experiment with different approaches. It could, for example, deploy meters from different vendors, which send information in different ways: either wirelessly, or over the power lines themselves. The company could also experiment with sending different signals to the meters to try to influence consumer demand. (See "Gadgets to Spur Energy Conservation.")

One scheme that Xcel plans to test is a way to make better use of renewable energy. On today's grid, intermittent sources of renewable power--such as wind--must be backed up by more conventional fossil-fueled or nuclear power stations. "Xcel's leading the country right now in wind power--we have almost 3,000 megawatts on our system and plan to double that--but we have a consumer base that doesn't modify its habits when that wind isn't blowing," says Carlson.

Instead of trying to store renewable energy for when it's needed--a pricey proposition--Carlson thinks that the smart grid may be able to "store" demand for when the wind happens to blow. Xcel plans to send signals when the wind is up, and some consumers will be able to program their smart meters to, say, activate their dishwashers or heating panels in response. "If the system could signal wind availability--or any renewable energy source, for that matter--would we see an adjustment of consumption? We think yes," says Carlson.

Similarly, real-time pricing signals should reduce consumption during peak hours, when the price of wholesale power spikes and power lines can overheat. In January, Pratt's group at Pacific Northwest National Lab completed a demonstration project that showed that real-time pricing can cut peak power usage by 10 percent, reducing congestion and power losses on the lines. It also means that the least efficient and most polluting fossil-fueled plants, which utilities would rather not fire up, can be left on the sidelines.

Continuous feedback from smart meters and substation sensors should further increase power reliability in Boulder by enabling rapid and precise response to grid problems. The system will pinpoint lines or substations at risk of overloading and activate remotely operated substation switches to reroute power. If problems persist, the system can send a signal to the smart meters of customers on the troubled lines, who have been offered some type of financial incentive to reduce demand when necessary.

Alex Steffen at WorldChanging has more - Boulder: The U.S.'s First Smart Grid?.
One of the fun things about editing a project like Worldchanging in times like these is the frequency with which our predictions and speculations get run down and overtaken by commercial realities. We've written a lot about smart grids, touting their potential benefits, from neighborhood survivability to enabling pug-in hybrid-electrics to act as a system of batteries during peak use surges.

Now Xcel Energy has announced that it's going to turn Boulder, Colorado, into the United States' first smart grid community.



Smart Grid News also notes that both California and Hawaii are looking at building smart grids.

Smart Electric News looks at smart grid related news in Europe (where it seems to at least partially fall under the category of "distributed generation") - "Institute for Energy releases report - “Distributed Power Generation in Europe: technical issues for further integration”".

Renewable Energy World has a summary of a speech at the National Electricity Delivery Forum by Kurt Yeager of the Galvin Electricity Initiative, describing the state of the US grid as the electrical equivalent of the sub-prime mortgage fiasco - " Regulators and Utilities Urged to Step Up Grid Modernization Efforts".
Speaking before an audience of federal and state regulators, utilities and other industry players, Yeager said that the future of the U.S. electric power system rests upon our ability to take advantage of the technology available today and prioritizing the modernization of our unreliable, inefficient and insecure grid infrastructure.

"Our electric power system has been in a sub-prime mortgage-like era for decades," Yeager said. "There are no technological or economical obstacles to modernizing the U.S. electric grid, only policy and regulatory barriers that must be eliminated," said Yeager. "If states open up the electricity market and offer utilities incentives for integrating smart grid technology and giving consumers control of their own energy use, everyone will win. Consumers gain better service and a smaller carbon footprint while utilities gain much-needed upgrades and a system that is less vulnerable to cyber-attack."

Yeager shared some of the Initiative's key proposals that will pave the way for a more intelligent electricity grid:

* The technology exists today to transform the 1950s-era grid into a smarter, reliable and efficient power system. To secure this future, state leadership is needed to remove the regulatory policy obstacles to smart grid development and implementation.

* Utilities need incentives to drive grid modernization efforts. Utilities are compensated for selling more electricity, not for providing quality service or efficiency programs. States need to support "decoupling," or separating utilities' profits from their energy sales. Only then will utilities become motivated to offer consumers tools such as time-of-use pricing and smart meters that can reduce the escalating demand that is taxing our aging grid infrastructure, increasing emissions of dangerous pollutants. Consumers should be treated as individuals with individual needs. As with other industries that have been opened to competition and choice, given the option, most consumers will take control and reduce their energy use.

* Renewable resources are an important part of our electricity generation mix, but they will not eliminate coal-generated or nuclear power. States should examine their available renewable resources for electricity generation — solar, wind, geothermal, biomass, etc. — and add them to their electricity generation portfolio.

* New transmission lines should be the last option. Technology currently exists to increase the capacity of the wires we have today. With the addition of "smart" electronic controls, transmission lines can run closer to their limits without risking overload. This will also minimize the major security and vulnerability risks that these extensive transmission networks pose to the nation today.

Robert Rapier has a collection of green job ads up at The Oil Drum - recruiting companies include Google, Choren, Khosla Ventures portfolio companies including LS9 and Accsys Technologies.

Joel Makower also has a column on green jobs (no ads though) at WorldChanging - "Where Are All the Clean, Green Jobs?".

1 comments

Big Gav   says 8:29 PM

Another one from Smart Grid News :

New Energy Economy and a 2008 Recession
http://www.smartgridnews.com/artman/publish/article_404.html

Like everyone else, we're running the numbers, searching for clues, and looking for empirical evidence in an effort to understand which way the economy is headed. We are optimistic for the emerging post-petroleum era, so we're especially focused on the impact a recession might have on the current revolution in sustainable industries.

But after conducting an analysis, we believe The New Energy Economy will hold up reasonably well -- even if the tide turns and a severe downturn washes over us. Of course, the effect of a downturn on sustainable industries will depend on the type of recession.

Five Reasons Not to Worry

1. Green Transformation - Large auto, utility and building construction companies have begun laying the groundwork for a sweeping eco- revolution; now that it's been started, it can't and won't be stopped. The participation of many public, large-cap and highly-valued companies in this revolution is a bellwether metric of success.

2. Investment Infrastructure - This fire wall is in place for clean technology and alternative energy, and it should provide a good measure of downside protection if a recession takes hold.

3. Energy Supply-Demand Imbalance - Investors will try to offset this increasing global disequilibrium, driven in large part by growing economies in China and India, by financing alternative and renewable energy plays.

4. Vociferous Voters - Americans are increasingly demanding change and accountability when it comes to U.S. energy policy; they want our petroleum-based fuel dependency addressed.

5. Public Sector Engagement - A large amount of government money is being funneled into clean technology and renewable energy at the national, state and local levels.

Five Reasons to Be Concerned

1. Fear of a Bursting Bubble - Investors could worry about a repeat of Internet Era excess, even though The New Energy Economy is very different from the IT Economy of the late 1990s.

2. Lack of Track Record - There could be initial downward sentiment after a recession bites because the clean technology and renewable energy sectors don't have much of a track record yet. This negativity could prevent large scale capital formation in these new markets.

3. Failure of Nerve - In the face of economic adversity, New Energy Economy entrepreneurs and investors could shrink their appetite for risk.

4. The Public Sector Retreats - Economic pressures could force government to withdraw or scale back its financial backing for clean technology and alternative energy.

5. Consumers Lose Interest - The recession could damage pocketbooks to such an extent that citizens mute their demands for a new energy policy, despite the fact that "green" solutions are more economical in an environment with high energy prices.

What a recession would do to clean tech venture opportunities

A deep recession in the United States that drags the rest of the world into the economic doldrums will clearly have consequences. Slower growth in India, China and - to a lesser extent - Asia and Europe will meaningfully decrease the cost of oil. A significantly lower oil price will - at least emotionally and perhaps economically - reduce some of the urgency to find alternative sources of fuel. ...

Contrarian analysis

A recession triggered, in part, by higher oil or fossil fuel prices will actually help sustainable industries for a variety of counter-cyclical reasons.

First -- higher energy prices will highlight the excessive cost of our fossil-fuel dependency; as a result, companies - big and small - will begin searching for ways to manage these costs and the accompanying volatility risks. This will mean hiring people for new positions in clean technology or even setting up new divisions focused on sustainable energy.

Secondly -- for their part, investors will finally - once and for all - come to terms with the fact that there is a fundamental long-term problem in the energy sector. We believe they will really dig in and truly step up by investing in new technologies, start-ups and early-stage companies that offer the potential to solve some of these problems. This will create more jobs in well-capitalized clean technology companies.

Thirdly -- a number of companies that were not economically viable at cheap oil or energy prices will quickly become economically viable. A wide variety of transportation innovations on the fuel side or the vehicle side, for example, will become cost competitive versus traditional products. This will lead to expanded sales and new hiring for those companies. The same pattern will take place in green building/energy efficiency. When energy costs increase, the benefits that accrue to real estate owners if they install energy-saving technologies become greater. Again, this leads to more work and more jobs.

Finally -- public discord will rise in a hurry if a recession is clearly prompted by high energy costs, so government will do what it can to retain renewable power incentives such as grants, loans and tax credits. As mentioned above, though, if a recession bites with severity, the economic pressure on the public sector may prevent this.

Recessions traditionally signal economic transition, and although they frequently cause financial dislocation, they also usually lead to a new clarity of thinking.

Long term good news
The good news is that even if there's a deep recession that slows sustainable industries, the setback will be temporary. We believe that there is a 20-30 year secular uptrend waiting for renewable energy enterprises on the other side of the downturn.

And if there's a mild recession, the effects will be short-lived on The New Energy Economy and not especially meaningful. Valuations will moderate, deals on the margin will not get done and current trends like the reluctance to finance bio-diesel and ethanol deals won't be altered. But progress won't be halted and the sustainable industry revolution will continue to move forward.

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