Jolting the Energy Sector
March 30, 2009
Ken
Silverstein
EnergyBiz Insider
Editor-in-Chief
It had been termed the Brave New World -- the one where electricity
restructuring would revolutionize business models, technology development
and consumer behaviors. But it has yet to happen. With the newfound emphasis
on climate change, however, the energy sector may be jolted in ways that
advocates of deregulation had only dreamed.
It centers on controlling energy use, which in turn limits emissions, helps
preserve the environment and increases grid reliability. It will take an
holistic approach. That will entail scheduling the most economical fuels and
building of a digital network that extends to meters, which can then send
signals to consumers or their automated appliances so as to cut usage. High
hopes now exist as the cause is supported by national public policy that is
enabling pilot projects to become commercialized.
"To be good stewards of the environment, we have to do things differently,"
says Jon Arnold, managing director of Microsoft's utility program. "The fact
is that technology is critical across the whole value chain. Our vision is
that the technology and the subsequent change that it brings will actually
span across the entire ecosystem. The grid is the centerpiece. But if you
are really going to make a change, then you need to make this difference by
looking at fuels and generation -- all the way inside the home."
All utilities are under pressure to limit their emissions and produce energy
savings. And many power companies are already making investments somewhere
along the value chain in the intelligent utility. Now that the federal
government is more involved, it should expedite the progress.
According to consulting firm Energy Insights, the recently passed national
stimulus plan sets aside about $4.5 billion to modernize the grid -- an
endeavor that can involve increasing reliability or curtailing consumption.
It's all coupled with the push to limit carbon emissions and to increase the
use of renewable energy.
Utilities are therefore under the twin pressures of managing their fuel mix
while keeping down costs. The technological changes start with the power
plants, which traditionally have been unsophisticated. Now, though, they can
become equipped with the tools to analyze and monitor efficiency and
emissions processes. Such technologies can also evaluate market and
environmental conditions as well as fuel costs and then compile that
information so that utilities can operate their plants as a fleet.
At the same time, the grid is changing. With or without national renewable
portfolio standards that mandate green energy usage, such sustainable fuel
forms will grow. It then becomes a technical question as to how to integrate
those renewables into the system, particularly as they expand from 2 percent
of the portfolio mix today to as much as 20 percent. It involves optimizing
the performance of power plants and the transmission grid while also
communicating with customers so that they can participate.
"Managing this environment will make putting a man on the moon look like
child's play," says Arnold. Microsoft is involved throughout the value chain
and working with Alstom, for example, to allow power plant operators to tie
in their real-time plant scheduling decisions with wholesale power and
carbon markets while also joining Itron and Infosys in preparing 4.5 million
smart meters for prime time.
Holistic Approach
It's easy to be skeptical. After all, consumers were told in the 1990s that
utility restructuring would cause power companies to streamline their
processes and usher in new products and services. While onlookers can debate
the types of policies enacted to achieve those goals, the bottom line is
that the results have been dubious.
But the ultimate fate of the intelligent utility may be different. That's
because the Obama administration is committed to the technologies,
rationalizing that the rollout is both necessary to limit emissions and to
control consumption as well as to create the next generation of American
jobs. The starting point: The smart metering programs that have already
received regulatory approval and which are "shovel ready," says Rick
Nicholson, a vice president at Energy Insights.
For now, much of the effort will go toward helping homeowners and businesses
reduce their carbon footprint by giving them a greater understanding of how
energy is consumed. Eventually, though, the popularity of prevailing
technologies will spread.
Consider Microsoft Germany and its partnership with Yello, an energy
provider there: The goal is to get consumers to reduce consumption, saving
as much as 10 percent of their electricity costs. Online software will
chronicle their consumption patterns and provide continual updates, tracking
such appliances as refrigerators, hi-fi systems and water heaters. It makes
note of those devices that are energy hogs -- something that the two
partners say provides a practical way to ensure environmental protection.
To succeed, a comprehensive approach is necessary -- one that increases the
productivity and efficiency of everything from power plants to distribution
grids to consumer appliances. The tools to achieve higher standards are, in
fact, emerging and are partly driven by consumer concerns and partly by
global initiatives meant to minimize emissions. It's a powerful one-two
punch.
"Everyone is on a mission to help sustainability and emissions," says
Microsoft's Arnold. "Our company has been through it before with the
Internet and putting a personal computer on every desk. We will invest $9
billion in 2009 in total research and development with a significant amount
going into energy and environmental research. The power of software can help
everyone reduce their impact on the planet."
The know-how and the skills to get it done have existed. But the public will
and the financing have not. Changes, now, are coming -- the kind that may
indeed transform an industry and in doing so, change the way energy is
consumed. ###
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