POWER June 2010 - 72

Commentary
The Second Wave of the
Smart Grid
By David Leeds
N
ow that U.S. utilities have taken federal stimulus funds
and seamlessly built out two-way advanced metering infrastructure
(AMI) connecting utility control centers and
end users (ok, not completely, but let's assume that the " stallulus "
becomes a true stimulus), the question becomes, what's
next? At the moment, this new " comm layer " or " platform " has
utilities planning in two directions: upstream and downstream
from the smart meters.
A recent GTM Research report titled " The 2010 North American
Smart Grid Deployment Survey " asked more than 50 leading
utilities what the primary purpose of their end-to-end communications
network is. (See the online version of this commentary
for survey graphics.) Though 77% answered " advanced metering, "
the real promise of AMI is enabling new applications, which
was reflected in 63% answering " demand response/HAN [home
area network] enablement. " The third-ranked answer, at 60%,
was distribution automation (DA) and grid optimization. These
results suggest that demand response/HAN enablement (making
consumers smarter) and DA/grid optimization (making the grid
smarter) can be considered the second wave of the smart grid.
Though DA and HANs are in no way mutually exclusive, I would
argue that HANs (which could include integrating electric vehicles)
are going to generate the bulk of the smart grid's long-term
value, whereas DA represents a rather large basket of low-hanging
fruit for virtually all distribution companies.
Short-Term and Long-Term Opportunities
In the short term, our grids will provide very promising operational
returns on DA investments, as the inefficiencies of our aging distribution
grids will substantially benefit from an upgrade. In the long
run, as we are able to increase automation and run the equivalent
of least-cost routing algorithms on top of the grid for line losses
and voltage correction, these returns will likely become asymptotic,
as the bulk of existing inefficiencies will have been corrected.
Right now, however, there's an extraordinary business opportunity
in the DA market as more states and governments move toward
mandating grid efficiency (see Senate Bill 221 in Ohio, for example)
and as ISOs and RTOs consider allowing efficiency gains to
be effectively bid into the wholesale market.
Although the transmission and distribution behemoths are
getting into the act, they are moving slowly. I wouldn't be surprised
to see new market entrants-like Current Group, which has
successfully deployed real-time sensing and control technologies
as part of Xcel Energy's SmartGridCity, or Petra Solar, which provides
real-time sensing as a result of mounting solar panels onto
the actual distribution grid-gain significant traction.
On the other hand, and in the longer term, the potential value
that can be generated by reinventing end users' relationship
to energy use is simply astronomical. Not only will consumer
energy data be transformed into actionable intelligence, allow72
ing
homes and businesses greater efficiencies and greater cost
savings (largely through automation and demand response programs),
but this participatory network will also allow end users
to perform countless new actions, including selling electricity
from distributed generation.
Don't take my word for it. Here is a small sample of companies
that have jumped into the HAN space over the past 18 months:
Google, Microsoft, Apple, Intel, GE, and Intel. And don't be surprise
to see everyone from Sony and LG to Comcast and TimeWarner
to Best Buy following suit in the next 18 months.
The Customer Conundrum
Having said that, the consumer adoption challenge is looking like
a hairy beast. Recent research from GE and Accenture highlighted
the consumer education challenge. GE discovered that 79% of
Americans are unfamiliar with the term " smart grid, " and Accenture's
research revealed a significant contradiction between
consumer perceptions and actual knowledge related to energy
efficiency programs. However, GE's research also demonstrated
that those who understood what the smart grid is were interested
in supporting it, and its basic conclusion was that " smartening
the public is as critical as smartening the grid itself. " Accenture's
research supports my own sense that the missing piece in terms
of getting consumers on board is a straightforward and intuitive
value proposition.
As for the utility side, there have been hiccups, including
concerns about smart meter accuracy at two major utilities in
California and Texas. Though I don't give much-meaning any-
credibility to those claims, they highlight the importance of
clearly and proactively articulating to consumers the benefits of
smart metering. But utilities have no real experience marketing
to consumers, and I think there are glaring and substantial
risks here. For example, in March, Duke Energy started canvassing
60,000 customers to take part in a new program; after six to
seven weeks, 20 people had enrolled!
Due to the smart grid's growth, the electric power industry
has attracted heavyweight talent and big name executives from
tangential industries such as IT and wireless communications
(actually, the smart grid can rightly be viewed as the convergence
of all three sectors). It's time to get smart about what
comes next. Now we need to pull talent from another industry:
consumer products and retail. One way or another, utilities need
to gain the talent and skill to effectively segment their customer
base and target their marketing dollars. Otherwise, there is a real
chance those dollars will be spent in vain, and the pace of consumer
adoption, which will pace the growth of the entire smart
grid industry, could slow. ■
-David Leeds in an analyst at GTM Research (www.gtmresearch
.com), where he focuses on smart grid issues. He has lectured on
the subject at MIT, Stanford, and the Wharton School.
www.powermag.com
POWER | June 2010
http://www.gtmresearch http://www.powermag.com
POWER June 2010

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