Tweet this: http://bit.ly/cw10ep

Podcast

Download mp3

Program Notes & Transcript

Name change alert: Starting with our next program we'll change its name to "Energy Priorities."

DENIS DU BOIS: The ConnectivityWeek 2010 conference took place in Santa Clara, California, at the end of May. This is no ordinary conference.

ConnectivityWeek is the event I attend to find out what people will be talking about at other energy conferences two or three years from now.

The focus this year was the smart grid, specifically the role of the consumer -- of energy users, whether commercial, industrial or residential -- in making the smart grid live up to its potential.

There were dozens of speakers and panelists on hand to examine that subject -- with an address by internet pioneer Vint Cerf, and panel discussions with leaders in government, utilities, industry, and nonprofits with a stake in the smart grid.

Here's a clip of the opening keynote by Vint Cerf, who is Widely known as a "Father of the Internet," and is now an Evangelist at Google.

(Insert: Vinton Cerf clip)

The speakers and attendees at ConnectivityWeek debated the role of energy users so seriously, it really points out the importance of gaining acceptance -- and it leads to our title for this month's program, "The smart grid wants you!"

ANTO BUDIARDJO: "The key takeaway from this week is more realization, pretty much on a consensus basis, that the inclusion of consumers--and by consumers, I mean both residential and commercial and industrial--is a key part of a successful smart grid.

DENIS: That's Anto Budiardjo, the man who's been organizing ConnectivityWeek since 2003.

ANTO: And that is quite subtle, but it means that people in the smart-grid community, I think, are better-equipped now to understand that it is important to appreciate the subtleties and the issues that happen on the consumer side--again, in commercial buildings as much as anything else."

DENIS: Mr. Budiardjo organizes other energy conferences, including one held in Washington DC in October called GridWeek.

Much of the day-to-day media coverage of the smart grid is focused on homes and smart meters. But within the industry, designers of the smart grid have acknowledged the high priority of commercial buildings.

ANTO: "In the short term, smart buildings, or specifically large buildings, that are controlled, typically with some form of building automation systems, represent large electrical loads that can relatively easily be managed from the utility side of the meter."

DENIS: In other words, a lot of buildings are already smart. They represent huge potential for efficiency gains, in a relatively few sites. There are just under five million commercial buildings in the United Sates, compared to over a hundred million homes.

And whether the occupants are businesses, governments, or schools, they respond to economic opportunities more predictably than residential energy consumers.

How do you make a commercial or industrial facility into an integral part of the smart grid? I asked Jack McGowan, founding member and Chairman Emeritus of the GridWise Architecture Council. These days McGowan is on a team of leaders for the Galvin Electricity Initiative.

JACK MCGOWAN: Smart grid integration in this case means perhaps demand response, perhaps critical peak pricing, like the project we're doing in California, where we're implementing technology in a building that takes a price signal from the utility based upon that price signal actually executes a sequence of operations to reduce consumption, and reads the meter instantaneously and pushes that data back up to the Internet. Now, in that case, the consumer, the building owner, gets 10 percent discount on their cost of electricity for participating in the program.

But, 12 days a year, they're going to get a signal from the utility with day ahead notice that says that your cost per kilowatt hour tomorrow is going to be 10 times higher than it is today. So you need to have the technology in place to be proactive so that you can actually keep as much of that 10 percent discount as you possibly can.

DENIS: Demand response comes up frequently when we talk about the building-to-grid interface. But demand response isn't offered, or even needed, by every utility in the country. For grid integration to become the norm everywhere, it will have to be part of the larger process for making buildings less costly to operate.

JACK: And I like to use as an example a solicitation that Duke Energy did last fall. And in the context of electricity and smart grid, you might say or you might ask, why would Duke Energy do a solicitation related to buildings? It's because buildings make up a large energy consumption segment for them. But it's also because they are beginning to recognize that that's a segment that can be incentivized to participate in programs that will ultimately reduce their costs and allow them to hedge against building future infrastructure.

So this solicitation that they did was interesting in that it blended traditional energy efficiency and energy auditing with smart grid and with a lot of the other trends that we're seeing in buildings -- commissioning, et cetera.
So, what they created was something that looks very much like a continuous improvement cycle that you might see in a total quality management program. And that cycle begins with an energy audit, moves into a commissioning, a retro commissioning process. Where you say, what is it that's in this building and how do I make sure it performs it the way it was intended to perform?

It then moves from there to a controls upgrade, because in many cases, automation is an aspect of the building that has been ignored. Or has been circumvented or has in one way, shape or form been interrupted from its original intent. So, you upgrade and optimize the control system, then you move into smart grid integration.

DENIS: What's so hard about smart grid integration?

ANTO: Just understanding that it can be done. It is actually relatively easy to do because, especially in buildings that already have building-control systems, it is effectively another input to the building-control system that says energy is now 10 times more expensive, or some other figure, and for the building-control system then to use its typical and normal logic to determine what energy-load devices or equipment continues to run because of critical need and what can actually be switched off for a period of time. So, it's really just an understanding, particularly from the building-automation industry and the people involved in installation and commissioning building-automation systems, that this is doable and it has value.

JACK: Well, when I got involved in smart grid about six or seven years ago, the first barrier that everyone identified was legislation and regulations. And you might say, those are two barriers.

But, this is not a technology issue. Most of the technology by and large is available. There's a lot of work underway in Washington and across the country with the National Institute of Standards and Technology to develop standards and make sure that it's easier and cleaner for buildings to play. But, at the end of the day, the technology's by and large available.

The big issue is we have to look at regulatory and policy initiatives from the perspective of the building owner and say, under what conditions does it become cost effective and reasonable for a building owner to make investments? So, the kinds of things you're going to see are tax incentives that provide consumers with a way to offset some of the costs to implement systems.

Incentives that allow consumers to implement on site generation and get a return on investment. Some of which, some of that return on investment's going to come from tax incentives, some is going to come from renewable energy credits that a utility might buy from that consumer, some is going to come from the consumer's ability to sell power back to the grid, some is going to come from a wide variety of other benefits that might include less power outages or shorter periods of power outage during the course of a year. And so from a policy and regulatory point of view, we have to look at the environment and say, what's stopping a building owner who happens to own buildings on two sides a street from generating power in one building and consuming it in both buildings?

There're a lot of things that we wouldn't even think of as being issues as an individual building owner. But our issues when it comes to how do I get a return on the investment for that technology. And the other things I think that are going to come into play are going to be a wide variety of new and exciting opportunities like property assessed clean energy, where the municipalities across the country are actually in a position to allow a building owner or a residential consumer to pay for a solar panel through an increase in their property taxes. Anything that overcomes that first cost issue or helps that building owner to overcome that first cost issue.

DENIS: OK, so, we have the technology, it's doable, we just need to show everyone, particularly policymakers, that it has value.

Value for whom, exactly? As taxpayers and ratepayers, we know who'll be footing the sizeable bill for the smart grid -- estimates are in the trillions of dollars -- and we've heard about the advantages: reliability, security, sustainability, and so on.

Let's get more specific, though. Who exactly benefits from all that investment?

ANTO: Well, it benefits probably at least three different groups of people.

It benefits the building owners, because, effectively, a kilowatt curtailed by not using a kilowatt is valued the same as a kilowatt generated by a generator. So, a building that can curtail load is effectively a virtual power plant, and therefore, the financial rewards for not using energy can actually be translated to benefits to owners. For the utilities, the benefits are that they would not have to build the plants to generate that same kilowatt, or megawatt, or whatever.

The third area of benefit is society at large because, if the utility were to build power plants, the likelihood is that to create power plants that are controllable and put into the circuit at the on-demand basis is going to be something that will produce carbon or greenhouse gases.

So, basically, the inclusion of buildings as part of the electricity system, as a virtual power plant, is a very valuable thing for a lot of people.

JACK: So what's in it for the building owner is an excellent question. And to really answer that question, we have to step back and think in the context of what's in it for the building owner to engage in energy efficiency or engage in any activities that reduce their overall energy cost.

Now, in the big picture, the challenge for building owners has always been that as a function of the total operating cost for a commercial building, whether that's a K through 12 educational building or a college or a university or a commercial building, the percentage of their overall operating cost that energy makes up is really relatively small.

What most people don't understand, however, is that it's a controllable cost. And that's really what's in it for the building owner is that in addition to the fact that you can control that cost at all, it compliments climate change initiatives and many other things that building owners are concerned with. But, at the end of the day, it has to bring value to the building owner or it really is not going to get attention.

The only way we're going to get the zero net energy buildings is if the building is actually capable of both generating its own power and effecting how much power it consumes at any one point in time. So, from that smart grid implementation, which could include meters and could include battery storage, it could be like the building we did at the University of Mexico, which we can take off the grid for cooling because we have thermal storage on the roof -- actually, solar thermal on the roof that actually contributes hot water to thermal storage in the basement. We can store chilled water from the central plant loop and we can also run an absorption chiller from the hot water that's coming from the solar panels on the roof.

So on a hot summer day when there's a high demand for electricity, we have the ability to use thermal storage in that building to actually take it off the grid for cooling with the exception of pumps and fans. That gives the building owner the opportunity to save a whole lot of money and achieve a return on investment.

DENIS: That explains what's in it for building owners -- having more control over operating costs, particularly energy costs. Now, why does the power grid need intelligent buildings? What's in it for the folks on the other side of the meter?

JACK: In the very beginning, the impetus for the whole discussion of smart grid began with the blackout that occurred on August 14th of 2003. And that was a wakeup call in many respects for the utility industry, because that wakeup call told them that not only were they unable to respond quickly enough to an outage in Ohio that rippled through the entire east coast and up into Canada. It was part of the realization, perhaps not in the utility industry itself, but to the larger US that we have an industry that by and large is being operated the same way it was operated 100 years ago.

You know, there was a comment made not that long ago that if Alexander Graham Bell came back to life tomorrow and looked at telecommunications, he would be shocked and amazed and would not understand how most of the devices we use for telecommunications work. Where as if Thomas Edison came back to life tomorrow and looked at the infrastructure we have in place for electricity, he would by and large know what's happening throughout the entire system.

So, the point is that the utilities need to change the business model. Because let's face it. We all, by and large, have the lights come on when we flip the switch when we walk into a room. So, we all think life is good, there's no problem, there's many other forms of technology that we don't understand how they work. I mean, we flip the switch, the light comes on, we don't exactly know what's happened throughout the entire chain of delivery. But, what we do know is that we flipped the switch and it works.

What's in it for the utility is they can't continue to do business as they have. There's got to be changes. Now, there's a lot of resistance throughout the electric industry to those changes. But, in reality, it's not just about the electric industry itself. It's about the fact that this now is a stake that the entire country has in not only the fact that this is the most important form of energy that we have. It's the highest quality, most valuable form of energy that's available to any application you can think of.

But, more importantly than that, the only way we as a country are going to deal with environment and climate change and all the other issues we're facing is to recognize and deal with this. So, in some respects, the short answer to the question is, what's in it for the utilities is to keep the lights on. But, in the bigger picture, what's in it for the utilities is to be part of the solution of a much larger problem that many believe is facing our planet. And that's why they need to play.

DENIS: Blackouts are a rare occurrence for most Americans. The grid today is more than 99 percent dependable.

Unfortunately, that one percent translates to 80 billion dollars in lost productivity and revenue every year. The more heavily businesses depend on "cloud computing" and data centers, the higher that cost will climb.

The costs that are rising right before our eyes are on our electric bills and in our environment. If we invest in the smart grid, does the smart grid help us with those?

JACK: Well, that's a really good question. The number one answer that I can't give you is that it's going to make the cost of electricity go down. That in fact was one of the problems that we had with deregulation in the electricity business a while ago. So, what's in it for the consumer is that we're going to be able to reduce the rate at which the cost of electricity is going to go up. We're going to increase the reliability of the energy that we have come to rely on so much. And over the long haul, we're going to start addressing some of these issues like climate change and so forth that we're concerned about. And at the end of the day, the planet's a better place.

Wrap-up

DENIS: The goal of making a building a participant in the smart grid is part of the larger goal of reducing energy and operating costs for the building.

The process starts with an energy audit and retro-commissioning, then an upgrade to the building automation system, then smart grid integration. From there, the process starts over and becomes a continuous improvement cycle. This time around, there are more data, and more opportunities to reduce costs.

We have the technology to do all of this. What's still under development are the comprehensive policies and incentives that allow building owners to install those technologies, like control systems or on-site generation, and recover their investments.

If the smart grid is going to reach its full potential, it will need buildings to be smart, integrated, active nodes on the power network. And as utilities change their business model to adapt to the grid of the future, those buildings are in the best position to benefit from it.

As for the rest of society, there are long-term benefits from the up-front investment. Electric rates might not come down, but at least consumers will have more control over their energy costs.

Power becomes more dependable, which has a direct benefit for the economy. Renewable energy sources are more readily integrated into a smart grid. That helps us address serious issues of pollution, fossil fuel dependency, and climate change.

The title of our program is "the smart grid wants you." But as you come to understand this vision for the future, you may be surprised to find ways that you want the smart grid.

Many thanks to the people who shared their thoughts with me during ConnectivityWeek, including Anto Budiardjo, president and CEO of Clasma Events, and Jack McGowan, GridWise Architecture Council Chairman Emeritus, and CEO of Energy Control.

We're taking July and August off for some summer fun. We'll be back in September with a new program name and the same great, useful information on how to be a more savvy energy user. Until then, have a safe and enjoyable summer.