Smart Grid: Where Do We Grow From Here?

Smart Grid: Where Do We Grow From Here?

Image courtesy of GE

Last week, approximately 1,400 leaders from utilities, business, government and academia gathered in Washington, D.C. for the third annual GridWeek, a four-day convention organized around the business issues, technical challenges and policy requirements of a smarter grid.

Since 2007, we've not only seen a four-fold increase in attendance, but a significant change in the underlying smart grid conversation -- moving from "How do we begin?" to "Here's what we're doing to make it happen." With the $4.5 billion in government stimulus funding acting as a catalyst, we've moved the discussion from planning to delivery, and we're seeing growing excitement around significant progress.

At one time the subject of debate, a smarter grid is now accepted by most nations around the globe as a key enabler of energy independence and economic vitality.

Specifically, a smarter grid will help:

• Integrate cleaner energy resources and plug in vehicles
• Empower consumers to manage energy usage and save money
• Increase productivity and efficiency in how our power is delivered
• Improve power reliability

While at GridWeek, it became overwhelmingly clear that we've moved the needle on three critical fronts:

• The commitment and engagement of government
• The utility's approach to smart grid projects
• The business community's approach to delivering an ecosystem of solutions

Commitment from government

Smart grid has been the buzz since the government's February announcement of smart grid stimulus funds. In fact, the topic has become so mainstream that President Obama discussed smart grid on the September 21st "David Letterman" show, which happened to coincide with the opening day of GridWeek. The government's commitment became even clearer in the days that followed, with the attendance of two Cabinet-level officials.

U.S. Department of Energy Secretary Steven Chu opened the conference, announcing $144 million for state public utility commissions and smart grid workforce training. And the conference closed with Commerce Secretary Gary Locke announcing the completion of the first phase of the smart grid standards roadmap [PDF], a laborious process which was delivered in a matter of months.

Utility Engagement

With greater certainty around the government's position on smart energy policy, utilities have moved with unprecedented speed to organize their business operations in preparation to deliver smart grid deployments. With more than 500 stimulus applications pouring in from utilities all over the country, utility conversations have turned from theory to deployment in less than a year. The proposals show an industry that's broadening its traditional focus on safety, reliability and supply to include environmental sustainability, consumer empowerment, and energy efficiency. With stimulus funding, we have a true opportunity as an industry to demonstrate large-scale projects that prove out the efficiency, consumer, and reliability benefits of a smarter grid.

Business Collaboration, Commitment and Interest

Over the past year, we've not only seen a greater maturity in how businesses are collaborating to deliver an ecosystem of smart grid products and solutions, but we're also seeing new players in this space -- from Cisco and Microsoft to AT&T.

The industry has come to realize that no single company can deliver a panacea of smart grid solutions, and with that we saw a flurry of announcements about companies coming together to deliver more holistic offerings. As examples, GE and NURI Telecom, Ltd. of Korea announced a collaboration to explore opportunities to further progress of smart grid, and Silver Spring Network announced its purchase of Greenbox Technology, a software developer that measures home energy consumption.

Where Do We Go From Here?

While we have come a long way, consumer education and engagement, new business models, and smart regulation and policy were the top challenges discussed at GridWeek.

Consumer Education and Engagement – A Must

Without consumer buy-in, the full promise of smart grid benefits will not be realized. And because many utility programs will be "opt-in," consumers will need to understand the benefits a smarter grid can deliver.

Not only do consumers have a real opportunity to save money on their power bill (10 percent or more), but utility and environmental benefits will also correlate with consumer participation.

At GE, we've conducted analyses demonstrating that moving consumer participation in demand-response programs from 5 percent to 20 percent could increase utility savings by $15 million annually and improve CO2 reduction equivalent to taking an additional 9,000 cars off the road, for utilities with 1 million customers. (The estimates are based on GE analyses using a McKinsey model.)

Education will also need to be "two way," and utilities will have to begin educating themselves about consumer preferences -- segmentation will be key.

New Business Models

As an industry, we'll also need to move away from business models that rely solely on selling kilowatt/hours to business models based on services. As we gain understanding of consumer segments, the industry will need to provide a variety of options, much in the same way cell phone companies offer different plans for different lifestyles.

Smart Regulation and Policy

While stimulus funds will jump-start the smart grid movement, smart regulation and policy will help keep the industry moving forward.

Under utility regulation in most states, power companies make more money by selling more electricity. This linkage creates a disincentive for energy efficiency programs and technologies, as decreasing energy sales would cut into utility profits.

Ultimately, policy will be needed to encourage and reward utilities for driving efficiency and conservation.

While we've accelerated the industry in many critical ways, we need to continue pursuing more innovative ways of thinking. We need to be creative in how we educate consumers and regulators to ensure we do not lose the momentum we've gained toward a smarter energy future.

This smarter future is the only way we can free ourselves from our dependence on foreign oil, meet our environmental targets and further economic vitality going forward.

Bob Gilligan is the vice president of GE Energy's transmission and distribution business. His team is responsible for delivering reliable power delivery and integrated smart grid solutions to the electric utilities. He can be reached at Bob.Gilligan@ge.com.

U.S. Capitol — Image CC licensed by Flickr user cliff1066.
All other Images courtesy of GE.
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