Sustainable Business Council & UCLA Host Smart Grid Panel

Tobin Richardson, (Moderator): We’ve heard a lot about the complexity of implementing the smart grid. We’ve talked about customer value and the consumer focus here. What kind of advice would you give to somebody trying to start a business in this field? 

Is there a role for someone trying to take the complexity and make it simple so that the consumer can use it? Or are there other really stark business opportunities for entrepreneurs today, especially as we are looking at creating a market and a smart grid?

Doug Kim (Director of Advanced Technology, Southern California Edison): We do talk with a large number of companies and with folks with new business ideas. It certainly is an interesting space, and people are always coming to us with creative proposals. But here are a couple of observations that I have made. 

First, the conversations are usually quite geeky and technical. We talk about how we manage both water and power factors; we have these intimate conversations about energy chemistry. What we forget is that all of these devices and all of these technologies are for people like those in the audience of this room. For example, we are trying to develop a standard at which all of these different devices can communicate so that there is a seamless connection between those who provide energy and those who consume energy. 

In our system, electricity travels at the speed of light, and you can’t store these things in any cost-effective way. Therefore, we are constantly balancing supply and demand. That’s the challenge of the electric system. What ends up happening is that you have to size your system for the highest peak because otherwise you experience outages during those times. 

The highest peak in our system comes around five to eight hours during the course of the year. There’s a five percent peak. If you can shave that off you get so much more efficiency out of the system. We need customers to participate for this to happen. We need them to not turn on the air conditioning and turn on 65-inch plasma televisions, like I do, at 2 o’clock in the afternoon in the summertime. 

If you had a smart device, you could just plug it in and monitor your energy usage. Wifi, Zigbee, power line communication: there are all sorts of ways to do it. We want to create that kind of ecosystem, and we want these folks developing these new ideas to make this incredibly user friendly, easy to understand, easy to communicate, and easy for consumers to use. So when I ask my wife, “Would you rather spend 50 minutes on Facebook, or spend 50 minutes on the computer looking at your energy usage? By the way, the national average for a monthly electric bill is $100. You’ll save five percent or maybe 10 percent.” She’ll say, “Well that’s $5. I don’t want to spend that much time for that amount of savings, even at 10 percent, even at 20 percent.” 

I think the technology that is really going to succeed will be like the apps in your iphone. Will it be very technical? Sure. Behind the scenes it has got to have all those technical things. But at the end of the day, where the rubber meets the road is where the system interfaces with the consumer. 

Tobin Richardson (Moderator): Rajit, you’ve already founded two companies with your students. What’s this third one around smart grid technology?

Rajit Gadh (Director, Smart Grid Energy Research Center, UCLA): Our students were just demonstrating this electric vehicle monitoring and control network, where the idea is that you’ve got EVs in a city where you wish to monitor the entire electric vehicle grid. Does the consumer really care? The consumer is really interested in the bill at the end of the day, whatever it is. There are some consumers who are interested in being green. So again, use a mobile app to do that. But when you think of a network like that, the utilities need to manage, monitor, and control the network.  For example, in case of an emergency, like during a hot summer afternoon, maybe the utilities would like to turn off all of the electric vehicles and give one or two dollars, or whatever the incentive is, to the owner of the EV in exchange for doing that so that the utilities don’t need to turn on peaker plants. A third part of this is the owner of the garage who is installing the infrastructure. 

Who is the customer? I think that that is very critical question. In some instances it is the consumer. But in some instances it is the owner of the garage, like in our system, and in some instances it is the utility. They may be interested in other concerns like, for example, if everybody turns on their EV charger at the same time and all of a sudden you’ve got 100 EVs charging. That would create a huge shock to our local distribution system. The shock could be from UCLA, but it might be felt at DWP. 

All of these things have to be looked at not just from a technical standpoint, but also from the perspective of who the customer is. Right now I don’t know what our students are going to do, but when we created the start-up company it was my students who did everything, and I was merely helped them along. Right now we are just trying to solve these hard problems. 

Tobin Richardson (Moderator): Mukhles, at LADWP and many other utilities and service providers there are different ways of getting technology involved. I can either sell to the utility, or I can try and get the utility to enable different programs so I can sell directly to consumers. For the smart grid, what is the best approach right now for entrepreneurs do you think? To go directly to you or to go directly to the consumer?

Mukhles Bhuiyan (Smart Grid Program Director, LADWP): I would say that, first of all, that we are working on a demonstration project. That project involves a few different segments, and electric vehicles are one of them. How can the charging happen, and when are the customers charging? The next item we are also working on is installing the smart meters. When we install the smart meters, we want to see the customers’ behavior as well as the usage of the energy. We want to see how we can interact with the customer. So the customer is an integral part of our smart grid implementation plan. 

The other segments deal with the resiliency of the grid, which means cyber-security and making sure that any attack on the grid is unsuccessful. The customers are the backbone of any implementation that we are planning to do. We will be communicating with the customer through the meters and then through the smart appliances. The customers will be using some Home Area Network or some wireless technology to see the usage of their energy. They can then decide whether and when they need to reduce their usage. 

All of this collaboration with the customers will depend on the technology that the entrepreneurs come up with. What you produce needs to be standardized. 

You need to look at the pricing and at the ease of use. This would be my advice to the entrepreneurs. 

Tobin Richardson (Moderator): I know that in many markets utilities will sometimes adopt things that are actually related to new service outreach. For example, some service providers are actually buying parts of in-home display manufacturers as part of their role-out strategy. In their territory, they are actually taking an ownership position. Is LADWP looking at these kinds of investment opportunities?

Mukhles Bhuiyan: Our purchasing process is actually part of the city’s purchasing process. With that, we don’t buy part of individual companies. We have, however, reserved a time every week for the equipment manufacturers and entrepreneurs to come and talk to us about their products. But at the end we go through our purchasing process, which is the open-bid process. It goes into the market, and the manufacturers and the entrepreneurs bid. The contract is always based on lowest cost. 

Doug Kim: LADWP is not an investor-owned utility. Southern California Edison operates under a different framework because we are regulated by the California Public Utilities Commission. We are not a government entity. There are still rules that we must follow. There are markets where the power industry is vertically integrated. In that model, the retail business is free to compete. In our case, that’s not the market structure. Utilities are not authorized to invest money, because the money that we invest is our ratepayers’. 

Mukhles Bhuiyan: Let me also, if I may, make a little distinction between Edison and us. I live in Edison territory. Almost every month I see that there is a rate increase on my bill. Therefore, Edison has a different budgetary situation than we do, because CPUC and Sacramento approve Edison’s rate increases. Our city council approves LADWP’s rate increases, which is almost impossible to get a majority vote for. We are therefore constrained by budgetary concerns and other city rules that we need to follow, while the investor-owned utility normally has a different set of rules. They have rules too, but those are completely separate. 

Doug Kim: We have regulators. They are there to represent the consumers. 

Tobin Richardson (Moderator): David, if I’m an entrepreneur and I’m looking for different parts of the market to play, I really have to apply some filters to come up with some way of focusing. You had a great opportunity in energy storage, and there is a good market there. But how do you look at that kind of filtering process, and what would you recommend trying to focus on within smart grid?

David Rosen, (Senior Director of Energy Storage Solutions, CODA Automotive): I think it is important to change only one thing at a time. For example, at CODA, with respect to the electric vehicle, the most consistent feedback that we get from people after they have driven it is, “After two or three miles I forgot that I was in an electric vehicle.” You see the same thing happening with respect to charging. People are used to going to the gas station and putting the pump in. 

When you look at the standard J1772 connector, it basically looks like a gas handle; it’s basically the same experience. After people are used to their electric vehicle and the electric charging it’s just a matter of changing one thing to get the signals from the utilities to be able to use it for the additional applications. 

It’s really about people not wanting to change. They might change one thing, but if you have to change two things all of a sudden it becomes too complicated. So even in energy storage, you’ve got this new asset, and right now we are shoehorning into the existing frameworks. We’re looking at changing the frameworks to help facilitate adoption. But I think that to really make the technology adoptable, look for the customer who has to change this stuff the least. 

For more info on the Sustainable Business Council, visit: http://www.sustainablebc.org