VX2013: The Smart Grid - Real or Hype? (Part II)

James Kelly: Doug Kim is a visionary and a futurist in this smart grid area. He’s not only looking at the stuff that’s happening today in the industry but is involved with research at national labs and universities, examining what will change in twenty-five years. We’ve asked Doug to talk a little about what’s in the future for the grid.

Doug Kim: Seriously, the fact is, I don’t know. No one really knows. Why is that? Well, Mike Montoya explained a good deal of the technologies that we’re investigating, but that’s only a partial list. The really big challenge is how to integrate all these different things to provide the solutions that people are looking for and will be looking for five to ten years down the road.

The smart grid is really complicated because it’s a volatile mix of, in my view, four things. There are the policies. In California it’s 33 percent renewables. We have lots of distributed generation that is fundamentally different from the way we used to generate power. The whole policy angle is pushing the smarter grid, particularly at the state level, very fast. The second thing is the technologies themselves. What is it that we know about technology? Well, it keeps coming up with things that are completely unexpected; you can’t predict exactly what the next thing is going to be. So you’re dealing with technologies that are fundamentally unpredictable, and it’s those things that have reshaped the business.

It’s hard to forecast that for consumers. While we’re in the early stages of consumers taking advantage of some of these technologies, and certainly they will become engaged more and more as there are more opportunities to do so. The last piece is the competition. Many folks are coming up with unbelievably bright ideas. So when you put them all together in a box, it is a pretty volatile mix, and it’s hard to predict exactly what is going to happen. But it’s going to be an exciting journey.

Last night I looked at the heading of this panel: “Smart Grid, Real or Hype?” Clearly, I believe it’s real, but at the same time, when I look at that title, I realize there’s a lot of impatience. We’re trying to figure out why it isn’t here already because we’re so used to our technologies today. Did you know the first commercial mobile phone was demonstrated in 1973? Quite a while ago. They had this device that was 2.2 pounds, about the size of a brick, cost $4000, and you could talk on it for about 30 minutes before you had to charge it for ten hours. The first commercial network was deployed in Tokyo in 1979. The first U.S. network was deployed in 1983; that was 1G. 2G didn’t come out until 1991, 3G until 2001. So it was a long journey, and today, we have the iPhone, which isn’t even a phone so much as a lifestyle device. The point is it took a while for the cell phone to get real traction. It took a lot of people, a lot of ingenuity, and some fundamental things like standards and consumer awareness, desire and demand, to have these capabilities. Another example is the Internet. Today, it’s completely transformed our lives—it’s certainly transformed my teenage daughter’s life—but it was invented in the 1960s. These technologies don’t exist for their own sake but really enable people to do something, and that takes some time. I think about smart grid the same way.

Southern California Edison just finished half-a-million smart meters. I remember the genesis of this in 2003 because I did the business case for it. When I was thinking back then about what the meters would do for the utility of the future, many of the things that people talk about today—things like transactive energy, appliances fitting into the ISO, and all that—I couldn’t think of those things. So as we look at the future from this point, I think it’s the same challenge. It’s going to be so driven by society and policy’s need to have a cleaner environment; giving customers control and more information so they can better manage their energy usage; and, frankly, managing the grid.

We talk about 33 percent renewables, distributed energy resources, using solar and wind and all of that, it’s great, but there are costs. There has to be technology solutions to take all of these things and integrate them into our system. Because what we’re talking about today, and for the next ten years, is how we may transform our massive grid—as Jim mentioned, the greatest engineering feat of the twentieth century—while balancing supply and demand at the speed of light. It’s a very complex task, and we’re going to put more complex things on top of the grid, so to me is why we have to have a smarter grid. It’s why I’m convinced we will continue to move forward.

Many participants in the market today have great ideas. Some will make it, others will not, some will get bought. Big companies will come up with solutions and help us manage the integration aspect of all of this, but I think that’s just part of the journey, and we’re in it for the long haul. 

James Kelly: Now imagine for a minute as we talk about this progression of the grid: did you ever think about what it took to light the Superdome (New Orleans)? Bet you did when the lights went out (during this Superbowl). Until then, it was taken for granted. The progression of the grid can be that way, too. A black swan event happens and the whole world changes.

What if you had one of the most sophisticated and developed nuclear power fleets in the history of the world that provided almost inexhaustible power, at reasonable prices, to your consumers, 24-7? You’ve developed a whole nuclear infrastructure, and all of a sudden, in virtually one day, it was shut down, and you had to go to other sources of power and still supply a highly-industrialized, modern, progressive country? Our next speaker actually lived through that—Fukushima Daiichi, through the tsunami and so forth. So Osamu is going to tell us a little bit about how Japan moved one step closer than it ever planned towards a smart grid, in a day—a day they’ll never forget.

Osamu Onodera: Thank you for a great introduction, Jim. I must admit, I didn’t live through it firsthand because I was in the US! But I will speak a little about the experience of the time. As was just stated, smart grids have different objectives: reliability, renewable energy, etc. Japanese utilities until 2006-2008 were actually insulted, in a sense, because they thought that their grid was already smart. If you looked at it’s performance, mostly in transmission and distribution, it was 5 percent compared to 7 percent in the US or 8 percent in other countries. The average outage time, or I should say, distribution automation—this is a pretty hot thing in the US industry right now—so as a result, outage times were ten minutes on average per customer in 2008 compared to 250 in Australia and 50 or so in the US. So it was a much more reliable gird. Generation efficiency is 40 percent compared to 36 percent in the United States.

So in various categories the Japanese grid was smarter. But actually, when the tsunami occurred, it wiped out 40 percent of generation, and so, what happened was there was a big loss of generation and the demand was still there. So you have to balance demand and supply. Now that’s probably a characteristic that the new smarter grid would require, but unfortunately we have minimum smart meters right now in Japan. We don’t have enough information on individual users, and as a result, when they tried to do rolling blackouts, they found that they couldn’t. For example, they couldn’t create any blackouts in Tokyo unless it disrupted the trains. So there was a lot of confusion as they tried to do rolling blackouts at the same time as making public transportation infrastructure run.

If you had smart meters you could do remote disconnect, and it would be probably be a little bit easier. So in ways, a smarter grid would have been better. From that point of view, the utilities have to change their minds quite a lot. Having said that, now the utilities have had to change over their current meters. In the next five years, 50 to 80 percent of the meters will be changed to smart meters.

Now, this does create some problems. I’ve heard an interesting joke about utilities that says, “Utilities want to be first to get second place.” They don’t want to be the first to do anything. They want to be the first to second place, and they don’t want to be behind anyone else. At the same time, a lot of the investment they do is supposed to be there for 10 to 20 years, as opposed to the IT industry, where things change every two to three years. So there’s a very big difference in business models. When the Japanese Government said, “We want to go to a smarter grid,” the utilities were saying, “Do we have to change over all of our smart meters at the same time?” So changing the grid to a smarter grid in a cost-efficient way is difficult, and they are in a position now where they are trying to change the meters over as they age.

At the same, another one of our objectives is to integrate more renewables into the grid, and of course renewables are intermittent and therefore more difficult to manage. So our definition of a smarter grid is a grid that allows for two-way communications that facilitate integration of intermittent renewable energy to the distribution feeder in an affordable manner. Having said that, I think on the distribution/transmission level, we have a pretty good grid, but on the smart-meter/customer side, we have a lot to learn from California and the US. 

James Kelly: Thank you. Before we open it up for questions, we’re going to hand it over to Panama to give us a different perspective. He has deep experience with the legislature, with regulators, and nongovernmental organizations. They’re watching the industry, whether it’s in Japan or California, go through all this, and the industry is asking for a lot of money, and they want programs to do research and to deploy new equipment. So tell us, how does the legislature see this? Do they think it’s real or hype? Do they support it? What do they want out of it? What are the policy public drivers that you’re seeing?

Panama Bartholomy: Thanks for having me on the panel. It better be real, and we have no time for patience, unfortunately. We are engaged in our energy policy in California in the ultimate and potentially most costly faith-based initiative in the history of the country. We have adopted policies for climate change, for energy efficiency, for renewable energy, that will only work if we have an incredibly smart grid that is very different from the grid that we have designed and rolled out here in California.

We are, right now, looking to become heavily reliant upon intermittent, renewable resources in our deserts and mountains. We’re looking for a dramatic transformation of the transportation grid, our largest greenhouse gas contributor, to move towards an electric-based transportation grid. These are such dramatic changes that we’re going to need almost a completely different grid. Our grid is basically designed to take power to a substation to a neighborhood. Now to have to deal with bi-directional power; communication back and forth in and out of neighborhoods; ramping up and ramping down power plants depending on weather patterns; being able to predict weather patterns in the future; being able to accommodate electric vehicles coming on the grid.

You know we in the legislature will do the right thing, eventually, once we’ve exhausted every-other opportunity. The biggest fight last year on energy in the legislature was not about net metering. Though that’s what you’ll hear, it was about the smart grid and whether or not we will be able to allow a grid that will take into account significant amounts of distributed generation. The biggest fight on energy this year is going to be on rate reform, how we actually build the smart grid of the future, who’s going to pay for it, and what that impact is going to be for ratepayers moving forward. You folks here in Southern California are going to be right in the center of it. As we’re going to be shutting down power plants down here (due to getting rid of power plants that use seawater for once through cooling) you folks more than ever are going to be dealing, in the next couple years, with a dramatic need for a much more highly-integrated grid.

I grew up some of my life in Hawaii. Right now, over there, a kilowatt-hour is about 24 cents on the low end, about 42 cents per kilowatt-hour on the high end. Solar hot water heating pays off in about a year and six months; solar PB pays off in about two to four years. There is incredible penetration of solar over there right now. Some substations are looking at already 25 percent penetration of DG in certain neighborhoods. It’s at the point now where the utilities are getting so freaked out they’re having every household do a $2,000 interconnection study for their own household, just to add a household sized PB system onto their roof. We cannot do that in California. We have got to be developing a grid that’s going to be able to bring on the kind of solar industry that we need, not only for electricity, but also for economic growth here in California.

So unfortunately, as we move from a smart grid to the smart grid that we need, and as we move from a rotary phone to a smart-phone-type of electricity grid, legislature is not going to have the patience. We proclaim great things that must happen, and we want the utilities to do it and all of you to pay for it. We look forward to the conversation on how that’s happening.