[May 2, 2008 / No. 974]

Smart Grids Need Smart Policies

A daylong gabfest on smart-grid technology at the California Energy Commission revealed much -- but mostly in the questions-left-unanswered department.

Utilities spent hours describing advanced-metering programs and pilot projects as officials from the CEC, California Public Utilities Commission and California Independent System Operator wrestled with smart-grid philosophy.

Walt Johnson from the Cal-ISO's information technology department questioned whether smart-grid applications would be smart enough to redispatch generation, and if so, how often: day-ahead? An on-peak call? Four-second frequency control from plug-in vehicles?

I have more basic questions: How much energy could utilities save from advanced meters and smart-grid-enabled demand response? What kinds of operational benefits come with smarter circuits and better transmission-control procedures?

"We need a common definition of smart grid," admitted CPUC Commissioner Rachelle Chong. "And targets for utilities to reach."

While smart grid is more than demand response, DR targets would certainly help. French utility EDF shed 10 percent of its peak load years ago, but California utilities are far behind. There's supposedly a goal for utilities to shed 5 percent of peak savings from demand response, but as far as I have seen, they haven't met it and discussion on the issue has dithered.

California utilities all have advanced-meter programs which are in different stages of development, and Southern California Edison has unveiled a circuit of the future. But the hard discussions on DR savings are mostly taking place through a regulatory thicket of individual utility programs, with little coordination, direction or shared overall goals.

Last year the European Union issued a $3.6 billion request for proposals to simulate and estimate smart transmission, distribution, grid assets and electricity storage. In California, even though energy efficiency and demand response are the state's chief priorities -- according to the Energy Action Plan -- investment in smart-grid applications is scarce. The CEC's 2007 Integrated Energy Policy Report notes: "California utilities have very little regulatory incentive to design and build 'smart' distribution infrastructure."

Whose fault is that? Utilities invest in efficiency only because the state has mandated it. And now, at least, an incentive system adopted by the CPUC rewards or punishes them in light of set efficiency targets. Maybe something similar for demand response?

The CEC projects that an $8.5 billion investment in demand response could reduce electricity needs by 15 percent. When coupled with energy efficiency, the state would knock off 37 percent of its natural gas-fired electrical demand by 2020.

Perhaps the most intelligent observation at the meeting came from Richard Schomberg, vice president of EDF North America. In trying to achieve a common vision for smart grid, Schomberg advised against a "mastermind" approach, where a central planning organization determines what such a grid would entail, and a "bottom up" approach where utilities simply install equipment such as advanced meters and nobody knows what the final system should look like. The costly, mishmash, bottom-up approach is what seems to be taking place in California.

Rather, Schomberg advised that the state should plan a smart grid and allow its vision to become refined as technology advances, in a building-block approach based on interoperability of parts. "A smart grid might have old parts, it might have new parts and it might have parts that can be removed," he said. Get ready to play electric Legos, I suppose, but the approach makes sense.

While state policy is thin on demand response and smart grid, it's heavy on green-energy junk food. I've already talked about the $600 million Institute for Climate Solutions, the Bob's Big Boy of renewable-energy policy.

But wait, there's more: This year in the Legislature, one bill, AB 2003, seeks $2 billion in general-obligation bonds for energy-efficiency and renewable-energy deployment. It's sponsored by fuel-cell concern Bloom Energy, which the Legislature has noted already has received more than $100 million in venture capital. Guess that ran out fast.

Next up is SB 1670, a $2 billion bond measure for state green buildings. I hope state buildings are going to be greener than the existing Title 24 energy-efficiency standards for commercial and residential buildings, which contractors say aren't really enforced (see CEM No. 973 [14]).

Finally, a note on last week's column, where I expressed some skepticism that Irish company NTR plc would commercialize Stirling Energy Systems' solar-thermal dish technology (see CEM No. 973 [11]).

NTR plc bought a $100 million controlling interest in SES, but critics have argued that SES' 25 kW "Suncatcher" units have maintenance problems and are not ready for rollout. NTR plc Development Director Ian Simington called to explain that the company, which has a track record as a corporate parent of shepherding large infrastructure projects and helping smaller companies grow, performed the due diligence and is confident the SES dishes can be commercialized. I still have doubts, but nonetheless, Simington's call was perhaps the friendliest "complaint" I've ever received. So I wish them luck. May the sun shine warm on their backs and on their concentrators [Chris Raphael].

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