Transactive Energy and Little White Lies

As I head off to the second smart grid interim roadmap workshop (whew – that’s a lot of pairs) I think back to one of the participants in the Business and Policy track that I led with Lynne Kiesling. Several members, bunched together in the participants, were from the Edison Electric Institute, the association of share holder owned utilities. They peppered us with detailed questions and countered transactive smart grid scenarios with valid objections. It was on the second day, however, that I recognized the thought behind many of their concerns. They feel that they are asked to subsidize pretend transactions. When I say “buy power from your neighbor’s solar cell”, they hear “so we’ll put in $1,000 of equipment so you can buy $100 of power; the cost of which will be subsidized by all the other customers.”

Well, they’re right.

One reason that there is so much inefficiency in electricity is because utilities are asked to be providers of all sorts of social services. No cut-off of electricity in winter in the north. Subsidize rates to the poor. Smooth rates throughout the year. None of these ideas are bad; it is bad that we have no idea what they cost.

Now we add in feel-good electricity generation: Subsidize new energy. Provide reliability to back up the intermittent energy sources. We do need to plan for tomorrow, but do these investments make sense? How large are they? Are we increasing the base rate for electricity which we will then subsidize down for the poor to pay for the hobby power affected by the well-to-do?

These are legitimate questions. Murky accounting that hides the costs—costs to utilities, costs to customers, and costs to society—is always a bad policy. Transparency is good. Occulting is bad.

Transactive energy on the smart grid actually supports the concerns of the Institute. They wish to know what things actually cost. Transactive energy will reveal those costs. As a society, we may decide that we want to subsidize particular energy sources. We may wish to prime the pump for new energy. We may wish to impose carbon taxes on other energy.

Whatever we decide, we should do it in the light of day. In a free country, we should not hide public policy behind a cloak of murky accounting. Let’s make our decisions in the light of day. Transactive energy lets the sun shine in.

New Energy and Legacy Buildings

Building systems used to be fully compatible and interoperable. Prior to digital controls, the best systems were built with pneumatic controllers. Electric signals are complicated. There’s voltage. There’s there is binary packing of data. There’s non-standardized xml vocabularies. Pneumatics were simple. Pressure was everything.

Many institutional owners of buildings resisted the new-fangled digital controls for a long time. When own a large number of buildings, interoperability is more important. Before real standards for networking and remote communications, the most important interoperability was with the maintenance technician. As Roger, the long time head of HVAC for UNC explained to me “No matter what the problem, we can clear it from here with a tank of pressurized air”. This means that at UNC, and on many campuses, most of buildings still have pneumatic systems.

Pneumatic systems work best for continuous operation. They usually cannot perform automatic setbacks. Setbacks refer to adjusting the building temperatures up or down (depending on season) outside of business hours. Just as in the home without a digital thermostat, it is a rare building operator who will consistently and reliably perform manual setbacks.

At UNC, we have been looking at some innovative approaches to retrofitting pneumatic systems for automated central operation.

Cypress Semiconductor is one of the old-line silicon valley firms. Cypress has come up with a digital retrofit for pneumatic thermostats. The digital thermostats are then linked by a wireless network back to a central controller, enabling the thermostats to be re-set remotely. Cypress further claims that the thermostats collect data on system health through analyzing fluctuations in air pressure. The central controller is a standard PC, so an operator can use the web to re-set the thermostats.

The external interface to that PC is a traditional building system protocol. Cypress would have better served itself if they had reached further. Buildings that have pneumatic systems do not usually have effective or extensive building operations systems in place. At the next level, owners are trying to crack the façade of proprietary building systems and to achieve enterprise interaction. Interposing traditional building control protocols just gets in the way.

Enterprise interactivity will let these systems respond to the business of the occupants. Conference rooms could be heated and cooled based upon schedules in the corporate calendar. Larger building operations could respond changes in business schedules and to changes in staffing. In this year’s tight economy, building operations could respond to Friday furloughs in response to signals from human resources. Enterprises expect abstract web services such as oBIX, not low level protocols, even if repackaged in TCP/IP or even XML.

Cargo Cult Energy

I spent last week in Chicago and by of Silicon Valley, talking about new energy. In Chicago, we were talking about the smart grid, and how it enables new markets in energy. Out by San Francisco Bay, the conversation was, of course, about ventures and new businesses and high tech. There were exciting conversations in Chicago, ones that may lead getting the underlying structures of smart energy markets right. There were innovative projects in California, ones that are beginning to answer "What would your stuff do, if it knew the price of energy, now.?" In both locations, there was a tendency to fall into a trap that I call Cargo Cult Energy.

The phrase Cargo Cult names a reaction of some isolated islanders in the South Pacific to what they experienced in World War II. Some of these islanders had never seen internal combustion or manufactured goods or any food that they had not themselves pulled from the sea or hewn from the land. One day a stranger would come, or several. These strangers seemed very determined to cut down trees, and to flatten the land. The strangers were so obsessed that the islanders helped them, even going so far as to build a tower at the end of the flat space.

The strangers would go up into the towers and call down huge flying machines. All the supplies necessary for industrialized war would flow through this airstrip on an isolated island. The leavings dropped by the runways, and pilfered from the warehouses were more wealth than the islanders had ever imagined. The war ended, and the strange men left, and the flying machines came no more. On some islands, myths grew. If only the towers were maintained, if only the right rituals were performed at the end of the runway, then the machines, and then wealth would return.

In Chicago, fat too much of the conversation, before the GridEcon started each day, was of incentives. Over breakfast, alas, the conversation was often not of systems, and technology, and business process. Too often, plans were being built around short term incentives. What incentives do they have in New York? When do the tax incentives expire in Illinois?  We are not talking about priming the pump here. The business plans are short. Can we get in and get out when the incentives expire?

The venture capital guys were clear. They were not interested in funding any project whose business plan was based on tax credits, of utility rebates. What government gives, what the public utility commission grants, can just as easily be taken away tomorrow. Venture money wants long term value. Each technology should be sold on its clear and identifiable business value. Once that case was made, credits, and rebates could be a sweetener, a way to accelerate the business cycle.

Around the bay, I saw some many technology plans. I saw novel integrations of existing technology, in which simple things were made smart, particularly in how they used energy. I saw polymath projects, in which technologies and approaches from all over were combined into a novel product that used smart energy. There is a buzz of something ready to happen. Unfortunately I also saw folks tempted to lose their virtue.

Silicon Valley prides itself on a "virtuous culture of innovation", in which good products win, bad products lose, and hard work gets you ahead. I saw some very interesting, and perhaps some very good products. Too often, though, the management team forgets about the building the internet of things around energy, and gets lured by the siren song of third party programs. It’s great – they won’t even have to pay for it! We’ll pay for the installation with DR dollars! The homeowner won’t care because they’ll get a tax credit! We are not talking about priming the pump here. The business plans are short. "Can we get in and get out when the incentives expire?" In other words, these plans were without Silicon Valley virtue.

The energy markets in the US have been poor markets, looking to the regulators rather than to competitors for 100 years. To the extent that the smart grid enables new markets, successful new ventures will chase those new markets. Unless of course they get seduces by unnatural signals coming from the externa of the old markets. Unless they build their business plans around Cargo Cults.

What if the Smart Grid had Reliable Generation

Most of today’s conversations about smart energy have at their core recognition that new energy is inherently unreliable. That unreliability will flow throughout the grid, and those that rely on the grid (homes, buildings, industry, vehicles) will need to consider that unreliability. The requirements reach beyond the operation of transmission and distribution (T&D) to intelligent end-points, able to adjust energy requirements, store energy locally, and even supply energy back to the grid. This requires two-way symmetric communications.

But what if new technology provides us with rock solid reliable power? A couple reports this week have turned my thoughts to the problems of the smart grid given perfect reliability of generation

In the last week, I have read reports of working prototypes for traveling-wave reactors, able to rely on minimally processed fuel, and to consume their own waste, running for a couple hundred years without refueling. I have also read of small package nuclear power plants, completely sealed in stainless steel, to be delivered for local generation. When five years are up, the entire unit would be swapped out, the old unit taken away for maintenance and refueling.

I make no argument here about whether these technologies will be here soon, or are even technically feasible. I make no argument here about waste disposal or transit, although the travelling-wave reactor appears to address many of those issues before they arise. I am instead exploring the requirements of the smart grid with reliable power.

One of the oddest characteristics of energy markets today stems from the most reliable energy sources. Wholesale markets in energy regularly go negative for brief periods. If you have, say, a nuclear plant, you have a fire-hose of energy, one that cannot be scaled up or down easily or quickly. Too much energy on the grid at one time leads to spectacularly bad outcomes (except if you think explosions are pretty). If you operate such a plant, you pay other plants to go off-line during times of low demand.

So I began wondering, what if most of the energy on the grid came from such sources. What if no one was willing to accept an offer to reduce production because they too have difficulty scaling production up or down? How would we want to design the smart grid in those circumstances…

In this new reality, generators and grid operators would want to offer incentives for increasing energy use during off-peak hours. Smart homes and Buildings would want to install storage capabilities to transfer energy uses to these times when power was, at last, “to cheap to meter”. These end nodes would use this stored energy not only for their own use, but perhaps sell it back to meet the peak loads of their neighbors in this future time without expensive dirty peaking generators.

Buildings would choose different energy storage strategies based on storing energy for internal or external use. Thermal storage a can be a good solution for shifting load where heating or cooling is important. Kinetic, potential, or chemical storage might be better if the energy is intended for resale. Industry would want to consider, as it sometimes does now, changing its schedule to use energy when it is plentiful.

These use cases would require market operations to offer incentives for storage and resale to buildings and homes. We would need a model for time-sensitive prices to align use with scarcity and abundance. We would need symmetric negotiations to support returning of power to the grid without hierarchical control.

The smart grid requirements if we assume reliable power are much the same as if we don’t, and they would need participation from all parts of the market. Any node might be sometimes a supplier, sometimes a purchaser.