Risky Business – Removing barriers to Free Energy

It is no secret to readers that I think we can best balance energy supply and demand using pure economic transactions. Whatever you feel about flash trading, those markets with millions of 14 millisecond transactions prove that we know how to run markets fast enough to manage even the most demanding decision making on smart grids. Free energy, that is energy markets unencumbered price and reliability arbitrage, is certainly the fastest path to the technologies we need to balance supply with the increasingly volatile supple we foresee. But today’s utilities serve a social justice purpose that I have been unable to reconcile in my mind with free energy until now.

We need free energy because we need to unbundle two of the most significant services provided alongside today’s energy delivery; availability risk arbitrage and price risk arbitrage. These services create a moral hazard we can no longer afford. Availability risk arbitrage removes performance incentives for end nodes to install systems for energy storage and generation. Price risk arbitrage reserves all economic incentives for energy storage and generation to the grid, where it is too expensive and innovation adoption is, of necessity, to slow to support the type of venture creation we have seen in high tech.

The basic problem is that our electric grid operates with lower margins for error than it ever has before, and current policy is to reduce them further. No community is clamoring for more power lines in its back yard even as our houses are filled with ever more energy consuming equipment for computing, telecommunications, and entertainment. It is becoming too expensive, in generation costs, infrastructure capacity, and social will to maintain constant oversupply of traditional energy. We wish to use new energy sources that are unpredictable and episodic. Attempts to smooth out supply volatility at the grid re too expensive or too few. (Ask me some time why natural gas sales went up when gas generation was replaced by wind in Colorado.) The ability of the grid to supply availability arbitrage is failing.

With fixed prices, the economic incentives for end nodes to participate in energy generation and storage are non-existent. The most basic market rule is buy low and sell high. Without dynamic pricing, the rule for homes and commercial buildings is sell low (wholesale) and buy high (retail). Efforts by local regulators to repeal that rule are as artificial as efforts to repeal gravity.

Dynamic pricing changes all that. With the volatility of energy supply fully exposed, end nodes will buy technologies to manage their risk. With the volatility of energy prices fully exposed, end nodes will find the business case to manage their power purchases. Bottlenecks in the power grid will result in local congestion pricing, letting the true costs neighborhood infrastructure decisions to be seen by the public.

Utilities today must play not to lose rather than to win. They cannot adapt new technologies quickly because they must always be reliable. Market actors that cannot accept risk, cannot afford to innovate. End nodes can voluntarily accept risk, and so can afford to adopt new technology. If Denver, where we met this month to form the Smart Grid Interoperability Panel (SGIP), is plunged into darkness for a week, it is a dire outcome; if my home fails for a week, is provides entertainment to my neighbors. The difference between grid-level innovation and end-node innovation is the difference between tragedy and comedy.

Smart grids will transfer risk to their end nodes. Economic agents which assume risk will expect to be paid for it. These payments will be the fertilizer for an untold number of new technologies. The best way to transfer risk and payments together is self-balancing, self organizing free markets in energy. Systems that can participate in these markets for us as well as systems that can store or generate energy on-site, will be the reward.

Energy Privacy

Energy Privacy was the hottest topic of Grid-Interop in Denver. Perhaps it was the Google Energy demos, which show people discussing each little recurring burst of energy use, whether refrigerator or Jacuzzi, that alerted the public to the issues. Perhaps it was when people read the UCAIug plan for OpenADE, which lists a "Law Enforcement Interface" for energy use as a higher priority than sharing information with the building occupants. Perhaps it was a late-night comedian commenting slyly that at least battery-operated devices could not be tracked, yet. Perhaps it was heightened awareness flowing over from health care debate. However it happened, privacy issues and privacy concerns became front and center at the Grid-Interop and the SGIP.

Without clear standards, and with little sense of architectural boundaries, utilities have been slowly extending control directly into the home. ZigBee Smart Energy, OpenHAN, and SEP all are premised on treating the home as an extension of the substation, another asset to serve the operational needs of the central utility. This model does more than infer energy use, as does the Google Energy model; it includes direct registration and recording of the use of each system in the home.

The NIST Smart Grid Interoperability Report reported that "distributed energy resources and smart meters will reveal information about residential consumers and activities within the house." The panel went on to cite "a lack of formal privacy policies, standards or procedures about information gathered and collected by entities involved in the smart grid." Today, there are no consistent definitions of personally identifiable information in the utility industry. In the week before Grid-Interop, there were numerous privacy meetings, expanding the conversation to include the large internet privacy advocates and public policy think tanks.

During the same week, some of the bloom went off the rose of AMI (Automated Metering Infrastructure). AMI infrastructure, or automated meter reading plus, has been touted as critical to smart grid efforts. In an effort to justify the expense of AMI deployment plans to regulators, utilities have packed more and more functions into AMI, including those described above. This has, in turn, increased the expense of the systems and opened the door to potential security holes.

The message that the public heard about AMI was that “smart meters will reduce your bill”. The message they should have heard was “smart meters will reduce your bill if you take advantage of their information and respond to dynamic prices.” Pacific Gas & Electric meters came under fire by customers whose bills went up dramatically. As far as I know, the meters were accurate, but the public is now paying closer attention—and asking questions. Some of those questions are about direct management of home systems using AMI.

The controversy went mainstream on Tuesday when a report jointly released by the Ontario Information and Privacy Commissioner and the Future of Privacy Forum (FPF). According to the report, “information may be gleaned from ongoing monitoring of electricity consumption such as the approximate number of occupants, when they are present, as well as when they are awake or asleep.”

My daughter summed it up; "if they can see all that stuff, it is time to tell them to take the equipment out." At Grid-Interop, several expressed a contrary view, that they needed to know more. PGE representatives believe that sharing information with the occupants is a privacy issue. If the utilities don’t understand privacy soon in a way that makes sense to their customers, they will find that instead of more control, they will get less.

And drop me a line if you want to get involved in privacy standards for new energy.

Sharing Energy Information within the End Node

Customers and/or their energy management systems require live energy usage information to help make decisions in response to grid-centric events such as DR, curtailment, and energy market events. Energy sales and purchases are the basic elements of transactional energy; a common shared understanding of each energy use proximate to the operating decisions that influence energy use is essential to collaborative energy on the smart grid.

The target of smart grid communications, particularly in collaborative energy space, should always be the microgrid. Some microgrids may contain a single home, or commercial building, or and industrial site—those are irrelevant details. Microgrids have a number of systems inside them that must work within the economic environment of that microgrid—and I am thinking of old economics, before the distinction of economics and ecosystem arose. Some microgrids may have a single entity inside, say a traditional siloed BAS (Building Automation System), but the unitary microgrid is merely an artifact of the way we have always done it. The energy services interface is the gateway to a microgrid.

Shared responsibility for balancing energy production and consumption requires shared access to information about energy markets and actual use. Shared information on energy use, especially live energy use, is essential to cooperation between the grid and its end nodes. Each end node may have multiple systems. Those systems may have multiple strategies and approaches to managing energy. Each strategy may have unanticipated effects on the other systems. These effects can occur quickly. Unambiguous feedback and continuous monitoring are essential to deliver results while providing services to the building occupants. The official recorder of market transactions is the electrical meter.

Energy use is more than net use for a period. Load shape matters. Multiple systems may each be operating efficiently, but in ways that their aggregate effect requires more energy use than anticipated. Systems within a building should be able to share their energy use, and their anticipated energy us with each other. Load shaping within a building is a critical pre-adaptation for site-based generation and energy storage. Load shaping is necessary for multiple systems to coexist within a minimal fixed energy budgets. The ability to function within a fixed energy budget reduces the risk and thereby increases the value of site based energy sources.

Microgrids contain collections of systems that may not share common technology. Some of these systems are small, self contained, and serve special purposes, such as appliances. Some are large and complex and span significant space, such as HVAC or an industrial line. Some look alike, are built from the same components, but have different missions; the laboratory fume hood and the air conditioning system are run for different purposes and have different constraints. Some may rely on different energy markets to do the same work; heat may come from electricity, gas, or solar thermal in the same building. Some systems may store generate energy used by other systems. All of these coexist in the ecosystem of the microgrid.

Shared energy usage information is essential to interactions between:

• Distribution and the industrial, commercial, and home premise.
• The service provider and the industrial, commercial, and home premise.
• Distributed energy resources and all other domains
• Plug-in electric vehicles and premises and the grid

Any other interactions that will cause, use, or track energy transactions on smart grids.

Building revenue meters and intelligent systems in buildings should share their energy usage information in real time within the end node in a clear, accessible standard.

A Microgrid of One

The target of smart grid communications, particularly in collaborative energy space, should always be the microgrid. Some microgrids may contain a single home, or commercial building, or and industrial site—those are irrelevant details. Microgrids have a number of systems inside them that must work within the economic environment of that microgrid—and I am thinking of old economics, before the distinction of economics and ecosystem arose. Some microgrids may have a single entity inside, say a legacy BAS (Building Automation System), but the unitary microgrid is merely an artifact of the way we have always done it. The energy services interface is the gateway to a microgrid.

Microgrids contain collections of systems that may not share common technology. Some of these systems are small, self contained, and serve special purposes, such as appliances. Some are large and complex and span significant space, such as HVAC or an industrial line. Some look alike, are built from the same components, but have different missions; the laboratory fume hood and the air conditioning system are run for different purposes and have different constraints. Some may rely on different energy markets to do the same work; heat may come from electricity, gas, or solar thermal in the same building. Some systems may store generate energy used by other systems. All of these coexist in the ecosystem of the microgrid.

Diversity is the source of resilience in the economy and ecosystem. Monocultures fail badly in either. The diversity of systems in a microgrid is a source of stability. This is as true of the microgrid spans a campus or spans a high-rise. One source of diversity is diversity of response, which is tied to diversity of business service provided. A unitary system all too often has too few response options. Without expensive and non-standard integration, these simple systems are unable to expose nuanced and diverse services for manipulation by the humans, and human processes, they serve.

Diversity within kind (read Darwin for a definition) in building systems can come from multiple technologies (hard to maintain), or from multiple systems programmed quite differently (expensive to integrate) or from identical systems responding to different users. Diverse systems can be much more agile, just as individuals can be more agile than a committee. I posit that a collection agile systems is better able to respond to heterogeneity of environment, including unpredictability of power supply, than is a single committee of systems.

Diversity of services can provide new assets to the commercial building owner. Green leases seek to tie technology, capital, and performance together to please the tenant. Green leases require separate metering and operations for each tenant to be credible. Green leases in a high rise might work best with a number of identical systems, one for each tenant, rather than a monolithic system that responds only to all. Diversity is an amenity that enhances tenant service and leas ability.

How do we distinguish a microgrid from a grid? The external interface should be the same. Inside, microgrids are more intimate, they are the safe neighborhood the kids can go out and play in. Alternately, they may be more dangerous, the prison society in which no inmate must reveal anything. A microgrid defines a security context and a security posture. Intimacy and sharing and collaboration are all a part of some contexts—and not of others.

To me, the most interesting question of the week is what information do the systems within a microgrid need to share as they support their divers purposes and work within their mutual constraints. I know it starts energy usage, and predictions of energy usage, because that is the common resource they share within their environment, the basis of their economy and their ecosystem. I suspect they need currency, to negotiate their access to resources within the constraints of the microgrid—although I am not sure that currency is always expressed in legal tender. Some systems may only be able to buy at certain stores, or sell to certain buyers.

I’m not sure what else they share.