Canute, Energy, and Natural Laws

Politics has been unusually intense this week, and many new themes of varying worth have echoed around the public square. One meme that surfaced held that belief in creation invalidates one for higher office. The argument runs that if a candidate is unable to understand natural law and science, as evidenced by creationism, then they are unfit to govern in the modern world. This week, numerous politicians showed ignorance of other natural laws and natural systems, ones whose effects are more immediate. I am more concerned with the immediate harm caused by those who ignore natural laws, as they did this week, that have been confirmed by repeated experiment.

The laws I am speaking of are those of supply and demand, and that price should reflect scarcity and value, rather than cost. Those who ignore this iron law can always make things worse.

King Canute was surrounded by a flattering court who magnified his power and magnificence in their speech, claiming that he could control the forces of nature. When some claimed in their over-the-top praise that he could control the tides, Canute decided to teach them a lesson. Canute had his throne carried to the beach at low tide, had a proclamation read requiring the tide to stay out, and held court surrounded by the flatterers. Predictably, all were soon flooded; one can only hope that some of the advisors were swept away. I hope Canute received better advice thereafter.

This week, government actions that created wide-spread shortages and economic dislocation in the Carolinas.

Local gas markets were stirred up with the prospect that hurricane disruption of gas production would soon cause shortages. Panic buying created runs on gas stations as drivers topped off their tanks before the weekend. Many convenience store owners increased their prices, a healthy response that reduces demand and encourages drivers to allocate gas use only to high value activities during a time of scarcity.

The governors of each of the Carolinas (and perhaps elsewhere) invoked emergency powers to prosecute those who raise prices. The predictable effect was that stations began running out of gas. The economic dislocation spread, as local service companies, unable to fuel their trucks at any price, began holding off all customers until next week. Tradesman were effectively laid off for the day. The underemployed now have full tanks that they do not need, and the regularly employed stayed home. The governors Easley and Sanford demonstrated that both parties can make bad situations worse through ignorance of natural laws.

Somehow energy befuddles public agencies, public discourse, and, obviously, governors. Energy companies, for the most part live in a bizarre world wherein prices are determined by approved costs rather than by value delivered. Decisions, on technology, and on resource allocation are made by fiat.

As I drive by stations with no gas, I know that neither the hurricane, not the station owner, nor the distributor is to blame. I blame Easley, and the latest of the many uneconomic decisions he has sold to the state of NC. I wonder when the pundits who are so forceful in arguing about evolutionary biology will consider whether own economic innumeracy poses a greater risk.

The local governors are all wet. Unlike Canute, they do not recognize why.

It’s all too cheap!

Even with today’s rising energy costs, most things do not cost very much. This is a good thing. Food, as a percentage of income, is still at historic lows. In real dollars, gasoline is just where it was at the birth of the modern car in 1908. For most people, switching to a more fuel efficient car will not pay back the initial capital outlay in the next five years. Local energy generation just doesn’t pay back its installation cost quickly enough.

A penny saved may be a penny earned, but today, everyone leaves their pennies by the cash register. Gas prices do not come down because no one wants to make a left turn against traffic to get a better deal. (See also many articles on the front page of Knowledge Problem this week. The New York Times recently indicated that a load in the washing machine might cost $0.53. Who is going to personally manage that? Who is going to miss their $4 coffee on the way to work to reset when the dishwasher runs for this type of gain?

Life cycle does more than lifestyle to determine energy usage. Homes with small children have different energy profiles than empty nesters. Life-cycle trumps life style in energy use except in the most extreme cases. Extreme energy savings are not ever going to be a mass phenomenon. People would rather get to the beach an hour earlier, and get the complaining kids out of the car and in bed on time than they would drive for greater mileage on the trip. These facts are not likely to change.

Well, if we are not going to manage our devices, our systems, and our energy, who will? There are only two answers: someone else and the systems themselves.

Few people want someone else to manage their power, because few people want to relinquish autonomy over their home to someone else. Service is a possibility here. Services like Sensus could remotely monitor my heating and cooling for peak performance, and let me know when and what maintenance is needed. If I approve it, they could even schedule the maintenance themselves, and verify post-repair performance before I pay for it.

This leaves the devices managing themselves. There are a lot of devices, with a lot of features. If we are going to let these devices manage themselves, they need an economic interface, too.

I could ask my dishwasher to run itself, and manage its own budget for the month. I could also set service standards that the dishes always be clean before dinner the next day. This leads to a relatively simple and consistent user interface.

I could tell my solar panel to sell to the grid whenever the price is above a certain amount, and to store any excess energy. The grid might consistently outbid the dishwasher—and that’s OK. If so, the dishwasher would still run only at night.

I could tell my whole-house storage system to buy power at any price until it has four hours on hand. Thereafter it might buy whenever energy is below a target price. I could even let it take bids from the household systems and devices, or from the neighbor. This system would, of course, need to charge an appropriate mark-up based upon its inefficiency of storage.

If we develop the right sort of abstract business interface between the power grid and our buildings, it can also be used between buildings, or within buildings. Most throw-away cell phones have more computing power than it took to go to the moon. Surely, our embedded systems can do a little day trading…

Embbedded commerce heats up

I want to alert my readers that there are two activities afoot right now that have the potential to affect everyone interested in GridWise, particularly those interested in the new e-commerce side of energy.

1. NIST has begun working in earnest on the protocols of the new smart grid, in particular the B2B interactions between the grid and its end nodes. Work is split into B2G, I2G, H2G, and T&D, with electric cars placed, for now, in H2G. It is important that they are opting for business to business interactions, and not on machine to machine interactions. Services inside the building would be coordinated by the business processes of the occupants. Grid messages would go to the business agent of the occupants. Interactions, including pricing and bidding, would be between the grid agents and the building agents. This group had its second meeting today, and is requesting submission of applications (use cases but with an economics/business slant) to base the roadmap around.
2. OASIS, the e–commerce people, have a stated intent of aligning / cross-pollinating the e-commerce and the device crowds. Clearly, in WS-* (pronounced ws-splat), we have most of what we need to put secure, scalable, abstract, verifiable, transactions around the underlying business transactions of GridWise.

Those who know me, know I am excited about this convergence, which I have been writing about, at here and at other places, for years.

If you have application cases that you would like the business of energy to support, built upon transacted open markets, let me know and I will stir them into the hopper. If you want to be kept notified, let me know that as well.

Toby.Considine@unc.edu

Toby.Considine@gmail.com

Tomatoes and Energy

Ahh, Saturday morning at the farmer’s market. Wonderful smells, and bright colors, and seasonal delights. The local peaches have just come in, and it looks like this year’s crop is making up for the failures of the last two. The nightshade family has just come into full mid-summer explosion; every kind of tomato and pepper is piled high on the tables.

Mid-summer abundance is a time of choice. Winter tomatoes are commodities; local spring tomatoes at the farmer’s market red and flavorful, fresh from the hot-house. Late summer tomatoes come in red and gold and chocolate brown and even in surprising stripes. They come in small bites and in one slice per sandwich double-handfuls. They are low acid and high acid, are recently designed or heirloom favorites. With multiple producers all competing you can get any attributes you want, along with helpful suggestions and advice thrown in for free.

Several people have written or called this last week that they do not like my call for a universal B2B (Business to Business) interface for energy-using and producing systems. The most cogent comments advocated P2B. I also tended to agree with their vision. But I still call it B2B

Everything at the farmer’s market is personal; but only the most naïve of the local city folk think that it is not all business. It takes just a few minutes from the market opening to achieve price equilibrium for “ugly” or “canning” tomatoes. Prettier tomatoes soon reach equilibrium, and compete on special qualities; “heirloom”, “low-acid”, or “no sprays”. Farmer’s markets are all personal, and all business. Just watch them establish new market clearing prices at ten minutes before noon….

The home and the individual energy user, the Person in P2B, should have all the abilities and responsibilities that the business has. Some home users are gradually moving to sophisticated always-on homer servers; others are doing the same with always on servers in the clouds. Many homes use more technology than many small businesses. Many individuals have much more sophisticated understandings of energy than do many businesses.

Like the farmer’s market in mid-summer, I want the vendor communications in energy markets to include more than price. I may want to contract for today’s shaky power or for true digital-quality power. I may want to buy only local sources of power, or only power at least a thousand miles away; let NIMBY (Not-In-My-Back-Yard) and short transmission advocates both express their desires in the market place. Just as the farmers sell no-spray and certified organic produce, let the market interface describe renewable status, carbon cost, and even bird kills.

A single robust B2B standard for two-way negotiation can be applied to new market models. There is no reason that a negotiation with your neighbor’s power generation, or that run by the neighborhood homeowner’s association, be any different that the negotiation with the traditional utility.

Even within your home or business, there can be a negotiation. If your drier submits a lower bid for energy than does the grid, perhaps your home generation should sell to the grid, or to storage, rather than to the drier. As the home owner, or as the business manager, you can of course set the rules for the internal market. As an enlightened despot of the home market, you can override the market rules when you want to.

Energy that interacts only with the established energy market is hard pink winter tomatoes, available at the same price even in summer. New energy needs farmers markets with plenty of choice. These markets are B2B, even if the agent lives only as a minimized program on your Mac.