How to Enable the Energy Revolution

This weekend, I read what may be the most important book yet for those transforming today's grid into the Intelligent Grid, and transforming today's buildings and the systems inside them into Smart Buildings. No, it is not Thomas Friedman's "Hot Flat and Crowded", although that work has set the table nicely for discussions of the importance and opportunity of this effort. It is not and of the chap books from the Department of Energy, or the IEEE, or EPRI. It is not one of the many books on environmental eschatology. Nor is it any of George Gilder's visionary history books that bring perspective to technology.

I recommend that anyone involved in these efforts read "The Future of the Internet--And How to Stop It" (TFOTI) by Jonathan Zittrain. TFOTI is at first glance a sober history of technology and culture and regulation. TFOTI tells how the internet grew from its roots in telephone systems and closed garden communities into the amazing engine for transformation, innovation, and new wealth creation we know today. This happened because of a series of legal decisions and technological choices that let people place any device on the communication on-ramps, and create or install any program on their devices. Zittrain calls the capability of the internet to generate and support new technologies and new capabilities "generative".

Zittrain warns that we may be losing this generative aspect of the internet. The internet is being neutered by the growing deployment of locked-down devices, systems that do only what their manufacturers allow. The glamour and ease of use of the iPhone is afforded by locking down the system to approved programs. Xboxes and PlayStations offer connectivity on locked down computers. The social networks are becoming walled gardens; once again business users are establishing accounts on FaceBook, MySpace, LinkedIn, and Plexus as they once established multiple email accounts on COMPUSERVE, AOL, Prodigy and others.

Zittrain is concerned that we are losing the future opportunity of the Internet. We are recreating the dynamic of the time share system, and loosing the generative features of the internet. The siren song of ease of use can lock in today's internet and forestall future advances. Even the multimedia free-for-all risks turning into one large Cable TV system, with predicable results and one-way communication. Zittrain shares his vision of how to develop new technologies and social structures that allow users to work creatively and collaboratively, participate in solutions, and to thus preserve generativity of the Internet.

When we look at the power grid today, we see ATT way before the breakup, perhaps even before the Carterphone ruling. Today's power grid is essentially closed to the wall outlet, and with walled garden communications to the meter, at best. You can use power with any technology you want, but no technology that generates, or stores, or converts energy is allowed to participate in the wider grid. All access to the energy networks is jealously guarded by the utilities and the utility commissions. The Carterphone lawsuit opened up the old phone network to new technologies such as answering machines and fax machines. We need a similar opening up of energy networks.

The challenge of interoperability, and standards, as we move into the era of energy technology, is if we can create a system for energy creation, distribution, and use that is generative. Solving the most pressing problems of our time, those of energy and its effluents, requires engaging the creative talents of as many as possible. No one knows what the innovations of tomorrow might be. We must learn from the lessons of other large networks and build something that is generative.

Get TFOTI and read it. Send a copy to your utility commissioner as well.

(Full Disclosure: In the mid eighties, I was coding for CitiNet, briefly the largest walled garden BBS in the Northeast. Last spring, I ran into fellow CitiNet alum and star salesman Myron Kassaraba; he was talking up his smart energy venture Outsmart Power Systems. I see former CEO/CTO Tom Considine at Christmas each year. I would love to hear from any of the rest of the gang ...)

Thomas Friedman and "The End of Green"

In a recent blog post titled "The End of Green", Thomas Friedman ponders whether the current troubles in the financial markets will end investments in sustainable technology, particularly in energy. In his conclusion, he writes:

What we are seeing in this crisis is the need for a whole new financial architecture-and people are recognizing that some problems are just too big to solve unless we approach them systematically. As it is with our economy, so it is with our ecosystem: we need a new system, and we are going to have to think things through very carefully and make some hard choices to get it right.

Although Friedman describes the risks and the opportunities better than anyone, in this point I think while his aim is true, his target selection is off. What we need is new market structures.

Many of the most eco-aware individuals are rightfully humble about are abilities to manage an ecosystem. Ecosystems are tough manage. We have bad results in managing them. We have a long record of unimagined and unforeseen interactions and consequences.

Human activities and more importantly the human innovations are just as tough to manage. Only rarely does direct government action lead to sustained innovation. Central control, whether by mandate or by target financial incentives, can only select winners. It can optimize an existing system at the cost of eliminating diversity; that's how we got the power grid we have today. New central systems for finance and will do little better. Central directives do no reward and sustain innovation; innovation is what we need most right now.

The current financial crisis come from three big picture issues. Direct interference with markets, a thumb on the scale to drive home ownership down the economic scale, increased borrowing amongst those that could not afford it and amongst those willing to game the new rules. Rent-seeking by regulation and lobbying created financial forces that were untouchable. Persistent deflationary policy drove investments seeking better return into the few areas with rising prices. These forces led to the whole arbitrage via derivatives and widespread financial exposure that we have been watching as it breaks up.

In a similar way, we have energy markets that are regulated achieve minimal risk for all and to protect current market participants. All innovations must come to market by way of the existing large utilities, and promise guaranteed results along the way. Even new technologies must promise 20 years warranties. Anything that threatens current market players must first come through utilities commission hearings or legislative mandate. This creates markets that are un-innovative, risk-adverse, and hostile to new entrants.

Two factors are critical to creating the era of E-Tech that Friedman envisions. We must have clean market structures that allow new players and new technologies to enter energy markets and succeed or fail. We must have the technical infrastructure in place to allow a much more heterogeneous market of generation, storage, conversion, recycling, and resale to develop.

Interoperability and the smart grid are at the heart of this new market design. Interoperability is necessary for consumers to swap technologies without rebuilding their entire infrastructure. High barriers to change stifle innovation. This interoperability must include interoperability with the people and business systems; without information behavior and process will not tolerate agile energy decisions. The smart grid is the core locus of interoperability, where changes in energy use and market prices in energy interact.

It's a problem of energy market rules, not financial systems.

Free markets are Live Markets

The Wall Street Journal looked at Texas Energy price increases this year and got nearly everything wrong.

The big changes in electrical prices in Texas this year mirror the price changes in all energy markets. It is unclear to me how people think that *any* industry, no matter how regulated, can repeal supply and demand for its primary supplies. Some are arguing that these price changes argue for extended market regulation. The regulated energy market is not the natural order; we have a regulated market structure only because nothing else made sense in 1908 when the current model was created in Chicago..

Renewable energy will not work until we break the dependency on the perfect grid. The current grid requires spun up power plants, always ready, to achieve reliability. This spin reserve is an effective tax on every renewable energy source because unfortunately renewable ==> unreliable

You can gain reliability by combining a number of unreliable sources, as long as the reliability profiles for the different sources are different. This requires scheduling and wide area service choreography, and perhaps even architectures with full ontologies, as some laughed about yesterday on another thread. Those interested should just google Kombikraftwerk.

There is an interesting combined power generation scheme currently underway in the inland empire area of California, that combines remote web control of household systems, including homeowner intervention (Don’t regulate anything today – my wife’s parents are in town and I do not want to listen to my mother in law complain!). What is unique about the system is that it is only installed in house that also have solar panels, and the excess output is sold back to the grid at prices as if it was one large distributed solar PV generator, a virtual power plant. This business model, and many others, only works with the extra incentives of live time-of-day pricing.

Many observe that live pricing does not work very well with the home and office infrastructure we have. Well, the internet did not work very well with the phone infrastructure we had 20 years ago. Live prices will be what creates the infrastructure of tomorrow that will work differently.

One difference will be home storage of energy. Energy storage need not be limited to batteries or lakes in the mountains. A tank of icy slush in the basement is a fine energy store if your major energy use is daytime cooling; cool it at night and use it for Air Conditioning during the day. Your heat pump to make the slush is also working more efficiently when it is cooler outside. At a 20% price difference between 2AM and 2PM, that slush might start looking pretty good. At a 50% difference, everyone might have one. We do not know what folks will come up with, and without market information on value and scarcity, we won’t.

It is these new markets that make live pricing important. New business models will change technology decisions.

Local storage becomes an additional use for any locally generated power. This increases the benefits for both generation and storage. This continues to make folks less sensitive to grid fluctuations. This ecology of local energy requires live pricing to thrive.

She never wants an Electric Car

My daughter explained to me yesterday why she never wants an electric car. She has been reading about Shai Agassi’s and Idan Ofer’s efforts to build an electric car while building up an electric car infrastructure. She resents the “Gillette” (or Polaroid) model: sell them the handle cheap and sell them blades forever. She does not want to be even more dependent upon the power grid. She also mistrusts giving a single player access to her driving information.

Many of today’s twenty-somethings have deep doubts about our information society and its long-term stability. Cultural messengers from Al Gore to Rap to Ron Paul communicate a society whose wheels are ready to fly off. The local food movement is at least as concerned with relying on fragile connections to far away locations as it is with transport costs and produce freshness.

My daughter likes the idea of being able to pay cash for fuel and leave no records. Her generation has few illusions about privacy and a reflexive understanding of her exposure to data mining. She is refusing to use Chrome because of the ever intensifying record keeping it manifests.

Her generation sees the amorality of large institutions in part through the lens of the collapse of the intellectual property deal. The deal has been that by revealing secrets and participating in trade, individuals would get short term government enforced exclusivity. The deal was that to encourage creative works, the author would get a brief exclusive use of the work. That deal has been broken by patent trolls who never develop products, but merely wait to hold for ransom those who do. That deal was broken when Congress, corrupted by liberal application of corporate money, retroactively extended copyright on old works.

Once the deal was broken, the new one-sided deal has been enforced by data mining for IP addresses and enforced by technically illiterate courts. Even when the data mining is done incorrectly, the courts have allowed the RIAA to assert points of law and points of fact by raw assertion, turning personally identifiable information into vulnerability to a shake-down. And so this generation mistrusts data-miners even when their motto is “Do No Evil”.

Power companies are proposing models of central control and data tracking to manage the smart grid. Smart car models are developed around automatic tracking, for billing purposes. Regulations stipulate that privacy concerns are paramount; those privacy rules are used to prohibit homes and businesses from seeing their own data, their own energy use.

Current practice has taught the college age generation about privacy as well. Privacy is an inviolable contract, one that prevents parents paying the bill from even finding out what classes are being taken, yet privacy concerns are tossed out when corporate interests are involved. This year’s Congress proposes that unless campuses track data to support the RIAA, that all federal funding be denied. No student today believes in the enforcement of privacy laws.

She does likes the idea of fuel stills, so she can be self reliant. She would welcome the self charging electric car, on that would let her go off grid and off the records. She mistrusts a rigid reliance on our infrastructure; while happy to use it, she does not want to have to rely on it.

This is the citizen of the future. This is the middle aged consumer of the 2030 challenge. If we want to define successful new energy markets, we had better keep her in mind.