Big Plans are susceptible to changes in the world around us, and even bold visionaries can have wrong assumptions about the future.
After blanketing the media landscape over the summer with The Pickens Plan, T Boone Pickens has announced that he is slowing down his plans to build a massive wind farm in West Texas. Pickens’ $2 billion order of GE wind turbines has not been affected, but scaling up of the project is likely to happen more slowly than originally hoped.
A changing world or wrong assumptions?
Pickens has certainly felt the pains of shifts in the market where money is now in short supply and the global economic slowdown has battered his energy intensive hedge fund. But there have always been flaws to his core assumptions that support the vision that have somehow escaped widespread critical thought or media scrutiny. Pickens deserves credit for his willingness to advance the energy conversation in the US, but it does not free his Plan from closer examination:
#1 Utilities won’t evolve without regulatory changes
#2 Wind needs storage to evolve
#3 Natural Gas is a globally integrated industry, no breaking ‘foreign’ dependency there!
#4 The Auto Industry’s problem is not oil, it’s the combustion engine.
#5 Building transmission lines in my backyard or ranch?! It’ll cost you!
#1 Utilities won’t evolve without regulatory changes
One of the great efficiency opportunities for the next century is based on the convergence of information and energy flows. The notion of a 'smart grid' is a more reliable and efficient energy web based on the integration of software, sensors and energy storage.
And for those homes with 'Smart Meters' or Smart Devices, solutions are coming online quickly. Google has now thrown its hat into the ring around the basic idea: 'if you can measure it, you can improve it'. The Google Power Meter is a software tool integrated into smart meters that helps consumers better understand how they use energy in order to reduce their costs and consumption. Google is a big name, in an expanding space of 'smart energy' startups, like Sentilla and REGEN, who are trying to build demand in the residential market.
Related Smart Grid posts on The Energy Roadmap.com
The ‘smart grid’ is coming, but arriving at this future is likely to include some twists, turns and battles led by some ‘Big Grid’ utilities who might struggle to see their role in this alternative future.
At the surface ‘smart grid’ concepts sound like a logical next step for the modern day utility grid: minimizing downtime, managing peak demand, improving efficiencies, and anticipating problems before they occur all sound like a positive step for the world. But underneath it all the ‘smart grid’ is incredibly disruptive to the regulatory framework, operational standards, capital investment strategies and business models of most large utilities.
To understand the evolution of the ‘smart grid’ and the utility of the future, we can imagine two initial stages of development.
Part One: Software for Managing Infrastructure
The first steps to building a ‘smart grid’ utilize the power of software to maximize the efficiency of the grid. Simply put, we add a layer of information technology to improve management of existing one-way grid infrastructure to improve performance and reduce costs.
Mark your calendars! The business case for ‘smart infrastructure’ has been made by one of the world’s biggest companies. On November 6th, IBM CEO Sam Palmisano delivered a speech (text / video) at the New York Council on Foreign Relations. Palmisano highlighted ‘Big Blue’s vision of a ‘Smart Planet’ and the tremendous near term opportunities in building out the global smart infrastructures for energy, water, information, and transportation of people and goods.
Palmisano echoed a vision described by visionaries and futurists long ago of a ‘digital planet’. Now we might expect broader endorsements for ‘smart infrastructure’ by mainstream business and policy leaders especially in the US under the incoming Obama Adminstration. We can also build more reliable forecasts and roadmaps based on expectations for investments and application of technologies that improve the flow of traffic (without adding more lanes), more efficient energy grids, wider access to clean water and food, improved personal safety, and more secure information flows around financial, governance, and healthcare information.
Quotes from Palmisano’s address: What’s making this possible? First, our world is becoming instrumented
“There will likely be 4 billion mobile phone subscribers by the end of this year… and 30 billion Radio Frequency Identification tags produced globally within two years. Sensors are being embedded across entire ecosystems—supply-chains, healthcare networks, cities… even natural systems like rivers.“
Second, our world is becoming interconnected
“Very soon there will be 2 billion people on the Internet. But in an instrumented world, systems and objects can now “speak” to one another, too. Think about the prospect of a trillion connected and intelligent things—cars, appliances, cameras, roadways, pipelines… even pharmaceuticals and livestock.“
Third, all things are becoming intelligent
“New computing models can handle the proliferation of end-user devices, sensors and actuators and connect them with back-end systems. Combined with advanced analytics, those supercomputers can turn mountains of data into intelligence that can be translated into action, making our systems, processes and infrastructures more efficient, more productive and responsive—in a word, smarter.“
MSNBC’s Rachel Maddow interviews Barack Obama (on 10/31/08) who highlights near term demands (and opportunities) for ‘Smart Grid’ investments needed to bring the US infrastructure into 21st Century.
‘Big Grid’ could replace ‘Big Oil’ as a major story for 2009, as it becomes clear that the regulatory frameworks of our electricity utilities are not designed to support growth of utility scale wind and solar, micro-distributed power generation, and energy storage. All these things are disruptive!
The Takeaway's Host John Hockenberry interviews the CEO of Sentilla and explores the huge opportunity around the convergence of energy and information. The era of 'smarter energy' systems is likely to be more efficient and profitable because it taps the integration of software, sensors and energy storage.
The efforts to reduce carbon emissions and increase the use of reliable power generation of renewable fuels will determine the future of the electric grid, as was reported by the North American Electric Reliability Corporation. But solar and wind will have to overcome some fundamental challenges before they are accepted by large utilities.
“As we consider our energy future, it becomes increasingly clear that our success in reducing carbon emissions and realizing energy independence will hinge on our ability to provide reliable, clean, electricity where and when it is needed,” states Rick Sergal, President and CEO of the NERC.
Minnesota Public Radio has featured a story of Xcel Energy’s efforts to build out the state’s first utility-sized electricity storage facility based on batteries that can store enough electricity to supply 500 homes for seven hours. This push to integrate energy storage systems with wind and solar farms could emerge as a major growth area over the next twenty years.
Why is this important to the future of energy
Today’s energy industry is dominated by two ideas: producing energy and consuming energy. As a result most leaders and consumers focus only on trying to find new ways to produce energy (‘build more plants’) or highlighting ways of being more efficient in energy consumption. But we overlook one of the most disruptive ideas in the future – energy storage.
Energy storage can help lower the cost of producing energy for utilities, accelerate adoption of renewables and electric vehicles, and bring power to billions of people who do not have reliable access to grid-based energy.
Understanding Intermittent Power Sources
Solar and wind are known as intermittent power sources since they only produce power when the wind is blowing or when the sun is shining. They are clean, but not reliable. Outside of production costs, this is the primary reason why utilities avoid making major investments to expand their renewable portfolio. They are not ‘anti’ renewable, they are ‘pro’ reliability.
Until solar and wind can overcome this problem of intermittency with energy storage systems, major utility companies will not be able to significantly expand their renewable portfolios.
Efficiency is widely considered the 'low hanging fruit' for improving the energy sector.
And while it is tempting to seek out gains via some mass market consumer push with hybrids and new lightbulbs, the greatest near term returns are to be found within the utility sector (electricity power generation) and among power hungry industrial clients.
Rocky Mountain Institute's consulting arm RMI ERT has identified US opportunities to 'close the electric productivity gap' around tremendous cost and carbon savings.
The new report “Transforming America’s Power Industry: The Investment Challenge 2010-2030” [Full Report / Exec Summary] estimates that the U.S. utility industry will have to invest between $1.5 and $2.0 trillion between 2010 and 2030 to maintain current levels of reliable energy service for customers throughout the country.
“This study highlights the investment challenges confronting the power industry in the coming decades,” according to Brattle Group Principal Peter Fox-Penner. “The industry is facing enormous investment needs during a period of modest growth, high costs, and very substantial policy shifts.”
Why is this important to the future of energy?
This investment figure challenges some deeply held assumptions and visions of the future promoted by people on all sides of the political spectrum. Free market advocates will have to confront role of government spending on infrastructure. Unless we completely abandon the centralized power plant to home model that exists today, most of these investments will come from states and the federal government.
But the more emotional conversation deals with the dreams of new sources from solar, wind and ocean power. This report confirms the brutal reality- Renewables alone, cannot scale to meet demand through 2030. While Al Gore’s We Campaign is trying to make a convincing case that we can go ‘all green’ in a decade, the numbers do not add up without a radical social-industrial engineering project with no budget limits.
The most likely near term future through 2030?
All sources of energy used in electric power generation will grow.
What to watch for
These types of reports often grab headlines, but are quickly forgotten by the public. Yet there is evidence to suggest that America is preparing to make significant investments in our energy infrastructure and change its regulatory framework to enable the Utility industry to transform its business and operating models. [Until those regulatory changes are made, the utilities will remain locked in their current business models, and will be unable to introduce innovative and cost saving efforts.]