The current trend in going green is producing clean gas, finding renewables and maintaining energy efficiency. If the government seed money allocated for smart grid is any indication, a green smart grid may be the best approach to reducing your carbon footprint. But how do we know that this isn’t just another green technology bubble like solar energy? How can IT help to capitalize on these initiatives? What can we do now to ensure we will see our investments in this technology 20 years from now?
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Summary
Beyond simply PR reasons, prioritizing renewable sources of energy moving forward is essential to the business value of utilities in providing consumers with choice, continued low cost and making the most of the Smart Grid.
Countries such as Germany have already been pegged as global leaders in renewables, but the struggle for them as anywhere has been in finding ways to appropriately finance these initiatives without sitting on a bubble in terms of investments. Collaboration between utilities, distributors and government can help utilities provide a more organized distribution grid equipped to deal with neighborhood energy storage and provide stronger resilience in the face of disaster.
Renewables have the potential to change the distribution channel of energy as consumers are enabled to make choices about the energy receive based on their ability to install home PV arrays and the implementation of the Smart Grid.
Utilities are the backbone for Smart Grid’s interconnectivity. Cost effective integration can only be made possible by distribution and substation upgrades. The part of the grid touching the consumer must handle the requirements from an electrical and informational standpoint.
But none of these things will come for free, and utilities need to focus on having the right conversations surrounding green energy and technology to see them become permanent.
Transcript
Sanjog Aul: Welcome listeners, this is Sanjog Aul, your host, and the topic for our conversation is; “Making Renewable Energy a Lasting Priority” and I have with me Dirk Mahling. Dirk is the Chief Information Officer of Seattle City Light. Hello Dirk, thank you for joining us.
Dirk Mahling: Thanks for having me Sanjog; it’s my pleasure to be here.
Sanjog: Now, we know green and renewable energy is an important and buzzy, political topic today and we want to be environmentally friendly, but along with this discussion and need for change comes some serious business challenges about how we’re going to make the most of our investments. So beyond PR reasons, how compelling is the business value for a utility to embrace renewable energy sources?
Dirk: Well I think it is very important. Here at Seattle City Light, we have been using renewable energy since the start in the early 20th century. Like most Northwest utilities, we are heavily based on hydro, so we have a long and proud tradition of using renewable energies. We’ve since then added wind and solar to it and I think we’re one of the few utilities in the country and the world who has a zero carbon footprint. That doesn’t stop us from going forward and embracing new renewable technologies that come either on the utility scale or on the neighborhood scale or even going down and working with individual customers on individual PV, solar or energy storage projects.
“How do you bring renewable energy into the mix and keep energy prices low? There is no single answer to it.”
Sanjog: For those who have treaded this path earlier, what specific challenges are they facing in making it a sustained reality? Are there any past successes and failures we can learn from here?
Dirk: Oh there absolutely is. I am the CIO at Seattle City Light but I am originally from Germany, so I keep watching the German example very closely. And Germany has been acknowledged as a leader in renewable energy. There are windmills all over the country, there are solar farms every 15-20 miles, and for a while, that worked very well for Germany. Currently the price of energy has become prohibitive. There is large debate going on in Germany and Europe on how to continue financing it because more and more customers have huge problems paying their bills, and we definitely don’t want this here in the United States and definitely not in Seattle where we’re proud to keep energy priced very low for our consumers.
So the question becomes, how do you bring renewable energy into the mix and keep energy prices low? There is no single answer to it. It definitely has to do with bringing the consumers into it and making consumer technology and PV installations, but also electric cars part of the overall network. So I would see it for US utilities as a question of how do you organize the distribution grid and how do you make a distribution grid ready to deal with household PVs, to deal with neighborhood energy storage, to deal with electric vehicles that are charged? Utilities can help guide the process, but since the distribution companies own the wires, that is the piece where investment has to be made, and that’s where utilities, politicians and the consumers have to decide where the investments go in order to provide the infrastructure to link all these pieces together.
“Utilities can help guide the process, but since the distribution companies own the wires, that is the piece where investment has to be made, and that’s where utilities, politicians and the consumers have to decide where the investments go in order to provide the infrastructure to link all these pieces together.”
Sanjog: Are there any other areas where you are seeing progress and signs of success, or are things not going the way you would like in terms of how they’re adopting renewable energy? What lessons can be learned from how they are funding?
Dirk: If the market tends to have a way of sorting things out, then Solyndra and this country is a good example of how not to do it. There are others, though, such as in Europe, where in the end, the market does sort things out. For instance, Q-Cells, which was one of the largest German manufacturers of PV modules, basically went into insolvency by being pushed by their Chinese competitors. And that only lasted for a while, because now the largest Chinese manufactures are in trouble too. The whole PV industry is in trouble. So that’s definitely a way not to go because it’s not sustainable; it has all the signs of the bubble. I think Seattle has shown in the Northwest how with hydro and with renewable energies, you can be in business for over 100 years and not live on a bubble.
“If a disaster happens, we want to have a certain amount of resilience, and micro grids and renewable energies are a way of adding value to it that goes beyond just the free fuel factor.”
And we want to build on that proud tradition by consciously putting consumer and neighborhood PV in and build around micro grids to see this as part of the resilience. Here in Seattle, we are prepared for mud slides, earthquakes – we even have two volcanoes here – so something may happen. If a disaster happens, we want to have a certain amount of resilience, and micro grids and renewable energies are a way of adding value to it that goes beyond just the free fuel factor.
Sanjog: How will the inclusion of renewable energy change the expectations of the consumer and the behavior of the distribution channel? For example will it become like cable TV, where we need to sign up in advance to use a certain amount of power and pay more money, or will it make executives re-think their energy procurement policies due to obvious fluctuations in the renewable energy prices that create an impact on the profit margins?
Dirk: That’s a very difficult question; it goes into future rate design and the whole governance of renewable energy and energy markets, which is definitely outside of my area of expertise. I’m the CIO, so I make sure that we have information flowing and that we have energy flowing for our customers. I’m not a regulator or a rates or tariff expert. I know there are many regions in the United States where you have a choice of your generation. So people may not know the details, but just on the top level, the utility industry and most parts of the United States are broken into the generation of electricity, either by nuclear, coal, gas or renewable. But transmission to the metropolitan centers and the final distribution, the last mile in some regions, is done by three different companies, and the consumers have a choice who they want to generate their electricity, and of course have a choice to go green. In this case, the cost of the kilowatt hour is higher than if you took the lowest bidder, but the consumer does have a choice, and the market ends up sorting out some of these issues on a higher level. You can say, “No, I do not want to buy nuclear power; I want to go green,” or you say, “Well, I’m on a budget and I personally don’t really care as long as it’s most profitable for me.”
Sanjog: It seems what Smart Grid is to renewable energy is what supply chain is to a manufacturer. So are utilities recognizing this and making investments in Smart Grid a pre-requisite to any renewable energy adoption initiative?
Dirk: Not necessarily. The utilities provide the backbone or the interconnection. Let me give you two examples; in a previous life I worked for a large contract research organization and we looked at a concept for home PV. How can a home owner put a PV array on the roof in an afternoon, almost like going to a home store and buying, installing the cables and all the PV panels and putting them up on a roof and connecting them? That would be one example for distributed generation, which then needs to be managed by the utility.
So you need to have those home or neighborhood PV arrays connected to the distribution grid, which now needs to run forward and backward. That is to say, the traditional distributional grid is a top down model that the power flowing from the plant all the way to the smaller transmission and distribution channels. With distributed generation, that needs to go backwards because it flows from the end point to the substation and then redistributed back to the utility, and the Smart Grid can help there to forecast when and where distributed generation happens.
The Smart Grid can help to monitor the flows of electricity to make sure that distribution lines are not over taxed and to make sure that the standard for the utility has to hold 60 Hz for distribution, that there is no reactive power or power quality considerations, and that that all happens with the consumer or a distributed generator, who would really not be concerned. With the Smart Grid, we start to get those capabilities, and it’s interesting to look at substations and the distribution grid because usually the industry had focused on smart metering, and that was in many utilities the entrance point for the Smart Grid. I personally think that looking at the distribution automation and substation automation, you are working at an angle where you provide infrastructure that actually allows the consumers and the citizens to participate with their individual distributed generational arrays.
“The Smart Grid can help to monitor the flows of electricity to make sure that distribution lines are not over taxed and to make sure that the standard for the utility has to hold 60 Hz for distribution.”
A second example may be demand response. Demand response is the idea that a signal can be sent either from utility or from an ISO, a program sponsor who monitors the overall electrical grid and says, “We are starting to see a peak, and we can either switch on new generation or we can ask consumers, small and large, to reduce on the predesigned schedule,” and that way we’ve avoided the peak. Again, you need the information from the Smart Grid to see the peak occurring to predict it, but then you need to communicate with all those loads on your grid to inform them that the time has come to do that demand reduction. So now you have two examples, one being the PV distributed generation, the other one being the demand response, where communication networks sit on top of electrical networks and where the distribution network really is the place where these things are happening. It’s not happening at the power plant, and it’s not necessarily in the transmission network, but it’s happening in your neighborhood’s distribution network, which now works basically upstream and downstream closely monitored by sensors and overlaid with predictions and control signals.
Sanjog: What is needed for the easy and cost effective integration of renewable energy into legacy utility infrastructure and information systems in order for it to be a viable proposition?
Dirk: From our point of view, it is definitely substation and distribution grid upgrades. The part of the grid that touches the consumer needs to be able to handle the requirements both from an electrical and informational standpoint. There are utilities where up to 40 percent of the load at certain times comes from solar, wind and renewable on the neighborhood, and their biggest problem is paying for the upgrades of the distribution grid and of the substation. So that is the question; how much political and how much economic will is there to provide these upgrades either through grants or through tariffs? But somehow the infrastructure needs to be there to accommodate the growing distributed generation and the initiative that the individual citizens may take.
“The part of the grid that touches the consumer needs to be able to handle the requirements both from an electrical and informational standpoint.”
Sanjog: Do utilities have enough resources and the right resources in terms of people, processes and technology to make this happen, and if there is a gap, then what external help and/or additional resources are needed?
Dirk: I cannot talk for the whole industry, but in order to be cost effective, we don’t have a lot of people who can be immediately repurposed to do some of these things. We have a number of strategic initiative projects going on here in Seattle to prepare for that, we’re working on substation automation, we’re working on distribution automation, and we’re working at the undergrounding of cables. I know that my friends in other utilities do the same. Where the hurricanes have really driven this point home, they have distributed generational help with disaster management.
The point though is it doesn’t come for free, so the utilities are ready to do it. The other element in this mix is vendors. So you have the large Operational Technology vendors, i.e. people who manufacture, build and sell energy management systems and distribution management systems. These are a computerized IT system that in the utility are usually run under the heading of Operational Technology, and there’s a convergence happening between IT and OT. But utilities to a certain extent are not only looking at the customers, the rate payers and the governing bodies but also at the vendors to come up with technologies or innovations that help to use the current infrastructure to do more for cost effective, transitional operating parts.
“The point though is it doesn’t come for free, so the utilities are ready to do it.”
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