Smart Grid: Powering Us Out of Recession

Several years ago a power plant in Florida shut down suddenly. That put a sudden shock on the grid and shut down a large baseload plant in Georgia at the same time. The Georgia plant employed around 800 people at the time. Those employees averaged about $35,000 a year or about $10.00 per hour in the mid to late 1970’s. The plant was down for about 8 hours. It produced 8000 megawatts of electricity per hour. The cost of one kilowatt of electricity was about $0.10 (ten cents). Multiplying 1000 kilowatts per megawatt times 8000 megawatts per hour times 10 cents per kilowatt times 8 hours times 800 employees times ten dollars per hour comes out to $7 million. If the Georgia plant had been on Smart Grid Technology, the digital sensors would have protected the plant and it would not have shut down due to the shock placed on the grid by the Florida plant.

A Day Late and a Dollar Short…Again!

Are we always going to be “a day late and a dollar short” compared to other nations in this respect? Georgia Power Company has installed Smart Meters on all of the residential and commercial power meters. That move displaced all of the old-fashioned human meter readers. Most of them were relocated to other jobs within the company so that did not cause a large layoff of employees. Now the company does not have to contend with the problem of meter readers being bit by dogs or stung by wasps. We are behind other nations in this developing technology, in fact a company called Invensys Process Systems (IPS) has been awarded a contract to provide digitized control systems and simulator control systems to China for about $250 million dollars. This is part of China’s overall program to reduce dependence on coal fired plants and reduce carbon dioxide emissions while increasing their nuclear power plants and thereby increasing their total electric energy supply to meet present and future growth needs. This is just one example but there are hundreds of others similar to this one.

The Bottom Line: What Does It Cost?

The initial conversion from the present national grid system to the new Smart Grid system will initially cost billions for the installation of equipment and reconfiguring the controls. In Boulder, CO alone, the estimate was $100 million to convert the city’s population of 100,000 to digital. Since almost all of the power companies in America are regulated by a state utilities regulating commission, this expenditure would have to be approved by each states utility commission. The President’s stimulus package includes money for this purpose but it has to be requested and approved through the state commission. At this time, West Virginia and Georgia are leading the way in moving to the new digital systems. The other states are at various stages along the way. The next five to ten years will see the greatest changes in the power industry since the birth of nuclear power back in the early 1950’s.

Can Smart Grid Technology Help Lead Us Out of the Recession?

This emerging technology may be happening at precisely the best time for it. Now, while America, and yes, much of the rest of the world too, is in the bottom of probably the worst financial situation that we have faced since the Great Depression of the 1930’s, this Smart Grid conversion can put hundreds of thousands and possibly millions of people back to work and out of the unemployment lines. Many jobs would be short term for the initial installation of equipment but more employment would remain in place long term due to the businesses that are created to make money from it. However, similar to South Korea’s Wireless Super highway initiative, the government needs to mandate standards and provide a platform for entrepreneurs and Smart Grid businesses to thrive.

Putting many of the people to work in the power industry will require many of them to be retrained. This training will also cause a greater workload on the technical schools and colleges, requiring more instructors, more classrooms and training equipment. The employment agencies could be the pivotal point in this process by referring people to the schools for training based on the contingency of getting work when they graduate. This training will cost money that can come from the stimulus program and the states’ budgets. Getting the lawmakers to approve such a plan should not be difficult considering the many benefits involved.

The Smart Grid’s Secret Weapon

One of the powerful effects of the internet and cloud computing is the ability to store data on servers which are accessible 24 hours a day. Conversely, energy on the grid needs to be used or it’s lost. However, an emerging technology is taking shape that could prove to be the holy grail of energy storage. Ultracapacitors are just now entering the market as an effective replacement to batteries. In fact, 5.11 Tactical is offering the first rechargeable flashlight running on an ultracapacitor that not only recharges in 90 seconds but will run for 90 minutes at 270 lumens. Imagine a much bigger ultracapacitor that can store energy in a homeowner’s garage or a local business that can store energy to resell to customers. Theoretically, energy resellers could be storing energy when rates are low, then resell it when rates go up (energy arbitrage).

Who’s Playing In This Game?

There will be many businesses started to accommodate all of the sales and work needed to fully implement the Smart Grid Technology. We need to start now though, because in the past year and a half there has been thousands of companies going into bankruptcy and taking chapter 11 protection. Much of that can be offset to a large extent by the emerging smart grid startup companies as they put people to work and put money into the economy.

We will probably see many of the familiar names maneuvering for positions to reap more sales from this conversion. Names like Cutler-Hammer Controls, Square D Electrical Supplies, Ingersoll-Rand (IR), The Shaw Group (SGR), General Electric (GE), Westinghouse (WAB) as well as non-traditional technology companies like Google (GOOG) and Microsoft (MSFT). There will be some big international players like the Siemens Company (SI), Framatome, FCI connectors and AREVA (ARVCF.PK).

Because this is going to be one of the biggest money moving events in recent memory and many of the larger financial institutions and private investors will be maneuvering for position to be able to reap the rewards. Unlike the internet, the risk is that the government acts too slowly and tries to over regulate the grid. Such a scenario would be a mistake given the potential for a new frontier and even bigger opportunity to produce jobs and revenue. However, given the dot-com and real estate bubbles, my bet is that the current administration will over regulate it and cause it to develop much slower than the internet.

The next few months will show us which way the smart grid is going to develop. Watch companies like Google, General Electric, ABB (ABB) and other major industry players for tips on the direction of the smart grid. If a self-regulated smart grid emerges, these companies have significant upside potential. Owning a basket of these stocks would be wise.

Comments

[pacman1947:]

Mark,
I agree with many of your points above. The Northeastern grid still uses parts deployed by Edison and Tesla! The Western states and Midwest wind corridor are still largely without modern distribution, and smart devices (used here for decades ineffectively) may have finally evolved into a means to regulate local consumption. However, the big problem, the demise of the nuclear industry and the failure of utilities to clean up their coal act, will create an enormous shortage of available generation very, very soon.

97 GWe of nukes lose their licenses to produce electricity by 2025. That's 100% of current US capacity. Why? They'll be too old to operate. Secondly, we are already importing 84% of our uranium. Why? Digging the ore is dangerous. More than 1000 dead Navajos can attribute their lives to that radiation poisoning effect. The tribe no longer allows its people to work the mines. Any takers for a well-paying job? Openings available abroad.

The Sierra Club announced that 93 new coal-fired plants have recently been shelved because they cannot meet EPA standards for CO2 sequestration. Of course, those who live downwind of the new plants can now breathe a sign of relief with clean lungs. Mountaintops can now be covered with windmills rather than be stripped away and bared to poison the local water supplies.

We will need over 400 GWe of new power plants from new technology. That will create over 10 million jobs. The smart grid will complement that choice, and will be necessary.

What new technology? Ah, Mark, that information is highly confidential and totally unknown to the Press. The secret lies all around us. Next time!

Mar 12 08:25 AM

[fran:]

i read the first two paragraphs then stopped, rejecting the remainder. would you supply specifics and extents of these other "advanced" countries with implemented sophisticated/intellig... grid structures. i don't believe your information will be extensive.

meantime,search the implementation actions/development trials in the USA, by state, by utility, by the major technology sponsor. compare that list with others you find throughout the world. you will begin your education, leading towards competency in this subject.

i do not claim the USA actions are complete nor adequate for achieving total benefit from your subject matter. this subject is broad and deep enough for a dozen textbooks and thousands of sound papers/journals.

but your entry here demonstrates a shallowness undesrving persuit beyond two paragraphs.

may you prepare better in the future or modify your introductory writing style and content.

Mar 12 09:15 AM

[nakedjaybird:]

Mark and Pacman: Mark first: the utility that lost $640,000 of revenue during the 8 hour outage PLUS $64,000 of labor cost is a $700,000 round trip, NOT YOUR $6.4 MILLION. Your aritematic is illogical.

The driver(s) for the smart grid is not only first preventing power plant outages where and whenever the cause is downstream of the power plant; but, secondly preventing user downtime while a generating source is down, which provides a double whammy revenue increase for the utilities that continue to provide elsewhere the lost power AND, of course, to the end user that doesn't experience the shutdown (in your case, some other utility gains $640,000 of revenue; which should be a real driver for utilities to upgrade, while endusers lose nothing with no interruptions, being a good secondary causes to upgrade).

pacman - most nuc plants in operation are forever being upgraded and many are obtaining 60 year extentions to 40 year liacenses.

As for uranium shortages, most "spent" fuel in storage remains to be about 80% "unspent". Commedrcial nuclear fuel is "retired" at about the 20% burnup level. So, all the spent fuel storage throughout the US is a uranium gold mine, so to speak.

I wonder how many lives would have been lost over the years due to severe winters and hot summers had we not had nuclear power? Your arguments suck.

Mar 12 09:33 AM

[c300man:]

You've gotten carried away with your multiplcation in the lead-in paragraph. Lost electrical energy sales = 800 mw x 1000 kw/mw x 8 hr x $0.10 / kwh = $640,000

Wages paid to plant employees during that outage =
800 employees x 8 hrs x $10 / hr = $64,000

There are lots of opportunity for improved and more efficient energy use and reduction of energy waste although you can't eliminate some cost for moving energy.

I believe we need to increase use of nuclear energy. Mining and processing of Uranium ore is safe. Disposal of spent fuel is safe but unfortunately the Obama administration has let politics guide their decision making.

Mar 12 09:49 AM

[thotdoc:]

Take look at FCEL.

They predict they will be profitable. This year. They have many, many fuel cells in service.

G


On Mar 12 08:25 AM pacman1947 wrote:

> Mark,
> I agree with many of your points above. The Northeastern grid still
> uses parts deployed by Edison and Tesla! The Western states and Midwest
> wind corridor are still largely without modern distribution, and
> smart devices (used here for decades ineffectively) may have finally
> evolved into a means to regulate local consumption. However, the
> big problem, the demise of the nuclear industry and the failure of
> utilities to clean up their coal act, will create an enormous shortage
> of available generation very, very soon.
>
> 97 GWe of nukes lose their licenses to produce electricity by 2025.
> That's 100% of current US capacity. Why? They'll be too old to operate.
> Secondly, we are already importing 84% of our uranium. Why? Digging
> the ore is dangerous. More than 1000 dead Navajos can attribute their
> lives to that radiation poisoning effect. The tribe no longer allows
> its people to work the mines. Any takers for a well-paying job? Openings
> available abroad.
>
> The Sierra Club announced that 93 new coal-fired plants have recently
> been shelved because they cannot meet EPA standards for CO2 sequestration.
> Of course, those who live downwind of the new plants can now breathe
> a sign of relief with clean lungs. Mountaintops can now be covered
> with windmills rather than be stripped away and bared to poison the
> local water supplies.
>
> We will need over 400 GWe of new power plants from new technology.
> That will create over 10 million jobs. The smart grid will complement
> that choice, and will be necessary.
>
> What new technology? Ah, Mark, that information is highly confidential
> and totally unknown to the Press. The secret lies all around us.
> Next time!

Mar 12 11:12 AM

[andychoka:]

The leader in ultracaps is a small growing company named Maxwell Technologies (MXWL). Ultracaps have become the leading method to trim blades on windmills also.

Mar 12 01:51 PM

[William Cowie:]

John Peterson has written extensively on this subject, mainly on the storage aspect. Although his admitted slant is toward newer lead acid battery technology, offers good updates on what a lot of folks are doing on th storage side of thing.

Mark, you'd do well to review some of his tables and incorporate them into your research. This is a topic needing more coverage, so good luck!

Mar 12 02:35 PM

[Dave Marsh:]

Your opening paragraph demonstrates a problem that competes with the grid's in terms of potential downside for the U.S., i.e. a complete lack of basic science and math competence. Megawatts per hour? Interesting. Since a megawatt is a million joules per second, MW/hr would be a rate of energy accleration (nonsensical). And electriciy rates are per kW-hr, not per kW. Your math also has $-squared in the numerator (nonsensical). Please learn basic energy units, and basic unit cancellation math, before attempting to write again.

Mar 12 02:37 PM

[creativforce:]

We need to do two seemingly contradictory things before the energy situation improves.
1. Nationalize the grid,
2. Micro-localize energy production and storage.
The local monopolies held by power companies are preventing forward progress. We have too many "Mr. Burns and Homer Simpsons" running the power supply ... one blinded by greed, the other satisfied to sit on his ass forever. Look at the lightning speed with which communications changed once Ma Bell was broken up. Look at how quickly the federal government was able to develop the Interstate system.
Central production of energy is wasteful (a large proportion is lost in transmission and friction) and it's strategically dangerous.
We have been lucky so far that the giant blackouts in the North have only happened in the summer. Try one in the middle of a cold winter and thousands of people could die … millions could become refugees. During the Great Depression you could chop up the furniture and stick in the boiler to get heat. Today a modern gas furnace won't even light without grid power. Even the gas is supplied by an electronic valve that stops working without electricity.
If the outage lasted long enough to freeze pipes the damage would be in the Trillions and make 9/11 look like a holiday.
A NG powered fuel cell in every basement that supplies heat and power would be more efficient than grid electricity, greener, and with economies of scale probably no more expensive than what the average home owner pays for a furnace and water heater.
Supplement that with solar and wind where appropriate and everyone would be happier, healthier and safer. PLUG, GE, and United Tech...all have fuel cell products ready to go, but it will take a disaster before anyone unseats Mr. Burns.
Ask yourself, has the power plant in your area done anything new in 30 years? How much more black coal smoke do we need in the atmosphere? Has the electric meter or wires coming to your house changed in the last 50 years? If not, maybe it's time.
In the early 80s we could not have imagined the iPhone. Imagine what a consumer market could do for energy!

Mar 13 02:23 PM

[PeterB:]

I don't see how ultracaps can trim the blades on windmills. And running a flashlight for an hour is far away from running even a house for a few hours.


On Mar 12 01:51 PM andychoka wrote:

> The leader in ultracaps is a small growing company named Maxwell
> Technologies (seekingalpha.com/symbo...). Ultracaps have
> become the leading method to trim blades on windmills also.

Mar 14 03:25 AM

[TinyTim:]

This is another uneducated article hyping the Smart Grid, for whatever reason.

The SmartGrid is just smartmeters so far. Without technology like SmartHome or rate incentives, most consumers will just ignore the info that smartmeters provide.
Many cars have electronic dashboards that provide a readout of instantaneous MPG. Do drivers use them to save money?

Let's not confuse energy storage and alternate energy technologies with the Smart Grid. The Smart Grid will do nothing to create base load or peaking capacity, nor will it provide any load leveling.

So far, this is the only article to make the sole accurate claim for the Smart Grid. It will do away with meter readers. I seriously doubt this will pull our economy out of its present predicament.

Regarding outages due to equipment tripping off line and the SmartGrid... LOL

Mar 18 12:53 AM

[Mark Fidelman:]

I also disagree with Mark... Hey wait a second that's me!

Thanks for all of the constructive criticism. There are a variety of comments and opinions on this article. While the smart grid has yet to be formally defined, I believe the amount of investment and revenue generated over the next few years will help power us out of recession. We need a new industry to help lead the charge, and smart grid is a viable candidate.

Mar 18 12:08 PM

[Mad Hedge F...:]

Check this out. For those out there still looking for a “smart grid” play, take a look at Quanta Services (PWR). The Houston based company offers design, construction, and maintenance of power infrastructure networks. At a 17 multiple of next year’s earnings it is not cheap, and the shares have already posted a double since the March 9 low, so the action is definitely there. But when the full force of Obama’s stimulus plan hits, the 30% earnings growth that is the current consensus forecast may look a tad low. The Federal Energy Regulatory Commission (FERC) has already announced $10 billion in programs, and “smart grids” are one of the few places in the energy space where the government can spend money and generate an immediate result. Up to 10% of America’s electric power supply is thought to be lost through resistance from decrepit power lines and inefficient distribution. That works out to a lot of tankers from the Middle East or train loads of coal from Appalachia. Never underestimate the power of a buzz word to boost earnings. Buy on the inevitable dip.

Apr 22 11:19 AM

[20-20 Hind ...:]

"Smart grid" is like "smart children", everyone wants it but have little idea what it means or how to get there.

The vision that the power from square miles of solar panels in the Mohave desert can be transmitted across the continent to light up New York is fraught with difficulties, if not outright impractical.

Transmission line voltage seems to be limited to 750K volts. So we are talking about a transmission system that has to handle millions of amperes, over thousands of miles.

What happens when there is cloud cover over the Mojave; for a week, say?

I don't like central power stations and coal plants. But given our present consumption levels, there is no magic fix. Conservation takes time to implement. We are looking at a social and industrial revolution on the order of 1,000 Manhattan projects, which will evolve and grow over decades.

It is sheer fantasy to think you can pick stocks now. You'd do better selling house boats in some of the low-lying island nations.

Apr 23 01:01 PM