Six Myths About Smart Grid

By Michael Kanellos

Smart grid. You can't even pick up USA Today without reading about it. The technologies for modernizing the grid and automatically controlling appliances, lights, homes and businesses will likely reduce the need for building coal fired plants. And smart grid will probably be cheaper and quicker than building wind farms and solar panels.

But some of the stuff you hear doesn't completely add up, in my opinion. Here are the main myths:

1. Consumers Want Control
This is probably the biggest red herring out there. The conventional wisdom is that consumers won't allow utilities to crank down their air conditioners or other appliances. It smacks of big brotherism and impinges on their freedom, critics say. Even if you offer them a discount and tell them letting the utility have control will avoid brown outs, they still will want autonomy.

Pure bunk. A good percentage of Americans would go to work with bee beards if you offered them a 10 percent discount. We are the cheapest people on the planet. Besides, the vast majority of people don't even know how to program their thermostats, so most will conclude they are giving up nothing for something.

Customers don't want control – they want to abdicate control.

2. It Won't Save Money or Reduce Power
Another complaint is that the gains and cost savings will be incremental. On an individual level, the gains are small. In Italy, consumers participating in the Ener1 program save about €1.5 a month on their utility bill, barely enough for two Mars bars.

Nonetheless, it adds up. That's €18 a year, or close to $225 in U.S. dollars. And Enel has 30 million customers signed up. The total comes to over a half billion Euros.

3. ZigBee Has Won
One radio standard will rule them all. Won't happen. You will see different standards for different parts of the world. In Sweden and some other European countries, however, concrete construction is somewhat common, which creates potential problems with maintaining a signal via ZigBee from inside the house to an external transmitter, said Meera Balakrishnan, Freescale's Global Segment Leader for Building Control in a recent interview. Partly as a result, power-line networking has been adopted in many areas in Europe.

And in China, the issue is cost. "They are looking at sub-1GHz," she said. "We are talking cents" for radios for meters, she added.

Probably the only trend everyone agrees on is that proprietary standards, although handy for security, will fade away.

4. Smart Grid Is the Computer Industry, Part II
The analogy to the computer industry is as follows. Computers are based around digital software and hardware. By deploying these and open standards, a massive ecosystem emerged that turned humble engineers into multibillionares. Smart grid is dependent on the same thing, power is more pervasive than PCs, and thus we are all going to be rich.

There is one problem with that analogy. The market for computer equipment and services consists of billions of independent consumers – everyone from DuPont to Barry's Bail Bonds. The sheer variety means that brands like Zenith can live on in markets like India after fading away elsewhere selling computers.

The market for smart grid equipment, for the most part, will be dominated by utilities. There are only a few thousand in the U.S. and most of them will be content to follow the advice of the 20 to 50 big wigs willing to conduct early in-depth technical trials.

In about two years, much of the field will already be winnowed down.

If there is an analogy here, it is to Project Runway: You're in or you're out.

5. We Will Get a Moore's Law to Drive it
Back to PC world analogies. The idea here is that Moore's Law will help drive down the cost of equipment, thereby leading to an explosion in demand. In part, that's true – the cheaper this stuff gets the more popular it will be. But Moore's Law and semiconductors also ushered in new capabilities to consumers. It let them calculate numbers, shop online, obtain information and play shoot-em-up games with teens in Seoul at 3 a.m. It brought fire to the cave!

While Moore's Law will make equipment cheaper, it won't make it less utilitarian: it will flip the lights off. Landis+Gyr will not cultivate fanboys. (But just imagine how great a world like that would be: CNBC would provide breathless coverage about CEO Cameron O'Reilly getting a liver transplant and 24-year-old single males would camp outside fashionable SmartSynch store for the latest DCX peak shavers.) The janitor will be the one who understands the majesty of it most. Without consumer lust, margins will remain tight.

6. Google, Microsoft, Oracle Will Dominate
In the past year, nearly all of the big names from the IT market have come into the smart grid space and the growing suspicion is that they will buy or decimate the cast of startups. In many ways, it makes sense. Silver Spring Networks, after all, makes an intelligent networking card: There is no reason Cisco (CSCO) can't make and sell more of them for less money.

Nonetheless, IT companies – for all of their virtues – have had difficulty in shifting into new markets. Remember when Intel tried web hosting? Or got into cameras? Or when Microsoft (MSFT) tried software for wristwatches? Whether it is consumer backlash or corporate inertia, these companies find it difficult to colonize things that run too far from their normal course of business.

Will Google (GOOG) really put a lot of effort into its smart meter effort? Imagine the company meetings. The search group will claim that it brings unprecedented levels of knowledge and enlightenment to the corners of the earth. Its motto: "Do No Evil."

Then the energy group presents: "We Make Thermostats."

Many companies will do well – Cisco, Intel (INTC) and SAP could do better than most – but energy may ultimately and always remain a sideshow.

What is the bottom line? Smart grid technologies will become pervasive. Consumers and businesses will gravitate to them faster than most analysts realize. Utilities will pick many of the winners and losers.

Utilities, however, will also likely offload many functions to demand response companies. But to survive, the demand response companies will have to become full service ESCOs offering efficiency advice, ongoing monitoring, solar panels and other goods and services. This will be profitable, but not Microsoft-Google-obsequious-profile-in-Fortune profitable. In fact, the real profit may come from selling hardware and software to these guys, just like how software companies made more than Egghead in the PC boom. Inside the meter is likely the place where most people will make money.

And even though the market will be dominated by utilitarianism and price, the number of first time buyers remains staggering. There is 300 billion square feet of commercial floor space in the U.S. and something like 100 million residences.

So there are lots of chances to cash in.

Comments

[joarring:]

How do you get $225 dollars from 18 euros?

Jul 13 03:03 PM

[ruby_99:]

18 euros a year is more like 25 dollars american.

Still adds up, but not as fast.

Jul 13 03:09 PM

[ruval-dee:]

Yes!! I want more of those really smart central planners from DC controlling my life. Oh, and please tax me some more to pay for all of this.

Jul 13 06:18 PM

[Dirk McCoy:]

The difference in wholesale market price between peak (late afternoon) and low demand (early morning) is only about $.02/kwh. Figure a typical household uses 10kwh per day, even if smart technology could move half that demand from peak to low, the savings would only be about $.10 a day, $3.00 a month, or $36/year- and what is the cost of putting radios and controls in all these devices and upgrading the grid? I know people like to use the term "pennies" with Zigbee, but last I looked a year or so ago we're still talking a few dollars, the meters are a few hundred (though stripped down versions that offer information only can be had for around $100).

Meanwhile, alternative saving opportunities (credit to michaelbluejay.com/ele... for this):
1. Space heaters instead of central heating: $1286/year
2. Ceiling fans of A/C: $665
3. Wash laundry in cold water instead of hot $167
4. Clothesline instead of dryer $141
5. Switch a single $100 watt light bulb from constant on to off $96
6. Replace regular light bulbs with compact fluorescents $90
7. Sleep your computer when you're not using it $73

$2518 every year

So for a couple hundred dollars investment in fan, clothesline, lightbulb, you can save $2500/year; or for a significantly larger investment you can save $36?

But perhaps we shouldn't underestimate the alliance between liberals and big business to push through uneconomic incentives...

Jul 13 06:32 PM

[notsosmart:]

dont trust anybody with your power.those folks in ca got aroyal screwing from enron.they tried to buy control of my ac but i declined.nobody cares about you.remember that.

Jul 13 08:43 PM

[TinyTim:]

You're right, Mike.
These are myths. Has anybody even heard of most of them?

SmartHome tech has been around for years with most of the capabilities you describe. My last few trips thru CES indicate no interest except by the suppliers and subs. The people who can't program their thermostats are the same ones who couldn't handle VCRs. This technology won't be self installing and it certainly won't be invisible. As far as I can tell, it's already failed once.

People that are concerned with saving money on their electricity bills have plenty of non-smart options now, if they feel their effort is worth it. Smart Grid is just reducing the number of meter readers to zero. Everything else is hype.

Jul 14 01:00 AM

[John Bowman:]

Those figures are way overboard.

Space heating will save money. However, in this area, electricity is 15 cents per KW and is planned to go higher next year. I figured that the breakeven point at the present electrical rate to be equivalent to $2.60 per gallon heating oil, which it is hovering around presently. But that is for my efficient oil burner.

And the replacement light bulbs shoud be compared to the equivalent rated incandescent bulbs. The savings per bulb is significant but not close to that figure.

Using ceiling fans instead of an A/C will not reduce the humidity in an area where I live.

Obviously, one can not use a dryer in the winter.

The remaining figures are probably OK.


On Jul 13 06:32 PM Dirk McCoy wrote:


> 1. Space heaters instead of central heating: $1286/year
> 2. Ceiling fans of A/C: $665
> 3. Wash laundry in cold water instead of hot $167
> 4. Clothesline instead of dryer $141
> 5. Switch a single $100 watt light bulb from constant on to off $96
>
> 6. Replace regular light bulbs with compact fluorescents $90
> 7. Sleep your computer when you're not using it $73
>
> $2518 every year
>
> So for a couple hundred dollars investment in fan, clothesline, lightbulb,
> you can save $2500/year; or for a significantly larger investment
> you can save $36?
>
> But perhaps we shouldn't underestimate the alliance between liberals
> and big business to push through uneconomic incentives...

Jul 14 08:44 AM

[john s. gordon:]

clothesline = solar powered clothes dryer.
wonderful idea.
in the town where i live we have protective covenants banning clotheslines. also cows, horses, sheep, chickens etc. are forbidden.
> jack

Jul 14 08:54 AM

[tedstr:]

a bunch a snake oil being sold by GE and Goldman Sachs to power the next bubble

this country has become manic in it's need to generate successive BS to power absurd margin crap

How about lets build some nice dams and nuke plants and wind farms transmission lines to make some nice cheap power so we can go back to building great stuff cheap as China that doesn't break or poison you.

Jul 14 08:55 AM

[drzarkov:]

One thing the smart grid will do: make it easier for hackers to shut down the entire nation's power grid with a single attack. I'm all in favor of interconnecting the grid to enable shipping of power across regions, which will enable wind and solar power to be used in Eastern metro areas. I predict that most will reject the idea that the government should decide what temperature their house should be. Subsidizing the system to provide an artificially low price will increase, not decrease the cost of living, due to the need to increase taxes to cover the cost. The author is an imbecile.

Jul 14 09:27 AM

[Perki:]

You may underestimate the simple things. People change habits with real time information. Just look at what "real-time" gasoline prices do for consumption!

I installed a simple power monitor that shows the KW being used at the moment, right in my web browser tool bar. I literally use 40% less energy.

I glance at the toolbar, it is showing 3kw, and I realize i left the coffee pot on. Seems like a little thing, but 1.1KW coffee maker heat production requires 2KW of additional A/C energy to compensate. It makes a difference!

Also, moving high wattage appliances (to evenings or low usage times) has a huge effect on the future base-load investment of the power company. It can delay or eliminate the future cost of very expensive base-load plants. Energy late at night is very cheap. If these savings are passed on, then the savings can be substantial.

Jul 14 11:04 AM

[Perki:]

Newsflash: hackers can already shut down the whole power grid ( except for parts of Texas) by accessing three systems. The "smart gird" referred to here is for consumers of power.


On Jul 14 09:27 AM drzarkov wrote:

> One thing the smart grid will do: make it easier for hackers to shut
> down the entire nation's power grid with a single attack. I'm all
> in favor of interconnecting the grid to enable shipping of power
> across regions, which will enable wind and solar power to be used
> in Eastern metro areas. I predict that most will reject the idea
> that the government should decide what temperature their house should
> be. Subsidizing the system to provide an artificially low price
> will increase, not decrease the cost of living, due to the need to
> increase taxes to cover the cost. The author is an imbecile.

Jul 14 11:10 AM

[Alan Young:]

Most commenters are making the wrong calculations. The key factor is the difference in DEMAND, not price, between day and night. If NEW demand is shifted to low-demand hours, existing facilities can meet it. If not, then new power plants will be needed, and THAT will be a much more expensive "solution" than smartening the grid.

So it doesn't matter if consumers actually "save" money on their current bills by having more information; what matters is that the whole system can be used more efficiently, so as to minimize the need for new investment (and the rate increases that invariably must pay for it).

Jul 14 12:11 PM

[Old Rick:]

The story is pretty pointless (as are most stories by entities labeling themselves as "Green" something or other) . Taking the actions enumerated by Dirk and Perki is the real way to go. We don't necessarily need a smart grid, we need smarter people who are equipped to handle their own decisions!

Jul 14 12:33 PM

[TCK:]

Take a look at your utility bills. If you cut your energy usage by 10% your bill will likely only be reduced by pennies. Half or more of the charges on your bill are for delivery, taxes, and other charges.

That is before the Public Utilities Commission raises rates or "Cap and Trade" puts another surcharge on your bill.

Jul 14 12:39 PM

[JayWen:]

The market price of wholesale electricity, peak to off peak, is a small part of the smart grid peak management story Markets are dynamic with wide swings in day/hour ahead pricing. The more important issue is total energy cost peak vs. off peak. The value to the utility is in the range of $500 to $3,000/kw for a 15 year peak reduction measure. Much has been written on time dependent energy value at the FERC and in California. See www.energy.ca.gov/titl... for one of several approaches to this issue.


On Jul 13 06:32 PM Dirk McCoy wrote:

> The difference in wholesale market price between peak (late afternoon)
> and low demand (early morning) is only about $.02/kwh. Figure a
> typical household uses 10kwh per day, even if smart technology could
> move half that demand from peak to low, the savings would only be
> about $.10 a day, $3.00 a month, or $36/year- and what is the cost
> of putting radios and controls in all these devices and upgrading
> the grid? I know people like to use the term "pennies" with Zigbee,
> but last I looked a year or so ago we're still talking a few dollars,
> the meters are a few hundred (though stripped down versions that
> offer information only can be had for around $100).
>
> Meanwhile, alternative saving opportunities (credit to michaelbluejay.com/ele...
> for this):
> 1. Space heaters instead of central heating: $1286/year
> 2. Ceiling fans of A/C: $665
> 3. Wash laundry in cold water instead of hot $167
> 4. Clothesline instead of dryer $141
> 5. Switch a single $100 watt light bulb from constant on to off $96
>
> 6. Replace regular light bulbs with compact fluorescents $90
> 7. Sleep your computer when you're not using it $73
>
> $2518 every year
>
> So for a couple hundred dollars investment in fan, clothesline, lightbulb,
> you can save $2500/year; or for a significantly larger investment
> you can save $36?
>
> But perhaps we shouldn't underestimate the alliance between liberals
> and big business to push through uneconomic incentives...

Jul 14 12:43 PM

[kertch:]

Myth #1 is itself a myth. Consumers may not want complete control, but they don't want want to abdicate it either. What the consumer wants is to turn on an appliance when they want and expect it to work. If I need a shower in the afternoon I don't want the power company shutting down my hot water heater, nor do I want them unilaterally lowering the temperature on my thermostat. Once consumers have this happen to them, you kcan pretty much trash the whole idea.

Jul 14 02:17 PM

[RWCMom:]

Readership of Seeking Alpha and most financial information probably have a profile that puts them in the top 10% in terms of intellectual capacity. You have been blessed. You have not only the ability to understand the information but to understand it quickly and process the possibilities. You are the decision makers for the rest of the world. Please decide wisely and careingly for the rest of the world who have ceded control of many aspects of their life to others. The mere fact of advancing in years has decreased some of my mental acuity & speed and I incrementally give up control of some aspects of my life though I wish I did not need to.

On Jul 13 06:18 PM ruval-dee wrote:

> Yes!! I want more of those really smart central planners from DC
> controlling my life. Oh, and please tax me some more to pay for
> all of this.

Jul 14 03:22 PM

[Boxed Merlot:]

…Here are the main myths:
1.Consumers Want Control
This is probably the biggest red herring out there…Pure bunk…the vast majority…will conclude they are giving up nothing for something. Customers don't want control – they want to abdicate control…

You almost had me there. It looked like an authentic article, but then I see it’s an old Pinky and the Brain transcript from Spielberg’s Animaniacs. Funny joke, narf.

Jul 14 05:34 PM

[Old Wizard:]

I don't know how to trust someone who can't properly convert euros to dollars with anything remotely technical, let alone the complex issues both technical and economic surrounding the smart grid. First the advocates of this solution were part of the Obama so called technical advidory team and included general electric, ibm and several other companies that have a vested interest in receiving large amounts of gov. contracts to create new business for their products. Of itself, this wouldn't be bad, if it was also in the public interest. That is the real question. Without a comprehensive energy plan articulated by the Obama administration, it is impossible to evaluate the investment in "smart grid" in terms of the public's benefit. For example, if the administration succeeds in its strategy to drive the public to a large number of electric cars how much of the off peak capacity would be required. Smart grid should also define some terms like what's its definition, whose smarts, what overides of the central control functions do individuals,hospitals and unforeseen events have and what are the cost penalties,etc. Since I know that the control function that would control a national interconnected grid does not exist and that regional failures can still affect large interconnected grids like the northeast, I don't believe any company now knows how do derive such a function.

Jul 14 05:43 PM

[Worldtravel...:]

I live in West Texas where the temperatures are extreme (101 right now).. We have a 2600' main house and a 600' bunk house. If I could save $2500 dollars a year, my total year's electricity would cost less ~ $200/ Somehow I have a feeling that amount of savings would never happen.

Maybe in the next 60 years or so, smart grids will make some sense. In the mean time, let's go Nuclear and keep our power sources local. We won't need no stinking grid!

Jul 14 07:04 PM

[Henry Buttal:]

SmartGrid is the next bubble; or perhaps the current bubble. Until a rational round of state and federal rule setting comes about, there will be the potential for improvement, but no large scale de-centralization or distributed control of generation.

Not to mention we have several years of line build out to accomplish any kind of basic improvements.

I think a consumer should look for simple improvements in metering, potentially a little better data capture and control, and please don't bet the house on any smartgrid players.

We aint living in George Jetson's house anytime soon.

Jul 14 11:28 PM

[sethmcs:]

There is no energy shortage. Not now. Not back in the 70s. We could run the entire country on coal. Coal is the cheapest source of electric. Coal can be made into gasoline and diesel. The United States has at least 25% of the world's reserve of coal. To reduce the use of coal will reduce our standard of living while others will choose to increase their standard of living by burning more coal. Funny isn't that exactly what China is doing.

Jul 15 01:00 AM

[User 448356:]

Our power company here in north dakota, ottertail, offers "off peak" power that is basically the same as the senario presented in the article. It utilizes a dual meter setup that allows the power company to remotely shut down service to the secondary meter at times of un-anticipated peak demand. They charge 1/2 price (about 6.5 cents) per kilowatt hour for all usage through the off peak meter. The shut downs are rare (less than 3 times a year) and short ( less than 6 hours) I run everything I can through this meter. The savings are substantial and the limitations are not tough to live with. It probably would not be as good of a deal if more people took advantage of it.

Jul 15 03:03 PM

[MSimon:]

All aircraft use smart grid technology. It is how they prevent excessive loads from tripping off the aircraft electrical supply.

Does it make sense for the electric power grid? Maybe.

In some sense we already have a smart grid for large interruptible electrical loads. Does it make sense for small loads? Maybe.

The real reason for the push is that we are not adding enough capacity to the grid. So the question is: will it come in time to make a measurable difference? Unequivocally NO. It will take 20 or 30 years for a measurable impact. We are going to need that extra power in 5 to 10 years.

Jul 15 10:32 PM

[steve goff:]

Like all major/impactual life altering technology. You have to release/implement it, at a rate the world can both socially and economically absorb it! Lets just say cold fusion was mastered/conquered (it just might be already) They couldn't release it to the world overnight. World govt and economies would fall off the proverbial cliff overnight.

As for people not wanting to give up control over their electricity needs and wants. that process has already started w/out them people even knowing yet. Via the actions taken by most utility companies across America going to wireless meter reading technology. To optimize efficiency and to cut overhead, via not having to dispatch a electrical service worker, to say terminate service for non payment (boot your electric meter). It now can be done at the punch of a computer button from the local office. Big money saver there for them. Itron (ITRI) ,Badger Meter Inc (BMI), Digi International Inc. (DGII) Comverge, Inc. (COMV) all major players in the trade. I have owned and traded them all, within the last year (see below links to stockpickr.com) The backlog of products needed is impressive. Utility companies cant get the new wireless/RF meters quick enough. As for the stocks in the "smart grid trade", I am leery here at these elevated levels. Some report earnings next week. I think most were bidded up on alt energy stimulus money. And with (BMI) I feel it was the S&P and
Russel re-balancing. It is up over 100% off bottom. It is hard to get a gage on
the earnings #, because I'm not sure any of the Obama clean energy stimulus
money has filtered through to their bottom line just yet.

Jul 16 12:44 AM

[Old Wizard:]

Wireless meter reading has been around since the mid nineties. We helped train folks on maitenance for Niagra Mohawk. It's a big leap from the simple remote and passive reading of meters to positive instantaneous control and central decision making for a large interconnected grid. These measures are great sounding, but practically speaking they both don't solve the country's negative operating cash flow, and are not substitutes for a comprehensive energy plan that can be implemented with affordable cost in the next 5 to ten years. With the country's current account[operating cash flow] approaching a negative trillion a year and our borrowing another trillion a year to fund our domestic deficit, we cannot wait for another 15 to 20 years to solve the economic and strategic issues presented by our dependency on foreign producers of energy and sustain the dearth of new job creation spawned by the purchase of more of the things we use every day from china and other developing countries. An energy plan that uses natural gas for transportation, an energy source we have in abundance, would provide a near term job stimulus that would all but rescue our domestic car industry, reduce our negative cash flow,and reduce carbon dioxide emissions. This could be accomplished in the short term[5to 7] years. Investment in alternate energy, usage efficiencies and nuclear as well as in high energy,quick charging, safe batteries and intermediate storage mechanisms for wind and solarshould be made in parallel and large scale implementaion could be planned for 7 to 15 years out, Clean coal, tidal electrical generation could be brought on as they are perfected. As I said a comprehensive energy plan that has significant gov. funded impetus is needed that addresses the economic, job creation, and strategic issues as well as pollution is required and it's not pie-in-the-sky rhetoric with no urgency that is discernable in action is needed.

Jul 17 04:55 PM

[DeeCee8121:]

You mean nuculer, I'm sure.


On Jul 14 07:04 PM Worldtraveler777 wrote:

> I live in West Texas where the temperatures are extreme (101 right
> now).. We have a 2600' main house and a 600' bunk house. If I could
> save $2500 dollars a year, my total year's electricity would cost
> less ~ $200/ Somehow I have a feeling that amount of savings would
> never happen.
>
> Maybe in the next 60 years or so, smart grids will make some sense.
> In the mean time, let's go Nuclear and keep our power sources local.
> We won't need no stinking grid!

Aug 04 05:38 PM