Commercial and industrial markets: The key to smart grid opportunity

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By Chuck Newton,
President of Newton-Evans Research Company

I hesitate to use the marketing term “low hanging fruit” in my call to utilities to consider pursuit of commercial and industrial (C&I) demand response (DR) and energy efficiency programs as ideal initial targets in our quest to build a smarter grid.

Most fruit orchard field bosses would likely inform us that the low hanging fruit actually should stay on the tree longer than the more sun-ripened fruit up higher on the tree. Nonetheless, the term as it has been used in marketing discussions, means to pursue easily obtainable goals, with minimal effort expended to attain these goals.

When it comes to smart grid and its myriad components, cornerstones and building blocks, it can make your head spin trying to prioritize, plan and fund these projects. A recent Utilities Telecom Council article (UTC Journal 2010 Special Edition) pointed out the need for utility planners to first develop utility-wide strategic communications architectures, and I fully concur.

Electric power delivery is certainly among the most communications-centric industries in existence. For the country’s largest utilities, the telecom planning and operations effort is intense, complicated, and currently consists of multiple, applications-specific sub-networks.

A strategic overhaul will often mean a multi-tier approach to such a comms design, at least for our largest power utilities. For the bulk of mid-size and smaller utilities of all stripes, the architecture is likely to be of a less complex, less sophisticated, less costly design.

The smart way for electric power industry to gain influence with all stakeholders may be to move C&I efforts to the front burner, ahead of residential AMI.

So What Comes First?

While the communications architecture plans are being discussed and planned, there are activities that can be undertaken in the near term that will yield early benefits and win over the naysayers.

After participating in scores of electric power industry briefings and panel sessions over the past few decades both here and abroad, I have come to the conclusion that we continue to overlook the early gains to smart grid development that can be realized with a comprehensive approach to addressing the needs of the country’s commercial and industrial customer base.

Why We Should Proceed Rapidly with C&I Smart Grid Efforts

While representing less than ten percent of the total end use customer base in numbers, the C&I portion of electric power industry revenue is very high ($70 billion for industrial; $139 billion for commercial — combined value nearly $210 billion compared with only $155 billion in revenue for all residential customers).

Winning Hearts and Minds for Future Smart Grid Developments

Well, first, regulators will tend to be more receptive to (or less concerned with) advanced programs involving the C&I customers. Regulators are primarily charged with the responsibility to be concerned for the welfare and benefit of residential users of utility services.

Secondly, C&I customers, especially the largest customers within the multi-tiered C&I segment, are eager to save on energy costs, are more knowledgeable about energy-related technology, and more willing to interact with utilities and their partners than are residential customers.

Membership-based organizations such as CABA, IFMA and BOMA together with government energy research organizations such as Berkeley Labs are great at educating their members, industrial organizations, building owners and property managers about energy topics.

The Need for a Continuing Role of Private Telecom Networks

Having participated at GridWeek recently, I realize the debate on private versus public ownership of utility telecommunications networks is not going to end any time soon. However, it is clear that a large proportion of utility networks should remain essentially private, supplemented for less critical activities by the judicious application of commercial telecommunications services.

There have been a spate of comments recently made by a number of executives, including Smart Synch’s CEO, regarding inefficiencies within utility operated private networks. I agree that there are likely to be more cost-effective approaches to utility communications by using commercial services, but there is not nearly the same level of availability, reliability and security inherent in commercial-grade public networks as there are in utility telecommunications networks.

Earlier this year, while attending a luncheon sponsored by Electric Light & Power magazine, Lieutenant General Russel Honore (USA Ret) questioned why the electric power community would only attempt to construct a “smart” grid, when what we really need is a “brilliant” grid if we are to be prepared for any emergency. He suggested that cell towers and certain other public telecommunications infrastructure were among the first to fail during Hurricane Katrina.

Should the Western Nations Become Self-Reliant for Telecommunications Infrastructure?

We need to know a lot more about our key partners/suppliers of telecom equipment! From my perspective, having made an initial assessment of what we believe to be the active (some might say pervasive) role of high-level Chinese military involvement in Chinese telecommunications businesses a few years ago, the last thing our country’s telecommunications infrastructure needs right now is to have major Western telecommunications carriers sign up to partner with Chinese companies such as Huawei and ZTE, and others, that apparently remain subject to a great deal of influence by the Chinese military.

I trust that readers of this article in a position to influence our country’s and other Western nations’ telecommunications infrastructure and those telecommunications-centric industries typified by the electric power sector will keep this in mind, political correctness aside. Western companies have an inherent duty to be vigilant in their business dealings with less democratic nations.

Western computer and communications equipment manufacturers are also influenced by their governments and military establishments, but it is a very different level of involvement. Western democracies will specify technology requirements, and eligible suppliers will respond (be influenced by) these requests in order to sell equipment to their governments and military services.

However, there is not any manufacturer I can think of that is actually a quasi-military business entity such as found in China today. Yes, there are defense-centric think tanks and an array of large and smaller defense contractors focused on ICT activities, but these businesses do not manufacture high technology equipment for sale to the private sector across the world.

Chinese Excellence in Technology Adoption

Please don’t get me wrong. The Chinese nation has achieved outstanding technology advances throughout their society in recent decades, typified by the explosive growth of the electric power industry in their country, and the outstanding contributions of Chinese power engineers and Chinese university researchers that have accelerated this development.

In our own Market Trends Digest fourth quarter 2006 edition we wrote on the development of the Three Gorges project. Then, in 2007, our Liz Forrest noted the strong advances in Chinese electric power development (third quarter 2007 edition). Our U.K. correspondent, Gerry George, will again be providing his summaries of CIGRE and the recent CICED events in the upcoming 4th quarter 2010 edition, which highlight recent Chinese smart grid accomplishments.

Author: A graduate of Fordham University (BA, Economics) and Loyola University of Maryland (MBA, Marketing), Chuck has been a 35-year career-long researcher of information technology products, markets and trends. Since 1983, that research commitment and organizational work effort has been focused on the world’s electric utilities and energy pipelines.

During the 1992-2009 periods, Chuck has worked in more than 35 countries meeting with leading utilities, systems integrators, management consultants, and energy IT suppliers to conduct market and product research, as well as to provide briefings and training on infrastructure, automation and information technology issues.

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