Did the stimulus help the energy sector?

By Ron Chebra, vice president, Management & Operations Consulting, DNV KEMA Energy & Sustainability

With the upcoming presidential election, there is and will continue to be a bombardment of commentary on the pros and cons of various platforms that candidates are espousing.

While it is not my intent to take a side with either camp, I do believe that there is a need to look at the efficacy of the stimulus monies that were allocated to various power utilities in the form of grants distributed under Smart Grid Demonstration Grants (SGDG) and the Smart Grid Investment Grants (SGIG) as part of the American Recovery and Reinvestment Act of 2009.

Looking back nearly three years ago, it is helpful to first reflect on the objectives of the Recovery Act:

·      To preserve and create jobs and promote economic recovery.

·      To assist those most impacted by the recession.

·      To provide investments needed to increase economic efficiency by spurring technological advances in science and health.

·      To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits.

·      To stabilize state and local government budgets, in order to minimize and avoid reductions in essential services.

The SGDG objectives allocated funds “to support regionally unique demonstration projects to quantify smart grid costs, benefits and cost-effectiveness, verify smart grid technology viability, and validate new smart grid business models, at a scale that can be readily adapted and replicated around the country.”

The SGIG was directed “to accelerate the modernization of the nation’s electric transmission and distribution systems and promote investments in smart grid technologies, tools, and techniques which increase flexibility, functionality, interoperability, cyber-security, situational awareness, and operational efficiency.”

So let’s take a look how well these and other objectives are being addressed with respect to smart grid implementation:

1) Job preservation, creation and economic recovery: This topic will be debated heavily during the election. It is my belief that many energy jobs were created as a result of the Recovery Act. The greatest areas of positive impact have been in the manufacturing and installation sectors where the rush to build and install millions of smart meters formed a great need for these resources.

However, the question that will be answered over time is: how sustainable are these jobs? It is expected that as many of the funded programs head toward full deployment, the rate of installations could plateau. Certainly, with the step change that stimulus created, there seems to be some sluggishness in new U.S. smart meter orders.

2) When it comes to helping those most impacted by recession, stimulus has definitely helped spur growth in domestic manufacturing, an area that had seen erosion by offshore providers.

3) Innovations in communications networks, intelligent end devices, cyber security measures, software systems, battery technologies, renewable sources, and sensors are just some of the technological advances that I believe were accelerated by government funding.

4) For some time, some of the investments made in the electric infrastructure were directed toward meeting the increasing need for supply; through the initiatives funded by these grants, many of the investments focused on the delivery and demand side.

Certainly customer participation in balancing the supply demand equation has been at the root of many of the smart meter programs. As we await the tally of realized net benefits of these investments, the trends now show that many of these programs have resulted in greater customer awareness and participation in demand management efforts that will result in sustainable long term economic benefits.

5) Although it may be a stretch to predict that the investments in the energy infrastructure have really helped stabilize state and local government budgets, the matching funds of stimulus may have enabled many of the recipients to extend their coffers to sustain essential services.

The real bottom line, however, is what has stimulus done to (and for) our energy industry? Here’s the good news:

Stimulated technology innovations: Although a significant amount of stimulus money went toward purchasing and installing smart meters, some of the innovations that have resulted from the volumes of devices have driven more integrated and packaged meters. In the past, the meter and communications modules were treated as two devices housed under a common fixture. Manufacturers have begun to “embed” these as holistic offering.

Expanding the functionality of meters beyond interval recording and billing is the next wave of innovation. Metering is moving to become an application rather than the core of a meter. This innovation creates greater value creation throughout the enterprise.

Data analytics has taken a major leap forward as field devices that have the potential of producing petabytes of new information that can now be massaged to produce intelligent action and response.

Driving costs down: With larger volumes of power products one can now benefit from greater economies of scale. Smart meters have surpassed the cost crossover point of their simple mechanical counterparts. Mass-market deployments of smart meters have driven installation costs to near commodity pricing.

Recovery Act programs created greater awareness and capability of smart grid functions, such as fault location isolation and restoration, conservation voltage reduction.

The intelligence of field devices continues to grow in capability, making remote electricity measurements along the feeder a reality. Event driven-actions, coupled with near real-time communications networks, have started to provide closed control loop functionality.

Advanced electric vehicle developments: Metering and demand control have become an essential part of intelligent electric vehicle charging systems, a necessary element to better manage this new mobile load. Extensions of services now often include smart phone applications to provide the user with key statistics and information.

Making home area networks a real potential: Home automation is now making its way into the mainstream, and WiFi enabled thermostats are now available at big box stores. Appliance manufacturers are now incorporating greater grid intelligence, leading to power grid friendly products.

Thrusting the energy infrastructure into the internet age: Just as networking and connectedness has forever changed business and lifestyles through the power of access and information, so too is the energy business being transformed into an interactive intelligence based resource.

The distribution of these Department of Energy funds was not without shortfalls, however. Here’s the bad news:

These DOE funds caused stumbles in customer engagement (radio frequency fears, opt-out, etc.) that could have a long-term negative impact. In some cases, the urgency to deploy technology has left the power customer behind. The failure to engage customers as stakeholders in the process may have now created an unfounded backlash against power innovations.

Similarly the jaundice of a few has spread to other areas, creating an undercurrent of dissenters who have found a way to create negative energy sector news.

The funding also created utility haves and have-nots, driving some utilities who may have been on the cusp of implementing innovative energy practices to further delay their technology decisions until the list of who received DOE monies is published.

Some power utilities have taken a “wait and see” attitude, assuming that the experience gained by “winners” will help define the energy solution that could fit all.

Furthermore, the stimulus accentuated the lack of consistent and interoperable standards. While some standards have started to come closer to adoption, the variability of what a smart grid performance as a system of systems network still remains a challenge.

Early adopters of certain power technology approaches have placed significant trust in the vendors ability to modify functions with over the air flash downloads, however often the telemetry networks that are at the foundation of many of the smart grid networks may not be adequately sized for mass changes.

The Recovery Act contributed to the creation of “islands” of automation in the rush to be “shovel ready” that now need to be integrated to achieve the benefits anticipated in the business cases.

As operating groups worked feverishly to complete their business cases and justifications, many of the assumptions about value creation across the enterprise have yet to achieve reality.

Many of the advanced metering infrastructures and systems are still striving to achieve sustainable results for their primary purpose, thus delaying the true integration of the information for other purposes.

The definition of “stimulus” states that stimulus is an incentive. That is, “something that encourages an activity or a process to begin, increase, or develop; something arousing interest: an agent or factor that provokes interest, enthusiasm, or excitement.” Given this as a basis for judgment, the stimulus grants have indeed met their objectives.

In time, with concerted effort and harmonization, I am confident that the vision of grid modernization will be achieved.

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Did the stimulus help the energy sector?

By Ron Chebra, vice president, Management & Operations Consulting, DNV KEMA Energy & Sustainability

With the upcoming presidential election, there is and will continue to be a bombardment of commentary on the pros and cons of various platforms that candidates are espousing.

While it is not my intent to take a side with either camp, I do believe that there is a need to look at the efficacy of the stimulus monies that were allocated to various power utilities in the form of grants distributed under Smart Grid Demonstration Grants (SGDG) and the Smart Grid Investment Grants (SGIG) as part of the American Recovery and Reinvestment Act of 2009.

Looking back nearly three years ago, it is helpful to first reflect on the objectives of the Recovery Act:

·      To preserve and create jobs and promote economic recovery.

·      To assist those most impacted by the recession.

·      To provide investments needed to increase economic efficiency by spurring technological advances in science and health.

·      To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits.

·      To stabilize state and local government budgets, in order to minimize and avoid reductions in essential services.

The SGDG objectives allocated funds “to support regionally unique demonstration projects to quantify smart grid costs, benefits and cost-effectiveness, verify smart grid technology viability, and validate new smart grid business models, at a scale that can be readily adapted and replicated around the country.”

The SGIG was directed “to accelerate the modernization of the nation’s electric transmission and distribution systems and promote investments in smart grid technologies, tools, and techniques which increase flexibility, functionality, interoperability, cyber-security, situational awareness, and operational efficiency.”

So let’s take a look how well these and other objectives are being addressed with respect to smart grid implementation:

1) Job preservation, creation and economic recovery: This topic will be debated heavily during the election. It is my belief that many energy jobs were created as a result of the Recovery Act. The greatest areas of positive impact have been in the manufacturing and installation sectors where the rush to build and install millions of smart meters formed a great need for these resources.

However, the question that will be answered over time is: how sustainable are these jobs? It is expected that as many of the funded programs head toward full deployment, the rate of installations could plateau. Certainly, with the step change that stimulus created, there seems to be some sluggishness in new U.S. smart meter orders.

2) When it comes to helping those most impacted by recession, stimulus has definitely helped spur growth in domestic manufacturing, an area that had seen erosion by offshore providers.

3) Innovations in communications networks, intelligent end devices, cyber security measures, software systems, battery technologies, renewable sources, and sensors are just some of the technological advances that I believe were accelerated by government funding.

4) For some time, some of the investments made in the electric infrastructure were directed toward meeting the increasing need for supply; through the initiatives funded by these grants, many of the investments focused on the delivery and demand side.

Certainly customer participation in balancing the supply demand equation has been at the root of many of the smart meter programs. As we await the tally of realized net benefits of these investments, the trends now show that many of these programs have resulted in greater customer awareness and participation in demand management efforts that will result in sustainable long term economic benefits.

5) Although it may be a stretch to predict that the investments in the energy infrastructure have really helped stabilize state and local government budgets, the matching funds of stimulus may have enabled many of the recipients to extend their coffers to sustain essential services.

The real bottom line, however, is what has stimulus done to (and for) our energy industry? Here’s the good news:

Stimulated technology innovations: Although a significant amount of stimulus money went toward purchasing and installing smart meters, some of the innovations that have resulted from the volumes of devices have driven more integrated and packaged meters. In the past, the meter and communications modules were treated as two devices housed under a common fixture. Manufacturers have begun to “embed” these as holistic offering.

Expanding the functionality of meters beyond interval recording and billing is the next wave of innovation. Metering is moving to become an application rather than the core of a meter. This innovation creates greater value creation throughout the enterprise.

Data analytics has taken a major leap forward as field devices that have the potential of producing petabytes of new information that can now be massaged to produce intelligent action and response.

Driving costs down: With larger volumes of power products one can now benefit from greater economies of scale. Smart meters have surpassed the cost crossover point of their simple mechanical counterparts. Mass-market deployments of smart meters have driven installation costs to near commodity pricing.

Recovery Act programs created greater awareness and capability of smart grid functions, such as fault location isolation and restoration, conservation voltage reduction.

The intelligence of field devices continues to grow in capability, making remote electricity measurements along the feeder a reality. Event driven-actions, coupled with near real-time communications networks, have started to provide closed control loop functionality.

Advanced electric vehicle developments: Metering and demand control have become an essential part of intelligent electric vehicle charging systems, a necessary element to better manage this new mobile load. Extensions of services now often include smart phone applications to provide the user with key statistics and information.

Making home area networks a real potential: Home automation is now making its way into the mainstream, and WiFi enabled thermostats are now available at big box stores. Appliance manufacturers are now incorporating greater grid intelligence, leading to power grid friendly products.

Thrusting the energy infrastructure into the internet age: Just as networking and connectedness has forever changed business and lifestyles through the power of access and information, so too is the energy business being transformed into an interactive intelligence based resource.

The distribution of these Department of Energy funds was not without shortfalls, however. Here’s the bad news:

These DOE funds caused stumbles in customer engagement (radio frequency fears, opt-out, etc.) that could have a long-term negative impact. In some cases, the urgency to deploy technology has left the power customer behind. The failure to engage customers as stakeholders in the process may have now created an unfounded backlash against power innovations.

Similarly the jaundice of a few has spread to other areas, creating an undercurrent of dissenters who have found a way to create negative energy sector news.

The funding also created utility haves and have-nots, driving some utilities who may have been on the cusp of implementing innovative energy practices to further delay their technology decisions until the list of who received DOE monies is published.

Some power utilities have taken a “wait and see” attitude, assuming that the experience gained by “winners” will help define the energy solution that could fit all.

Furthermore, the stimulus accentuated the lack of consistent and interoperable standards. While some standards have started to come closer to adoption, the variability of what a smart grid performance as a system of systems network still remains a challenge.

Early adopters of certain power technology approaches have placed significant trust in the vendors ability to modify functions with over the air flash downloads, however often the telemetry networks that are at the foundation of many of the smart grid networks may not be adequately sized for mass changes.

The Recovery Act contributed to the creation of “islands” of automation in the rush to be “shovel ready” that now need to be integrated to achieve the benefits anticipated in the business cases.

As operating groups worked feverishly to complete their business cases and justifications, many of the assumptions about value creation across the enterprise have yet to achieve reality.

Many of the advanced metering infrastructures and systems are still striving to achieve sustainable results for their primary purpose, thus delaying the true integration of the information for other purposes.

The definition of “stimulus” states that stimulus is an incentive. That is, “something that encourages an activity or a process to begin, increase, or develop; something arousing interest: an agent or factor that provokes interest, enthusiasm, or excitement.” Given this as a basis for judgment, the stimulus grants have indeed met their objectives.

In time, with concerted effort and harmonization, I am confident that the vision of grid modernization will be achieved.