In physics, when two or more energy waves interact in sync to create a higher amplitude or intensity, we call this “constructive interference.” That term could be used to describe the development of the smart grid and where we stand today.
Since April 2009, when the U.S. Department of Energy first announced plans to distribute over $5.7 billion to fund smart grid initiatives under the American Recovery and Reinvestment Act, the utility industry, government and entrepreneurs have been working steadily to make the smart grid a reality.
As the industry has developed over the past 18 months, four core drivers of innovation in the smart grid industry have emerged:
· Consumer education and engagement
· Movement within political and regulatory environments
· Investor backing
· Continued development of new technology
Together these drivers are on the verge of a monumental “constructive interference for smart grid.” They support, challenge and check each other, as all sectors work toward a common goal.
There have been some high-profile examples in smart grid’s infancy that demonstrate why consumer engagement is crucial to smart grid development. Despite highly publicized problems with early smart meter rollouts in California and other regions, consumers are expressing an interest in having more communication with their utility provider as a means of obtaining greater levels of control.
Even if they are unsure of the terminology we use in the utility industry, such as demand response and smart grid, surveys show that consumers are interested in energy efficiency and energy savings. Among the many surveys that have been published, two consumer surveys completed by GE this year stand out.
In March, GE found that of 1,000 consumers surveyed across the country, more than three-quarters did not understand what the term “smart grid” meant.
However, a similar survey conducted in June showed that more than half (63-percent) are willing to work with their power company to change their individual energy consumption. In addition to greater control, consumers are also beginning to demand more choices that reflect their values. For example, people also want the option to purchase greener energy.
An obvious conclusion is that consumers are ready and willing to embrace the smart grid, if it is explained to them in a way that they understand and engages them in the process. This is one area where there is still much work to be done.
Political and regulatory
Government support has been crucial to the rapid forward movement the smart grid sector has experienced in recent months. It has provided necessary funding as well as education on the value it will have to individuals, the energy industry and the nation by reducing U.S. dependence on foreign oil and allowing us to better manage the country’s long-term energy needs.
Through recent stimulus grants, the smart grid industry is enjoying, with matching funds, over $8 billion in investments. As a percentage of the overall $787 billion recovery plan approved by Congress, that investment amount may not seem like much. But the resulting microeconomic effect is substantial; there are 100 utilities that have received funding from these grants, and the more than 3,200 utilities that didn’t participate are now behind the curve in providing the capabilities and benefits their customers will demand.
Meanwhile, the federal and state governments are beginning to realize the importance of meeting consumer demand for options and providing transparency in the marketplace. U.S. Representative Edward Markey (D-Mass) has introduced the Electricity Consumers’ Right to Know Act, also known as E-Know, which will establish federal policy that allows for every energy consumer in the U.S. to have access to their energy consumption and related costs in real time (or near real time).
On the state level, there are an increasing number of regulations guiding infrastructure development by establishing energy consumption standards, as well as standards for utilizing higher percentages of renewable energy. For example, according to The Pew Center on Global Climate Change, 37 states now have standards specifying that electric utilities generate a certain amount of electricity from renewable or alternative energy sources.
Investors have followed the government’s lead and provided funds for new technology development. According to Ernst and Young, venture capital investment in clean tech is recovering faster than any other sector, with $733 million in deals closed in the first quarter of this year; the majority of those deals occurring in the energy efficiency segment.
This community is engaged in clean tech because they see emerging technologies that are finally capable of solving urgent energy problems. Investors understand the long-term implications of rising energy costs and see support in the marketplace from consumers who are more attuned to the issue of climate change. And as the regulatory environment becomes more conducive to innovation in the energy sector, progress will occur at a faster pace.
From a technology standpoint, the energy industry today is reliable but not smart, since the ability to optimize supply and demand on a large scale does not yet exist. As we work toward a nationwide roll-out, the focus of the smart grid is on operational efficiency (i.e. peak load efficiency), regulatory compliance and improving customer service.
But the emerging technologies developed by existing and young start-up companies will enable the smart grid by giving everyday devices a higher level of intelligence and the ability to communicate to a network.
In the very near future, with interoperability and the adoptions of standards for the smart grid system, the technology being developed today will deliver market-based pricing, renewables integration and expansion of home-area networks to include everyday appliances and electric vehicles.
Very soon, we’ll be able to negotiate in real time how much energy is needed and where it comes from. For example, someone may be charging their electric vehicle at night, at the same time that winds tend to be stronger. Linking the two allows customers to take advantage of that renewable energy source. Customers will not only be informed enough to make that choice but will be able to link choices of consumption with their own habits and values.
Technology alone will not make this happen. For smart grid deployment to accelerate, it will take all four of these key drivers working together. The National Action Plan for Energy Efficiency states that 50-percent of the growth between now and 2025 can be met through using energy smarter.
The nation’s agenda to establish higher levels of efficiency is driving stricter regulations for utilities, which in turn recognize that consumer education is imperative to meeting new standards.
The key to consumer education, and ultimately the driving force for changing consumption habits is access to information. As more utilities turn to new technology to provide this to their customers, investors see the opportunity that emerging clean tech companies have to shape the future of the energy industry. It is this convergence of drivers that will move the industry forward toward a common goal.