WASHINGTON, Wednesday November 15, 2011 – November’s breakfast and panel discussion drew a packed crowd Tuesday morning as industry lawyers, lobbyists and experts filed into Clyde’s to hear from the Whitehouse, telecoms, energy management companies and utilities about the challenges and efficiencies that lies ahead with “The Smart Grid and Broadband.”
Nick Sinai, Senior Advisor to White House’s Chief Technology Officer gave the opening remarks at the breakfast. Sinai focused on what the Obama administration is doing to support, secure and modernize the energy system for the country. He noted that although the current grid has expanded, it is fundamentally still an analog grid and has been that way since the beginning of the 20th century.
“The administration invested $4.5 billion in Recovery Act across 140 projects in 46 states to build a more stable secure electric grid that increases access to renewable energy and helps offer opportunity for consumers to cut their utility bills,” said Sinai.
This summer the administration released its Policy Framework for the 21st century grid, which lays out a roadmap for state regulators, industry and all Americans to benefit from investments in infrastructure. Additionally as part of their commitment to Rural America, 150 million in smart grid investment was allocated through RUS loans.
Sinai also highlighted the administration’s interest in placing more information in the hands of consumers. He said, “Aneesh Chopra challenged utilities to develop a green button to make energy data available to consumers in standard machine readable formats…whether through an energy efficiency app or broadband thermostat, unlocking detailed energy data in computer friendly formats is key to jumpstarting all innovation.”
As for broadband, the Senior Advisor stated, “Smart Grid increasingly needs broadband. The Recovery Act is helping to fund 1000 censors across the transmition grid to help prevent a blackout like one in 2003.” He added that, “all advanced meters and endpoints in homes are now being backhauled by broadband circuits.”
In addressing the broadband standards and technologies that are used with new smart grid developments, Sinai stressed, “There are opportunities to use commercial networks, opportunities to use public safety networks and opportunities to use private networks…all three happen today, all three will continue to happen in future, it is therefore important to use private sector developed standards so we don’t strain investment in any of those three options.”
When asked about the administration’s thoughts on privacy and security concerns in the smart grid, Sinai once again pointed to the administration’s Policy Framework where one of the four policy pillars include securing the grid both physically and from a cyber perspective. “From a cyber perspective, the government needs to continue to provide threat information to industry, and industry needs to move from a compliance model to one where there is active modeling, assessment, and response to threats.”
Sinai added, “Smart grid privacy is an important issue. If you don’t do it right it will back fire. Many states are thinking about how to update existing privacy rules in a utility context. The flip side of privacy is data access, so it makes sense for states to be thinking about these in parallel, rather than just a privacy proceeding.”
Sinai steered clear of any controversial remarks regarding overlapping telco and utility footprints as well as questions about when the administration plans on clearing out Department of Defense Spectrum that can be used as wireless backhaul support for smart grid technologies.
When asked whether the government would endorse a time of use rate structure that would drive innovation and be implemented by the individual states. Sinai told the audience that the federal role is not to tell the states what to do. “The government has said that aligning incentives and experimenting with lifestyle rates and other dynamic rates allow for important innovation but these issues are to be left up to the states.”
Katie Fehrenbacher, Founding Editor of Earth2Tech.com moderated the panel that followed. Panelists included, Jeffery Dygert, Executive Director of Public Policy, At&T, Arkadi Gerney, Senior Director of Policy, Partnership and Public Affairs, Opower, Paul Hamilton, Vice President of Government Affairs, Schneider Electric, and Sunil Pancholi, Smart Grid Program Manager, Pepco.
Some of the major topics the panel touched on included the importance of broadband for smart meter use, the privacy and security concerns of sharing private energy use data, rates setting and responsibilities of the states, and incentives for consumer adoption of smart grid technologies
Role of Broadband in Smart Grid
After introductions from each of the companies Fehrenbacher asked the panelists about connectivity to the grid and what role broadband will play whether connecting at the consumer level or deeper in the grid when dealing with censors.
Each of the panelists agreed that broadband is essential for Smart Grid infrastructure. Where utilities used to take one reading a month, new devices are taking multiple readings per second that need to be synchronized and uploaded with no latency, “that type of connectivity cannot happen over dial up,” said Dygert from AT&T. “If you build a network they will come…we have a greater demand for a bigger pipes and having the infrastructure in place for better and more robust connectivity will create incentive for more people to create more Apps and more solutions we have not thought of yet..”
When asked about the stage of their development Gerney from Opower told the audience that they are still in their beginning stages of development in the residential space. Mail is still their most important delivery method for expressing cost savings, even in the houses with smart meters. They have implemented bill alerts through email that can notify customers if their usage has significantly increased in relation to the prior month. They are still providing basic information about consumption, “if you can provide a small amount of insight people can take some big steps forward.” Gerney added that challenges will get harder because they are still only picking off low hanging fruit.
With regard to creating a digital home Gereny said, “There is no one device that will make a dramatic change; we want to reach people through the devices they are already using.”
Dygert told the audience that AT&T is working on a Digital Life Project that would create a unified digital platform in the home that will incorporate home security, monitoring, telehealth, energy efficiency, smart grid as well as video IPTV and DSL services that can all be accessed through a single device. He was not willing to give any exact roll out date however.
Standards and Hurdles within the Ecosystem
When asked about hurdles to the ecosystem moving forward, Hamilton suggested that different markets have different needs. The residential market that uses 35% of the power but consists of 85% of the users, “care about safety, price and outages, after that there are not a lot of drivers for energy efficiency.” “Utilities need to open up information so that you can have innovation from companies like AT&T and Opower.” Real drivers for residential households are access to real time information and price signals.
“Commercial drivers are different,” suggested Hamilton, “industry is very aware of managing energy.” Drivers for industry include opening up demand management and demand response markets so industry can put the appropriate tools in place to react.
With regards to standards relating to data, Hamilton agreed that broadband will be able to provide immense amounts of very useful data for companies and consumers, but the key for useful information is to set standards around the consistency of data.
Gerney noted that the bigger challenge in terms of standards is whether there are incentives in place for utilities to provide products and services like Opower’s. Instead of just selling power, “utilities are really in the business of selling energy services and meeting the demands of their customers,” said Gerney. More focus should be placed on creating the regulatory structures that incentivize utilities to want to meet the demands of their customers.
Pancholi countered that Pepco is already there; they have worked with regulators and claim that they do not have incentives to sell more electricity. Pancholi added, “the biggest debate out there is what is the privacy of information. Customers and States are concerned about their entire monthly bill information going out into the internet where anyone can access the pattern of their utility usage.
Hamilton answered by stating that privacy concerns are a red herring. “We need to separate privacy and security,” said Hamilton. He argued that protecting data is about security and the utilities will have to face the same challenges that other industries face in creating a way to deliver their data in a secure manner. He differentiated privacy as a choice that the consumer makes every day. The way utilities can get beyond privacy is by providing the data and information right at the consumer’s meter, then it is the consumer’s choice of what they want to do with it.
“Access to information is key to accelerating markets and making sure that those that understand and know how to manage consumer are actively and readily engaged.” Utilities need to provide access to the information that can allow consumers to make their own choices one way tot do that would be by giving price signals. Since energy management is a low priority for many consumers those price signals and data can be integrated into other technologies within the home. “These privacy concerns should not be slowing down the marketplace,” ended Hamilton.
Pancholi responded that they cannot just give out customer information, “the states would have to say what is acceptable and what is not…we are months or years away from having consensus on how to move forward.”
AT&T’s Dygert admitted that the largest impediment to smart grid and home energy management services has been this concern with jurisdiction by jurisdiction privacy decisions. He said, “Many companies including AT&T do privacy very well.” It therefore makes sense that AT&T is currently attempting to put together an industry wide coalition that will provide a set of best practices around privacy that can then be presented to the states for adoption.
State Regulatory Commissions Incentivizing Utilities
A very interesting set of audience questions addressed the state regulatory commissions and asked how incentives can be changed for utilities to invest.
Dygert jumped right in and said that state commissions could rationalize treatment of smart grid investments. He addressed the difference between capital investment and operating expenses. “Utilities get a rate of return on their capital investments but not on their operating expenses. Traditionally for the extent that a utility is using commercial communications for their smart metering solution those expenses have not been treated as a capital investment, which in turn means they do not get a rate of return. This causes less incentive for utilities to go that route in the first place.”
Dygert continued, “One thing AT&T has done is to bundle a package of both the meter and 10 years of communications so the utility can take that to their state commission and say look I am putting in smart metering solution and have pre paid for the communications lets treat that as a capital investment that I get a rate of return on.”
Dygert also signaled back to his earlier comment and said that the commissions can create a set of best practices for privacy and data access rules.
Gerney added that incentives for efficiency are also important. States should set energy efficiency goals and set standards for how utilities are compensated.
Hamilton thought there were additional measures that utilities themselves needed to take to prevent push back on smart grids. He said, “utilities have not done a good job of bench-marking what the real payback of these systems are and have not been able to communicate those with customers.” He stressed that the focus on the customer is as important as the focus on the commissions.