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Markets: Smart Energy Advances Or Does It?

We have portrayed a vision of smart energy driven by real-time, interactive communication networks that provide services and are adopted in a manner very similar to the evolution of the web and the Internet. In this vision, customers and consumers would be able to see variable pricing changes in real time, supported by smart meters and energy management devices that read and visualize energy consumption at a high rate, leading, ultimately, to changes in consumer behavior. A brave new energy future where real-time energy data unleashes innovations and applications that we haven’t yet thought of.

This vision of the future may be overly optimistic. Fully integrated two-way networked smart energy management is the outcome entrepreneurs and their investors are hoping for. The reality is that the consumer piece of the smart grid will look very different for many years to come. While it’s significant that utilities are starting to build out smart grid infrastructure, utilities are largely opting for networks that provide connections that are far from real time, and this could stifle the desired innovation.

Utilities today are largely designing smart grid networks to collect data from smart meters in a time frame that ranges from between every 15 minutes to an hour, then bringing that data back to a collection point on the network. From there, many utilities are only bringing data back to the utility back office where the numbers are processed and packaged for consumers once a day.  This implies crucial temporal issues: the resolution of the energy data (at what intervals the energy consumption is tracked) vs. the age of the data (how long it takes before it makes it back to the customer).

There is a rapidly growing number of connectivity and smart meter infrastructure players getting funded who are, for the most part, tied mercilessly to this schema.  When an outside company partners with a utility to provide smart grid and energy management tools, it’s beholden to this setup. When say a Google with its PowerMeter energy tool or a Cisco with its Mediator building systems integration box — who both subscribe to a world where more information the better — works with a utility, smart meter data that is pushed to these tools has to make its way back to the utility before it can be sent to anyone’s system. That means that even for either Google’s energy tool or Cisco’s integration box, there will be a significant delay before information reaches consumers, and significant gaps in energy usage details. These delays and gaps can undercut the premise of how smart meter technologies will empower customers to make decisions about their energy use based on real-time costs.

Why are utilities not rolling out networks that can provide more real-time services? Primarily because of the cost. It costs more to build out networks that are more complex and provide more services. Utilities have to get regulatory approval for these smart grid rollouts and want to keep costs low, particularly because customers will end up indirectly paying for these programs and upgrades through rate hikes. Utilities want to move slowly because they aren’t sure how consumers will react.

This fundamentally gets down to the fact that the utility industry doesn’t realize the disruptive nature and capabilities of communication networks. While networks have been changing the way we consume entertainment, work, talk to friends, and spend money, it’s perhaps not so clear to the utility industry how powerful the network effect will be. As many new non-traditional players enter the Smart Energy arena there are likely drive many new behaviors. Recent entrants include:

  • The many players focusing on residential energy opportunities such as Tendril and Control4;
  • Cisco Systems with its “Converged Buildings and Converged Communities thrust;
  • nPhase, the Qualcomm and Verizon joint venture with its Enterprise Smart Cleantech Services offering;
  • Tridium/Honeywell’s introduction of the Sedona open source platform; and
  • Google with its ‘open’ meter solution based on the Android platform.

The closer the networks get to delivering real-time information, the more an ecosystem of innovation and new applications can be built up around this information. For example, look at the history of the telecom industry and location-based services. Many years ago, a debate arose around how often phone companies would enable their networks to ping the GPS in the cell phone — what would be most productive, people asked, once every couple of minutes, or closer to real time? For cell phone companies and utilities alike, it’s more expensive to provide data more frequently. But for cell phones and GPS, the debate ended when the killer location-based app — turn-by-turn driving directions – finally emerged.  Turn-by-turn driving directions only work when the data is available in real time — no one will use a service that tells you to turn a couple minutes after you pass the right street.

If integrated energy and information networks aren’t built to provide granular information then there’s less of a chance it will foster the innovation we need to reduce energy use.  Most utilities claim they plan to make networks more robust and collect and process data more frequently down the road. But it’s important for all participants to realize this variable could wreak havoc on current assumptions and plans about smart energy.

 

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