On Sharks, Data Doors, Smart Grid and Broadband

Nick Sinai has been working at the Federal Communication Commission (FCC) for almost a full month now. And, he's already had his first test of office: gathering vendors, utilities and thought leaders for a webcast on broadband and the smart grid.

He managed an impressive list for a newbie: Eric Lightner, director of the Federal Smart Grid Task Force for the U.S. Department of Energy; Dean Prochaska, national coordinator for smart grid conformance with the NIST; Mark Dudzinski, CMO of GE Energy; Eric Miller, SVP of solutions at Trilliant; Henry Jones chief scientist with our old friends SmartSynch; Joby Lafky, program manager of an electric vehicle management platform at Gridpoint; and Jason Griffith, director of IT telecom engineering with AEP.

Sinai started the show by admitting that there are a lot of varying definitions of a smart grid.

"Sometimes it's hard to understand what the smart grid means," he stated. "But, all elements that I've seen have a communication requirement."

And communication was the central point of this webcast (which would be obvious to anyone looking at the speaker line-up without even a glance at the title).

Sinai continued: "Having worked both in communication and energies, I can tell you that both are essential services. Both built reliable networks. But, there are some differences. There's been tremendous innovation in communications, but perhaps less so in electric power. Spending is pretty low. It's been said that dog food makers spend more money on research than the power industry."

The dog food makers weren't available for comment about that statement, but it is a common industry comment that our R&D money is a little light. And one area that will need significant cash to smooth the way for the smart grid is communication.

In the meeting, most speakers were adamant that we must roll out the smart grid train from a new, shiny and well-polished communications station.

Dean Prochaska with NIST confirmed this: "Wireless communication for smart grid is an area we need to hone in on during our action plan."

But, it's all not quite as simple as laying out cash. There are problems. According to Mark Dudzinski of GE these fall into two areas: volumes of data and speed of data.

For those of you out in cyber space not "up" on the communications requirements of the smart grid, let's stop here for a little allegory. Think of the grid as a series of tunnels, linear and sealed off by a series of doors. (If you've seen "Jaws 3," just picture all those underwater observation tubes the cardboard-cutout 3D shark attacks at the end of the worst Dennis Quaid flick ever made.)

Now, when the very angry shark in "Jaws 3" rammed the tubes, all sorts of doors slammed down to seal off areas to keep water from drowning the people still inside. But, take away the teeth-heavy shark and all that water and you have an idea of the urgency with the smart grid "tunnels." Doors will slam. Regularly. With urgency.

Think of those people as data, and we need to get those people from one end of the tube to the other end before the big, heavy door slams down. Now, we know that the door slams down and opens up every 15 minutes. (The grid transmits data---or basically "works"---in 15-minute intervals.)

If you have three people to run through the door in 15 minutes, this is a relatively easy task. But, each new feature on the smart grid would be represented in this scenario by more and more people---perhaps reaching into the millions. Now, how do we get a million people through the door in 15 minutes? Either we need more time (which isn't an option, really) or we need a bigger door, right?

Right. That's where broadband comes in. It's the bigger door for the smart grid data. And, so far, no sharks. Well, no literal sharks, anyway.

Eric Miller of Trilliant revealed: "Smart grid is not just about metering. There's grid communications, real-time communications, information on energy use and price in the home. When we look at communications needed for that, it drives a different model.... Many of those will require true broadband capacity. The key is bandwidth. It will be critical. Controlling a substation doesn't require much, but an additional video feed to watch the substation requires megabits of additional capacity. As we increase the need of users, bandwidth needs expand exponentially."

Now that we're all sure we need that bandwidth that broadband provides, the question remains whether to use commercial options already available (the same network your cell phone uses) or build our own private network. Miller wants the private option, but Henry Jones with SmartSynch sees more positives with the network already available.

Miller is worried about backhaul issues; Jones is looking at the practical economy of it all. But, nothing has been decided upon just yet. So, the discussion continues.

Jason Griffith with AEP doesn't really take a side on public or private networks. As a utility representative, he is concerned about two items: money and coverage. And whether that's covered by a commercial option or a private one isn't nearly as important as how it answers these three questions: Will it work? Will it be reliable? Will there be costs I have to pass on to my rate payers?

It will certainly be an interesting debate to keep an eye on.

Information from the FCC webcast on smart grid, broadband and climate change can be found on their website:www.fcc.gov

Should Exec Pay Impact Consumer Bills?

AP reported this week that before regulators will consider raising rates for Florida Power & Light (FPL) and Progress Energy in January, they want a look at the books---not the fuel costs or bills for upgrades and new technology. No. Specifically, they want to know who gets paid over $165K a year and why.

A sweeping unanimous vote by the Public Service Commission, they've gone on the record saying that such information is vital to their analysis. FPL wants $1.3 billion, Progress Energy $500 million. The Public Service Commission wants details.

Legal reps for Progress claim that revealing that info will raise costs and lower productivity. They expanded on that statement to say that showing their hand on employee compensation would also create poor employee morale and increase employee turnover. (No, they never actually explained how all those dots connected, exactly.)

According to public records reported on by AP, FPL has 463 employees that jump that 165K bar; Progress Energy has 132.

It seems obvious, doesn't it? The Commission is thinking that, perhaps, instead of raising rates on an over-taxed, recession-exhausted end-user, the utilities should consider compensation evaluations, reductions or layoffs.

My stepfather used to say that no one, anywhere, could ever work hard enough to "morally earn" more than 100K a year. Any more than that, and there was, obviously, a little gouging going on somewhere, in his view. (Of course, he worked outside in the heat, in the cold, under old homes, in the dirt, and never made more than 25K. So, he probably would feel very little empathy for an executive making "the big bucks," as he'd label them.)

But, do they earn the big bucks? Now, the utilities might argue that some of those people---nuclear engineers, for example---have unique skills and that high compensation is the cost of keeping them around, making sure they don't jump ship to another employer willing to pay them what they are worth.

But I think the average joe at the receiving end of an FPL or Progress electric bill would be surprised to learn that anyone working at their electric company makes $165K a year, let alone over 100 (with Progress) or almost 500 (with FPL).

So, does the Commission have a point? They might be approaching it on the subtle side right now, but the question lingers: Do utilities have a right to go out and ask for consumers to pay more without first examining expenses in house?

AWEA, WOW use FERC to go toe-to-toe with MISO

As a writer, I get a lot of press releases a day: products, contracts, events, staff changes. A lot. If I don’t clean them out by the hour, there’s a chance of a digital avalanche, of sorts. Every once in awhile, though, while religiously deleting and passing things on to other editors and writers, I find one that captures my interest. Yesterday, it was the AWEA, WOW release claiming “unfair practices” in a new FERC filing.

I love this blog headline, by the way. Is that enough acronyms for ya? I wonder if I could fit in any more. Here are the basics before we start into the juicy goodness of the story: AWEA stands for the American Wind Energy Association. WOW is the Wind on the Wires organization. AWEA, of course, is all about getting wind to a viable spot for regular use as a generation source. WOW is about getting equal, fair access to transmission for wind generators. FERC, or the Federal Energy Regulatory Commission, regulates power stuffs nationally and MISO, or the Midwest Independent System Operator, keeps an eye on all sorts of grid stuffs in the Midwest.

Now that we’re all acronym savvy, let’s get to the meat of this: MISO is proposing wiping out their current cost allocation system for upgrades to hook generators into the grid. Currently, there’s a complicated system using various factors like kilovolts and regional loads. The basic idea boils down to this: 50% of the cost to hook in generators with new upgrades is paid for by the generator and about 50% is paid for by the transmission peeps in the region, since it is assumed that they will benefit from the load.

But, a few smaller transmission people, like Otter Tail, are a little peeved. See, they’re paying 50% for a load that zips right past them, like paying for a highway with no exits to benefit the businesses of your town. They’ve cried foul. MISO’s heard them and proposed a reversal, with 90 to 100% of the upgrades required to hook in generators to be paid for by those generators.
At its core, the idea seems fair, like a manufacturer rolling in the cost of distribution. You’ve got to get the product out there, and local businesses who don’t sell your pickles, tires or pencil sharpeners don’t wish to contribute to your distribution system.

But, AWEA and WOW point out that MISO’s solution is heavy-handed due to one issue: wind generators don’t have a lot of choice about where to put their power. They can’t be lured to one region or town or county by tax incentives and local parades like the mechanics bay for American Airlines or the next Toyota plant. They have to follow the wind. So, without the choice to decline use of a space, this system change is a bit choking to the wind industry.

So, what’s a fair compromise? Do we put the burden on the company creating the product, on the region that may or may not benefit from the load, on the end-user (if you can track it through that far)? How much leeway do we give generators like wind and solar who have to follow nature rather than tax incentives? And, how much should we expect of their neighbors who “lived” in that area before they moved in and never expected to be charged for the privilege of just seeing a new face in the neighborhood?

Are PHEVs on the Horizon?

A couple of weeks ago, I interviewed Dave Mohler, the chief technology officer of Duke Energy, for an article I’m doing on smart grid technology.

After a lot of discussion about how much Duke is investing in smart grid---with cash, manpower and pilot programs---Mohler revealed what I consider to be his most controversial, yet interesting, point.

I asked him what he thinks the smart grid will bring about that’s unique. He replied, “The one killer app from smart grid tech will be PHEVs.”

PHEVs? Really? I admit it. I was floored. Smart appliances, demand response ideas, even cyber security alternatives, all of these I might have expected from an industry insider, but PHEVs?

PHEVs, by most industry peeps I’ve spoken too in the last few years, is considered to be ... well, dare I write it out? OK, I dare: Silly. Impractical. Even impossible.

And here Mohler is just pulling the rug out from under me. Is he right? Is the smart grid going to give me a plug-in car that I can charge from the house (and that I can use to charge the house, too, if the power goes out)? It’s certainly an interesting idea. And, it’s not coming from the “far left”; it’s coming from Duke Energy---they of the Utility of the Future, they of the 35,000 MW of generating capacity.

It’s just rather shocking to have what my mother would term “hippie talk” from the tech head of one of the largest power companies in the U.S. It’s also exciting, interesting and fascinating.

In related news, U.S. power industry research giant EPRI is working with one of the largest ports in the world, the Port of Long Beach, to test plug-in hybrid “tractors” to unload cargo. The three-month Port of Long Beach demonstration project is part of a one-year demonstration, during which the tractor will also be tested and evaluated at ports in Savannah, Ga., Mobile, Ala., Houston, and New York City. EPRI will document the tractor's performance and operation including electric grid system impact, vehicle system efficiency, emissions, costs and vehicle performance.

Perhaps Mohler can predict the PHEV future for all of us. First the Port of Long Beach, then the world.

CO-OPs Do One Thing

It appears that one area of our industry may be recession-proof indeed: co-ops.

This week, the National Rural Utilities Cooperative Finance Corp. announced results from its annual key ratio trend analysis (KRTA) report that keeps an eye on the wallets of distribution cooperatives across the country. Low and behold, this year’s results show cooperatives that are strong and holding steady, even amidst the gloom and doom newscasts lamenting the demise of consumer confidence, the evils of the job market and concerns that the stimulus moola has been a waste.

The KRTA report is based on data submitted by 819 distribution cooperatives for the year ending Dec. 31, 2008. The report had three major findings.

1.) Revenues at co-ops kept up with fuel issues last year, indicating that, indeed, fuel adjustments and rate increases are being used more often, keeping the co-ops healthy.

2.) Financial ratios are not careening out of control, so no worries about a Wall Street crash among the rural power set. TIER is super (2.27, which is happier than the 1.25 required to borrow cash). Modified debt is A-OK. Aggregate cash is weathering nicely. Cash equivalent is solid.

3.) We have growth. Consumer growth rate was 1 percent. OK, 1 percent doesn’t sound super. But, that’s nearly double that of municipals and IOUs, according to the EIA. Kilowatt hours were up, too (1.22 percent).

Perhaps this only goes to prove that power is a necessity, and if you’re in the business of selling power and not selling a smart grid or a marketing campaign or investments or stock portfolios, you can survive those downturns. I’d say it’s all about ‘back to basics,’ but co-ops are all about basics and always were. They’ve never strayed from that.

Reminds me of the old farmer down the street from my parents’ place in Kansas. The man never strayed, either. Every year, he grew wheat. He’d say, “Kansas was meant to grow wheat. Period.” His peers experimented with soy beans, with corn for ethanol, with cotton, even. Trying to stay ahead of the market and the prices. But, that old farmer, he lived and breathed wheat. He knew wheat. He stuck with wheat. And, while he may have had a lean year or two, he never busted. But some of his peers did.

He had wheat; the co-ops have power. The simplicity and experience with both may be the key: Do one thing. Do it well. It’s a UNIX concept. It’s Google’s corporate philosophy. And, for co-ops, it may have been a saving grace during an economic crisis.