Let me preface this entry by saying that I believe in the smart grid. I’m a fan. I think we need a smarter, more self-healing, more active, more adaptable energy system. It is, indeed, the wave of the future, the golden child, the technological messiah.
But, nope, it ain’t gonna be cheap.
Last week, I wrote a blog about the California governor signing into law a bill that (sorta) mandates utility targets for energy storage in the state. You can read it here, if you’re interested.
One of the comments I received was from a reader named Jim. He wrote:
Will investment in energy storage lower my energy bill? Of course not. Is this the most effective way to reduce green house gases? Not by a long shot. The virtue of this plan is that everyone gets to subsidize those who will make a lot money from it.
To be completely honest here, Jim is absolutely right. Is energy storage specifically (and smart grid or renewables generally) going to automatically start Jim’s electric bill on the path to negative numbers? Is the power company going to, eventually, have to pay him? Probably not unless he has own wind turbine or solar panels, and, even then, such technologies would cost him a lot up front for purchase and installation.
And, sure, energy storage is not the most direct way to reduce greenhouse gases produced by the power industry. The most direct way would be to just shut down fossil fuel plants---at least the most direct within our industry. But, we can’t do that. So, we have to look for some outside options that may be more than the mathematically logical straight line between two points. Sometimes, it takes a cloud of dots to clear the air.
And, in the end, will people make money off this stuff? Yes, they will. For AB2514 (that energy storage bill), the companies that make the equipment will make money. For the smart grid, yes, the companies that have those smarter technologies and can sell them will make money. That’s the way capitalism---fortunately or unfortunately---works. Those companies wouldn’t be in business if they didn’t have a profit margin.
And, in the end, the same has to be said for your utility. While they are highly regulated and while they don’t really get the free reign of capitalism that, say, Wal-Mart does, they are still a company and still trying to make a bit of money---while providing a valuable, important service. Whether or not such a service should be socialized, privatized, deregulated or regulated is another argument really. Here, we’re talking about what is.
And, in the land of “what is,” here are the facts:
(1) Smart grid technology costs money.
(2) Utilities can only take on so much of the up-front costs of smart grid before passing it on to consumers.
(3) We also need to seriously upgrade infrastructure for those smart grid technologies, and that, too, costs money.
So, yes, Jim is totally right. Why can’t we, as an industry, admit that? We often market the smart grid as a way to save the consumer cash, but, let’s be honest, that’s not always true. And, to so do, the consumer would have to be willingly involved---checking energy consumption, adjusting their use, understanding rate changes.
In the end, can we set aside the idea of selling the smart grid, renewable adoption and upgraded power technology as a saver of nickels and dimes and dollars? Instead, can we be more direct and say, “The smart grid is good for the individual, good for the marketplace and good for the country.”
As Martha Stewart coined, the smart grid is a “good thing.” It will allow for more renewables. It will give better information on power use, outages and issues. It will add technological options to the grid. And, sure, if you’re super dedicated to your in-home energy management unit and are willing to invest time (and perhaps cash if you had to buy and install that unit), the smart grid could save you money.
It could, but we’ll still need to pay for upgrades, research, investment and pilot programs before that happens. And, while a lot of that cost is being shouldered by utility companies, it is more than true that the average consumer is not going to see a financial benefit to the smart grid in the near future. They may get smarter, more reliable, higher quality energy. And, they may, in a few years, get to help with that greenhouse gas reduction, but it’s time to market the smart grid with it’s definite positives and let go of the idea that the average consumer can only be swayed to join the smart grid fan base if we talk about cash.
Let’s talk about change, about a smarter future. Let’s talk about cleaner energy and fewer outages. Let’s talk about more understanding with energy use and energy production. But, let’s stop talking about the almighty dollar. It’s just clouding an issue that should be about positive and necessary change and not about cost savings.
I can not differ a simple bit of that opinion. Smartgrid is going to cost a lot of money so, please, don't try to sell us the concept on cost savings basis but, instead of that, in terms of energy savings which is, in the end, the main objective. Let's things clear from the beginning. Otherwise people can overreact against this and get exhausted of void and false messages.
ReplyDeleteI don't disagree that smart grid represents an 'investment' and therefore has costs associated with it. But the unfortunate situation is that we don't have access to the information to appropriate evaluate whether technologies like storage may save us money. One of the benefits of storage is that it can offset the need for peak demand resources, which is extremely costly. But we don't know how costly because the general public doesn't have access to that information. If utilities in California (and other states) were required to disclose these costs (which are passed on to the ratepayer) then we could evaluate whether storage is a cost-effective solution. But they don't have to disclose and can aggregate all the costs together. One of the fundamental principles of a functioning market is having accurate and timely price information available. We don't have that today, so we can only guess. My guess is that smart grid (and storage) will actually save us money, if we use the technology properly. But I (like all of us) can only guess at this point.
ReplyDeleteSo, when has any public utility been interested in reducing costs ?
ReplyDeleteThe way public utilities are regulated and have their profits set argues against any effort to reduce costs, since in almost all cases regulators have set profits as a percentage of cost of doing business.
More costs = more profits
The smart grid is a complete waste of money - it's only function is to allow utilities to charge more during periods of higher demand.
ReplyDeleteThe idea of supporting the use of more renewable energy using the “smart grid” is equally absurd. Not only is renewable energy ineffective at reducing greenhouse gas emissions, but it is extremely expensive to boot.
If the objective actually is to reduce greenhouse gas emissions, then concentrate on increasing the efficiency of energy use and production. That will actually reduce costs and increase economic activity. Alas, utilities, developers and their freeloading supporters would lose out, but so what.
kellermfk sure hit the nail on the head. We would be better off investing in efficiency than all the "sexy," trendy stuff. The payback and effect are much quicker.
ReplyDeleteSmart Grid is believed to be the platform that enables “Smart Generation and Consumption” for reduced overall cost in terms of Dollars, Reliability, Environmental Footprint, etc., to all the relevant parties, from the consumers, the utilities, an all the way to entire the society and the world. I cannot agree more that it will be very costly to achieve these goals. However, I think it should exist a quick and simple “rule of thumb” for a specific utility to figure out the number of years of the return for the investment. Smart Grid will not reduce the total energy consumption in a daily or annual basis. The maximum it can help would be to flatten the generation/demand profile so that the high cost of peak generation can be avoided. A utility can simulate the scenario of “flat” generation/demand to estimate the cost savings against the current practice with the equal total energy consumption in a daily basis over a year. Then, they can estimate the potential cost to make the Smart Grid achieve the “flat” goal, which will give us a rough idea for how long it will take for all the parties to balance the investment and how much benefits we can get after that. Unless you can offer specific numbers, it will not do much good to convince the consumers who are the eventual and the real payers to the overall cost.
ReplyDeleteThe expansion of the smart grid past the point of controlling the utility infrastructure and into our homes and businesses involuntarily is not compatible with most peoples' view of their liberties. It is in fact a political football that the politicians feel a compulsive to run with so they can be seen doing something. The politicians are so used to spending other peoples' money that the concept of fiscal consequences seems to elude them completely. Why should they care about cost, or even reality?
ReplyDelete