Energy Risk - Smart Grid, New Products Promoting Wise Use of Energy

When discussing Smart Grid and Smart Metering, the topic usually centers on the new advancements with the energy distribution and metering capabilities. This not only includes the utility companies themselves, but also the metering hardware and software vendors supplying them. The implementation of these system wide modernizations provide the critical backbone of the infrastructure, but the capability of achieving the goal of using energy wisely to reduce the carbon footprint and manage peak demand is also dependant on new parties entering and fulfilling the important role of providing necessary products and services to consumers.

New developments in home appliances will be required in order to complete the overall infrastructure of the Smart Grid.

Many of the new players in the industry are large, well established companies who will be adding the new functionality and expanding their existing product lines to meet the new Smart Grid requirements. I imagine there are several engineers excited about the opportunities these changes are bringing.

Appliance Manufacturers

General Electric and Whirlpool are two major appliance manufacturers that are taking a lead role in providing smart appliances to help shift some of the energy load from peak hours to other parts of the day to reduce the need to build new peaking power plants. Both companies are working with industry leaders to help accelerate the adoption of these new capabilities to address how appliances will interact with the Smart Grid. Bracken Darrell, president of Whirlpool Europe recently announced that by 2015, the company will “make all the electronically controlled appliances it produces—everywhere in the world—capable of receiving and responding to signals from smart grids…” This promise is based upon two key conditions:

1. The development by the end of 2010 of an open, global standard for transmitting signals to and receiving signals from a home appliance and
2. Appropriate policies that reward consumers, manufacturers and utilities for using and adding these new peak demand reduction capabilities.

General Electric is introducing appliances that are capable of receiving pricing increase signals and adjusting their functions to reduce power consumption until prices goes back down.

They currently have a pilot program in Louisville, KY to determine the effectiveness of the Smart Grid enabled appliances. The utility is providing a pricing plan where prices varies across the day and once customers have established their preferences based on pricing, these smart appliances will adjust their operations automatically. However, customers will have the ability to override the automated response at any time.

In addition to the major appliance manufacturers, several manufacturers already have thermostats and other proven products that not only allow automatic control of the heating and air, but also serve as portals to display both pricing and billing information. A variety of companies are ready to deliver wireless energy dashboards that will monitor energy consumption data, i.e., Google PowerMeter, GreenBox and EnergyHub. Some of these companies are targeting end users while others are focused on utility partners. Regardless of the equipment, providing the customer the ability to control all of their smart devices without requiring a Ph.D. is critical for the acceptance of these new products. Manufacturers must balance the customer's desire for using energy wisely and managing their energy spending with their need for convenience and simplicity.

Communications

While smart metering providers have incorporated communication networks within their devices, wireless carriers such as AT&T and T-Mobile have started to work with partners to enter the Smart Grid arena. These wireless companies already have high-bandwidth communications infrastructures in place. By taking advantage of these networks that are already in place, utilities have another option to consider going forward for local area networks and many are already using cellular communications for wide area network communications.

The utilization of existing wireless networks may also facilitate the support of cell phones and other wireless devices for control and monitoring of home appliance and other energy consumption.

With Congress allocating the $4.5 billion of the economic stimulus package to develop new smart grid technologies, the major U.S. wireless carriers are working to create a business model that will allow them to effectively enter the smart grid market with new products and services that can compete with the existing utility vendors.

Government

As in every sector of the industry, various levels of government play a critical role in the successful implementation of the Smart Grid. The new US administration has been activity defining and promoting the implementation and acceptance of the "Smart Grid" initiative. On March 16, the DOE worked with the Senate to introduce S.598 "Appliance Standards Improvement Act of 2009" which would amend section 324A of EPCA to strengthen the joint DOE/EPA Energy Star Program. The plan is for these new standards for appliances to save consumers over the long run despite higher up-front costs for improved products.

Individuals and companies are also given the opportunity to take advantage of tax credits and deductions by installing approved energy saving products. State and local regulations will need to be modified to introduce new pricing models with saving incentives based on these new products and consumer awareness of using energy wisely.

With the stimulus package and the increased focus on green policies, the government is aggressively promoting development and acceptance of the Smart Grid. These actions are providing incentives for new players to invest in the development of the necessary products and services to make the Smart Grid successful.

Utilities and Traditional Utility Vendors

The addition of these new players in the industry sector provides opportunities for new partnerships and acquisitions. Traditional software and hardware vendors will need to be able to support these new appliances, whether through pricing structures, billing, data gathering, inventory, monitoring and controlling. Security and the volume of data will also present new challenges. Utilities need to be able to respond to the needs of the customer, which will change significantly as smart appliances and metering penetrate the market. Education and marketing programs will need to be developed to introduce their customer base to these dramatic changes. Utilities will also need to invest in additional training for their call center agents to use new systems and features and be able to assist customers with new pricing plans, smart thermostats and in-home display devices, as well as investing in new systems and business processes to support these new products and services.