How Smart Can You and Your Local Electricity Grid Get?

Xcel Energy's small-town test of smart-distribution and home-monitoring technology may set the stage for much bigger things.

The potential benefits are obvious: Install all kinds of monitoring equipment in personal residences, at small-business establishments, and out on the poles in the streets so that both providers and consumers know just how much electricity is being used at any given time to do what, and everybody stands to gain. Customers who have a better idea of how they’re using electricity and what they’re paying for it will consume it much more judiciously. The electricity provider, with much the same information plus still more coming from the distribution network, will be able to see problems coming and fix them more quickly and economically, before they start compounding and cascading. The provider, what's more, will have tools to influence consumer behavior so that all users of the grid become cooperative partners in making the electric power system more reliable and robust.

If it all comes out right, the overall efficiency of the power distribution system will be significantly improved, so that long-term investment in new generation can be reduced. Instead of having to add big new base-load plants that typically run on coal or natural gas, energy companies will have the option of building smaller wind farms or gas peaking plants instead.

The only thing is, nobody really knows just how big such benefits will be, how soon they will materialize, and how much it will cost to produce them. Seeking to get a handle on those issues, Xcel Energy, a Minneapolis-based distributor and producer of electricity, is in the midst of organizing an experimental project in Boulder, Colo., that it and its partner companies have dubbed SmartGridCity. Xcel, which claims to be the largest wind generator among U.S. utilities, hopes to figure out how to best design interactive systems that it can install in its own electricity distribution systems and then sell to others. Xcel’s partners, which make various kinds of smart-grid-relevant equipment and software, want to show potential customers around the world just how cost saving and useful their goods can be.

SmartGridCity is by no means the only project in the world flying the smart-grid flag, though it may be the most comprehensive. Billions of dollars are being spent in the United States and around the world on installation of  smart meters,  which represent just one facet of what smart-gridsters have in mind. (Smart meters tell customers and utilities when electricity is being used, communicating wirelessly or over power lines, thus opening up opportunities for conservation and improved load management.) In principle, many billions of dollars could be spent on all manner of gadgets from sensors mounted on wires and transformers to programmable refrigerators, washers, and dryers. And that doesn’t count the US $4.5 billion that the Obama administration plans to spend, as part of the stimulus package, on smart-grid demonstrations, innovative electricity storage systems, and transmission-system monitoring.

What makes SmartGridCity different from all other smart-grid projects, programs, and proposals is simply this: Xcel is spending upwards of $20 million of its own money, and its partners are providing about $80 million of theirs—to undertake the Boulder experiment. Not a penny is coming in the form of public or private grants, and not a second has been wasted seeking such grants. Simply put, SmartGridCity is the one project in which the partners—all of them profit-making corporations closely attentive to the bottom line—are putting their money where their mouths are.

In principle, of course, there are hundreds of smart-grid tech companies from which Xcel could have recruited partners. Michael Carlson, until recently Xcel’s CIO, says it picked its handful of partners based on three or four key criteria: the viability and relevance of the technology the company had to offer, the company’s willingness to invest from its own funds, and a corporate culture of partnering.

From the outset, Xcel and its partners conceived of SmartGridCity as an attempt to determine exactly what needs to get done for smart-grid technology to be deemed smart business. Unless energy distributors and their regulators are persuaded that payback will be big enough and fast enough to cover costs and produce profits, Xcel reasons, the smart grid won’t happen. And payback depends not only on the quality of technologies and their reception in the marketplace but also on the regulators who set the all-important rules.

”The real risk” in implementing the whole panoply of smart-grid technologies, says Xcel in a white paper, ”is that these technologies that transform conservation and efficiency efforts can lead to degradation of the regulated return and uncompensated demand destruction.” In plainer English, getting consumers to use less electricity could mean, unfortunately, that their utility would make less money, unless regulators give it some kind of break.

In principle, the utility could come out well ahead, partly as a result of improved maintenance operations and savings on distribution equipment like transformers, which could be matched better to usage patterns as consumer behavior is better understood. Then, too, points out Tom Henley, a Denver-based spokesperson for Xcel, there are the potential savings in long-term investment—not just for base-load generation but also spinning reserves (generating capacity that has to be held ready to meet sudden and unexpected increases in demand).

An old-fashioned, vertically integrated company like Xcel owns generation and spinning reserves as well as distribution networks, so if it saves on new investment in generation, it can reap rewards directly from adoption of smart-grid technology. But in a deregulated and restructured electricity system, in which the company distributing electricity is not necessarily the same company that owns generation, transmission lines, and reserves, it may be that savings obtained by the distributor would actually accrue to some other company.

Because of quandaries like this, Xcel and its partners have conceived SmartGridCity not merely as a project to test and demonstrate technologies but also as an experiment that will produce lessons that they can then take to state and local regulators. They hope to do so late this year or early the next, as results come in from the fully deployed smart-grid systems.

Photo: William Sweet

Wished-for Thinking

Designers of SmartGridCity hope that when consumers are shown how they are using their electricity on an Internet-based home portal like this one, there will be a “demand response.”  

Though its ambitions are lofty and it is one of a kind, SmartGridCity is a rather small project and is still in a rather tentative stage of development. Only about half the relevant equipment has been installed to date, and fully interactive technology is fully operational at just a handful of consumer locations. Tangible results worth reporting to the general public and to local regulators will start materializing only toward the end of this year, at the earliest. Were it not for the pioneering character of the project and the very big impact it could end up having—or not!—the project might be deemed overhyped and overcovered. A really cantankerous curmudgeon might even call it a stacked test, based on an unrepresentative sample and therefore destined to produce unconvincing results.

Xcel picked Boulder precisely because it’s not your typical American town. Situated less than an hour northwest of Denver, right where the Plains meet the foothills of the Rockies, it hosts the University of Colorado and a large, somewhat floating population long known for its New Age and slightly left-leaning inclinations. It’s the home of Celestial Seasonings, the purveyor of natural herb concoctions and is the only community in the United States so far to have enacted its own carbon tax. Not infrequently, Boulder is compared with the California city sometimes called the People’s Republic of Berkeley.

Xcel liked Boulder because it happened to be part of its Colorado operating area, because of its sharp physical definition, and because of its environmentally minded citizenry. If anybody is going to put interactive electrical devices to good use, the energy company figured, it ought to be Boulderites just being themselves. A concern, joked company executive Raymond Gogel during a media briefing last year, was that some of them might fear being caught by smart sensors growing marijuana under intense basement lights. But Xcel didn’t worry much about whether Boulder’s civic-spirited citizens would be willing, for example, to let their utility directly turn down their air conditioners when summer demand is too high and threatens to bring down the grid.

Pervasive communication and quick response are at the heart of the smart grid concept. Most of the smart meters that Xcel has been placing in Boulder homes communicate to the utility via broadband over power lines (BPL) and a fiber-optic communications system the company maintains; typically, BPL will carry the data the first 75 meters or so from the smart meter out to where it meets up with a fiber link. Information the utility compiles from each residence is communicated back to the user over the Internet.

Demonstration homes, including the chancellor’s residence at the University of Colorado at Boulder, are equipped with computer-based “home portals” where residents can scan historical usage and make decisions about how to manage present-day and future electricity usage. A variety of plug adapters permit the conversion of any major appliance into a smart device. The city of Boulder and the University of Colorado are participating in an experiment involving 60 plug-in electric cars, which will be chargeable at stations to be established around town.

The ultimate hope or fantasy is that hybrids—in addition to drawing on electricity—will also serve as home energy storage devices that can contribute power at times of system overload. That way, the hybrid car, in combination with scattered home generation from photovoltaic panels or even personal windmills, can help make the whole system more secure and more economical. At times of high general demand, homes can contribute generation to the grid, but when electricity is plentiful and cheap, homes can draw power to charge up their cars and run major appliances.

The only residential installation in Boulder that comes close at present to realizing all those possibilities is the chancellor’s residence. It’s divided into a number of electricity zones, enabling the residents to see in some detail where and how they’re drawing the most power. It has a plug-in hybrid in the garage and a 6-kilowatt solar panel on the roof.

Ultimately, in theory, a customer equipped with all those things and a home portal to regulate their use will be able to determine, whether at home, at work, or on vacation, just how the home electricity system should be configured.

A highly motivated customer, no doubt, will be able to realize really significant savings that will be good for the family budget and good for society as a whole. The former Colorado chancellor’s wife, Val Peterson, an ex-teacher, told NBC’s Tom Brokaw that she and her husband reduced their home’s energy usage by 30 percent by making intelligent use of the home portal system. Environmental lawyer Dennis Arfmann and his wife, Julie Brown, installed a 4.5-kW photovoltaic array on their roof and plan to use their smart-grid technology to maximize their sales of solar electricity back into the grid and minimize their own electricity use.

But how many Boulderites are like the Petersons, Arfmann, and Brown? Most, obviously, do not live in enormous official residences in the public eye, and most are not going to install photovoltaic panels on their roofs or windmills in their yards. So how motivated will Boulderites be to use such portals, and how well will they use them?

A startling aspect of Xcel’s situation in Boulder is that the utility is not as yet authorized to charge consumers variable rates for electricity, to reflect real-time changes in generation and delivery costs. Consequently, Xcel lacks what otherwise would be its most potent lever for changing consumer behavior: If consumers saw in their home portals how electricity prices were changing in real time or were alerted by e-mail of peak-load conditions or automatically programmed their systems to reduce electricity use when prices crossed a predetermined threshold, then they would have really strong motives for monitoring and changing their behavior.

But the way the system is set up now, consumers can only guess how much they’ll save on electricity costs based on home portal feedback and commonsense intuitions about the natural cycles of prices. (Obviously, electricity is usually cheaper at night than during the day, and during the summer it’s much more expensive on hot days than on cool ones.)

The British government, having adopted a plan to equip all homes with gas and electricity smart meters by 2020, has estimated, according to the BBC, that the average consumer will cut energy usage by 2 to 3 percent in response to feedback. If every single citizen of the United Kingdom in fact cut usage by 2 percent, the aggregate amount of energy saved would of course be enormous. But how exciting, to the average customer, will a 2 percent savings be? Exciting enough to actually go to the trouble of creating the savings?

One bet Xcel is making in Boulder is that green-minded consumers will like the idea of regulating their usage to draw increasingly on wind- and solar-generated electricity and less on that generated from coal. Most of Boulder’s electricity comes at present from a coal-fired plant, but Xcel has announced plans to build the country’s second-biggest solar generating plant, in south-central Colorado. Will Boulderites really go to some trouble to shave a few points off their coal consumption and add a few points to what they get from renewables?

A disconcerting recent development in SmartGridCity was the rather abrupt recent departure of Carlson and Gogel, the two Xcel executives who usually were the spokespersons for the project. When asked for comment, the company declined to make available the person now responsible for the project or one other person who has worked at a senior level all along. Corporate partners in the project say nothing is seriously amiss, but admit they wouldn’t bad-mouth Xcel in the press even if something were seriously wrong.

Standing in an impressive demonstration room in Denver last March as Xcel’s Kathleen Evens gave a virtual tour of the chancellor’s home portal system, this reporter felt an uneasy memory rise to the surface—it was of a similar visit paid 10 or 15 years before to AT&T. There, the object of scrutiny was a demonstration lab that had been set up at the behest of AT&T’s highly trumpeted chairman, C. Michael Armstrong, to show how the company’s triple play—telephone, Internet, television—would work.

A few years later, Armstrong was history, AT&T had been converted into a mobile phone company, and to the extent the triple play was making big corporate profits, it was making them for other companies. To be sure, Xcel’s Boulder experiment does not have to produce profits for Xcel itself to be deemed a success. As Gogel said at last year’s briefing, SmartGridCity “is a pure R&D play.” But of course the experiment will be a lot more convincing to global customers if it really does prove profitable for Xcel, beside producing good PR and favorable news copy.

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