Deployment of the "Smart Grid:" Transforming the U.S. Electricity Delivery System

Last week the U.S. House Committee on Science and Technology heard testimony about the progress towards transforming the U.S. electricity delivery system. Discussion was focused on the planning, development, and deployment of the "smart grid."

The stakes for successfully implementing a smart grid could not be higher. The U.S. Department of Energy (DOE) has estimated that if the efficiency of the American grid was improved even by five percent, "the energy savings would equate to permanently eliminating the fuel and greenhouse gas emissions from 53 million cars."

Subcommittee chair Brian Baird, Washington Democrat, said, "Even today with tremendous advancements in technology, electrification is considered the greatest engineering achievement of the 20th century. However, parts of this infrastructure are nearly a century old, and our increased reliance on electrical power is straining this system's capacity."

According to the subcommittee:

"The smart grid is a two-way communication system for managing our electric infrastructure hat offers utilities and consumers more information regarding electricity supply, consumption, and price which would ultimately modify patterns of electricity usage. It would give consumers access to real-time pricing, which will enable them to use energy when the price is lowest. For example, if electric use in an area is high, customers will see that the price at that time is higher, and they may choose to limit or delay energy usage until the price goes down, like running the dishwasher later in the evening instead of right after dinner, when the air conditioning and the television are also running."

The National Institute of Standards and Technology smart grid coordinator, George Arnold, told the subcommittee that the institute will deliver the first set of standards to the Federal Energy Regulatory Commission this fall. FERC has the responsibility to adopt interoperability standards.

The complexity of the task at hand was underscored by Mr. Arnold who told the subcommittee that NIST's standards will involve software and hardware standards for nearly 5.4 million miles of transmission and distribution lines, more than 20,000 substations, and nearly 130 million electricity meters linked to more than 3,000 utilities, according to the BNA Daily Environment Report ("Smart Grid Will be Costly, Taking Years But Necessary for Economy, Experts Say," July 24, 2009).

Suedeen Kelly, a FERC Commissioner, testified that, "A critical issue as smart grid is deployed is the need to ensure grid reliability and cybersecurity. The significant benefits of smart grid technologies must be achieved without taking reliability and security risks that could be exploited to cause great harm to our nation's citizens and economy." She noted that in mid-July FERC adopted its smart grid policy statement. However, she cautioned that if Congress intends that all operators associated with the smart grid comply with FERC's standards "additional legislation would need to be considered."

Ms. Kelly explained that deploying the smart grid will be essential to the role renewable energy may play in the future. She said, "Smart grid technologies have considerable potential to facilitate demand response, and demand response can help address bulk-power system challenges, including reliably integrating unprecedented amounts of renewable resources into the grid."

The so-called stimulus bill included more than $10 billion that could be used for grid upgrades. This figure includes $4.5 billion for funding smart grid-related projects.

Smart grid work is also taking place in the European Union in the form of the SmartGrids project.

There seems little doubt now that the smart grid will be part of our electricity future. Consequently, it would be reasonable to conclude that there will be significant opportunities ahead in this nascent industry.

To learn more about the smart grid, read "The Smart Grid: An Introduction", which was published by the DOE.

UK Construction Association President: Climate Change Mitigation Will Mean a "Revolutionary Change in Our Society"

Keith Clarke, chair of the UK Construction Industry Council and CEO of the Atkins engineering firm, says that mitigating climate change is "a moral imperative" that will both challenge and offer opportunities to society and the building industry.

Speaking to the Financial Times ("Atkins Likens Climate Change to Industrial Revolution," July 22, 2009), Mr. Clarke said, "It won't be comfortable. It's horrifying, it really is. But it is extremely exciting to think about a change that has so many unpredictable effects. Intellectually it's about exciting as it gets."

The EU mandated major changes in energy efficiency standards. The U.S. is finally beginning to show more interest, at federal level, in this concept.

You can be sure that a successful businessman like Mr. Clarke does not want his company left behind, and that should tell all of us something about the opportunities directly ahead.

U.S. Electricity Generation: Prepare for Major Developments

The country and the energy industry are in the middle of what could very well be a time of major change according to one energy expert.

Kate Marks (MRLS graduate, 2009), who is Managing Director of the National Association of State Energy Officials, and I met several days ago. Ms. Marks, who formerly headed the energy division at the National Conference of State Legislatures, is extremely knowledgeable about the challenges and opportunities on the horizon. And she has to be -- she advises the state energy officers in the 50 states and assorted territories. One issue of key importance in Ms. Marks's opinion is transmission.

She began our conversation by pointing out:

"Initially the power system was distributed and generators were located where electricity was used. This all changed in the 1890s when stronger transmission lines were developed that could transfer electrons much longer distances. The economics and ability to serve more people with more power led to consolidation of the smaller, more distributed generation companies into large monopolies. States in turn extended their regulatory power from railroads to electricity, and by 1914 43 states regulated electric utilities. Twenty years later, the federal government passed the Federal Power Act giving the Federal Power Commission jurisdiction over wholesale power sales and interstate transmission."

Nevertheless, the matter of the siting of interstate transmission lines -- and related issues such as planning and paying for these lines -- has traditionally been handled at the state level. Does this approach remain logical in today's world where more renewable sources are being talked about and developed? This is just one of the issues she is working on.

Another is the role of renewable portfolio standards (RPS) as a means of encouraging the integration of new renewable sources into utilities' generating portfolios. To date, more than half the states have adopted RPS's, but there is no federal standard.

Despite its rather low-profile image the electricity sector is enormous, accounting for nearly $350 billion in retail sales in 2007 according to the Energy Information Association. And yet the electricity sector is confronted by enormous challenges.

Individuals such as Kate Marks are helping establish the blueprint for what America's energy future will look like. It is an exciting time to be involved in these issues, and Ms. Marks is right in the middle of them.

Vast Majority of U.S. Scientists Say Global Warming Caused by Humans While Less Than Half of the American Public Agrees, New Pew Report Says

Nearly 85 percent of scientists say that global warming is being caused by human activity while less than 50 percent of the public agrees with that assessment, according to the Pew Research Center for the People & the Press.

In "Public Praises Science; Scientists Fault Public, Media," the Pew Center reports that 84 percent of scientists it surveyed believe the link has been made between global warming and human behavior. However, only 49 percent of the public agrees with that assessment. This finding was part of a much longer study that paints a fascinating picture of how the American public views scientists. 

I am sure similar studies have been conducted in the European Union, although I have none at my fingertips. However, my firm suspicion is that the percentage of EU scientists agreeing with their American counterparts would be about the same. However, the EU public also shares this opinion in contrast to many of their American counterparts.

This difference is played out in the very contrasting approaches the EU and the U.S. have taken to climate change policies. In the EU, all serious political parties (with almost no exceptions) favor limiting greenhouse gas emissions. And, at least from an aspirational standpoint, they are serious about enacting legislation. In the U.S., the debate about the causes of climate change go on without end in Washington and the public is divided. 

Bearing all of this in mind, my view is that a serious U.S. legislative greenhouse gas limitation measure is going to be very difficult to achieve. Too many special interests doling out too much money. In truth, Washington is awash in this money and because of the pattern of Congressional districts generally being drawn to favor one party or the other, don't hold your breathe waiting for any real middle ground to be reached.  (Has anyone in the U.S. seriously thought about proportional representation in U.S. House races?  It seems to work just fine in many other places.)

Consequently, America has in effect ceded the climate change leadership to the Europeans.  There is nothing new about this.  And perhaps that is the way it should be taking into consideration the relative ambivalence Americans seem to feel about this issue.  Let the next generation worry about it, which appears to be the new American mantra.

Walmart to Introduce "Sustainable Product Index"

Giant retailer Walmart has announced plans to develop a "worldwide sustainable product index."

According to Mike Duke, Walmart's president and CEO, "Customers want products that are more efficient, that last longer and perform better. And increasingly they want information about the entire lifecycle of a product so that they can feel good about buying it. They want to know what materials in the product are safe, that is was made well and that it was produced in a responsible way."

The first step in the initiative is to survey the more than 100,000 global suppliers. Among the topics asked about will be energy and climate, material efficiency and use of natural resources.

The second step will consist of developing "a database of information on the lifecycle of products -- from raw materials to disposal."

The third step will involve developing the index and establishing a rating system for customers to assess product sustainability.

Will Walmart be able to achieve what many governments have shied away from? Or is this another example of "greenwashing" that will amount to little more than a series of press releases and promotional stunts? Come to think of it, some may say that this latter comment rather sounds like how many governments already approach these issues.

Cap-and-Trade: A Step Towards "Environmental Progress" or Simply a Giant "Bubble Machine" That Will Enrich Wall Street?

There are many (but certainly not everyone) in the environmental and utilities communities who think that the cap-and-trade concept is a reasonable approach to reducing greenhouse gas emissions. But a recent story in The Rolling Stone ("The Great American Bubble Machine," July 9-23, 2009) makes the argument that the cap-and-trade concept being discussed in Washington is effectively "a new commodities bubble" that will enrich a handful of traders.

Of particular interest is the discussion of "Bubble No. 6: Global Warming". Matt Taibbi, the newspaper's politics reporter, contends cap-and-trade "will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax-collection scheme. This is worse than the [financial] bailout: It allows the bank to seize taxpayer money before it's even collected. [Mr. Taibbi's italics]"

Mr. Taibbi explains:

"The feature of [the cap-and-trade] plan that has special appeal to speculators [such as the investment banks] is that the 'cap' on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand-new commodities market where the main commodity to be traded is guaranteed to rise in price over time."

And here is some more troubling information about one of the leading corporate cap-and-trade supporters, investment giant Goldman Sachs:

• President Obama received $981,000 in presidential campaign contributions from Goldman employees.
• In the last election, Goldman employees gave nearly $4.5 million to the Democratic Party and its candidates (do you think this had anything to do with the fact that in the run-up to the November 2008 election it looked like the Democrats would continue their control of the House and would likely take control of the Senate? Surely not...).
• Last year, Goldman spent more than $3 million to lobby on issues related to climate.
• The Chicago Climate Exchange, which presumably will be right in the middle of emissions trading, is owned in part by Goldman.
• The Obama Administration is filled with Goldman alumni, not all that bad perhaps from Goldman's standpoint but what about the larger public?

Of course it would be nice to conclude that Goldman and its employees' actions are purely those of interested citizens and a benevolent company. But, after what all of us have seen in the last year, that's about as hard to swallow as a fresh $8 hot dog (to say nothing of a two-day old one) at Mile High Stadium in Denver. I do not care how many $10 beers one tips to wash it down. You still cannot rid yourself of the awful taste, and the knowledge that you actually ate the vile thing. (I know about this...I tried it several years ago.)

In the article, Mr. Taibbi takes Goldman Sachs to task (a better word is "excoriates") for a whole list of bubbles including the Internet and mortgage bubbles before moving on to cap-and-trade.

In response, Lucas van Praag, a spokesman for Goldman, told FelixSalman.com that, "Taibbi's article is a compilation of just about every conspiracy theory ever dreamed up about Goldman Sachs, but what real substance was there to support the theories? We reject the assertion that we are inflators of bubbles and profiteers of busts, and we are painfully conscious of the importance of being a force for good." (And making astronomical amounts of money, too, it might be observed -- check out Goldman's profits for the last quarter).

What to make of this? I suppose that any time a market is created -- which is effectively what cap-and-trade will do -- there are opportunities for the quick and clever to make money. No one I know disagrees that making money is what makes the world go round (this is the lesson the Chinese seem to be preaching to the Americans and Europeans in particular). But why is Goldman so interested in this particular issue? Are they simply doing it for the good of the planet?

As a long suffering fan of the Kansas City Chiefs pro football firm (cannot really call it a "team" anymore since these outfits are businesses, not sports "teams" as they once were), I want to believe that the Chiefs will win the Super Bowl next January. I want to believe that they have assembled a team that all Chiefs' fans can be proud of. But I also know that just as surely as the sun comes up in the east and goes down in the west, the Chiefs are about as likely to make the Super Bowl as I am of being President Obama's second nominee (when a position opens) for the U.S. Supreme Court.

The point is that we can all dream magical thoughts, but reality often pokes its ugly head into the dream. All of this has set me to wondering about exactly how the cap-and-trade is going to be implemented (if it's passed) and who will be among the big beneficiaries. For some reason, I can't get Goldman out of my mind...

Investment in Sustainable Energy Reach $155 Billion in 2008, UNEP Report Says

Despite the economic downturn in 2008, investments in sustainable energy projects totaled nearly $155 billion, up from $148 billion in 2007.

In "Global Trends in Sustainable Energy Investment 2009," which was sponsored by the United Nations Environment Program, Achim Steiner, UNEP executive director, wrote, "While the $155 billion sustainable energy investment in 2008 and the multi-billion stimulus packages can go a long way, investment needs to reach a half trillion dollars per annum by 2020 to help ensure a peak in greenhouse gas emissions by then...Perhaps the biggest stimulus package of them all will happen in Copenhagen if governments agree a scientifically-credible and forward-looking new climate agreement."

By comparison, investments in sustainable energy were $22 billion in 2002, $27 billion in 2003, $35 billion in 2004, $60 billion in 2005, and $93 billion in 2006. Looked at another way, 2008 was the first time that new power generation associated with renewable energy topped the investment in new fossil-fuel fired generation.