The Smart Grid's Coming Electric Economy

Written By Nick Hodge

Posted December 9, 2009

The economy of yesterday was dependent on access to cheap petroleum. The economy of tomorrow will be dependent on access to cheap, reliable electricity.

Consider this nugget of crucial information: In the 1950s, 40% of the U.S. economy relied on electricity. Today, fully two-thirds (66%) of our economy depends on it.

And we haven’t even electrified our transportation yet.

Such was the backdrop for high-level talks at GreenBeat 2009, where I had the chance to talk about the future of electricity with some of the brightest (and wealthiest) in the biz.

Last week, we took a look at Google’s perspective and entrance into the electricity arena. Today, we’ll take a look at the utility perspective.

Smart Grid and The Economy

While I heard from many venture capitalists and smart grid product providers, I must say it was a pleasure to get the utilities’ take on things. After all, when it comes to the smart grid, the utility is the customer.

The session began with a primer on the current status of the grid. Basically, we’ve been living for 100 years with grid 1.0, the electro-mechanical analog version that dumbly pushed power along.

Today, we’re at grid 1.5, meaning the first layer of digital technology has been introduced to the grid. Think digital thermostats and smart meters.

But we’re quickly approaching grid 2.0, which will see the implementation of common, open standards (like the Android phone) and specialized apps for homeowners and other utility customers.

And the economy will be dependent on smart grid success.

I’ve already told you about our economy’s increasing dependence on electricity. But did you know the average downtime for an outage in the U.S. is 120 minutes? In parts of the Southeast, that number climbs to 400 minutes.

It’s one of the major reasons there isn’t a robust manufacturing base in the south.

And if you think that’s disturbing, consider that average downtime for a power outage in Japan: just three minutes.

So we have some work to do.

Andres Carvallo, CIO at Austin Energy, has been a leading smart grid pioneer for years now. And he has some ideas how to get it done…

The Utility View of the Smart Grid

Austin Energy serves 1 million customers in the heart of Texas. And they’re adopting the smart grid out of necessity.

“Not because it’s trendy. Not because it’s cool. Not because it’s the right thing to do,” according Carvallo. But because they have to.

And he offers an analogy. Think of the energy business like the computer business.

Central power plants become mainframes. Cogeneration like boilers in hospitals and hotels are equated to minicomputers. Rooftop solar and other distributed generation are personal computers (PCs). And electric cars are laptops.

With respect to the grid, there currently aren’t many PCs or laptops. But they’re coming.

Carvallo said Austin currently has ~1,000 rooftop solar installations. They expect 50,000 by 2015. And by the same date, they expect 100,000 of the area’s 800,000 cars to be electric.

According to Carvallo, if those things happen without the utility’s involvement — and without the development of the smart grid — “the Austin grid would become the biggest fireworks display in the history of mankind.”

So the utility very much wants to be a part of the smart grid build-out.

What Needs to Be Done

The smart grid is the bridge between new electricity generation and distribution. It’s what allows wind energy to get from the field to your toaster — efficiently and quantifiably.

It’s what allows rooftop solar electricity to be introduced to the grid and what facilitates the easy charging of thousands of electric vehicles.

The smart grid is also what enables us to adapt widespread efficiency — to remotely turn off lights or switch loads between household appliances.

To make it happen, Carvallo says, we’ve got to incorporate four industries: hardware, software, telecommunications, and energy.

He sees collaboration, integration, new programs, and new services as opportunities for new companies. Just think about all the voids that need to be filled.

There’s a need for smart meters and thermostats. There’s demand for Wi-Fi enabled switches, routers, and substations. That alone creates a huge hardware market.

And that’s without mentioning the software. Utilities will increasingly be adopting new software to manage all these devices and the data they’ll produce.

There could even be an app store to help manage your home energy use.

It’s being equated to the Internet. And the profits the smart grid generates will be just as big.

I’ll be releasing some new smart grid picks soon. But for now, I’ve got my eye on a small Chinese battery company.

You see, batteries will be an integral part of the smart grid — not just for vehicles, but also for energy storage. Take a moment to read about this gem of a company and the profits it will offer early investors as batteries take center stage in the energy industry.

Call it like you see it,

Nick Hodge


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