THE BUSINESS SCENE

Smart Grid Millionaire

Do you want to be one?
Gerald B. Sheblé

 
©Corbis
The onslaught of advertisements, announcements, and pronouncements has risen to a fever pace as the end of oil, natural gas, green house gases, and renewable resources are brought forward to solve the energy crisis. Many announce that the solution has been found. According to the many advertisements and reports, it is the stockholder protection of traditional utilities that prevents the rapid deployment of such technologies. If money is placed with one of these resources, the energy problem can be solved simply and quickly with the stroke of a pen. Unfortunately, these are exaggerations whenever one digs into the presented material. Most of the analysis is flawed as long-term fuel prices, environmental impacts, transportation network capabilities, and appliances are not included, and the details are lost in the exceptions and assumptions in the fine print.

Generation

"Calpine's stock has rallied as investors bet that the power generator, which is operating under bankruptcy-court protection, will benefit from pared debt, environmental advantages and speculation of buyout interest," according to Infocast, Inc. The present environmental crisis is a unique constraint on the development of future energy resources. It is not clear which resources will most benefit the environment.

Wind generation is being installed at a feverish pace throughout the Midwest; biomass using cow and human excrement is on display in Los Angeles, Oregon, and Wisconsin; photovoltaic is cost effective in New Mexico, and pumped hydro is cost effective in California; even nuclear, often noted in soft tones, is again a viable option if it is recycled until it is economically depleted. Environmental concerns have downgraded coal as the solution until CO2 sequestration is understood. However, the promise of coal gasification may solve such issues as mercury and sulfur contamination.

The impact of renewable resources in Europe is very remarkable. It is noted that soon 65% of the energy in the Netherlands will be produced by wind generation that is integrated with energy storage in Sweden and Norway. There is 1,500 MW photovoltaic already in the German power system with much more planned. Technology is now changing quickly enough in the energy industry that the field experience with network integration of photovoltaic (PV), with integration of wind power, with the increased energy storage as available with energy storage, and the resulting impact on reregulation and market interaction is hard to disseminate internationally. The integration of renewable resources and energy storage are widely documented as a viable solution.

Tidal Power

The capture of water after the high-tide inflow has been studied for decades in the Bay of Fundy and other areas. Building dams to capture such large amounts of energy are extremely intensive, comparable to other engineering wonders, and have a significant impact on the local ecosystems.

Wave Power

The capture of wave energy is presently proposed in Europe and the United States. The concept is simply to use the rise and fall of the water level to generate electricity. Linear machines have been developed for this application. The problem is to connect the energy to the grid. Most coastal areas are very expensive when considering transmission system expansion. Additionally, the location of many generation buoys are a navigational hazard, a restriction to fishing rights, and a potential restriction to aquatic life of presently unknown impact.

Nuclear

AREVA is presently offering recycling services around the world to demonstrate the viability of nuclear energy. Alternative electric conversion from radiation is about to be demonstrated by several companies. The energy content of nuclear fuel is the largest resource on the Earth at present estimates. However, the present political climate is suicidal for any government to press forward with nuclear development. The cost overruns, the lack of secure transportation, and clean-up costs for past experiments such as Hanford and other have instilled general distrust of the nuclear industry. Most universities have closed their nuclear engineering departments, and there is general unavailability of skilled labor to build such plants.

Energy Storage

Recent wind energy systems require considerable pumped hydro storage to satisfy demand without significant demand side management. The complete, complex systems required to provide reliable energy are demonstrated in the recent California project to develop Tehachapi Mountain as a pumped storage facility to balance the wind generation availability and the Portuguese matching of thermal, pumped hydro storage, and wind generation.

The potential for underground and pumped hydro storage is being investigated as a reuse of the many underground mines and caverns. While the use of compressed air has not found wide-spread utilization, pumped hydro has spread and could spread more quickly if the environmental imprint was reduced. The flooding of high valleys is not always seen as an environmental benefit even if there is an additional recreational area. It is noted that many pumped reservoirs are not suitable for recreation.

The announced development of 20 MW flywheel storage devices provides an interesting addition to a distributed storage solution, especially as the system inertia is plummeting with the development of lighter generation units and the decoupling of rotating demand with power electronics.

The recent announcements of battery development are especially promising for transportation using hybrid automobiles.

Distributed Generation/Storage

Distributed generation, using biomass or hydrogen, is the ultimate solution according to many, if the prototypes work as expected. The expected profits are huge, if the silver bullet is found. Financial calculations, called valuations, are hard to compute given the multiple markets, the multiple resources, and the availability of capital funds in the near future. The availability and transportation of fuels is often not part of the valuation. Most reports ignore the transportation of the fuels when providing a valuation.

The impact of gas prices has led to a new international "ethanol diplomacy" from Brazil to Venezuela, the rest of South America, amd the United States. President Bush and Brazilian President Luiz Inacio Lula da Silva toured several ethanol plants after signing an agreement to promote the use of ethanol. There are an estimated eight ethanol plants to be built in Iowa alone, if the electric energy is available and if the price of corn, japka, sugar, eucalyptus, or other fermentable sugars remains stable. According to The Daily Reckoning Web site, "Brazil and the United States are the world's biggest ethanol producers, cranking out better than two-thirds of the global supply." There is obviously overflowing enthusiasm from corn-producing states, especially as the "United States will maintain steep tariffs on Brazilian ethanol," according to The Daily Reckoning. The big food producers in the United States have announced a 30% increase in all products as corn juice is in all food products. As more corn is moved into fuel, livestock feed prices are increasing, and the cost is certainly to be passed to consumers. As it presently takes large amounts of energy to produce ethanol fuel, the price of corn is up 30% since the beginning of 2007, and in September 2007 rose 20% in two days. New processes to use the remnants are available but are not yet widely in development. The most recent IEEE-USA white paper, from 15 June 2007, supports the need to connect hybrid cars, hopefully using biofuels, to the regional transmission grid. This is yet another form of distributed generation and/or distributed storage. One can only imagine the sleepless nights as our autos start up, generate electricity, and then charge up for us to go to work in the morning.

Energy Demand

Three years ago, I was on vacation in Bordeaux, France, with my family to taste the local wines. We were amazed to find that transportation was impossible within the city. The city was expanding its mass transportation system with 13 new tram lines. Because of the expansion, it was impossible to get from one part of the city to another in a single cab ride. One had to leave the cab, walk over the construction, and then take another cab toward the destination. Portland, Oregon, is now expanding its light rail system as the number of riders has increased above all previous forecasts. The interstate highways in Portland are often overloaded, the parking costs are rising, and many companies have trouble tolerating the unscheduled work week that results. Flexcar, a fleet of mostly hybrid autos, is spreading through the four metropolitan areas of Portland. It will be interesting to see how these cars will be integrated into the regional grid. It will also be interesting to note where the electricity will be produced to power mass transportation if the United States attempts to catch up with Europe and restores the mass transit systems that existed in the 1950s. The impact of dc conversion equipment on power quality will be most interesting. The number of tram train rails presently being removed in Portland demonstrates, as a stark indicator, that a previous decision now has to be undone.

This year I have noticed significant mass transportation developments in Portland, Oregon; Nice, France; Minneapolis, Minnesota; and Saint Louis, Missouri as the customers flock to trams for daily transportation to and from work. Mass transportation is most evident in Chicago, where I have seen interstate parking lots from the fast subway to and from Chicago O'Hare Airport. As parking fees exceed US$60 per day, the automobile as transportation to and from work is becoming a luxury.

Environment

As the green craze expands, it would seem that legislators could bring an environmental market or a package of fuel-efficiency reforms to the congressional floors. Such proposals are not finding adequate support, even though utility executives are calling for environmental markets to guide the planning process that has been stopped for many decades. Are the environmental concerns a craze or a genuine concern?

The Senate Commerce Committee has been the recipient of pleas from U.S. auto makers who have cried foul as it is simply too expensive since all three are consumed with massive restructuring, extensive retooling, and declining market share to foreign imports. The discussion of the automobile is just starting to develop. A Wall Street Journal blog noted that "Sen. Barack Obama, the 2008 Democratic presidential candidate, told the Detroit Economic Club that the financial mess the city's auto leaders have found themselves in is to some extent their own fault, and that he wants to see annual increases in mileage standards. He also said that protests by the Big Three that such efficiency improvements are costly won't wash, saying yesterday that 'expensive to do is no longer an excuse for failure to do.' The Transportation Department has estimated that 4% annual increases in fuel efficiency would cost the auto giants $85 billion between 2010 and 2017."

As noted by several financial journals such as Barron's and The Wall Street Journal, "President Bush will call today for negotiations among the world's economic powers aimed at establishing a target for greenhouse-gas reduction, a long-awaited milestone for his administration that allows him to leave a bigger mark on climate change policy during the remainder of his term. But the initiative is likely to run into criticism among some environmentalists, who worry that Bush's separate dialogue among the world's biggest greenhouse-gas emitters may undermine broader United Nations negotiations that are just getting under way." How can the general public form a consensus on potential solutions given the thrust and counter thrust of economic warfare?

Networks

All of the above components are ineffective on their own. Only when they are interconnected into a regional grid, soon to be a national grid, can the economies of scale and the economies of geographical diversity be fully harvested as the resources of each area are unique and the demand in each area is growing at various rates.

Energy Transportation

The transportation of energy has become a key problem as insufficient infrastructure exists to transport coal by train or barge, to transport electricity as HVac or HVdc, to transport gas (natural, coal, hydrogen, biomass) in a financially viable manner. The previous systems are at a limit with many restrictions on extension development. New systems are imagined to obtain the maximum flows for a large percentage of the time with a given level of reliability. New systems are envisioned to integrate distributed generation into the regional grids, thus reducing the flow requirements on existing equipment. While some networks, such as natural gas, can be expanded, transmission systems and hydro systems seem to be at a standstill. Only recently has there arisen a public concern with the gas pipeline network as a terrorist target. Concerns with the delivery ports for oil, natural gas, and liquid natural gas have caused several projects to be halted. It should be noted that liquid natural gas ports are not being built within the United States but in neighboring countries.

The networking of HVdc has been proven by Bonneville Power Administration. The addition of a boosting bridge has shown that a dc network could be built to interconnect with more than two points.

Smart Grids

EPRI has centered on the development of a smart grid for over a decade. Several companies have developed tools applicable to a smart grid. At least three consulting firms are centering their resources to smart grid strategies. A smart grid is composed of several general concepts.

The overall intent of smart grid development is to align the interests of electric utilities, consumers, and environmentalists through an intelligent network, the Internet. This network would control distributed resources including demand-side management, energy storage, and renewable resources. The smart-grid platform would enable an operator to efficiently balance supply and demand with economic efficiency of stored energy during peak periods.

A smart-grid platform would reduce nonessential loads, optimizing existing base-load generation asset performance and relieving congestion on transmission systems. One such solution by GridPoint is a smart-grid platform that advertises itself as able to provide "a modular, scaleable, and upgradeable architecture that enables utilities to achieve the short and long-term goals of the smart grid. Utilities can immediately deploy proven technologies (e.g., load control devices, batteries, or renewable energy systems) while creating a practical path for integrating new technologies (e.g., plug-in hybrid vehicles and fuel cells)." It is analogous to the development of the USB port on computers to which many devices can be attached and used as the system dynamically selects the proper software to integrate the device attached with minimal user intervention. It is advertised that "for consumers, GridPoint's platform provides protection from power outages, increases energy efficiency, and integrates renewable energy systems, paving the way for the commercial success of solar and wind energy sources." This author is surprised that the cost of altering the vast relay protection network has yet to be calculated as this is the primary target of this development. Relay technology has only recent utilized the power of the microprocessor other than to mimic the operation of mechanical relays.

The component of the smart grid that is not new is automated meter reading (AMR). Several projections find that the U.S. AMR market will grow about 20% annually through 2010. However, as of this writing, AMR or related smart-grid initiatives have not been implemented on a large scale in the United States. It seems that while such AMR technologies are maturing, they are not yet fully mature. Based on concerns of stockholder interests, communication protocol standardization, inadequate technologies, and customer interest fester, development is not rapid. However, it is noted that a significant number of U.S. electric utilities "are taking leaps of faith towards developing AMI/smart grid strategies," according to Electric Energy Online. It is noted that demand reduction is not a profit center for any company at this point in time. It should be remembered that demand side management has been forced on utilities since the first oil embargo in the middle 1970s. The expansion of the regional grids into a national grid has been transformed into a national security interest as transmission corridors have been identified as critical infrastructure. Such development has brought forward analogies to the environmental protection laws with regard to legal process that may be hard to justify and to meet the goals as presently stated. This area is now highly politicized as several activist groups are being formed to address this process. It should be noted that the hydrogen economy and distributed generation are often proposed to eliminate the transmission grids. The development of reliability standards will determine the primary technical basis for this new federal activity.

The transportation of energy has become a key problem as insufficient infrastructure exists to transport coal by train or barge, to transport electricity as HVac or HVdc, or to transport gas (natural, coal, hydrogen, biomass) in a financially viable manner. The previous systems are at a limit with many restrictions on extension development. New systems are imagined to obtain the maximum flows for a large percentage of the time with a given level of reliability. New systems are envisioned to integrate distributed generation into the regional grids, thus reducing the flow requirements on existing equipment. While some networks, such as natural gas, can be expanded, transmission systems and hydro systems seem to be at a standstill. Only recently has there arisen a public concern with the gas pipeline network as a terrorist target. Concerns with the delivery ports for oil, natural gas, and liquid natural gas have caused several projects to be halted. It should be noted that liquid natural gas ports are not being built within the United States but in neighboring countries.

It seems that problems with the regional transmission grids are spreading to other energy transport networks.

Reregulation

The competitive electric markets are working, are failures, are not yet developed, or are dysfunctional, depending on the source one reviews on a daily basis. All of the above uncertainties are magnified by the political uncertainty of "deregulation." I find it most amusing to review articles of progressive city development that requires more generation, transmission, and distribution to be paid by existing customers as developers reap the profits from such activities. It may now be time to consider an alternative solution to demand growth. Consider the possibility of eBay auctioning development energy rights just as they are now to broker radio ad time. It was recently announced on Yahoo Finance that "eBay plans to allow more than 2,300 radio stations to auction their airtime to advertisers, ratcheting up competition with Google."

Maybe the next millionaire will be on TV telling us how to become millionaires with eBay strategies for energy procurement.