By Jon T. Brock, President, Desert Sky Group, LLC

April 23, 2010

The smart grid has gone global.  It may mean different things to different stakeholders and may also vary based on geography.  While North America appears fixated on getting into the consumer’s home, Europe appears to have started focusing on the distribution technologies, while Asia is learning from other geographies on where to put its priorities.  Alexander Graham Bell would not recognize what we have done to the telecommunications industry he helped father while Thomas Edison would totally recognize the electric industry of today.  Interestingly enough, the new smart grid world may involve the convergence of these two industries leveraging an information technology industry that did not exist when they were born. 

I recently had the good fortune to interview a smart grid luminary, Ray Gogel, President & Chief Operating Officer for CURRENT Group, LLC on issues related to the smart grid, differences by global geography, and ideas on how to improve a smart grid implementation for success.  Ray will be joining myself and three other industry luminaries at the Smart Grid Road Show to be held May 11-12, 2010 in Cincinnati, Ohio to discuss in more detail smart grid experiences and future looks.  For now, I trust you enjoy this interview with Ray.

JB:  Please share with us the background of CURRENT and its role in a smart grid world.

RG:  Sure, CURRENT is an early software and hardware pioneer in smart grid technology.  We've been recognized with numerous green tech awards, and we have a quickly growing clientele in some of the largest utility companies in Europe and North America.  What we do is provide low-cost, easy and quick-to-implement distribution management solutions which improve both the efficiency and reliability of the grid and help the grid address the increasing volatility that is coming into it.  We do this, Jon, by strategically placing sensors which, combined with enterprise software, improve power factors and dynamically manage voltage, thereby providing transparency, automation and control of the elements and events on the distribution grid. That is really our North American solution. This solution provides 3-5% reduction in load which you might well call “consumer-less energy efficiency”. Aside from the reduction in fuel costs and carbon emissions, it also has positive impacts in terms of reducing customer complaints and service investigations and, as I mentioned before, increases the utility operator’s ability to handle volatility that is an ever-increasing part of the industry’s future, as renewables and distributed generation are added into the grid.

JB:  You did mention a North American solution.  What geographies do you play in globally?

RG:   We play in North America, Europe, and increasingly we are providing solutions to the Asia Pacific arena, as well. Most people are aware of the pivotal role which CURRENT played in SmartGridCity™ at Xcel Energy. That formed the cornerstone for both global product lines, but each of these geographies requires significantly different forms of functionality.  Coming out of SmartGridCity™, we learned that dynamic event management on the distribution grid in North America can be done by strategically placing sensors on the grid and combining them with enterprise software to improve distribution power factors (volt/VAR) and provide dynamic voltage optimization, as I noted earlier.  In Europe and AP, utilities want our solutions to do that—and much more.   Europe, in particular, needs complete transparency and control on the grid, so we also do “grid to ‘edge’ [i.e., consumer] integration” with metering, leveraging the evolving universal standard of PRIME.  In this way, we ‘light up’ the entire distribution grid, gaining actionable sensor information from both meters and transformers.  This is pivotal to handle both the increased volatility associated with central site renewables as well as for the incorporation of distributed generation into the grid

JB:  Ok.  So if you had to take the areas of the smart grid, which areas do you play in?  Let me read them to you.  There is smart grid policy, generation, transmission, distribution, and the consumer.  Ray, what areas does CURRENT address?

 RG:  I think all Smart Grid service providers have some tentacles into the policies domain because we're all really helping to reshape the nature of the electric industry.  But when it comes down to naming the traditional verticals within the utility space, we are clearly focused on distribution.   It is an oxymoron to talk about Smart Grid without focusing on distribution.

JB:  Ok, and I did hear say you earlier “consumer-less energy efficiency”?  So what you are saying is that you actually have the ability to increase energy efficiency without touching customers?

RG:  Absolutely – the energy savings are 100% in control of the utility and immediate.

JB:   So what are the main objectives of a smart grid from your perspective?

RG:   The goal of the “smart grid”, and what it ultimately helps the industry address, are some of the invalid assumptions that are embedded in our electric industry and, as of the 21st century, are no longer valid.  Assumptions like:

ü  Energy is so cheap that it is okay to waste it, 

ü  Or that carbon and other forms of pollution have no consequences for our planet. 

ü  Or that supply and demand doesn’t have to be managed as a continuously flexing, holistic phenomenon but can be looked at and managed separately in silos. 

ü  Or that analog speeds and manual interventions and our “run until broken” approach in customer service is going to be something that customers will continue to tolerate and support for the next 100 years. 

So “smart grid” to me means leveraging innovative technology and new 21^st Century business models to rethink many of these assumptions because they are simply no longer valid.  And from a distribution perspective, if I apply that to our product set and where we work as a solutions provider, that's all about how you make the grid more efficient.  How do you optimize it?  How do you improve reliability?  Reliability is something utilities have always focused on.   But the challenges of reliability which we address today are much larger than the traditional sense of reliability which the industry has always wrestled with.  Today there is increasing volatility coming into the grid via central site renewables.  That’s a challenge of a different order.  Add to that the introduction of distributed energy coming into the grid and ‘reversing’ the directional flow of electrons, and you have a  conundrum which the distribution grid will have to address effectively if we are to live up to our customers’ reliability requirements.  Think of the increased complexity that arises from the distribution neighborhood network having more and more localized generation built into it that might be cost effective from a marginal pricing perspective and that utilities will be required to absorb.   In my mind, this represents a deep rethinking of the electric industry as we know it today and the solution requires huge innovation.

JB:  It is a changing industry, and it is interesting to think of different analogies.  When you mentioned energy too cheap and also energy efficiency not being an issue, I do recall back in the IT or hardware realm when a 20 megabyte hard-drive was just incredible and developers were forced to develop down to that limit because they had to be efficient.  And then when storage got cheap and limitless, efficiency is out the window.  You can't load a program that's not several gigabytes now.  It's incredible how we have gotten so inefficient at least in the computing areas. 

RG:  That's a good analogy.

JB:  What are we doing wrong in rolling out the smart grid right now?

RG:  Well, “wrong” is obviously a relative term.  It's probably best to focus first on what we [i.e., the market as a whole] are doing right.  We're talking innovation which is not something we've talked about in a long time.  We're bringing stimulus money to the table.  We're doing it slower than perhaps we’d all like to, but certainly we're making progress.  Not necessarily the “wrong” side,  but an area where we have made less progress than I hoped is in addressing the real drivers of value for the electric industry from a national perspective.  When you look at some of US roll-outs currently being planned, there is a lot of overlap in how our country is approaching it from a utility perspective.  Looking at some of the pilots -- I'm not convinced that the full sweep of  a potential re-invention of the grid is really being sped up or expedited in a way that  maximizes the nation’s  return.  If you look at Europe, you see a different picture, Jon.  You see stimulus money being deployed by consortia of utilities who are bidding for support monies where they are experimenting with all sorts of different new forms of technology and ultimately new business models.  So, they are dealing with distributed generation in an expedited format.  They are dealing with carbon proactively.  They are dealing with distribution generation components beyond simple PVs.  For a while here in the States, it seemed that the common wisdom was “first we have to have an infrastructure refresh of all our meters before we can move on to the smart grid.”   So, it sometimes seems to me that Europe and Asia Pacific are more sweeping in their innovation, and you see more acceptance of the concept of innovation.  I think as an industry in North America, we haven't necessarily directly addressed what we want from innovation.  We're stuck in a paradigm that says ‘ok we like the idea of innovation -- and sure we like that America might be on the leading edge of creating new products and new ways of doing business -- but at the same time, that disruptive new technology better darn well be perfect before we think about deploying it.’  And it better not really change the nature of our industry or else we will have a lot of finger pointing to deal with.  We tend to push back on the natural growing pains in technology, rather than accept them as part of a process.  You cannot do innovation in a continuum where everything is perfect.  That's not the nature of innovation.  I think as a country, we run the risk of being bypassed and not being a global player because even though we're putting real money into this space, we're not having the deepest conversations around  how much risk do we want to take?  Where do we want to experiment with new cutting edge ideas?  What is the regulatory dialogue that has to take place that gives utilities real return for innovation instead of just downside when they are not perfect?  Where’s the utility’s upside for leadership and innovation?

JB:  You are absolutely right.  We're in an industry that has a low tolerance for failure to put it bluntly.  In innovation and entrepreneurial circles, we don't call them failures, we call them learnings.  Do you see a difference between countries?  Do you see a higher tolerance for learning in Europe per say than North America?

RG:   No one is willing to sacrifice reliability for learning, regardless of geography.  Being reliable is the nature of the electric franchise.  So, I don't see anybody being very risky in Europe.  What I see, however, is very well thought out plans that examine and sample different components of the smart grid and don't keep repeating themselves in the same areas.  I see a strong emphasis on sharing those results in an open format.  I think that's what the FP7 Program, for example, does very well in Europe, and that to me bodes well for the Europeans getting ready to handle the volatility that's coming into their grid and redesigning what the future of the grid is going to look like.  On the American side of the equation, what worries me is we really haven't found a way to show regulated utilities what the viable business models of the future might be.  We need answers to questions such as: How could innovation in fact be incented to encourage change?  Or how utilities are going to transform from a throughput model which incents ever increasing demand to a model which monetizes and incents the efficient management of that demand—i.e., which prices ‘negawatts’ into the utility ROI model.  I I haven’t seen a lot of people playing in the States with the concept of virtual power until recently, but it’s a concept which clearly has been played with in Europe for awhile. 

JB:  Interesting, so give me an example of virtual power in Europe.

RG:  There was a virtual power program experiment over there called Fenix that started already in 2005 or 6, I think it was, examining how do you use microgrids, how do you seamlessly modulate customer demand, and how do you leverage distributed generation to really let the grid “flex”  so that it can absorb and leverage all sorts of different types  of power-- including “negawatts”-- to keep the grid functioning and in shape. Now the conclusion of that program which ended in 2009 as I recall was "wow, we have a lot more to learn".  It was one of the major takeaways, but it was a dialogue that was started early and with some real thought behind it and there are going to be more consequences coming off of it.

JB:  Well, Thank you very much Ray.  I appreciate your time.  I look forward to continuing this dialogue at the Smart Grid Road Show in early May with other colleagues and being able to debate what's going on today and where we are headed in the future.  

RG:  My pleasure, Jon.