Energy
The USA ... Smart Grid

Smart Grids, Stupid People ... an article about the failure to invest in infrastructure

Burgess COMMENTARY
This article is a little disappointing ... the facts are fine in the sense that Smart Grid is a technology area with important advantages ... but I was left hanging around the question of 'stupid people'.

My take on the subject of 'Smart Grid' is that there is a dangerously dysfunctional management environment where corporate executives representing investors and Public Utility Commissions (PUCs)representing the industry (methinks rather than the public) and the politicians representing industry lobbyists (methinks rather than the people) are conspiring so that money profits in the electricity industry are high and growing at the minimum of investment.

This country ... the United States ... could use a lot more jobs, and one of the best ways of getting more jobs is to do more physical investing ... not money investing where money gets invested in pieces of paper that represent stuff that has already been made, and may well have way less value than the paper purporting to have such value! In other words the stupid in this article is more about the decision makers who refuse to understand that investing big resources in physical improvement of infrastructure has huge costs but ever more huge value. The value of investment in infrastructure, especially paradigm shifting infrastructure is way more than the costs being talked about.

And I come from a Keynesian school, so I am aware of the big value that is derived from investing. It is a gift that keeps on giving!

I wrote this comment in Clean Tech and Renewables Google Community

The title of this article makes it clear that a Smart Grid is smart and I am OK with that. I am not sure that the article gets to grips with Stupid People. From my perspective it is pretty clear that there is massive management dysfunction in that all decisions are made short run with focus on money profit, minimum investment in real things and a huge belief in the power of GDP growth (stupid consumption) to solve economic problems. The investment cost of infrastructure building is tiny relative to the value getting created, but we do not do any metrics around value flows, only money and profit flows which have a very different dynamic. Keynes got it right when he talked of the importance of investment. He wanted savings to be high to fund physical investment. He spoke out about 'pump priming' which is now the only tool seemingly in play in the US monetary economy! I see 'stupid' in almost every economic conversation ... but did not see stupid in this article.

Smart Grids, Stupid People

Here’s the thing: In the immediate term it’s expensive to be smart, and cheap to be stupid. In the long term, smart saves, though the math is a bit complicated.

There are a handful of energy experts out there who believe that America’s utility giants could have recovered from Hurricane Sandy much better had they invested in smart grid upgrades.

A number of smart grid paraphernalia would have come in handy:

• Smart-Metering: Smart meters pinpoint utility customers who are without power, enabling the utility company to respond in a timely fashion. These smart meters monitor electricity flow and send data back to the control room in seconds.
• Outage Management Systems: The OMS reduces the impact of outages by reducing the time and resources used to deal with them, through automated call-taking, prediction and the integration of Advanced Metering Infrastructure (AMI) integration and Integrated Voice Response (IVR). In simpler terms, it predicts the location of a failed fuse or breaker, prioritizes restoration efforts, provides information on the extent of outages, calculates restoration times and manages repair crews.
• Distribution Management Systems: This is a collection of applications that work to monitor and control the entire distribution network, and it is a key decision-making tool that improves reliability and deliverables.

According to Siemens, which is one of the key developers of this technology, the greatest cost is not in the technology itself, but in the training of personnel required to effectively use it. Apparently, you have to have smart people operating a smart grid.

Siemens knows. It acquired California-based eMeter in January 2012. Still, no one’s willing to put a price on implementing this technology, with too many variables to consider.

John McDonald, director of GE Digital Energy’s Technical Strategy and Policy Development, told AOL Energy that if US utilities in the east had installed this smart technology earlier, they would have known about outages more quickly and been able to respond more rapidly.

GE (NYSE:GE), of course, is another leader in smart grid technology.

Ralph LaRossa, the president of PSE&G, told reporters that his company had no immediate way to tell if a customer was without power. Installing smart meters, though, would cost as much as $700 million. Until the company is ready to foot the bill, it will remain “antiquated”.

Let’s take New York: Governor Andrew Cuomo is asking for $30 billion in disaster money: $3.5 billion to repair infrastructure; $1.65 billion to help rebuild homes; $1 billion for overtime costs. Separately, Cuomo wants a smart grid, which he estimates will cost $30 billion over the next decade.

There are a few in the east who have jumped on the smart bandwagon. Con Edison in New York is working on smart grid installations, but we’re still about four years away from completion—certainly, to the dismay of those who suffered lengthy blackouts in the wake of Hurricane Sandy.

Pennsylvania-based PPL is also more up to date, already operating four smart grid systems, putting them ahead of the pack and offering their consumers a great deal more security. PPL reportedly has smart meters for 1.4 million customers.

Overall, American utilities have installed around 36 million smart meters—so there’s progress, albeit slow.

In terms of cost, McDonald told AOL Energy that they will be quickly outweighed by the benefits, and will eventually lead to lower electricity prices.

The mathematics is complicated, and it’s hard to determine the amount of damage to electricity infrastructure Hurricane Sandy caused, and how much less damage might have been caused if we had smart grids. Immediate damage is more a question for burying power lines, than for installing smart grid technology. But smart grid technology would certainly help predict potential problems and respond to them before they get out of control. More than anything, it’s about fast recovery and about serving the customer, who is, after all, paying for electricity.

There are also plenty of naysayers, who like to point out that smart grid technology is not a magic cure. Certainly, it’s not, but no one’s talking about magic, they’re talking about progress and modern technology.

Smart grid technology would also reduce the vulnerability to physical and cyber attacks on the system, and as we’ve pointed out before, the US electricity network is vulnerable to just about everything.