For 100 years, Americans have lived with what amounts to a corner store for electricity, but the smart grid means someone, somewhere, will start building Walmarts.
And the Sam Waltons of the power grid won’t wait for a regulatory invitation to start.
Steve Corneli, Senior Vice President, Policy and Strategy of NRG, challenged the experts gathered at GridWeek 2012 in Washington, DC last week to think of the smart grid as an interstate highway that will enable entire new forms of commerce.
Just as the US interstate system allowed faster and more efficient truck travel that enabled businesses like Walmart to access and leverage the lowest prices nationally, the growing smart grid’s multi-directional power and communications capabilities will enable transformative business models, with new “trucks” and commerce centers.
The Obama administration’s stimulus funding supported projects nationwide to retrofit homes with advanced digital meters and upgrade transmission systems with new sensors and controls. Nearly all US homes are expected to have smart meters by 2020, analysts say. Utilities in some areas, including Washington DC, already have installed smart meters for every customer.
Regulatory Systems and Incumbent Utilities Seen as Potential Obstacles
The smart grid is already creating, said Corneli, a “vast market” for entrepreneurial innovation.
While utilities and regulators try to figure how to adapt their legacy systems and processes to the new smart grid reality, he said, innovators will be trying out ideas that may undermine that regulation-based business model.
Other GridWeek speakers worried that a slow-changing regulatory system, along with entrenched utility resistance to any change that might threaten profitability, could delay or stop realization of the benefits that advocates see in the smart grid, like time-of-use pricing to promote conservation at peak periods.
Time-of-use prices can be displayed on home thermostats or in computer or phone apps, giving consumers a chance to cut their usage during peak demand when power costs the most, and reducing the need for new generating plants. But it could also expose customers who don’t respond to much higher power bills, and that has state regulators balking.
Becky Harrison, Interim CEO, GridWise Alliance, said utilities have traditionally made their profits on return on capital investment, so new technologies that involve changes in operations are at an inherent disadvantage when utilities are deciding on business spending. Reorienting to the new world of the smart grid is requiring substantial operational changes, she said.
Smart meters may be tomorrow’s dark fiber,” – Corneli
Susan Tierney, Managing Principal, Analysis Group, said new technologies still need the “reliability backbone” supplied by the grid, and regulators need to ensure that reliability is properly valued.
But as the grid becomes a true multi-directional network, said Bracken Hendricks of the Center for American Progress, there will be new opportunities sprouting at every node.
Corneli said entrepreneurs will be looking for opportunities that don’t need fundamental law changes. He pointed to Walmart and other “big box” retailers now selling cell phones and phone plans.
Commissioner John Norris of the Federal Energy Regulatory Commission said utilities, rather than wait for regulators to set rates of return, should themselves be looking at opportunities to profit from creating value for customers.
One parallel may be the “dark fiber” of the mid-1990s, said Corneli, when a great deal of cable was laid but some companies behind it went broke because cable capacity significantly outstripped applications to use it.
But today, that capacity is vital as new applications in telecommunications mushroom and gobble more transmission space.
“Smart meters may be tomorrow’s dark fiber,” Corneli said.
