Newsletter
12.7.2009
DOE Announces Smart Grid Winners
Unfortunately American Public is Not Among the Winners
Last month DOE released information on the winning Smart Grid proposals. Out of 400 or so projects competing for the $3.4 billion of funding, 100 were funded. The government’s $3.4 billion will be matched by $4.7 billion in private funding. Grants ranged from $400,000 to $200 million. Every state in the Union received some level of funding except Alaska. The smart grid has many very carefully-worded stated benefits. Please see DOE’s press release at: http://www.energy.gov/news2009/8216.htm
The Smart Grid is many different projects under one heading. It is real-time metering, economic load shifting, demand response, and transmission and distribution upgrades to increase reliability and expand transmission service to encompass wind farm installations in the plain states. Because the Smart Grid is not well defined it means different things to different people. As a result, it is used as a catchall phrase when someone wants to justify new investment that has anything to do with electricity. Rather than dwell on what the Smart Grid means to one group or another, I’ve decided to concentrate on what the Smart Grid isn’t to anyone. Bluntly stated, the Smart Grid isn’t the efficiency enhancement we are led to believe it is. Somewhere in the development and marketing of the Smart Grid concept, some very smart people decided to address the supposed gross inefficiency of the current transmission and distribution system as a means of achieving national buy-in. In almost all the information disseminated regarding the implementation of public) are led to believe it will result in a significant increase in efficiency of the electrical transmission and distribution system. Will improving the current transmission system and replacing old transformers with newer, more efficient ones increase the efficiency of the system? Sure it will. But the question is by how much? To answer the “by how much” question, one first needs to know how inefficient the current electrical delivery system is. Before you answer that question, please check out this U-Tube clip distributed as a TV commercial by a major multi-national technology corporation: http://www.youtube.com/watch?v=zuDndnIl39s
I’ve gotten feedback from many people on this commercial, and almost to a one, they believe that 50% of the energy is wasted between the power plant and the customer’s side of the meter. While the commercial doesn’t expressly state that fact, one viewing it could reasonably come to that conclusion. This misconception is propagated by a statement about inefficiency (“… one half the energy never reaches a single light bulb…”) followed by a solution (i.e., Smart Grid). It is unfortunate (either by ignorance or design) that the solution does not address the stated problem. So what’s the real answer to how much energy is wasted on transmission and distribution of electricity? Most subscribers have been purchasing electricity from third party sources for several years. They all know that there is about a 7% difference between the electricity put into the transmission system by the generator and what the customer’s meter reads. These are the losses owed to the RTO and the local electric delivery company. The 7% figure was determined by using information provided by engineers, regulators, accountants and lawyers. So that’s probably a pretty good figure. Interestingly, if you go to the Energy Information Agency’s website you can calculate the same 7% on a national level. So how much can a “smarter grid” save? Best case scenario is probably half of the 7% or 3.5% — a far cry from 50%. Maybe saving 50% of 7% is what those in the commercial meant by half. In fact, the 3.5% may be a high estimate. One of the nation’s better-run utilities, Sacramento Municipal Utility District, issued a press release on their stimulus spending improvements, along with quantified benefits. For “Smart Distribution” the quantified improvements were 1% to 2% increase in efficiency.
Last week (11/6/09) I received an email from the Environmental Defense Fund encouraging me to read a column by a renowned writer and author Dominique Browning in support of America’s Smart Grid. Her premise is that the electric industry is the only industry that hasn’t had a technological revolution and the Smart Grid is the answer. She then states, “…up to two-thirds of the fuel burned to produce electricity is lost in the process of generation and delivery.” No argument here. But once again it is heavily implied that the Smart Grid is the answer. If you break down that 67% of total wasted energy (which is correct), 60% is lost in the inefficient generation of electricity and 7% is lost in the transmission and distribution (i.e., delivery) of electricity. One doesn’t have to be an energy expert to figure out that we should be looking a lot closer for efficiency improvements at the part of the system that wastes 60% rather than the part of the system that accounts for 7% of the total waste.
Putting the financial performance of smart grid investments aside, if the purpose of the $3.4 billion smart grid investment is to stimulate the economy, there are many other options that would achieve greater energy savings (good for the environment, economy and voters’ pocketbooks), at lower investment and put many more people to work quickly. Expanding the low-income program of residential weather-proofing (weather stripping, etc.) to include more homes would be a much a better use of funds. Winterizing homes is a low tech response that not only would be easy to implement with a semi-skilled workforce, but also would bring the energy solution into homes where some of the largest energy savings potential resides. Unfortunately, it’s not as cool sounding as Smart Grid.
There are several takeaways from this analysis. The first lesson is that some things aren’t as they seem. There is a lot of money being made by selling Smart Grid half-truths. Full disclosure doesn’t appear to be good business for those who have the potential to make billions on minimal efficiency improvements. Doing your own analysis based upon the facts you have at hand, coupled with some thoughtful investigation, will allow you to come to your own conclusions that may differ from the conventional wisdom being sold on a large scale. You may be surprised by what you come up with. The second lesson is that Smart Grid-associated energy savings will be limited because today’s transmission and distribution systems aren’t that inefficient. With 7% total loss for the transmission and distribution systems there really isn’t great opportunity for efficiency enhancements. We shouldn’t count on Smart Grid being a panacea for all our energy ills. As a result, developing a “Plan B” is warranted. The third lesson is that there are probably several behind-the-meter energy efficient measures you should investigate that provide economically justified investments. Sitting back waiting for Smart Grid improvements to kick in to reduce your energy budget is wishful thinking. In fact, after the electric distribution companies file rate increases to cover their share of the costs for receiving stimulus spending, your electricity expense will probably increase due to the Smart Grid “efficiency improvements.” On the other hand, to counterbalance the big Smart Grid giveaway, there will be some government-sponsored programs that subsidize installation of energy efficient measures for end users. While taking fullest advantage of these programs may not make you a big winner, keeping current with what’s going on and being proactive is the way for making the best of this challenging situation.
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Update --CFL Trick or Treat
For the last several Halloweens, along with giving candy to children who come to our home, I have given Compact Fluorescent Lamps (CFLs) to their parents. The CFLs aren’t exactly free as I require the parents to answer a few simple questions regarding CFL use in their homes. I then compare year-onyear data to see how much things have changed among residential users. CFLs are everywhere you look outside your home. Over the past year and a half it seems you can’t attend a public event without being handed a free CFL or walk into a store without seeing a huge CFL display touting their benefits. With the market being flooded with free or extremely cheap CFLs, you’d think that everyone would have one in every socket in their homes. So what do the data show?
The data this year show an extension of what we’ve been seeing over the past several years – two distinct populations are being developed. One population has accepted CFLs and has put them in almost every light socket in their homes.
This group accounts for about 20% of the population (10 or more CFLs in their homes). The other population group accounts for 55% of the population and is comprised of residents who have heard of CFLs and know what they are (with regard to energy savings capabilities), but still won’t use them (2 or fewer in their homes). I believe what the data show is that we need to change whatever we are doing and find some other method for getting residential customers to use CFLs.