We recently interviewed Paul De Martini of the Newport Consulting Group about the state of the U.S. smart grid market. According to De Martini:
...innovation is accelerating and we can expect to see very disruptive energy and consumer technologies over the next 10+ years as we have over the past ten (e.g., Facebook in 2004, Twitter 2006, iPhone in 2007, Instagram 2010, Nest 2011, etc.). This means we need to be transforming the distribution grid into a highly scalable open platform for customers’ distributed energy resources and microgrid evolution if the audacious goals of the past decade are to be achieved. It is important to consider that an investment in the electrical grid today is effectively a 15-30 year bet on the future of innovation.
We were reminded of Paul De Martini's predictions about grid innovation, evolution and scaling as we read an astute analysis by Opower's Aaron Tinjum of the Obama administration's proposed rules on power plant carbon emissions, announced Monday. A few key points by Tinjum particularly hit home:
- The goals are ambitious but achievable: The EPA carbon emission goals are "ambitious" - a "30% reduction by 2030 below 2005 levels" - but also highly "achievable."
- They're flexible: States and utilities will have a great deal of flexibility in how they meet the EPA standards.
- They Include "Beyond-the-Fence" Energy Efficiency Measures: One of the major ways in which these goals will be achieved is through energy efficiency measures (Tinjum notes that the phrase "energy efficiency" is "mentioned 227 times in the proposal") at the state level. This includes "beyond the fence" energy efficiency steps that go "well beyond simple efficiency measures at power plants" to "renewable energy standards" and "demand-side energy efficiency programs."
- In Meeting the Goals, Energy Efficiency is Extremely Cost Effective: "Why is efficiency so prominent in the proposal? Because of its vast cost-effectiveness... A recent study by the American Council for an Energy Efficient Economy (ACEEE) found that it costs utilities just 2.8 cents on average to reduce electricity consumption by 1 kilowatt-hour — which is two to three times less than it costs to generate the same amount of electricity at a power plant."
- They Represent a Huge Opportunity for Utilities: As Aaron Tinjum explains, "With energy efficiency at the core of this proposal, utilities have a tremendous opportunity to engage their customers like never before.”
- They Also Represent a Huge Opportunity for Power Customers: " With behavioral energy efficiency alone — which includes giving households personalized feedback on their usage, targeted incentives to conserve, and easy-to-understand savings advice — US households could save over 18 million megawatt-hours every year. That’s $2.2 billion in cash savings for American consumers year after year — and the equivalent of abating 10 million metric tons of CO2."
This is all very exciting, and it also brings us back to Paul De Martini's quote at the start of this article: specifically, that meeting the EPA carbon reduction goals will require a great deal of innovation in all aspects of the electricity market. We've already discussed the supply and demand sides, but we certainly shouldn't forget the advanced smart grid that will be required to connect the two, plus all the hardware, software, and business model changes that this will require for successful implementation.
In part, accomplishing all this will be about marrying the smart grid and Web 2.0 to maximize the effectiveness of both energy efficiency at power plant sites and demand response and other programs “beyond the fence.” We're also thinking about the overlap in which cutting-edge utilities like Sempra Energy subsidiary San Diego Gas & Electric - which has been named as "one of America's 'Most Connected' energy companies" and "the most 'intelligent utility' in the United States" - use social media and mobile communications technologies to engage their customers in new and innovative ways.
And, of course, these tech advances could also play a big role in meeting the EPA carbon reduction rules in ways that benefit the utilities, power consumers, clean energy, the economy and the environment simultaneously. That's the kind of innovation we can enthusiastically support!