Wednesday, November 13, 2013


I work with the good folks at InterProse on articles and blog posts for IEEE Smart Grid and other industry websites and ezines. They recently asked me to express my views of what have been the most significant developments in the smart grid over the past year and what might be the most important new trends and developments next year and beyond. I thought that you might be interested in what I wrote for them.


What significant smart grid developments and trends have transpired in the U.S. over the past year? It wasn’t so much a year of dramatic technological breakthroughs, killer software apps or industry restructuring as one of dawning realization by the electric utility industry of the inevitability and scope of change in the physical grid and the way it will have to be operated. Let’s look at harbingers of this transformation.


A good place to start is the downward turn in the AMR/AMI business since this has been perhaps the principal component of what most of the industry has been referring to as smart grid. More money was spent in the name of smart grid on AMR/AMI for demand response than any other technology or application. Almost all of the incumbent AMR/AMI vendors are experiencing declining sales or shrinking market share or both. Yet considerably less than half of existing electric utility metered accounts are AMR/AMI. What gives?

Disappointing Results - A motivation for AMR/AMI deployment over the past few years has been legislative and regulatory mandates requiring demand response programs. Participating utilities were authorized to recover from customers their costs plus a reasonable return on investment in these programs. The goal was to get customers to change their consumption patterns so that utilities could avoid building increasingly expensive, carbon emitting, underutilized central station generating plants while making better use of their existing plants. Yet, as Yogi Berra observed, “If the fans don’t want to come out to the game, you can’t stop ‘em.” Customer participation proved disappointing and even when customers participated in significant numbers the results were less than hoped for. It turns out that most customers don’t want to be engaged by their utility to solve the utility’s problems meeting peak demand or providing reliable, affordable energy. Disappointing results and consumer resistance in turn caused legislators and regulators to be less enthusiastic toward utilities including the expenses and return on investment in their rates.

ARRA Smart Grid Stimulus Grants End - “We spendin’ other people’s money and we like it,” rapped Dom Kennedy. Much of the growth in smart meter deployment over the past few years was spurred by the US DOE ARRA Smart Grid stimulus grants.  Many utilities would not otherwise have deployed AMR/AMI or at least not as aggressively but for these grants. More of the stimulus grant funding went toward AMR/AMI than any other smart grid technology. By 2013 the stimulus projects were mostly done and there were no significant incentives available or apparent on the horizon. 

Today’s “Smart” Meters Aren’t Enough - As Peggy Lee asked in her classic song, “Is that all there is?” AMR/AMI and demand response can’t be all there is for a modern, intelligent grid? It hasn’t even done enough to solve the particular problem that it was designed to address. This is not just because of slow adoption and disappointing results. Better data about energy consumption and electric utility prices may make buyers and sellers better informed, but the legacy grid in many ways constrains the kind of organized energy market activity that could truly maximize economy, efficiency and sustainability. Better usage and pricing data and demand response programs don’t make the grid smarter, more controllable or more resilient. Their motivation is to persuade customers to take up the slack..

As Huey Lewis and the News lamented in song, “I need a new drug.” AMR/AMI and demand response don’t make the grid more observable, more controllable, more adaptable. They are just an electronic version of the traditional electromechanical meter that has been equipped to measure, record and report demand and energy more often and to communicate price signals between customers and providers. New and better intelligent electronic devices will be required throughout the grid and even distributed within customers’ premises. The days of a single, utility owned and controlled meter for every customer are rapidly waning. A utility that has not already deployed the AMR/AMI systems that are available today will be better served to wait for the next generation of intelligent electronic devices, telecommunications and software applications.

Inadequate Integration / Interoperability - The ‘60s rock band Canned Heat exhorted, “Let’s work together. Come on, come on, let’s work together.” The smart grid systems that are in place today in by and large don’t work together. There is little or no integration or interoperability between and among different vendor’s hardware devices, software applications or telecommunications systems. Sometimes there is not full interoperability between a vendor’s different product lines or even different vintages of the same product line. Absent this kind of “3-D” integration, which is much more prevalent in Europe, it is very difficult for a utility to augment or upgrade its AMR/AMI system with newer and better hardware, software and telecommunications from other vendors unless it entirely replaces its existing system. The cost, effort and difficulty integrating with the utility’s other systems and applications are prohibitive. 


The goal of demand response is to shift consumer demand without reducing total energy consumption too much. Otherwise the utility’s revenues are reduced by more than their costs. However, consumers are finding that they can with more certainty effect larger reductions in their power bill, their carbon footprint, their impact on the environment, their utility’s need to build new generation, their exposure to price increases in the future, by reducing the amount of energy that they purchase from their electric utility, not just shifting their demand. The simplest and least risky way to accomplish this is through conservation and energy efficiency measures. It is so much simpler just to make the changes necessary to use less energy all the time than it is to reschedule when to use it. And all it takes is a one time decision to convert to more efficient end use (e.g., LED lights, more insulation, higher efficiency appliances, etc.). 

Unfortunately for utilities, a substantial portion if not most of a utility’s fixed costs are recovered by through energy sales. So, consumers who reduce energy purchases will reduce a utility’s revenues more than its costs. If a utility raises prices to recover the lost revenue, that will just increase the economic benefit for the customers and even incentivize them to further reduce their energy purchases.


Another way customers can reduce energy purchases from their local utility is to get their energy from somewhere else. They can’t buy capacity anywhere else, but they can get energy from other sources, including deploying their own generation. A steadily increasing number of electric utility customers, residential, commercial and industrial, are doing so through standby/backup generators, rooftop and community solar PV, fuel cells, biomass fueled generation and even conventional carbon fueled generation. And they are not just doing it to reduce their utility energy purchases. Some wish to improve reliability, security or disaster preparedness while others desire to obtain renewable or “green” energy. And some consumers simply seek some measure of independence from a monopoly grid. 

Today there are only some 10,000 generating units on the North American grid. If only 1% of the population adopts some form of distributed generation and/or storage, that would mean nearly 2 million distributed generators operating on a grid that was not designed for that. Utilities and non-utility market participants, both existing and “wannabe,” are recognizing the tremendous challenges and opportunities posed by this. Some utilities seem determined to resist distributed generation through legislation, regulation, interconnection constraints and pricing penalties (e.g., not allowing customers to save as much from self generation as they do from conservation and energy efficiency). However, other utilities and many existing and emerging market participants are seeing that they can survive and prosper by embracing this irresistible trend.


At the extreme, distributed generation enables some customers to go mostly or entirely “off the grid” by having enough on-site generation and storage to meet all their needs (i.e., a microgrid) or maybe just enough for one or more critical subsystems (i.e., a nanogrid). In many cases this happens when an industrial or commercial facility requires a level of reliability / security that they are not confident will be available from the utility grid given increasingly frequent and prolonged outages caused by severe weather events, human errors and grid inadequacy. For example, a growing number of data centers, Internet hosting complexes and customer service centers are implementing the microgrid concept. The US Department of Defense is doing it for mission critical loads at their various bases and installations. This trend erodes electric utility revenues more than it reduces their costs in the short run. It also creates complications in planning and operations if the utility must occasionally serve some or all of the requirements only some of the time rather than plan to serve all of their requirements all of the time.


The past year saw steady growth in the deployment of renewable energy generation, both wind and solar, both utility scale and distributed. This in turn stressed the legacy grid because of both the stochastic, non-dispatchable nature of renewable energy and the siting of the resources in locations that the grid had not been designed for, particularly in small, customer-owned installations scattered throughout the distribution grid. 

Even more interesting, renewable energy increasingly proved to be the cheapest energy on the grid, displacing base load coal and nuclear generation which had long been the most economical way to meet customer requirements. Combined with the increasing costs of operating and maintaining coal and nuclear fueled plants, especially for meeting increasingly constraining regulatory requirements related to environmental impact, safety, security.


Once customer demand and energy consumption and utility demand and energy pricing data becomes readily available, not just to utilities, but also to their customers, it becomes easier for customers to to business with non-utility entities. These include on-site generation and storage vendors like Solar City and Power Secure. Last year saw continued growth in the aggregation of consumption and supply by non-utility third parties (e.g., Enernoc, ERCOT’s REPs, etc.). Some aggregate customers’ capability to reduce demand and energy consumption (“negawatts”) and even their distributed generation and storage output. These dreaded disintermediaries continued to unravel the cost-plus monopoly business model and offer more and more alternatives to the legacy centralized grid.


Some utilities made progress with emerging technologies and applications that make the electric distribution grid more observable and controllable:
    • Automated demand side energy management systems to optimize customer demand response while at the same time freeing customers from effort, inconvenience and uncertainty.
    • Automated Distribution Management Systems (ADMS) that can perform Fault Location, Isolation and Service Restoration (FLISR)
    • Automated Volt/VAR monitoring and control to:
        • Reduce peak demand via voltage reduction
        • Reduce energy consumption via voltage reduction
        • Improve power quality via Volt/VAR monitoring and control
    • Real-time, synchronized grid-wide monitoring and analysis with data from phasor measurement units (PMUs) also known as synchrophasors and from similar monitoring devices sometimes called “grid nodes.”
    • Distribution fault anticipation (DFA) which uses computer analysis of the power waveform to identify incipient equipment failures or other conditions that could cause services outages
    • Automated monitoring and control of energy storage to minimize on-peak demand, minimize purchased power costs, maximize energy take from renewable energy resources, enhance reliability and power quality


Nobel Laureate physicist Niels Bohr said, “Prediction is very difficult, especially if it’s about the future.” Nonetheless, I’m prepared to rush in where angels fear to tread because some trends and developments are nearly certain. What’s next? What can we expect in 2014?

My friends John Cooper and Andres Carvallo, in their excellent book published in 2011, “The Advanced Smart Grid: Edge Power Driving Sustainability,” assert that a modern, sustainable grid will emerge from the edges, in spite of the existing grid, through non-utility energy sources and systems rather than evolve from the center of the legacy grid through the traditional regulated, cost-plus monopoly utility model. A few weeks ago GreenTechMedia published a seminal report, “Grid Edge: Grid Modernization in the Age of Distributed Generation,” in which they reinforced Cooper’s and Carvallo’s assertion, calling the phenomenon Grid Edge. 

In 2014 and beyond it will continue to be more and more difficult for utilities to maintain, expand and improve the legacy grid by adding conventional generation, transmission and distribution facilities through the usual planning, operations and management approaches. Yet, the trends and developments occurring in 2013 will continue unabated, some even expanding and accelerating, portending ever greater challenges for the legacy grid. So what will bridge the gap?


Over the past two decades we’ve seen electronics technology improve in capability and decline in real cost exponentially courtesy of Moore’s Law. And network technology has as well courtesy of Metcalfe’s Law. This in turn drove revolutionary changes in entire industries. Clearly this will continue in 2014 and beyond. In fact, the work of Santa Fe Institute (SFI), reported in their working paper, Statistical Basis for Predicting Technological Progress, suggests that Moore’s Law is just a special case of a more general truth . . . that all useful technology improves exponentially. And the work of David P. Reed suggests that Metcalfe’s Law far understates the power of networks of devices and people. 

Ray Kurzweil synthesized this into his Law of Accelerating Returns:  The rate of change in a wide variety of evolutionary systems (including the growth of technologies) tends to increase exponentially. This means that the technologies that will enable a modern, intelligent grid, specifically electronics devices, telecommunications networks, software applications, will continue to improve exponentially, leading to availability of ever better components and applications. This in turn will revolutionize the entire electric energy industry.

Renewable Energy Generation & Storage - The performance versus cost of renewable energy generation, especially solar PV and fuel cells, and electrical energy storage will continue to improve exponentially, driving increased market penetration, some through grid scale projects but even more through non-utility generation facilities dispersed throughout the distribution grid.

EVs and PHEVs - Similarly, the performance versus cost of of electric vehicles will continue to increase, driving increased market penetration. This means more challenges for a grid that was designed for loads that stay put, not for the electrical demand equivalent of a residence moving around on the grid, sometimes with more than one congregating at a single location.

Intelligent Grid Nodes - The vanguard of next generation intelligent electronic devices will begin to emerge and will be far more than electronic versions of the traditional electromechanical meter that can measure, record and report demand and energy more often. They will have the capability to monitor, measure, and analyze the local state of the grid (i.e., voltage, current, phase angle, waveform), its own environment (i.e., weather, intrusion, manipulation) and the customer’s appliances, generation and storage. They will not be a single meter outside the customer’s building, nor a centrally polled and controlled SCADA point, but will be large in number and diverse in functionality, dispersed throughout the utility’s distribution grid and the customer’s premises (e.g., the Modlet), even built into some of the customer’s equipment and appliances.

Ubiquitous Wireless Internet - Public two-way, high speed, digital wireless telecommunications networks and the Internet access that they provide will continue to become more ubiquitous and powerful. They will increasingly be used by utilities, customers and disintermediaries for smart grid applications.

The Internet of Things - The increased ubiquity and capability of the Internet will mean that more and more smart of the world’s electronic devices will be connected to and their enabling software systems and applications will reside “in the cloud.” Cisco has prognosticated that 37 billion new connections will be made to this Internet of Things by 2020. The ever growing nodes of the electric grid will be part of this. A modern, intelligent grid will be a convergence of the electric grid, both legacy center and new Grid Edge, with the Internet of Things. The industry will continue in a path postulated by Bob Metcalfe, inventor of the modem, “Over the past 63 years, we met world needs for cheap and clean INFORMATION by building the INTERNET. Over the next 63 years, we will meet world needs for cheap and clean ENERGY by building the ENERNET.”


All of the above will enable non-utility market participants, existing and new, to provide customers with demand and energy response functionality, distributed generation and storage and even power and energy from transactive markets. The existing legacy electrical grid will increasingly resemble the telecommunications industry networks which are more and more carriers of products and applications provided “over the top” by non-utility providers.


There is an additional, monumental factor that is already affecting the development of a modern intelligent grid and will continue to do so. There’s another “edge” at which a new grid paradigm is emerging, and it’s not in the developed economies. Less than one-fifth of the population of the world accounts for some three-fourths of all the electric energy used in the world. The rest of the world will eventually use as much energy per capita as the developed economies because it is the central means of bringing their quality of life and productivity of business up to the same standard as the developed economies. Even assuming substantial improvements in the efficiencies of energy production and utilization throughout the world, this represents as much as a thirty times increase in the world consumption of electric energy.  

Today, though, the majority of the population of the world does not have a monolithic, centralized grid of the form that was constructed in the developed economies. It is increasingly unlikely that they will develop that kind of grid because their geographic and demographic circumstances are so starkly different. In fact, they will be able to leapfrog the developed economies captivity to what is now, in the new global energy economy, an increasingly obsolete fixed grid because they have access to new and improved technologies and applications that weren’t available when the developed economies were building their power grids. A modern grid for the developing economies will emerge first as an edge grid and not have to gradually erode and replace an outdated centralized grid. 

There are so many more people in the developing economies that now use so much less energy per capita than the people in the developed economies. As their economies develop and they use as much energy per capital, that they will drive the development of so much more of the global energy infrastructure than the developed economies. 


It is not likely that there will be big advances in 2014 in 3-D integrations between and among the incumbent, competing vendors of smart grid technologies, and not just due to a paucity of widely adopted industry standards. Most vendors will avoid investing the resources and effort required to develop open applications programming interfaces to enterprise data buses. Many will be threatened by the idea of being too easy to displace if they are 3-D interoperable with their competitors. Finally, the large installed base of AMR/AMI and other smart grid systems cannot be easily retrofitted to fully or even partially integrate and interoperate.

Well, there you have it, my view of where we’ve been over the past year and where things will be going in 2014 and after. Of course, the only certain prediction one can make about the future is that it will not be like the past, or, as Yogi Berra observed, “The future ain’t what it used to be.” Thank goodness for that! We simply must have a different grid for the future. Not just a smart one, but a transformed, modern grid that is more reliable, resilient, sustainable, adaptable, environmentally benign, decentralized and merged with the Internet of Things.


  1. Very effective! What about a Pareto based approach? .... like this:

  2. Thanks for taking the time to read my post and for sharing your paper on distribution system reconfiguration.

  3. "If a utility raises prices to recover the lost revenue, that will just increase the economic benefit for the customers"
    Could you please explain the logic?

    1. Amin,

      Thank you for taking the time to read my blog post and especially for leaving a comment.

      Utilities suffer a revenue loss when their customers start getting some of their energy from their own, on-site generation (or when they reduce consumption via conservation and energy efficiency). Utilities' costs are usually not reduced by as much as their revenues in the short run. They typically raise their prices (rates) when they are not collecting enough revenues to cover their costs plus profits. Higher prices means that customers' bills increase even if they continue using the same amount of energy. So, they can save even more for every additional KWh that they can avoid buying from the utility, meaning even greater incentive for distributed generation as well as conservation and energy efficiency.

      There is a growing trend that can erode the ability of customer to save money by buying less energy from their utility. Utilities have traditionally recovered a substantial portion, even a majority, of their revenues through an energy charge (i.e., $/KWh) even though much of their costs are fixed and do not vary with the number of KWh sold. Because of the phenomenon described above, utilities will try to collect more of their revenues through fixed charges rather than variable energy charges. This will reduce customers' ability to reduce their power bill through distributed generation or conservation and energy efficiency. Some utilities are charging substantial fixed charges for customers to connect distributed generation facilities, further reducing the savings that customers can gain by having their own generation. As a result, some customers may seek to disconnect from their utility altogether.

      As electric utility industry restructuring continues at an accelerating rate, major changes will occur in how electric energy is priced, even how it is bought and sold. I believe that ultimately electric power and energy will be bought and sold in competitive transactive energy markets rather than through the century old, cost-plus monopoly model.


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