Searching for Argonauts to Save Our Smart Grid Future

Heracles and the gathering of the Argonauts (o...

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My smart grid play on Greek mythology began with a description of the harpies of our smart grid future. In that mythology, the harpies always arrived and stole the food before it could be eaten, and then befouled the remaining food as they departed to torment their victims. Today the harpies of the smart grid snatch away the customer benefits or the essential building blocks of scale before we are able to make use of them.  In so doing they foul the smart grid nest and prevent us from realizing its promise of a clean energy economy future.

But naming the harpies of our smart grid future is not enough to stop them.  We need to confront them with a faster, scalable power that is greater than the roadblock the harpies present. We need Argonauts to take on our harpies, to cage them and prevent them from snatching away our benefits before we realize their full potential for change in our energy future.

In that same Greek myth the torment by the harpies continued until the arrival of Jason and the Argonauts. The Argonauts were the super-heroes in Greek mythology who before the Trojan War, accompanied Jason in his quest to find the Golden Fleece. Their name comes from their ship, the Argo, named for its builder, Argus.

Two of the most famous Argonauts were the Boreads, brothers Calaïs and Zetes, the sons of Boreas, god of the north wind, and Oreithyia, daughter of King Erechtheus of Athens. As sons of the north wind they were supernaturally gifted and as fast as the wind and able to fly. They drove off the harpies, but did not without kill them, at the request of Iris, who promised that King Phineus would not be bothered by the harpies again.

Thankful for their help, Phineus told the Argonauts how to pass the Symplegades the Clashing Rocks, also known as the Cyanean Rocks, which according to mythology were a pair of rocks at the Bosphorus that clashed together randomly. The rocks represented a trap but were defeated by Jason and the Argonauts, who would have been lost and killed by the rocks except for Phineas‘ advice. Jason let a dove fly between the rocks; it lost its tail feathers but survived. The Argonauts rowed with all their strength to get through the rocks with only minor damage to their ship. After that, the Symplegades stopped moving permanently. (Argonautica, book II; Ovid XIII, 710; Virgil III, 211, 245).

Argonauts of our Smart Grid Future

To qualify as Argonauts you must be big, strong and smart and have a sense of ethics and honor that represents the values being defended.  Being conventional was not necessary to be a good Argonaut. In fact, it often served as an impediment to success.  The Argonauts were inventive, decisive, and strategic risk takers.  Those are precisely the traits needed to cage the harpies of our smart grid present and survive the clashing rocks. So my nominees for Argonauts of the Smart Grid Future are:

NIST Interoperability. As the Argonauts chased the harpies they gathered allies from among the tormented.  To succeed they needed to work together, to communicate and share information.  So it is with the smart grid.  There are so many moving parts and new technologies that making it all work together requires agreement around standards that enable each component to plug into and play nice with other components.  The National Institute of Standards & Technology (NIST) is the hub of the quest for smart grid interoperability.  The Institute develops the testing, measurements, and reference materials needed to ensure the quality of energy-related products and services and ensure fairness in the marketplace. Its work in smart grid-enabled technology and methods is essential to achieve the promise of smart grid.  We know that every vendor seeks to dominate the space with proprietary technology, software or equipment that ‘sets the standard’ and drives out the competitors.  Competition is good but it must take place using market forces and common sense.

Scalable Markets. We are in a period of accelerating consolidation among smart grid market participants. Why?  Because good start-ups have produced many good products, but standalone those products are not sufficient to solve the business problems of the smart grid.  The venture capital firms that invested in the start-ups also are looking for an exit strategy.  Building the product in sufficient scale to realize its potential often takes more capital and capabilities than the start-up possesses.  Enter the looming giants of the smart grid.  We know their names: GE, ABB, Siemens, Toshiba, IBM and others who are spending their hoarded cash to buy market share and assemble complete solutions betting that the smart grid will be a BIG DEAL.  But to realize that big deal pay-off they need scale—big markets for big deals.  Leveraging interoperability these giants of the smart grid seek to survive the clashing rocks of utility fragmentation, power grid boundaries, state by state regulation, lack of adequate electric transmission and a score of other random impediments in search of the smart grid equivalent of Jason’s Golden Fleece.  Without scale these giants cannot drive down prices to grid parity levels to be sustainable without government subsidies.  And giants are loathe to have the government in their business so they seek to drive it out the old fashioned way—by making huge profits, besting competitors in commercial battle, and being #1 in their market segment.  Remember this is a quest for smart grid supremacy and the mantra is get big or get gone!

Big Data.  High quality smart grid products assembled into interoperable solutions and sold across a large market footprint around the world is the strategy of the giants of the smart grid.  But smart meters produce a deluge of data and managing the volume and making sense of the information is the secret to surviving the clashing rocks.  Big data is the apt description for the core competency of smart grid giants. They seek to collect, organize, analyze, slice and dice and then reassemble data turned into insight to inform customers and improve decisions.  And if they can do so, then they create a growing market for the rest of their products and services that can make use of that data and turn it into gold.  Big data ends up being the big difference between the competitive advantage of players.  Big data used and useful across many big markets is what it will take to be #1 or # 2 in the future of smart grid.  And if big players cannot be #1 or #2 then Jack Welch and other CEOs will tell you its not big enough to make a difference on their bottom line.

Competitive Choice. Getting to money-savings decision choices is the holy grail of the smart grid—no one is going to make money unless someone is able to save money by using energy more efficiently, producing it cheaper or not wasting it by line losses moving it around.  It takes big data to make big money and the giants of the smart grid are into big money big time. Who is going to make money on the smart grid?  End users of energy certainly hope to save money but the challenge is whether the savings will be worth the aggravation in the commodity sale of energy.  Utilities hope to save money and their best opportunity is to leverage big data and interoperable equipment to improve distribution automation, reduce line losses, cut labor costs from meter readings and other operating efficiencies that reduce cost, improve earnings and thus return on equity.  Squeezing out all of these savings in a market of downward prices is going to be a ruthlessly competitive blood sport.  Not all the players will survive the clashing rocks.  Yet realizing the promise of smart grid depends upon this competitive choice process to drive out the excess costs, stimulate new technology investment and give customers both wholesale and retail what they want.

Distributed Energy Resources: Go Big by Getting Small.  One of the big risks in making power grids interoperable and scalable is we also make them more vulnerable to cyber attacks and other harpy torments.  Ironically, one of the most promising ways of making the grid smarter, more responsive and yet safer is to go big to create the scalable markets and advanced technology products and services we need—and then deploy it by going small to create a more distributed energy resource business model that encourages onsite generation, energy efficiency, demand response and energy self-sufficiency.  I’ve written before about microgrids and their potential to align the market forces of greed and greatness to encourage this sustainable self-sufficiency.   The irony of microgrids is they work well is rural areas lacking sufficient energy infrastructure like Africa as well as in dense urban areas where integrating combined heat and power systems with net metering, demand response, energy storage and energy efficiency produces a perfect harmony of enabling industrial, commercial or residential customers to use renewable energy and smart grid technologies to produce energy for their own needs, net meter the excess back to the grid and assist the grid defend against attacks or natural disasters by “compartmentalizing” the grid operation in emergencies to ‘ride out the interruption’ without taking down the entire grid.  These are customer benefits we can believe it!

Who will face the clashing rocks?

The challenges facing the Argonauts of our smart grid future are that the strategies that help you survive the clashing rocks really irritate the traditional utility monopolists, state regulators and the courtiers who have benefited from the hundred years of average cost, ratebase utility monopoly regulation and more recent social engineering subsidies that smart grid may push aside.  Here are a few examples:

  • Utilities. Today, even the largest investor owned utility is small compared to the global Fortune 500 sized players seeking to dominate the smart grid space.  While we will see some consolidation among utilities both domestically here in North America and globally, these utility players are still at risk to larger, more diversified, more nimble global engineering, information services and technology firms.  The M&A activity we see today of utilities combining with other utilities is a purely defensive play not a game changer.  These M&A deals are being driven by the changing economics and risks of coal and nuclear primarily.  There is an important role for utilities in the smart grid future but it is not the dominant player role most have been accustomed to living. The real signpost of change will be the bundling of energy and other services into solutions offered by non-utility players including some of the giants mentioned.  Even that is still playing defense until the promise of smart grid is on the horizon.
  • Regulators. When markets rule the utilities lose control over the energy market place and so will their state regulators.  Nothing is uglier to watch than the wrath of a scorned utility regulator so be prepared for some to reject deals and impede progress even though they know it does not best serve the public interest.  There is also a gladiator contest of wills between state regulators and federal regulators over preemption and king of the mountain status.  This has virtually killed electric transmission progress in the United States and a solution is not in sight. Eventually this will sort itself out but near-term expect volatility and fireworks.
  • Subsidized Industries. Because the transition to a clean energy economy has, for good or ill, been built on an industrial policy of choosing winners and losers and employing mandates and subsidies to change behaviors, the transition to a competitive smart grid enabled future is going to be painful for subsidized industries like wind, solar, ethanol, nuclear, coal, and others.  When customers have choice they tend to choose the least cost product that best fits their needs.  That is going to be the clashing rocks experience for renewable energy and other industry segments that depend upon government financial support to be sustainable.  The state renewable portfolio standards will soon be achieved and China is helping drive down the commodity cost of wind turbines and photovoltaic panels so deal flow and market share growth in the smart grid enabled competitive future is going to depend upon competitive prices and improving technology that brings more efficiency and performance to renewable technologies. High cost, standalone, subsidies clean energy businesses are an endangered species.

Advocates for a smart grid future hoped to see a clean energy economy where they could choose the winners and punish the losers.  But the torment of the harpies and the challenge of the clashing rocks likely will produce different smart grid outcomes.  This may be a ‘be careful what you wish for scenario’ for government and environmental advocates because the competitive forces of the smart grid future will subject every technology, every regulation, every environmental policy to the ruthless competition of the markets in search for that “sweet spot” where the least cost technology produces the best fit and best balance of technology, performance, sustainability and price to satisfy the customers’ needs and values.