Broadband Smart Grid Power War Games

The recent release of a proposed National Broadband Plan [1] by the Federal Communications Commission’s was provocative for several reasons:

  1. Chapter 12 Energy and Environment.[2] By devoting an entire chapter to the implications of broadband communications for smart grid, energy efficiency and the environmental benefits of emissions reduction the FCC is going beyond—way beyond—its traditional telecommunications franchise and risks sticking its nose into the business of FERC and the state public utility commissions. The regulatory environment for energy and the environment is already a minefield for market participants and no one needs the dueling views of competing agencies out to protect their territory.
  2. Utility Control of Communications Networks and Data are at Risk.  The FCC to its credit seems inclined to provoke wide-ranging competition between private communications networks owned by utilities regulated by FERC and the States and commercial networks regulated by the FCC.  Chapter 12 seems to be telling the states to get with the program— “States should reduce impediments and financial disincentives to using commercial service providers for Smart Grid communications.”  At the same time the FCC is saying to both utilities and commercial broadband participants that it is tired of hearing complaints about “the reliability and resiliency of commercial broadband communications networks” with utilities complaining that commercial networks aren’t reliable enough, lack the needed bandwidth and cost too much.  Does that mean more pressure on commercial networks to expand bandwidth?  But the report also says“…large utilities have economic disincentives to use commercial networks and may be making suboptimal choices. As rate-of-return regulated utilities, they typically earn a return on invested capital they deploy—including private communications networks—but only receive cost recovery if they use commercial networks.”   Or, in other words, we the FCC are not going to let utilities exploit their private monopoly communications networks for smart grid data and services and thus undermine the national public interest in expanding the robustness of commercial communications networks open to all—including potential utility competitors.   POW!  BAM! #$&@!  ZING!!!
  3. Smart Grid Game Changer for Use of Federal Communications Spectrum. The FCC uses this National Broadband Plan to stake out a claim for a compelling national interest and role within its jurisdiction for allocating Federal spectrum among competing public interest uses.  It said: “Congress should consider amending the Communications Act to enable utilities to use the proposed public safety 700 MHz wireless broadband network, and utilities should be able to share the public safety mobile broadband network for mission-critical communications.”  This is clearly an area where the FCC can play a very significant role in the shape of smart grid futures and the fate of players—that is both good news and bad news.  If the FCC uses its authority to create a competitive, open, expansive broadband communications system that provides choices for market participants and options for vendors to deliver competing products it will be good for all.  If, on the other hand, the Government through the FCC uses its authority over spectrum as a form of industrial policy to pick winners and losers then we will all be losers especially the public interest.
  4. Who Owns Smart Grid Data? The FCC reports seems to be telling utilities that customers will ultimately control access to their own energy use data and have a reasonable expectation of privacy but legislation may be needed to clarify and codify that intent. “States should require electric utilities to provide consumers access to, and control of, their own digital energy information, including real-time information from smart meters and historical consumption, price and bill data over the Internet. If states fail to develop reasonable policies over the next 18 months, Congress should consider national legislation to cover consumer privacy and the accessibility of energy data.”  This suggests that the FCC see its role as a referee, of sorts, among the parties and will not hesitate to ‘rat them out’ to Congress if the playing field seems tilted in ways that do not best serve the public interest.  You can bet that the next round or two of NARUC meetings of state regulatory commissioners will be full of froth and fury over this intrusion by the FCC in the state PUC business.

So what?

There are three takeaways from this:

  • Broadband and smart grid issues are intertwined and will define winners and losers in the cleantech smart grid race. But this competition is about more than just the smart grid focus on meter data and access to it.  Just because a smart meter can read and dispatch its data frequently does not mean the cost of doing so is worth it—at least yet.  Here the interests of ratepayers and utilities diverge from outside vendors and users of that meter data.  Until we have dynamic pricing of energy in place it may not make sense to go to more frequent meter readings and data dumps even if Google Energy and others want it.  So one contest will revolve around these issues of frequency and access to meter data.  Another contest will revolve around the technology choices of vendors and the role broadband plays in scaling the potential of each technology.
  • Monetizing smart grid usage data requires prices for electricity at each incremental meter reading. That means dynamic pricing at near real-time increments and we are nowhere yet ready for that.  But face it, there is no reason to spend all this money deploying smart meters unless regulators across the several states are going to move away from average pricing to dynamic pricing (often referred to as real-time pricing even if it is set up in blocks of frequency such as 15 minute).  Unless end use energy consumers are exposed to the real prices of energy at various times of day and do something to change their energy behaviors we will miss much of the savings potential.  It’s coming, but we will be dragged kicking and screaming to dynamic pricing.
  • The customer payoff is from convergence not energy. As important as energy is to realizing the smart grid promise, the real pay-off from investment in broadband is the ability to ‘mine the money’ from the convergent use of broadband capacity for streaming content for entertainment, faster internet access for applications, better communications services, security and monitoring service apps, and all the things we want to do at the gateway to customers both at home and mobile while away.  Players with broadband capacity have a much greater likelihood of successfully monetizing that broadband for wallet share and market share growth in the bundling of services for Home Area Networks (HAN), neighborhood area networks (NAN) for microgrids and zero-energy buildings, and customer owned generation and net metering for commercial and industrial direct access (DA) uses.

Broadband is the great equalizer—and the great enabler!

The technology focus on broadband expansion and creation of a competitive market for energy, entertainment, communications, security and convenience services better serves the public interest than a narrow focus on smart meters and making the utility operation that owns them more efficient while subjecting customers to more volatile energy prices.  If that level playing field competition is what the FCC’s National Broadband Plan is all about we should cheer them on in order to realize in the energy sector the benefits wireless broadband has brought us in communications, entertainment and other areas.

What broadband does is enable the scalable convergence of these services in ways that are technology and device agnostic so the focus turns toward giving customers what we want, bundled in packages of services to fit our lifestyle and other needs, at price points we can afford.