The Smart Grid: Deconstructed and Demystified

1. The Smart Grid:Deconstructed and Demystified Christine HertzogManaging DirectorSmart Grid Library September 2009 www.SmartGridLibrary.com © Smart Grid Library

2. Guilty or Not Guilty? • Do you turn on your kitchen sink faucet, then leave for the day? • Do you leave your car idling all night in your garage? • Do you leave lights and computers on, and all charging devices plugged in all the time?

3. Why is electricity held in low esteem? • Because it is always there • Because it is cheap • Because we treat it like a commodity • Because we ignore it unless THE LIGHTS GO OUT!!

4. Northeast Blackout of 2003 • Causes • Lax tree-trimming • Software bug • Human error

5. Agenda • Today’s Grid • Smart Grid Overview • Players • Funding the Smart Grid • Evolutions and Revolutions • Smart Grid Top Ten Trends

6. Today’s Electrical Grid • Energy flow in one direction, from generation to consumer (residential or C&I) Generation Transmission Home/Office Distribution • Information flow in one direction from meter to utility – manually read by a meter reader or transmitted information back to the utility Energy Information

7. It’s not a National Grid

8. High Reliance on Fossil Fuels • 259 GW (2,590 MW) of new generating capacity - equivalent to almost 2 million homes - will be needed between 2007 and 2030 • EIA Annual Energy Outlook • Local utilities rolling out smart meters and demand response programs • Peak power demand may outstrip current supply in 5 years • First new transmission line in 25 years – MidAtlantic Power Pathway

9. Highly Fragmented Market ISO/RTOs (Independent System Operators/Regional Transmission Organizations Federally-regulated entities coordinate regional transmission and markets May be intrastate or interstate Create level playing field for alternative energy sources Ex: PJM Forecasts energy needs Monitors wholesale markets Operates reliability markets to accommodate unexpected changes in electricity supply Wholesale power markets trade short and long-term power contracts Power marketers include all energy sources – coal, gas, nuclear, solar, etc. Register tariffs with FERC to sell wholesale power Electricity derivative markets Futures and options 3200 IOUs, municipals, and co-ops that buy and distribute electricity

10. Agenda • Today’s Grid • Smart Grid Overview • Players • Funding the Smart Grid • Evolutions and Revolutions • Smart Grid Top Ten Trends

11. Smart Grid 101 The Smart Grid is a bi-directional electric and communication network that improves the reliability, security, and efficiency of the electric system for small to large-scale generation, transmission, distribution, and storage. It includes software and hardware applications for dynamic, integrated, and interoperable optimization of electric system operations, maintenance, and planning; distributed generation interconnection and integration; and feedback and controls at the consumer level (from the Smart Grid Dictionary).

12. Tomorrow’s Smart Grid • Energy flows in many directions, from generation to grid or building, from car to/from building, from utility to customers, from customers to utility Home/Building Generation Transmission Distribution • Information networks established to create secure communications between devices and people DistributedGeneration& Storage

13. Smart Grid Benefits The Smart Grid will: • Reduce CO2 emissions by up to 480 MMT by 2020 • Save up to $35B in energy and fuel costs(Smart2020.org report on information and communications technologies) • Lower rates? No • Lower bills? Yes

14. Regulatory Agencies Influence Smart Grid Definition and Deployment Federal Energy Regulatory Commission Oversight of interstate and wholesale electricity rates Works with ISOs FERC DOE • Department of Energy • The Smart Grid money machine • Involved in standards via NIST FCC • Federal Communications Commission • WAN to HAN focus • Licensed, unlicensed, and wireless spectrum • North American Electric Reliability Corporation • Not a governmental entity, but with mission to ensure reliability of the bulk power system in North America • Proposes standards for reliability that are reviewed/ approved by FERC NERC

15. States Also Impact Smart Grid Plans PUC • Public Utility Commissions • Manage investor-owned utilities like Pepco • Approve rates for electricity/gas, etc. • Referee in fight about who owns energy use data • Energy Commissions • Roles vary in states • Ex: California Energy Commission responsibilities • Energy policy and planning agency • Sets appliance and building energy efficiency standards • Provides incentives for renewable energy EnergyCommissions

16. Legislation Impacts on the Smart Grid • Waxman Markey (ACES) • Emissions activity already spurring utility plans and investments • Wyden (STORAGE) • Provides an investment tax credit for energy storage assets • American Clean Energy Leadership Act (ACELA) • Distributed generation, transmission siting and deployment • EPACT2005 • Lighting and appliance efficiency standards • EIEA2008 • Renewable energy tax credits • EV tax credits The biggest complaint in Silicon Valley? The fits and starts of investment tax credits, production credits, and incentives make it impossible for investors to truly understand and calculate risks and potential ROIs. All start-ups are told to not use assumptions about government incentives in their business cases.

17. Federal Money Trail • American Recovery and Reinvestment Act fueling $83 billion into clean tech sectors • Energy efficiency grants and investments for government buildings, HUD dwellings • Home weatherization • Renewable energy loan guarantees, wind tax credits extended • Electricity transmission and smart grid (3,000 miles of transmission lines and 40 million smart meters) • Clean tech tax expenditures (including renewable energy credits) • Carbon capture research • Vehicle battery loan guarantees and grants for R&D $83B $12B $5B $6B $11B $21B $3.4B $2B

18. VC Money Trail • Energy policy is spurring venture capital and public investment • Venture capital clean tech investment • $4.1 billion in 2008, up 54% from $2.7 billion in 2007 • The recession toll: VC funding fell by 14% in the fourth quarter of 2008 • Tops $1.6 billionin 2009 (thru July) for about 100 deals • The top seven VC investments in 2008 were in clean tech • Sectors include Smart Grid software applications, geothermal companies, pollution and recycling technologies, and transportation (EV and batteries)

19. Agenda • Today’s Grid • Smart Grid Overview • Players • Funding the Smart Grid • Evolutions and Revolutions • Smart Grid Top Ten Trends

20. Electricity Supply Chain – Now Say Good bye to these three silos

21. The Supply Chain Evolves Traditional Grid Smart Grid Enhancements

22. The Smart Grid Relies on Storage Energy Storage technologies underpin centralized and distributed generation Traditional Grid Smart Grid Enhancements

23. The Smart Grid Changes Generation Traditional Grid Smart Grid Enhancements

24. Transmission Impacts – Big but Mostly Invisible to End Users Traditional Grid Smart Grid Enhancements

25. Distribution Becomes Bi-directional Traditional Grid Smart Grid Enhancements

26. Major Changes in Store for End Users Traditional Grid Smart Grid Enhancements

27. A Revolution is Ongoing Remember how the telecom industry looked and acted twenty years ago? Be prepared for big changes to your relationship with electricity!

28. Agenda • Today’s Grid • Smart Grid Overview • Players • Funding the Smart Grid • Evolutions and Revolutions • Smart Grid Top Ten Trends

29. Top Ten Trends #1 – The Smart Grid will dramatically increase renewable energy sources for utility-scale and distributed generation From this To this

30. Top Ten Trends #2 – NIMBY, BANANA, and NOPE will kill or delay many remotely-based renewables generation projects Existing transmission assets must be upgraded to transport the maximum KV amounts on them

31. Top Ten Trends #3 – Security standards will guide protocols, processes and procedures, but mistakes will occur, creating new cottage industries for consultants, lawyers, and hackers Issues • Privacy of consumer information • Ownership of energy data • Physical and cyber security • Liability for breaches and failures

32. Top Ten Trends #4 – Distributed generation facilities will be built using renewable energy sources and storage for onsite consumption and for resale back to the grid

33. Top Ten Trends #5 – Energy will be stored at many points on the grid, including rolling batteries (EVs and PHEVs), home batteries, as well as utility-scale storage

34. Top Ten Trends #6 – Us ordinary folks will engage in energy arbitrage, using intermediaries to manage interactions with utilities #7 – Cars become income generators for their owners -- carbitrage EVs and PHEVs will not lose value the minute they are driven off the lot =

35. Top Ten Trends #8 – Energy efficiency-enabled devices will proliferate in homes – my home will be smarter than I am! #9 – HEMS applications will control appliances to save on energy bills

36. Top Ten Trends #10 – Multiple options for your home control device and application What will be the most popular in-home display device? Computer? Smart phone? Internet TV? Wall-mount unit?

37. And One Very Real Threat If we are not very aggressive in objectives and pace, China will leapfrog the USA in Smart Grid technologies and deployments • No need to protect stranded assets or vested interests • Build from scratch using the latest/greatest technology • Largely unified market structure, unlike USA with 3200+ utilities, 50 PUCs, 10 ISOs/RTOs, 4 major Federal entities, and excessively combative inhabitants It’s telecom all over again…… but with a lot more complexity

38. We Can Win This Horse Race • Good start with Federal initiatives on standards and funding • Can’t get derailed on political arguments about whether global warming is real • Focus on innovations in technology and regulations • For a truly level playing field, stop subsidies to established fossil fuels • Remember to keep the consumer (end user) in mind

39. Thank You! For help with the terms and acronyms in this presentation, get the Smart Grid Dictionary, First Edition, at the website below or at Amazon.com For more information, visit: www.smartgridlibrary.comor contact Christine Hertzog at chertzog@smartgridlibrary.com