Archive for 'June 2012'

    Smart grid is dead, long live smart grid

    June 20, 2012 11:09 AM by Alan McHale
    The origin of the expression, "The king is dead, long live the king," is that the king has died, and the hope is that the new monarch will live a long time. The reasoning behind the statement goes deeper, however.

    A quick and unopposed succession to the throne was needed to avoid a power vacuum that would bring chaos and social unrest with it. So the moment one ruler died, the next in line had to be crowned immediately.

    Reflecting on what has happened in the smart grid business over the last two years, this expression and its meaning strike a chord. The business of the smart grid is, of course, alive and well. But it clearly has not yet fully delivered on its promises and is stagnating. It is vital that a practical solution be found.

    There is a major dilemma out there because the king's successor for utilities now needs to operate within a distributed framework, which entails the utilities giving up a little control. At the same time utilities will be expected to invest heavily in this technology without necessarily having the means to do so — unless of course they hike up charges, which might not be allowed. Under the conditions of this scenario, just about any king would be sure to take a beating.

    So whether they know it or not, utilities need some allies, and the only people who can deliver for them at the moment are the owners of smart buildings . Smart building controls companies are the ones who can help utilities address this problem. They see a big market for their systems businesses and an even bigger one for businesses linked to virtual power through interfacing smart buildings with smart grid.

    The smart building owners pick up the bill for interfacing their building energy management systems with demand control, reduce consumption and produce a revenue stream by providing renewable and/or relatively clean energy back to the utility companies. The utility companies can reduce their spending on replacing their coal-fired plants and will then have money to invest in smart grid.

    This is a possible solution, but on the other hand it does require the utility companies to operate a new business model that utility leadership might instinctively resist — preferring to hang onto the way things have been done for the past century. Is there an alternative? Well, they could form alliances with the IT and communications companies and let them share Big Data territory. It would be better to settle for working with your customer and maintain control while wholeheartedly accepting the business model of distributed power.

    Given these facts, the best solution to keep them in power is to partner with their largest customer: the owners of smart buildings. They can deliver distributed clean power and control energy demand. At the same time they can also improve the efficiency and control of energy consuming devices such as lighting and HVAC, and conserve energy — further reducing baseload demand and transmission losses. This relieves them of a lot of responsibilities and they retain control longer.

    If the utility companies take advantage of the valuable services that will be available to them through operating what will become the Internet of Energy, they will prosper. In this way, utilities will trade up from a highly capital-intensive, low-margin business to a high-growth, high-tech busness. At least that's what this scenario predicts, but it all depends on how well these companies are able to reinvent themselves.

    Success only requires both parties to work together and realize the benefits.  Not only can interfacing a smart grid with smart buildings provide for a relatively small investments and an attractive return on investment, but there are also no major obstacles to be overcome. There is an overwhelming case for joining them together and the majority of the investment required will come from the private sector.

    Smart grid, smart building interface could be big business

    June 8, 2012 8:43 AM by Alan McHale
    There is an almost perfect case for interfacing smart buildings with smart grid because all the stakeholders win. It will require minimum technical and commercial risk and decades of latent potential business is stacked up waiting to be converted.

    The driver for this business is negawatts, or energy efficiency. Through reducing consumption at the consumer end and reducing production at the central power source through distributed energy, a cost-effective solution to meet the needs of a low carbon economy in the 21st century is achieved. Intertwined with this is the function of demand control and cost benefit it can deliver.

    Our report, The Smart Building To Smart Grid Interface Business, provides a detailed assessment of this growing business over the next 20 years. It looks at the potential size of this market and sets out all the important factors that will shape the business in the next 5 years in the developed countries of the world, as well as breaking this down by product category and vertical building markets.

    We estimate that this market will be worth some $3.05 billion over the next five years and will peak at about $2.2 billion in 2020. This is based on what we term the priority market and this includes the software and its installation for high-energy intensive buildings that generate their own power.

    We have only included in these figures a small percentage of large high energy intensive buildings that do not generate distributed electricity but will install demand control functions.

    This represents no more than 2 percent of the total population of buildings in the world and therefore our estimates of the market demand represent the lowest case scenario. However in time we expect that for new smart buildings an advanced BEMS would be installed that would have all the functionalities in it and would be directly linked to the smart grid ADR.

    This would reduce the total cost of the interface software but demand would increase. These figures do not include the building energy management control and its central supervisory software, which are detailed separately.

    Whilst these figures are substantial they represent only 1 percent of the total investment needed to deliver a fully operational smart grid and the return on the investment in the short term looks much more attractive. More important is the fact that private money will be available for around 70 percent of the investment.

    We have identified some 40 companies that offer software and systems to control and manage energy consumption and energy generation equipment in smart buildings and interface with load control and automatic demand response on the smart grid.

    We also predict that the 4 companies  —Honeywell, Johnson Controls, Schneider Electric and Siemens — that already take some 80 percent of the world's product market for BEMS, will also eventually dominate the interface market. Not only do they dominated the market but now they have also built up a vast heritage estate that they have a strong grip on. With at least 65 percent of the business going to the retrofit market they know where to select and find the interface business.

    But selling and installing interface products is "small time" for these companies. In addition they have well established EMSCO service businesses particularly in the developed markets of North America and Europe and they are in a position to use their interface capability to leverage much more attractive business.

    They are now in a position to bring together total energy management solutions not just on single sites but multiple sites across regions and whole countries. These contracts have been in place for some years and now through virtual power plant technology they can provide the opportunity to aggregate their supply and control hundreds of megawatts of electrical power.

    This provides the scale that major utilities want for a cleaner source of distributed electrical power generation to meet their carbon dioxide reduction targets, whilst reducing the investment that they would need to make in new generating facilities.

    Through interfacing smart buildings with smart grid you get a fine tuned system that automatically receives the data from the smart building control systems and balances supply and demand in real time. Also through aggregating electrical production and consumption by joining together a large number of plants you get scale and efficiency.

    We show in this report how through strategic acquisitions, these companies as well as ABB and GE, have more than the last 2 years been acquiring expertise in software analytics and companies that buy and sell energy and further extending their EMSCO business across the world.

    The interface technology is in place and both smart grid and smart buildings benefit from the integration. It does not require fast sums of money to bring it about and the likely slowing down of the development of smart grid because of the present poor economic conditions and lack of finance will push more investment in the direction of this easy win.