Smart grid is dead, long live smart grid

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.