Transcript Innovation at the Edge: Technological Change in Electric Power

Innovation at the
Edge: Technological
Change in Electric
Power
Lynne Kiesling
IFREE, ICES & Northwestern
University
IRLE May 2006
What do I want you to take
home?

The potential for technological change to
reshape the electricity industry is large
Capacity utilization/load factor
 New/different services and business
models
 Different platforms
 Interoperability
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Ability of digital and communications
technology to create value
What do I want you to take
home?

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The value and importance of distributed
knowledge in the electric power network,
and how technology can help us harness it
and unleash it
Technological change => ability for
decentralized market processes and
decentralized controls to create an
integrated, transparent, transactive network
Regulatory institutions currently dampen
this potential, but don’t have to
Standing still is falling behind
Electric power system
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
Technology and the electric
power industry
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Physical infrastructure is almost a century old
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Digital and communications changes have not
(r)evolutionized value chain, as has happened in
other industries
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Central generation
Grid
Metering
Network intelligence still concentrated in the
substation
Effects of external technological change
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Reduced scale of generation: CCGT
Application of some digital advances to operations
Exhibit A: The watt hour
meter
Can you
guess the
date of
this one?
QuickT i me™ and a
T IFF (LZW) decom pressor
are needed to see this picture.
Objective: capacity
utilization/load factor

Our electric power network has large
excess capacity on average b/c we
are built to meet the peak
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With fixed regulated rates, we waste
capacity
Excess capacity is expensive
 Technology is an effective, dynamic,
flexible way to provide additional
capacity when needed -- increase
load factor
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Energy intelligence
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Data are vital to the efficient and optimal use
of energy (Prudencio, PUF, April 2005)
Two-way wireless communications
ubiquitous in society, but not in electricity
industry
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SCADA networks in place, but underutilized
Usage/interval/operations/condition data
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Digital technology would create an
information network in parallel with the
physical network, from producer to end-use
customer
Electricity industry for a digital
age-the smart network
Uses digital technology to harness
& aggregate distributed
intelligence/knowledge
 Three parts of the smart network
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Smart generation
 Smart grid
 Smart end use
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Smart generation
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Decreased economies of scale in generation =>
more competition, lower entry and exit barriers,
assets more redeployable, less sunk
Portfolio of fuel types
Portfolio of generator sizes and locations
Distributed generation
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Heat exchange units
Thermal storage
Reliability backup
Renewables
Combined heat & power
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Dramatic increase in energy efficiency
Smart grid
“Self-healing” transmission and distribution
wires
 Automated digital devices
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Power line digital sensors could give realtime temp, voltage information, fault
identification
 Distributed throughout the grid
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Voltage and frequency control
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Example: HT superconductors (wires have
140 times the capacity of copper, low
impedance; mobile dynamic VARs)
Smart grid (cont.)
Distributed technologies for improving
reliability, reducing operating costs
 DG interconnection standards-CHP, largescale renewables
 Improved security as a “free lunch”
 Distribution: automated switching
 Parallel comm network with electric wires
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Closed network architecture
 Non-proprietary (i.e., open) standards
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Smart end use
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Voltage regulation devices in buildings
Building control systems, load management
Digital metering
Programmable thermostats
Grid-friendly appliances
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Programmable, automated responses from
refrigerators, washing machines, etc.
Frequency fluctuation sensors and automated
response
Automate to respond to price signals
Applications of
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Automation of decision-making/change
Multi-way communication
These parts of the value
chain interact
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Incorporating customer information and
preferences optimizes grid load factor and
generation capacity
Distributed generation makes transmission
contestable
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Natural monopoly features of network
industries are not engraved in stone, not static
Communications-enabled grid operations
reduce required generation capacity and
deliver customer value
Thus interoperability is crucial
Benefits of integrating digital
technologies throughout the grid
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Management of end-use power demand => reduce
peak loads (increase load factor), provide new
flexibility in facing unexpected contingencies
Better, more flexible, more nimble operations
management (real-time condition information)
Better reliability/ability to sell different levels of
reliability to different customers with different
preferences
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Digital-grade power
Priority insurance/reliability insurance
The digital, 21st-century network
is also clean and green
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Largely through peak smoothing
Energy efficiency through automated
building management systems, end-use
metering, etc.
Peaks disproportionately cause pollution
(cycling up and down, spinning reserves)
Automation of green power bids and offers
Automation of “dirty” plant cycling down in
response to smog alerts
Unleashing technological
creativity harnesses the edge
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Distributed knowledge
Ex: Wal-Mart’s supply chain logistics
Diversity of preferences, costs, economies,
regions
Centralized, top down approach does not use
these valuable resources
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Stop thinking of customers as load and start
thinking of them, and their private information, as
resources
Vision: a digital electric network that aggregates
distributed knowledge
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Optimizes load factor
Schumpeterian enabling of innovation
Dangers to regions of not
enabling technological change
Falling behind in jobs and economic
development
 Failure to appeal to businesses that
require digital-grade power
 Rising electricity prices due to
inefficient capacity utilization along
whole network
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A thought exercise
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Suppose it’s 1910 and you survey
telephone customers
Ask them: would you use PBX
switching/911/cellular phones? They’d say
no. But look at how much value creation
has occurred in the process of creating
products and services that customers
couldn’t anticipate.
Nation’s phone bill $120 mil, nation’s elec
bill  $250 million. Think of the untapped
potential of technology in electric power, just
based on the size of the industry.
How can we bring this smart
network into being?
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Testbeds/demonstrations
Regulatory innovation-remove barriers to
technological change, to interoperability,
and to technology deployment
Regional start-ups, centers of smart
network innovation
Nodes that are dispersed will grow together,
linked by telecom into virtual smart energy
networks
Information: The Virtual Electric Infrastructure
FACT:
CHOICE:
In the next 20
years, the U.S.
will spend
$450B on
electric
infrastructure,
just to meet
load growth.
Perpetuate a 20th
Century solution
OR
Invest in a 21st
Century system
saving ratepayers
$80B while
increasing
reliability and
flexibility.
:
Revealing Values +
Communications +
Advanced Controls
≡ Electric infrastructure
The choice is
easy because…
$ bits << $ iron
Key Ingredients
of GridWise
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Enable collaboration of new distributed
resources with existing grid assets
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3rd party controlled assets, investment are key
Voluntary – opt in, incentives not requirements
Respect for privacy
Respect for enterprise – min. info across
boundaries
Transparently reveal all values to all parties
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Commitment to adopt new policy, regulatory
and business models
Utilities must earn or replace return on
investment from capital assets
Grid-Friendly™ Appliances (GFAs)
Help Keep the Lights On
Loads and Reserves on a
Typical U.S. Peak Day
Industrial
28%
Commercial
29%
Resident
(nonGFA)
10%
Residential
(GFA*) 20%
Operating
reserves
13%
GFA* potential
exceeds US
operating
reserve
requirements!
*GFA appliances:
heat, AC, HW, refrig.
Grid-Friendly Appliances sense
grid frequency excursions &
control region’s appliances to act
as spinning reserve – No
communications required!
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Transmission
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Avoided infrastructure
Congestion relief
VAR support
Spinning reserve
Non-spinning reserve
Distribution
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Avoided
infrastructure
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Avoided
infrastructure
Voltage support
Power quality
~3-yr payback
Penetration
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Connecting the Dots of the Value
Chain: Revealing Value at All Levels
to All Participants
$ $ $$
Central generation
Customer
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Lower electric
costs
Waste heat
utilization
Power quality
Backup power
30%
Rate-of-Return
Markets and (Distributed) Controls
Merge to Form a Transactive Network
Markets
Controls
Impediments to a digital
electricity industry
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Lack of clear value opportunities for
entrepreneurs
The substation as an impermeable black box
Utility resistance to change
Property rights over customer use data
Customer resistance to change
History and culture of industry and regulation
Regulatory institutions that discourage
technology adoption (can you identify any?)
Others?
Supply-focused regulation is the
main barrier to value-creating
innovation
Although both exogenous and
endogenous technological change
have influenced electric power, its
effects have been very limited
 Incumbency barriers and status quo
bias
 Regulatory institutions shut out
demand side participation, and that’s
unfair
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Transitions that will enable a
dynamic, robust, reliable electric
power industry/network
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Integrating demand into regulation and
markets, enabling consumer choice
Different regulatory and market institutions
will unleash economic benefits to a greater
or lesser degree
Enabling the application of innovation and
technological change that create consumer
value
Reports and demonstration
projects
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WAMS implemented in west
CA: Open AMI, metering legislation (good/bad)
DOE OETD: Grid 2030
EPRI: “Self-healing” grid
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“Intelligrid” architecture
Digital communications among distributed network
nodes (gens, ops, customers)
Pacific Northwest National Lab GridWise testbed
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Customer retail choice among 3 contracts
“Grid-friendly” appliances, programmable
automated response to price changes
130 households
Some resources
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GridWise http://www.gridwise.org/
Center for Smart Energy
http://www.centerforsmartenergy.com/
DOE OETD http://www.electricity.doe.gov/
DOE NREL http://www.nrel.gov/
EPRI http://www.epriintelligrid.com/intelligrid/docs/System_of_the_Fut
ure.pdf
USCHPA http://uschpa.admgt.com/
American Superconductor
http://www.amsuper.com/
Nxegen http://www.nxegen.com/
Contact information
Lynne Kiesling
Center for Applied Energy Research, IFREE
Interdisciplinary Center for Economic Science,
George Mason University
Northwestern University
Department of Economics
2001 Sheridan Rd
Evanston, IL 60208 USA
http://www.knowledgeproblem.com
[email protected]