August 2011

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Where Should We Start When Developing A Smart Grid?

Demand response and pricing signals to homes and businesses could be better achieved via the internet through a combination of Home Area Networks and Energy Management software.

Allan McHale

Allan McHale

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Where ever we are going we start from where we are now and that point in the Smart Grid industry is very different across the world. Surprisingly, no where more than in the world’s developed countries. In Northern Europe the electrical transmission network is robust and reliable, as much of it, for some years has been regularly refurbished and fitted with automatic controls. In Germany this has allowed electricity from renewable energy sources, which now account for some 15% of the total generating capacity, to be accommodated without any problems.

In some quarters they are confident that this figure can probably be doubled before they need a fully digitized network in place. They are now initiating smart metering projects and no doubt the whole communication and information structure will fall in place with time.

At the other extreme is the US, the premier source of innovation and entrepreneurship in IT and Communications and the application of this technology to produce a fully digitized electrical network. But before it can become smart and efficient enough to accommodate this brave new low carbon renewable energy world, the US electricity grid needs a lot of work. The average annual outage in the US can be as high as just over 200 minutes, which is costing them dearly. It is not surprising therefore that electrical generation and transmission infrastructure in the US is receiving so much attention from the President’s desk, with much support from stimulus funds and generous tax hand outs.

So there are no prices for guessing where technology advances and investment will be made during the next 5 years. Smart meters have taken the majority of investment so far but the move now (and not before time) is to attend to and spend on the aging T&D network.

So far the largest spend for any single segment in the Smart Grid business has gone to smart meters. The reason for this is that the basic network grid topology was built on stand-alone facilities offering limited if any interactive networked intelligence from the substation, distribution and transmission side with even fewer capabilities on the user-demand side.

With limited network capabilities in place, the US power companies pushed to offer end-user network intelligence for every user on the demand side of the grid and this was thought necessary to quickly show Smart Grid utility ROI and power generation savings. The basic demand-side theory was that if you could gather intelligence from the power grid demand side first, you could immediately reduce peak load consumption offering tremendous capital and raw material recurring savings.

This approach is now being questioned because it is not being built on a firm foundation of a reliable, robust and flexible T&D network. As explained in last month’s blog and it now seems more likely, that demand response and pricing signals to homes and businesses could be better achieved via the internet through a combination of Home Area Networks and Energy Management software.

However Electrical Utilities would much prefer having an AMI infrastructure which they control. Developed countries have elected to adopt different strategies when bringing their transmission and distribution networks into the Smart Grid age and time will tell which strategy has been most successful.

Most developing countries seem to be going for the US model. However in China the majority of their investment is going into constructing new facilities and here they are incorporating digitized systems into their transmission and distribution networks.

Other BRIC members have been more attracted, it would seem, in starting their Smart Grid programs by installing smart meters. But when it comes to volume of spend China will eclipse all other countries by 2015 and the major segment of the business will be automating the control and balancing of demand and communications in transmission and distribution networks.

About the Author
McHale's career spans 40 years in the Energy and Building Controls Industry. In 1980 McHale formed Proplan to provide consultancy services in marketing and business development of products for security, safety and environmental control in buildings. In 1998 Proplan was merged into a new start company, i&i limited in order to provide more comprehensive solutions to both the demand and supply side of intelligent and sustainable buildings. In 2008 the assets of i&i Proplan were acquired by BSRIA Ltd. Later that year he co-founded memoori ltd to provide web based business intelligence services to energy and security related industries.

During the last twenty years McHale has managed a wide range of marketing strategy assignments for some major international companies, and is the author of forty published market studies and numerous papers on physical security, fire detection and environmental controls and smart grid industries and has lectured in the U.S.A, Europe and the U.K. on business development.


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