Monthly Archives: May 2013

Wind Forecasting (II) — A Business Case, Demonstration, and Investment Opportunity Based on Ultra-Low-Power, Smart Sensor Technology

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Dominic Geraghty, SGiX (smartgridix.com)

 

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John Manobianco, MESO Inc.

 

Recap of SGiX’s First Dialog on Short-Term Wind Forecasting

Wind power generation facilities continue to be deployed across the nation as a result of RPS mandates. In our previous dialog on short-term wind forecasting, we showed that: (1) it is possible to improve the accuracy of wind forecasts, (2) improvements can create substantial value for different Smart Grid (SG) 2.0 stakeholders, (3) increased accuracy requires both higher quality data and improved modeling, and (4) better data is expensive to collect.

cropped-DSC_0288_2.jpgWe also pointed out that there are two potential pricing points for wind forecasting services: today’s (mostly) low-priced commodity market with little differentiation in forecasting accuracy among service providers, and the potential for a value-priced service providing customized higher-accuracy forecasts.

New Business Opportunity for a Smart Sensor Application in Wind Forecasting

This dialog is about an opportunity to develop a value-priced service based on a unique and innovative, approach for collecting higher quality meteorological data, using smart micro-sensors. Dr. John Manobianco, VP, Business Development at MESO Inc., my co-dialog-er, is leading the development of this business. He is an industry veteran with very deep experience in weather forecasting and the use of wireless sensors for meteorological applications.

John has already completed a substantial body of work developing a technology solution based on ultra-small, smart sensors, and identifying and solving some (but not all) of the technology challenges. This work has been supported by NASA from 2002-2005 and NSF in 2012 through a Phase I SBIR I contract - see also a summary here.

He has analyzed the costs of developing and commercializing the technology in some detail. Either of two alternative business models – a systems sale or a services business – seems possible.

To improve and refine the business case, and assess the technology and market risks, John is looking for collaborative help from the SG community.

Two Partnering Offers

In addition to participation in the team-solving process, John is also offering two partnering opportunities: (1) a technology demonstration and (2) a matching-dollar equity investment option (see below).

This Is a Chance to Work on a Real Business Opportunity, and Create a Work-Product On-Line

Smartgridix.com likes this opportunity because it is a real, market-driven need for a business case.

On-line team-solving allows John, the entrepreneur, to leverage the collective intelligence of the SG community in building his business case and identifying creative solutions for some of the technology challenges.

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John Manobianco:

 

Business Concept Application for Wind Forecasting

The overarching vision of our business concept is to revolutionize environmental sensing by developing a system of disposable, centimeter-scale probes that weigh less than a gram and gather data as they drift passively through the air.

Our novel probe design exploits component miniaturization as well as the integration of sensors and other components. But here’s where it gets really interesting: GlobalSense probes can provide measurement accuracy equivalent to or even better than currently accepted instrumentation. Continue reading

Concerned Citizen: “So, What is the Cost of Building SG 2.0?” The Engineer Ultra: “Ahem……about $407 Billion!”

("....and that’s not all", he said, sotto voce, "we also need about $1.6 trillion for non-Smart-Grid power system infrastructure".)

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 Breaking Down the Cost of the Smart Grid

Dom Geraghty

 

This dialog continues our series on The State of the Smart Grid, providing context for SG 2.0 business cases to follow. This dialog is fairly long, at about five pages (ouch!) but broken up into digestible pieces with lots of bullets -- we are hoping that you will find it gripping enough to make it to the end…..it is a really important topic, and we provide lots of numbers. All references are available in our Archives here, as well as directly linked to the source.

Definitions are important when you talk about costs (or benefits) of SG 2.0 and its applications*.

10. DSC_1334-150x150AMI is not the Smart Grid (SG) -- it is enabling infrastructure (iX) that supports automated meter reading and a few SG applications (SG 1.0). It lacks the band-width and speed necessary to provide grid automation and control, i.e., to make the grid “smart” and deliver the full benefits of SG 2.0 applications.

*We are using our new standard definition of SG 2.0 (see here) which differentiates SG 2.0 applications from (a) the infrastructure (iX) that enables them, and (b) legacy AMI 1.0 applications.

What Has Been Spent to Date

The power industry has made a very large investment in AMI, i.e., SG 1.0. There are about 40 million (see EIA, Pike) smart meters deployed in the U.S., costing an estimated $100 - $125 per installed unit, for a total cumulative cost to date of $4 billion to $5 billion.

Included in this number is $813 million in ARRA government funds that were provided for AMI deployments. Note that since the completion of the ARRA program, shipments of smart meters in N.A. have slipped 42% to 7.2 million in 2013 from their peak in 2011 of 12.4 million. A substantial amount of additional ARRA funding was also provided for the early deployment and demonstration of selected SG 1.0 applications.

If we want to transition to SG 2.0, it is clear that we’ll have to make an even larger investment than that which has been made to date for AMI. This investment in SG 2.0 will likely be spread out over a 20 – 30 year period as we transition to full SG 2.0 capability.

What Will the Transition to SG 2.0 Cost?

Continue reading

Building the New SG 2.0 Infrastructure (IV) – “Where Are My Customer Benefits?”

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Dominic Geraghty

 

This dialog discusses the sixth success condition for SG 2.0 – the electricity customer.

Customer’s electricity bills will continue to increase because SG 2.0 needs new iX.

Since the NPVs of AMI investments are less than zero, they cannot reduce customers’ bills. It is the SG 2.0 applications that create NPVs greater than zero.

If the current AMI infrastructure were capable of enabling SG 2.0, then the deployment of SG 2.0 applications would gradually lead to reductions in customers’ bills, everything else remaining constant.

However, new iX is needed to support the roll-out of SG 2.0 applications.  Customers’ bills will increase to pay for it. The increases will be offset, over time, by the reduced operating (short-term) and capital (long-term) costs enabled by SG 2.0 applications sitting on top of the new iX (iX 2.0 in our standard definition). Generally speaking, these applications have the potential to provide good returns to most SG stake-holders.

Of course there are other non-SG 2.0 reasons why customers’ bills will likely increase – but that’s a topic for another dialog.

Don’t we need to distinguish between residential, commercial, and industrial customers’ interests/needs for SG 2.0 applications?

There’s a great book by Neal Stephenson, “The Diamond Age”, set in the near future, in which essential utility services, the Internet, and chemicals essential to compiling matter are delivered through a “pipe” called “The Feed”. The services are viewed as commodities with price proportional to quantity used. No other thinking or action is required on the part of the consumer.

Isn’t that what residential electricity customers really want? “Don’t bug me – I’m too busy living and making a living -- automate your services so as to give me a price optimized around the resources and assets required to deliver, and use, electricity (“The Feed”) – isn’t it an essential public good? I'm entitled to receive it at least cost, tailored to my particular behavioral choices.” Don’t residential consumers want a bill-optimized commodity? With the help of social networking today, i.e., mass individualization, this tailored billing should be possible to achieve in an SG 2.0 environment.

The sustained value of a hands’-on residential energy management system is questionable when a small amount of learning (about an individual’s energy needs and behavior) coupled with real-time capability can enable a permanently-automated system that minimizes the electricity bill.

We have to do a better job educating the electricity customer about the benefits of SG 1.0 and SG 2.0

To engineers, educating customers is what writing a users’ manual is to software engineers -- boring/tedious work -- the fun is in the technology development, but putting it in writing is sheer drudgery (!).

If this is a generally true assertion, it has ominous implications because, to date, the AMI and the Smart Grid initiatives have been mostly driven by technologists. Utility engineers pride themselves on delivering reliable service, and demonstrating and implementing beneficial new technologies.

Customer-focused communications and education have been given nowhere near the same level of attention. The SG 1.0 deployment to date has hardly been a customer-needs-driven activity.

A compounding factor is that the SG development and deployment engineers are not responsible for business case analyses of SG 2.0 applications. As we’ve said time and again, the AMI and SG 1.0 business cases have turned out to be over-optimistic, and promised benefits have not been delivered, because they couldn’t have been.

The absence of tangible benefits, exacerbated by insufficient education about the workings and potential benefits of the SG, have been creating rising electricity customer opposition to the SG as a whole.

To be successful, SG 2.0 applications need to be more customer-needs driven, electricity customers need to be better educated, and vendors and utilities have to deliver on promises made.