Today’s alternative energy news keys off of another acquisition in the increasingly competitive smart grid area. What is more important is that the dollars at stake here are literally billions and billions.
France’s Schneider Electric SA (OTC: SBGSY) has offered to acquire Spain-based Telvent GIT, S.A. (NASDAQ: TLVT) for $2 billion.
Schneider, along with ABB Ltd. (NYSE: ABB), France’s Alstom SA (OTC: ALSMY), General Electric Co. (NYSE: GE), and Siemens AG (NYSE: SI) are major players in the nascent buildout of the smart grid.
The Electric Power Research Institute (EPRI) has estimated could cost nearly half a trillion dollars in the US alone. That’s enough money to be worth fighting over.
And that’s what these players have been doing, using their stacks of cash to acquire strategic components of the smart grid. Telvent, for example, offers real-time monitoring services for utilities to help balance electricity load. Doesn’t sound like a big deal, but the amount of electricity flowing to the grid is now calculated, not measured. Monitoring equipment like that from Telvent will give a utility a more accurate picture of load, and enable more efficient generation. Better monitoring will also help avoid costly blackouts and brownouts.
The First Trust NASDAQ Clean Edge Smart Grid Infrastructure (NASDAQ: GRID) ETF is too thinly traded to even matter for most investors. What does matter here in this ETF is that any or almost all of the fund’s small and mid-sized weighting components could find themselves under fire from an acquirer if they can be quickly integrated and then scaled for broader distribution.
ABB paid $3.1 billion in Janurary to acquire precision motor maker Baldor Electric and GE spent $3.2 billion to get 90% of French automation equipment firm Converteam. Siemens is looking to spend up to $4.3 billion on “bolt-on” acquisitions this year. Siemens has not yet participated in the buying spree, but it will likely have to do a deal or two if it wants to stay in the smart grid game.
These companies understand the stakes in the smart grid game and they also understand the utilities. Big utilities are wary of buying technology from start-ups and other small companies, but are willing to buy the same thing from ABB, GE, Schneider, or Siemens because these companies have a history and a track record. The risk that a company like GE will fold is very small, which means that it will be around to maintain and upgrade any systems it installs.
When it comes to M&A in the smart grid, the questions should probably point to “when” rather than “if” more deals are coming.
By Amy Westervelt, Daily Climate News and Analysis
April 2, 2010
You never get a second chance to make a first impression. It’s an old lesson that smart meter companies and utilities are learning the hard way as some of the country’s first smart grid pilots get underway.
Smart meters, unlike traditional meters, analyze home energy use for time-of-day pricing and send the data to customers and utilities to help them better manage their energy use and supply. While that knowledge can help customers save money, the technology is under fire in California and Texas, where lawsuits and scores of complaints are accusing utilities of using the new meters to inflate their customers’ bills.
The meters allow utilities to see if customers are using energy during peak-load times and charge them accordingly under specified plans. That means careful customers can save money by opting to use their high-energy appliances, such as dishwashers and clothes dryers, during off-peak times.
But with consumer education lagging behind smart grid rollouts, thousands of customers haven't taken advantage of the information and instead have been left thinking that their utility is just price gouging in the name of energy efficiency. Some think it’s a scam cooked up by the utilities; others assume the meters are inaccurate.
The utilities claim that bill increases can be explained by a number of factors, namely increased energy use, energy use during peak-load periods and a colder winter this year. After all, they say, smart meters have been deployed by the millions throughout the world, with few complaints from customers, so clearly the technology is not the problem.
Customers aren’t buying it.
In late 2009, Northern California utility Pacific Gas & Electric found itself in the middle of a lawsuit accusing it of false advertising.
The utility had told its customers that the smart meters it was installing in their homes would help them save money on their electric bills. When some bills went up instead, hundreds of PG&E customers filed formal complaints with the California Public Utilities Commission (CPUC). One Bakersfield resident, Pete Flores, sued the utility, claiming his electricity bill had jumped from about $200 a month to over $500 a month once a smart meter was installed in his house, with no change to his energy use.
The CPUC moved to investigate the claims, and PG&E stopped installing meters in Bakersfield. Now, several months (and more complaints) later, that investigation is officially underway: The CPUC announced this week that it had hired The Structure Group to conduct an independent evaluation.
In California, the CPUC had already authorized Southern California Edison to install approximately 5.3 million new smart meters, San Diego Gas & Electric to install about 1.4 million electric smart meters and 900,000 natural gas meters, and PG&E to install about 5 million electric meters and 4.2 million natural gas meters.
Since these smart meter rollouts began in 2009, the CPUC says it has received about 600 complaints, almost all from PG&E’s service area. In addition to evaluating the smart meters in the San Joaquin Valley, the origin of most of the complaints, the CPUC has asked its independent investigator to evaluate meters throughout PG&E’s territory.
Trouble in Texas
While PG&E submits to an investigation of its meters this week, Dallas-area utility Oncor is preparing to deal with its own smart meter investigation.
The utility has installed about 760,000 meters in its customers’ homes, and complaints to the Texas Public Utilities Commission have increased tenfold in the year since the installations began, all focused on large increases to bills.
The utility claims the increases are due to an unusually cool winter in the region, especially when compared with last year’s unseasonably warm winter. When Oncor ran a side-by-side test of its smart meters and the “dumb” meters it used to use on several homes in its service area, the results showed energy use readings to be the same on both meters, but customers wanted more proof. The commission will now conduct an independent test of Oncor’s meters to determine whether they are functioning properly.
“We’re enthusiastically supporting the testing program so that we can eliminate any seeds of doubt about the accuracy of these meters in consumers’ minds,” said Bob Shapard, Oncor’s chairman and CEO.
"Once we get these concerns behind us, all of us can get focused on the real cause of the high bills and help consumers address that."
Both utilities use Landis + Gyr smart meters, so the court cases and investigations aren’t doing any public relations favors for that company. Stan March, senior vice president of communications for Landis + Gyr, has been reminding the media (and consumers) that the Swiss company has successfully rolled out millions of smart meters around the globe.
Clearly, these two cases are relevant far beyond the borders of Texas and California.
At stake is not just the reputation of any single company or utility, but of the smart grid experiment in general. If customers begin to see smart meters as just a tool utilities use to price-gouge, they’re not at all likely to engage with the meters, or the applications attached to them, in a positive way.
Unfortunately, rate hikes aren’t the only consumer concern associated with smart meters. Several consumer groups have pointed out that the meters pose security risks, as well.
While companies like Silver Spring and Cisco, which are building much of the networks that smart meters and various smart grid applications will work on, insist security issues are under control, industry analysts and consumer advocates aren’t so sure.
Joshua Wright, a senior security analyst with InGuardians Inc., said in a recent report that smart meters can be hacked without a utility company knowing, and that the communications infrastructure between homes, meters and utilities is often weak. Hackers could break in remotely to shut down someone's power, raise or lower bills or even steal data from the utility company, according to Wright.
The same issues arose in the early days of the Internet, but while some analysts cite that fact as evidence that more needs to be done on smart grid security, the big tech players in smart grid largely claim the work done years ago to secure the Internet can be easily transferred to the smart grid.
“Internet Protocol [IP, the official communication standard of the smart grid] has been around for many years and there are already many mission-critical networks that run on IP,” says Inbar Lasser-Raab, senior director of network systems at Cisco. “We’ve dealt with those [security] issues many years ago.”
Nonetheless, so long as the media, analysts and consumer groups are talking about the security risks of smart meters, consumers aren’t likely to be comfortable having the meters installed in their homes.
Educating the Public
The negative press surrounding smart meters was part of the impetus for the recent formation of the Smart Grid Consumer Coalition, which is charged with educating consumers about all things smart grid in the hopes of engaging them in modernizing the grid and using energy more efficiently.
“Almost every week right now there’s a consumer group coming out saying they’re concerned about the accuracy of smart meters,” says Richard Walker, CEO of home automation company Control4. “We need to make it clear to consumers what the value of the smart grid is, why they should care, what they can do to reduce their bills. We need to encourage them to participate.”
The results of the Texas investigation are scheduled for release before the summer, while the California investigation is expected to take four months.
In the meantime, CPUC said in a statement about the investigation:
“It is premature to put a moratorium on smart meter installations before we have the results of the independent investigation. There are millions of smart meters installed and operating around the globe with no complaints. In addition, a moratorium would involve costs to consumers for ramping down installation and re-starting at a later date that we cannot determine are warranted at this time.”
The thing is, smart meters, despite the fact that they’re linked into the smart grid — a term that has come to have a futuristic, cutting-edge connotation — are pretty simple pieces of digital technology. They gather and transmit information to an analytic software package that makes that information actionable.
It’s highly unlikely that hundreds of thousands of meters would be inaccurate. However, if customers are given smart meters without any education about how to take control of their energy use, how to do a home energy audit, or to determine which times of the day electricity prices are highest, it makes sense their bills will go up. And in that case, customers are right to blame the utility — not because the smart meters are broken or because the utility is out to get them, but because the utilities have largely failed to explain how smart meters work.
March 29, 2010
Computer-security researchers say new "smart" meters that are designed to help deliver electricity more efficiently also have flaws that could let hackers tamper with the power grid in previously impossible ways.
At the very least, the vulnerabilities open the door for attackers to jack up strangers' power bills. These flaws also could get hackers a key step closer to exploiting one of the most dangerous capabilities of the new technology, which is the ability to remotely turn someone else's power on and off.
The attacks could be pulled off by stealing meters, which can be situated outside of a home, and reprogramming them. Or an attacker could sit near a home or business and wirelessly hack the meter from a laptop, said Joshua Wright, a senior security analyst with InGuardians Inc. The firm was hired by three utilities to study their smart meters' resistance to attack.
These utilities, which he would not name, have already done small deployments of smart meters and plan to roll the technology out to hundreds of thousands of power customers, Mr. Wright told the Associated Press.
There is no evidence the security flaws have been exploited, although Mr. Wright said a utility could have been hacked without knowing it. InGuardians said it is working with the utilities to fix the problems.
Power companies are aggressively rolling out the new meters. In the U.S. alone, more than 8 million smart meters have been deployed by electric utilities and nearly 60 million should be in place by 2020, according to a list of publicly announced projects kept by the Edison Foundation, an organization focused on the electric industry.
Unlike traditional electric meters that merely record power use -- and then must be read in person once a month by a meter reader -- smart meters measure consumption in real time. By being networked to computers in electric utilities, the new meters can signal people or their appliances to take certain actions, such as reducing power usage when electricity prices spike.
But the very interactivity that makes smart meters so attractive also makes them vulnerable to hackers, because each meter essentially is a computer connected to a vast network.
There are few public studies on the meters' resistance to attack, in part because the technology is new. However, last summer, Mike Davis, a researcher from IOActive Inc., showed how a computer worm could hop between meters in a power grid with smart meters, giving criminals control over those meters.
Alan Paller, director of research for the SANS Institute, a security research and training organization that was not involved in Mr. Wright's work with InGuardians, said it proved that hacking smart meters is a serious concern ...
Click here to view a video about the Smart Grid
Your electric meter is about to get smarter. SMUD is installing new state-of-the-art meters at all homes and businesses. These new “smart meters” will help us improve your service and, over time, will provide you with the information and tools that give you better control over your energy use and your bill.
Smart meters are a major step on the path toward a "smart grid" and a smarter energy future. While full implementation of some features is a few years away, a smart grid will deliver electricity using digital technology to save energy, reduce costs, and increase reliability.
SMUD plans to replace the meters at all homes and businesses by the end of 2011. Installation only takes a few minutes, with a brief interruption in electric service, and you do not need to be home.
Following extensive testing of the first 75,000 meters installed, we plan to start installing meters to all homes and businesses by 2011. At that time, customers with smart meters will start to see a number of benefits, including:
- When you visit SMUD.org, you will have access to "yesterday's energy use today." This can help you make more informed and immediate decisions on how to save energy in your home and money on your electric bill.
- Your energy use data will be securely transmitted directly to SMUD.
- Since meter readers will no longer be required to read each meter once a month, we'll reduce the number of vehicles on the road – helping to reduce pollution, fuel consumption, and traffic.
Smart meters will enable SMUD to adapt to advances in technology to gain efficiencies in our operations and provide you with many additional benefits in the future. Just some of the benefits you can expect are:
- Being able to identify when your home is using the most energy and what it's costing you, giving you more control over your bill.
- Accurately track which appliances or other equipment are costing you the most. Then make changes, at your discretion, to help make your home more energy efficient.
- Your smart meter could also be able to communicate with programmable devices in your home, like your air conditioner or other appliances, to let you directly monitor your energy use.
- Smart meters will help SMUD better pinpoint power outages to restore power as quickly as possible.
- We expect to identify additional benefits over time that give you more control over your electricity use and your bill.
May 4, 2009
As the United States sped along the Information Superhighway through the 1990s, it left its electricity grid in the dust.
Now, energy efficiency has become an imperative, and momentum is building to merge information and power into a smart grid that can promote energy efficiency and savings.
Miami became the one of the largest U.S. cities to embrace that shift last month when it announced it would invest $200 million in smart meters for homes. Boulder, Colo., Austin, Texas, Southern California Edison and Duke Energy Indiana are also planning smart grids or smart metering programs.
The federal government is getting on board, too. President Obama and Energy Secretary Steven Chu regularly talk about a smart grid future -- built by U.S. innovators. Congress this year has already invested $4 billion in smart grid technology in the stimulus package alone, and federal agencies are getting to work designing an overhaul of the power system.
Smart grid technology will eventually revolutionize how we generate, distribute and consume energy on both macro and micro levels.
To get there, however, the nation will have to get over some significant technological and institutional hurdles.
A Glimpse of the Power Grid's Future
Under the current power grid system, utilities don't learn about power outages until their customers call. Smart grids will be able to diagnose themselves, as well as monitor electricity demands in real time.
Smart grid technology will also allow customers to sell electricity they generate from rooftop solar panels and other renewable sources back into the system, which will be able to locally store energy and incorporate intermittent sources like wind and solar.
Using smart meters, customers will be able to monitor their electricity use online -- and get suggestions for minimizing it, either by turning certain appliances off or using them at different times. At the micro level, appliances themselves may use the smart grid’s intelligence. For instances, refrigerators may one day have chips that keep the ice maker from running during the heat of the day when air conditioners are also sapping power from the grid.
Increasing the efficiency of the electricity grid and adding smart metering could have a huge impact on energy use and consumer costs. In 2007, 9.4 percent of electricity generated was lost in transmission and distribution.
First, Writing the Rules of the Road
But wide implementation of smart grid technology is a while off. There are several large institutional challenges, including systemwide standards and interoperability. As Garry Brown, chairman of New York State Public Service Commission explains:
“If I let Utility A go one route and Utility B go the other route and Utility C a third, did I just set up a system in which three systems can’t talk to each other and the grid operator is not going to understand what is going on?”The stimulus package gave $10 million to the National Institute for Standards and Technology to begin writing standards for the new power grid. NIST expects by year’s end to have Smart Grid standards that will ensure the interoperability of systems and appliances.
NIST is already working on a draft roadmap for smart grid development, and it plans a stakeholders summit May 19-20 in Washington. At a workshop last week, discussions focused on creating a system that encourages collaborative energy and efficiency, is transparent, secure, avoids congestion, and is loosely coupled, flexible and will last.
Safety and Synchronicity
Technologically, smart grid has two major challenges: how to integrate renewable energy sources and how to maintain cybersecurity.
The smart grid needs to be able to store renewable energy that is generated when demand is low and provide it to customers when demand is high. Right now, energy used at peak times tends to be inefficient and environmentally dirty. At the same time, the grid should be able to accommodate plug-in electric vehicles, which many anticipate will become more widely used.
The need for cybersecurity will also have to be balanced with the push for open standards, which would allow upgrades or changes to be made to the system with software changes, rather hardware substitutions.
“What we’re doing here is opening up two-way communications," Brown says. "We’re giving someone the ability to remotely turn a building on or off. If the wrong people get a hold of that power, we’ve got a real problem. We’d better get cybersecurity in the system as we build it."Guido Bartels, general manager of IBM's Global Energy and Utilities, also notes a fundamental problem in the utility business model -- utilities lose money if the grid becomes more energy-efficient and consumers use less.
“If we do demand-side management and energy-efficiency and if utilities are going to sell less electricity, that needs to be supported by a certain business model and the whole regulatory environment,” he said. (In 1982, California successfully decoupled utility income from consumer use, resulting in the state’s per capita energy use remaining flat since then, whereas the per capita use in the rest of the country increased by 50% in the same time period.)Consumers in the Driver's Seat
The problem is not just for government and utilities alone to solve.
"It’s a consumer opportunity," says Audrey Zibelman, president and CEO of Viridity Energy. "At the consumer side, you can have micro turbines, you can have electric cars, you can have the ability to automatically turn down your thermostat based on price and temperature.Because of how much control consumers will eventually have, businesses sense opportunity. A number of companies are introducing smart meter applications. Google announced in February that was developing an online Power Meter that allows users to track their home electricity use. Its engineers who are testing the equipment says they were able to quickly cut their electricity use as soon as they could pinpoint the power hogs.
"It turns one of the biggest variables on the system -- load, which is not predictable -- into something very predicable just like generation. So I think the smart grid will move past demand-response, which is, ‘Let’s turn off the lights when it’s really hot,’ to optimize our energy all the time and tell the person operating the grid how much electricity we plan to use tomorrow, because that will make a very efficient system.”
Other business ideas may utilize smart grid in as-yet unimaginable ways.
“The best thing that will come out of smart grid is something we haven’t predicted yet,” Brown says. “And the best example I can give is the Blackberry after cell phones. When cell phones first were introduced, surveys showed cell phones would just be used as an emergency phone. Obviously the regulators were completely wrong.”
October 28, 2009
Earlier today, President Obama spoke at the opening of what's now the largest photovoltaic power installation in the US, using the opportunity to announce the funding of a different energy project: the modernization of the US electric grid. The two might seem unrelated, but a report released earlier this year by the National Academies of Science indicated that grid modernization was essential of the country's use of renewable electricity was to rise above 20 percent of its total. The new projects would involve a total of $3.4 billion dollars of stimulus spending; with matching spending by utilities, the total commitment would reach over $8 billion, and fund the installation of over 5 million smart meters.
The funding has been in the works for a while, as the DOE solicited grant applications shortly after the stimulus bill was passed. But this is the first time that the projects that would be funded have been revealed (a list, broken down by category, is available).
A significant portion of the funding, $1 billion dollars, will be going to consumer-level technology, primarily smart meters. The project list indicates that well over 5 million smart meters should be installed. These devices will allow homeowners to receive fine-grained information about their energy use, in some cases on a per-appliance basis, and exert greater control over its timing. These devices will be most useful, from both a financial and grid perspective, when they're coupled with pricing that encourages use during off-peak hours, so some of the funding is going to help utilities transition to these pricing systems.
A larger chunk of the funding, $2 billion, will go toward putting the infrastructure in place to support these smart meters. The same sort of reporting and control provided by a smart meter can be provided at a variety of levels, allowing utilities to better handle issues like changes in demand, intermittent renewable power sources, and equipment malfunctions. In addition to getting the hardware in place, the utilities will be facing an enormous IT challenge, as the data has to be transmitted on secure networks, analyzed, archived, etc. The $2 billion will help cover these projects as well.
Another $400 million will be used to modernize transmission lines, both to limit the losses during transmission and to allow greater long-distance shuffling of power, "so that a wind farm in rural South Dakota can power homes in Chicago," as Obama put it. Another $25 million is going to foster the development of a smart device manufacturing capability.
In making the announcement, Obama claimed that the smart meters and demand-response pricing should enable consumers to save over $20 billion during the next decade, far exceeding the cost of the new program. He also suggested that the projects would increase grid reliability, limiting the $150 billion a year in economic losses suffered due to power outages.
All of that is generally good news, but the longer-term significance of this program may simply be to push smart metering and equipment out of the realm of test projects and into the mainstream. So far, smart meter deployments have been the rare exception on the US grid; if the program works as planned, nearly five percent of US households will have experience with them in the near future, and the utilities will have a wealth of real-world experience with the technology.
In that sense, a recent move by California may be equally significant. As part of a flurry of bill signings, Governor Schwarzenegger approved a smart grid measure that calls upon the state's Public Utilities Commission to come up with a plan for a state-wide smart grid deployment by July of next year (the bill's passage was spotted by Green Beat). Utilities would then have a year to come up with their own deployment plans, after which, presumably, the hardware would start to be put into place. California accounts for another 10 percent of the households in the US, so this has the potential to create an even larger impact than the stimulus spending.
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Smart Grid Interoperability Panel (SGIP)
The Smart Grid Interoperability Panel (SGIP) supports NIST in fulfilling its responsibilities under the Energy Independence and Security Act (EISA) of 2007. The SGIP will identify, prioritize and address new and emerging requirements for Smart Grid standards. It will further develop the initial NIST Framework and Roadmap for Smart Grid Interoperability Standards, Release 1.0 , which was released January 2010. Coordination between any and all groups which must complement each other on the resolution of a gap or overlap in Smart Grid Technologies.
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