Distributors

Smart grid, smart move

By Carol Katarsky

Growth of efficiency projects opens the door to opportunities.

“Energy efficiency” may have the feel of a buzzword these days, but it’s much more than that. As energy costs rise and demand increases, products and services that help end-users monitor power quality and improve efficiency are transitioning from a nice-to-have item to a necessity—and that need is one that distributors are in a great position to meet. However, finding the best opportunities, and how best to serve those potential customers, will take some legwork.

To start, selling smart grid technology isn’t just about the products.

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“We have a tendency to define smart grid as a technology,” noted Phil Davis, senior manager, Schneider Electric Demand Response Resource Center (schneider-electric.com). “While there are technical implications, the big picture is that the smart grid depends on a high level of interaction between customers and the operator of the grid.”

He noted that over the next 20 years, utilities are expected to spend nearly $2 trillion on the smart grid—but not just on products: “Portions of that investment will appear as incentive or rebate opportunities for energy end-users to purchase more grid-friendly equipment. This presents a strategic, long-term sales opportunity for distributors.”

More promising, the variety of applications where smart grid technology can be used means that distributors are well positioned to leverage their existing product knowledge to help customers transition to these newer lines.

“The application of power electronics to provide better power quality and improved reliability applies across the energy delivery system: static var compensators at the transmission level to provide system voltage support, statcoms for industrial applications to improve power quality and to mitigate harmonics from applications such as arc furnaces, automatic voltage regulators, and compensators for critical processes that are sensitive to quality of power,” noted Gary Rackliffe, vice president of smart grids North America, ABB (abb.com). “Knowing their customers’ processes and having the capability to control loads during peak demand periods enable utilities to provide value that ultimately reduces generation and T&D capacity requirements.”

Davis emphasized that smart grid products “aren’t a different product, but rather a new and improved version of existing products with added capability to communicate and be controlled remotely. Most smart grid activity is currently in metering and utility-level communications. Much of the market activity is in pilots, the majority of which is aimed at the residential sector,” he said.

But opportunity beckons from other industries as well. “For distributors calling on utilities, distribution grid management is the growing investment area,” said Rackliffe. “Advanced metering investment is forecasted to peak this year, but there will be ongoing investment going forward. The growth areas will be offering solutions to commercial and industrial customers that help them become more efficient in energy consumption and to take advantage of opportunities to participate in energy markets.”

Growth Factors

There’s no doubt that the smart grid holds tremendous future growth potential, and one of the driving factors behind that potential are federal and state policies that incentivize and/or require cuts in energy use.

“Federal policy primarily affects the transmission grid in terms of ROI, NERC CIP [North American Electric Reliability Corporation Critical Infrastructure Protection] requirements, and open access,” said Rackliffe. “Federal policy can also address efficiency standards, and the DOE has NIST [National Institute of Standards and Technology] working to identify the standards needed for smart grid interoperability.”

At the state level, energy-related policies and regulations are already having an effect—but with varied results.

“Policy changes have already begun and will intensify. Six states—California, Michigan, Minnesota, Ohio, Pennsylvania, and Texas—have laws mandating specific reductions in overall energy consumption, and 30 states have laws requiring that specific targets be met from renewable energy sources,” noted Davis. “Utilities cannot comply without involving their customers and familiarizing them with the implications these policies will have on grid reliability, power quality, and business growth.”

At the state level, however, there are more stakeholders, which can prove challenging, noted Rackliffe. “The states’ legislative bodies and public utility commissions primarily provide oversight for the distribution grid. The smart grid is challenged at the state level because there can be multiple stakeholders and entities making the investments for some smart grid technologies and taking on the risk of implementation. The project may not have the return to justify the investment, yet the benefits across all of the affected stakeholders is strongly positive,” he noted.

Distributors should also be prepared for clients and end-users who don’t understand, are skeptical of, or are even hostile to smart grid technology. There have been complaints from some (admittedly nonmainstream) organizations that some smart grid devices are harmful to human health and can actually cost end-users money in the long run. The solution? Distributors need to be ready to provide more education for customers and be prepared to explain the realities of the current economic climate.

Davis pointed out that as energy prices increase, customers will become more open-minded to new technologies and willing to explore ways to keep their own energy costs down. “Distributors that inform and prepare their customers today will set the stage for long-term relationships,” he said.

Carol Katarsky is a freelance business writer based in Philadelphia. She can be reached at ckatarsky@verizon.net.

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