The Transformer – August 18, 2010

Background
Energy journals and, increasingly, the popular media now teem with updates and predictions on developing “smart grid” technologies … how they will help smooth power demand peaks and valleys, greatly improve transmission efficiency and outage/service response, and reward consumers with lower bills for slightly adjusting their energy use patterns.

The smart grid offers great promise. For example, utilities are rapidly installing remotely readable smart meters that can identify problems, report real-time usage and facilitate electronic communication between utility and customer or even the customer’s appliances – the holy grail for energy storage and cost savings.

But dangers lurk as well. Consumer advocates rightfully note that the same technology can be used to shut off service to families struggling to pay their bills without so much as a face-to-face meeting.  Cyber-security is another looming risk. Will hackers break into billing systems or even grid operations?

This issue of The Transformer looks at another problem, namely that the smart grid isn’t necessarily a green grid and, in fact, could actually foster greater demand for power from coal-fueled or nuclear baseload plants. It also presents one proposed means of dealing with the problem: buying green electrons.

A shave and a fill
Because customers’ power demands vary widely from hour to hour, utilities must keep on-hand a large supply of reserve generation resources, some of which get used a few hours each day or just a few times a month. Utilities have been enthusiastic about the smart grid’s potential to flatten demand and thus reduce expenditures on mostly idle generation facilities.

A smart grid allows utilities to charge customers more for power during peak periods and less when demand is low. The smart network can give instantaneous “time-of-use” price information to customers, who can try to align their own peak power use with the price signals. This strategy, if implemented, must be done with special consideration for low-and fixed-income households who may lack the flexibility to align their energy use with low off-peak prices.¹

In addition, a smart network can automatically adjust the controls on appliances such as water heaters, air compressors, freezers, heat pumps and air conditioners so they run on high power when prices are low and on low or no power when prices are high.

This strategy is known as peak-shaving and valley-filling. It helps flatten the demand curve, reduces the system’s need for backup resources and sharpens its demand forecasting, allowing maximum use of the grid’s baseload plants.

Therein lies the rub.

Smart grid control technology and time-of-use pricing let utilities run their baseload plants longer, spreading the plants’ fixed (capital) costs over more hours of operation, thus lowering costs. Of course, these baseload resources tend to be polluting, coal-fired (and/or nuclear) plants that run best and cheapest when going all-out, 24/7.

How time-of-use furthers coal
(NB: The following description refers to a single, optimized “system” representing a collection of grid-connected utilities.  While each utility has its own unique mix of resources, market transactions between utilities work to ensure that the least expensive resources in the system are operated first, regardless of which utility owns them.  Customers’ behavior anywhere on the grid – regardless of their particular utility and the kinds of power they provide — has essentially the same effect on grid operations.)

Given daily and seasonal changes in electricity use, a system’s minimum load might be only half of its peak needs. Utilities run their coal and/or nuclear plants as close to full out as long as it takes to meet that minimum, or base load.  Thus the system relies on higher-cost, but cleaner and built-to-be-adjustable natural gas plants (or hydro) to cover the other half of its need.

The more the system can use the smart grid to lower peak load and raise its base, the more it can run its coal plants … undercutting the drive to limit greenhouse gas emissions.

Adding wind power to the generating mix reduces carbon emissions but exacerbates the grid’s peak load problems. This is because wind, especially in the Northwest, often blows hardest in the early morning or at night when loads are low, forcing the system to throttle back baseload generation during those hours.  That reduces emissions, but creates even more need for flexible power plants.  As the amount of wind on the systems grows, utilities will look to complementary generation options such as natural gas plants, especially at night. Burning natural gas instead of coal for power cuts per-kilowatt-hour CO2 emissions by 60%.

So wind power cuts greenhouse gas emissions both by directly substituting for fossil-fueled generation and by making the grid less friendly to coal plants.  Increasing amounts of wind on the system will slowly but surely shift the generation mix away from inflexible coal plants.

But vast deployment of smart grid technology could reverse this trend, enabling utilities to depend on dirty coal plants once again.

Color-of-use
But what if consumers could tap the smart grid to maximize their use of clean energy? Of course, an electron from fossil-fuel combustion is identical to one from use of a clean renewable resource. We can’t differentiate “green electrons.”

But the grid can see colors. More precisely, grid operators know the exact amounts of power coming from every source at every moment. They have to know; balancing available resources with demand is their job. The smart grid can communicate the relative green-ness of its electron mix, using the same technology that could send consumers minute-to-minute price signals.

Guided by these generation mix signals, commercial, industrial and residential electricity consumers can manually or automatically use their power when green electrons are flowing and reduce power use when they are not.

The above is no pipe dream. Kirkland, Wash.-based GridMobility LLC², for example, is fashioning technologies for delivering generation mix signals to consumers via the Internet or radio. Soon, consumers will be able to choose greener power for their water heaters, heating and air conditioning systems, freezers and other shiftable loads. They can set appliances to run at 100% when the wind is strongest or the sun is brightest, and operate at a lower level when the grid’s carbon footprint grows.

The Bonneville Power Administration recently announced a partnership with Mason County PUD No. 3 and GridMobility on a pilot project to allow water heaters to turn on or off based upon grid conditions and renewable energy content.  Combining smart water heaters with a smart grid allows the water heaters to store wind-generated power. (Electric vehicles could be used in the same way.)

Conclusion
Successful color-of-use programs could help utilities by reducing the costs of integrating intermittent renewables. Should wind generation surge — a big problem for the grid — water heaters can be brought to 100% capacity to absorb the sudden increase (see Aug. 4, 2009, Transformer, “Using simple smart water heaters to integrate intermittent renewables”).  Should the wind quickly drop off, freezers could be turned down or off (briefly) to match the falling supply.

So, in addition to providing an incentive for developing more renewables, a smart grid configured to prefer green power would lower the cost of renewables for everyone by reducing integration costs.  Part of the cost savings could be used to provide incentives for adopting the technology and/or lowering the rate impact of the smart grid infrastructure investments.

This technology is moving ahead. On July 30, 2010, appliance manufacturers, utilities, consumer and environmental groups reached an agreement that will lead to a new federal requirement that all new major appliances be smart grid-ready in the next few years.

The pace of smart appliance penetration is hard to predict. But whenever we get there, we’ll be able to use the technology to further encourage and reduce the costs of clean energy rather than to facilitate coal. This is the essence of an environmentally smart grid.