Sioshansi F.P. Smart Grid: Integrating Renewable, Distributed & Efficient Energy

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• Dynamic electricity pricing information is delivered to the

user, providing the ability to adjust demand of electrical

energy use.

• It can respond to utility signals, contributing to efforts to

improve the peak management capability of the smart grid

and save energy by:

• Providing reminders to the consumer to move usage to

a time of the day when electricity prices are lower, or

• Automatically—shedding or reducing usage based on

the consumer's previously established guidelines or

manual overrides.

• Integrity of its operation is maintained while

automatically adjusting its operation to respond to

emergency power situations and help prevent brownouts or

blackouts.

• The consumer can override all previously programmed

selections or instructions from the smart grid, while

ensuring that the appliance's safety functions remain active.

• When connected through a home area network and/or

controlled via a home energy management system, smart

appliances allow for a total home energy usage approach.

This enables consumers to develop their own energy usage

profile and use the data according to how it best benefits

them.

• It can leverage features to use renewable energy by

shifting power usage to an optimal time for renewable

energy generation (i.e., when the wind is blowing or the

sun is shining).

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http://www.zpryme.com/SmartGridInsights/

2010_Smart_Appliance_Report_Zpryme_Smart_Grid_ Insights.pdf.

Appliance manufacturers have been working to reduce the

power consumption of their products since California's 1978

passage of Title 24. Title 24 was the first set of regulations to

mandate energy efficiency standards. Energy efficiency

standards are concerned with how much power an appliance

uses, not when it is used. So, the emergence of new smart

technologies and price signals generated by organized

wholesale markets is beginning to change the way that

manufacturers think about energy efficiency. From an

electricity grid perspective, when an appliance runs is more

important than how much total power it uses. Take

refrigerators; for example, on average refrigerators actually

only consume about 70 watts. However, the 10- to 15-minute

defrost cycle can consume 10 times that amount.

Making

refrigerators smarter by including a network connection can

enable simple adjustments like helping to shift the defrost

cycle to low-priced off-peak times.

See: http://www.tendrilinc.com/press-releases/

tendril-teams-with-whirlpool-corporation-to-usher-in-new-era-of-smart-appliances/

Although few smart appliances are available today, the global

household smart appliance market is projected to grow to $15

billion by 2015.

Many different manufacturers are piloting

new technologies in an effort to meet this predicted demand.

However, none have yet found the right business model, as

we will discuss. Below are some notable examples of

activities being undertaken by major manufacturers; these

manufacturers are focused on different aspects of the same

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theme: that automated response to prices will help lower

energy costs.

http://www.zpryme.com/SmartGridInsights/

2010_Smart_Appliance_Report_Zpryme_Smart_Grid_ Insights.pdf.

Whirlpool

Whirlpool Corporation markets appliance in nearly every

country around the world across all major categories,

including fabric care, cooking, refrigeration, dishwashers,

countertop appliances, garage organization, and water

filtration.

The company has announced that all of its

electronically controlled appliances will be smart energy

compliant by 2015. These appliances will be able to respond

to signals from the utility company to optimize operation

using dynamic electricity prices.

In the short term, the

company has even committed to make one million smart

dryers by the end of 2011.

http://www.whirlpoolcorp.com/about/overview.aspx.

http://grid2home.com/sg-consumer html.

http://www.greentechmedia.com/articles/read/

whirlpool-plans-to-make-1m-smart-dryers-by-2011/\

Whirlpool's long-term deployment strategy includes short-

and medium-term deployment and testing activities to ensure

the company is headed in the right direction. In the years

leading up to 2015, the company will initiate a 40-home pilot

in Houston to study consumer behavior—the pilot will be

conducted jointly with Direct Energy, Lennox, Best Buy, and

OpenPeak.

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The Houston pilot will involve washers, dryers, dishwashers,

refrigerators, and water heaters at the 40 homes with products

that communicate over a network. It also will install energy

monitoring devices so that people can keep track of and adjust

energy use.

http://www.zpryme.com/SmartGridInsights/

2010_Smart_Appliance_Report_Zpryme_Smart_Grid_ Insights.pdf.

GE is another worldwide appliance manufacturer looking

closely at the smart appliance space. Beginning in November

2009, GE began distributing a type of hot water heater that is

the first smart appliance available commercially in the United

States.

Currently, GE has teamed up with Louisville Gas &

Electric Company (LG&E) to create a pilot program that uses

smart meters, smart appliances, and a tiered-pricing program.

Participants in this pilot are GE employees living in the

LG&E Louisville market, and they were provided with a suite

of GE “smart” appliances to replace their standard appliances.

Many installations included a refrigerator, range, microwave,

dishwasher, and clothes washer and dryer. In addition, LG&E

installed a programmable thermostat in the participants'

homes. Examples of saving opportunities include:

http://www.zpryme.com/SmartGridInsights/

2010_Smart_Appliance_Report_Zpryme_Smart_Grid_ Insights.pdf.

• The refrigerator can delay the defrost cycle from

occurring during peak hours. One participant's energy

efficiency efforts with refrigerator usage over 10 weekdays

showed over a 20% reduction of energy usage during peak

hours.

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http://pressroom.geconsumerproducts.com/pr/ge/

smart_meter_pilot09.aspx.

• Microwave ovens power down slightly by reducing

wattage used when operated during peak hours.

http://pressroom.geconsumerproducts.com/pr/ge/

smart_meter_pilot09.aspx.

• The ”smart” dishwasher can delay starting the cycle to

off-peak times.

http://pressroom.geconsumerproducts.com/pr/ge/

smart_meter_pilot09.aspx.

LG Electronics, another major electronics and appliance

manufacturer, is planning to incorporate demand response

technology in its new generation of smart appliances. The

company's smart appliances use patented THINQ™

technology, which allows users to set their operation

according to personal preferences and to control or monitor

them via websites or smart phones and tablet PC applications.

The interface is still evolving, but the goal is to make it easy

for customers to make educated decisions about the trade-offs

between comfort and convenience. LG is also working on

smart grid projects around the world, including a residential

energy storage system with Southern California Edison

(SCE), a real-time energy pricing project in Germany, and a

pilot project on Jeju island in South Korea.

http://thinkd2c.wordpress.com/2011/01/26/lg-thinq-and-the-smart-grid/

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The Future of Smart Appliances

The major appliance manufacturers are all seeking the same

core functionalities in their devices, although their

technological and marketing approaches are different. Of the

physical devices on the residential customer side of the meter,

appliances may hold the most value for consumers and the

electricity grid. Appliances seem to have the most potential to

provide tangible benefits to residential consumers, provided

that manufacturers can minimize the cost of installing the

smart communication and control technologies in order to

make the new functionalities more attractive to consumers.

One limiting factor will be the lack of available granular

usage information and dynamic pricing programs. As

discussed above, the lack of such information and programs

will reduce the realized benefits of many smart devices,

including appliances. In addition, there are no clear standards

for the interconnection of smart appliances yet. This issue is

still being debated and should be clarified as the market for

such devices begins to grow.

Existing Models for Customer Participation

There are four basic models of customer participation that

have emerged for existing demand response and energy

efficiency programs:

• Traditional utility model

• CSP (curtailment service provider), or aggregator model

• customer-provisioned model

• Energy services company (ESCO) model

The first model of participation is the traditional model of

utility account representatives signing up individual firms to

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participate in utility-run offerings. In many cases the utilities

have offered a site assessment to help businesses identify

demand response opportunities and develop a demand

response plan. This model functions most clearly in states that

have not restructured and where the relationship between the

utility and their larger customers has not evolved. In

restructured states where commodity electricity is bought

from a third-party supplier, these relationships do not exist in

the same way.

The second model of participation is through an intermediary,

and is the model seen in restructured states. These are either

demand response firms ranging from aggregators such as

EnerNOC to more focused curtailment service providers such

as CPower. These firms take advantage of existing ISO/RTO

and utility demand response programs and seek out

businesses to participate in them. These aggregators replace

the functions provided by utility account representatives and

typically bring in the resources of their own centralized

control facilities. EnerNOC in particular is well known for its

ability to aggregate the usage of onsite backup diesel

generation for demand response purposes. Some alternative

electric suppliers, perhaps most notably Constellation Energy,

also bundle these services in with their energy supply

offerings. Unlike traditional utility-offered programs these

firms operate in a deregulated landscape. This model is

dependent upon the programmatic offerings of utilities and

RTOs/ISOs, which often puts CSPs at odds with owners of

traditional generation resources.

The third model of participation is through the customer

purchasing and provisioning demand response technology and

processes for themselves. Today, many large national retail

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chains have their own internal corporate policies regarding

demand response as a way to manage operating costs and that

develop and manage participation in programs at a national

level. Firms like Wal-Mart and Target carefully monitor the

operations of their stores in real time. The same aggregation

of information can and is used for demand response purposes.

The basic choices to change lighting levels or temperature

settings provide consistent demand response, but in different

geographical areas the value that can be achieved from those

consistent actions varies greatly, as the standardized systems

have to intersect with a patchwork of different RTO/ISO and

utility demand response programs. This same problem also

exists for appliance manufacturers and others looking to

provide demand response services. As standards become

clearer, and telemetry and control costs decline, large

customer opportunities will become clearer, and we anticipate

that smaller and smaller customers will be able to provision

and maintain their own demand response.

The final model that is in use today is the energy service

company or (ESCO) model. The ESCO model is based on the

idea that there are savings created by the installation of new

more efficient equipment that can be shared between

installers and customers. This is sometimes referred to as the

shared savings model. There has been tremendous excitement

about the ESCO model in the past, but today, despite the

success of many companies, the model has not taken off to

any large degree. As of yet, property owners and managers

have very little real-time information about their energy

usage, so it is very difficult to validate that savings were

produced by a single technological change. Accordingly, it is

difficult to establish benchmarks that define the shared

savings mechanisms. While the ESCO model has been

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successfully deployed, the potential is limited by data access

and availability of usage information for many customers.

Future Developments: Integrating Technologies

with Customer Participation Models

The emergence of more advanced communications and

control technologies is creating new opportunities. Instead of

a piecemeal approach to demand response, voluntary price

response, and energy supply purchases, it appears that an

integrated model is emerging. In areas with organized

wholesale markets and retail competition, companies will

begin to monetize energy savings and load shift through a

fully integrated supply model.

New business models combining energy supply with demand

response and energy savings opportunities are technically

possible today. In effect, such a model combines energy

supply with the CSP and ESCO models described above.

Such a model will allow suppliers to use savings, from load

shifting and efficiency gains, to create models that do not

necessarily require customers to pay for efficiency

improvement up front. This is a critical metric for widespread

success. Programs and offerings need to be designed to

minimize the up-front capital required of customers,

providing a very short payback period for any investments

made by customers.

These new business models are possible, in restructured

markets, because a “hedge” against rising prices is a big piece

of the value stream for customers. Today, many customers

pay suppliers or utilities a flat (or tiered) rate to protect

themselves from the volatility of real-time electricity prices.

To the extent that physical systems can be used to limit

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exposure at peak times, the “hedge” is a piece of the current

electricity bill that can be leveraged to pay for efficiency

improvements or other equipment upgrades. The technology

exists for this model to emerge; what's required are specific

targeted solutions. These solutions will allow suppliers or

other actors to monetize actions taken by physical systems to

provide physical hedges that effectively replace, or reduce,

the need to purchase financial hedges.

The Illinois Smart Buildings Initiative: Creating

Dynamic Efficiency

The Illinois Smart Buildings Initiative (ISBI) aims to develop

the fundamental architecture underlying the new model

described above. The ISBI is a partnership developed by the

State of Illinois Department of Commerce and Economic

Opportunity and the South Korean Ministry of Knowledge

Economy. Under the ISBI, companies from Illinois and South

Korea are working together to enable Chicago skyscrapers to

respond to price signals from the PJM market.

In order for an integrated approach to be truly successful, we

need to think differently about demand response, energy

efficiency, and even energy supply. Instead of optimizing

building operation only for tenant comfort, as is the standard

today, building operation has to be optimized for both tenant

comfort and wholesale electricity market price signals, with

tenant comfort being of the upmost importance—referred to

as “dynamic efficiency.” This may seem like an obvious

connection to many, but in the building market, it's a radical

operational change. Building owners and managers operate

buildings very efficiently for comfort, while minimizing

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Sioshansi F.P. Smart Grid: Integrating Renewable, Distributed &amp; Efficient Energy

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Sioshansi F.P. Smart Grid: Integrating Renewable, Distributed & Efficient Energy