The Future of Energy Infrastructure: 'Transactive' Rather Than Centralized

Russ Vanos: After about 25 years, with 200 million electric gas and water meters connected in the world, Itron woke up a few years ago and began to study IoT and the predictions around connected devices and smart cities. When we did so, we realized that, quite by mistake, we had built already some of the largest IoT networks in the world.

We’re not only automating meters and bringing in metering data—we’re also putting sensors on the network that collect data on leaks, theft, contamination in water systems, and more. A tremendous amount of data finds its way back to the head end.

Today that data—reams and reams of it—goes to utilities, where it’s really not put to much use. Inside those seven-inch stacks of paper is a street corner with a leak or someone stealing resources, and that’s what the utility looks for.

For the last 10 years, we’ve been trying to pivot into the smart city space. We’ve found that technology has evolved to a place today all these networks built on the backbone of Cisco technology—which is all IPv6, open, and interoperable—really welcome all kinds of companies. Not only large companies like Black & Veatch, Cisco, or Microsoft, but also local companies where a lot of innovation happens, can connect to the network and extract data to write creative applications for smartphones or the web.

A lot of times at conferences I’m asked to speak about smart cities, and in reality, I think that’s a bad topic. There is plenty of technology here today that can solve these problems. What I think we need to be talking about is: For the sake of what? And usually, I think, the answer to that is sustainability and economic development.

Scott Stallard: I have 25+ years of experience working in centralized generation, operation, maintenance, and optimization—essentially, traditional generation.

In the last five years or so, I’ve been focused more on the opposite end: how to draw in distributed energy resources, create a mechanism and a means for addressing the energy future, and have a very complementary set of resources at the distribution end as well as the generation end—and enable all of that in a smart and automated way. I’ve been focusing on analytics and a strategy for how we go from point A to point B, and transform the industry from its current state to its future state.

I would argue that the disruption is there; it’s happening. But it’s happening in pieces. We’re not seeing it as a unified movement at this point.

Rich Barone: The first thing you should know about me—and this may be indicative of the future state of energy—is that I am not cut from the utility cloth. I’ve been at Hawaiian Electric for less than two years, having served utilities as a consultant for a few years before that. Overall, I’ve been in the energy industry, mostly on the IT and emerging technologies side of things, for just short of a decade.

Two and a half years ago, Hawaiian Electric was ordered by the Public Utilities Commission in Hawaii to, among other things, initiate an integrated demand-response portfolio plan. The intent of that plan was to promote customer choice, take advantage of increasing populations of distributed energy resources, and avoid the need for more thermal units—more conventional fossil fuel—and use these distributed energy resources to help stabilize the grid, which is faced with increasing amounts of variable and renewable penetration.

It’s a new arena, and our charge is to deliver, in lieu of the demand response of yesteryear, full spectrum of grid services—very complex, interrelated services—to try to approximate what the operators of the grid are accustomed to using to maintain the grid.

It’s a big challenge—not only a technology challenge and a planning challenge, but also a challenge with respect to engaging the customer participation and shepherding them into the future.

I see the energy the future as transactive: It’s participatory and it’s distributed, in lieu of being centralized and single/vertical player. It’s much more diffuse in terms of the participant pool, and somehow coordinated therein.

H. Christine Richards: Going from the model we’ve had for 100+ years to something that’s so different is a big jump. I want to talk about the role of new relationships and new partnerships in this change. Who is important in moving toward that future? Who needs to be a part of this conversation?

Russ Vanos: We need collaborative involvement from everybody in the community—community leaders, businesses, and utilities. We also need the public utilities commissions involved, because frankly, they may be the group that needs the most education and needs to be better informed.

Rich Barone: Technologies, technologists, and vendors are a hugely important part of the mix.

There’s so much complexity associated with the future state. It’s not going to get simpler; it’s going to get increasingly complex, with more data, more endpoints, and more coordination. We’re going to need intelligent market participants to help bridge the gap between the customers who want to participate and the coordination of the energy itself. Intermediaries serving as proxies on behalf of the electricity consumer or distributed producer will have an important role in abstracting and simplifying engagement.

Scott Stallard: I don’t think people understand or appreciate—or want to understand and appreciate—the complexity involved, not only in a very different future state, but in how we get there from our current state. A lot of the skepticism out there stems from a lack of understanding of this complexity.

That’s a planning problem. It’s a confidence problem. We have to appreciate, not only the role of the city, the role of the technologists and solution providers, and the role of the utility, but also the sheer number of hurdles that will have to be navigated along the path.

Timing is also important. There is a sense of urgency to putting in these technologies. But without a road map or visioning, it could all be done in the wrong order, for the wrong reason, or for the wrong purpose. These things have to fit together right.

We can only go through this major transformation of our infrastructure once. Getting it right—getting people to understand how these different initiatives, customer groups, and communities play together and can participate, and when certain dimensions should be in play—is critical.

H. Christine Richards: Where have you seen success in making some of these changes? Have you seen examples of communities and organizations that are starting to change relationships among these different groups? What are they doing right?

Scott Stallard: Rich, talk about the excitement about demand-response and customer participation in Hawaii. To me, that’s probably one of the best examples of a functional model evolving to enable direct customer participation—and it’s scalable.

Rich Barone: I will share our success, but I also want to underscore that there are still internal challenges, even within the utility.

Even though the utility is a known, existing, and future participant and stakeholder in this process, the skillsets are not necessarily there to get us into the future state. In terms of the planning processes or even the dynamic operational requirements of this new paradigm, there’s still a lot of internal work that has to happen. We have two goals in this effort: One is getting the utility itself to start to climb the hill, and the other is to make sure we have outside understanding and cooperation.

What’s unique about Hawaii is that we don’t have any kind of wholesale market for energy services—no ISO or anything like that. Therefore, we have nothing to fall back on; there’s no safety net, and there’s no market-driven valuation for these services. Some of the work we’re doing is simply creating an assessment of what these things are worth, so that we can foster public participation.

We’re working on developing a framework of the services that the grid needs, and we’re creating the ability for people to deliver those services in aggregate or individually through their own customer-side assets. This has won a lot of favor with the Public Utilities Commission. They wanted us to take a market-based approach, and this is our first step in that direction.

It’s also won a lot of favor among the distributed energy resource vendor community, who has been looking for the assuredness that they can make investments into this market over the longer term—especially when some of the favorable conditions for solar economics are starting to go away.

We’re making a lot of headway with the outward-facing stakeholder communities of the commission and of the intermediaries. Those intermediaries are in turn bringing the message downstream, or outbound, to their potential or existing customers to help tie that up for us. We’re allowing them and encouraging them to help educate their customers on where there are and will be opportunities for that kind of transactive coordination.

Russ Vanos: Hawaii is one good example. So is what you have done here in California—and I think it’s only the beginning—in terms of bringing renewables online and being able to get them integrated.

This is all about vision, collaboration, and innovation. When I think about innovation, I think about what the city of Charlotte has done with Duke Energy, Piedmont Gas, and Charlotte Water. They’ve been able to bring together the local community, business leaders, and the universities, and lots of innovation is being spurred there.

They’re spending a lot of time on the topic of visioning, which is something I would encourage all of us to think about. What do we want the future to look like? As I said, I think we can solve the technology challenges very easily. The question is what we want the end state to look like.

Pittsburgh is also doing a great job with that. And in Spokane, where I live, Avista Utilities and Washington State University recently announced an initiative called Urbanova, which is about utilities partnering together with local communities, business leaders, and water, gas, and technology companies to build a living laboratory around smart cities.

We’re seeing this around the world. In Malta, Barcelona, and everywhere, there are great examples. You don’t have to look hard to find them; you just have to know what it is you’re looking for.

This visioning process is really important. It’s easy to look at the negatives. We need to spend some time thinking about the positives of where we want to go. And for that, you can find all kinds of examples.

H. Christine Richards: There seems to be some confusion outside the energy industry, where energy is also invisibilized to an extent. What have been your experiences in terms of communicating with customers about the complexity of energy? What needs to happen there?

Scott Stallard: The bottom line is that it’s not easy stuff to communicate.

To some extent, we’ve leveraged the intermediaries—their relationships and their inclination toward these economic opportunities—to help us. But that’s a slippery slope, because they have a vested interest, perhaps, in oversimplifying the value proposition for customers. If we can compensate for the complexity that they’re helping to deliver, then they can effectively work to communicate that complexity to the customers.

Beyond that, it takes a lot of pounding of the pavement—talking with your regulators, your state energy office, your city and local officials, and all the usual suspects in terms of stakeholders. We have to make sure we continue to focus on education, because it’s got to start from the ground up. 

Rich Barone: Virtually everyone in the state of Hawaii, it seems, has a solar panel. Some are horribly aligned to the sun, but people still put them up. That’s because when someone sees a solar panel on a roof, they assume it’s a straightforward, low-tech thing.

The fact that solar is highly variable is not apparent to the person in their house. They’re not seeing the lights flicker. They’re not seeing their TV stop operating. That’s because there’s compensation in the grid that makes that experience seems simple. As a result, we’re met with skepticism when we talk about complexity and about the long-term need to make technological advancements, and I think that complicates the story.