Tuesday, November 30, 2010

Grid-Interop: Day 1 Notes

For my regulatory friends, here's a capsule summary of Grid-Interop Day 1 (11/30/2010) (Commentary is in italics):

  • Governing Board meeting.
    • Most surprising comment: It's too soon to start communicating to consumers about the advantages of Smart Grid.  Not enough is known about the devices yet.
      • I couldn't disagree more, it's not too soon.  It should have been happening months ago.  A quick look at the language flying around the interwebs (or some of the links in my earlier posts) demonstrates the coming problem.  People do not understand what is happening, and so they are viewing it as something being done to them, rather than for (or better yet by)them.  If the goal here is at all customer empowerment to control their energy usage, we have to get to this being something done by the customer.  If we wait for devices to be ready, it won't fly.  Customer interest has to exist for the devices to have a market.
    • Most interesting point: Business and Policy Working Group wants to "identify issues and find solutions related to state to state variations that impede HAN products."  "Impede" may be overstating the case, but it may help to have a standard, simple, way to express different tariffs and tariff structures.  Paul Centolella gave a solid push in this direction.  A new Priority Action Plan (PAP) perhaps?  If the retail service provider is able to communicate price for the coming period, then there may not be a problem, but that may constrain useful tariff structures. We may need to do a gap analysis on the work of PAPs 3, 4 and 9 to know for sure.  BnPWG is a logical place to do this, but it needs more state regulatory and utility tariff experts at the table.
    •  IP (Intellectual Property) policies are a growing issue.  Different SDOs have different IP rules and practices,and were trying to get a common set of standards under a consistent (open and interoperable)  IP policy.
    • PAP 1 - Internet Engineering Task Force has issued an informational RFC on a Smart Grid Internet Protocol Suite (IPS).  A set of IP tools specific to Smart Grid needs.
    • PAP 11 - Plugin Electric Vehicles Status.  3 Standards reported on:
      • SAE J1772-TM - Inductive charging coupler up for SGIP approval.
      • SAE J2836-TM - Use cases for PEV - Grid communication up for SGIP approval.
      • SAE J2847-TM - Communications Protocols for PEV to Grid Communications is NOT up for SGIP approval. 
        • Cyber Security Working Group does not recommend, as it does not sufficiently address cybersecurity and privacy.
        • Smart Grid Architecture Council still reviewing.
    • Development of vision, mission & roadmap statements.
  • Plenary Session:
    • George Arnold - Brief &
      encouraging comments noting growth & the beginnings of mature

      • 650 SGIP members
      • Maturing processes starting to generate new standards, and more importantly critically reviewing those standards.
    • John McDonald (GB Chair) - Historical Review.
    • Paul Molitor - Events for the week & year
  • CyberSecurity Working Group Meeting
    • Rhonda Dunfee DOE - NESCO National Energy Sector Cybersecurity Organization: Public-Private partnership to lay out SG CyberSec. Goal is for it to be fully private in 2 years.
    • Mission
      • Promote best practices
      • Analyse infrastucture threats.

    • Structure
      • Funded by EnergySec & EPRI
      • Information to be via a portal site.
      • Go to Energysec.org to register. Membership is vetted.
    • Goals
      • Coordinate "end user" testing
      • Create code repository
      • Provide a path for rapid information dissemination &
        situational awareness.
      • Provide on-demand resource for forensics.
  • Marianne Swanson – NIST
    • Intro to NISTIR
    • 3 year plan for CSWG
    • Upcoming local outreaches.
  • Subgroup updates:
    • Cite for all CGCTG Subgroup information:
    • AMI Security - Darren Highfill (Newest Group, so Darren
      provided more background)
      • Meetings are Tuesdays @ 13:00 Eastern
        Call In #
        866-7936322 Access Code 3836162#
        Contact tanya.brewer@nist.govto join mailing list (true for all groups)
      • Scope:
        Back office systems that accept AMI data
        Communication through Meter or other utility-owned/operated gateway
        Non-electric or customer owned equipment is out of scope
        Development of devices using AMI
        communications must meet capabilities in order to be allowed on net.
        May develop "classes" of devices.
        All layers of stack.
      • Goals
        Plan to propose a PAP for AMI security.
        Set of criteria and RFI to select an appropriate SDO to be issued.
    • Architecture – Sandy Bacik
      • Telecon Day & Time: Bi-weekly Thursdays, 2pm Eastern
        Call-in number: 218-862-1300 Participant code is: 283348
      • Scope:
        Overall information architecture scoping and design.
        Provides basis for many of the standards groups to define actors & relationships.
    • Daniel Thanos - Design Principles
      • Telecon Day & Time: Every Friday @ 3:30PM-4:30PM
        Call-in numbers: 1-800-728-9607 (Toll Free),
        1-913-904-9873 (Direct), Participant Passcode: 4570752

      • Develops core principles for security and privacy
    • Tanya Brewer – Privacy
      • Telecon Day & Time: Thursdays, 11am Eastern Time
        Call-in number: 866-802-3515 Participant passcode: 2817109

      • Reviews and makes recommendations regarding privacy issues
        within smart grid development

Monday, November 29, 2010

What's Really Wrong With Media Coverage Of Smart Grid

You may have read Lisa Margonelli's article in the Atlantic. If you haven't, do so. As Smart Grid coverage in the popular media goes, it's pretty darned good. Of course, it should be, since Lisa is the author of an interesting book on the petroleum industry, and seems to know a thing or two about energy.
The problem is that it's a subtle argument, using statements from one side to make the point that the other side has done a poor job of making its case, and it's written by someone who the average person will see as an expert. Understand, I largely agree with her that the failure to engage consumers is the biggest problem Smart Grid faces. I'm going to be responding to statements in Ms. Margoli's article a lot, but I don't want to pick on her. It's just that her article brings together a few common media misunderstandings, without making it clear that they're misunderstandings. It can leave the casual reader with the impression that an expert agrees with the positions she cites. Perhaps she does, which is a larger problem.
For example, she repeats the oft-stated misunderstanding that time-of-use rates are about the electric company being able to charge more for peak usage, and those customers who can't change their appliances to more energy-efficient ones, or who can't shift their usage are going to be screwed. The implication is, of course, that the utilities will be raking in profits.
Let's start be looking at why time-of-use rates make any sense in the first place. (Those of you in the electric industry can skip this next bit. It's a very simplified view for the folks who don't work with this stuff all the time.) Electricity can't be efficiently stored (yet), so it has to be produced in almost exact balance with consumption. In most industries, an imbalance between supply and demand does bizarre things to the price. Mismatch supply and demand in electricity, even for a split second, and really ugly and disastrous things happen to hardware. Voltage surges or sags, frequencies shift, and efficiency goes right down the toilet, just before the lights go out.
In order to do this just-in-time delivery balancing act, the generation industry has to run different kinds of generating plants. Some are very efficient and inexpensive to run, but can't respond to changes in demand. Others can respond to load somewhat, but are more expensive to run. Some can respond pretty much instantly, but are the costliest to operate. Since the demand generally rises and falls in a fairly consistent pattern from day to day, with seasonal variations, time-of-use rates are a pretty good way to reflect the actual cost of the product at the time it is being used.

Let me expand on an analogy from Paul Centolella's Blog entry at the Harvard Business Review. To quote Paul:

Today most consumers are charged a flat rate for every kilowatt hour they consume. They are billed monthly. And, despite wholesale power costs that can be as much as ten times higher during peak hours than at other times, consumers have little idea which energy uses cost the most. This would be equivalent to receiving your grocery bill weeks after you visited the market and being charged the same price for each item, whether you bought chewing gum or caviar.
To my mind, this is a brilliant analogy. Paul uses it to point out the consequences of continuing on the path we're on. I'm going to use it to point out a common misunderstanding of where we are. Let's do a thought experiment:
You have a grocery store, where everyone who shops there pays the same amount for every pound of food they buy, whether it's fillet mignon, caviar and Dom Perigon or hot dogs, peanut butter and Pabst Blue Ribbon. Now in order for the grocery store to stay in business, it has to cover it's costs for all the food purchased, so the single price per pound will be the average cost of all the food purchased, plus enough to cover operating costs like paying cashiers and the guy who has to mop up the mayo spill on Aisle 3. What would happen?
As Paul points out (in more industry-specific detail than I will here) people will buy more fillet, caviar and champagne than they otherwise might. This creates two problems.

  • Because people will buy more fillet, caviar and champagne when they pay the same price regardless, the average is higher than it would be if each item was priced based on its cost.

  • Because everyone is paying a higher average price, those folks who do just fine on hot dogs, peanut butter and PBR are subsidizing the fillet, caviar and champagne consumers.
Looked at that way, the current situation sounds pretty outrageous, doesn't it?
Here's another consequence that you won't see touted in the press anywhere, if the time-of-use rates are set properly, the utility company won't make any more than they do now. All you're doing is disassembling the average. Over time, the average will go down as the fillet eaters only eat fillet when they need to, or are willing to pay the real cost of it.
In short, time-of-use rates are part of doing what Lisa suggests in her blog; “...make cooperation between utilities and their customers part of the contract.” Now I don't want to take away from Lisa's point that Utilities have done a poor job of engaging consumers in this discussion. I think my immediately previous posting makes that point. I'm only saying that she misses that time-of-use rates are part of that contract negotiation.
Now we come to the one point in her article that is really a problem, to my mind. Let's take a look at her suggested solution, in light of our grocery store analogy.

For the first five years after installation, the utility has to charge the consumer the lesser charge--either calculating by time of use or by the old utility contract of static pricing. Utilities, however, are given the option of making more regulated profits by reselling power to other utilities, giving them a clear incentive to help their customers use less power or less expensive power by helping them change behaviour or buy more efficient appliances. (And utilities could use the low-interest publicly guaranteed credit lines they use to build power plants to instead invest in their clients appliances--passing along the low interest rate of course.) Consumers, given the option of buying cheaper power at less popular times, would be able to--without paying a penalty (yet) for using more expensive power.
So what happens to our hypothetical grocery store under this scenario? Well, they can charge for any item either the cost-based price, or the average, whichever is lower. Or to put it another way, their prices are capped at an average cost. They can't cover their total costs if they do that. Ah, the argument goes, but they can make more money by selling to other grocery stores. What happens when those other grocery stores try to sell to their customers on that same basis? Those other groceries can't cover their costs (which now include food that the first grocery store is selling to cover its costs). Meanwhile, consumers have precisely zero incentive to change their food-buying habits, except for whatever (non-price) incentive that the grocery stores can figure out.
I have a hard time seeing where they'll be able to fund incentives if they can't cover their costs. The low interest rates that could be passed on to consumers is based on the assumption that utilities (unlike other industries) will always be allowed to cover their costs. Take that away, and the market will treat utilities like any other business, and those advantageous interest rates will evaporate. The point seems to be, as she put it giving consumers “...the option of buying cheaper power...without paying a penalty (yet) for using more expensive power.”

Where is there a “penalty”? Paying fillet mignon prices for fillet mignon isn't a “penalty” at the grocery store, so why is it a “penalty” at the electric meter?
I'm not saying that these problems can't (or shouldn't) be resolved. They have to be resolved, and they have to be resolved in a way that, as Ms. Margonelli's article points out, gives consumers real control. However, they have to be resolved in a way that works economically, top-to-bottom and across the board. In short, we have to deal with all the realities. Otherwise, we're just going to shoot ourselves in the foot, or maybe higher up.
The article also touches on privacy issues, something that's near and dear to my heart, but that will have to wait for another entry.

Friday, November 26, 2010

The nature of trust

UPDATE 5/24/11: Kimberly Kupeicki from Edelman just showed a slide at Connectivity Week that points out that for a trusted company, only about 1 person in 10 will believe negative information on the 1st or 2nd hearing.  For an untrusted company around 2/3 will believe the bad news the first or 2nd time they hear it.  The Utility Industry in general and Smart Grid in particular are suffering from a "trust deficit."

You have probably seen the brouhaha early in November over a PG&E exec trying to infiltrate an anti-smart meter forum  (and doing a miserably, nay, pathetically bad job of being sneaky.)  If you haven't, Google "PG&E spy" and read some of the reactions there.  Go ahead, I'll wait.

Had enough?  Okay, now let's talk about what's really going on here.  Why is it that in Southern California the reaction to smart metering has been so radical?  Why are people saying that Smart Meters expose people to "powerful spikes of microwave radiation 24 hours a day through our brains and bodies.

Now, I'm not saying anything here about the safety of cellular phone frequencies, I want us to look at the language.  The same thing could have been said "Having a Smart meter is about the same as talking on a cell phone 24/7, and there are peer-reviewed studies which indicate that is dangerous."  Why "powerful spikes"? Why "through our brains and bodies"?  Why those particular words?

The words are strong, yes.  They are also graphic and visceral.  The image one ends up with (subconsciously) is gruesome and gory, with physical spikes being driven though one's skull and torso.  Again, without unpacking the psychology of the language here, why the level of vitriol?  It takes a lot of anger to use (or respond favourably to) words like that.  That anger, and how to address it, is what I'd like to explore.

Here's a basic fact of humanity:  We naturally want to trust the ones we are dependent on.  As infants, we want to trust our parents.  As schoolchildren, we want to trust our teachers.  That's why we view parents who abuse their children and teachers who abuse their authority as so despicable.  It is a violation of an inherent trust.

Here's another basic fact: People have come to see Utility service as essential, like food and clean water.  Our society has come to believe that it dependent on utility services.  To a great extent it is, but I'm not here to debate that point (at least not in this post) so we'll limit our discussion to beliefs.

Now let's put 2+2 together.  People see themselves as dependent on their Utilities. + People want to trust those they are dependent on. = People want to trust their utility.  That's why the backlash is so strong when that trust is violated, for the same reason that we consider adult child molesters the lowest of the low.

PG&E's mistake was not in seeking the information.  The mistake was in seeking it in a way that risks that trust, rather than building on it.  The reason for that mistake lies in the mindset of the executive doing the "research".  He was seeking intel on the plans and motivations of his opponents.  From a business point of view, there's no real problem there. 

The problem lies in the way I worded the action.  I used military words (intel, opponent).  In plain fact there's another, far more useful, name for this particular class of opponents.  Customers.

Now I'm not talking in the business-buzzword "everyone we interact with is a customer" sense.  I'm pointing out the simple, and it seems oft-forgotten, notion that the people who are becoming advocates against PG&E and the smart metering program are regular, ordinary "we pay you for a product" customers.  In short, the smart meter protesters are simply dissatisfied customers.

Any PR or marketing expert can tell you that the best way to deal with dissatisfied customers where you have or want a long term relationship is simple:
  1. Ask them what they want.
  2. Make an honest effort to figure out how to give them the best approximation of what they want.
  3. If what you can offer isn't exactly what they want, honestly explain why, and find alternatives.
  4. Repeat 1 - 3 until the customer is no longer dissatisfied.
Now somewhere in there one has to sleuth out what the customer really wants (as opposed to what they say they want) but that's been the purview of market researchers since Eve decided that the Apple looked like a good idea.  However, I've already given you a good starting point.  One of the things they want (maybe the only thing they want) is to be able to trust their utility provider.

There is a word for this iterative process towards a satisfied customer: collaboration.  Working together to solve a problem, or series of problems.  Collaborative processes work, and work well.  Admittedly, they are also a lot of work in and of themselves.  In my experience, it is well worth it.  Even when trust isn't established, a grudging acknowledgement that the other guy might have a point goes a long way towards finding better solutions, or at least damping down the pejorative language.

I can say from experience that when a company that has a distrustful relationship with its customer base decides to take the gamble, and open its doors to its "opponents" to deal openly and honestly with them, it's a real game-changer.  For one thing, it redefines "winning".  A "win" becomes finding a workable solution, rather than forcing (or stopping) needed change.  For another, your "opponent" becomes your ally (maybe not right away, but eventually) and the problem you both want to see solved becomes the "opponent".

PG&E has an opportunity here, if they move quickly and correctly.  It may require a massive change in corporate culture, because to do this right, you can't really fake it.  It means taking a different kind of risk.

What do you say, Pacific Gas & Electric?  Treating customers as opponents isn't working all that well.  Anyone else?  Anyone?

Smart Grid Realities

Okay, that's a pretty audacious title for a Blog.  So what exactly do I mean by it?

There's more than one thing behind that title:

  • There are a lot of different views (different "realities" if you will) of the Smart Grid, and we'll discuss them here.
  • I think that the series of projects and innovations that are collectively called the Smart Grid have the potential to make this world a better place, but there are risks involved with each that could make it a worse place, too.  Those are realities we have to deal with.
  • I have always believed in being honest with myself and others, and I think that our best chance to make this whole thing work is to deal with the realities (good, bad and ugly) as they present themselves.  If we make mistakes, let's make honest ones, and get about the very real business of fixing them.
Now we could do this Smart Grid thing very wrong, and end up with some real problems, or we can do it very right, and hand our kids and grandkids a better world than we started with.

The difference between the two is likely to be dealing with the realities of what we're doing and why.

That's why I'm writing this blog. To deal with realities as best I can. I might be wrong from time to time, but I'll be honestly wrong. Feel free to disagree, because that's how the truth gets wrung out, by honest people honestly disagreeing.

Comments, criticism and ideas are welcomed.  All I ask is that you keep it civil.