Monday, February 14, 2011

Oh, give me a home where the PEVs roam...(?)

There has been a lot of discussion about Plugin Electric Vehicle (PEV) "roaming" in various contexts.  For those not familiar with the term, PEV "roaming" is like cellular phone roaming.
  • With a cell phone, if you take or make a call outside of your cellular carrier's service territory, the carrier who handles the call bills your carrier, who bills you, and the call gets charged back to your home (or business) cellular phone bill.
  • With a PEV, you recharge your PEV outside of your local distribution company's service territory, that distribution company bills your distribution company, and it gets charged back to your home (or business) electricity bill.
Roaming makes sense for cell phones, but I'm not sure it makes sense for PEVs.

Phone companies have had an infrastructure all along that provides for one carrier billing another for service provided to end users (i.e. intercarrier compensation.)  That doesn't mean that it works without problems.  The FCC has been wrestling with intercarrier compensation problems for about a decade, and still hasn't found a universal solution.  For that matter, ask any telco exec about access charges and "traffic pumping" sometime if you want a real earful.  However, at least there is a business case and infrastructure for doing it.

Electric utilities have never had or needed kind of infrastructure.  I'm not sure there's a business case for developing it for PEVs, either.

Let's take one aspect of transportation costs for an example of the problem; taxes on transportation fuels.

Right now, gasoline is taxed at a rate of $0.18 / gallon at the federal level, and between zero and $0.461 / gallon at the state level.  That is just the excise tax on fuel.  Some states charge sales tax on top of that.

In most States, most of that money goes to fund the Department of Transportation (around 60% of the Federal portion goes to the USDOT.)  In some states, it is the vast majority of the money that goes to build and maintain roads.  As electric vehicles increase in market penetration, that tax revenue will dry up.  It won't take long for the various states to start taxing electricity when used as a "motor fuel."  I imagine that it isn't happening now only because (a) there is a desire to encourage initial PEV adoption, and (b) the revenue impact of PEVs hasn't been felt yet.

Right now, these taxes on gasoline are paid along with the fuel, in a "pay at the pump" situation.  It's a fairly efficient and equitable way to collect taxes to support road use, since presumably one drives the roads in the locality where you purchase fuel, at least most of the time.  If PEV recharge stations operate on the same "pay at the pump" concept (you pay whatever the local rate is for a recharge wherever you're recharging, when you're recharging) the transaction is fairly simple, and the taxes continue to get collected in pretty much the same manner.

Now if the Utility is billing for customer "roaming" recharges, they'll have to rework their backoffice systems to handle taxing "motor electricity" and remitting to the correct authority.  That's fairly straightforward, even trivial, in a "pay at the pump" scenario.  The customer swipes a credit card at the recharge station, and the credit card charge includes the taxes in effect at that recharge station.  If the corner 7/11 can do it with gasoline, I gotta figure a utility can do it with watts.

Are Utilities additionally going to rework their back office systems to handle;

  • different tax rates, depending on the state (or even locality) in which a PEV is charged,
  • billing for, tracking and remitting the taxes to the appropriate State,
  • tracking and remitting to the Feds their portion,
  • dealing with the inevitable errors and exceptions,

just so they can do PEV roaming?

I'd love to be listening in as a customer service rep tries to help a customer understand their electric bill after Grandma and Grandpa make a cross country trip to see the kids.  That's another aspect, Customers are accustomed to paying for transportation fuel where they "fuel up".

What happens if localities jump on the bandwagon?  City transportation departments are cash-strapped, and while people are screaming over fuel prices already, having something new to tax gives a great opportunity to "bury" the tax.

All of that gets avoided in a "pay at the pump" scenario.

"Ah," I hear you saying, "but what happens when I recharge at a friend's house?"  Uh, you settle up with your friend, on whatever basis you and your friend choose.  That's no different than a million other "6-pack" transactions that happen every day.  Last week I repaired a friend's PC and charged him a cup of coffee.  Does AEP want to get involved, just because electricity was involved?

Fuel taxes are only the beginning.  Privacy and data security issues (with all that those entail) get rather simpler in a "pay at the pump" scenario as well.

Could these problems be resolved?  Probably.

With an existing, simple, and customer friendly business model, and no compelling reason to open that can of worms, should we?

(Postscript: I reworded one sentence because, frankly, what I wrote wasn't what I meant.)
(Postscript 2: Since posting this missive, I have heard that California is requiring utilities to do the very "excise tax on motor electricity" that I describe here.  I haven't been able to confirm that, yet.)

Friday, February 11, 2011

Security lessons from the Financial world...

I'm getting caught up on some reading that I set aside until I had a gap.  Once again, an InfoWorld columnist has pointed out an IT security threat that can affect the SmartGrid.  In a nutshell, Bill Snyder (whose column is on the financial side of IT) points out that a sufficiently clever hacker could manipulate the financial markets, particularly the ultrafast transactions in high-frequency trading networks, in a way that would be exceedingly difficult to trace.

Our anti-hero wouldn't send a bogus transaction, pretend to be someone else, or any of the usual schemes.  All (s)he would have to do is diddle with network latency.  In some (nay, many) financial markets the phrase "seconds count" is outdated.  In these markets transactions delayed by milliseconds can make a difference of millions of dollars in the value of a transaction.  You don't have to take my word for it, since Bill Snyder points to both a cPacket Networks whitepaper and a previous InfoWorld Column that discusses an article in Physics Review E that suggests that the location of financial datacenters should take into account the latency that distance adds to speed-of-light communications.

The latter paper (titled "Relativistic statistical arbitrage") reads like what you would expect at the conjunction of physics, mathematics and economics, containing phrases like "Such slowing or stopping of the propagation of pricing information due to arbitrage is somewhat analogous to the refraction and  scattering of light by a dielectric medium, but novel in an econophysical context."

It's a dense read. It's also bleeping brilliant, and potentially deeply frightening.

Okay, so what does that mean for the SmartGrid world?  Ask any power engineer about what effect a few milliseconds change in latency lag would have on frequency regulation, particularly in an "event" scenario.  I'm not that imaginative, but I can see some clever soul with an ax to grind, a point to make, or a bundle of cash to make, playing "crack the whip" with spinning reserve.


For that matter, some enterprising soul could make a bundle in our bulk energy markets, if the transactions get dense enough.

Once again, security is not a product feature, it's a business mindset.