Wednesday, January 23, 2013

SEP 2.0 is almost awesome.

SEP 2.0 is almost awesome.  It has just about everything I would like to see in a Home Energy Management protocol.  It's reasonably robust, in terms of the type of activities it can handle, and it's reasonably agnostic at the phy-mac (hardware) layer.

However, it is tied to (or should I say "bound by") an architectural understanding of Smart Grid that keeps it from being truly awesome.

SEP 2.0, like Zigbee Smart Energy 1.0 and 1.x that preceded, it presumes that the Utility is controlling the operation of end-user devices.  The claim is that SEP 2.0 enables the Utility to:
  • Control end-user equipment consistent with user desires.
  • Control end-user equipment in a beneficial way.
  • Control end-user equipment in a way that the user doesn't notice it being controlled.
But still, at the end of the day, controlling it.  Part of the problem is that SEP 2.0 can enable control, but it can't enforce that it be beneficent.  It comes down to "trust us".

Right off the bat, I can see a number of scenarios where this can go horribly wrong, with all manner of nasty backlash against the Utility, Smart Grid, and whatever government agency supports the implementation.  (Picture what happens when some sweet little Grandma dies in a heat wave because the SEP 2.0 logic in her air conditioning went screwy, and it wouldn't start.  If you think the A/C manufacturer is the first one to get blamed, I have a bridge to sell you.)

However, I see a lot of problems primarily because it really is an ongoing reinforcement of the existing paradigm, not a re-thinking of how things could be.

Take a look back a couple of posts to see why I think this is wrong.

To save you some time, here's the gist of the argument; extending centralized control of the grid to centralized control of end-user devices will never make for a grid that is either resilient, or more reliable.

However, my background is Public Policy, so let's take a look at the Public Policy issues underlying SEP 2.0.

Think about this for just a moment.  How long has it been since your electric utility had a say in what kind of appliances you purchased, or how you used them?  I'll give you a clue, not since the Utility provided light bulbs for free, because they were selling lighting, not energy.

At what point does the Utility's right of eminent domain end?  For those not schooled in regulatory policy, "Eminent domain" is the State's "power to take private property for public use by a state, municipality, or private person or corporation authorized to exercise functions of public character, following the payment of just compensation to the owner of that property."  The State has that right, and essentially delegates some of that power to the Utility to exercise for the purpose of providing Utility service, which is considered a public good.  The Utility's legal right to make decisions on the customer side of the meter, about either purchases or operations may effectively require that the State's eminent domain rights extend inside the four walls of the home.  There could at some point be a protracted legal battle about this, particularly in states where eminent domain is not strongly recognized, exercised, or approved of.  The Supreme courts of Illinois, Michigan, Ohio, Oklahoma, and South Carolina, as examples, have all ruled to restrict eminent domain takings under their state constitutions.

There's a legal question (probably one of many).  Now how about the economic question?

A Utility is like any other business.  They have two groups of people that they need to make happy, their customers and their investors.
  • They make their customers happy by offering reliable service at reasonable rates.
  • They make their investors happy by maximizing profits.
There's an inherent conflict here, since lower rates reduce profits, and the costs of increasing reliability also reduce profits.  We tend to think of this as a balance, but there is a significant tip to the balance.  There is a fiduciary duty to the investor to maximize profitability, and the salaries of the people making the decisions are tied to that profitability.  Regulation is supposed to level that balance, but it's always done a relatively poor job of it, because regulation moves much slower than business.  In addition, more and more utility services are subject to less regulation.

So here's the economic question: Does it make sense to turn over decisionmaking about your electric usage to (a) the entity that sells you that energy (or gets paid to transport it) and (b) who has both an obligation and a tendency to make decisions to maximize profit, rather than minimize your bill or encourage "green-ness" or whatever other overarching goal drives your own decisionmaking?

(Note: Those of you who are members of / work for a municipal or co-op electric company don't have this issue.  The stockholders and the customers are the same group.)

Of course, if a Utility games the system that way, the regulators will make a rule against it.  However, as I've noted, regulation moves slower than business, so there's money to be made in the gaming.  As long as there's money to be made, even for a little while, new rules just change the game, they don't end it.  You end up in a cycle of "regulatory whack-a-mole"

Boil it all down, and SEP 2.0 is bound by an architecture founded on, at best, questionable public policy.  IF it shed those ties, it could make a significant contribution to the development of intelligent end-points.

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