ANALYSIS

The Coming Wave of Smart Grids, Smart Energy and Smart Appliances

The recent lull in smart meter deployments and smart grid projects has come to an end with an announcement from the Obama administration last month. The Department of Energy (DOE) announced over US$3 billion in funding for smart grid projects, which will be matched by private-sector funding to push the total amount of investment in smart grid project over $8 billion.

The reason for the lull in activity?

Technology developers and utilities were preoccupied preparing requirement documents and proposals for the stimulus funds. The Obama Administration made energy efficiency and conservation one of its many priorities when first taking office, emphasizing the smart grid as one of the main avenues for the U.S. to update its aging electric infrastructure, to better use and conserve energy, and to create jobs.

Since that time, hundreds of entities have applied for energy-related funds through the American Recovery and Reinvestment Act of 2009, with many utilities shedding their reputation as slow-moving behemoths to submit requests within this narrow timeframe.

Broader Implications

The administration awarded about one-fourth of the approximately 400 applicants with some level of funding. For example, the DOE approved a $200 million grant for the Energy Smart Florida Project, which will help the FPL Group, Cisco, GE and Silver Spring Networks build out a smart grid in Florida.

The smart grid has broader implications beyond benefits to utilities, of course. When utilities bring two-way digital communications to households, smart meters can link to energy management and other systems within the home, bringing benefits, and greater control to utility customers.

The benefits to consumers and communities are so significant that Austin Energy, a pioneer in this field, has its Smart Grid Program divided into two “phases.” The first phase, Smart Grid 1.0, is focused on the utility side of the grid, mainly systems integration, communications, and reliability of electric operations, covering the two-way transmission and distribution infrastructure between the central power plant to the meter.

The second phase, Smart Grid 2.0, goes beyond the meter and into the premise (e.g., home, office, store, mall or building). This phase focuses on managing and leveraging elements such as solar assets, storage, hybrid and electric vehicles, and smart appliances on the customer side of the meter. This is the point where end users see the benefits directly and also can interact within this new technological paradigm.

(Austin Energy will further discuss its Smart Grid Program at the upcoming Smart Energy Summit in Austin, Texas, on Jan. 25 through 27.)

Thus, it is important to note that Whirlpool (which received $19.33 million in stimulus funds) pushed up its self-imposed deadline for releasing its smart appliances. The company recently announced that it will make 1 million smart dryers by the end of 2011, four years ahead of its original deadline for selling smart appliances.

This move will create tighter competition with fellow manufacturer General Electric (GE), which itself has a broad-ranging set of goals, starting with plans to market smart water heaters.

Establishing Interoperability

Stimulus funding, it would appear, can get many aspects of this industry rolling. Companies have been discussing smart appliances for years, going as far as airing commercials for refrigerators that can print out your grocery list based on current inventory, or a dishwasher that calls a repair service when it anticipates a maintenance need (although the appliance never paid the bill).

However, for over 10 years, the market has failed to deliver on smart appliances beyond these clever but unconvincing commercials. This time, it seems there is the right mix of incentive, competition, and government/societal pressure to get smart appliances on the market in a real way. Whirlpool already has some prototypes deployed as part of the GridWise project in Washington, and other companies such as Samsung, Panasonic and LG, in addition to Whirlpool and GE, are looking to compete in deploying smart appliances. The market is definitely gaining momentum, and activity in this space, as well as the space for smart grid as a whole, will shift into a higher gear now that the government has announced funding.

The biggest potential stumbling block, though, is in establishing sufficient schema to ensure interoperability. There are many efforts, from ZigBee to Z-Wave to Control4, to establish communication with the grid and among other devices in the home, so the challenge for the manufacturers is in picking which technology to use.

The federal government is working to set these standards for the industry, with plans to complete these efforts by 2010, but we, along with all market players, will be watching this process closely, as delays or diversions in this process could block the path for smart appliances into the home — and postpone promised benefits to consumers.


Farhan Abid is a research analyst at Parks Associates. Bill Ablondi is director of home systems research at Parks Associates.

1 Comment

  • The surge in interest and development in creating a smart grid of interconnected energy supplies, transport, and end use could not come at a better time. There are only positives, and no negatives (except at the extreme end, some privacy issues). The reduction of energy use and waste, real time monitoring of problems macro and micro, exponentially greater efficiency, a reduction in the use of oil (and the foreign policy headaches that follow the pipelines), greater control by consumers — all with make the world a better place, right under our noses. The US economy now faces its greatest challenge: The drain of the world’s best minds from our universities (and the lack of qualified minds from within our own borders) will sap the innovations that companies and utilities need to prosper; the fact that the US has always striven to innovate itself out of a recession– with the exception of nanotech, the US does not have a commanding edge over other economies this time around, in fact is severely lagging in many industries; and the fact that the infrastructure in the US is hobbled by lack of political will (the biggest pork barrel of all–why is it empty?) and by short term balance sheets. Many companies are being too knee-jerk conservative to break out of the status quo into the new, very real, world. Yet the coming revolutions in green, nano, and smart grid are coming fast, and will actually SAVE companies millions of dollars in the long term. According to IBM’s Rich Lechner, "for every dollar saved on energy, there’s an additional $6 to $8 in operational savings" (Newsweek). We need massive funding (an "Apollo program") of R&D to make the systems interoperable, flexible and future-proof. If the shareholders could allow for long term investment at the temporary short term hit, we would all be better off.

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