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January 04, 2010

UTC - Smart Grid Perspectives and Outlook - Interview with Bill Moroney



The Utilities Telecom Council, or 'UTC,' is an important smart grid player, and their President and CEO, Bill Moroney, will be speaking at our Smart Grid Summit later this month. UTC is also supporting the summit in the form of a media partnership and we hope to see their members join us in Miami Beach. In advance of the summit, I caught up with Bill to get his thoughts on what’s driving smart grid going into 2010, and the dialog has been summarized in the interview below.
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Jon Arnold (News - Alert):
Let's focus first on UTC - an organization with a long history supporting all types of utilities. Tell us a bit first about what brought UTC into being and how it got to where it is today.

Bill Moroney: UTC was created in 1948 by a group of electric utilities that wanted to work together to use new wireless communications to help provide more reliable energy services in North America.  Since that time, UTC’s membership has expanded to include electric, gas and water utilities, other critical infrastructure organizations and their technology partners.  

At the same time our mission has expanded to encompass a broad range of different communications technologies and applications – most recently including smart grid systems.  For the last sixty years, we have been actively supporting the convergence of utilities and communications with regulatory compliance and lobbying services, research and conferences, trade shows and wide variety of education events.

JA: I realize smart grid is a subset of UTC's focus, but still a pretty important one. Where does smart grid figure into your overall priorities, and in what ways is it becoming a more dominant part of your agenda?

BM: Helping utilities deploy smart grids really has been the dominate issue for UTC’s for at least the last 10 years. Utilities have been deploying robust two-way communications control and metering networks for the last decade, but it is only in the last few years that it has become fashionable to call these networks and their applications smart grids.  

Today, supporting our members’ smart grid needs includes helping them evaluate new technologies and technology companies, understanding how, where and when to deploy smart grids for their markets, and understanding a dizzying array of new regulatory pressures that will impact their smart grid efforts.  Most recently, our members are trying to understand how the new NIST smart grid standards efforts will impact them, especially as they become enable by means of FERC regulations.

JA: UTC is a global organization, and I'd like to get your views on how the smart grid milieu in the United States compares to your other core markets, namely Canada and Europe.

BM: The U.S. market remains the largest market for smart grid technologies, followed closely by Europe.  But, that said, the rest of the developed world – led by Brazil, Japan, China and the United Arab Emirates – is actively deploying smart grid technologies.  Europe has taken an early lead in the development of standards, but the United States is moving much faster in that realm than normally.  

One irony of the federal government’s smart grid stimulus grants awarded last year is that a number of technology buying decisions were postponed until 2010 while utilities waited to see what direction the stimulus funding would point.  Aside from the U.S. federal government’s support for smart grids, the next most important driver in the United States will be state regulators who are deciding on a variety of different timetables for how utilities will recapture the cost of deploying smart grids.

In Europe, it is the European Union that has taken the most aggressive smart grid leadership role.  By driving smart grid standardization in Europe and by far out-stripping individual nations’ funding for smart grids, the European Union has clearly established itself as the smart grid driver for Europe and many other parts of the world.  This month, the European Union will consider following the lead set by the Canadian government of allocating radio spectrum for smart grid deployments throughout Europe.  Perhaps the most aggressive investment by any government has been Canada’s decision to let smart grid deployments use 30 MHz of government spectrum there to speed deployment of smart grid systems and to reduce the costs of network deployments.

JA: Most smart grid focus is on electric utilities, but UTC also represents gas and water utilities. Is the smart grid opportunity essentially the same for all these types, or are there particular differences?

BM: The benefits of deploying intelligence further into utilities’ networks have been apparent for years.  What has been lacking has been the political will to make the investment.  The difference between electric, gas and water utilities tends to relate proportionately to the speed with which each delivers its commodity.  Electricity moves a lot faster than gas and water.  In Europe, a smart grid is presumed to include electricity and gas – a smart energy grid enabled by a companion smart IT grid.  

In the United States, the focus is almost exclusively on electricity, but I expect that will change in 2010 as we begin to realize how much precious funding can be wasted building separate communications networks to talk to three different meters – electric, gas and water – at the home.  State regulators who generally set or influence local rates will eventually see the waste and encourage utilities to look to one network to carry all that metering data.  Separate control networks will remain essential, but even there some convergence may inevitably happen.

JA: From your perspective, do you feel that government smart grid policies are on track? Are there other areas you'd like to see more focus, and where do you think policy should focus on one to two years from now?

BM: Right now, smart grid policies seem to be focused on the grid from the perspective of the meter.  This is because so much of the smart grid stimulus funding was aimed at projects already approved for deployment. Regarding smart meters, however, we are seeing the beginnings of a shift in perspective to that of the grid control room looking out to all the new sources of energy enable by smart grids and then down the grid to the home.  

The levels of savings that can be achieved with a control-room perspective versus the meter/house perspective are on a magnitude of 10 to 100 times greater.  Ultimately, it is grid control communications that will deliver the much heralded smart grid savings.  That said, for now, the saving at the home delivered by smart meters remain significant and very valuable.

JA: We see many parallels between utilities and telecoms in terms of the modernization challenges they need to face. A key difference is how utilities are regulated, and that has both pros and cons. In what regard do current regulations hamper smart grid efforts, and do you envision any areas of utility regulations being reformed or loosened in the near term?

BM: The major difference between energy and telecom regulation is that energy regulation focused on ensuring that one, reliable delivery network is maintained – think electricity wires.  Using smart grid technologies is all about upgrading this core delivery network.  On the other hand, telecom deregulation focused on creating competition not just at the service level, but at the infrastructure level as well.  

That was a decision that it could be easily argued resulted in far less reliable networks – think cellular networks – than exists on other parts of the world where core infrastructure is shared.  Regulators may debate how some of the customer data collected via smart grids is shared, but no one is seriously discussing following the telecom regulatory model of competitive infrastructure competition.

The biggest change in smart grid regulation will be the growing number of government offices that are taking in interest in weighing in on this hot issue.  Distribution utilities are traditionally regulated by the state public utilities commissions and transmission companies by the Federal Energy Regulatory Commission.  Today, we now have the U.S. Departments of Energy and Commerce considering new rules; plus the National Institute of Standards and Technology is creating new “voluntary” smart grid standards that will be made “mandatory” by FERC, as required by Congress.  

Utilities are regulated monopolies that require regulatory clarity before they are permitted to act.  If there is anything that could slow down the smart grid juggernaut, it will be conflicting regulation or regulatory uncertainty; however, that seems less and less likely.

JA: Ideally, the smart grid will benefit both energy producers and consumers. UTC is focused mostly on the former, and I'd like to hear your thoughts on how smart grid benefits will accrue to energy consumers as well as what the driving forces of this will be.

BM: The principal benefit of smart grids for energy consumers – both businesses and homeowners – will be a new ability to control their energy usage and how much they pay for it.  Regulators have been and will continue to be primarily focused on that key benefit.  Additional benefits of the smart grid are it enabling features that support other national policies – that benefit individual consumers as well – such as energy independence, like cars running on electricity or natural gas, and green energy, such as connecting wind, solar and tidal energy generators to the grid.  But, the bottom line for individual consumers from smart grids will be the ability to use more energy at less cost.

JA: A lot of companies from outside conventional energy circles are making inroads with smart grid. In what light does UTC see this, and in what ways are utilities most embracing these new entries?

BM: The total market for telecom equipment and services has been contracting by 5-7 percent for several years.  Meanwhile, the utility telecom market has been growing by 10-20 percent over the same period.  Why? “Smart” telecom investments.  You are correct to observe that every communications company with any marketing sense has decided to take a whack at selling to utilities.  Most, unfortunately, have done do so without much understanding of this market.  By not making an effort to understand what and why utilities buy telecom equipment and services, most have not been regarded as serious by our members.  

The secret to selling to utilities is really very simple.  A utility’s fundamental job is to make sure you and I do not freeze to death in the dark – to ensure the reliable delivery of energy and water and, should service ever be interrupted by anything, to restore service as fast as humanly possible.  Sound obvious?  You would be surprised at how few of the new entrants into the utility telecom market sell how RELIABLE their equipment is.  It’s all about reliability and then listening to the utility tell you what types of systems they have regulatory approval to build that year.  

One of the services that UTC offers its associate members is market research of utility buying trends and education on what is driving utility technology buying decisions.  The new entities that utilities are embracing are those that can demonstrate that they deliver reliability and understand that particular utility’s needs.

JA:
Most of the onus for smart grid falls to energy producers; consumers are primarily interested on how it impacts their utility bills. How important is it for consumers to play a greater role here, and what's the best way to make this happen?

BM: I realize that it may not be politically correct these days to say this, but it is not at all important that consumer be driven to play a greater role in making smart grids happen.  It is the role of smart grids – approved by regulators and deployed by utilities – to enable consumers to make enabled decisions to reduce their energy costs in ways that work best for them; and to share in the societal benefits from grid improvements and new renewable energy sources connected to the grid because of smart technologies.  Control of their energy and water bills will be the primary consumer benefits of smart energy grids and intelligent water systems.

JA: Smart grid has become a household name in 2009, and expectations continue to rise with all the stimulus money flowing into this space. What can we expect to see in 2010, and what will constitute progress in your eyes?

BM: This year we will see an explosion of spending on smart metering and smart grids, driven by the smart grid stimulus funding approved last year but not limited to it.  The term “smart grid” may have become a general recognized in 2009, but smart grids have been pushed by UTC and other industry organizations for the last decade.  What happened last year was that a critical, tipping point was reached.  To me, smart grid becoming a household name is 2009 is akin to the public discovering ATMs and email – once embraced, both literally took off; and that’s what I see for smart grids in 2010 – a great year to be in the smart grid business.

Learn more about Smart Grid technology at the Smart Grid Summit, an event collocated with ITEXPO East 2010, to be held Jan. 20 to 22 in Miami. This is the event you need to attend if you want to understand the role that IP communications technologies will play in how the Smart Grid evolves – not just for making utilities more efficient, but also for enabling the Smart Home and a new generation of communications innovations. Register now.

Jon Arnold is co-founder of Intelligent Communications Partners (News - Alert) (ICP), a strategic advisory consultancy focused on the emerging Smart Grid opportunity. To read more of his Smart Grid articles, please visit his columnist page.

Edited by Kelly McGuire
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