Tuesday, Jan. 25, 2011

For Electricity 2.0, a Short Circuit in Boulder

When Boulder, Colorado, launched its SmartGridCity project along with utility Xcel Energy back in 2008, the college town of roughly 100,000 residents was greeted with international attention. Local leaders traveled to Copenhagen, Dublin and Paris to talk about how they planned to use an intersection of new technology and behavioral economics to lower energy use. SmartGridCity officials spoke at the prestigious annual World Economic Forum in Davos, Switzerland, twice.

But, three years later, as often happens with early efforts to roll out new technologies, it appears the fanfare exceeded the reality. The Boulder project has gone massively over budget, raising issues of who should pay for what, and whether all this investment will be really worth it. What's more, most Boulder residents have yet to see much pay off. That's because the utility has spent much of its effort on infrastructure and been slow to roll out the residential meters that would help homeowners alter their energy use and save money.

"From Xcel's perspective, there are a lot of benefits from the infrastructure they've installed," says Kara Mertz, local environmental action manager for the city of Boulder. But what the city is interested in, and the community is waiting for, are the customer applications that allow people to control their own energy use."

Xcel spent $44.8 million on SmartGridCity, a whopping three times what the utility had planned to spend alone. Xcel argues that the pilot project — which relied in part on donations from corporate partners to cover a total budget of $100 million — was the best way to get answers on how to roll out smart grid more widely. "Somebody has to go out first, and get a bloody nose on it. That's the bleeding edge of technology," says Ken Wilson, Boulder's deputy mayor who is also a smart-grid consultant.

Getting the smart grid right is hugely important, not just for Boulder but for cities everywhere. The concept of the smart grid is to use information technology, such as sensors and digital meters, to help cities mitigate the strain of rising energy use. In theory, the smart grid allows utilities and consumers to make smarter choices about power usage. Utilities can raise the cost of keeping on your lights or running the washing machine during peak hours, as well as better manage the grid to incorporate renewable sources such as solar energy or wind power. The result should be changed behavior, decreased costs, fewer power outages, and lower environmental impact.

Participants in the Boulder project can check online to see detailed information on how much power they're using. Meanwhile, the utility is testing ways to automatically ease the strain on the grid by, say, remotely turning down customers' air conditioners on a hot summer day. Out of sight of consumers, there were a whole host of improvements to creating a fiber-optic infrastructure.

In the long term, proponents hope that making the electrical grid smarter will not only lower costs, but will also allow utilities to build fewer power plants, and help spread green technologies. Wide adoption of electric cars, for instance, probably isn't going to be possible without upgrading the nation's power system. Boulder hopes that the smart grid project will help the city meet the goals it's set for energy efficiency and reduction in greenhouse gasses. "The grid is a mess, and it's a matter of national advantage to fix it," says Jesse Berst, managing director of GlobalSmartEnergy, a smart-grid consultant.

Boulder is not alone. Spurred by more than $3 billion in federal stimulus funding distributed in 2009 (which the Boulder project predated and did not qualify for), utilities across the country are upgrading their distribution networks with improvements like digital wireless meters, which give consumers and the utility more control over power usage, and pole-top outage sensors, which allow faster response to any power outage. Cities as diverse as Houston, San Diego and Chattanooga, Tennessee, are getting in on the action, and private investors are increasingly interested in smart-grid companies. At the same time, though, smart-grid projects also raise big questions about privacy, security, technology, and regulation, all of which are still being debated.

So it is no surprise that utilities and cities are watching Boulder closely because it's the first full-fledged test of the smart grid. As such, the city has become both a trailblazer and a cautionary tale of what can happen. Xcel relied on fiber-optic cable, which is notoriously expensive to install, rather than on newer, wireless technologies, which have improved dramatically since the Boulder project was started. Then, too, Xcel focused first on the big infrastructure pieces of the project, which are required to upgrade the aging grid itself, rather than on consumers, who had hoped to see early benefits in their own usage and pricing. In early January, the Colorado Public Utilities Commission agreed that Xcel could pass on two-thirds of its costs to ratepayers, but that it could not recoup the remaining one-third till the project proved its value. Still, consumer advocates question spending so much money on technology and passing that tab on to ratepayers, especially in an economic downturn.

Xcel expects to release its own analysis of what it learned from SmartGridCity by March. It's also continuing to work on a new pricing plan that it has asked state regulators to approve. The goal of that is to let prices fluctuate according to demand, that consumers who want electricity at peak times will pay premium prices (and those who are willing to wait may get a discount). Xcel hopes that what it learns in Boulder will help it to improve operations in its full eight-state service area for its more than 3 million customers.

"When there is something new and there is momentum, one of the biggest challenges is separating the excitement from the reality," Randy Huston, Xcel Energy's business technology executive, says. "The grid is going to get smarter and smarter over time. The challenge is that if we invest too much, people will say, 'you are wasting money.' On the other hand, if we're not prepared, people will say, 'why weren't you thinking about it?' There is no smart-grid formula. The question isn't are you going to do smart-grid, but how."