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Middle Mile Moxie

Fortnightly Magazine - January 2010

The market will have to change, because we’ll be looking at smaller pieces of the puzzle to dispatch. Can you imagine a day when we’re aggregating distributed resources as a first call for energy into a feeder, instead of just calling on bigger bulk-power plays? The future won’t be about just [base-load plant] retrofits and building peaking plants. And the nature of the peaking plant is fundamentally changing, because the more volatility you put on the grid, the more backup you need. Peakers will be running more than they were before.

As for retail markets, I’m not yet a believer that retail markets fundamentally will shift, and I believe utilities are a very efficient way to make capital investments. But we have to change the model so utilities aren’t making their money on iron in the ground and sales volume. The revenue model has to change so utilities make their money on innovation and cleverness. But that also means we have to get away from this Monday-morning quarterback practice where the regulators say an investment wasn’t prudent because it was imperfect. That doesn’t encourage innovation. Instead it maintains the status quo . The market should reward innovation and new entrants into the industry, and we should change any framework that doesn’t reward that.

 

Fortnightly: That would require some fundamental changes in the business model. Isn’t that asking a lot of the industry?

Gogel: Well, we are asking a lot already. We’re asking utilities to change the tires while they’re driving the car. Going from a product mentality to a service mentality requires re-engineering our whole delivery model. Contacts with shareholders, employees and consumers are fundamentally shifting.

 

Fortnightly: What lessons have been learned so far from Xcel’s Smart Grid City project?

Gogel: Obviously there’s much more yet to be seen, but the initial results are coming from the middle mile, the distribution grid. They’re around things that don’t sound as sexy as PHEVs, but are really important to the charter of the utility. We know, for instance, that service investigations resulting from voltage fluctuations at the customer premise went from 50 in 2007, before the smart build out, to zero thus far in 2009. Admittedly that’s not a huge universe, but it shows the benefits of making the grid proactive, where you can see every transformer and use software to analyze the data and make recommendations. There hasn’t been a transformer event that the software hasn’t predicted. It’s going from a reactive world, where you run to fail, to a world where you can dispatch resources to avoid outages. I hope soon we’ll see how dynamic voltage optimization is implemented and what consequences that has for the grid in general.

Also we’re still awaiting results around customer buy-in, the use of smart meters, changing lifestyles, all those things. It’s too early to judge, and you have to be realistic when you talk about disruptive technologies changing people’s behavior. Until the technology is smooth and sophisticated—which isn’t the definition of disruptive technology—people’s lifestyles won’t change. It will take