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Stealth-Mode Startup Could Shake Up the Demand Response Market By Jesse Berst Oct 27, 2008 - 11:20:03 PM
The demand response (DR) market is in turmoil, as multiple vendors take multiple approaches to the technology and to the business model. It will coalesce in the next 12-18 months and then launch into a widespread growth stage that should last at least 5 years.
A small stealth mode startup may have a big impact on how this nascent sector organizes, how it goes to market, and how utilities approach the opportunity. North Carolina-based Sequentric has the most comprehensive vision I’ve seen so far. Here are a handful of the clever ideas I noticed as I made my analysis:
All of these concepts arise because Sequentric has the first end-to-end strategy that makes the home a full player, all the way down to the appliance (device) level.
Editor’s Note: SGN is best known for tough criticisms that other publications are afraid to print, whether debunking technology hype (as we did with BPL) or giving vendors actual grades on their technology (as we do with our Tech Take reviews). Since we’re about to say some nice things here, it behooves us to assure readers that we have no business or financial relationship to Sequentric.
For the purposes of this analysis, I’ll use the word “appliances,” but you should read it as “any device that consumes electricity.” Sequentric produces hardware and software linking appliances, generation and storage into a single network. This embraces three overarching functions:
I’ll drill down into each function in turn. I have neither the space nor the technical expertise to evaluate the technical claims. I hope those of you with engineering know-how will use the “Leave a Comment” button at the bottom to post your insights. I’ve also linked an article that explains some of the tradeoffs between different wireless approaches.
Making Appliances Connectable and Controllable
There are more than 140M homes in the U.S. and Canada with more than 1B “islanded” appliances – refrigerators, washers, dryers, ovens, water heaters, plasma TVs, HVAC equipment and so on. These appliances often have sophisticated controls, but they can’t talk. What if there was a way to:
Sequentric connects HVAC equipment with modules that allow existing thermostats to communicate wirelessly with the Sequentric HAN. As company founder Daniel Flohr puts it, when utilities get into the business of swapping out thermostats, they also get into two other businesses: 1) repainting and wallpaper repair and 2) consumer tech support to teach families to use the new devices. Sequentric’s approach eliminates those costs.
When it comes to other appliances, the company ties wireless sensors into the breakers that protect them. (Quite often, appliances such as ovens, air conditioners, water heaters and furnaces are on their own breakers.) This allows Sequentric to monitor the power use. For controllable devices such as water heaters (pool pumps, etc), Sequentric also makes simple control modules that can turn them on or off. Sequentric also supplies smart power plugs and power strips that can be turned on or off wirelessly. Flohr says these devices have an override button so consumers always have final say.
Creating a Low-Cost Home Area Network
Now comes what may be the most controversial part of the Sequentric scheme. To make homes full players in the electricity value chain, they must be networked. To make this networking cost-effective for utilities, the equipment cost per home must be in the range of $150 per home, or less.
To keep costs under this threshold, Sequentric uses a proprietary wireless network in the 433 MHz spectrum. (The same band used for wireless alarm sensors, RFID, home weather stations, garage door openers and automotive key fobs.) The FCC only allows it to be used for brief amounts of time, but Sequentric believes it meets those restrictions and still accomplishes everything it needs to do.
Networks such as ZigBee and WiFi use the 2.4 GHz spectrum. More importantly, they are based on open standards. Long-time readers know that SGN is a big believer in standards. And that SGN predicted years ago that ZigBee would be the victor in the home area network wars, as has since occurred. You won’t be surprised to hear, then, that we questioned Flohr closely. Why would utilities choose a proprietary network maintained by a single vendor? Wouldn’t they be wiser to demand an open standard supported by many vendors?
Flohr cites numerous benefits, starting with cost. Sequentric literature claims the cost per node of a “fully implemented transceiver” is $1, compared to $5 or more for ZigBee. He also cites longer range, a greater ability to pass through walls, and lower complexity. Flohr says Sequentric has “carrier-class” reliability as opposed to the “consumer-class” reliability of WiFi and Zigbee.
At the request of its current utility customers, Sequentric plans to make its protocol available to others. It is the utilities that will manage the integration of third party devices onto their networks. Flohr argues that Zigbee HAN devices are not standardized at the application layer. (For example, the remote command to adjust a thermostat up or down is not standardized.) Sequentric’s HAN gateway/router gathers the data from the appliances inside the home. It can also gather information from many existing meters with the addition of a Sequentric module using the meter’s IR-Optical port, or through its Zigbee interface for Zigbee meters. To transmit that information to the central servers, the company will use whatever IP backhaul system the utility prefers. Today, it can send it over a pre-existing Internet connection if the customer already has broadband. In the future, the company intends to support IP-enabled smart meters, WiMax or even cellular communications.
Analyzing the Data and Creating Value
The final piece is Sequentric’s utility network operating center (NOC) software. Every Sequentric-connected appliance becomes an intelligent node on the utility’s network. The NOC uses Sequentric’s sophisticated analytics to constantly analyze both generation and demand. The system takes actual energy use from appliances, adds in historical patterns, considers weather predictions and real-time weather data, and plugs all that information into its patent-pending algorithms.
With this tool, utilities get a detailed understanding of home energy use and can begin to optimize its systems and its timing. Let me give you a few examples of the ways a utility might put this to use:
Optimization. Track hourly loads, appliances, price elasticity, time-of-use effects, incentives and more, and then mine that data to optimize. Think of it as a step beyond real-time optimization, all the way to “predictive” or “proactive” optimization.
Customer portals. Present bills, analyze energy use to the appliance level, compare the customer’s usage to similarly-sized homes in the same area (a great efficiency motivator), allow customers to sign up for programs and incentives or to set preferences and overrides.
Turning peaks into plateaus. Sequentric’s system could also level demand inside the home. For example, it might delay the water heater for a few minutes until the oven heats up. In like fashion, it can juggle many different devices throughout the home. The overall energy use is the same, but without the big peaks and valleys.
Cut electric bills up to 40%. Utilities with time-of-use pricing or other methods of passing savings through to customers may be able to reduce customers’ electric bills by as much as 40%, says Flohr.
Automatic blackout protection. If you have followed ideas such as the Grid-Friendly Appliance Controller from Pacific Northwest National Laboratory (see link below), then you know about the idea of having appliances turn themselves off automatically if the grid frequency goes outside safe limits. The appliances turn off or down for a few minutes to allow the grid to recover, then ramp back on in a randomized fashion.
Now here’s an interesting bonus from Sequentric’s approach. Since the company gets into the breaker box to install its monitors, it can install frequency detection at the home level. In theory, as more and more appliances are connected and as Sequentric’s software gets more capable, it could decide which appliances to turn off once a home detects a frequency excursion. In theory, the Sequentric approach could save avoid the delay of waiting for an entire generation of appliances to be replaced with smarter equipment.
Additional scenarios. In the future, says Flohr, Sequentric’s system could help with distributed storage, whether that storage is battery-based or uses some other mechanism. For instance, if we someday have tens of thousands of electric vehicles plugged into the grid, Sequentric could tell those batteries when to charge and when to pause. This kind of “battery arbitrage” could level demand and could even be useful in balancing intermittent generation from wind.
I could go on with more scenarios, including detection (or even prediction) of appliance and equipment failures. But I think you have a picture of the potential. In a general sense, Sequentric’s vision tracks closely with the generic end-to-end Smart Grid concept that has been promoted by the U.S. Department of Energy and others since the turn of the century. The difference is that a) Sequentric has much of the needed hardware and software in place or in the works and b) it has very specific ideas on how utilities can profit.
Sequentric’s Business Model
Here are a few key points that will help you understand when and how Sequentric intends to attack the market. These are my assessments and inferences, not necessarily the way the company describes itself:
Consider that last point and contrast Sequentric’s model with the approach taken by the competition. Comverge will happily sell to utilities, but it also wants to aggregate its own “negawatts” and sell them back to the utility. EnerNOC is aiming primarily at the commercial and industrial space. Google wants to aggregate and create value from huge networks spanning entire regions. GridPoint is focusing primarily on platform software for utilities, not on gadgets for the home. IBM wants to custom build one-off software for large utilities. PowerMand hopes to sells software as a service to utilities, charging a tiny fee for each transaction. Site Controls Energy Systems (aka SureGrid) wants to tie into the existing building automation systems in commercial and industrial buildings. Tendril sells software for utilities, but also wants to sell devices via big box retailers such as Home Depot and Best Buy.
Each strategy has its pros and cons. But a close look reveals Sequentric as the only one that is focused solely on creating both hardware and software that utilities will deploy on their own.
What Sequentric Means for Vendors and Utilities
Just because Sequentric has clever ideas doesn’t guarantee the company’s success. Nor does it mean that all of its ideas will fly in the real world, where factors such as money, relationships, marketing, timing and luck come into play.
If you make smart devices for the home, you probably want Sequentric (or something very like it) to succeed as quickly as possible. Those devices don’t have much value until they are linked with an intelligent NOC that can gather the information and mine it for value.
If you market meter hardware or software, you probably want to adjust your value equation to include the additional benefits possible when your products are hooked up to a system like the one Sequentric envisions.
If you make ZigBee-compatible equipment, you ideally want to reduce its cost to neutralize the price advantage Sequentric is claiming. Barring that, you’ll need a story to explain why your gear is worth the extra cost. My recommendation: Take a lesson from John McCain’s failures and avoid negative campaigning. Don’t try to discredit Sequentric’s proprietary system. Instead, explain why your open, standards-based approach is even better (and worth a price premium).
If you make (or are thinking of making) a system to manage distributed resources then you need to make sure your vision is as comprehensive and compelling. In this era of coopetition, you also need to make sure you have a partnering strategy when companies like Sequentric show up with disruptive technology. If North Carolina has been harboring a bright young company under the radar, you can be sure there are others out there as well. And some of them may have addresses in Germany, Japan or China.
If you are a utility, consider whether you intend to buy tools and create your own end-to-end system (the Sequentric model), or whether you expect to use one of the hybrid approaches from other vendors. You should also look very closely at the Sequentric vision (where we need to go) and its approach (how we should get there). Whether or not Sequentric can achieve its vision, it paints a compelling picture of where the Smart Grid could go. And how to get there even faster by making many of today’s existing appliances connectable and controllable.
PNNL’s Grid Friendly Appliance Controller “Which Wireless Fits Your Application” article from the Industrial Wireless Book Sequentric’s stealth mode Web site (don’t expect much) Subscribe to our FREE eMail News Alert!
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