Q&A With IEEE's Dr. W. Charlton (Chuck) Adams, Jr.
Dr. W. Charlton (Chuck) Adams, Jr.
In this interview, Chuck Adams shares his vision of new business models that will emerge with Smart Grid. He compares the industry's transformation to changes already experienced in the computing and telecommunications sectors and calls for a concerted effort to engage consumers in Smart Grid. Dr. Adams served as President of the IEEE Standards Association (IEEE-SA) in 2009-2010. He now serves the IEEE Board of Directors as Chair of Public Visibility and is currently a member of the Huawei Corporate Standards Office.
What types of challenges are regional experts talking about these days when it comes to Smart Grid? How do these challenges compare to those we're facing in the U.S.?
CA: There is one challenge today that is very significant in Europe and the United States and that is the decentralization of the power industry: breaking up the industry into generation, transmission and distribution companies.
Decentralization will fundamentally alter the utility industry business model. Today we have big grids and big power companies that make and own the investments. But as we start decentralizing, it is not clear where that responsibility will lie or how it will affect the process of building and implementing Smart Grid.
There has been fairly significant debate about this recently in Europe, where the power industry is mandated to tie all the national systems together for Smart Grid. Many are asking who owns the business responsibility for that investment. And companies developing equipment for Smart Grid are asking who they will sell it to. Industry participants in the U.S. are asking similar questions because the country has three grids, which involve approximately 3000 power companies, to integrate for Smart Grid.
How is Smart Grid development progressing in the United States?
CA: In the U.S., the roles and responsibilities for standards development belong with industry, not government. The industry has begun addressing the standards requirements needed for modernizing the three grids and the 3000 utilities that make up the U.S. infrastructure. IEEE and many other groups have begun to identify requirements and the work that needs to be done.
I believe these organizations are at a strategic turning point. Government funding to support this work in the coming years cannot be assured. I think at some point the industry is going to have to step up and start funding this work. As it does so, the industry will also have to decide what roles it wants to play in the emerging business environment.
What kinds of roles do you believe will present meaningful opportunities for utilities?
Power companies are going to have to make some decisions about what their future business models will be, especially if they're going to be decentralized. They'll have to decide what kinds of services they can support and deliver in addition to supplying power.
The opportunity to create new services explains why communications companies are so interested in the roles broadband and narrowband networks will play. It explains why the consumer electronics industry is so interested in leveraging the grid networks for new residential products and applications. In this new, IT-functioning industry, power companies will be able to deliver services and manage these networks with servers. But today the power industry is a very low-margin industry, so its incentive to invest in these new capabilities is quite stressed.
Can you describe the types of services that will emerge in this new business environment?
CA: I think we're going to see the development of a service delivery concept in the power industry. We have yet to see how the industry will structure this business environment, but once it gets over the technology hurdles of how to leverage and utilize the grid, power companies will sell services to vendors and consumers.
Consumer electronics manufacturers are planning to embed IP addresses in electric appliances to facilitate monitoring and communicating with the products for maintenance and other purposes. In this scenario, power companies could start charging the consumer electronics vendors for the use of the power line communications infrastructure for these services.
Power companies will own the smart meter that provides the intelligence for controlling and managing devices inside the house and they will use the communications infrastructure they have over the grid to provide added value to the consumer via the smart meter. For example, they could manage the power flow and end-use loads in office buildings for commercial customers for an added fee. Commercial customers might very well be willing to pay for those services.
You have seen the computer industry overcome a staid business model to become more nimble and innovative. What can utilities learn from that experience?
CA: Utilities have a heavy capital investment in their infrastructure, and this slows technology and business transformation. But external forces can provide a catalyst for change and I believe that customers will provide that catalyst in the utility industry.
In the ‘90s, IT customers demanded that vendors create interoperable servers because they wanted to interchange products from different companies. Industry was forced to respond and servers became commodity products. The same type of thing happened with the Internet.
In the U.S. power industry, the use of Internet Protocol to provide a communications infrastructure on the power grid will have a similar effect. Utilities want IP infrastructure because it will make grid components active and intelligent and improve reliability and reduce costs. Once the infrastructure is established and grids are interconnected, power companies won't be independent entities anymore and manufacturers will expect their products to interoperate. That's my prognostication, although others might offer different scenarios.
Power companies could even become outsourcing companies like IBM and HP. And the minute they begin to look at outsourcing they will need to interoperate. But the power companies will first need to identify coherent ways to support these market opportunities.
How long will it take for these new business and service models to emerge?
CA: It will probably take twenty years for this new business environment to develop. Part of the challenge is that the power industry must learn how to partner with other industries. It took the communications and IT industries a fair amount of time to learn how to work together. It didn't happen overnight. For Smart Grid, power companies will have to change their business structures, including their return, investment and tariff structures. They will have to work with their PUCs and the PUCs will seek some guidance from the Federal Energy Regulatory Commission. So the business model will need to work itself out.
In the short term, vendors will see an opportunity to sell products, such as smart meters and intelligent consumer devices.
Consumers are more sophisticated today than ever before, but interacting with grid-based applications will be new to them. What must be done to engage consumers in Smart Grid?
CA: In Europe, consumers are already engaged because the power industry is mandated to include their requirements when developing standards for Smart Grid.
In the United States, industry's role is to deploy the systems and the applications and educate the consumer about them. The power and communications industries will need to work together to gain customer acceptance and participation. One opportunity is to use the model that the Wi-Fi Alliance developed to help vendors make interoperable products, certify compliance and assure consumers that any Wi-Fi-branded product would work with another. There should be a similar effort for Smart Grid.
Another example comes from the cable industry, which created special 24/7 technical support services when it rolled out high-definition TVs. This type of service can't be automated. It takes people. The companies don't need to do this for the long term, but it is worth the investment upfront to get customers to convert to new services.
I also expect that companies will band together in industry groups to address these types of issues. I believe some new organizations will emerge to address this work.
How is IEEE helping the industry develop Smart Grid?
CA: The IEEE Standards Association, has brought together the three industry constituents needed for Smart Grid-the power, IT and communications industries-to develop the IEEE 2030 framework that creates interconnection and interoperable interface standards for services that will be delivered over the three technology domains. The IEEE-SA is also developing a family of IEEE 2030 specifications to integrate automotive, storage, ultra-high voltage transmission and other systems into Smart Grid.
The IEEE-SA has more than 100 standards or standards that are in development that pertain to Smart Grid. It is developing another iteration of the IEEE 1547 standard, used to interconnect distributed resources with electric power systems, to address renewable resources. The IEEE 802.15.4 standard will provide a low-power wireless communication mechanism for reading smart meters. We've also initiated work with the ITU on broadband over powerline and narrowband communications standardization activities for Smart Grid.
The IEEE-SA continues to reach out to industry and partner with other standards organizations around the world to build Smart Grid. We have many challenges and Smart Grid standardization will take time, but with IEEE 2030 in place we have the foundation needed to pursue this important work.