Schneider Electric smart grid Q&A: Where we're going (and how we'll get there)
By Jesse Berst
I consider Schneider Electric one of the smart grid's Big Five industrials along with ABB, Alstom Grid, General Electric and Siemens. But Schneider has a different mindset. The others originally approached the market from the utility side. Only recently have they begun to expand their customer-facing activities (end user-facing).
Schneider, by contrast, tends to think more from the end-user side given its "medium-voltage" emphasis and its constituent brands such as Square D. Only recently has Schneider begun to expand its utility-facing activities, most notably with the June 2011 acquisition of Telvent.
I thought you might like to hear how Schneider views the market and what it sees coming next. Here's a Q&A with Don Rickey, the man who runs Schneider's infrastructure business in the U.S.
Q: What will it take to help utilities to transform ratepayers, both commercial and residential, into partners in energy management?
This has to be supported by rate or open market pricing that exposes customers to the reality of pricing, much like airlines or hotels. Next, commissions and utilities must look at investing in demand side resources as an alternative to generation. If a kW of capacity costs $2,000, for example, that funding should be available to both sides of the supply/demand equation. Ideally, the energy supplier would develop a relationship with a portfolio of customers committed to continuous improvement. Over the long term, this has significant impact on utility long-range planning.
Q: What are the next steps in enabling auto DR, also known as Demand Response 2.0?
The adoption of open standardswill be the key to enabling DR 2.0. The National Institute of Standards and Technology (NIST), several expert working groups, and standards bodies have worked hard to develop a framework of standards that will support vendor development of key equipment to link utilities and their customers. However, this has to be ratified by utilities and their regulatory processes.
Q: Sixty eight percent of commercial building owners say they do NOT have plans to connect their systems to automated smart grid systems in the next three to five years. What is the impact to utilities hoping to enable energy programs powered by the smart grid?
Building owners generally have a 3-5 year planning horizon whereas utilities look out 15-20 years. Utilities understand energy costs could quadruple by 2030 whereas building owners likely anticipate selling any given property well before then. What’s likely to happen is that these timelines will intersect when the public recognizes we’re in a period of sustained increases in energy costs. At that point, buildings that have been upgraded appropriately will start to leave the other properties behind in market value.
Q: What can we do as an industry to motivate commercial building owners?
Pay them. These are businesses with financial goals to be met. Margins are slim, so every dollar spent must be relatively risk free and have a clear path to the required return. If a building can provide a consistent megawatt of load reduction, how is that different from a megawatt of generation? It’s closer to the point of need, it’s cleaner, and it’s more efficient. Given that, shouldn’t there be a consistent long-range program of investment capital available, just as there is for generation projects?
We’ve seen the value of resource portfolios assembled to provide demand responsecapacity in wholesale markets. It would be just as valuable to have a portfolio of motivated building owners assembled into a portfolio committed to continuous improvement in energy demand.
However, most commercial buildings have tenants. Those tenants, not the building owner, pay for energy, but they do not want to pay for capital improvements that benefit the owner. Until tenants and owners hold each other accountable for responsible energy stewardship, long-range improvements will be difficult. That solution will require political leadership.
Q: What's next for your business unit? Given the broad issues we've just discussed, what are the main themes going forward?
Schneider Electric’s Infrastructure business will continue to focus on completing the structural integration of Telvent, which will be key to the initiatives Schneider Electric’s Infrastructure business is focused on. For instance, through the integration of Telvent, Schneider Electric will move forward with deploying our Smart City Solutions for targeted metro areas. These performance-based solutions will enable cities to make needed infrastructure investments, funded by cost reduction delivered through optimized, smarter, more efficient infrastructure solutions.
For utilities, we will focus on delivering distribution grid automation and energy efficiencysolutions to improve safety and reliability for their customers. The release of Struxureware for Grid software suite will complete our EcoStruxure offering, enabling efficient connection of supply and demand, and leading to improved reliability and lower cost operation for electricity suppliers and enabling end users to optimize their cost by making (either automated or manual) choices in how they use electricity.
We are also focused on providing solutions for the shale industry. Shale provides the U.S. with an opportunity to reduce dependence on foreign oil and is a cleaner fuel source for generation. Schneider Electric has developed a large portfolio of smart (upstream, midstream, downstream) solutions for the rapidly growing industry.
Don Rickey is Senior Vice President, U.S. Infrastructure Business at Schneider Electric. His division offers solutions for utilities, for oil and gas, and for other customers who use medium-voltage equipment. Prior to joining Schneider Electric, he held a variety of technical and management positions with Central Illinois Light Company and General Electric. He has an AAS, Industrial Electronics from Illinois Central College, a BS, Electrical Engineering from Bradley University and an MBA from St. Ambrose University.