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KNOW YOUR RIGHTS

The Smart Grid

Energy Scarcity by Design

By: Jim Jensen

Part I is an introduction to the smart grid and the plan for implementation. Part II is an in-depth look at the plan to wrest power from consumers.

Part I | We Need a Plan, Disruptive or Not  

One afternoon in early 2008 the wind stopped blowing in Texas. Unfortunately for the consumers there, the electrical grid relies a lot on wind power for energy. All that air sitting around doing nothing reduced the power going into the grid by 1,300 megawatts in just 3 hours. This kind of unanticipated reduction in power generation is typical of renewable energy resources like wind and solar. It can also lead to grid failure and affect a lot of people. An emergency demand response program was started in which large industrial and commercial users restored most of the lost generation within ten minutes.

This event was heralded by the U.S. Department of Energy (DOE) as a perfect example of how demand response can work to make up for grid power-generation failures. At first glance, it appears to be a success story about the cooperation between businesses and utilities. But another way to view it is that large customers had to interrupt their productivity to compensate for the failure of their supplier (who also happens to be a monopoly). The concept of demand response is a step backward from the level of service we expect in America and is an idea that smart grid proponents want everyone to get used to. It’s a sugar-coated way of saying that purchasers of a product can’t use it when they need it.

In this post, we will explore smart grids and how dull bureaucrats are pushing them on us as an inadequate substitute for innovation. We will see that their pipe dream is an elaborate attempt to hide the failure of their “clean energy” plan and part of a communist attempt to seize control over global energy consumption.

What is a smart grid?

According to the Department of Energy, “defining the Smart Grid is in itself tricky business.” How do you tell someone you want control of everything without telling them you want control of everything?

Our current grid consists mainly of relatively few coal, hydroelectric, and nuclear power-generating plants that supply the bulk of electricity to everyone who needs it. Now imagine a grid where the need for large, manageable generating systems is replaced by millions of small wind and solar power-generating systems interacting with millions of battery storage systems to help balance supply and demand. We’re talking about a transition from just-in-time generation of electricity when it is needed to a system that sporadically, erratically, and uncontrollably generates electricity at the whims of clouds and the wind.

Image Source: Center for American Progress

The technology required to manage and balance this imagined ad hoc network of generation, consumption, and storage, keeping everything in balance, and meeting everyone’s need is euphemistically and quaintly referred to as the “smart grid.” One of the key attributes of a smart grid, and the thing that makes it “smart,” is that it supports the two-way transfer of data. In the existing grid, information flows from the utility to the devices using electricity. On the smart grid, the devices will be able to talk back and let the utility know what they’re doing.

The thing about the smart grid that causes the hair on the back of your neck to stand up is that the main idea is to have a grid smart enough that it can control all the devices hooked up to it. When we say, “all the devices,” we’re not just talking about solar panels and electric vehicles. We’re talking about air conditioners, water, and entertainment systems. The push for a smart grid is a crusade to get “behind the meter” and control demand.

Why do we need a smart grid?

You probably already know this, but never really think about it. Electricity travels at the speed of light and a current could circle the earth 7 times in a second. When you flip on a light switch, somewhere in the world, a generator must kick up production a little to supply your need. Of course, the energy demand of your 100-watt bulb is lost in a sea of devices flipping on and off, so the generators must understand the hourly, daily, weekly, and seasonal overall rise and fall of demand patterns. While this sounds like an incredibly complex engineering problem (and it is), the brilliant minds of the 20th century figured out how to successfully maintain an uninterrupted supply of electricity 99.991% of the time.

If it ain’t broke, don’t fix it.

Enter the alarmists. They have been on a half-century long campaign to dismantle this miraculous system. It began with nuclear power, the cleanest and most efficient method of generating huge amounts of electricity. Irrational fears began the efforts to shut down nuclear power plants decades ago. The force of these fear mongers is so intense, Germany is currently shutting down their last few nuclear plants in the face of their most acute energy crisis . . . maybe ever.

Then these same forces turned to coal and fossil fuels. Over the last few decades, with their lie of global warming/climate change, they are persuading all nations to rapidly abandon reliable, proven energy resources in favor of what is known as the "non-controllable generation" of power by wind and solar. This despite the fact that our nation’s transportation sector emits only 20% of all the carbon dioxide we produce, and the generation of electricity emits 40%.

Generating electricity emits double the CO2 as gas-powered vehicles and yet we have efforts to ban these vehicles in 17 states? This is a riddle wrapped in a mystery inside an enigma, as Churchill would say. Common sense tells you that if you want to reduce greenhouse gases, don’t increase production in the facilities that are causing most of it. Of course, common sense doesn’t apply when you’re dealing with global power struggles and hidden agendas.

How does it make any sense to abandon a proven resource and rush impetuously into the arms of an unstable, uncontrollable, and largely unplanned web of new technologies that do more to destabilize the grid than improve it? The answer is: it doesn’t . . . unless you believe the earth is being destroyed by cow farts.

One of the reasons the current grid has been so stable for so long is that the systems producing the power can be carefully controlled. Wind and solar cannot. Solar, of course, works only during the day. That is, if it’s sunny. When wind turbines began to come online, we learned that with wind speeds below about 11 mph, no electricity is produced. With speeds above about 45-55 mph turbines can become dangerous, the blades must be “feathered,” and production is stopped. Both wind and solar energy die down at night, which makes sense because the root force causing all wind is the sun.

To summarize, the plan is to save the planet by shutting down the traditional stable sources of electricity, replacing them with millions of uncontrollable smaller generators, and accelerating demand growth by bringing online a giant new fleet of volt-guzzling vehicles, all at the same time, by (you guessed it) 2030. What could go wrong?

The plan is facing stiff headwinds

Smart grid promoters are well-funded and powerful, but they have an uphill battle:

  1. The grid they are trying to replace is over 99.99% effective.
  2. The greenhouse gas argument is weakening as pollutants decline.
  3. The current grid owners don’t see a compelling ROI to upgrade by choice. Enter in ESG scores.
  4. Consumers are largely satisfied with the existing product.
  5. Renewable energy systems are destabilizing the grid.

Any normal entrepreneur would look at this business proposal and die laughing. It’s going to be tougher than convincing iPhone users they should switch to Android, even if it is better. But many governments are behind this, and they are standing with pen in hand, a giant blank check, and an utter lack of logic.

What we find is that almost all utilities and consumers either don’t want a smart grid or don’t care whether we ever get one. Even the DOE admits, “the benefits of the Smart Grid are not as apparent to many stakeholders as they could or should be.” Not a very compelling business case considering the existing grid is going to cost trillions to upgrade. And because of this apathy, the government must step in and threaten us with climate change, extreme weather events, cyber security breaches, and terrorist attacks to justify their unbridled spending.

There are numerous materials written by the US DOE that are directed at utility operators that were published to persuade or cajole utilities into seeking the investment capital needed to begin the grid upgrade. Quite a few producers have taken the bait. Many more are much more conservative. The benefits listed by the proponents, not the least of which is a nebulous ROI, don’t begin to outweigh the costs. The promised and vague “societal benefits” of a smart grid are not fully rewarded by markets, so utilities have little incentive to bear all the costs of smart grid investment. Once again enter in the ESG scores to give a push.

Venture capital is especially hesitant given the current climate change indicators. In a 2010 publication, the DOE noted that “emissions of carbon dioxide from fuel-burning in the United States were down 2.8%, the biggest annual drop since the 1980s.” This big drop was widely attributed to the length and depth of the worldwide recession in 2008-2009. It was just as widely expected to be an anomaly. Most agreed at the time that as economies improve, carbon emissions will resume their upward trend.

Wrong. CO2 emissions have decreased by another 15% since that failed prediction was made.

According to an article by Shan Zhou, there are very large cost and regulatory barriers to investing in a smart grid. “Like many other green technologies,” he notes, “deployment requires significant initial investment, while the resulting benefits may not be fully realized for many years.” (Sounds like solar panels.) “Smart grid investments needed in the United States,” Zhou warns, “would cost the average residential customer $1,000 to $1,500. Amortized over a 10-year period, this would cause residential electricity bills to increase by 8 to 12%.” This is a huge deterrent to consumers as well as utilities.

Zhou’s analysis was confirmed by the DOE who warned, “It is a given that modernizing this infrastructure will be extremely costly for all of us.”

Another reason utilities are hesitant is their business model already provides smooth sailing to profitability. Utilities negotiate with regulators on a rate-of-return that adequately recovers their capital investment. Profits are linked with sales as they should be. Because of this, they are incentivized to maximize throughput, not onboard customers who are going to conserve or, worse, compete with them by generating their own electricity.

The smart gridders plan really doesn’t have legs. For lack of anything better, the benefits section of the DOE Smart Grid Stakeholders Book for Utilities, ludicrously claims “PHEV (plug-in hybrid electric vehicle) deployment will cut GHG (greenhouse gas) emissions including CO2 and, in the process, work toward improving the general health of the United States.” This is a hideously expensive, extremely slow way to marginally improve the nation’s health in an imperceptible way. If you really want to improve health, why don't you spend a fraction of the money for smart grids on helping people eat right (have access to clean food) and exercise.

To be sure, there is one beneficiary of this drive to a smart grid: China. Even back in 2010, China made most of the world’s solar panels, but over the past 12 years, its average share of the solar panel supply chain has gone from 55% to 84%. But that’s a topic for another time. It’s not surprising then that the smart grid plan bears communist markings.

How will the smart grid be implemented?

Take a look at California. Their hysterical push to renewables and EVs is causing regular disruptions to service, yet a member of the California Energy Commission says “we need to double and triple down on building the renewables and clean energy resources as quickly as we can.”

This while the typical sunny day in California causes the over-generation of electrical energy by the solar panels installed on rooftops. The situation is aggravated when traditional generation stations cannot meet the instantaneous hike in the energy demand at sunset.

The attitude of the control freaks driving the smart grid is perfectly illustrated in a DOE publication for utility companies called What the Smart Grid Means to You and the People You Serve: “What is abundantly clear is that our costs are rising, our environment is suffering, our energy resources are finite – and we need a plan, disruptive or not.” They are very open about the idea that they are going to ram this down our throats, consequences be damned.

Then the same smart grid zealots go on to compare their misadventure to a religion, “It is an article of faith that grid infrastructure is beginning to fail us.” If there is a failure, it is self-inflicted with the push for unstable renewables and their unpredictable dumping of excess power into the grid.

What is being proposed by this dangerous cult is a three-part plan:

  1. Pay consumers to conserve
  2. Develop energy storage
  3. Control consumption

I. Paying Consumers to Conserve

As expected, the bureaucrats pushing the smart grid are completely disconnected from the world of normal people. As such, they are misreading the market and the motivations of the average consumer. Ask any marketing guru about how important convenience is to American consumers.

Convenience has been the driving force behind innovation for decades. Things we take for granted like buying movie tickets online have ended waits at the box office and queues to see the movie, all in the name of convenience. We love convenience. But smart gridders think we’re ready to give up convenience to save a few dollars a month.

The dullards at Litos Strategic Communications who prepared a 50-page marketing slick for the DOE to explain how cool smart grids are, came up with a wonderful new consumer “mantra” that we’re all supposed to adopt:

“Ask not what the grid can do for you. Ask what you can do for the grid – and prepare to get paid for it.”

JFK is turning in his grave!

It’s fascinating to learn how these people think about their green religion. In an article about using game theory for arriving at electricity market price, the authors held an assumption that people feel a “patriotic” duty to the Earth. It seems almost everyone is against littering and pollution, but let’s be real: it hardly ever rises to the level of feeling love and devotion to the planet.

Here’s how they think it’s going to work. The utility is going to slap a new “smart meter” on your home which will give them the ability to break down what you pay into different price categories based on when you use your power. Electricity costs more to produce during high usage periods (like July 15th at 2 p.m.) than it does during normal or low usage periods. This is because to meet peak demand, utilities must bring online more inefficient generators. Once the peak is over, those generators go back to being idle. The electricity price you pay now is an average price that considers all the cost peaks and valleys throughout the year. (Remember cell phone minutes and when you could use those?)

Their misguided assumption is that once we see how expensive it is to run our air conditioner during the hottest part of the day, we’ll voluntarily choose to raise the temperature on our thermostat. Implied is that we are currently using electricity that we don’t really need. Or, that we can easily shift around the time of day we use it.

What kind of business encourages their customers to use less of their product? Or sells a product with restrictions on when you can choose to use it? Answer: A business run by communists. Many models discussed in business school follow the theory of economies of scale. That is, the more of something that is sold and delivered, the better the price the customer can expect to pay for it.

While the idea of being paid to sweat out summer afternoons may sound good to Global Warmingism adherents, if you really think about the math, you’ll understand it’s not going to fly with many consumers. In one example, if electricity costs $0.67/kWH during 2 peak hours a day, and you’re able to shift 10% of your usage during peak hours to other times of the day, we estimate you’d save a whopping $0.85 for your adjustment.[i]

Less than a dollar per day is not the kind of money that really motivates a lot of people to change their habits. An informal survey leads us to believe there isn’t anywhere near as much elasticity in electricity demand as these charlatans claim. Energy is essential. Like gasoline, when prices go up, we suck it up and pay more. A commute to work or the grocery store is not optional. Electricity demand is like toilet paper. You use as much of it as you need, no more. And you use it when you need it and at no other time.

On the contrary, it seems more likely the inelastic nature of electricity demand is well-understood by smart grid proponents, and this is more of a plan to throw off regulatory pricing shackles disguised as a chance for customers to save money.

How will you remember to curb your electricity usage during peak hours? Don’t worry, there are people who will handle that for you.   

 

[i] This example is based on a household that pays $150/month for electricity in the summer and consumes about 30kWH per day. Assuming a 30-day month (ignoring weekends), the blended price you’re paying now is $150/900, or about $0.1667/kWH.