New Daedalus

Even with today’s rising energy costs, most things do not cost very much. This is a good thing. Food, as a percentage of income, is still at historic lows. In real dollars, gasoline is just where it was at the birth of the modern car in 1908. For most people, switching to a more fuel efficient car will not pay back the initial capital outlay in the next five years. Local energy generation just doesn’t pay back its installation cost quickly enough.

A penny saved may be a penny earned, but today, everyone leaves their pennies by the cash register. Gas prices do not come down because no one wants to make a left turn against traffic to get a better deal. (See also many articles on the front page of Knowledge Problem this week. The New York Times recently indicated that a load in the washing machine might cost $0.53. Who is going to personally manage that? Who is going to miss their $4 coffee on the way to work to reset when the dishwasher runs for this type of gain?

Life cycle does more than lifestyle to determine energy usage. Homes with small children have different energy profiles than empty nesters. Life-cycle trumps life style in energy use except in the most extreme cases. Extreme energy savings are not ever going to be a mass phenomenon. People would rather get to the beach an hour earlier, and get the complaining kids out of the car and in bed on time than they would drive for greater mileage on the trip. These facts are not likely to change.

Well, if we are not going to manage our devices, our systems, and our energy, who will? There are only two answers: someone else and the systems themselves.

Few people want someone else to manage their power, because few people want to relinquish autonomy over their home to someone else. Service is a possibility here. Services like Sensus could remotely monitor my heating and cooling for peak performance, and let me know when and what maintenance is needed. If I approve it, they could even schedule the maintenance themselves, and verify post-repair performance before I pay for it.

This leaves the devices managing themselves. There are a lot of devices, with a lot of features. If we are going to let these devices manage themselves, they need an economic interface, too.

I could ask my dishwasher to run itself, and manage its own budget for the month. I could also set service standards that the dishes always be clean before dinner the next day. This leads to a relatively simple and consistent user interface.

I could tell my solar panel to sell to the grid whenever the price is above a certain amount, and to store any excess energy. The grid might consistently outbid the dishwasher—and that’s OK. If so, the dishwasher would still run only at night.

I could tell my whole-house storage system to buy power at any price until it has four hours on hand. Thereafter it might buy whenever energy is below a target price. I could even let it take bids from the household systems and devices, or from the neighbor. This system would, of course, need to charge an appropriate mark-up based upon its inefficiency of storage.

If we develop the right sort of abstract business interface between the power grid and our buildings, it can also be used between buildings, or within buildings. Most throw-away cell phones have more computing power than it took to go to the moon. Surely, our embedded systems can do a little day trading…

I want to alert my readers that there are two activities afoot right now that have the potential to affect everyone interested in GridWise, particularly those interested in the new e-commerce side of energy.

1. NIST has begun working in earnest on the protocols of the new smart grid, in particular the B2B interactions between the grid and its end nodes. Work is split into B2G, I2G, H2G, and T&D, with electric cars placed, for now, in H2G. It is important that they are opting for business to business interactions, and not on machine to machine interactions. Services inside the building would be coordinated by the business processes of the occupants. Grid messages would go to the business agent of the occupants. Interactions, including pricing and bidding, would be between the grid agents and the building agents. This group had its second meeting today, and is requesting submission of applications (use cases but with an economics/business slant) to base the roadmap around.
2. OASIS, the e–commerce people, have a stated intent of aligning / cross-pollinating the e-commerce and the device crowds. Clearly, in WS-* (pronounced ws-splat), we have most of what we need to put secure, scalable, abstract, verifiable, transactions around the underlying business transactions of GridWise.

Those who know me, know I am excited about this convergence, which I have been writing about, at here and at other places, for years.

If you have application cases that you would like the business of energy to support, built upon transacted open markets, let me know and I will stir them into the hopper. If you want to be kept notified, let me know that as well.

Toby.Considine@unc.edu

Toby.Considine@gmail.com

Several precise correspondents disagreed with my characterization of the ideal interface on every energy widget as a single Business to Business B2B economic interface. Some argued for Business 2 Machine (B2M) and some argued for Machine to Machine (M2M). A few argued for P2B (Person to Business). I think they all make it too complex, and limit the opportunity for new business models. B2B is meant to liberate new markets, new market entrants, new trading models.

Starting with today’s Automated Demand-Response (ADR) interfaces, we get more benefits as we move them from M2M to B2B. People want to be in charge of their own property, so a Business inside the building puts the occupant in control. A business inside the building can only express their willingness to participate with an offer or bid. As not all bids are winning bids, the energy supplier outside the building must select a group of offers that clears the market and inform the winning and losing bids. To my eye, that is a B both inside and outside the building.

Remember, the biggest Demand Response on record is when ALCOA furloughed an entire plant for the summer to sell power at high prices to California. Business response always has more options than M2M.

The homeowner, or the homeowner’s agent needs the same opportunities to bid as does the business. The homeowner’s bid may be subsumed into a larger bid, say, a bid by the green neighborhood homeowner’s association. For the utility, a single home, a row of townhouses, or a neighborhood should all have the same external interface. Clearly the neighborhood and the business should have all the same options. This means that the homeowner’s agent, no matter how small, has a business interface on its outside.

Homes may sell power to other homes in the neighborhood. This may be generator power after the storm, or solar power in the afternoon. There may be competition between my neighbor and the big utility for my business. Homes need the same selling interfaces as the larger grid.

I may even have an economic competition inside my home. If I have told my washer not to run, or my car not to charge, until the price is less than a target, that might be a simpler market interface. One source of power for the car or washer may be in-home generation. Perhaps I can charge from that whenever I wish. Or perhaps I am able to sell my local generation back to the grid for higher than the target price, so the washer sits idle.

Perhaps my car batteries and my home batteries have their own rules. Each wants a little bit of storage, say for a 20 mile drive, or to run off-grid for 1 day. Each of them also could charge up for longer. Perhaps the car and the house will bid the price higher when they are below these minima. Perhaps the house will sell stored energy to the car, but only at a premium.

Variable pricing makes economic sense out of local storage. Local storage markets grow naturally. Local storage removes Grid reliability arbitrage tax on unreliable sources. This transfers larger portion of dollars (less fee for T&D) to the unreliable producer...Local storage will grow, but only when it is priced properly.

Eco was in economics before eco was in ecology. We can have a vibrant market ecology at every level of the grid, from the largest scale to the neighborhood microgrid, to inside the house.

Ahh, Saturday morning at the farmer’s market. Wonderful smells, and bright colors, and seasonal delights. The local peaches have just come in, and it looks like this year’s crop is making up for the failures of the last two. The nightshade family has just come into full mid-summer explosion; every kind of tomato and pepper is piled high on the tables.

Mid-summer abundance is a time of choice. Winter tomatoes are commodities; local spring tomatoes at the farmer’s market red and flavorful, fresh from the hot-house. Late summer tomatoes come in red and gold and chocolate brown and even in surprising stripes. They come in small bites and in one slice per sandwich double-handfuls. They are low acid and high acid, are recently designed or heirloom favorites. With multiple producers all competing you can get any attributes you want, along with helpful suggestions and advice thrown in for free.

Several people have written or called this last week that they do not like my call for a universal B2B (Business to Business) interface for energy-using and producing systems. The most cogent comments advocated P2B. I also tended to agree with their vision. But I still call it B2B

Everything at the farmer’s market is personal; but only the most naïve of the local city folk think that it is not all business. It takes just a few minutes from the market opening to achieve price equilibrium for “ugly” or “canning” tomatoes. Prettier tomatoes soon reach equilibrium, and compete on special qualities; “heirloom”, “low-acid”, or “no sprays”. Farmer’s markets are all personal, and all business. Just watch them establish new market clearing prices at ten minutes before noon….

The home and the individual energy user, the Person in P2B, should have all the abilities and responsibilities that the business has. Some home users are gradually moving to sophisticated always-on homer servers; others are doing the same with always on servers in the clouds. Many homes use more technology than many small businesses. Many individuals have much more sophisticated understandings of energy than do many businesses.

Like the farmer’s market in mid-summer, I want the vendor communications in energy markets to include more than price. I may want to contract for today’s shaky power or for true digital-quality power. I may want to buy only local sources of power, or only power at least a thousand miles away; let NIMBY (Not-In-My-Back-Yard) and short transmission advocates both express their desires in the market place. Just as the farmers sell no-spray and certified organic produce, let the market interface describe renewable status, carbon cost, and even bird kills.

A single robust B2B standard for two-way negotiation can be applied to new market models. There is no reason that a negotiation with your neighbor’s power generation, or that run by the neighborhood homeowner’s association, be any different that the negotiation with the traditional utility.

Even within your home or business, there can be a negotiation. If your drier submits a lower bid for energy than does the grid, perhaps your home generation should sell to the grid, or to storage, rather than to the drier. As the home owner, or as the business manager, you can of course set the rules for the internal market. As an enlightened despot of the home market, you can override the market rules when you want to.

Energy that interacts only with the established energy market is hard pink winter tomatoes, available at the same price even in summer. New energy needs farmers markets with plenty of choice. These markets are B2B, even if the agent lives only as a minimized program on your Mac.

Notes on SmartGrid Domain Experts Workgroup, NIST, August 5, 2008
NIST (National Institute for Standards and Technology) started by making a strong claim for ownership in this area, citing Title XIII, 1305 of EISA 2007. NIST set out an aggressive agenda including a preliminary report at GridWeek on 9/24 and a NIST workshop on developing standards at Grid Interop in Atlanta November 11-13.

NIST wants to have in place tight working relationships with the target SDO’s (Standards Development Organizations) in place before 2009. NIST and the GridWise Architectural Council are working together to direct the standards direction toward e-commerce and interactions with building operations and with the building occupants. Some of these standards will be e-commerce focused, some will be looking to the Building Information Models, and to the energy models they support. I am excited that this might push these design approaches into continuing use during operations.

B2G Breakout (Building to Grid)

We quickly agreed that goal of the SmartGrid standardization efforts is to design the information exchange and informational interoperability to enable healthy markets to emerge around energy use in buildings. Success was defined as enabling buildings to trade their energy.

The group was in violent agreement that we needed to work on business to business interactions, and not on machine to machine interactions. Services inside the building would be coordinated by the business processes of the occupants. Grid messages would go to the business agent of the occupants. Interactions, including pricing and bidding, would be between the grid agents and the building agents.

But market development for what? The problems that need solving quickly include real time pricing and automated demand response. The solutions should encourage the development of distributed generation and local energy storage. The Pricing Models and Buying Models for Energy should also work inside microgrids such as the building or neighborhood.

We spent a considerable time defining the characteristics of live pricing. There was intense interest in moving beyond static prices to curves, i.e., if the prices move like this tomorrow, I will commit to energy consumption in a curve that looks like that. Automated contract execution and on-line exchange of tariffs are both desired.

One thing that everyone agreed is that automated metering infrastructure would never meet its potential unless full live real-time access to all meter information is made available from *both* sides of the meter should be the standard. Parties could then collect the data in accord with the schedule that made sense to them.

This has been about the business exchange – soon I will write about the attributes of these transactions and product differentiation on the grid.