Smart Grids Need to Be Evaluated With Cost Benefit Analysis

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Graphic by Emily Metcalf

As the author Henry Curtis of Life of the Land explains, the concept behind “SMART GRIDS” is that billions/trillions of dollars should be invested into upgrading electric grids with complex, proprietary Command and Control technology, and layers of cyber security, should be added without economic analysis or cost-benefit analysis. SB 1040 defines “Advanced grid modernization technology” without including any references to costs or impacts. This is his testimony to the House COMMITTEES ON ENERGY & ENVIRONMENTAL PROTECTION and ECONOMIC DEVELOPMENT & BUSINESS in advance of the hearing on Tuesday, March 19, 2013 on Re SB 1040 RELATING TO ELECTRIC SYSTEMS.  



BY HENRY CURTIS FOR LIFE OF THE LAND HAWAII – My name is Henry Curtis and  I am the Executive Director of Life of the Land, Hawai`i’s own energy, environmental and community action group advocating for the people and `aina for four decades. Our mission is to preserve and protect the life of the land through sound energy and land use policies and to promote open government through research, education, advocacy and, when necessary, litigation.

PUC Already Has Authorization

In oral testimony at the last hearing the PUC stated that this bill was not directing the PUC to approve Smart Grids but was allowing them to investigate Smart Grids.

But the PUC already did that almost five years ago.  In 2008 the PUC opened Docket 2008-0303 to examine HECO’s proposal for Advanced Meter Infrastructure (AMI).  Life of the Land was admitted as a party.  The PUC closed the docket without prejudice, telling the utility to come back after filing a Smart Grid Roadmap.  The utility has not done that, and is instead trying to get piecemeal approval for Smart Grid components.

This Legislation is Redundant

The 2012 Legislature has already authorized this, and the PUC has directed to the utilities to produce a report that is due in June 2013.

The PUC has opened a docket for the HECO Companies Integrated Resource planning (IRP) process whereby HECO, MECO & HELCO must develop short-term (5 –year) and long-term (20-year) plans. The HECO Companies must file the Plan in June. The Commission and the 2012 Legislature has required that the utilities examine 18 Big Ticket items and issues, one of them being the Smart Grid.

HCR 58 HD 1 SD 1 (2012):  “BE IT RESOLVED [ ] that the Public Utilities Commission direct that the integrated resource plans of electric utilities examine  a strategy that replaces existing fossil fuel-based electricity generation plants with renewable energy resources; [ ]  examine a strategy that develops excess firm or intermittent electricity to be transmitted between islands,  including plans to develop undersea electricity transmission cables to support transmission of electricity between the islands;

[ ] consider the following resources: (1)  Electricity generated using geothermal steam on identified geothermal resources to replace or mitigate the use of fossil fuel-based electricity generation facilities;

(2)  Hydrogen and other available energy storage technologies used as a source of stored energy to stabilize the grid when necessary; and (3)  Electricity generated by waste-to-energy facilities to serve as an untapped fuel source; and BE IT FURTHER RESOLVED that the Public Utilities Commission is requested to examine:  (1)  Its avoided cost calculation methodology;  (2)  Ways to maximize the use of distributed generation, including an examination of the appropriateness of current circuit penetration threshold levels for the interconnection of distributed generation resources; (3)  The increased use of energy efficiency programs and technology to meet the goals of the energy-efficiency portfolio standards under section 269-96, HRS; (4)  Ways to minimize the curtailment of renewable energy resources; and (5)  Ways to modernize the State’s electrical grids

SB 1040 is So Broad it includes Everything

SB 1040 (2013) states: “The [public utilities] commission [ ] shall consider the value of [ ] advanced grid modernization technology,” where ” ‘Advanced grid modernization technology’ means equipment, facilities, and  associated processes that individually or collectively function to improve the reliability, resiliency,  flexibility, and efficiency of the Hawaii electric system [ ] including but not limited to [ ]  optimization of assets and improving the operational  efficiency of the Hawaii electric system.”

This definition is broad enough to include every utility project that every Hawai`i electric utility has ever proposed since the 19th century.

SB 1040 opens on a false note

Sentence one of SB 1040 states: “Hawaii’s progress toward the widespread use of renewable energy requires modernized electrical infrastructure supported by nimble, robust technology capable of servicing the evolving needs of the grid.”

A dumb grid powered by 100% baseload biofuels and geothermal requires no modernization. It would rely on 100% renewable and indigenous resources. Alternatively, some wind and solar could be added.

Smart Grids have Manufactured Support

The federal government is pouring in billions of dollars to advance smart grids.

Consultants are seeking to cash in, and offer glowing recommendations for the industry that will finance their future.

Command and Control

Perhaps the bill intends to limit the scope to new smart solutions as opposed to past dumb solutions. That is, the focus is on building multiple terrestrial and undersea high-voltage transmission lines, installing two way communication and control systems at the 250,000 electric grid nodes, installing a sophisticated computer system that can monitor the new grid in 1/1000th of a second, and provide cyber security to all components.

Smart Grids are a trillion dollar effort to vastly overhaul, centralize, and rigidly control all energy policy.

They require vast proprietary systems, increased cyber security, and far greater complexity.  Complex and proprietary command and control systems allow for very limited participatory democracy and taxpayer/ratepayer influence. Instead, the system is friendly to elites and consultants.

Upstream and Downstream Smart Meters

One part of a Smart Grid is a Smart Meter.  Smart Meter can provide two-way electronic communication between a utility and a ratepayer.

The Smart Meter can serve as a gatekeeper in one of two ways.

Upstream gatekeeper: all customer supply and demand data is sent upwards to a huge utility-run computer that measurers instantaneous changes in electricity demand and supply, and fluctuations in current and anticipated wind and solar generation due to current and forecasted wind speeds and cloud cover. The forecasts will cover the next  millisecond, second, minute, hour and day. Vast layers of cyber security systems will be installed. Most of the computer programs needed do not yet exist.

Downstream gatekeeper: Red, yellow and green lights appear on cell phones letting customers know when there is adequate/inadequate energy on the grid. People are able to use apps to turn off systems when demand is high. Each color has a different cost per kWhr to the customer. Sort of like cell phones having cheaper weekend rates.

It is intuitively obvious that experts and utility executives prefer the upstream gatekeeper because that will maximize their financial interests.

But without any economic analysis whatsoever it may turn out to be true or false. The answer may differ based on the island or the type of customer.

For example, many large commercial banks processing billions of dollars in checks believe that a grid offering 99.9999% reliability is not reliable enough, and so they have opted to have installed on-site back-up systems. Some major hospitals in Hawai`i have done just that.

The use of the term “Advanced grid modernization technology” implies that those who favor other solutions are the backwater luddites who oppose progress and oppose the inter-island grid.

It is interesting that the term “Advanced grid modernization technology” does NOT include any references to  community values, lower electric rates, lower environmental impacts, lower cultural impacts, and/or lower greenhouse gas emission impacts.

Smart Grid, Stupid Policy? by Andy Stone. Forbes (Jan 29, 2009)

“When it comes to upgrading the U.S. power system, spending runs far ahead of understanding. … Rarely have such high hopes for economic growth been pinned on a concept that so few understand.”[1]

Why Smart Meters Might Be a Dumb Idea By William J. Kelly (Consumers Digest, January 2011)

“We interviewed 35 experts, including smart-grid- and utility-industry executives, government regulators and consumer advocates. We also reviewed thousands of pages of government documents, filings with state utility commissions, materials from smart-meter-makers, and reports that were produced by the emerging smart-grid industry. A few experts suggest that smart-meter conversion represents little more than a boondoggle that is being foisted on consumers by the politically influential companies that make the hardware and software that are required for the smart-meter conversion. And based on our investigation, it’s difficult to disagree.  …

What’s discouraging about the all-but-mandatory dynamics of the smart-meter transition is that it’s appealing only if you’re willing to pay a lot of money to save a little electricity.  … Consumers will pay for it all through electric bills, taxes and direct purchases.  …

The whole premise of smart-meter benefits relies on getting consumers to pay strict attention to how much electricity that they use and when they use it, smart-meter advocates say. And to make that happen, electric companies seem determined to swing a stick at consumers rather than to dangle a carrot. …

It’s difficult to see how anyone ultimately will stop the advance of smart-meter integration, because everyone who has a stake in it is marching in lockstep to a long-term game plan.”[2]

The Future of Global Smart Grids: A NEW ENERGY INTERNET?[3]

We are facing a high-stakes moment  for smart grids. Trillions of dollars  of private and public sector investment are at stake over the next 20  years. But, the future of smart grids  is unclear. Some believe that smart grids will usher in the next Internet boom — democratizing energy management and use. Others imagine the future of electricity grids falling into the hands of a few, powerful, established players that are poised to leverage smart technologies into even greater control over national energy

flows. Now is the time for business  leaders across a wide array of sectors to question their assumptions.  [ ]

A High-Stakes Moment: Smart grids might be the next big thing. If you happen to be an energy security or climate change evangelist, an entrepreneurial  technologist, a business executive in the energy sector or simply an investor looking  for large returns, it is hard not to notice that  smart grids are attracting a lot of attention.  [ ]

But, wherever you  hear the sound of  money rushing in, you can be sure that the  hype is not far behind

To be sure, electricity  grids themselves do not have a reputation for  being the most dynamic of sectors. [ ]

The Official Future:  “The Energy Internet“  In the official future, the rapid implementation of smart grid technologies will enable  an equally swift decentralization of our existing electricity grids, allowing distributed  electricity generation and newfound consumer controls with reasonably open access  to and management of information and energy. []

An Alternative Future:  “Air Traffic Control“   Access to and management of energy and  information is proprietary and centrally controlled by utilities and large-scale regional or  national network operators. Big established  electricity players, infrastructure firms and  large grid-management technology suppliers call the shots in their respective ecosystems. Overpowered by reliability-impacting  events, such as security breaches and large-scale disruptions, government essentially  abandons attempts to empower the demand  side and to foster distributed energy generation or consumption control. Consumer  energy and information flows are steered  by these large corporations and government  agencies.

‘Smart’ Grid: New Critics of a Bad Idea  by Robert Michaels (January 12, 2010)

Possibly the most fascinating aspect of the Smart Grid is the absence of an economic rationale. But industry incentives being what they are (concentrated benefits, diffused costs), many have bet on much of it being built. Boondoggles must pass political tests, not economic ones. … The utilities have yet to find consultants who can make an easy case for the grids. … Just about everyone agrees that its main effect will be to time-shift peak consumption, with little if any effect on total power use, i.e. no carbon consequences.”[4]

Simplicity versus Complexity

The difference between simple models and complex models is that complex models require experts, consultants, hired guns, patents and confidential business information.

Complexity requires consumer confidence that legislators, regulators and bureaucrats will do the right thing as large vested interests throw huge amounts of cash, awards, prizes, trips and gifts aimed at getting acceptance of their preferred solutions.

Some would even say that complex models can not be understood by the layperson who just gets in the way of those who know what they are doing and are getting handsomely paid for it.

Simple models are driven by community values. They are community friendly and utilize participatory democracy. Thus they are less efficient to implement but in the long-run are more desirable from a societal perspective.

Could a complex system be better than a simple solution.

Yes, but not because its proponents say so based on the thickness of their pocketbook.

Rather, the choice of solutions must be based on community values and involve scientifically sound and data driven analysis.





[3] Implications for Corporate, Investment and  Innovation Strategies Across Industry Sectors

By Olaf Groth, Jesse Goldhammer and Doug Randall