Conference Transcript

Break out session: Connected and Sustainable Energy San Francisco, Day 2 February 21st 2008

Each panelist’s contribution is summarised below, along with a synopsis of the Q&A session that followed

Jorge Vasconcelos, Chairman – New Energy Solutions (moderator) • Energy systems are undergoing a radical change, partly dictated by new institutional

and policy directions and partly by new technologies. New power generation technologies are the most visible element of this transformation, but the application of new ICT will have the most disruptive effects and will bring the most important benefits to energy consumers and suppliers.

• Decentralised energy systems provide people with the ability to manage their energy needs in a new way, shifting the emphasis on to supply as well as consumption, liberating people from being passive slaves to their energy consuming devices.

• ICT has considerable disruptive potential to change the way that consumers buy and sell energy, perhaps more so than any other technological developments.

• While urban concentrations increase and energy generation systems become more decentralised, the outcome is in fact that they are converging to mutually reinforce one another putting more responsibility and power at the local level, providing the power to manage energy needs in a new way.

• We are driving towards a new energy landscape away from the old hierarchical, supply-side orientation and structures towards more customer-oriented structures. In this context, some lines of action for civic leaders include using their powers to create frameworks to promote the adoption of new patterns of energy consumption. Civic managers can use public buildings showcases for these innovations in energy consumption and they can promote new partnerships aimed at widespread adoption of new models.

• The challenge faced today is two-fold. On the one hand city leaders must realise the potential of new technologies to help them create more sustainable cities, on the other hand they must introduce user-friendly energy solutions to address the problems faced by modern cities.

Kurt Yeager, Executive Director – Galvin Electricity Initiative • Electricity has been the great enabler of the 20th Century, transforming every aspect

of the economy and society. But as important as it had been in the 20th, it will be more so in the 21st as it is the enabler of a sustainable world. However, it is the mechanism by which electricity is generated and distributed that will be the determinant of a sustainable future.

• Electricity is the most critical infrastructure in cities. It is the engineering marvel of the 20th Century. But while energy systems have grown bigger they have not necessarily got better. To a large extent our electricity systems are becoming legacy infrastructure – similar to where telecommunications was 30 years ago with very little

Conference Transcript

incentive among the monopoly suppliers to make use of the significant innovation that is available.

• There is an irony in the fact that thought the electricity industry is the underpinning of our increasingly digital economy and society, it remains the last bastion of an analogue, electrical mechanical system. To overcome this requires transformative change.

• The electricity system today acts as a constraint on the efficiency and environmental performance of our whole society and economy. In the US for example, the unreliability of the electricity system costs the economy over $150 billion every year.

• There are no technology hurdles to enabling a smart grid. The barriers are cultural and policy-related. There is a need to change the status quo from a situation today where the regulator is the customer to one where the customer is the customer. There is no need for the ‘iron curtain’ of electricity today.

• The steps required are: electronic monitoring and control that allows the system to be monitored at the same speed of light at which electricity operates. The switches as we know them have not changed since they were invented.

• Smartness arises from integrating electricity and telecommunications. The business model of the 21st Century is not one that is selling a dumb commodity, but making a seamless communication between the supplier and the user so that each has instantaneous access to pricing, load control and so on.

Jim Rogers, Chairman, President and CEO – Duke Energy • There are two primary aspirations for the utility company and these are or will be

shared by every city. The first is to decarbonise the energy supply. The second is to create the most energy efficient communities in the world, to have gigantic gains in the productivity of their use of electricity.

• There is an opportunity for partnership between utility companies and cities to build a bridge to a low carbon world. In the US 40% of carbon emissions comes from the power industry, 30% of carbon emissions comes from the auto industry, If you decarbonise the power and the auto industry that is the path forward to decarbonising transport and that is 70% of emissions.

• The utility business has had the same regulatory model for 75 years. But that model needs to change. It is based on building bigger and bigger power stations, based on a commodity model. But that model should and can change. The model of the future should be to optimise the networks and all the networks embedded in customers. To optimise the performance of the network not simply from the source of generation, but all the way through the meter through to the applications.

• There are five ways of generating electricity: coal, gas, nuclear, renewable sources and energy efficiency. And the last of these should be the first priority. Savawatt opens the door to look beyond the meter, opening the gateway to the home and the customer.

• Utility companies have the ability to provide consumers with information about their use of electricity in the different applications and systems that they operate. Creating the ability for more efficient use, so that the utility company becomes an optimiser for its customers.

• In this era of new technology energy saving is not about sacrifice, but about helping customers to tailor their energy use to fit within their parameters of comfort and convenience, by using smarter and better grids to make it a two-way communication.

• The technology is available, but the will and the vision are currently missing. There is a need for ‘cathedral thinking’. The architects and builders who started cathedrals

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never saw the final results, but they dedicated their lives to it because they had a vision. And building the energy efficiency requires similar thinking. The challenge is how all parties can contribute to that long-term vision in a way that makes sense for all.

Rick Nicholson, Vice President, Research – Energy Insights • The intelligent grid is one of the key enablers of sustainable cities. The components

of an intelligent, distribution grid must first and foremost include first a communications network – a backbone – that enables two-way communications between electricity providers, users, devices, and so on.

• In addition, application control systems (smart thermostats for example), energy usage monitoring, smart heating and lighting systems are all required components. Sensors are needed on the distribution network itself.

• Demand response means getting energy consumers to respond to price signals by shifting their demand to different time periods. In periods of high demand all energy producing units have to be utilised, including the most inefficient. But enabling the consumer to shift to periods of lower demand can increase the efficiency of generation. But it requires information to reach consumers.

• Many utilities are moving towards smart metering and adopting other initiatives. Cities need to take a look at what is happening now and take some immediate steps.

Paul Marcoux, Vice President – Cisco • There are 1.25 billion people on the network globally today. That is expected to grow

in the next few years to more than 2 billion, with most of that growth in developing nations. It has been projected that over the next 20 years an additional 250,000 MW of power over and above existing requirements will be needed to meet that level of growth.

• Cisco’s development organization is working on new technologies for its own products as well other technologies that make better use of the energy creating a ubiquitous system that will require no human intervention to make a better use of energy to generate significant savings.

• A typical data centre will uses huge amounts of water for cooling. There are now other technologies such as air to cooled systems.

• There are millions of small applications that use energy, and so there are opportunities to address everyday technologies to achieve significant energy savings. Set-top boxes, hard-drives, communications devices and so on can all be developed to operate with energy efficiency as a core objective.

• Cisco is collaborating internally and with other suppliers to brainstorm where the next level of energy efficiency is coming from. Energy efficiency is becoming a standard design requirement.

Steven Selkowitz, Program Head, Building Technologies Department – Lawrence Berkeley National Laboratory

• The biggest issue for cities is how energy is used in buildings, as these are the largest users. 40% of carbon emissions arise from buildings and 70% of electricity is consumed in buildings. There is no silver bullet, however there are some big targets.

• Lighting consumes a significant proportion of energy and much of the waste is related to the fact that lighting systems are not controllable. So most lighting needs to

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be dimmable, addressable and affordable. This means simply that any single fixture needs to be addressable so that it can be controlled. The technology to achieve this is not new, but only between 1–2% of lighting in buildings today is dimmable and controllable today. Wireless controls will be a big enabler that could deliver significant savings.

• There is an enormous potential to control demand response peaks. Demand response will be controlled with ICT, creating interfaces for automation. Implemented and demonstrated across California, this illustrates how to control the load of a building and have instantaneous control over lighting and heating.

• While there have been some major commitments to achieving energy efficiency and carbon neutrality in buildings, the challenge is implementation and many different people have to play their part. The key is to think big, start small, but act now.

Maria Graca Carvalho, Principal Advisor – Bureau of European Policy Advisors

• The European Commission has created an integrated strategy on energy and climate change approved by 27 heads of national governments. The basis of this policy is a vision for 2050 for a zero-emission society. As an intermediate stage, there are binding targets for 2020: CO2 reduction of 20% by 2020, 20% renewable sources, and 10% bio-fuels. European legislation is now in place to put those targets into practice.

• The target for renewable sources, divided between member states on both an absolute basis and proportional to GDP to place greater emphasis on the wealthier countries to make greater efforts.

• Each EU member state has to fulfill a certain reduction in CO2 and the EU has launched an emissions trading scheme that covers large power generation installations. There are also rules for CO2 in the buildings and transport sectors, with generic and country-specific targets.

• R&D and technology deployment is viewed as critical and the EU activity encompasses a wide range of initiatives and public-private partnerships to develop a range of technological solutions. Among these are the program targeting energy and climate change in cities: the Concerto Project. The main objective of this project is to introduce significant renewable sources and energy efficiency within cities, to enhance quality of life and to create economic opportunities. There are 46 communities in 18 projects, with a budget of €4 billion euros, in buildings housing 1 million people. Another related project is Civitas which is focused on transport using ICT and clean vehicles to address congestion and pollution and involves 36 cities in 17 countries.

• Though Europe will be responsible for less than 10% of global emissions by 2020 it needs to set an example about what is possible to the rest of the world in order to foster international action and agreement.

Q&A summary

What will drive the utility companies to greater partnership? The reality of climate change, and a number of factors is pushing utility companies in that direction. What is needed is a change in the regulatory model, much as happened in the telecoms industry but help is required to get there.

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From my perspective the utility community and the technology companies ought to get together and agree that the time has come to get together and change. Let us be part of the business, to break down the monopoly and work as part of the community. Q: One of the most frequently used words at the conference has been collaboration. But what does that mean in the technology and the utilities model? There is a vision in the future that the only way to achieve business performance will be to optimise the networks. Utility companies will have to become distribution partners and play a vital role. If we have sensing devices in the home, and the ability to mine the information they provide we can use that to deploy channels to create greater efficiency and therefore value.

Q: Can regulation drive behaviour? People in the home do not think about where the energy comes from. To make people more aware you can raise the price but that is not a very smart way to get their attention. The other way to do it is that with technology evolving as it is, is to make energy efficiency equally as ‘back of mind’ to consumers as throwing the switch is today. If I depend on the consumer to achieve energy efficiency, you will hit resistance. Consumer’s energy concerns are more about reliability and affordability than they are about being clean. So the answer is to tailor the products to the customer, enabling them to operate on automatic pilot. The technology is there, the will to do it is what is needed. I would much rather invest in providing the individual homes and businesses with the wherewithal to control their use of electricity than invest $8 billion in a nuclear power plant.

Q: What should be the approach to the growth in fossil fuels, for example in China? We need to recognise that coal will run the world for a large proportion of this century as China and India base their economies on coal. So the developed countries are going to have to lead the way not only in moving away from coal but also in developing technologies for cleaner use of coal. And the same applies to nuclear power; we will not get through the century without a very heavy dose of nuclear power. The least sustainable future that we can have is to deny future generations access to the essential energy resources of the world. The renewable future is a great one to have, but it is the future. It took 100 years to get where we are in the use of fossil fuels. But we cannot snap our fingers and change things. We will not solve this overnight, so we need to have longer-term visions and goals, but it will take us 50 years to do this. We are beyond mitigation, but there is a recognition that we are going to have to change over decades.