Smart Grid Solutions( June 2012) my presentation from 2012 on state of smart grid solutions. I tried to identify 5 areas of technology most interesting for VC(cleantech one) within next 5 years. My intended 20m presentation turned into 80m discussion. Looking at it from 2014 some interesting things happened. I identified 5 interesting technology areas: Data management(Big data), AMI, Home automation, Cyber security and substation automation. I looked at grid scale energy storage because everyone wanted it badly but no one could figure out way for it to work at scale. So what happened since 2012. In home automation coolest company was NEST and their main innovation was that they made thermostats consumer product. That was not obvious to everyone at the time. But we discussed investment in NEST, it not so easy though as NEST had enough cash, and you need take into account fund's life cycle. In January 2014 Google acquired NEST for $3.2B. Also at the time smartphones and technology made home automation relatively affordable and there was need for platform to control it. Microsoft was working on Home OS, software platform and interface to control home automation devices. In 2014 Apple announced HomeKit, platform to control home automation devices. Data management - Big data started to become buzz word and companies using billions of sensors accumulated ton of date but most of them never used it. in 2014 Hadoop is standard and companies find very creative ways to use data. AMI - i expected that we will have smart meters everywhere. 2014 I overestimated it. Though cool company Opower who found create way to use data from smart meters to create social platform for neighbors to compare their energy usage and compete to reduce it, had it successful IPO. Cyber Security. I focused on grid security because with all smart in grid you have shift from analog to digital and risk of cyber attack. Also Cyber security for grid became mandatory by law in USA. in 2014 it is very hard to dig up data on grid but everywhere else there were huge cases of cyber security attack. Now people aware of it but still underestimate its threat. Huge but sensitive and complex market. Grid storage. Elon Musk announced Gigafactory. It is very hard to use battery technology used in cars and smartphones on grid. Scalability is an issue. We actually did small exercise to check. My boss took his blackberry and disassembled it. We look at numbers at battery, made calculations, added cost, estimated watt needs for grid storage one, added manufacturing, environmental risks and concluded that it will not work for some time. But China announced that they will use lithium ion for storage so everyone else paid attention. It was fun to do this research and talk to smart people. I had discussion with execs from ABB Technology ventures, VC, McRock Capital, professors from MIT, ETH. I talked to CTO of IBM's big green innovation, and my fav author James Utterback. I was great pleasure.

1. Market Adoption of Smart Grid Solutions
Berik Dossayev
berik.dossayev@gmail.com
Image source: G. Moore “Crossing the chasm”
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2. Agenda
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①Smart Grid Definition
②Smart Grid as Critical Infrastructure
③Smart Grid as High Reliability Organisation
④Technology Adoption Rate/Methodology
⑤Discussion and Conclusions

3. ①Smart Grid Definition
②Smart Grid as Critical Infrastructure
③Smart Grid as High Reliability Organisation
④Technology Adoption Rate/Methodology
⑤Discussion and Conclusions
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4. Smart Grid Definition
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“SmartGridisasetofsolutionswhichaddintelligencetotheelectricalgridimprovingitsquality,observability,controllabilityandreliability”.
Owndefinition.

5. Smart Grid Holistic Definition
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Source: World Economic Forum, Smart Grid investment report 2009

6. Transition to Smart Grid
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Source: World Economics Forum, EPRI, M.Jelinek and M.Ilic
Important: proprietary standards open standards

7. Drivers
Transition from commodity provider to higher–value service provider
Operational and maintenance savings
Fulfill carbon goals and regulations
Accommodate renewables and EV
Development of new products and services
Improved understanding of consumer behavior
Return on investment
Energyandbillsavings
Smarter energyusage
Desiretobegreener
Additional services
Deregulation of power industry
Carbon abatement scheme
Push for open standards
Jobs creation
Innovation
Government and Regulators
Utilities
Vendors
Consumers
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8. Barriers
Technology challenges
Lack of common standards
Skill crisis
Return on investment
Policy and regulations
Technology challenges
Resistance to proprietary standards
Access to capital
Skills crisis
Global market differences
Lack of knowledge
Fear about cost increase
Privacy issue
Behavioral change
Vested interests and influence of power industry
Resistance to open standards from incumbent
Complexity of regulation process
Government and Regulators
Utilities
Vendors
Consumers
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9. Smart Grid Patents with Graph
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Source: US patent office

10. ①Smart GridDefinition
②Smart GridasCritical Infrastructure
③Smart GridasHigh ReliabilityOrganization
④Technology Adoption Rate/Methodology
⑤Discussionand Conclusions
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11. Smart Grid as Critical Infrastucture
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Characteristics:
• Very complex interdepencies
• Change in one agent has an
impact on whole system
• Strict regulatory environment
• Many stakeholders and
interests
Source: Steven M. Rinaldi, James P. Peerenboom, and Terrence K. Kelly, IEEE control systems magazine 2001
Electric grid is most important
critical infrastructure

12. ①Smart GridDefinition
②Smart GridasCritical Infrastructure
③Smart GridasHigh ReliabilityOrganization
④Technology Adoption Rate/Methodology
⑤Discussionand Conclusions
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13. Power Industry now vs. Airline Industry before
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Similarities:
•Strictly regulated environment
•Vested interest
•Zero tolerance to failure
•Limited storage capacity
•Few big players
•Was based on guaranteed rate of return
•High dependency on fossil fuels
•High fixed cost base
•Before 1978 US airlines industry almost came to bankruptcy
•Deregulationsaved airline industry from bankruptcy brought competition, reduced prices and increased innovation
Source: M.Jelinek, M. Ilic
source image:local.wasp.uwa.edu.au, soil-net.com

14. ①Smart GridDefinition
②Smart GridasCritical Infrastructure
③Smart GridasHigh ReliabilityOrganization
④Technology Adoption Rate/Methodology
⑤Discussionand Conclusions
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15. Evaluation of Technology Adoption Rate
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>To calculate Technology adoption rate we multiple each criterion impact level to corresponding criterion influence. Sum of all criteria gives us Technology adoption rate.
Method
List
Discuss
Refine
Select
Criteria Selection
•Literature inspiration
•5 brainstorming sessions 2-3 people within Company
•Expert interview
•Frequent feedback within company and ETH network
LikertScale:
Criteria selection
validation within Emerald
•Scale 1 (Lowest)-10(Highest)
•Industry experts
•Academia Experts
Evaluation of Criteria impact level
•6 areas of technologies
•Selected by Emerald
Selection of investigated areas
•+1 –accelerate adoption rate
•-1 –slow down adoption rate
•0 –no impact
Evaluation of criteria influence

16. Technology Adoption Rate excel file
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• Assumption is that criteria
impact level is SAME for all
investigated technologies
Influence on adoption rate is
different for any combination
of technology, customer and
region

17. Segments selection
From about 40technology segments in Smart Grid space 6where selected for evaluation
Selection was based on
•Capital intensity
•Technology maturity
•Relative importance of technology
•Indicated by experts and industry partners
Home automation
Energy storage
Cyber Security
Data Management
Substation Automation
Advanced Metering Infrastructure
Region: USA, California
Customer: Utility
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18. Criteria Impact Level
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19. Technology adoption rate: Results
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Technology area
Technology adoption rate
Capital intensity
Home automation
62.4
Low
Cyber Security
70.5
Low
Substation Automation
58.4
Low
Energy storage
-16.2
High
Data Management
70.8
Low
Advanced Metering Infrastructure
44.3
Low
•Market size and market growth are very important measures
but difficult to find reliable data.
•Capital intensity allows easily to evaluate investment potential

20. Smart Grid Investment matrix
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Technology adoption rate
Capital intensity
High
Low
Low
High
Energy storage
Data management
Cyber security
Home automation
Advanced metering infrastructure
Substation automation

21. Evaluation of the method
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+ Covers important areas of technology adoption
+ Can be used for different industries
+ Takes into account different user habits and specifics of the market
+ Gives simple visual feedback
+ Can be used as check list to facilitate discussions
-Input is subjective
-Applicable to current situation only
-Can take a lot of time
-Complex interactions not taken into account
-Score depends on clear common understanding of definitions
Can be used as quick evaluation method
Most useful to encourage right questions

22. Recommendations andConclusions: part1
InvestigatedeeperCyberSecurity
•Iscompulsoryin US
•Pushedbyregulators, underestimatedbyUtilities
•Several big players, most others provide services and
customerrelations
Look forBlack Swan orsysteminnovationin storage
•People reallywantstoragetohappen so theywill investanyway
•Withproper incentivesgoodsolutionscancomefaster
•Storage managementismoreinterestingatcurrentstate
Home automationisgettingconsumer
•Easiertotrack, interactandbuy
•Smartphone asperfectremote
•Technology issmarter
•Potential forbigenergyandbillsavings
•Smartphones, internetshapeapplications
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23. Recommendations andConclusionspart2
Data management is the biggest buzzword(Big Data)
•Onlyfewvendorshaveexpertise
•Core enginecouldbeopen source(Hadoop)
•Privacy anddataownershiparebigissues
•Most oftechnologyissoftwarebased
•Data isnot usedin mostcases
AMI will beeverywhere
•Most widelyadoptedelementofsmart grid
•Verycasespecificimplementation
•GSM seemsasmostrobust solutionforcommunication
•Enablerforsocial
•Innovation will bein softwareandusage
not hardware
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24. Backup Slides
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25. Smart Grid technologies
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26. Smart Grid Patents
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Appendix table 6-69Region/country/economy1995199619971998199920002001200220032004200520062007200820092010World295289295312304277316305350305288384360385378528United States140153160178160158186174195172162226218248230303EU40364742695148635742474345505981France131093156891249285715Germany1171317191913202014141113202529Italy1112343348786424Netherlands0002201012010120Sweden5816722810171036755212United Kingdom8981181010106611075107All others21111444551146101115Japan93776559524354415242315340363366China0010002010111465Asia-8463965961310122220152024India0101001112123214South Korea2218436355314106149Taiwan23201221638667410All others0000100110001011All others18181925182019213338344036333050Central Asia and Europe1000010110000110Russia0000000000000110All others1000010110000000Middle East and North Africa1111010122563558Israel1111010122463556All others0000000000100002South and Central America0102000031110013Argentina0000000010000000Brazil0002000011000000Mexico0100000010110003All others0000000000000010Sub-Saharan Africa0100100000001011South Africa0000100000001010All others0100000000000001All others16151821171819192735283332272238Australia1112120135443023Canada7781011511131519121923211429Switzerland877828841079105564All others0032331104301202USPTO patents granted in smart grid technology, by region/country/economy: 1995–2010EU = European Union; USPTO = U.S. Patent and Trademark Office NOTES: Technologies classified by The Patent BoardTM. Patents fractionally allocated among regions/countries/economies based on proportion of residences of all named inventors. United States includes Puerto Rico. EU includes 27 member countries. China includes Hong Kong and Macau. Detail may not add to total because of rounding or minor discrepancies. See appendix table 6-62 for full list of countries by region. SOURCE: The Patent BoardTM, Proprietary Patent Database, special tabulations (2011). Science and Engineering Indicators 2012

27. New architecture for electrical grid
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Figure 3: Opportunities for Alternative Architectures for the Electrical Power Industry
Arrangements
Existing Power Grid
Institutional
Structure
Regulations on Pollution,
Recoverable Costs
Technology
Coal, Nuclear or Oil Fired,
Centrally-Generated &
Transmitted
New Technology Set
New Institutional Set
Alternative Power
Generating
Some Architectures for Electric Energy in the Future:
Opportunities exist to make strides in all areas affecting the electric power industry, as shown in
Figures 3 and 4. On the technological dimension, serious R&D (into to the new types of energy sources,
energy storage, technologies for cost effective customer choice) to support systematic understanding of the
role of transmission providers offers potential. So, too, does the promise of flexibility in power delivery to
Source: jelinek, ilic

28. Improtant events
Energy Independence and Security Act of 2007
•Smart Grid definition
•Smart grid vision
American Recovery and Reinvestment Act of 2009
•3.4 billion investment into smart grid technology
TheFederal Energy Regulatory Commission(FERC)
•main regulatory body of power industry in USA
TheNational Institute of Standards and Technology(NIST)
•standards
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29. Inducement and blocking mechanisms of innovation
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Sourse: Anna Bergek, PhD thesis

30. Criteria Impact Level
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8.2
6.5
7.2
7.3
7
3.5
6
ExistingInfrastructure
Scalability ofdistribution
Referencecustomer
incentives
Regulations
Networkexternalities
Capital intensity
Criteria impact level
Market category

31. Criteria Impact Level
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6.3
7.8
8
6.6
6.7
Technologymaturity
Reliability
Benefit
Never beforeseen functionality
Interdependencyof technology
Criteria impact level
Product category
6.2
7.6
5.6
Behavioralchange
Risk aversion
Hype/Publcity/Prestige
Criteria impact level
People category

32. Very smart meters
•Smart meter
•Social app
•Interaktive web portal
For utilities
•Cusotmer retention
•Differentiation
•Added value
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33. Energy efficiency
Consumption feedback
Psicology
Game mechanics
Customer engagement
•Trying to enter area where utilities have least experianse
•Experienced team with full support from ETH
•Customers in Switzerland with expansion in EU
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34. Nest -not your average boring thermostat
Learns over time that you don`t have to
Remote control
Easy to use
Saves energy and money
Innovation: thermostat as CONSUMER PRODUCT
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35. Adoptation of major technologies
Source: Harvard Buseiness Review
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