”smart grid” or “smart hype”
… an analytical perspective from a ‘grid’ neophyte
Vinod Khosla
vk@khoslaventures.com
Novembe...
Last year’s summary…
I’m not skeptical about investing in the grid
Storage better than Demand response
Let’s not get caugh...
…”certain” dispatchable supply
Source: Morgan Stanley
3
Solar & Uncertain
4
Wind & Uncertain
5
Uncertainty Time Scales
Milliseconds
Seconds
Minutes
Tens of minutes
Hours
Days
Years
Decades
Faults
Markets
EV uptake
C c...
Increased renewables deployment, EVs
Increased reliance on innovation (e.g., Storage, renewables, software, etc)
Huge capi...
Aggregating supply: wind, solar, coal, gas, nuclear…
Aggregating over geography
Aggregating over time
Information technolo...
Central problem of uncertainty
demands grid infrastructure redo
… not minor issues like meter reading
…though AMI has a ro...
smart meters, HAN and thermostats
Closed protocols
Real-time pricing
most value is automating meter reading
Focus on deman...
…where’s the BEEF?
… SECURITY & CYBER WARS
… De-coupling “rigid grid”: self healing & adaptive
… Local “power quality”: lo...
Source: McKinsey
Opportunity: $130B in US alone?
12
Storage and DG can play
these roles…
Storage and DG can play
these rol...
Issues, drivers & concerns
13
… useful (concerning) but hyped?
…. smart meters (automation, not smart device)
…. demand response (5-15% factor?)
…. cons...
… modularity and “design for the future”
“The problem here is there has been
a rush to install these fancy new hi-
tech me...
Westinghouse’s Law vs. Moore’s Law
When a 70 year lifecycle collides with 18 months..
“Instead of installing meters capabl...
Eco:nomics vs. Greco:nomics
( or the principle of economic gravity)
Avoid the hype (and the environmentalist’s solutions)
...
Consumers resistant to costs
…who decides, who pays?
18
Smart grid subsidies?
Misdirected…
$19M for networked home
appliances
Needed…
$19M for power distribution
& management
19
Smart hype ….even your remote is smart grid
20
Zero Net-Energy vs. Efficiency
Environmentalists dream “pay for itself 1st year” Efficiency
VS.
Zero energy is an irreleva...
Standby Power
efficiency vs. “smarts”
..what if everything used 80% less electricity?
22
What if we had fundamental new power electronics
devices?
…early transistor …Intel I7 (transistors 774million)
23
1 MW wind “converter”: huge=expensive
What if we had the perfect power electronics sub-
system?
Reactance worries=expensiv...
What if a Russian Hackathon brought down
electricity to 20 million US homes?
….is a hackers “how many homes” competition i...
Managability: focus on IT to Increase Certainty?
Silos ESB Adapter-based Common
Current-state System Integration (IBM)
App...
Efficiency vs. DR
Efficiency vs. conservation/insulation
Storage vs. DR
Storage vs. DG
Transmission vs. storage
Load regul...
… beefy solutions?
Active sub-systems, manageable grid components
Ultra efficient consumption devices (80% less!)
Automate...
Design for evolution
Design for resiliency
Design for competition
Design for open standards
…..
Suggestions from a neophyt...
What will drive grid change?
30
Mckinsey : US mobile subscribers
Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it...
yesterday’s technology, tomorrow’s forecast
1980’s phone: year 2000 phone:
32
2010 phone:
300,000 available apps
7bn+ apps...
Forecasters, Analysts, Pundits &
Astrologers
1990 Unimaginable: >480 pixel, interlaced, analog HDTV
1995 Unimaginable: IP ...
What would change?
34
vk@khoslaventures.com
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Vinod Khosla: “Smart Grid” or “Smart Hype” — An Analytical Perspective From a ‘Grid’ Neophyte

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  • 1
  • Example (corresponds to letters in chart):
    Point A shows 27,000 megawatts of demand at a given point in time
    In order to reach a cumulative supply of 27,000 megawatts, all of the available wind, hydro, nuclear and coal plants will be running
    Additionally, all of the gas plants to the left of plant B and including plant B will run. This makes plant B the marginal plant.
    Plant B’s $52 per megawatt bid at point C becomes the market price (the market clearing price) for that hour and all plants get that same price
    Line D represents the generating margin for coal plant E. The margin is the spread between the clearing prie and plant E’s variable cost.
    Line F is the generating margin for nuclear plant G.
  • 9
  • 11
  • McKinsey report on Smartgrid summer 2010

    “Instead of installing meters capable of receiving high-speed broadband Internet signals, Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric have opted for cheaper, lower-speed connections.
    Yet the utilities are also laying the groundwork for advanced "smart grid" networks that will use broadband technology for managing power supplies and distribution. The upshot: smart grids and smart meters that, in essence, won't speak the same language.”

  • The best smart meters are more than AMI
  • http://www.mydesert.com/article/20101020/NEWS01/10200309/Southern-California-Edison-s-new-meters-raise-concerns
  • http://www.latimes.com/business/custom/yourmoney/la-fi-lazarus20apr20,0,7194397.column
  • Survey of regulators in 17 states

    Wrong FRAMING… Consumers don’t want a smart grid that just costs more money… what do they actually want, if anything?
  • http://realitypod.com/2010/08/net-zero-energy-home/
  • Most people trust their utility more than their cellular carrier, FYI.
  • Prof. Mani Chandy at Caltech
  • Vinod Khosla: “Smart Grid” or “Smart Hype” — An Analytical Perspective From a ‘Grid’ Neophyte

    1. ”smart grid” or “smart hype” … an analytical perspective from a ‘grid’ neophyte Vinod Khosla vk@khoslaventures.com November 2010
    2. Last year’s summary… I’m not skeptical about investing in the grid Storage better than Demand response Let’s not get caught up in the hype of the smart grid one successful smart grid company doesn't create a wave networked grid = new applications Open = innovation hype cannot defy economic gravity Consumer behavior hard to change 2 Opportunity exists, hype exists
    3. …”certain” dispatchable supply Source: Morgan Stanley 3
    4. Solar & Uncertain 4
    5. Wind & Uncertain 5
    6. Uncertainty Time Scales Milliseconds Seconds Minutes Tens of minutes Hours Days Years Decades Faults Markets EV uptake C credits Source: Resnick Institute PV Wind Backup Gen Demand/ Response 6
    7. Increased renewables deployment, EVs Increased reliance on innovation (e.g., Storage, renewables, software, etc) Huge capital at risk & fast changing technology Increased security requirements Consumer response Drivers of Uncertainty 7
    8. Aggregating supply: wind, solar, coal, gas, nuclear… Aggregating over geography Aggregating over time Information technology Dynamic response of subsystems Design for non-catastrophic failure Increasing Certainty… 8
    9. Central problem of uncertainty demands grid infrastructure redo … not minor issues like meter reading …though AMI has a role … Silver Spring with $800m of DOE funding does not make for sustainable “wave” even if it means good equity returns 9
    10. smart meters, HAN and thermostats Closed protocols Real-time pricing most value is automating meter reading Focus on demand response Increases energy security Intelligent consumer electronics More money in the GRID than in the HOME OPEN protocols will win (mesh?) Diverse, bandwidth needs 100X larger? Grid = smart power electronics (PE) hard to predict needs (flexibility) Architecture determines security distribution automation, 2-way flow, redundancy …REAL smart grid wisdom? 10
    11. …where’s the BEEF? … SECURITY & CYBER WARS … De-coupling “rigid grid”: self healing & adaptive … Local “power quality”: locally self adjusting … Evolvable architecture, open, predictive … Power Electronics (control, quality, locality…) … (modularity/flexibility & Management) 11
    12. Source: McKinsey Opportunity: $130B in US alone? 12 Storage and DG can play these roles… Storage and DG can play these roles… 5-15% from consumer behavioral change or …efficiency could shrink by 50% This is what many utility commissions focus on May grow…
    13. Issues, drivers & concerns 13
    14. … useful (concerning) but hyped? …. smart meters (automation, not smart device) …. demand response (5-15% factor?) …. consumer engagement …. time of day pricing …. proprietary networks …. fashion of the day & “deterministic need” assumption 14
    15. … modularity and “design for the future” “The problem here is there has been a rush to install these fancy new hi- tech meters and they're not energy- saving devices; they are simply meters. They're not going to be worth the customer investment.” 15
    16. Westinghouse’s Law vs. Moore’s Law When a 70 year lifecycle collides with 18 months.. “Instead of installing meters capable of receiving high-speed broadband Internet signals, Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric have opted for cheaper, lower-speed connections. Yet the utilities are also laying the groundwork for advanced "smart grid" networks that will use broadband technology for managing power supplies and distribution. The upshot: smart grids and smart meters that, in essence, won't speak the same language.” 16
    17. Eco:nomics vs. Greco:nomics ( or the principle of economic gravity) Avoid the hype (and the environmentalist’s solutions) Economic gravity WILL win: with consumers, regulators and Governments 17
    18. Consumers resistant to costs …who decides, who pays? 18
    19. Smart grid subsidies? Misdirected… $19M for networked home appliances Needed… $19M for power distribution & management 19
    20. Smart hype ….even your remote is smart grid 20
    21. Zero Net-Energy vs. Efficiency Environmentalists dream “pay for itself 1st year” Efficiency VS. Zero energy is an irrelevant focus 21
    22. Standby Power efficiency vs. “smarts” ..what if everything used 80% less electricity? 22
    23. What if we had fundamental new power electronics devices? …early transistor …Intel I7 (transistors 774million) 23
    24. 1 MW wind “converter”: huge=expensive What if we had the perfect power electronics sub- system? Reactance worries=expensive 1900’s transformers 24
    25. What if a Russian Hackathon brought down electricity to 20 million US homes? ….is a hackers “how many homes” competition improbable? 25
    26. Managability: focus on IT to Increase Certainty? Silos ESB Adapter-based Common Current-state System Integration (IBM) Approach DoD “style” Approach Standards –based Internet-style Source: Jeff Gooding, Jeremy McDonald, SCE …but managing (Smart) Grid means manageable grid elements 26
    27. Efficiency vs. DR Efficiency vs. conservation/insulation Storage vs. DR Storage vs. DG Transmission vs. storage Load regulations vs active devices Command & control vs resilient networks What if we asked … A lot of the “wisdom” may be made obsolete by technology 27
    28. … beefy solutions? Active sub-systems, manageable grid components Ultra efficient consumption devices (80% less!) Automated & predictive grid flow management Ubiquitous storage DC transmission Beyond networking - fundamental device capability Cyber security 28
    29. Design for evolution Design for resiliency Design for competition Design for open standards ….. Suggestions from a neophyte: 29
    30. What will drive grid change? 30
    31. Mckinsey : US mobile subscribers Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml forecast actual 1986 forecast for 2000 31
    32. yesterday’s technology, tomorrow’s forecast 1980’s phone: year 2000 phone: 32 2010 phone: 300,000 available apps 7bn+ apps downloaded
    33. Forecasters, Analysts, Pundits & Astrologers 1990 Unimaginable: >480 pixel, interlaced, analog HDTV 1995 Unimaginable: IP in telco networks 2007 Unimaginable: Iphones & wireless bandwidth use Today’s unimaginable becomes tomorrow’s conventional wisdom 33
    34. What would change? 34 vk@khoslaventures.com

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