California, USA — California’s venture into electricity deregulation a decade ago led to what the children’s author Lemony Snicket might refer to as a “series of unfortunate events.”
What had been intended as the crowning achievement of U.S. utility deregulation flopped. California’s failure led to a bankruptcy reorganization by the (then) largest U.S. utility Pacific Gas & Electric, predatory market manipulation by evil-doers at Enron and widespread retail market failure triggered largely by the inability of price signals to be communicated to customers.
“Everyone agrees there are no heroes in this California power crisis, and that it was brought on by good intentions and some bonehead decisions,” NBC’s Tom Brokaw said as he introduced a January 2001 interview with John Bryson, then head of Southern California Edison.
But from California’s deregulatory rubble sprouted at least one good idea: the notion that two-way communication plays an essential role in the business relationship between customer and utility. The state’s deregulation scheme failed largely because price signals could not be communicated from the wholesale market through the utility to the end user. Energy consumers had no real-time information on which to base their consumption decisions. Price signals from wholesale markets hit the utility and stopped dead.
The result of this market failure? To name just three, PG&E ended up in Chapter 11, Jeff Skilling ended up in federal prison and Paul De Martini became one of many to start on a personal technology development journey whose cumulative effect could turn out even bigger than the Internet.
De Martini’s journey started with the recognition during deregulation’s post-mortem that fatal communication flaws could be resolved by adopting a number of functionalities that today are seen as basic to the modern smart meter. Those functionalities helped the smart meter emerge as a fundamental technology driving smart grid and its promise to open markets to everything from small-scale distributed renewables to mass-market plug-in electric vehicles.
Cisco CEO John Chambers has said the smart grid has the potential to be 100 to 1,000 times larger than the Internet. One member of the team now responsible for leading Cisco’s Smart Grid venture is its Vice President of Strategy and Chief Technology Officer for Smart Grid, De Martini.
Using the language of a technologist, De Martini (who joined Cisco earlier this year from Southern California Edison, where he was vice president of advanced technology) said the idea is to look at the physical configuration of circuits, communication networks and operating systems to deploy a “system of systems” that uses the grid as its foundation. “The totality is potent,” he said. Bigger, perhaps, than the Internet.
De Martini is a native Californian who grew up in San Francisco’s Sunset neighborhood. He recalls riding his bike through Golden Gate Park as a Fifth Grader during the 1967 Summer of Love. Early on he considered becoming an architect like his grandfather. In the end, he attended the University of San Francisco and earned a degree in Applied Economics. An MBA from USC followed along with a technology certificate from CalTech. He is currently a Fellow of the Wharton School at the University of Pennsylvania and focuses his professional efforts on smart grid technology and strategy (under the leadership of Cisco Senior Vice President Laura Ipsen) to build the company’s business line.
De Martini’s first utility job came in late 1977 when he joined Pacific Gas & Electric as an apprentice system operator. He later became a journeyman and for a decade worked at the utility’s transmission and distribution levels. He migrated to engineering project management, including large substation projects, then left in 1995 to join Coastal Oil & Gas to work in wholesale markets. At the time wholesale markets were a go-go field that rocketed to prominence as deregulation fever swept out of the airline, telephone and natural gas industries to embrace (unevenly and, in some cases, with unfortunate events) the electric power industry.
Deregulation California-style included a mandate for investor-owned utilities to divest themselves of generating assets. So when De Martini joined Southern California Edison in 2002 he went to work in its information technologies organization setting up systems to enable the utility to procure power. By 2003 he was working on problems related to demand response and a state-backed effort to deploy first-generation smart meters to industrial customers, which made up 60 percent of SCE’s demand load.
“After the energy crisis in California, it was recognized that providing energy use and pricing information to customers would allow them to make informed decisions about energy consumption that could mitigate wholesale market constraints,” De Martini said in July 2009 testimony to a U.S. House of Representatives subcommittee on Energy and Environment. With state backing, SCE deployed smart meters to all of its largest commercial and industrial customers to provide timely energy information and online energy analysis tools to help them manage their energy costs.
Smart meters were a step in the right direction, but De Martini and his team at SCE found it hard to make a positive business case for the technology. The meter’s one-way functionality was one stumbling block. Among other drawbacks, he said, were the meters’ limited memory, inability to accommodate remote software upgrades and lack of adequate security.
“We took a clean sheet of paper and looked at the functionality in the meter to make a positive business case.”
As a start, De Martini and his SCE colleagues concluded the meters needed more memory. With at best 16,000 bits of memory the early machines were “almost laughable,” he said. Today, at least 1 meg of memory is available-standard-on almost all meters.
Next, the engineers looked to have remote firmware built into the machines to prevent them from becoming prematurely obsolete. In this way, meters could be updated with new functions as software became available.
The SCE engineers also specified a home area network interface to enable customer data access from the meter every 10 seconds. Finally, they performed economic studies to prove the effectiveness of a switch to turn on and off power at the meter. This was seen as a way to reduce operating expense and provide more efficient customer service.
The smart meter model laid out by De Martini and other SCE engineers proved vital in opening opportunities for initiatives related to transmission, renewable integration, storage, electric vehicles and other technology platforms. And the timing proved fortunate. Gov. Arnold Schwarzenegger announced his California Solar Initiative in 2008 and called for one million “solar rooftops” across the state. Micro-wind projects also emerged as a new energy resource. Both resources would need to be metered and connected to a smart grid.
What’s more, business planners at Southern California Edison saw an unmet need in the 1 to 2 MW rooftop photovoltaic market. As a result, the utility proposed building 250 MW of small-scale solar resource. Its regulators approved the plan, but doubled the program’s scope to encourage non-utility developers to add 250 MW on their own. The utility’s plan called for spending $875 million over five years for its 250 MW block of solar, a pace that will see around 50 MW of PV added every year.
The new PV is being built on warehouse rooftops around the utility’s service territory in part because placing all of it in one location could overload local circuits. Dispersing the capacity also reduces the chance that clouds will disrupt power generation, an ongoing problem for PV. Further, because transmission ranks as the No.1 barrier to renewable energy growth in California, adding a lot of small, distributed resources has little effect on the distribution system.
SCE is beginning to see “significant penetration levels” of solar in its distribution network, De Martini said. One question that remains is how to develop effective distribution systems to support variable resources such as solar and wind. Utilities also are thinking about how to integrate electric vehicles into their systems. That includes providing electric service to charge the vehicles along with the mechanisms that would allow the grid to tap vehicle batteries to help meet periods of peak electricity demand.
De Martini sees both strengths and weaknesses in the utility business model as it begins to deal with what could be a rapidly evolving mixture of distributed and variable generation resources. In the strengths column, utilities understand their own system better than anyone else. They are best able to gauge the potential effect on their system that new generation sources may have. Utilities also are expert at understanding the range of regulatory constraints and policies that shape electricity generation and delivery.
Utilities also have substantial relationships with suppliers such as GE, Siemens, Itron, IBM, SAP, Oracle and Cisco. That exposes them to a range of ideas on how to address smart grid and its myriad possibilities. Utilities also can call on thought partners at universities and at the Electric Power Research Institute, the industry’s research think-tank. De Martini sees utilities increasingly looking at Smart Grid from a broad perspective and that’s a positive development.
A drawback is that utilities don’t develop products themselves and tend to focus on state and regional issues.
“When we got into these issues-certainly on the smart meter-it because clear the golden thread running through was connectivity,” De Martini said. “Solving the challenge of connecting these piece parts in a grid to address integration and efficiency was a fairly significant challenge.” That may be an understatement.
In early September Itron and Cisco announced a strategic alliance to deliver an Internet Protocol-based communications platform to the smart grid market to help advance more consistent and reliable energy delivery. The goal is to move smart metering technology into an open and interoperable, enterprise-class network for utilities. The business partners plan to develop a standards-based, secure technology for full “IPv6” implementation of field area communications to support smart metering, intelligent distribution automation and interface to the customer premise.
With projects such as that now on his plate at Cisco, De Martini says the industry will be better able to address these business issues on a global scale.
“The electrification of the world’s economy is increasingly being fueled by clean energy resources,” he said. “I see significant transformation and opportunities to do things differently.”