Mark Mills

Mark Mills

5/14/2010 @ 12:30PM

Smart Grid Revolution Starts With Big-Electron Storage

“Just imagine. The electric grid is so dumb that when the power goes out you have to actually phone your local utility to tell them you’re in the dark.” So goes an oft repeated insight at smart grid conferences, frequently followed by knowing, Urkel-like snickers from tech wonks.

All of our networks share a similar problem. Does AT&T know when your iPhone dies? Does Google know when your desktop goes blue-screen? Does Exxon know when your car runs out of gas, or the water utility when your pipes freeze? Is there any way Whole Foods can know when your fridge is empty of brie?

In fact, yes to all–in theory. There are means to install sensors and communications devices to do all the aforementioned. Ironically it will be the good, old, dumb, sprawling, trillion-dollar electric grid that will first get such capabilities–and more.

The paradigm of the “smart grid” has been embraced eagerly by everyone from staid old utilities to Silicon Valley venture capitalists, from startups and industrial giants to the Department of Energy, with its generous stimulus grants for the development. Why not? Who wouldn’t want to go from the ostensible dumb grid to a smart one? Easy sell.

Big opportunities for everyone in a transformative electric network: for consumers to make smarter energy decisions, vendors to sell smart hardware and software, utilities to optimize their assets and get green “cred,” and of course, for investors to facilitate and benefit from both real and frothy growth. Win-win all around. Bigger, greener, better, smarter.

So will the electric grid come to resemble the architecture of the Internet’s pervasive communications grid? It can and it will, but not entirely for the reasons proffered by smart grid cognoscenti. You need to know just two things–two macro trends–to know why the smart grid is coming, and will be a big secular trend. First is the rising use of electricity and collateral radical increase in its importance. Second are the technologies to make the grid smarter have come of age, and just in time.

First, the demand. More than 70% of U.S. energy is used for non-transportation purposes, with the majority (60%) of all non-transport needs being met with electrons. The use of energy in the form of electricity (measured in “barrels of oil equivalent” per year) has risen 75% in the past 30 years. The Energy Information Administration forecasts the trend continuing for another 30 years. Energy used for all other purposes (again, excluding cars, planes and trains, which for context use about 5 BBOE per year) has been essentially flat for three decades and will stay essentially flat, even as the U.S. economy has grown, and is forecast to grow.


The inexorable increase in the absolute and relative importance of electricity means that its transportation and management will collaterally rise in importance in our ever more electric and information-centric economy. It will be ever more critical not just to manage efficiently these vast quantities of electrical energy, but critically, to ensure things stay lit. Plus, if you’re a believer in the electric transformation of automobiles, this only amplifies all of the aforementioned.

Global spending on electric transport (transmission and distribution infrastructure) already runs about $100 billion annually, with the U.S. accounting for 20% of that market. It’s an easy bet on this macro; a lot more money will be spent on electric grids. That’s pretty much all you need to know to bet on this sector, but there’s more. Add to this trend the imperative to achieve more efficiency from the electric system, reliably and securely. This can only come from adding more smarts to the grid. Growth will be proportionally faster on new technologies to add smarts to the old.

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The second macro, then: technologies to make the grid smarter. There are quite a variety, from smart meters to clever software, and a large and rapidly growing constellation of small and large companies entering the fray, all in a race to be the leaders, or at least major players in the enormous market to add communications, sensors, computing and software muscle of the digital age to enable a 21st-century electrical age.

A telegraphic bellwether of the new smart grid was the recent announcement of an alliance between $25 billion-in-sales Google and $155 billion-in-sales General Electric to collaborate to bring power of network technologies to the grid because the “21st-century electricity system must combine advanced energy technology … and cutting-edge information technology.” GE grid hardware plus Google network software: As the kids say, “no duh.”

It can’t be all that hard to add a communications overlay to wires and meters using the ubiquitous products available from the telecom and Internet world, nor to add rudimentary intelligence to electrical appliances, thermostats, transmission gear and the like. After all, making a light bulb or air conditioner smart is about as difficult as training a flatworm to avoid the light. An iPad it’s not.

The emerging transformation of the electric grid is enabled not just by modern telecommunications, but also the analogous architectural evolution of the grid. The telecommunications grid was reasonably smart for its first century, which started with the 1877 formation of Bell Telephone. The old telecom grid crossed the smart divide to become the brilliant Internet, a true network, with the advent of four things, the emergence of cheap and powerful: communications connectivity, logic (computing and software) to make sense of things, controls (e.g., routing), and storage. This last was co-equally essential and often overlooked in popular historic accounting.

You can’t scoot information around with any degree of control and utility without the ability to store it effectively, cheaply, quickly at every level of a communication’s network hierarchy. Information networks would be nearly impossible to manage if all the data had to be created the instant they were used.

The architecture of the Internet is made possible by information storage technology at every level. Storage was the unsung partner enabling the Internet revolution. Storing electrons in the form of data became cost-effective and ubiquitous with the advent of the technologies of the random access memory (RAM) chip and the hard-disk drive. Both changed the game. Intel and Seagate can be credited with early game-changing products.

Information storage technologies and nomenclature are now familiar outside of the previously cloistered world of information engineering; megabytes of RAM and cache, gigabytes of hard drive. Storage devices are ubiquitous across the information network. Specific storage devices trade size and speed metrics depending where they are used in the hierarchy to facilitate both features (“I need to see my movie now”) and convenience (“I want to have access to a million movies”). The storage concept will need to be emulated on the electric grid if it is to become a smart network. Everything else is technologically readily available to enable a smart electric network.

Today electricity is produced, transported and used on the grid essentially without storage. For 99% of all electricity consumed–electrical energy is produced the instant it is used. From a smart network perspective, this is more than very annoying; it is an inherently inefficient architecture. The key technologies to change that are derivatives of the lowly battery, many now poised to finally unleash a migration to a truly smart electric grid with deeply hierarchal storage across the landscape.

Moving, managing and storing electrons at the power scale, rather than information scale, is like comparing aircraft carriers to water bugs. While there are a variety of ways to store electrical energy, it is lithium battery technology that is poised for ubiquitous deployment throughout the vast, sprawling middle of the electric network, in between the end-users and the primary providers. It is no coincidence that (much, much smaller) lithium batteries based on the same core chemistry are what enabled the revolution in wireless Internet and portable computing.

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For the original battery breakthrough, credit an Exxon researcher, M.S. Wittington, who in the 1970s invented lithium-class chemistry that enabled the 200% to 300% improvement in battery performance. Then collaterally credit ground-breaking research by University of Texas professor Goodenough that lead to the first practical commercial lithium batteries introduced by Sony in 1991. Derivatives of this same chemistry are now migrating to the heavy-electron lifting needed at the level of the electric grid.

The overall electric storage hierarchy, analogous to the architecture found in communications systems will find batteries, or equivalent at four main levels of the network; neighborhood storage, the local loop (in utility parlance, a microgrid), the network itself (again in utility parlance, substations), and finally at the head-end of the network (generation). Storage in emerging electric network (the “Electrinet,” as counterpart to the Internet?) is counted in kilowatt-hours and megawatt-hours, not kilobytes and megabytes.

The typical individual device storage requirements at the aforementioned four network levels: neighborhoods around 100 kilowatt-hours, microgrid a few megawatt-hours, the network tens of megawatt-hours, and at the head end hundreds of megawatt-hours. For scale context, your laptop battery stores about 0.05 kilowatt-hours. And at the generation end of the network, while batteries may play there one day, for now the technology options are largely in old but adequate (in terms of efficiency, cost and responsiveness features) storage from compressed air and pumped hydro.

The benefits from embedding storage pervasively in the middle layers of the network are fundamental in bringing efficiency, control, reliability and stability to quixotic electric grids. Storage-enabled smart grids will also make more practical all manner of otherwise episodic, and operationally annoying energy sources like wind and solar. Storage will be vital to practical deployment of plug-in electric vehicles but also something that is longer term at least in terms of relative scale and impact.

There are a growing though still relatively small number of lithium battery companies chasing the smart grid market, including familiar names like Johnson Controls and Saft (of France), as well as newer players like A123, Altair Nanotechnologies , Ener1 , Electrovaya, Kokam of Korea, China’s BYD and International Battery (full disclosure: I serve as chairman of International Battery). The battery piece of smart grid is a paltry $200 million global business today, but likely will soar 30-fold before a decade is out according to a new study from Pike Research.

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As with all technologies, there is never just one solution. Batteries are no different. While lithium chemistry is poised to dominate the middle of the smart electric network, other battery chemistries and technologies offer features that will have non-trivial roles, including so-called flow batteries using sodium and bromine chemicals (e.g., NGK, ZBB Energy and others), along with even flywheels (e.g., Beacon Power and Active Power).

Importantly, a handful of forward-looking utilities are already leading the storage charge, notably American Electric Power , NRG, Duke and AES, with others doubtless to shortly follow. It is notable that privately held S&C Electric Company has long been a leader, and continues, in serving and mapping out this domain. The utilities, along with the rest of the players, will need to wrestle with regulatory issues that remain unresolved in how storage is treated in a deeply regulated market; is it generation, a service, or a part of transmission? This matters in terms of how the money flows, and thus if and how the technology gets paid for.

Congress has, and necessarily will weigh in, in various ways. Sen. Ron Wyden, D-Ore., has sponsored a STORAGE bill, a properly contrived acronym for the Storage Technology of Renewable and Green Energy Act, which seeks investment tax credits for storage projects. A number of state regulatory commissions are already wrestling with the issue, and California has a regulatory order on the table that would require utilities to deploy storage as a specific percentage of the grid’s primary supply.

Some in the electric business take umbrage over the fact that the electric grid is already reasonably smart and has been for a long time, starting around 1930. Electricity is sufficiently strange that engineers from the early days of electrification had to add control systems borrowed from the telecom, and then computing industries. One of the early uses for real-time computing when it arrived in the 1960s was to create electric utility SCADA–Supervisory Control and Data Acquisition Systems. Adding smarts to the electric network, from long-wires to local building grids is already a $20+ billion a year industry. Truth be told, what is really happening now is the creation of a smarter grid–directly analogous to the communications grid’s earlier migration from just smart to the Internet.

That this is a new era for the old grid is abundantly clear given the names in the smart grid hunt, the likes of IBM , Cisco , Microsoft , Honeywell , ABB , Siemens , Motorola , century-old Landis+Gyr, and even Boeing .

Boeing thinks in a few years the smart grid communications market alone will be $20 billion a year. They are joined by upstarts like Itron , EnerNOC , Comverge , and start-ups like Silver Spring Networks, eMeter, GridPoint, SmartSynch, Trilliant, Tendril, and EDSA (this last providing enabling software for microgrid management; again full disclosure, where we are investors). These companies, and many more, focus on adding smart hardware and software to meters, appliances and devices from the customer premise through the grid to the power plant–all vital pieces of an emerging smart network.

Networks, rather than grids, have special properties as we have all noticed given the impact of the Internet on our lives and the economy. The power and value of a communications network increases as the square of the number of users connected; so postulated Robert Metcalfe, inventor of Ethernet. Double the number of computer-based smart devices on a network and its value quadruples. Rising value entices others to join the network, thereby creating a cycle of growth in value for users, markets and suppliers. This explains the explosive growth of the Internet, even though a communications grid had already existed for 100 years when the Internet burst on the world.

The belief that the Metcalfe’s Law is coming to the electric grid is evidenced by the players chasing opportunity in the emerging smart grid. Cisco breathlessly claims that the smart grid’s underlying network could be well over 100 times bigger than the Internet. It is entirely possible that the smart grid’s appetite for a lot of other things–hardware, software, sensors and batteries–will similarly eclipse previous uses of similar technologies. Perhaps the Urkel-nerds will get the last laugh.

Mark Mills, a physicist, served in President Reagan’s White House science office, is cofounding partner of Digital Power Capital, an energy tech venture fund, and coauthor of The Bottomless Well, (Basic Books, 2005). Mills may hold positions in companies discussed in this column and may provide technology assessment services for firms that have interests in the companies. He can be contacted at

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