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					”smart grid” or “smart hype”
 … an analytical perspective from a ‘grid’ neophyte




                                     Vinod Khosla
                                     vk@khoslaventures.com
                                     November 2010
               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
Opportunity exists, hype exists
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
                         …”certain” dispatchable supply




Source: Morgan Stanley
                                                          3
Solar & Uncertain




                    4
Wind & Uncertain




                   5
                            Uncertainty Time Scales

                            Faults
                                                                    Demand/
          Milliseconds                                              Response
                                     PV
          Seconds                                Backup
                                          Wind    Gen
          Minutes                                         Markets

          Tens of minutes

          Hours
                                                                           EV uptake
          Days                                                             C credits

          Years

          Decades

Source: Resnick Institute
                                                                                       6
                 Drivers of Uncertainty


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



                                                                         7
                 Increasing Certainty…

Aggregating supply: wind, solar, coal, gas, nuclear…


Aggregating over geography


Aggregating over time


Information technology


Dynamic response of subsystems


Design for non-catastrophic failure


                                                       8
   Central problem of uncertainty
  demands grid infrastructure redo
… not minor issues like meter reading


                    …though AMI has a role
… all that DOE funding does not make for sustainable “wave”
             even if it means good equity returns




                                                              9
     …REAL smart grid wisdom?

smart meters, HAN and thermostats        More money in the GRID than in the HOME

Closed protocols                         OPEN protocols will win (mesh?)

Real-time pricing                        Diverse, bandwidth needs 100X larger?

most value is automating meter reading   Grid = smart power electronics (PE)

Focus on demand response                 hard to predict needs (flexibility)

Increases energy security                Architecture determines security

Intelligent consumer electronics         distribution automation, 2-way flow, redundancy




                                                                                           10
…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
                   Opportunity: $130B in US alone?

                                        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…


                                                               12
Source: McKinsey
Issues, drivers & concerns




                             13
… 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
… 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
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
          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
   Consumers resistant to costs




…who decides, who pays?




                                  18
               Smart grid subsidies?

  Misdirected…                   Needed…
$19M for networked             $19M for power
  home appliances               distribution &
                                 management




                                                 19
Smart hype ….even your remote is smart grid




                                              20
            Zero Net-Energy vs. Efficiency




                            VS.




Environmentalists dream            “pay for itself 1st year”
                                   Efficiency


                  Zero energy is an irrelevant focus
                                                               21
            efficiency vs. “smarts”
..what if everything used 80% less electricity?




                            Standby Power




                                                  22
What if we had fundamental new power electronics
                    devices?




       …early transistor   …Intel I7 (transistors 774million)



                                                                23
What if we had the perfect power electronics sub-
                    system?




                                        Reactance worries=expensive




1 MW wind “converter”: huge=expensive
                                                          1900’s transformers


                                                                          24
What if a Russian Hackathon brought down
   electricity to 20 million US homes?


  ….is a hackers “how many homes” competition improbable?




                                                            25
           Managability: focus on IT to Increase Certainty?

                         Silos                       ESB                Adapter-based    Common



               …but managing (Smart) Grid
                means manageable grid
                       elements
                                             System Integration (IBM)     DoD “style”   Standards –based
                  Current-state
                                                   Approach                Approach       Internet-style




Source: Jeff Gooding, Jeremy McDonald, SCE
                                                                                                           26
                    What if we asked …

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

 A lot of the “wisdom” may be made obsolete by technology
                                                            27
… 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
      Suggestions from a neophyte:


Design for evolution

Design for resiliency

Design for competition

Design for open standards

…..




                                     29
What will drive grid change?




                               30
                                                       Mckinsey : US mobile subscribers
                                                                          1986 forecast for 2000




                                                     forecast                                                     actual




                                                                                                                           31
Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml
yesterday’s technology, tomorrow’s forecast
1980’s phone:      year 2000 phone:        2010 phone:




                                      300,000 available apps
                                      7bn+ apps downloaded



                                                               32
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
What would change?




                vk@khoslaventures.com
                                        34

				
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