In a previous post, I gave a brief overview of the history of electricity in Texas. I meant to come back sooner to this topic, but events have swept me away. I have a new client in UtiliPoint International - see them here. Also, my book, The Advanced Smart Grid was published last week (buy it here), so I've been fielding notes of congratulations and busy marketing that. This is all good.

But I've been eager to come back to this post, because the transitions in electric industry are so compelling, and with Texas as my backyard, this economy offers a great way to study and contemplate those changes and what they mean.

In this post, let's take up the questions that all this change brings on. We should look at the change from different perspectives.

Today let's look at change from the customer perspective: change holds opportunities, but also risks - and given their lack of sophistication on the finer points of change, residential customers especially are more suspicious of the risks of change - the downside. Customers, by and large, have had it pretty good in the US when it comes to electricity, where the utilities provide incredible reliability and absent the occasional outage, we can count on the electricity being there when we throw a switch or plug in an appliance. In the industry, they call this Reliability, and it is the driving force for utility employees. Not just "keep the lights on" but all aspects of reliability.

And electricity has by and large been an incredibly inexpensive product/service, when one considers how it has impacted our lives - we generally spend less than 10% of our household budget on electricity - only the poorest households see significant economic distress from paying their utility bill. So change, when it comes, has a challenge for residential customers at least. They already have it pretty good, so change may likely bring ... higher bills, less convenience?

With commercial customers, however, change represents the ability to improve how they manage a signficant cost item on their books. Every net dollar saved from the electricity bill of a business, after all, flows directly to the bottom line as increased profit. Change that makes electricity less risky in terms of price, that provides greater control to users, that gives them more information or more options? That is change they can believe in.

In Texas, we're working our way through a major change, one that will impact customers directly. Texas leads the nation in the deployment of Smart Meters - we're about halfway through the deployment in the deregulated portions of the state, with about 3 million more meters to go, with completion expected sometime in 2012. The data from those meters is already flowing into data banks and showing up on the website designed for customer acccess - SmartMeterTexas.com. It remains to be seen how customers will use this day-behind consumer data, and also, how utilities and retail electric providers will make use of a more informed marketplace.

But Texas is a big state - we must also look to those areas of Texas not included in ERCOT - looking at the previous post, one can see that that would include folks out in El Paso, up in the Panhandle, and over in deep east and southeast Texas. The changes sweeping over the rest of the state are surely occurring in those areas as well, because no utility is left out of these changes - all utilities are closely examining their operational models, looking for effiiencies in operations and in the ways they run their businesses. Truly, Texas has every type of utility environment, and pretty much, every type of climate as well.

The big questions to hit us here in Texas, and those that will hit those utilities, retailers, and consumers in other areas of the country, mostly concern adaptation to changing technolgies and changing environmental conditions, at both the climate and political levels. These changes, loosely understood by what we have already seen in telecom and internet markets, are even now impacting how we produce, distribute and consume electricity.

This post is getting a little long in the tooth, so I'll close for now, to revisit this subject I hope in the next few days. Change, and the questions it brings and hopefully the answers we develop in response, have arrived at the doorstep of the electric industry. We - both utilities and consumers - must understand change and its impacts, if we are to plan and react in ways that serve us in the long-term. Ignorance is rarely an optimal strategy - and these days - it may be fatal.

To understand the changes underway in today's electricity world, it's helpful to examine what has transpired in Texas over the last 50 years, given that Texas has an example of almost every major change during that time. Marketed as "a whole other country" by state tourism officials, Texas may be viewed that way (and it will certainly feel that way this summer if you happen to be driving from El Paso to Beaumont (829 miles) or from Dalhart to South Padre Island (888 miles)).

As with the rest of the country, the first to get electricity in Texas were the city residents in major population areas, served by investor owned utilities like Texas Power and Light (Dallas-FW), Houston Lighting & Power (Houston), Central Power & Light (Corpus Christi), and Eastern Texas Electric (Beaumont). And a strong city-owned industry developed in Texas with such cities as San Antonio, Austin, and Lubbock building their own distribution grids as enterprise departments within city government. The Lower Colorado River Authority was formed in 1934. And electric cooperatives were formed with the Rural Electrification Act in 1935; now Texas can boast 65 members in the Texas Electric Cooperative organization, the largest of its kind in the US.

The Electric Reliability Council of Texas (ERCOT) was formed in response to NERC requirements in 1970. ERCOT took on a market coordination role in 1981, which became more important with the deregulation of wholesale energy in 1995. Electricity wasn't regulated at the state level in Texas until 1975, when the Public Utility Commission of Texas was formed. But the monopoly investor-owned utlities in Texas vigorously defended their status as state-regulated, not federally-regulated entitites. In May 1976, the issue was forced when Central & South West technician connected grids in Vernon, TX and Aldus, OK, arguably putting all Texas electrons in interstate commerce. The issue was finally settled in 1980, when DC ties in Vernon and in East Texas connected ERCOT to the Eastern and Western Interconnections.

Stephen Lacey has a great podcast on Virtual Power Plants (VPPs) out and I encourage everyone to listen to this. Click on this article to get to the podcast - Virtual Power Plants Aren't Just Virtual -- They're Real.

The challenge to making the electric grid more efficient is focused squarely on managing the peaks better - the times when the grid is least efficient and power is the most expensive. Think about the folly of adding two additional highway lanes over on the left that are almost never driven on, but must always be maintained and paid for because we don't tolerate traffic jams - that's what it's like in the electric grid today. That is the infrastructure in the grid devoted to meeting peak demand - power plants and wires that sit idle much of the time.

An alternative to expensive, fixed investment in large remote power plants is to preposition and organize assets out at the edges of the grid that can be available to meet peak demand when it occurs, but far less expensively than we do today.

Combine some renewable energy (solar PV and wind) with on-demand conservation, known in the industry as demand response, add in a dash of energy storage, organize it all with energy management systems that can communicate with the utility, and you have a VPP that can address peak demand better, cheaper, and cleaner than a traditional fossil fuel plant can.

We can do it today, we just have to demand new ways of thinking about making and consuming electricity.

When does rooftop mounted solar PV serve multiple purposes? When designated disaster recovery areas such as schools and churches offer their rooftops as mounting sites for utility-owned grid-tied solar PV facitlities. In the event of a disaster and a loss of grid power, the facilities that will house refugees are thus assured of power for at least some of the day. And when energy storage is added, the facilities can operate lights and refrigeration.

Disaster recovery will become a fringe benefit of plans such as the Tuscon Electric Power Bright Roofs program announced recently, whereby public schools will contribute their rooftops to mount PV systems owned by the utility.

Distributed generation, as it takes hold, will open up new areas of synergy and creativity, where we get more from our investments.