The lessons of smart grid test in Boulder

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Xcel proclaims it a success; city not impressed

Back in 2007, Xcel Energy executives began planning for a grand experiment to take different smart grid technologies the utility had been studying since the 1990s and integrate them all into one geographic location.

Xcel’s concept of SmartGridCity was born, and the company set out to become the first utility in the world to create a fully-functioning smart city powered by an energy-efficient, self-monitoring smart grid.

Xcel considered two municipalities for the undertaking: St. Cloud, Minn., and Boulder, Colo. Xcel chose Boulder, and began installation in 2008, quickly bringing SmartGridCity online by the end of that year.

“We set out to test about 70 different distinct hypotheses, to test the unknown — but suspected — value of a fully integrated smart grid in one location,” said Michael Lamb, Xcel Energy operations chief of staff. “Some [hypotheses] were proven not valuable, others were proven very valuable. Since we met our objective, I think it was a very successful project.”

Not everyone agrees.

In fact, critics, and even some supporters of the project, have declared SmartGridCity a failure.

The criticisms most often leveled against Xcel in this case relate to a lack of communication with customers, and cost overruns that are being paid for by Xcel’s 1.4 million Colorado ratepayers.

The project has taken a steady beating in the Colorado press, and some energy experts fear that the program’s well-publicized missteps could give the perception that SmartGridCity hasn’t fulfilled the promise of smart grid technologies, and could kill innovation.

“There are several concerns,” said Kelly Crandall, the city of Boulder’s sustainability specialist.

“The initial vision of [SmartGridCity] was focused on selling the technology to the customer; what they could get out of this changing landscape of information and services,” said Crandall. “But, one thing we hear consistently [from customers] is: ‘We were told we’d have fully electronic houses with all this technology, and adding solar, etc.’ This is an aspect that has not been delivered on, and there does not appear to be a plan for figuring out how to get there.”

Xcel’s Lamb admits that he and his colleagues at Public Service Company of Colorado (Xcel’s Boulder subsidiary) should have done a better job setting expectations on the cost estimate and the objectives for the customer.

For example, Lamb said the utility misread the market for programmable, in-home smart devices. The components of these Wi-Fi-enabled devices allow customers to remotely control appliances and thermostats in the home, thereby achieving better management of their energy consumption.

But, in practice, customers reportedly found the devices too simplistic, and demand was not as great as Xcel anticipated. Additionally, many homes didn’t meet Xcel’s installation criteria.

Though plans called for installing 1,850 devices, the utility ended up installing just 101 of them in Boulder homes.

“To be quite honest, that market just hasn’t matured,” said Lamb. “We’re not the only ones disappointed that the products and services haven’t shown up from vendors.”

Xcel has also been heavily criticized for cost overruns developing SmartGridCity.

In 2008, when the project began, Xcel estimated a budget of $100 million, with Xcel spending just over $15 million. The rest of the cost was to be shared by seven investment partners including GridPoint Inc. and Accenture.

But, by 2009, the utility’s expenses shot up to $45.5 million.

“True, there were cost increases, there’s no arguing that,” said Lamb. “We were doing something new, and as the first people doing it, it is hard to estimate the cost since we hadn’t done it before.”

In 2011, the Colorado Public Utilities Commission (CPUC) allowed Xcel to recover $27.9 million of those costs from Colorado ratepayers. The CPUC withheld the remaining $16.6 million, telling Xcel it must show customer benefits from the project before it would allow recovery of the balance.

Just weeks ago, on March 21, the CPUC ruled against Xcel, denying it the recovery of the remaining $16.6 million.

Given the CPUC’s decision, the utility has to decide whether or not it will continue to invest in SmartGridCity and host new pilots there once the current demonstrations (an electric vehicle demonstration pilot and two pricing pilots) conclude at the end of 2013.

“For any pilot or demonstration project, we have to carefully review the relative benefits and risks for all key stake holders including our customers,” Lamb wrote in an email. “The results of the ongoing pilots and the recent CPUC ruling will be considered as we determine how best to utilize the [Smart Grid City] test bed.”

Lamb and other Xcel executives have said publicly that SmartGridCity’s future could be in question if the CPUC ruled against cost recovery. For instance, on July 16, 2012, Lamb told the CPUC that, should the commission decline its request to recover the remaining $16.6 million, Xcel would “not… be that amenable to doing new pilots with the project.”

Another factor complicating SmartGridCity’s future is a local effort to municipalize Boulder’s electricity system. City officials have collected input from residents and are in the final stages of a decision-making process that could lead to a complete takeover of all of Xcel’s infrastructure in Boulder, including the SmartGridCity components.

No matter what the city decides to do about municipalization, Boulder’s Kelly Crandall said for Xcel to abandon SmartGridCity as a future test bed would be short sighted.

“SmartGridCity had so much promise as a concept,” said Crandall. “The last thing we want to see is an investment like that wither on the vine. We want to see it encourage innovation from different entities.”

Despite being “strongly supportive” of grid modernization and smart grid development generally, Crandall said Boulder officials would be looking for certain criteria for new pilots in SmartGridCity. For instance, Crandall said the city would only support future pilots that have a strategic vision, a cost-benefit analysis, and approvals from the Public Utilities Commission.

Xcel’s Lamb is concerned that all the criticism against SmartGridCity, coupled with the utility’s inability to recover its costs for the project, will have a dampening effect on the industry.

“We were penalized for trying to do something risky,” said Lamb. “I hope that the fact that some people think of SmartGridCity as a failure doesn’t have an impact on the utility industry, but it does provide a bit of a disincentive to be innovative, to take a risk.”

As Xcel grapples with the fate of its ambitious experiment in Boulder, it and other utilities around the country are implementing new smart grid technologies every day to make the electric grid more reliable and responsive to customers.

Additional lessons learned from SmartGridCity

Communication: While “robust and reliable,” Xcel found that broadband over power line technology with fiber optics as a backhaul too expensive.

Metering capabilities: Advanced meters, or so-called “smart meters” are not always necessary for realizing customer value, “given that automated meters with similar capabilities have already been widely deployed by many utilities, including Xcel Energy,” said the utility’s Michael Lamb.

Technical requirements: “There are distinct and meaningful differences in technical requirements when one considers grid control capabilities versus meter reading capabilities,” said Lamb.

How SmartGridCity works

• A fiber-optic backbone allows near real-time communication between customers, substations and the utility’s central control.
• The two-way flow of information is enabled by electric smart meters installed on the outside of 23,000 homes, about half the residential base of Boulder. Another 700 businesses were also provided the outdoor meters, which send signals every 15 minutes through a broadband over power line technology.
• On the customer side, Xcel installed programmable energy management systems inside homes to allow the customer greater control over his electricity usage.