Digital Ecosystem: Smart Energy

New types of digital marketplaces run by cooperatives on top of smart grid infrastructure in are demonstrating how to deliver the full benefits of the Internet of Things and smart services to local communities. The new buzzword is ‘Digital Ecosystem Management’.

At the end of 2013, the Smart America Challenge initiative was launched by former President Barack Obama to – bring together research on CyberPhysical Systems with pilots and projects that were being undertaken in Smart Manufacturing, Healthcare, Smart Energy, Disaster Response and Intelligent Transportation. The aim was to bring to life the tangible benefits of IoT to the US economy and the daily lives of American citizens. In all, 65 companies – including AT&T, GE, IBM and Intel – combined with academic institutions and government agencies to form 12 projects. One project of particular interest is The Agile Fractal Grid, which looks at how the Industrial Internet can be combined with high performance computing and a new generation of digital controls to enable smarter grids and create entirely new markets for digital and IoT-based services. The problem being addressed was the fundamental inefficiency of energy systems, where typically around 80% of power produced gets lost before it reaches an end-user in the US. The belief was that new control and grid technologies, combined with a secure and trusted industrial internet and new thinking around business models, could not only address this issue but also potentially drive socioeconomic rejuvenation, especially in under-served rural communities.

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It was clear that more efficient control of modern energy distribution systems, which will increasingly need to support new forms of generation and consumption (such as solar panels, wind turbines and electric vehicles), requires rapid and accurate collection, analysis and sharing of information at all levels of the grid operation, says Geoff Mulligan, presidential innovation fellow at SmartAmerica Challenge. In turn, this requires a reliable communications network, ultimately the Industrial Internet, and a ‘fractal’ architecture on which each fragment of the grid could operate like a complete grid and be responsive in real-time to local supply and demand. Ideally, a truly smart grid should evolve from today’s relatively wasteful beast in which large scale power generation flows uncontrollably into its immense capacity, to one where local generation and loads can provide smaller scale, more efficient local options.

Great new opportunities

The Agile Fractal Grid project was originally set up to demonstrate how this could be accomplished, at any scale; for an individual factory, a city, a region, a whole country or even a continent. That’s interesting in its own right, but as the project evolved, new opportunities to enable new types of business models on top of this smarter infrastructure started to emerge, stimulated by some fundamental commercial issues that quickly became apparent. This is where the National Rural Electric Cooperative Association (NRECA) and one of the founding members of the project came in. NRECA is a large organization that you’ve never heard of. Its genesis was in the 1930s when Roosevelt’s administration urged the establishment of local cooperatives to bring electricity to hard-to-reach parts of rural America. Today, there are over 900 consumer owned, not-for-profit co-op members of NRECA operating in 47 out of 50 States and collectively serving around 20 million households or 42 million individuals. The co-ops have never been subject to federal energy regulations and can create their own rules. “NRECA’s interest in joining The Agile Fractal Grid project was based around the question of how to leverage its collective scale in new ways to service its members and their local consumers better”, says CEO Jim Matheson. A major challenge with the development of smart grids is that as they become smarter they also become more hackable.

We needed new ways to service our members as well as local consumers.

_{Jim Matheson, CEO NRECA}

This poses a major risk to security as more life-critical activities rely on them. The problem was that no one wanted to foot the significant bill for the needed military -grade security, which meant the grid would never live up to its full potential. So, with necessity being the mother of invention and thinking more laterally about its role in serving its stakeholders, the project came up with a unique approach to addressing both the technical and commercial issues of creating a new infrastructure. The idea now provides a beacon for many other smart grid, smart city, and indeed smart nation programs, and also any other infrastructure investment project. The NRECA team realized there was nothing to stop them offering any type of service on top of providing electricity to their consumers, including entertainment, broadband telecoms, public safety, remote healthcare, and so on. The problem, as with most utilities today, is that they had perceived their role and core competence to be in energy provision, since that’s what they’d always done. Like incumbents in most industries, they were entirely focused on optimizing their existing business model.

Managing micromarkets

As part of their initial planning, the Agile Fractal Grid project team ensured they spent time investigating business models that work in the digital economy as well as the technical requirements of upgrading a smart grid. They saw that the most powerful business model was that adopted by Google, Apple, Alibaba, Amazon, WeChat, Uber and the other fast-growing digital native firms, which are all what economists call ‘platform businesses’: they all proactively manage a marketplace or ecosystem of consumers and producers to stimulate new solutions for their markets and take a ‘rent’ from enabling them to interact and transact on their platform. As they scale they become more valuable to their users. The team figured that the cost of making the NRECA smart grid secure could be financed by future income generated from a marketplace for a much wider set of services that could run over its integrated electricity broadband network. They looked at the assets they had – in terms of many loyal consumers and soon-to-be very powerful smart grid and communications infrastructure – and designed a business model to take advantage of them. Having established a centrally coordinated ‘digital ecosystem management’ platform and an expanding catalogue of services, its 900 co-op members can configure whatever mix of services their local communities want. In some localities, there might be a demand for entertainment services in addition to electricity and broadband.

Agile control rests on rapid and accurate sharing of information.

_{Geoff Mulligan, Presidential innovation fellow, Smart America Challenge}

There may also be demand for public safety or precision agriculture services, or for insurance, or tele-medicine. Ultimately, there’s room for almost any advanced digital and IoT-based service to be offered and monetized through the marketplace. Because the aggregated demand is so large – 42 million people who are real stakeholders – it has suppliers and developers queuing up to make their services available to this substantial market. The Agile Fractal Grid manages the whole marketplace and the underlying infrastructure for the members of NRECA, designing and building an open IT infrastructure that supports the duration and needs of an ever expanding ecosystem of producers and consumers. Could combining a smart grid with a marketplace of digital and IoTenabled services be replicated elsewhere? In most countries energy generation and distribution is highly centralized, dominated by private or national companies and regulated heavily. But there are useful lessons to be learnt from the Agile Fractal Grid experience for any organization involved in promoting the benefits the IoT. European regional governments and utilities, for example, are already looking at how to combine the fractal grid and digital ecosystem management approach to support more efficient energy generation and distribution and to enable all the IoT based services.

The key lesson is to think about the business model in parallel with the technological possibilities of the infrastructure, in particular the opportunity to leverage new types of software to create marketplaces for a wider set of digital services on top of smart grid services. Having seen how managing a rich ecosystem of producers and consumers has become the winning business model for the consumer internet, the opportunity is now there to adapt the model to embrace the Industrial Internet and the Internet of Things. The ultimate benefit for national and local government, service providers, consumers, and citizens is to support the growth of local economies. Proactive ecosystem management tends to be best at doing this. If a network of US regional electricity cooperatives can take advantage of IoT to rejuvenate underserved rural communities, perhaps more traditionally structured utilities, governments and industries, can do the same elsewhere. It just requires a bit more lateral thinking than we’re used to, and applying the new business discipline of digital ecosystem management.

Getting more from less: The Agile Fractal Grid project was set up to demonstrate how local generation and loads can provide smaller scale, more efficient local options.

Digital Ecosystem - solutions across Europe

Micro Smart grid :A grid that manages itself

The Micro Smart Grid (MSG) at the Euref campus in Berlin Schöneberg brings together various generating units, as well as energy demands and energy storages and combines them intelligently. The project focuses on a regional grid connected to the public electric grid by only one transformer. The aim of grid management is, on the one hand, to operate the MSG within ecological as well as economic viability and, on the other hand, to reduce the grid’s electric intake from the public electric grid. The commitment of battery electric storage, including bidirectional charging via electric cars, will gain in importance. Future development envisages not only the implementation of additional hardware components, such as energy generators and storage units, but also the connection of the MSG to a decentralized energy management system. All components will be integrated in such a way that allows for an examination of multiple scientific questions that will form part of a Masters program called ‘Energy and the City’ at the TU-Campus Euref. The operative goal is to provide the integrated car-sharing fleet with 100% renewable energy and to expand the Euref Campus long-term into a selfsuffcient ‘island’ operation. Optimization will balance the energy consumption by shifting loads with economic and ecological goals while dealing with a volatile supply of renewable energy resources.

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