TODAY’S STUDY: COMMUNICATION (THE HUGE OPPORTUNITY ON THE WIRES)

Because communication is the lifeblood of a relationship, it is obvious why the relationship between the U.S. and its New Energy is having so much trouble getting established.

There is enough proposed wind capacity not being built due to a lack of transmission to provide a third of U.S. electricity. Development of entirely viable solar power plants and geothermal projects is stalled at sites rich with potential because there are no wires to deliver the power to where it can be consumed.

Where there already is built generation, transmission system operators are curtailing supplies because their grids cannot manage the capacity. In the Pacific Northwest and California, melting winter snow packs are expected this spring to force megawatts of wind off the inadequate wires with overwhelming output from hydroelectric dams.

In short, New Energy and the U.S. aren't communicating. Their romance, so rife with possibility, is floundering.

Greenhouse gas emissions continue to be a serious concern, billions in benefits from a New Energy economy are going unrealized and, as the study highlighted below shows clearly, the financial opportunities that would come from building new, smart, high capacity transmission are huge.

The business adage that it is necessary to spend money to make money has rarely been so relevant. The adage prescribing communication to nurture a relationship could not be truer of the nation and its abundant New Energy assets.

A half-century ago, the average home often had no more than a handful of electric appliances and gadgets. An electricity delivery system built to 19th century standards and capacities was then, perhaps, serviceable. Today’s home typically has dozens of electronic devices, tools, entertainments and necessities.

It is time for this nation to build a smart, high-capacity, 21st century transmission system facilitating communication with its rich but geographically undesireable New Energy riches. It will benefit every region and sector of the economy to do so. It could also be the beginning of a beautiful relationship.

U.S. Smart Grid; Finding new ways to cut carbon and create jobs
Marcy Lowe, Hua Fan and Gary Gereffi, April 19, 2011 (Center on Globalization, Governance and Competitiveness)

Executive Summary

The smart grid is often referred to as an “energy internet”—a decentralized system that turns the electric power infrastructure into a two-way network. This smart system allows utilities and customers to share information in real time so they can more effectively manage electricity use. The Pacific Northwest National Laboratory (PNNL) estimates that a fully deployed smart grid could reduce the U.S. electricity sector’s energy and emissions by 12% in 2030.1 Even greater savings would accrue from tapping the smart grid as an enabler of clean energy sources. If accompanied by substantial support for decentralized power, renewable power, and electric vehicles, smart grid could reduce energy and emissions by an estimated 525 million metric tons, or 18% of the total from the electric sector (PNNL, 2010).

The United States is among the global leaders in smart grid development, which is expected to create tens of thousands of jobs annually in coming years. Previous research suggests that for each $1 million in investment, a range of 4.3 to 8.9 direct and indirect jobs will be created…For example, global energy consulting firm KEMA, using the low end of this range, estimated that 278, 600 U.S. smart grid jobs will be created by 2012, including jobs with utilities, contractors, and suppliers (KEMA, 2009).

In this report, we focus on the subset of these jobs represented by the broad array of supplier firms involved, including those that have traditionally provided electric equipment and those that provide information technology (IT), core communications, smart hardware, energy services, energy management, telecom service, and system integration. We examine 125 leading smart grid firms in order to help assess their potential role in creating jobs. These lead firms provide hardware, software and services, which we divide into nine broad categories of smart grid technologies. Where possible, we identify what hardware, software and services each firm provides, and in which U.S. locations the relevant manufacturing and product development occurs.

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Key findings:

1) Our sample identifies 334 U.S. relevant employee locations in 39 states. These include 70 sites for hardware manufacturing, 76 for hardware development, 63 for software development and services, and 125 company headquarters. The region with the highest number of total sites is the Southeast (83). The next notable concentration is California — constituting its own region—with 75 total locations. The Midwest is next (74), and then the Northeast (70). Based on levels of investment to date, we estimate that the U.S. supplier segment alone—which does not include utility jobs—has so far created roughly 17,000 U.S. jobs…

2) Smart grid provides a way for well-established firms to transition from traditional products into new areas, including new manufacturing opportunities. For decades, a number of U.S. firms provided equipment for the power industry, but performed the manufacturing increasingly outside the United States. Many of these firms are now transforming from a device-only focus to new products including software, smart controls, and communications. These new activities are largely performed domestically.

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3) The fast-growing global market for smart grid technologies presents valuable export opportunities to be tapped by U.S. firms, large and small. Smart grid, renewable energy, and electric vehicles are counted among the most promising sectors for increasing exports in the National Export Initiative—the federal government’s goal, announced in 2010, of doubling the nation’s exports in five years (U.S. DOC, 2010). Industry leaders such as Cisco, GE, Hewlett Packard, and IBM are moving quickly to establish a stake in China’s smart grid market (Zpryme, 2010). Much smaller U.S. firms have also won large contracts in China and throughout Europe.

4) Future U.S. job creation by product vendors will likely concentrate in high-value IT innovations, product development, and systems design and engineering. Many of the world’s leading smart grid vendor firms—including leaders in IT, core communications, energy management, telecom service, and system integration—are either headquartered in the United States or have an extensive U.S. presence. A number of large and small U.S. firms are also pursuing breakthrough innovations in hardware— specially those associated with renewable power, energy storage, or electric vehicles. These activities are often performed in domestic facilities to protect intellectual property.

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5) Others are catching up quickly, so the United States will need to continue emphasizing not just innovation but also supportive policies. Chinese, Korean, Japanese, and Indian firms have reached U.S. levels or surpassed them in selected innovative technologies, such as high-voltage transmission (Berst, 2011b). Perhaps more important, several countries’ smart grid goals reflect energy policies that are not currently emphasized in the United States, including aggressive targets for renewable energy. Similarly ambitious targets in the United States would increase demand for U.S. smart grid firms’ products and encourage investment in related clean tech innovations.

6) Regardless of where smart grid products are made, many additional U.S. smart grid jobs will be located in the service territories of participating utilities, which means they cannot be off-shored. These will include jobs not covered in this study, such as direct employment with utilities, contractors, and temporary field offices, engaged in performing construction, installation, maintenance and ongoing services. By definition, these will be local jobs.

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To make the most of job opportunities, it will be important for the United States to continue to pursue the cutting edge of smart grid technologies, including those needed for integrating renewables, decentralized sources and electric vehicles into the grid. Collaborations between public and private organizations can play a key catalyzing role. Concentrated local and regional efforts can leverage important partnerships in which R&D is directly connected to new product development, commercialization, new business incubation, and workforce development. Such efforts are needed if the smart grid is to deliver on its considerable promise to reduce CO2, stimulate technology innovation, and create jobs.

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Introduction

The U.S. electric grid, designed more than a century ago, is badly in need of an overhaul. Relying on antiquated equipment put in place long before the benefits of 21st century networking and communication, the highly centralized, one-way system wastes energy and increasingly struggles to keep up with demand. Since 1982, growth in peak power demand—such as on summer days when countless air conditioners are running—has outpaced growth in transmission by nearly 25% per year. Too often, the result is power outages and even blackouts. The U.S. Department of Energy (DOE) reports that such interruptions cost the nation at least $150 billion annually (U.S. DOE, 2008)…

A smarter grid offers a cleaner, more efficient way to address the problem of peak demand. Providing peak-hour electricity requires grid operators to use expensive “peaker” plants that sit idle most of the year and require fuel bought on the volatile “spot” market. A truly smart grid would use digital technology to help utilities and customers manage existing resources more efficiently, thus reducing reliance on peaker plants and costly capacity expansions.

Perhaps even more important over the long term is the smart grid’s crucial role as “enabler,” facilitating the economy’s much-needed transition to clean energy. Analysts have noted that the smart grid holds the key to bringing renewable energy options to scale, making them more reliable and affordable (Leeds, 2009a). In addition, as the automotive industry makes its expected shift to electric vehicles in the coming decades, a smart grid will be needed to meet the challenge of charging millions of plug-in hybrid and all-electric vehicles.

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The smart grid encompasses many technical, economic and social goals, including making the grid more reliable and enhancing safety and national security. In this report, however, we will limit our focus to aspects of the smart grid that can potentially reduce energy use and carbon emissions. We ask the question, “What will these developments mean for U.S. jobs?”

Our analysis is structured as follows: First we will give an overview of the most important carbon-reducing functions of the smart grid. Next we will briefly describe the state of global smart grid development, placing the United States’ trajectory in the context of other leading countries. Then we will map out the U.S. value chain for smart grid hardware, software and services, drawing upon the extensive contribution made in recent studies by the Cleantech Group (Neichin & Cheng, 2010) and Greentech Media Research (Leeds, 2009a). Finally, we will discuss the types of U.S. jobs involved, where they will likely be located, and what workforce development will be needed in order to fully tap the carbon-reducing benefits of the smart grid.

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Conclusion

Smart grid efforts are well underway in the United States and abroad, with leading countries spending billions of dollars annually in public and private investment. Much of this activity is focused on reducing peak power demand and making an outdated electric system more reliable. Yet even greater energy- and carbon-saving potential lies in harnessing the smart grid to deploy distributed generation, renewable energy and electric vehicles. Fully tapping these resources will not happen automatically with smart grid development, but will require targeted policy support. It will also require regulatory reform and, more important, fundamental changes in the electricity sector’s prevailing business model, which incentivizes utilities to sell more, not less energy.

The smart grid promises a considerable role for U.S. jobs. Many of the positions necessary to install, maintain, and repair the new technologies are tied to utilities’ local service territories and so cannot be outsourced. In addition, many of the world’s leading smart grid vendor firms—including global leaders in IT, core communications, energy management and services, telecom service, and system integration—are headquartered in the United States or have a large U.S. presence. Their U.S. job locations will likely emphasize product development, software and services. New manufacturing opportunities may be largest in assembly and integration of smart devices, and in production by new firms that specialize in emerging clean technologies for renewables, energy storage and electric vehicles.

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To make the most of job opportunities, it will be important to actively pursue the cutting edge of smart grid technology. Collaborations between public and private organizations can play a key catalyzing role. Concentrated local and regional efforts such as those in Austin, TX can leverage important partnerships in which R&D is directly connected to new product development, commercialization, new business incubation and workforce development. Such efforts are needed if the smart grid is to deliver on its considerable promise to reduce CO2, stimulate technology innovation and create jobs.