Try as we might, it’s hard for us as individuals to see the world other than as we have been trained to see it over the course of our lives and careers. But in an increasingly networked world, it becomes ever more important to consider the entire system, not just a part of it. In network science, a network is comprised of links – the system of connections that comprises the infrastructure bringing things together – the grid, the internet, our streets and roads, etc., and nodes – buildings, cities, people, what is to be connected. The link-view of our critical infrastructure providers is inevitably associated with ensuring vital connections and system performance. In contrast, the node-view of building and business owners and residential energy users looks at the world through a different lens, one more aligned with the concerns inside the node, but also with network outputs that become inputs to the nodes: electrons, digital bits and bytes, etc.
When it comes to ensuring access to energy, leaders in the utility, real estate, and business sectors simply look at the world through different lenses, with different perspectives on critical energy infrastructure. In mapping strategy and managing risk, the challenge for leaders in these groups is to move outside their comfort zones and consider the world as seen through another’s’ eyes. While society and our economy are utterly dependent on a reliable energy infrastructure, we are now challenged to reconsider long-held assumptions on production and consumption and how the system might optimize itself going forward.
In fact, we are poised at the brink of a new set of decisions on the nature of critical energy infrastructure, with the potential for a new balance, where we shift from a production-centric environment to integration of new user-centric perspectives, including new technology options and new business models. If we are to have a more nuanced and balanced perspective on energy, we must integrate such divergent perspectives and make investment decisions that best serve our broader economic and social interests in the future.
In contemplating the lowest risk, highest reward equation for critical energy infrastructure, for example, we must put some of our core assumptions to the test and consider our universe of options from both perspectives. Is it better to continue to invest most of our future in a producer-oriented system? After all, it has served us well to date. But it also shows increasing vulnerability to outside disruption from extreme weather and both physical and cyber security threats. Or should we shift our focus to the growing potential of building-based energy? From this perspective, a building or business owner has options that are grid-alternatives, including energy efficiency that drives down long-term needs, demand response that shifts peak consumption requirements and emerging distributed energy resources that offer an alternative supply resource.
Other areas of our lives offer experience and approaches to risk management from which we might draw insights. We socialize a variety of risks with insurance – automobile, property, health – over a large pool of those exposed to risk. We manage our investment risks with a blended portfolio that we can adjust over time to match our goals with our risk tolerance. Similarly, we have learned to manage technology obsolescence risk by integration of multiple investments into a solution and outsourcing the solution to an expert better equipped to make the myriad decisions on optimizing the system’s components.
The Production/Distribution Worldview
To the utility veteran, energy is an industrial business with hundreds of millions of dollars invested in long-term projects to expand and maintain the grid, from power plants out through transmission lines and distribution grids to meters on the sides of buildings. Key tenets in this worldview include industrial scale generation, network delivery, and subject matter expertise to manage an incredibly complex system. Key metrics are production efficiencies, system reliability, and long-term capital investment. Energy is the key output of this highly complex system.
Until recently, utilities viewed buildings and factories as mostly passive participants in energy provisioning, where only the largest were worthwhile to engage for reliable demand side curtailment. Maybe they still do? FERC Ruling 745 prescribed equal payment for demand or supply side resources in wholesale markets. Subsequent reactions by several groups, including the California PUC, Cal-ISO and the Edison Electric Institute suggest that we may still have a long way to go to shift our collective perspective off of the supply side. But technology advances that automate demand response, and a growing maturity among energy consumers to take a more active role in their energy security hint at the potential for far more participation by the demand side in the energy equation.
The Consumption Worldview
Why would energy consumers be motivated to get more involved? Quite simply, new technologies have added new alternatives and options to the mix. For the real estate veteran or the business leader, energy has traditionally been viewed as an input from an institution into a highly valuable real estate investment asset, enabling the productivity of a business and the comfort or convenience of an occupant. A building owner hooks up to the grid and invests in key energy-using devices like lighting systems, boilers and chillers to light, heat and cool their building. For certain owners, the nature of the business might have also made it critical to invest in backup energy systems, primarily diesel generators and potentially, UPS systems. In most venues, grid electricity remained a relative bargain, highly reliable and relatively affordable compared to alternatives, but still, energy was but one line item on the cost side, an input into a much bigger financial picture, and more importantly, a line item over which they had limited control.
But from a financial perspective, all line items matter to the bottom line, so if an investment in improved energy management also conferred an opportunity to curtail during a peak, the user is increasingly likely to seek to capture that benefit as well, improving the project ROI. More options equal lower risk and greater value. As buildings are equipped with more sophisticated energy tools, they become more capable of participating with the infrastructure that provides their energy. On the energy efficiency and demand response side, high tech systems for building energy management, HVAC management and lighting management enable far greater control over consumption throughout the day and notably, during peak periods when a cost control asset may morph into a revenue generation asset. And distributed energy resources such as microturbine CHP generators and integrated solar PV systems offer a building owner more flexibility and reliability with energy expenses, risks and reliability.
Implications for Critical Energy Infrastructure
As demand side solutions mature and grow in value, commercial and industrial energy consumers especially will view investments in on site energy technologies, whether for energy efficiency and demand response (negawatts), or local energy production and storage (local watts, or “locawatts”) as increasingly valid options for investment. They will consider their options using such yardsticks as cost, sustainability, reliability and risk mitigation.
For utility executives and policy makers, long accustomed to viewing electricity and the grid as synonymous, shifting to a new more balanced perspective on electricity will not come easily. They will need to evaluate their investments in the network (the grid) in a new light, considering alternative investments in the network’s nodes (commercial buildings, industrial sites, and residences). For utilities and regulators, shifting to a more holistic perspective – one that’s more in tune with the trends of maturing technologies and a more active role for building owners and energy users – will be a huge challenge, but it will open up new discussions with a broader group of players, and ultimately, a more secure critical energy infrastructure for us all.
“Guiding Principles for the Nation’s Critical Infrastructure,” a fascinating report produced in 2008 by the American Society of Civil Engineers (ASCE) offers a compelling final take on the issues raised in this article. Highlighting breakdowns in communication and management that led to catastrophic infrastructure failures in the past, most notably the flooding in New Orleans after Hurricane Katrina, they stress these four principles to protect and preserve the value of critical infrastructure and ensure our nation’s health, safety and welfare:
1) Quantify, communicate, and manage risk
2) Employ an integrated systems approach
3) Exercise sound leadership, management, and stewardship in decision-making processes
4) Adapt critical infrastructure in response to dynamic conditions and practice
We owe it to our society and our families to initiate an expanded conversation on our nation’s overwhelming reliance on a single critical infrastructure for electricity – the grid – and to challenge our imaginations to envision a truly integrated systems approach, one that taps the full potential of both the links (the grid) and the nodes (commercial buildings, industrial facilities and residences).
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