Can a Systems Engineering Approach Solve Consumption Challenges in the Electricity Value Chain?

Published: Mon 07 Apr 2014
A blog entry by Christine Hertzog

Contributed by:

Christine Hertzog
Managing Director
Smart Grid Library

Christine Hertzog's Blog

A system is a set of inter-related components that interact in an organized fashion toward a common purpose.  When you add living organisms like humans, it becomes an ecosystem.  The electric grid was a complex system, but the advent of Smart Grid technologies started a grid transformation into a complex ecosystem or collection of related systems that are generally identified as the electricity value chain.

Traditionally, that value chain consisted of generation, transmission, and distribution systems.  Each of these systems contains subsystems – such as types of generation, or the distinctions between distribution substations and distribution lines.  One of the greatest disruptive impacts of the Smart Grid is the creation of a new system in the value chain – the consumption system.  Because we can now economically measure and communicate consumption, we can also enable intelligent control of electricity consumption and production in the residential, commercial, industrial, agricultural and other segments. 

Job one for all electric utility subsystems is to keep the lights on.  Of course, regulators will chime in that the goals are safe, reliable, and cost-effective electricity too.  True.  These are sometimes competing objectives, so there’s an art as well as science to balancing them.  A systems engineering approach, which takes a holistic approach to consider the impacts of changes in one system upon others is the methodology that policy makers should apply to achieve these balances.  And there’s no place that needs it more than Smart Grid investments and solutions targeted to consumption, and most specifically to family housing and rental properties (single and multifamily).

Most residential energy solutions and programs today are designed for single family dwellings occupied by property owners. But that’s not the reality for housing in many communities.  Most of the population in the US and globally is projected to live in cities.  The World Health Organization reported that as of 2010, more than half of all the world’s population lived in urban areas. Six out of every ten people will live in a city by 2030.  Do you think most of that will be in the traditional detached single family dwelling?  Doubtful.  Future housing construction growth will be in higher density multifamily residential buildings, and occupants may not be owners.

The composition of owner-occupied versus renter-occupied has changed in the years since the Great Recession began.  A Freddie Mac study in 2012 noted that since 2007 home ownership has dropped, and whether the housing stock is single family or multifamily, the rental market has expanded.  It’s too early to tell if rental versus ownership is a long term trend in preferences or simply mirroring challenging economic times.  The Recession caused significant financial disruptions for people, resulting in reduced ability to afford a home purchase to wariness to invest in a home that may prevent future mobility to react to job changes.

However, a number of other studies point to demographics and economics as key reasons for the growth of multifamily dwellings.  Demographically, the rate of marriage is declining in all age groups, and unmarried households favor multifamily housing.  Economically, young households favor urban living, which again trends to high density multifamily dwellings.

Traditional single family dwellings don’t have long-term growth potential for Smart Grid solutions that provide intelligence to energy consumption, yet the focus remains on single family dwellings.  Are these easier system segments for vendors to address?  In most cases the answer is yes.  Each dwelling has it’s own electric, gas, and/or water meters.   Businesses will always look for the “low-hanging fruit” in terms of customer acquisition and retention.  That’s why the commercial and industrial (C&I) segment has had a greater range of smart building solutions for a longer period of time than the residential segment.

This is not a criticism of vendors who serve the single family residential market.  It’s the low-hanging fruit in the residential segment of the Smart Grid ecosystem.  But the multifamily growth area is underserved, and until we apply sound system engineering principles to create solutions to solve their unique challenges, we are not leveraging the full potential of the Smart Grid.  Next week, I’ll explore some of the specific challenges inherent to multifamily and rental dwellings and possible solutions.

Christine Hertzog
Smart Grid Library