Monday, January 14, 2008

Brewster McCracken of the City Council Talks about the Pecan Street Project

Brewster McCracken of the City Council Talks about the Pecan Street Project

How did the idea for the Pecan Street Project get started?

I was having lunch with BJ Stanbury, Steve Darnell, and Dave Bowen, over at Taverna on March 7. We were talking about Helivolt’s plans. BJ was very passionate about how our focus needs to be on the locally sited solar rather than big, remote solar panel farms out in the hinterlands. That’s how you create the jobs and make it directly relevant to people.

I got together with Isaac Barchas and Joel Serface and started working through it. If you have solar covering offices, homes, stores, then you would need to have thin-film or a building integrated material, and you would need to reinvent the way utilities deliver electricity.

We asked ourselves what success would like 20 years down the road. Imagine we have solar all over the city. What changes would be needed to make that system as reliable and affordable as conventional fossil-based power? Currently, solar is intermittent now and it’s subsidized, so what does it take to get it as reliable as polluting energy. You would have to connect the solar systems coating the buildings to 2-way wiring systems. In turn, the wiring would send the solar energy large, interconnected storage servers. It sounded a lot like the internet. We learned from reading that Google had already reached a similar conclusion about the future of clean energy—that you have to reinvent the energy system into one with the architecture of the Internet. Thomas Friedman and former Motorola CEO Robert Galvin are also is advocating for the creation of an energy Internet. Friedman writes that this is the most important thing we could do to promote economic opportunity and to address the world’s biggest environmental challenge, climate change.

So we had our first formal meeting on April 16 at MCC.

It was Joel Serface, Isaac Barchas, Rachael Proctor May, Marsha Inger of UT’s Advanced Computing Center, UT engineering professor Michael Webber, Jose Beceiro with the Greater Austin Chamber and Austin Energy General Manager Roger Duncan there. Shortly afterward, Joel moved away and Colin Rowan from I&O Communications and Heath Hignight from UT’s Engineering School joined us. We started hashing through it what we needed to do in Austin to lead in clean energy – both economically and from a utility perspective. It took us three months to develop the consensus plan that became the Pecan Street Project.

Why did you call it the Pecan Street project?

It was initially called the Austin Project but that name it was already taken. Interestingly, the Austin Project was the name for the the job training initiative from Sematech. We didn’t want to use a generic name like “clean energy project.” So we decided to call it Pecan Street Project because Pecan Street used to be Austin’s original main street. We felt it fitting because we’re talking about taking energy away from the hinterlands such as from a coal-fired gas plant and bringing it into Austin’s main street.

When Edison was building out the infrastructure for generating and distributing electricity he had a choice between centralized and decentralized. He chose centralized which many people say is now outdated.

The most direct analogy is the evolution of broadcast television to the internet. If you look at broadcast television you get your news from three networks that they broadcast from big towers (with no way to store it) and you had to be in front of the TV at a certain time. Later VCRs, cable, and other devices came along but the fundamental structure was still there. Then along comes the internet in which information is deposited into servers and the users can pull out that information at your own convenience and the user can also put information out there. If power were structured like the internet then users could put energy out on the grid or take it back off at their convenience.

After the landline phone companies deregulated, that after twenty-five years later we’re basically back to one landline phone company. It’s a natural monopoly. It makes no economic sense to have duplicated line systems. It is likely that utilities will also be natural monopolies on the wiring side. Even in Austin, we essentially have a competitive market for the source of power, because we go out for bid on coal, uranium and natural gas. If you have a decentralized smart grid Energy Internet system and it’s just as reliable as from traditional energy sources, then it doesn’t matter from a systems perspective that the power would be coming from solar panels on people’s roofs rather than big power plants in remote locations This won’t just be an engineering and technology challenge. Developing an Energy Internet will also be a major software challenge. It will require the creation of a new business model for how utilities pay for solar panels and excess solar power coming from people’s roofs.

It’s too early to say what kind of business model will emerge from the Pecan Street Project. Duke Energy is paying put solar panels on its customers roofs. SoCal Edison is paying rent to building owners to place solar on their rooftops – that is a model similar to the cell phone tower business model in the mobile phone industry.

Christian Reed of E6 Capital made the point that Austin pays for putting in a solar panel system when it should pay for power put into the grid. How successful is the current solar power rebate project for Austin?

It’s too successful. The current way we do the rebate program will bankrupt the utility if we keep doing that because we’re spending more than we’re getting back. But we are sending our energy dollars outside of Austin in other ways, too. Right now as rate payers, we’re doing a massive export of our dollars out to Wyoming for coal and west Texas and Oklahoma for uranium and natural gas. Not only that but if you can get the technology for locally-sited systems to work as efficiently as carbon-based electricity then you could eliminate not only the several billion dollar cost of a power plant generating the electricity but also the inputs to that plant such as coal. About half of a customer’s electric fuel bill goes to pay for the cost of the fuel such as coal. With solar and wind, the fuel is free, so if we could develop a reliable, affordable delivery system for wind and solar, theoretically half the charge on your electric bill – the charge for the fuel to run the power plants – would be lopped off. It’s a long way off but that’s the vision.

What is the Pecan Street Project’s contribution to this effort?

We have everyone in Austin coming together to tackle this problem including Austin Energy, the City of Austin, the University of Texas, Austin Community College, the Environmental Defense Fund and leading technology companies, including SEMATECH, Cisco, Dell, Freescale, GE, GridPoint, IBM, Intel, Microsoft and Oracle .

As Thomas Friedman writes, creating an Energy Internet will require innovation in utility systems, building codes, land use policies and information technologies. It will require economic development investments. The City of Austin has all of the components needed to create and implement an Energy Internet – utility policymaking, economic development, building code authority and land use authority – integrated into one organization — the City of Austin. so We can, for example, change building codes to match the needs of the energy technology required to make this work. Utilities alone can’t do that. We can do this in one near-seamless body. We are likely the largest city in the nation and the largest public utility run by the same management – the Austin City Manager and the same board –the Austin City Council. That gives Austin an important differentiator in clean energy that can position us to lead economically and to make an important positive contribution to this national priority.

The vision is to have 100,000 homes and businesses in Austin equipped with solar. To make a vision like that work, we will need a reliable, cost-effective Energy Internet and a new business model – likely one in which we’re getting paid for the electricity we produce from our own rooftops. We can do make Austin the home for researching, developing and implementing this vision. Through the Pecan Street Project, we are bringing together the best in the nation to do precisely that.

Has anyone put up any money for it?

The corporate partners are dedicating 2 to 4 employees at 25% of their time for the next 7 8 months. On August 1st, we’re going to have recommendations from all our partners about what technologies and investments we will need to make to implement the vision.

How can angel investors help?

We believe there will be a tremendous amount of innovation and entrepreneurship coming to this effort. As we create in Austin an Energy Internet that makes it possible for entrepreneurs and innovators to introduce new clean technologies into the electric grid, many of which will involve the commercialization of university technologies, angel investors will be key to funding the innovators who will be making this vision a reality. We are talking about major opportunities for new applications in software, energy storage, solar, and home and business “operating systems.” Just like the internet created untold number of jobs, the distributed smart grid Energy Internet being researched, developed and implemented through the Pecan Street Project offers the promise of creating a tremendous number of jobs and startup opportunities. A distributed smart grid Energy Internet also offers the prospect of much lower barriers to entry for entrepreneurial start-ups to compete on the electric grid. We’re bringing the partners together to make this system work. Everyone involved in this project is tremendously excited about the future we can create – both environmentally and economically.

Best regards,
Hall T.

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