The overall goals can be summarised as:

1) Free movement of Goods: Product interoperability, safety, quality

2) Services: inclusive services, ensuring growth

3) Standards – accessible, inclusion of SMEs

But behind these overarching goals, there are deeper issues.

Next month, I am at the Digital agenda summit in the workshop on standards and there are two sessions of interest:

Action 23 how can public authorities ensure that best use is made of existing standards in public procurement in order to avoid lock-in into proprietary technology and enhance interoperability:

This relates to the issue of varying specifications for tenders on public procurement. i.e. from the outline of the panel – Public authorities should make the best use of available standards when commissioning hardware, software and IT services from external suppliers. Yet, the practices of public authorities across the EU vary greatly when it comes to writing tender specifications for public procurement. In some cases, public authorities find themselves unintentionally locked into particular IT solutions for decades, simply because they failed to draft sufficiently flexible tender specifications allowing for open choices in technological evolution. And

Action 25 how to boost interoperability (and innovation) in the absence of formal standards, e.g. through the licensing of interoperability information:

Companies which dominate the ICT sector achieve wide market penetration of their products and services. If their products are incompatible with those of other brands, users feel locked into the dominant company’s product range, for fear that any new devices they purchase will not be compatible with their existing equipment.

Re Action 25, the discussion goes further that: Companies should provide interoperability information about their devices and applications. With this information available, smaller enterprises have the opportunity to develop applications and services compatible with those offered by dominant market players. The end result will be an extremely competitive market and a happy consumer.

Thus, behind the single market goals, we have a more complex set of issues and I would like to debate these on talkstandards. I was trying to think of a parallel, ie any other instance when similar initiatives were undertaken – but I cannot! Would be interesting to see what views we capture at talkstandards.

Let us focus on the issue within the topic “Twelve projects for the 2012 Single Market” of European services standards as distinct from the impact of the effectiveness, efficiency and inclusiveness of the European standards system on that question.

While of course to separate these issues removes the very interesting political and philosophical debate whether it is wise or not to revise the European standardisation system to extend it to services based upon the performance of the European standards system to deliver relevant services standards to the market. My rationale is that the best predictor of future performance is past performance. Those who believe that the European standards model largely oriented to products has performed well in the past will see benefits to its extension to services in the future. And those who believe other standards models have better served markets in the past will reach negative conclusions.

If we remove the efficiency factor, the material strategic question becomes which services standards are relevant and what geographical scope is in question?

GTW Associates addressed the first question in papers presented in 2002 at DIN in Berlin [1] and the AFSMI S-Business Education Summit. [2] DIN had contracted with GTW Associates to complete a study Service Standardization in the United States Overview of current activities and issues [3]

GTW identified for DIN the sectors below from the view of potential role of standards upon the global services market place.

• Advertising Services
• Audiovisual and Related Services
• Construction
• Distribution Services
• Education and Training Services
• eGovernment
• Energy Services
• Environmental Services
• Express Delivery Services
• Financial Services
• Health Care
• Legal Services
• Telecommunications, value-added network, and complementary services
• Tourism Services

2002 was an interesting time for the services sector globally. The Doha Development Agenda Negotiations in the World Trade Organization (WTO) were beginning and governments around the world were requesting recommendations for negotiating objectives and examples of impediments to trade in services.

Indeed services have non trivial economic impacts in the US markets global markets. Services in the US economy account for 78% of US gross domestic product compared to 22% for goods. The United states leads the world trade in services with a market share of 20%. And in 1999, the US produced an $80 Billion surplus of trade in services while trade in merchandise produced a 348 Billion deficit.

With respect to geographical scope the strategic question for services standards becomes whether a European regional or International approach is optimal?

In 2002 there was beginning to accrue reasonable experience around the world with the standards policy text of the WTO Agreement on Technical Barriers to Trade [4] and in particular the special role reserved for “international standards:”

In cases where technical regulations were required, that in accordance with Article 2.4, Members were obliged to use relevant international standards or relevant parts of them as a basis for their technical regulations except when such international standards or relevant parts would be ineffective

Evidence was mounting in global product markets that “international” standards carried strategic impacts that national and regional standards could not deliver.

However there was less experience with the General Agreement on Trade in Services (GATS) [5] and in particular its standards principles remarkably parallel to those of the TBT:

With a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines

In determining whether a Member is in conformity with the obligation …, account shall be taken of international standards of relevant international organizations[1] applied by that Member.

The term “relevant international organizations” refers to international bodies whose membership is open to the relevant bodies of at least all Members of the WTO.

Members shall work in cooperation with relevant intergovernmental and non-governmental organizations towards the establishment and adoption of common international standards and criteria for recognition and common international standards for the practice of relevant services trades and professions.

Nevertheless the parallels are striking. GTW observed in 2002 with respect to international standards for services:

The strategic question is not “if” such standards will come to pass, the strategic question is who will write them and what will they require [6]

Any services business that does not contemplate its strategic global position and its global stake in international standards setting limits if not dooms its future

So my query to the European standards policy makers is why with respect to services standards have you stopped at the confines of what constitutes Europe these days? Is this not a strategic blunder? Should not the objective be a global market?

It could be a strait jacket definition of the term “International Standard” and or “International Standard Organization” that some European standards policy makers have proposed within the WTO Negotiating Group on Market Access for non-agricultural products round of discussions in Geneva. [7] It could be that the term “International standard” as understood in one context of products may be understood in the second context of services.

The United States submitted a proposal within the WTO NAMA March 29, 2011:

The United States notes the submissions relating to international standards advanced by other Members in the Negotiating Group on Non-Agricultural Market Access (NGMA). The aim of some of these submissions is to name specific standardizing bodies, and to deem that any standard developed by these bodies is a relevant international standard within the meaning of the WTO Agreement on Technical Barriers to Trade (“TBT Agreement” or the “Agreement”). The United States does not share the views advanced in these submissions as they would undermine the principles of the Committee Decision, and put the World Trade Organization (WTO) in the position of picking winners and losers among non-governmental, private sector bodies that produce standards. [8]

The European Union and others had proposed [9] to name the International Organization for Standards (ISO), International Electrotechnical Commission (IEC), the International Telecommunication Union (ITU) and Codex Alimentarius as sources for relevant international standards within the meaning of the WTO Agreement on Technical Barriers to Trade (“TBT Agreement” or the “Agreement”) provided that in their development the principles and procedures set out in TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations with relation to Articles 2, 5 and Annex 3 of the Agreement were followed

The US instead proposed the definition for an international standard to be:

For purposes of the TBT Agreement, an international standard, guide or recommendation is one developed in accordance with the principles set out in the Decisions and Recommendations adopted by the Committee since 1 January 1995, G/TBT/1/Rev.9, Annex B (Decision of the Committee on Principles for the Development of International Standards, Guides and Recommendations with relation to Articles 2, 5 and Annex 3 of the Agreement) (Committee Decision) issued by the WTO Committee on Technical Barriers to Trade (TBT Committee). These six principles are: 1) openness, 2) transparency, 3) impartiality and consensus, 4) relevance and effectiveness, 5) coherence, and 6) the development dimension [10]

In this regard the US decentralized market oriented bottoms up approach allows materially interested parties including those in Europe to pursue services standards within the international standards process described by the latter principles. We welcome global participation.

So why is progress so slow? Many challenges remain in creating successful electronic medical records and a key concern is the fact that technical standards vary and multiple systems cannot ‘talk’ to each other.  Sharing of information is also challenging with different types of records varying in the content they contain. For example, some will have a list of tests performed, but no access to the results. Not many doctors currently use electronic health records, so the field is still in its infancy rather than being an established way of working and thinking. Last but not least, the control of data and privacy issues are contentious and the patient does not necessarily have ‘ownership’ of their own data.

Given all these hurdles, creating a successful strategy for the future will involve multiple factors including substantial redesigning of business processes within healthcare systems – be they in the public or private sector. Technology alone is not going to make a difference unless working processes also change along with the times. Medical staff including doctors, nurses and administrators will require appropriate skill levels and skill sets to use and adapt to new systems. Importantly, the input of clinical content itself will also need to be standardized wherever possible, to facilitate the creation of standardized outcomes.

In practice, health systems in Europe and in the USA encounter these problems and more when they attempt to modernise medical records and bring them kicking and screaming into the 21^st century. Since many European systems are publicly funded they rely on the political will to finance and introduce new systems which do not come cheap. The costs and problems associated with the legendary NHS ‘spine’ of databases, for example, have become legendary and not led to significant improvements for patients despite billions of pounds worth of investment.

While it sometimes appears illogical to patients that their records are held in bulky paper files which must be couriered or transported by hand when they use a new provider, the reality of automating and computerising healthcare records is extremely complex, as well as costly.

Outside of what happens within health systems themselves, some patients are also taking the initiative – facilitated by innovative companies such as Google, Microsoft and Kaiser Permanente (the American Health Maintenance Organisation) -  to try to create their own personal health records. Again, difficulties exist, both in persuading healthcare providers to agree to give up the data and also in accurately interpreting that data once it arrives with the customer. So far, only a small number of hospitals have signed up to download data to Microsoft and Google — and what they are sending is often quite limited.

All sorts of different things are meant by the term “personal health record.” The idea behind the Google and Microsoft sites is that you will be able to have full control of your data and share it with anyone you want. But some so-called personal health records instead give a patient a way to peek inside a hospital system’s existing electronic records systems; without being able to download the data to a place you control. Still other insurance companies offer personal health records that allow you to look at specific types of data such as information on claims.

Building confidence in the reliability of these types of records will form a key part in widening their use. In a field as emotionally fraught as healthcare, mistakes can take their toll on both upset patients and liable providers who may incur substantial risks in not providing the right data.

In the long-run both the European and US markets can benefit greatly from the efficiencies which will ultimately be created by the wider use of electronic health records. Based on the catalogue of problems identified above, that day, however, is still a long way off.

Helen Disney is the founder and CEO of the Stockholm Network, a pan-European think tank.

While there are indeed many hurdles to overcome, I believe that there are many opportunities just around the corner.

Helen Disney’s post highlighted the growing role of private companies in the e-health field and it is these companies who could trigger innovation.

But before we realise that potential, we have to grapple with the problem of standards

I have been looking at standards across various domains in the ‘week in standards’ series and the standardization challenges of e-health are not unique. We see the same issue in other domain, for example Smart Grid standardization, where we have long standing legacy systems, huge bodies of data and existing processes which are difficult to change

But all these fields are fundamentally transforming through technology.

Take e-health

@Bart Collet had a very insightful presentation on the future of e-health specifically focused on m-health mHealth is Huge

The two images are from slides in that presentation.

Essentially, the Point of Care has changed and moves from the hospital to your home and to your body.

This is a fundamental shift and creates huge opportunities for technology

So, I think that the greatest opportunity for standards will not be the existing systems but in systems new changes to the system. This is the greatest opportunity for new standards

We cannot put old standards in new wineskins.

Ajit Jaokar is the founder of the London-based publishing and research company Futuretext and co-editor of Talkstandards, http://www.talkstandards.com/author/a-jaokar/

This forthcoming article is part of Talkstandards’ upcoming event “Recent Developments and Transatlantic lessons related to Health IT” and will be published Tuesday 3rd May.

• GMT 15:00
• Europe: CET 17:00 / London 16:00
• US: Eastern 11:00 / Pacific 08:00
• Beijing 23:00
• Sydney 01:00 (4th May)).

See here: http://www.talkstandards.com/recent-developments-and-transatlantic-lessons-related-to-health-it/

Helen Disney, is founder and CEO of the Stockholm Network, a pan-European think tank. http://www.talkstandards.com/author/helen-disney/

This forthcoming article is part of Talkstandards’ upcoming event “Recent Developments and Transatlantic lessons related to Health IT” and will be published Tuesday 3rd May.

• GMT 15:00
• Europe: CET 17:00 / London 16:00
• US: Eastern 11:00 / Pacific 08:00
• Beijing 23:00
• Sydney 01:00 (4th May)).

See here: http://www.talkstandards.com/recent-developments-and-transatlantic-lessons-related-to-health-it/

MG: Is standardization for interoperability going to be conducive to innovation and entry so that we get benefits for consumers?

GA: I think that standards are critical as cost of energy goes up. And it will go up. Consumers are going to be looking for ways to help them conserve energy so they can spend less  on energy. Measures such as innovation in terms of new applications and smarter appliances, getting rebates from the utility because they have the ability – maybe through an aggregator – to manage some of the demand on the system, are all going to be necessary. We get the best solutions if we have a competitive market of suppliers who are competing with innovative applications and technologies to achieve this.

MG: Do you think that the conditions and incentives will be there to get sufficient returns on investment for entrants?

AJ: At this stage I think that there is clearly a lot of interest in the start-ups and people like that especially trying to do something. But I think we still need some more things before we start to see a big enough network or a big enough market. The bottom line is that standards are ways to create a market in some shape or form and of course we would not be here had we not this sort of push to create this kind of thing, because the reality is that it doesn’t necessarily have to happen. None of these people have to necessarily talk to each other.

But the reality also is that you need to obtain networks, look at telecoms and the simple upgrade to LTE and other 4^th generation technologies. Like George said, if you didn’t do it you would have more cost because the traffic has gone up and something has got to manage it. It’s all about networking needing to be upgraded to handle traffic.

MG: Are there any parallels to mobile networks in terms of risks and opportunities in the Smart Grid space?

GA: I don’t really see it that way because this is an area in which when it comes down to it, you’re really supplying electricity. And energy has to obey the laws of physics and the laws of physics don’t differ from country to country. I really don’t see that standards are going be a real strong competitive advantage for one country.

MG: But still, don’t you think that standards could play a role in terms of creating say a potential for US exports of Smart Grid technology?

GA: I would say that standards enable free trade so that there aren’t barriers to accessing markets and that’s what we’re trying to achieve. I would say the standards create a level playing field which benefits everyone. I think the real competitive advantage is going to come through either lower costs or better performance in systems. Most of the suppliers in this industry are global companies and so it’s to their benefit to have global standards.

MG: Do you agree that if there is a parallel between the internet and the Smart Grid, this could really be a huge business opportunity for US innovative companies?

GA: I could. But it could also be huge opportunity for European, Japanese or Chinese companies.

MG: Do you see this kind of innovation taking place in Europe?

AJ: I don’t see that real top-down push in Europe. There is certainly a lot of talk and a lot of interest. But essentially I don’t see the funding we have seen in the US.

I think in terms of taking the opportunity, yes. Because those European companies are pretty global as well and we have so many names, such as Nokia etc. So I think that shouldn’t stop once you have enough of an open market place then anyone should benefit in the European market.

KD: To me it seems that standards enable things to happen, they don’t make things happen. To take that point and to put it in the context of what is going to make some winners and some losers out of entrants into the Smart Grid space, the fact that we have standards means that all of these entrants can play here, but it doesn’t mean that they necessarily will. There are other rules that control who win or lose in this game.

To give you one example: consider people that are doing in home displays and providing information to the customer. If we close off the access to utility information to those 3^rd party providers, they’re not able to send dynamic price signals through their informational display to the consumer, they lose out on a big degree of functionality when it comes to what they can provide to the consumer. This is a way of rigging the game to make them losers, whereas if the utility can provide that information to the customer, they have a competitive advantage. So just because we have standards where equipment and protocols are there so that things can speak to each other, doesn’t to me determine the competitive edge or contours of the playing field.

MG: Can you give us a final thought on why is it motivated to have this kind of special treatment of the Smart Grid and what is it exactly that explains this particular situation?

GA: Let me make two points on that. One, if I think of another infrastructure that is one of the great achievements of the last century, the telephone network, that infrastructure was developed largely by a regulated monopoly; i.e. AT&T. Bell Laboratories was the R&D outfit that did the systems engineering over many decades. When the industry got broken up in a new competitive model and much more fragmented, you had that starting point which provided a cohesive base from which things could evolve.

The same conditions don’t exist in the electric grid because there never was a regulated monopoly that had a cohesive standards based system. With two trillion dollars of investment that is going to have to take place over the next 20 years, we want to make sure that those investments which are going to be made by the private sector – the federal government has only put in around $11 billion in the electric grid – aren’t wasted in a hodgepodge of systems that don’t work together. Alternatively those investments could result in something that really allows us to integrate clean energy and increased efficiency. It’s just too great a priority to hope for the best.

It took us eight years to put a man on the moon. This is as difficult, and it’s going to take several decades.
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For the video of the discussion and profiles of discussants see here:
www.talkstandards.com/interview-with-george-arnold

Part 1 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-1

Part 2 of the discussion can be found here:

www.talkstandards.com/the-us-smart-grid-future-part-2

Part 3 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-3

Part 4 of the discussion can be found here:

www.talkstandards.com/the-us-smart-grid-future-part-4

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MG: There are no specific factors that suggest you need a hair dryer that works in the US but not Europe, but that’s a reality is it not?

AJ: To me I think the Smart Grid will be won or lost on the consumers. I had this very disruptive discussion yesterday when I said that you really technically wouldn’t need to go much beyond the smart-meter. For example, you could do a lot of what the demand-side and customer-side want to achieve can be done through normal things like HomePlug and other technologies like that, which is essentially connecting devices to the internet. But, you don’t necessarily have to go deep down into the energy networks at least in the first phase. And that could be very disruptive. I mean you could at least conceptually achieve what the customers want without getting too far down. But of course you need the whole vision of smart grid to get the wider vision, the green vision, the electric cars etc. But the consumer’s needs, to reiterate your point, are global. That is pretty much IT standardization which has been around for a while.

GA: To just add in to that point. We’re trying very hard to not just have US standards. We’re trying very hard to pick international standards because we want to see the market develop globally and the reason is very simple. Most of the suppliers in this industry are global companies and if they have to make needless adaptations as they move from market to market it increases their cost, making the equipment more costly for utilities and electricity more costly for consumers. So our view is that everybody wins if we have global standards. The area where that is going to be difficult is that we do have imbedded infrastructure in terms of 110 vs 240 volts, and so forth, that will probably never overcome. But when you get to the information overlay and energy management aspects of the Smart Grid there is probably no reason why the standards need to be different.

MG: But still, NIST’s work in this area and the Obama administration’s initiative to work on interoperability in the Mart Grid is a US initiative?

GA: We are very actively reaching out to other countries that are working on similar issues so that we can all be at the table as we work through the use cases and what the requirements are. We set up something called the Smart Grid interoperability panel that I think over time will become something like the internet architecture board is for the internet. We have the governments of Japan and Korea participating in that and we’re developing a relationship with the EU though CEN-CENELEC and ETSI. I think at the end of the day, everyone needs to look at what they need to do to serve customers in their country or state. But we can all work through the design of the system together and hopefully maximize the commonality.

MG: There are some that argue that the customer experience, or at least how they perceive the Smart Grid, is not all that great so far and there is an awful lot of criticism from the consumer side. What would explain this kind of sentiment and how is this problem going to be resolved. What is needed in terms of solving this problem?

KD: I think you’re right that it’s been a mixed reaction from the fairly embryonic roll-out to today from the consumer’s perspective and I think that there is a largely an experiential and educational deficit from the consumer’s perspective when it comes to Smart Grid. Which is to say that the value proposition for Smart Grid in terms of what it can do for the consumer both in terms of energy awareness and savings, when it comes to their utility bill, has not been fully explained or appreciated by consumers largely. And to some extent utilities are to blame for this, but to some extent their not because utilities themselves are going through the experiment of working out what this idea of Smart Grid means for the consumers.

There is also a kind of chicken and egg situation here too. For the consumers, in many instances, to fully appreciate the impact of what the Smart Grid can bring to them, you need to have some sort of dynamic pricing. In order to have dynamic pricing you need to have a sufficient number of consumers in a state participating in a program so that this makes sense.

So in many instances we have this experimental roll out of Smart Grid and we have some 3^rd party vendors that are trying to provide information to the consumer were we don’t have a full package where the public utilities commission has authorised a program of some sort of dynamic price signals so that people can really start to appreciate what those signals mean to their bottom line. I think this is going to happen in a haphazard, organic, incremental and somewhat painful way as we go forward, and there is no real way to solve that issue smoothly.

MG: I think there is one issue that I am struggling with and that is the fact that the Smart Grid may deliver great efficiency and benefits in terms of savings of resources that are not necessarily priced at the current state. For instance, if you take the impact of fossil fuels on the climate or on the environment, those costs are not priced within the current system. If the Smart Grid delivers a value in terms of saving those costs, it’s going to be of great benefit to society but it’s not going to end up in any substantial savings for the customer. How do you deal with the fact that the greatest benefit of the Smart Grid may well be something that is not showing up in monetary savings that is evident to the consumer?

GA: Well that’s an issue. There’s no question that having a price on Carbon will make the economics of the Smart Grid much more transparent and quantifiable. But I think absent that in the US, as Congress hasn’t done that, we do have the in most of the states in the US have set renewable portfolio standards. That in effect means that since most renewables are more expensive than traditional forms of generation, through these standards that they have set their not going for the least cost energy, their going for energy to meet certain environmental goals.

MG: How do you deal with the problem, that even if you distribute some of the gains to customers, it may well be so small that it is not material to the decision?

GA: This is where the business model and the regulatory model are going to have to adapt to the future. In many of the Smart Grid investments, the entity that has to make the investment is not the one who reaps the financial reward. So you don’t have the right incentive to make the investment. One of the benefits we have in having fifty different states dealing with this is that their trying different approaches to find the right way to provide the economic incentives to do the right thing. And we do have an organization where the state regulators get together and discuss best practices.

MG: Isn’t there a risk that some of these states will then invest themselves into something that is really suboptimal or inferior?

GA: Well hopefully they will find that out before it’s too late by looking at the results of other states that are taking different and perhaps better approaches.

KD: I think that your point as to the fact that some of the savings of customers’ perspective are going to be fairly small and whether that is enough to really incentivise them to participate fully in the Smart Grid is a very good question. Which is to say that we still haven’t worked out the business model from an average consumer’s perspective of: these are the gains you’re going to make for Smart Grid, and given those gains, how much time and energy are you willing to invest in making sure that your energy is managed optimally?

That said I think that it would be a mistake to cabin all of the benefits of Smart Grid into financial remuneration from a consumer’s perspective. There are lots of non-financial reasons and drivers of why a customer would want to participate in Smart Grid. Some of this has to do with these larger global or national externalities which you were talking about, that don’t reside on any specific consumer but reside on the shoulders of all of us. Whether it’s a public consciousness or a zeitgeist, there are lots of other reasons to participate in something like this, in terms of managing their own energy.

AJ: I’d just like to add to this thing about this value. I mean in a sense of where I the value created in many ways for the customer or somebody else. While the Smart Grid is a new type of network, networks themselves are very old and they behave in a very predictable way, basically by getting value to the edge of the network. You see this in telecoms and in IP and so on and so forth. Where I think this would be interesting is that somebody who is an innovator would be kind of utilising the Smart Grid to create something that none of us would see today.

This is my point. About three weeks ago the Sony Walkman was discontinued after 20 years, and today Apple is the dominant player and Apple is not exclusively hardware unlike the Sony Walkman, Apple is hardware plus software. So clearly the value created by these players is the mixture of the intellectual property plus the physical stuff. And that is because you then have this network and these players who are creating new innovation. I think that the whole question of value when it comes to Smart Grids has to also consider the side of these new 3^rd party players who are actually software players or integrated players or innovators or start-ups. You can call them many names but that is the value to society and the community and the grid itself.

GA: Getting back to the economic picture from a consumer’s point of view. You have to look at the big picture and consumers are going to have difficulty in grasping this because in the US the asset face of our utilities currently about a trillion dollars and over the next 20 years, to replace retiring coal plants and upgrade coal plants to produce cleaner energy – investments in transmission and distribution, etc. – something in the order of two trillion dollars will have to be spent. That is a huge number especially when you consider that there a trillion dollars in assets today.

The result of this is that there is going to be upward pressure on electric rates just to keep the lights on, it’s inevitable. So if we don’t have the Smart Grid, the costs to consumers are going to be increasing much more than they would otherwise. So if we had a Smart Grid that could shave 20% of the peak generation that’s needed as we retire coal plants, perhaps some of them don’t need to be replace. The Smart Grid would enable that. Consumers are not going to want to hear this, but the fact of the matter is that the Smart Grid will result in rates going up but less than they would otherwise, just in order to keep the lights on.

MG: So essentially what you’re saying is that the price per kilowatt hour may go up, but the total cost may go down?

GA: It’s not clear that the total cost will go down because the rates today are based on an asset base which is very largely depreciated. Transformers are typically about 40 years old. Coal plants are nearing the end of their lifespan and when you’re operating on rates based on fully depreciated assets, that really understates the cost.

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The discussion is continued in Part 5 which can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-5

.For the video of the discussion and profiles of discussants see here:
www.talkstandards.com/interview-with-george-arnold

Part 1 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-1

Part 2 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-2

Part 3 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-3

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Mattias Ganslandt, George Arnold, Ajit Jaokar and Kevin Doran

MG: What do you see as the potential for the development of renewables and the interaction between renewable resources and the Smart Grid?

KD: I think that the basic point is a simple. By having a smarter grid you can hopefully predict to a greater extent when load from renewables is going to come on or come off and integrate that in a more optimized fashion into the grid. That isn’t to say that renewables are necessarily part of the Smart Grid. Smart Grid is something that I would think of as discrete from renewable generation, but done right it can enhance the deployment of renewable within the electricity system.

MG: But to what extent is the Smart Grid and Smart Grid standardization instrumental for say the development of bi-directional flows of electricity so that you have roof-top solar, and residential as well as commercial and industrial consumers also become supplies to the grid? Is that a critical issue?

GA: It’s absolutely critical because you have both metering and billing that must be bi-directional to support that, but just having the information available on the resources, so that you can keep the grid in balance is absolutely critical.

MG: Do you see prospects for the development of true market place here? Not only where you have the classical generation of electricity being provided but also alternative sources of supply?

AJ: Well that is going to be the real innovator for the Smart Grid because the Smart Grid technology will work, for better or for worse, it’s just a matter of time. The business model innovation will be the real investment driver and therefore the market places will develop as we discussed yesterday during the event.

MG: What do you see in terms of development of this kind of market place where you have this distributed generation and distributed allocation of consumption as well as supply? Are the conditions there for customers to also become suppliers?

KD: I think the conditions are potentially there, but I don’t think they’re there yet.

MG: Do the utilities have the incentive to put in bi-directional meters?

KD: Well, again under the existing federal support that’s been done in recent years there’s plenty of current financial incentive to do that. But there is an inherent tension between deploying a system that enables you to see less of you product to your customers and not get return on that investment or some sort of compensation for the energy efficiency that you have embedded into the system. There are ways of dealing with that issue. There are enhanced rate of returns which some public utility commission provide to demand-side management programs. There’s the concept called de-coupling which is used in some areas.

It’s important to understand that the traditional business paradigm which the utilities have deployed in this country for a long time will need to change and nobody is quite sure what that change will look like or how it’s going to happen. But we can all see the writing on the wall, which is if Smart Grid and demand-side management and distributed resources are going to scale and play a significant role in electricity profile on the United States, we’re going to need to change how we do business at the utility level.

MG: Moving to the question on standardization and interoperability in somewhat more detail. NIST recently came out with the finding that you have identified five families of standards; can you describe in somewhat more detail what these families are and how you identified them?

GA: Those five standards are a small subset of a larger set that was in the release 1.0 framework we published in January. In that framework many additional standards are still under development and so they are not at a point where regulators, who may want to adopt standards and regulations, are really ready to be considered. We see this as an ongoing process where NIST, working with the regulators in the US, will identify the subset of standards and the regulators need to be concerned with. There are many standards that regulators don’t need to worry about because they are just purely technical and dealt with by industry, but some are really fundamental and need some encouragement.

The five standards we identified are really akin to a data dictionary and grammar that allows different entities in the core of the gird itself to communicate. One of the standards deals with the description of entities in the transmission system, another deals with the distribution system, one deals with entities in sub-stations which need to be enacted upon, there is an inter-control centre standard and finally cyber-security standard to ensure that the communications supported by these other four standards are done in a secure fashion.

MG: What is your comment to this Ajit, are there any parallels to internet standards here? How should we understand this list of standards?

AJ: I think the key here is the observation that these standards, especially the cyber-security and the lower level and device level standards, are building blocks as we said. I think that’s a positive step and needed for the next levels of things. I’m curious to see how what happens in subsequent iterations of this process.

MG: Is this an efficient level of standardization or would you see a further role in terms of coordinated standardization?

AJ: The operative word here is “coordinated standardization”. NIST is not a standardization body and it is not concerned with standardization per se. So this is coordinated standardization and there will most definitely be more to come, it is the beginning as I see it.

MG: George, what are the biggest missing pieces in the standardization puzzle for the Smart Grid?

GA: There are many missing pieces but they’re going to work. The gap we need to fill urgently is the definition of the customer interface both in terms of the data the customers have available to manage their own energy usage and the standards that the appliance industry can use to manufacture appliances which can be marketed anywhere. We can’t have an electric dryer that works in New York State but not in Colorado, because they have different standards. There has to be uniformity. So getting agreement on those standards is critical to enabling the marketplace to develop.

However it’s tricky because we don’t want to pick winners and losers and find we picked Betamax as opposed to VHS. So we’re trying to get the industry to gather around a sufficiently small set of standards to allow the marketplace to quickly develop but in timeframe that’s less than the five to ten years it would normally take.

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The discussion is continued in Part 4 which can be found here:

www.talkstandards.com/the-us-smart-grid-future-part-4

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For the video of the discussion and profiles of discussants see here:
www.talkstandards.com/interview-with-george-arnold

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Part 1 of the discussion can be found here:
www.talkstandards.com/the-us-smart-grid-future-part-1

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MG: The role given to NIST is clearly to identify standards that can facilitate interoperability and make the different components work together. In terms of other issues – legally, technically and politically – what other obstacles do you see in the rather fragmented US market?

KD: I think the way you put the question is telling. NIST is really the bridge builder when it comes to the technical components, making sure there’s interoperability and components are speaking to each other and that there is an efficient technical architecture for Smart Grid deployment. That said, we have a highly fragmented regulatory system in the US for governing electricity and the locus of power when it comes to regulating large utilities is in state Public Utilities Commissions.

These commissions are not uniform in the way that they operate and allow cost recovery for different kinds of things. We have a situation in which we have many state commissions doing things differently and are limited in the extent that they are even able to coordinate with other jurisdictions and consider extra-territorial interest in making their decisions for their State. This is a grey legal area and it’s of great concern to regulators to figure out to what extent they can cooperate within their various regions so they can optimize for the greater good, as opposed to state specific interests.

At the national level we can’t do things without the extraordinary assistance and coordination of the Federal government. We have states with many different kinds of resources. For instance, some have very strong renewable resources while some would argue that states in the South-West have much less in terms of renewable resources. But the Federal government here can step in and play a critical organizing role in bringing these entities together.

So to answer the question, it is the fact that we have, in some respects, this cumbersome fragmented system that makes it difficult. But it is also important to understand that this fragmented system is there because we have very heterogeneous policies and resources throughout the United States.

MG: Some would argue that some of the state regulations are actually an obstacle to the development of the Smart Grid in terms of the incentives it gives to the utility to invest and innovate and deploy the Smart Grid and possibly to also let others in. Do you see a trend where the states are responding in a similar fashion to the task given by the administration and playing in a coordinated way with the efforts made by NIST?

KD: I would say it’s a mixed bag. You can see states like Colorado that seem to be willing at the utility commission level to allow cost recovery for Smart Grid deployment. But the truth is that in the United States we have a least-cost mandate for capital expenditures when it comes to utilities and Smart Grid as a technological deployment doesn’t fit in with the notion of least cost. That is unless you start internalizing the cost of doing the other kinds of status quo behaviour, which is not something that the PUCs typically do.

So you are seeing some utility commissions reject Smart Grid deployment efforts. For instance, this happened in Maryland. We are still, as a regulatory community, figuring out how to wrap our minds around the concept of internalizing things that we’ve never internalised before and understanding that the least-cost alternative over the long run is perhaps not the optimal or strategic choice. This is something we’re wrestling with.

MG: Why do we need interoperability for the Smart Grid?

GA: Where we are today with the existing grid is very much like where the computer industry was 30 years ago where you had different suppliers, like IBM or DEC, with proprietary architectures. So if a business had in one part of their operation a system which used IBM’s SNA architecture and in another part of the operation a minicomputer based DECnet system and you need to integrate them into an overall business process this became very expensive and sometime infeasible. With the Smart Grid we really need to have the ability to move information end-to-end, so that you could have wider invisibility of distributed renewable resources and be able to balance that effectively, and the ability to support charging of electric vehicles. You can’t do this without having interoperability and standards.

MG: Utilities have traditionally not been working all that much with interoperability issues. Is this something where the telecoms and the software companies are in the lead for the Smart Grid?

GA: Yes, this is an area of huge change for the electrical utility industry and I would say that two years ago the participation by the IT industry and communications providers in the Smart Grid efforts was very low which has new been reversed and they are now very strong participants. What we really need to do, and we are doing, is getting the collaboration of these different perspectives to design an end-to-end system which based on open standards, layered architectures and all the principals that allowed the IT industry to really transform.

MG: Is this accepted by the utilities? These other industries could potentially be their competitors in some of this Smart Grid space?

GA: Well with 3200 utilities, we haven’t called each one, but I would say the utilities that have the most resources and are doing R&D are very much behind this. They see this as increasing competition and innovation lowering their costs which results in lower costs to consumers – so this is a no brainer for them. The smaller utilities which are really followers will come along. The utility industry as a whole has bought into this concept.

MG: Ajit, do you see the parallel to the traditional “walled garden” in the telecom industry?

AJ: Yes, I come from the telecoms industry and have talked about “Open Gardens”; a play on words which alludes to the opening up of telecom networks. There are absolutely similarities and I think George pointed them out with the SNA example, which is not telecoms but is the same concept in that you really had to have SNA networks to get to IP before we actually started to see innovation at higher levels.

So my vision of this is that in many ways what we are seeing and what NIST is doing is ensuring interoperability at different levels: device levels, network levels and services levels. At the device and network level this is perfect because of that need new for the equivalents of IP and HTTP, because those protocols actually get people to talk to each other at the network and device level. At a services level that’s more complex. I think that’s where you perhaps need more innovation from the industry and third-party vendors. This is where I see this value that by bringing devices and network levels together we start to create what is conceptually what we see in the IT industry as protocols and device layer.

Ajit Jaokar

MG: How fundamental will the impact of standards for interoperability be on the market structure? How can standards facilitate innovation and entry by other firms than the classic firms?

GA: The ability to define well specified interfaces and services that are available openly, allows others to innovate on the other side of that interface. That’s our vision of what we’re trying to do.

MG: What’s that other side? Where is entry going to occur?

GA: I think you’ll see entry on the customer-side of the meter in terms of new applications that manage energy in residences in the same way that you have energy management systems in commercial and industrial facilities. You’ll be seeing the appliance industry imbedding software in appliances that will interact with the gird to help with demand response and peak shaving.

One of the real opportunities with the smart grid that’s very different to the current paradigm is that today we really just control the generation. We take as a variable what demand is going to be, it just about balancing generation to meet demand. You worry about what happens when you don’t have enough generation to meet the peak load. With the Smart Grid we have the ability now to simultaneously manage both the demand and the load on the grid and that will result in a much more efficient system. So I think you’ll be seeing the emergence of a market opportunity for players who will aggregate large numbers of consumers and businesses into a demand management business.

MG: Do you see a role for standards also to facilitate innovation and entry in distributed energy generation or is that going to happen anyway?

GA: The standards are critical. The laws of physics don’t get repealed with the Smart Grid so you always have to have balance between load and generation. And as you get more distributed generation how can a utility balance the grid if it doesn’t know how much generation is there, what its output is and the ability to do some forecasting or that output. So information about the distributed resources going back into the grid is a critical area where you need standards.

MG: Ajit, what about the European experience in this respect? Do you think that this is an area where the fact that the US has this national initiative to standardize is going to make the US gain a leading position in all of this?

AJ: I think that certainly it’s on the radar. People are watching what is happening with all of this. I think that if its execution achieves even some of the goals, you will definitely see innovation especially on the edge which you wouldn’t have seen without having the Smart Grid in the process.

What I feel is interesting, which both Europe and the US perhaps should be looking at, is what is happening in China and places like that. If you look at cities Wuhan, which is the China equivalent of the Smart Grid City, there is a lot happening there.

I believe that this will be a big differentiator because don’t forget that it the companies that execute it first that will be the market leader of tomorrow. So whoever is able to generate experience first in places such as Boulder will be able to go out and sell overseas. It there are clearly competitive positions to be considered here.

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The discussion is continued in Part 3 which can be found here:

www.talkstandards.com/the-us-smart-grid-future-part-3

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For the video of the discussion and profiles of discussants see here:
www.talkstandards.com/interview-with-george-arnold

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