Climate Crisis: How investors and the Internet of Things can help solve it
Global temperatures are on the rise, but concerns about climate change aren't the only problem for the energy industry and its investors – electric utilities are also struggling to adopt new technologies, to meet demand, and to prevent blackouts. Fortunately, the Internet of Things has the potential to address both CO2 emissions, the main driver of rising greenhouse gas levels, and an aging energy infrastructure at the same time.
The term “Internet of Things” (IoT) refers to physical objects that are connected to the Internet through embedded sensors and monitors. The uniquely-identified, low-power devices transmit data (often wirelessly), allowing account holders to monitor the objects online, or from a smartphone app. These connected objects are referred to as “smart.” There will be 50 billion such smart devices globally by 2020, analysts at corporate growth consulting firm Frost & Sullivan project.
Customers can analyze and visualize the data collected on sophisticated online platforms, which can generate mission-critical business insights. IoT also enables remote control of connected devices, based on the information received. This functionality can save companies and consumers both human and natural resources, including energy. IoT is penetrating several industries including healthcare, transportation, manufacturing, agriculture, warehousing, retail, and municipal services.
Smart Grids and the “Internet of Energy”
While IoT is increasing energy efficiency across multiple sectors, its greatest promise may lie in the modernization of utilities. Aging energy infrastructure is struggling to keep up with demand, and utilities are challenged to manage loads.
IoT can enhance load management by creating energy efficient, balanced “smart grids.” These streamlined grids have the potential to improve cost recovery and return on capital for utilities.
“Investment in smart grid technologies has increased substantially because of the growing power crisis worldwide and increased power losses during” transmission and distribution (T&D), analysts at Research and Markets report. “This has led to reduced operational performance of power plants, which is expected to have a positive effect on overall market growth during the forecast period.”
This holds true at a global scale. Analysts at TechNavio, a tech-focused research firm, expect smart grid investment worldwide to boom in 2015. Energy policies are driving uptake in Europe, and the T&D market for transformers, switchgears, electricity meters, and power cables is expanding in the Asia-Pacific region.
"With electricity utilities in countries such as Japan preparing for the nationalised grid restructuring program, investments in T&D equipment will gain pace," Frost & Sullivan Energy & Environmental Industry Analyst Avanthika Satheesh said in a press release.
"Other lucrative markets for T&D equipment manufacturers are Japan, South Korea and Australia. These countries will see investments in certain smart grid technologies such as distribution grid automation, smart meters and demand response systems rise. With the expected privatization of the Australian grid in 2015 and the mushrooming of microgrid projects in APAC, market participants should focus on these markets to boost revenues," noted Satheesh.
Home and Building Automation
Smart meters that enable two-way communication between consumers and energy companies are the key to smart grids. While traditional meters send information on consumption out to the utility, home smart meters also feed near real-time data on usage and pricing to consumers, either to an in-home display or a central home energy management system (HEMS). The data can raise energy awareness and motivate consumers to change behavior. There are already more than 50 million two-way smart electrical meters in use in the United States, according to the Energy Information Administration.
A two-way smart meter used by EVB Energie Ltd. Credit: EVB Energy Ltd., via Wikimedia Commons.
Some HEMS simplify energy efficiency by automating decisions based on information about current demand, energy price, and other data - a functionality referred to as “demand response.” To help utilities balance loads, for example, a HEMS might direct smart appliances and thermostats to use grid energy only during non-peak times.
“IoT can help reduce home energy consumption by over 40 percent in various applications,” analysts at Goldman Sachs stated in a 2014 report. “As the base of smartphone users grows…coupled with increasing digitization within the home, we see home energy efficiency, home comfort, and security as key areas of focus for industrials.”
While still in its infancy, the HEMS market was valued at $1.5 billion in 2013. IoT applications in smart grids and smart meters have the potential to save over 2.0 Gt of carbon dioxide equivalent in the energy sector by 2020. When scaled up for “smart” commercial office buildings, IoT could save 1.6 Gt of CO2eby 2020, the Carbon War Room Projects.
IoT May Boost Adoption of Renewable Energy
Smart grids also have the potential to expand the market share of renewable energy. Integrating solar homes and demand response systems into the grid can address concerns about aging infrastructure and the reliability of renewable energy at the same time.
Net metering (a system allowing solar customers in some states to sell excess energy to the utility) is a first step toward this approach. Without the right technologies, electric utilities have been fighting net metering. IoT and utility-scale battery storage are now changing the game for all stakeholders. The combination of these technologies enables utilities to pull energy from residential solar panels and other distributed energy sources, and store it until needed during peak demand.
"[S]mart grid optimisation appears to be the optimal means to ensure that decentralised energy generation succeeds," Frost & Sullivan Energy & Environmental Industry Analyst Pritil Gunjan noted in a press release. "It also helps energy suppliers, who are constantly trying to control the levelised cost of generating electricity from renewables to achieve grid parity, reduce emissions, and decrease the energy generated from fossil fuels."
While smart grid implementations are currently infrastructure-intensive and subject to local regulatory roadblocks, Green Tech Media projects the cumulative value of the smart grid market will exceed $400 billion by 2020.
IoT is also poised to make a significant impact in the transportation sector. Traffic signaling is one area of application. While traditional traffic signaling relies on static schedules, adaptive signal control technologies (ASCT) use data from sensors to adapt to changing traffic patterns, accidents, and weather. ASCT keeps traffic flowing and reduces congestion, which reduces traffic-related vehicle emissions.
“On average ASCT improves travel time by more than 10 percent,” according to the U.S. Department of Transportation. When applied to all transportation sectors, IoT can save nearly 1.9 Gt of CO2e by 2020 by routing trains, trucks, planes, and ships as efficiently as possible. Fleet owners, however, will need to balance benefits with the knowledge that fleet management applications that involve embedding sensors in vehicles may limit vehicle resale and leasing options.
Smart technologies are also streamlining city parking. Smart parking systems aim to reduce greenhouse gas emissions and traffic congestion by making it easier to locate parking spots. The search for spaces in a 15-block area of Los Angeles alone produces 730 tons of carbon dioxide annually. Proximity sensors installed on street surfaces, parking meters, or garage roofs sense when spaces are empty and transmit the data. Drivers can view a map of available parking spaces through a smartphone app to save fuel and time.
Projects have already been implemented in San Francisco and London, and there will be total of nearly one million smart parking spaces globally by 2020, according to Navigant Research.
“North America is expected to have the highest market share in terms of revenue for the global Smart Transportation Market, while, Asia Pacific (APAC) is expected to show a potential growth with the highest Compound Annual Growth Rate (CAGR) for the overall forecast period due to technological advancements and leading smart transportation vendors concentrating in the region for expansion,” analysts at Markets and Markets say. “Middle East and Africa (MEA) and Latin America (LA) markets are showing are also in the growth phase of the Smart Transportation Market, hence could be good regions for investment in the next [five] years.”
The smart transportation market as a whole will be worth $138.76 billion by 2020, the market research firm reports.
IoT is just as valuable in rural areas as it is in major cities. The technology will be instrumental in meeting future farming challenges, according to Beecham Research.
“Precision agriculture” uses smart sensors to monitor soil conditions, moisture levels, temperature, cloud cover, pest counts, air quality, crop maturity, and livestock activity. The data can help farmers save water, fuel, petroleum-based chemicals and fertilizers, and costs while increasing crop yields. Precision agriculture could save as much as 1.6 Gt of CO2e by 2020, according to the Carbon War Room.
Perceived Risks for the Internet of Things
While the market for IoT is growing, a number of issues must be ironed out before it can reach its full potential. For example, while smart buildings hold great promise, the limited number of turnkey solutions available often means dealing with different vendors for different aspects of a project. The up-front capital required for smart building implementations is also a barrier for smaller real estate companies.
Interoperability is perhaps the largest hurdle to wider implementation of IoT. Integrating various objects and brands into seamless networks is no small feat, despite the potential efficiencies. Companies need to have the supporting infrastructure for IoT applications. And data security must be addressed before companies, governments, and homeowners become more comfortable with smart technology.
Behind the scenes, standards organizations are developing protocols to address the technical challenges. The Flexiblepower Alliance Network (FAN), for example, offers an open source standard for seamlessly connecting household appliances and devices to energy management services. Home Connect is an open source system for European brands. And the European Telecommunications Standard Institute (ETSI) is working to standardize Machine2Machine (M2M) communication privacy. Once achieved, IoT standardization has the potential to revolutionize the energy industry.
Companies to Watch:
* Cisco Systems (NASDAQ:CSCO) – Cisco Systems is a major IoT provider.
* Deere & Company (NYSE:DE) – John Deere offers the FarmSight platform for precision agriculture.
* GE (NYSE:GE) - GE is a major provider of smart technologies including grid, streetlight, and Industrial Internet solutions.
* Honeywell International, Inc. (NYSE:HON) - Honeywell offers automated building and industrial control services. Its Smart Building Score is the first grading system for smart buildings.
* Iteris, Inc. (NYSEMKT:ITI) - Iteris provides information solutions to the transportation and agriculture markets.
* Itron (ITRI) – Itron is a leading provider of smart meters.
* Panasonic (TYO:6752) – Panasonic offers SMARTHEMS, a home energy management system.
* Schneider Electric SE (EPA:SU) – Schneider Electric produces smart grid solutions and energy management systems.
* Siemens (FRA:SIE) – Siemens provides integrated solutions for commercial buildings and industrial systems.
* Silver Spring (NYSE:SSNI) – Silver Spring offers IoT solutions for both utilities and homeowners.
* Smart Parking, Ltd. ( ASX:SPZ) - Smart Parking has been chosen for projects in the cities of Westminster, Perth, and Cardiff.
Kate Dougherty is a freelance writer and geographer specializing in stories about where science, technology, and the environment meet. Her work has been published by Earth Island Journal Online, Next City, EnvironmentalScience.org, and the American Society for Mechanical Engineers. Prior to her freelance career, she was contracted to the U.S. Environmental Protection Agency libraries for six years, and also served as Assistant Professor/Geosciences and Maps Librarian at the University of Arkansas.