When we started Digipede (more than 7 years ago!), my partners and I had spent more than a decade working together in the electric utility industry, and frankly were ready for something new.  While some of the ideas that eventually became Digipede had been rattling around in our heads for years, we built the Digipede Network as a general-purpose grid computing framework, not a tool for electric utility IT departments.  Indeed, while we knew grid computing was important in finance, military, biotech, and manufacturing applications, we didn’t think utilities would be particularly interested.

I guess you never know.

Over the past year, one of our hottest segments has been the electric utility industry.  We now have customers in generation, transmission, distribution, and power marketing companies, running a variety of applications from risk management to market simulation models.  We’ve had an opportunity to work with utility software giant Ventyx (recently purchased by even-more-giant ABB, the same ABB that bought our previous utility software company Energy Interactive — I think the world really is smaller than I realized…).

Our first bit of collaboration with Ventyx has involved adapting their energy planning and analytics software tool, PROMOD IV, to run on the Digipede Network.  This has been an instant hit with utility customers.  (OK, the phrase “instant hit” may not quite capture the pace of utility procurement processes, but you get the idea.)

PROMOD is a very detailed simulation model, and users often have to run thousands of scenarios — so projects can take days to complete on a single high-performance workstation.  (Indeed, my first encounter with PROMOD was in the early 1980s, on a mainframe at Portland General Electric, but that’s another “small world” story…)  Users tell us they end up walking from machine to machine starting multiple runs before going home at night — we call this behavior, which goes far beyond the utility industry, the “sneaker grid.”

Not surprisingly, “sneaker grid” users make GREAT Digipede customers, because (a) they know how inefficient and limited such manual work is, and (b) work is really piling up!  Ventyx knows this too, and actually had a grid solution through Sun a few years ago — but nobody wanted to install a Sun grid for a single application when all their other infrastructure was on Windows.  Opportunity knocks…

Now PROMOD IV users have a scalable solution that allows them to get order-of-magnitude increases in modeling throughput, using the tools and platform they already know and understand.  Ventyx and Digipede worked together on a description of this solution, which can be found here.

So now I’m a grid computing guy AND a utility guy.  Full circle.

First, let’s not bury the lead:  Our PV system generated 36.5% of the electric energy used by our house in the past year, saving 52.8% of the money we would have spent on electricity.  Further, we received a 7.7% return on our investment, tax free, and it looks like that will go up next year.

Now, details.

Energy production

We bought our PV system from Borrego Solar last spring, while we were replacing our leaky roof.  The main components were 18 PV Modules from Sanyo (about 188 Watts each), and one Xantrex power inverter (for converting DC power from the panels to AC power for the house).  The installation went smoothly, and the system has operated without a hitch for the past year.

My calculation of our savings is based on several inputs.  It’s possible to find the amount of energy supplied by PG&E (that’s on our meter, and on our bill every month).  It’s possible to find the total energy supplied by our PV system (the cumulative energy produced to date is available from the LCD on our inverter).  So the amount and percentage of energy supplied by the PV system is straightforward:

9,261 kWh supplied by PG&E + 5,323 kWh supplied by our PV system = 14,584 kWh total consumed by our house, so:

5,323 / 14,584 = 36.5%

Monetary Savings

So far, so good.  Calculating the monetary savings is quite a bit more complex, since the good folks at PG&E and the California Public Utilities Commission have created residential rate structures that are as much about social engineering and income redistribution as they are about electricity, but let’s have a look.

We’re on the usual PG&E residential rate, E-1 (which can be read in all its glorious detail here.)  The most important attribute of this rate is that the price per kWh increases with the amount of energy the customer uses each month.  So you pay less for the first few kWh, more for the next few kWh, and so on until you’re paying A LOT more for your last kWh (especially if you have a big house, three kids, a pool, an air conditioner, multiple computers, electric oven, electric dryer, and so on.)  The rates by “block” of energy consumed are:

Total Energy Rates ($ per kWh)

• Baseline Usage $0.11531
• 101% – 130% of Baseline $0.13109
• 131% – 200% of Baseline $0.25974
• 201% – 300% of Baseline $0.37866
• Over 300% of Baseline $0.44098

The “Baseline” amount varies by region, but it’s small relative to our household usage, so without the PV system, we usually end up using at least some energy in that last “Over 300%…” block, where the price is very high. (Indeed, this rate went up during the year, which complicates the analysis a bit, but it’s just more rows in my spreadsheet — no big deal.  But to give you an idea of how wonderful it is to put up with PG&E as our utility, the price of the top block went up from 35.876 cents per kWh to 44.098 cents per kWh this year, an increase of about 23%.  This year alone.)

This rate structure, known as “increasing block rates,” is California’s way of reminding everyone (again) that it’s expensive to live in California.

On the bright side, it’s also a great way to encourage conservation and the installation of alternative energy systems like our PV system.

As mentioned above, the PV system only generates about 36.5% of our total electric energy consumption — but it displaces our most expensive purchases from PG&E.  Since we’ve installed the PV system, we’ve almost never had to buy any “top block” power from PG&E.  By reducing our consumption of the most expensive power to essentially zero, we saved a much higher percentage of the money we would have spent on power — 52.8% to be exact.

Here’s the month-by-month breakdown:

Investment Analysis

But — is this a good investment?  How does putting up a rooftop PV system stack up against other potential investments?

Well — after a substantial rebate from California and a substantial tax deduction from the US, the total cost of our PV system was almost exactly $23,000.  A savings of $1,770 in one year amounts to a simple annual rate of return of 7.7%, tax free (i.e., we’re saving after-tax money).  No tax-free fixed-income securities are paying close to that right now, although certainly a municipal bond is much more liquid than PV panels stuck to my roof.

Personally, other investment decisions I made early in 2008 did not go nearly as well as this one — negative returns were common.  So I am happy with this investment at this time.

There is also good (?) news on the future value of this investment.  As I mentioned, earlier this year the price of top-block power from PG&E increased significantly.  When I plug in the new higher prices for all of the next 12 months, I estimate savings of more than $2000, for a return of about 8.7%.   Further, these systems are becoming increasingly common throughout the Bay Area, so if we ever sell this house, we’ll likely recoup all or most of the original investment ( home appraisers are learning to incorporate the value of PV systems into the value of properties here in California).

Conclusion

Overall, I’m happy — our PV system has worked without a hitch, and has delivered a decent return on investment.

But I could be happier.

Our system is far too sensitive to shade, delivering less than half of rated capacity whenever even 5-10% of the system is in shade.  There should be a simple engineering fix to this problem, and I’ll be investigating over the next few months.

Our system also has an almost useless user interface; the analysis presented above required a ridiculous amount of manual effort on my part to develop.  For example, the only way to look at the performance of our Xantrex power inverter is to go outside and squint at the two-line LCD output, and bang on the side of the box (literally) to display a handful of statistics, the way our caveman ancestors did back in the 1970s when they did their earliest residential solar analsysis.  For trivial cost, any of four vendors could have included all the technology necessary for me to capture real-time system performance data on my computer via my home network, but apparently among PG&E, Borrego, Xantrex, and GE (maker of my not-so-smart meter), nobody bothered to do so.

This interface issue is particularly frustrating, because anyone in the tech industry knows that this actually matters.  If a PV system is a crude slab of silicon that sits on your roof and pumps electrons into your wires, it’s unappealing to many.  If it’s an elegant system integrated with your network and life, it’s far more likely to become mainstream.

So in my humble opinion as an early adopter, solar power has passed a crucial threshold — it has become reasonably cost effective in the most expensive residential markets.  But some simple technical and market innovations could really help it take off.

In exactly one week of long, sunny days, the system of 18 panels produced 154 kWh — or 22 kWh per day.  In that same period (which included some nice days and some very hot days — it was over 100 degrees F at our house yesterday), the new meter tells me that our house used all that plus 151 kWh more from the grid.  So even with the pool filter running and above-normal air conditioner usage, the solar panels produced almost exactly half the electricity used by our large-ish suburban California home.  Not bad, given that we could only put solar panels on a relatively small fraction of the roof (too much shade on the rest of it).

More economic analysis to follow after I get a bill or two.

I  haven’t used the SunGrid this week. In fact, no one has: there was a four day outage from last Saturday morning through this morning.

His post is quite illuminating about Sun, customer care, individuals involved in support services, communication philosophy, and related issues.  His conclusion:

As an idea, the SunGrid is a fast and easy way to get parallelism and performance flexibly. But Sun has to continue to improve the user interface (e.g., beyond the clever hack for job monitoring suggested to me by a Sun engineer) and relability of their infrastructure. Unless they do, people without CPU grants are going to start looking at alternatives like using Amazon’s hosted EC2 or running their own DigiPede.

Emil is, sadly, more than right.  Sun has to improve a lot of things, not just the UI, and not just reliability, because most people ARE ALREADY looking at (and using) alternatives (and — thanks for mentioning us!).  The problem isn’t UI — the problem is getting way, way ahead of the market, technology, and Sun’s own skill set.

Let me confess that I spent 20 years in or near the electric utility industry, and I know  A LOT about utilities.  SunGrid is not a utility.  The “utility computing” analogy bothers me in general, and I don’t have nearly the time or energy to break it down fully, but the standards, reliability, infrastructure, training, and commitment are not there (anywhere in the IT industry, including Sun) to run a utility.    

I almost wrote “not there YET” in that last sentence, but I remain unconvinced that a utility model will ever (or should ever) apply very well to computing.  Let’s be clear — I think outsourced computing in several forms can be viable, and that there are things you may want to compute on someone else’s computing infrastructure.  That doesn’t make it a utility.  And that’s probably OK.

The electric utility industry is boring.  Yes, I still have many fine friends there, and they are not, mostly, boring, but the industry as a whole does best when it changes slowly or not at all — and with good reason.  Appliances built in 1910 still run just fine when plugged into a socket — a socket whose voltage and frequency standards have not changed in a century.  Inventions since Edison, Tesla and Westinghouse have been largely incremental — in generation, transmission, and distribution.  Ways to USE electricity have changed radically over time, but even these are constrained (dramatically) by unchanging standards for voltage, frequency, and a handful of other key parameters. 

The tech industry has very few of the constraints (or benefits) of standards like these.  (Again, I don’t have time to elaborate fully (stay tuned for future posts), but if anyone wants to debate me on whether a Web Services standard compares to the 60-Hertz standard, I warn you — you’re going to lose.)  The tech industry delights in overthrowing standards, and as a result has made some pretty phenomenal progress — but as a result, use and generation of computing power have remained very closely coupled. 

Is this good or bad?  The jury is out (more on this another day).  But is it fact?  Yes.  The tech culture is not the utility culture (again, watch out if you want to debate me on this).  So even as we all root for SunGrid (even me), the deck is stacked against them. 

“A day may come when the courage of men fails, when we forsake our friends and break all bonds of fellowship, but it is not this day. An hour of wolves and shattered shields, when the age of men comes crashing down, but it is not this day. This day we fight!”

Facing similarly impossible odds during closing arguments, Ken Lay’s defense attourney Michael Ramsey borrowed from Aragorn’s playbook as he addressed the jury:

“There may be a court in America that bends to political pressure but it’s not this court! There may come a day when an American jury yields to a media mob, but it’s not this jury.”

Rhetorical similarities aside, the difference here, in my opinion, is that Mr. Ramsey’s impossible odds have been brought on by the actions of his own client.  Hey Mr. Ramsey — you’re defending the bad guys.  Don’t steal the good guys’ lines.

Now of course, my charge that Mr. Lay and Mr. Skilling are “the bad guys” is just my opinion, but my opinion is backed up by considerable personal experience.  As many of you may know, I worked in the utility industry for many years.  I have heard the claim that Enron was made up primarily of honest, hard-working folks trying to earn a living, and I have no doubt there’s some truth to that — I met many at Enron who met this description.  But there were also many who did not. 

A few years ago I had the privilige of working on projects that helped to unravel certain aspects of the California electricity crisis of 2000-2001.  Enron’s part in that disaster is now a matter of public record, and some of the most directly involved plead guilty to wire fraud.  I got to see records of Enron’s trading practices firsthand.  I got to listen to recorded phone conversations of Enron traders firsthand (although I never heard this one; I’ll have to go hunt it down.  You used to be able to get much of the whole zillion-hour set at the FERC Web site; some of it is still here, but I thought there was more…). 

I still have friends at Portland General Electric — acquired by Enron when Enron’s market cap was soaring — who saw their 401Ks evaporate as Ken Lay extolled the virtues of Enron stock.  When I worked at PGE for three years in the early 80s, the company was a fine example of the type of ordinary, basically functional and professional organization that ran the utility industry for many decades.  In a period of less than 90 days in 2001, life savings were essentially wiped out. (You can read this and many other references for this sad story.) 

I am not following the trial of Mr. Skilling and Mr. Lay in enough detail to have much of an opinion of their guilt or innocence of the specific charges involved; the feds have made their choices about what charges to bring and how to prosecute them.  But make no mistake — these two men led an organization that brought enormous harm to a very large number of people.  They set the tone for their many underlings, including Fastow and Causey and Belden and Richter and Forney and Boyle and the rest. 

The buck stops with Lay and Skilling.  A day may come when Mr. Ramsey can convince an audience otherwise, but it is not this day.