Obama’s Moon Mission
The economy remained weak throughout 2009, but not the clean-energy economy.324 Clean-tech became the leading U.S. venture capital sector for the first time, eclipsing biotech and infotech. The wind industry, which had anticipated a 50 percent decline in new generation before the Recovery Act converted its useless tax credits into cash grants, instead had its best year ever. It added enough new turbines to power over one million homes, the equivalent of twenty coal plants. Solar had its best year ever, too, with forecasts for even better years ahead.
“Before the Recovery Act, we were shutting down our U.S. projects and reallocating our capital around the globe,” says Don Furman, senior vice president of the Spanish-owned wind developer Iberdrola Renewables. “The day it was signed, our chairman turned on a dime and put $6 billion back into the U.S.”
The more America relied on renewable energy, the more it would need a smart grid. But the growing pains of the Recovery Act’s grid program, while less public than its weatherization delays, were in some ways even worse. The smart grid wasn’t just slow stimulus. Initially, it was anti-stimulus.
Everyone agreed that America’s outdated grid needed an overhaul. Its managers constantly scrambled to maintain a balance between generation and consumption, like those old switchboard operators who manually connected every phone call. When demand spiked, they often had to fire up inefficient fossil-fuel “peaking plants” to prevent rolling blackouts. Yet outages still cost Americans as much as $150 billion a year. And the analog grid was a major obstacle to a world of renewable energy and electric transportation. A digital grid could make it much easier to shift juice where it’s needed when the wind stops blowing or clouds hide the sun. It could also help utilities smooth out demand to reduce peak loads without bringing new plants online. And it could give consumers more information and control, so they could save energy and money, and sell extra power from solar panels on their roof and electric cars in their garage back to the grid.
Before the Recovery Act, almost every U.S. utility was at least starting to plan for a smart grid, and a few were already installing their first smart meters and other digital equipment. But while the passage of the stimulus accelerated the planning, because utilities had to think about their needs before applying for grants, it initially slowed down the installation, because utilities didn’t want to splurge on upgrades if there was a chance the feds would help pay for them. So until Obama announced the winners in October, grid investment froze, which was not the kind of response the stimulus was supposed to stimulate. “It was frustrating. The utilities put everything on pause,” says Raj Vaswani, chief technology officer for Silver Spring Networks, a Silicon Valley smart grid firm. And after Obama’s announcement, the awards were delayed again because utilities objected to paying taxes on them.
“It was one holdup after another,” Rogers says.
Once the grants were exempted from taxes, the first order of business for most of the winners was installing smart meters, just as Rahm had hoped. The stimulus will increase the U.S. totals from 8 million to 26 million. But inconveniently, the main up-front benefit of digital meters is their ability to replace human meter readers. The Phoenix-area utility Salt River Project’s new meters helped it complete over one million service orders remotely in the first year, saving 82,000 hours of labor, the equivalent of slashing forty jobs.
Smart meters weren’t the political hit that Rahm had hoped, either. Across the nation, ratepayer advocates and consumer groups like AARP have fought rate increases to help pay for them. In Northern California, a stimulus-funded push to install millions of meters sparked a particularly intense backlash, mainly because a heat wave made customers think the new devices had jacked up their bills, partly because of unfounded health fears about radiation, but partly because by themselves smart meters don’t do much for consumers. I found this out when my own analog meter in Miami Beach was replaced with a Silver Spring digital model through a $200 million stimulus grant to my utility, Florida Power & Light. Now my family can check online to see how much power we use and when we use it. But so what? We can’t tell how much energy our various appliances are wasting, and we can’t save money yet by running the dishwasher at different times of day.
“It’s like giving people Ferraris, without giving them the keys,” says Jon Wellinghoff, Obama’s top energy regulator.
It’s ironic, since what Rahm liked about smart meters was their visibility, but so far their benefits have been largely invisible. The utility savings on meter readers and home visits should eventually translate into lower rates; for example, in addition to its reduced labor costs, Salt River saved 44,000 gallons of gas from avoided “truck rolls.” And digital meters will help utilities do a better job keeping the lights on. But as a political matter, customers don’t notice when their meter alerts the grid to a potential problem they didn’t know they had.
“The holy grail in outage management is to avoid the outage in the first place,” says Elster Solutions CEO Mark Munday, whose firm provides smart meters to Salt River. “There’s so much you can do without even engaging the customer.”
That’s true of the entire grid. The better it works, the less we notice it. In that sense, Obama’s moon mission is another things-would’ve-been-worse-without-us achievement. Another example: Millions of fans watched Stanford defeat Virginia Tech in the 2011 Orange Bowl, but none of them knew that an aging transformer almost overloaded while feeding power to the stadium, triggering voltage alerts that gave new meaning to the term “red zone.” The problem was detected by Florida Power & Light’s new smart grid equipment, which quickly diverted the electricity to healthier transformers, avoiding a midgame blackout. The utility used to inspect its transformers annually; its new sensors and other smart machines now monitor them every second. “It’s like having an EKG or a blood pressure machine strapped to you twenty-four hours a day,” says Bob Triana, the operations manager for the stimulus-funded Energy Smart Florida project.
And yes, the synchrophasor revolution is quietly under way. The Recovery Act is financing a 500 percent increase in “phasor measurement units” that are producing rivers of real-time data, giving grid managers visibility over the entire high-voltage transmission system for the first time, dramatically reducing the chances of another wayward tree branch downing a power line and blacking out eight states. Industry researchers believe the new gadgetry will eventually reduce electricity losses over transmission wires by 20 percent, saving enough energy to power two million homes.
“It’s incredibly cool, and it’s a very inexpensive way to prevent the next New York City blackout,” Rogers says. “But it’s pretty hard to explain.”
It certainly isn’t as easy to explain as the New Deal’s grid upgrades, which extended electricity to families that never had it. But the Recovery Act’s grid money may be jump-starting America’s next trillion-dollar industry.
I got a glimpse of how my smart meter Ferrari might run with keys at FPL’s home automation lab in Miami. Two screens displayed competing “home energy controllers”—from Cisco and General Electric—with dashboards for tracking and adjusting the electricity use of every appliance in a home. They weren’t fancy, but they provided actionable intelligence a family could use to save energy. “We’re still in a 1.0 world,” lab manager Patrick Agnew explained. “We haven’t gotten from the lab to the living room. So customers haven’t seen what a smart grid could be.”
The grid is physical infrastructure, but the smart grid is a tech play, using megabytes of data to move megawatts of electricity. As a business opportunity, “we think it can be way bigger than the Internet,” says Cisco’s top smart grid executive, Laura Ipsen. It will require lots of the kind of hardware that Cisco built for telecommunications networks, and lots of sophisticated software to help utilities manage an avalanche of data. It will also inspire applications that haven’t been dreamed up yet. No one knows what the eBay or Wikipedia of the grid will look like—or the
pets.com of the grid. But it’s no coincidence that Silicon Valley giants like Cisco and Oracle have moved into the hardware space, while start-ups are racing to develop software and apps. Since the Recovery Act passed, the mega-players have created scores of alliances to offer utilities one-stop “networked solutions,” just as they once did for telecoms.
“This feels a lot like the early days of the Internet,” says Tropos Networks CEO Tom Ayers, a Silicon Valley entrepreneur whose wi-fi firm has expanded into the grid. “Because of the stimulus, we’ve moved beyond the early adopters. Around here, we talk a lot about ‘crossing the chasm.’ This market is crossing the chasm.”
Silver Spring is the kind of cutting-edge green business that Obama has in mind when he talks about the post-bubble economy. Founded in 2003 by software engineers who realized no one was building networks for the grid, it has raised $300 million and deployed ten million advanced meters worldwide. The smart grid now reminds the bearded, ponytailed Vaswani of the Internet circa 1994; just as the browsers of that era foreshadowed online banking and video on demand, today’s smart meters are harbingers of smart refrigerators that can adjust their temperatures according to price signals sent by utilities—I saw a prototype in FPL’s lab—and software that alerts you when an appliance needs to be fixed.
“I try not to use the word ‘explode’ when I talk about the electric grid, but that’s what’s happening,” Vaswani says. “There was a lot of talking, then a lot of thinking, and the Recovery Act pushed this over the edge into doing.”
Gotcha!
“It’s hard to amaze me,” said Glenn Beck, who actually professes to be amazed all the time, “but this is one of the more amazing stories about what our country and our government has turned into.” Beck loved stimulus stories—the nonexistent subsidies to ACORN, the porn he imagined the NEA must be funding, a bogus report of a $1.4 million door at a military base—and this was a stimulus story about green energy, another one of his go-to targets. But it was really a story about the corruption of the Obama administration, his favorite source of amazement. His guest was fellow Fox personality John Stossel, who told the saga of Serious Materials, another Silicon Valley firm that manufactured energy-efficient windows.325 Stossel announced that Serious had been mentioned in a speech by Obama, which was true, and visited by Biden, also true, before receiving “a special tax credit that goes to no other window company,” which wasn’t true at all.
“We found that the head of the weatherization department of the Department of Energy is sleeping with the vice president of policy for the company!” Stossel said.
“John, the arrogance of these people astounds me,” Beck said.
Yes, Cathy Zoi was sleeping with a Serious executive. They were married. But Zoi hadn’t started yet at Energy when Obama and Biden were citing her husband’s firm as an eco-friendly innovator. And Serious never got special treatment from Zoi or anyone else, just a green manufacturing tax credit that other window makers received as well. A geologist by training, Zoi had led a clean-tech fund in Australia and had developed the Energy Star program for energy-efficient appliances in George H. W. Bush’s administration. But to Beck and Stossel, she was just a Gore lackey who had run his Alliance for Climate Protection and was now scamming taxpayers in the name of eco-nonsense. “She said she’s going to recuse herself from anything having to do with this company, but basically she would have to recuse herself from her whole job,” Stossel said. “Her whole job is weatherization!” More lies: Zoi oversaw all of Energy’s efficiency and renewables programs, and anyway, Serious windows were too expensive for the home weatherization program.
But in Beck’s antigovernment universe, wisps of smoke were always evidence of a raging fire. To Beck’s delight, Zoi left government to run a clean-energy fund for the left-wing financier George Soros. And speaking of dynamic women hounded out of public service, Claire Broido Johnson is now an executive at Serious Materials, where she’s launched a new program to finance energy efficiency retrofits at Fortune 500 companies.
Buried under Beck’s rants, there was a legitimate debate about the federal role in promoting efficiency. “Do you think maybe the government has gotten too big when we have someone we pay in tax dollars in charge of weather stripping?” he asked. It was a fair question, despite the unfair description of Zoi’s job. The Obama administration argued that weatherization, in addition to saving money for families less fortunate than Beck, promoted our national, environmental, and economic security by reducing our energy consumption and carbon footprint while providing stimulus and creating jobs. But Beck—and the Republican leadership—rarely addressed this kind of argument on the merits. Instead, they created a caricature of the stimulus as a political con, a payoff to ACORN, a sleazy collection of sweetheart deals. Yeah, right, “weatherization.” Obviously, some lefties must be sleeping together.
The Republican case against the Recovery Act—beyond the overriding fact that the recovery didn’t feel like a recovery—still consisted mostly of cats and dogs. The lead inquisitors were Senators Tom Coburn and John McCain, whose reports crammed with allegedly wasteful stimulus projects gave the right its anti-stimulus talking points.326
Many of the projects they singled out were badly distorted, like a $54 million grant for a Napa Valley wine train, which was actually a flood control project for the entire valley, or a $10 million grant to renovate “an abandoned train station that hasn’t been used in 30 years,” when in fact its ridership had almost doubled in five years. Other projects sounded truly wasteful, like a $25,000 arts grant for an anti-imperialist puppet show. Quite a few of the projects had already been canceled by the administration, like a guardrail for a dried-out Oklahoma lakebed. But the facts didn’t matter much. The point was that government can’t do anything right, and Obama is tossing around your hard-earned money like a degenerate gambler.
To Coburn and McCain, the green-energy revolution was nothing more than a costly joke on taxpayers. In one report, their number-one boondoggle was a $5 million grant to retrofit an “almost empty” Tennessee mall to run on geothermal power; it was almost empty because it was being redeveloped. The top ten also included a $787,250 smart grid pilot program on Martha’s Vineyard, because Coburn and McCain apparently thought “smart appliances” that utilities could adjust remotely—“Big Brother–style”—sounded creepy. In fact, most utilities already use “demand response” for commercial customers like Walmart, paying them for the right to tweak thermostats a few degrees or dim lights a bit during peak demand. It’s voluntary, it’s unobtrusive, and it’s the future of the grid, saving customers money, helping utilities meet peak loads without building new power plants, and fueling a multibillion-dollar industry devoted entirely to demand response. Meanwhile, GE is taking advantage of the same tax credits that helped Serious Materials in order to manufacture smart washers and dryers in Senator McConnell’s hometown of Louisville, creating over eight hundred green jobs.
But that’s a complex story about change. The Republicans made the Recovery Act into a simple story about the fleecing of America, about small-business loans for martini bars and taxpayer-funded studies of malt liquor consumption, the Icelandic environment in the Viking Age, and the division of labor in ant colonies.
Medical research may be the best example of the gap between the substance and perception of the Recovery Act. Senator Specter’s insistence on the $10 billion windfall for NIH is already financing breakthroughs, especially in the futuristic field of genomics and personalized medicine. Stimulus-funded studies have already pinpointed genetic variations linked to Alzheimer’s disease, a rare birth defect called Kabuki syndrome, and a range of childhood brain disorders. The Recovery Act has also produced new advances in hip replacements, new proof that brains of different ethnicities are made of the same genetic building blocks, and new treatments of epilepsy, ovarian cancer, and lung cancer. It has accelerated the Cancer Genome Atlas, so that scientists will have a comprehensive catalogue of mutations associated w
ith the twenty most common cancers by 2014. And NIH director Francis Collins, the former leader of the Human Genome Project, says the stimulus is producing technological advances that are swiftly driving down the costs of genomic research, so that standard patient records could soon include a full genetic portrait.
“This could be a tipping point for personalized medicine,” Collins says. “The stimulus really created space for the out-of-the-box research that doesn’t get support when budgets are tight. You’ll hear about some game-changers.”
So far, Americans have heard about research like a $144,541 Wake Forest University primate study of cocaine’s effect on a brain chemical called glutamate. Or as McCain and Coburn described the research: “Monkeys Get High for Science.” Collins says the study could provide vital insight into the science of addiction, and it’s not the kind of experiment that can be conducted on humans. He also points out that research can provide just as much stimulus as tax cuts; NIH’s Recovery dollars would create or save fifty thousand jobs. But coked-up monkeys sound funny—and so do studies of “hook-up behavior” by drunken co-eds, the effect of methamphetamines on the sex drives of rats, and a $221,355 investigation into why young men don’t like to wear condoms. Whenever White House officials heard those stories, they stifled curses about their new Democratic friend Arlen Specter.
“If you took all the negative clips about the Recovery Act, the biggest pile would be the NIH studies, the teen sex habits and cocaine monkeys,” Ron Klain says. “And Republicans say: See? It’s classic government waste. Well, Specter was the sixtieth flipping vote! Without cocaine monkeys, there’s no tax cuts and no roads.”
Of course, the monkeys would have languished in Republican press releases and right-wing blogs if the media hadn’t found them irresistible. When it came to the stimulus, the national press was almost all- gotcha-all-the-time, missing the forest for the $564,635 grant to help undergraduates study Costa Rica’s trees.
The New New Deal Page 34