Technology: Can IT Help Utilities Lower Commercial Energy Costs?

By Debra D'Agostino  |  Posted 07-17-2006

You know there's an energy crisis when even the energy companies are turning to alternative energy.

Xcel Energy Inc., a Minneapolis-based energy firm, runs a healthy business, with more than 3.3 million electricity and 1.8 natural gas customers in 10 states, and revenues of $10 billion annually. But about a year ago, company executives found themselves facing a troika of problems: increasing energy demands, decreasing resources, and a little issue called global warming. "We realized we had an obligation to behave in a manner that balances shareholder, regulatory and community priorities," says Michael Carlson, Xcel's vice president and CIO.

So Xcel came up with a plan: Use technology to identify which customers would be candidates for alternative energy. In partnership with the National Renewable Energy Laboratory (NREL), which is funded by the U.S. Department of Energy, "we started applying some modeling technologies that combine NREL's weather and environmental data with our grid generation and consumption data," Carlson says. The modeling tool, called the Renewable Planning Model, is being used to determine exactly which kinds of alternative energy are best suited for specific customers.

By using NREL's satellite terrain imagery to determine solar irradiation on rooftops, for example, Xcel can determine where, and how strongly, the sun shines on Xcel customers. With that data, the company can calculate where solar panels should be placed, how large they need to be to generate the most power, and how that power generation might affect Xcel's own energy grid.

On the business side of the equation, Xcel is getting help from such technology companies as IBM Corp. and Siemens AG to incorporate alternative energy into the company's everyday business processes. "Utilities aren't known for their large R&D budgets," Carlson says, "so doing something like this requires collaboration. Thankfully, companies (our consumers as well as solution providers) are all showing an enhanced interest in this." IBM, for example, is helping Xcel create energy delivery and real-time pricing models for the company's renewable programs.

Ultimately, the goal is to create what Carlson calls a "smart" grid: an electricity system that incorporates renewable energy and distributes electricity based on real-time demand, instead of using less accurate historical estimates, as most grids are run today. That will allow Xcel to charge more for, say, running your dishwasher during peak hours rather than in the late evening.

There's still much to be determined, including who will pay for the alternative energy infrastructure and when it will be available. But Carlson is bullish. "We firmly believe we can do this," he says. "And technology is the key to making it happen."