For All They Do, Sempra’s Utilities Need Innovation Too

1/13/09Follow @bvbigelow

Perhaps because they operate in heavily regulated industries, electric and gas utility companies are not usually regarded as centers of innovation. And to some critics, the utilities operated by San Diego’s Sempra Energy seem to operate in stodgy defiance to anything shiny and newfangled.

But it’s a bad rap to Hal Snyder, who oversees strategy and program development as vice president for customer programs at both San Diego Gas & Electric and Southern California Gas Co. Both utilities are owned and operated by Sempra, and account for more than half of the company’s profits. Snyder and other utility executives talked with me at length about some of the technology advances they have underway and the innovations needed to change the way energy gets distributed in Southern California.

“We have been involved in fuel cell projects, sustainable energy community projects, and photovoltaic solar panels installed in various places,” Snyder says.

In July, SDG&E became one of the first utilities in the country to begin the full deployment of so-called “smart meters” throughout its San Diego service territory. Each of the 1.4 million meters features wireless mesh networking technology that provides two-way data communications between the meter and SDG&E’s data center. Each meter also is equipped with “ZigBee” technology, a low-power wireless standard that will make it possible—eventually—for customers to go online to monitor and control their own gas and utility use to avoid higher utility rates. SoCalGas hopes to follow with a similar deployment of 6 million smart meters throughout its larger service area, which includes Orange and Los Angeles Counties and most of Southern California.

“Given all of that, one of the reality checks is that we are not an R&D company,” says Mike Niggli, chief operating officer for the two Sempra utilities. But mandates by state regulators to increase the use of renewable energy sources, and to reduce greenhouse gas emissions, have prodded Sempra’s Southern California utilities to help support the development of alternative energy technologies.

In an effort to combat global warming, the state Legislature in 2006 directed California’s largest utilities to purchase 20 percent of their power from green sources—like solar and wind—by 2010. SDG&E currently generates only about 6 percent of its electric power from renewable energy sources, with about 13 percent under contract for development. Among the projects in the works is a plan to develop a series of small solar energy projects throughout the region. Utility officials say their proposal to install photovoltaic solar panels on the roofs of big warehouses and commercial buildings is estimated to cost $250 million, and represents San Diego’s single largest solar power initiative.

Asked what new energy technologies utilities need, Niggli said, “It’s fairly clear to us that we’re going to need some kind of new energy storage technologies” due to the intermittent nature of power generated by windmills and solar panels. If the wind wanes, for example, utilities currently turn on natural gas-fired peaker plants to generate the extra electricity needed to meet consumer demand—and those plants contribute to greenhouse gases. “So, very efficient energy storage systems would be helpful to pick up that slack,” Niggli says.

One promising technology the Sempra utilities have supported is the development of flywheel energy storage technology. In fact, a general rate application filing by SoCalGas shows that Sempra utility has invested $1.74 million equity investment in Pentadyne Power, a suburban Los Angeles company developing flywheels as backup power sources for factories and commercial facilities that require uninterruptible power systems.

Sempra’s utilities also have made a similar, small-but-undisclosed-equity investment in Plug Power, a New York energy company developing fuel cells. “We participate in the technology research and development,” Snyder says. “We actually have installed fuel cells in our service area.”

SoCalGas spokeswoman Denise King says the two utilities make such early-stage equity investments on a limited basis and evaluate a broad range of technologies that pose strategic value to its customers and market.
“As regulated utilities, we are a strategic investor rather than a traditional venture capitalist,” King wrote in an e-mail. “Our ratepayer-funded R&D investments are small and focus on development opportunities that lead to reduced rates and/or improved services for customers. ”

The utilities also are interested in improvements in lighting, such as high-efficiency ballast lights that are expected to last three times as long and operate 30 percent more efficiently than standard industrial light fixtures. And air-conditioning poses another area ripe for improvement. “If you could make a 10 percent improvement in the efficiency of an A/C motor,” Niggli says, “that could have a tremendous impact on energy demand in Southern California.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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