Guest Interview with Paul DeMartini of Newport Consulting Group

  How long have you worked in the
  energy/electricity industry?
  I’ve been in the industry 34 years, starting at PG&E in electric system operations and wholesale
  market transactions and operations. Then 8 years in competitive wholesale and retail energy
  services with several energy & consulting firms leading sales, marketing, and business and product
  development with a focus on distributed energy resources. I joined SCE in the early 2000’s and led
  the smart metering program (including demand response) and their advanced technology
  activities. Recently, I spent nearly two years at Cisco leading their smart grid strategy, policy and
  business architecture efforts.

What are you presently involved in?
I’m working with global start-up and growth technology firms on business models, market strategy, and policy as well as helping utilities and energy services firms worldwide to adopt new technology and business models. I’ve started a consulting firm, Newport Consulting Group, to facilitate these engagements. Already, I am consulting to Tendril, Cisco, and have an alliance with EnerNex.  I’m an advisor to PowerAssure, Ambature, and evaluating several other opportunities. Additionally, I will also continue my research interests with EPRI, Caltech, and other universities.  

You recently had Executive positions at SCE and then Cisco, and are considered to have helped get the smart grid to where it is today.  What is it like to work both inside a utility and inside one of the world’s leading technology companies?  How do they compare?
There are quite a few similarities among F250 companies like Edison International, Cisco, and other energy companies that I’ve worked for in terms of decision making, managing cross-functional business opportunities, corporate budget allocation, strategic planning, and core support functions like legal, accounting, etc.  The differences go to their respective core knowledge areas, corporate learning models, risk appetites for certain activities, business models, and deep global perspective and experience. 

One key difference is the focus and pace of the leading technology firms, like Cisco, to learn and evaluate new areas for business opportunity and then employ very sophisticated business development models to realize the potential.  Generally speaking, utility holding companies do not have corporate or business development capabilities like those of Cisco, Intel, and other leading technology firms.    

How do you see the roles of the various players (i.e. technology companies, service companies, utilities, etc) changing in the years ahead – if at all?
The industry is in the midst of a fundamental transition from a vertical market structure based on centralized generation - and one-way power flow from generator to end customer – to a more horizontal market structure that includes a significant amount of distributed energy resources and end customer participation in markets and providing reliability services. Also, this transition, and the related enabling technology, allows for new entrants and business models that can create value networks like those that emerged over the past decade in other industries. This means that nearly everyone in the traditional value chain will be impacted.  The discussion amongst most stakeholders today is focused on defining the impacts and new roles and how best to consider those opportunities for future success in the emerging energy value network.

You have witnessed and been a part of the changes from what was formerly known as load management into today’s demand response.  In your view, has that gone smoothly?  How do you see DR growing in the years ahead?  
Demand response has evolved relatively smoothly over the past few decades and continues today. The acceptance by policy makers, utilities, market operators, customers, and other stakeholders has been very good. That is not to say that there haven’t been challenges, but compared to other market transition issues - like deregulation of retail markets – it has been relatively smooth and successful.  The issue going forward is how to transition demand response to its full potential as a distributed resource that can be used by many stakeholders cutting across Federal and state jurisdictional boundaries.

In DR 1.0 the focus was on reliability based programs as an emergency response tool for electric system operators to maintain system reliability and avoid black-outs. This changed over the past decade with DR 2.0 type programs focused on demand response as an economic resource to mitigate wholesale market costs driven by FERC rulings and orders. We are now transitioning to DR 3.0, where demand response is one element of distributed energy resources that will increasingly be used by both economic markets and grid operators (distribution and transmission) to ensure reliability and power quality. This means new market/regulatory frameworks need to be developed to allow full utilization and monetization.

You are looked at as a leader in the effort on interoperability.  How would you characterize where that effort stands?  Are things on a glide path at this point?  Looking back, have things gone as everyone thought they would?  
The current NIST Framework 2.0, and the corresponding activities of the SGIP, represent excellent progress on identifying the needed systems architecture and standards to accomplish the goal of open and interoperable systems. The process has gone better than most expected.  The challenge now is the adoption of open standards and interoperability by firms developing products for this market.  Many seem to sill be focused on embedding proprietary aspects into their product interfaces, and this can create significant integration costs and/or multi-vendor product incompatibility for consumers, utilities, services firms, and other stakeholders.  Can you imagine, as an analogy, that each consumer product company tried to create unique approaches to implementing WiFi such that their products only interoperated with their own and no others?  This is the issue today and will hold back this market if we can’t achieve a minimum level of interoperability. I have been surprised that the policymakers have not understood this more clearly – they have been more focused on utilities – yet the established product firms are the biggest barrier to interoperability.

What do you expect to be the biggest challenge in growing DR and/or developing the smart grid over the next decade?
DR is an important element in the evolution of distributed energy resources becoming an effective substitute for centralized generation resources and traditional system and grid engineering planning. The next stage of the evolution requires that all stakeholders engage deeply in a discussion in how DER can be effective in both wholesale markets and distributed grid operations.  This requires multiple stakeholders to thoughtfully engage in a way that has not historically happened.

What advice or guidance would you give to young professionals who are already in DR and smart grid or those thinking about a career in these areas?
Congratulations, you are in the right place at the right time as we are in the midst of a fundamental transition in the global electric industry.  I believe the next five years are the inflection point toward mass transition of utility customers from consumers to prosumers projected for the 2020's. This will also transition the industry from a centralized model to a more hybrid model with significant distributed resources and customer participation.  The challenge is how to engage multiple stakeholders in the discussion about how this will occur and to facilitate the transition through policy, market rules, programs, new business models, services, and technologies.  It is very clear that technology change is accelerating and benefiting DR and DER to the point that the industry needs to fully embrace the potential – even if disruptive - lest they get left behind.

To learn more about Newport Consulting Group, please visit their website.