We were thrilled with the turnout, and couldn’t be more grateful for all the support we received from attendees, speakers, sponsors and the press. It’s clear that the Smart Grid has gained the momentum it needs for serious work to be done, and we are excited to play a big role in this conversation going forward.

With Al Gore, and several of the biggest utilities and brightest entrepreneurs leading the charge, 2010 should be a big year for smart metering initiatives, regulatory reform and consumer conservation education. Whether or not these efforts will result in a cleaner, more efficient grid, or a population more committed to saving power (even if it’s only to trim their bills) still hinges on policy and money.

Stationed in the most progressive state for environmental legislation, and at the heart of the venture capital community, VentureBeat is ideally situated to report on how this unfolds. We’re already looking forward to future events on the power grid that will pick up where GreenBeat 2009 left off.

Once again, we’d like to thank all of our event sponsors and strategic partners for making this week’s event possible: Accenture, Southern California Edison, Accel Partners, Mayfield Fund, Oracle Utilities, Schwartz Communications, Cisco Systems, CPower, CSC, S&C Electric Company, KPMG, Vantage Communications, DEMO, Matter Network and Fora.TV.

We were also honored to have so many of our colleagues from the press in attendance during the event. To thank them for their coverage, and give our readers a more holistic sense of the Smart Grid dialogue sparked by GreenBeat, here’s a roundup of articles from the last several days:

GreenBeat in the New York Times:

Google says it doesn’t want to be a utility
In Pursuit of a Smarter Grid

On Al Gore:

Al Gore: Super grid is critical to combating the climate crisis, Cleantech Group
Gore: White House shooting for climate bill by spring, Greentech Media
Al Gore: The Smart Grid is Key, Earth2Tech
Al Gore: Our next power grid will be like the Net, CNet

On Innovation Competition and winners Locust and CPower:

Data storage startup, energy manager, win GreenBeat Innovation Contest, TriplePundit
3 Next-Gen Applications for Smart Grid 2.0, Earth2Tech
Data centers that feed power to the grid?, Greentech Media
Xtreme Power named a Smart Grid innovator in VentureBeat’s Innovation Competition

Related news:
Google PowerMeter: It’s our gift to humanity, really, Greentech Media
Cisco seeks smart grid CTO, EE Times
Viridity Energy poised to make next generation of Smart Grid a reality, TMCNet
Current CEO Casey talks about SGIG, GreenBeat 2009 Award, Smart Grid Today

Here are some photos from the event — look for more media, including an image and video gallery, in the next few days.

[Photo credits: Alexa Lee, David Lin and Cheng Saechao]

Perhaps the most significant point: That energy efficiency is “the single largest solution to the climate crisis,” and the Smart Grid will “play a crucial role” in achieving that efficiency.

The Smart Grid will have a number of advantages, Gore said. It will reduce the carbon emissions that accelerate global warming.  It will give us more access to alternative energy sources like solar and wind, and will equip us to cope with the inconsistency of those sources. It will create jobs. And it will be cost-effective, eventually paying for itself by preventing grid failures and blackouts.

“The analogy to the internet is close to exact and very relevant,” Gore added. Like the internet, the Smart Grid is moving from a centralized to a distributed model, and it will spur the creation of new devices and applications.

Gore also talked about the obstacles facing the Smart Grid and other efforts to fight global warming. Those obstacles involve politics, economics, and short-term thinking. But those challenges must be overcome — because he said members of the next generation will ask one of two questions.

If the climate crisis has come to a devastating head, they’ll ask, “‘What were you thinking? Were you watching Dancing with the Stars? Didn’t you hear the scientists? Didn’t you care?’” Or they may see that we’ve taken the political, economic, and technological steps necessary to create “a new renewable energy platform and sustainable environment,” and they’ll ask, “‘How did you find the moral courage to rise and solve a crisis that so many people said was impossible to solve?’”

[photo:David Lin]

Perceived problems with interoperability, improper installation or short circuiting and decreasing life cycle of a fleet of batteries have all been cited as reasons to stick with a more conventional battery pack. Talking to chief executive Alex Livingston, though, one gets the impression he’s already thought of all this and has a solid plan to prevent such mishaps. In an interview at GreenBeat 2009, he clarifies some key points about his company’s product.

First, R2EV batteries aren’t some proprietary formula only available from R2EV and compatible with their Fuel 2.0 products. R2EV will be sourcing their cells from any battery manufacturer able to produce them within some basic parameters controlling the voltage and physical form for compatibility’s sake. The initial launch will be at the larger storage level and the primary consumer is expected to be the military, at least at first.

As the day-to-day realities of using Fuel 2.0 energy systems are figured out by the military (probably the toughest customer R2EV will ever have to deal with), the company will start expanding into the automotive market. This is where the real fun begins — because if battery change stations are strung out frequently enough, you could drive across the country with no more charge-time than an average ICE car would require fueling-time. Expect major cities and strategic transit stops on interstate highways to be their first locations opened. With time R2EV will adopt next-generation batteries with greater capacity.

This leaves a few questions about safety, though. After all, if Jiffy Lube can burn up an occasional engine with the wrong oil filter, could a similar type of station blow up a battery? Probably not, says Livingston. First, there will be only one way to plug a cell into the pack’s receptacle: the correct way. Second, there will be testable relays and display lights to indicate whether or not a cell is safe and fully charged. If a cell was showing substantially decreased capacity, Livingston says it would be taken out of automotive circulation and probably sold twice more for less demanding uses before it was recycled or disposed of.

This still leaves problems of adoption. While automotive companies are contracting their battery production to major cell makers it remains unclear which path to adoption R2EV is taking. They could sell their design to automakers and operate the swap facilities. They could also hit the after-market and offer a swap kit similar to their products for commercial fleet vehicles. This seems less likely to make it into the mainstream for personal commuter vehicles. According to its site, R2EV is “working with the world’s largest electric vehicle manufacturer to change the customer experience.”

Hopefully we’ll see the fruit of this labor soon.

Laura Ipsen, Cisco Systems’ smart grid guru is introducing Al Gore right now, highlighting his many achievements and awards. He’s been a mentor for Cisco in linking climate change to good business. Cisco will be launching its telepresence system at the climate talks in Copenhagen this December. (Incidentally, Gore will be making another cameo on 30 Rock tonight. Don’t miss it.)

He starts by acknowledging his partners at Kleiner Perkins Caufield and Byers, including yesterday’s keynote speaker John Doerr.

- “I am Al Gore I used to be the next president of the United States.” A good opening…

- “Thanks for mentioning my new book, Laura, Our Choice.” All of the profits from the book will be donated to the Alliance for Climate Protection.

- I was advised before coming on stage that the legislation haven’t been discussed in detail at GreenBeat yet.

- Expectations for Copenhagen have been scaled back because negotiators aren’t going to be able to reach agreement on a legally-binding treaty, but the heads of state that are gathering there agree they will seek a binding political agreement with as much specificity as they can muster. To provide a set of guidelines for negotiators to complete their work in the first part of the year.

- They are trying to get this done so it can be announced before Copenhagen to give more impetus to the talks there — the window for passing serious legislation in 2010 will close around the time the spring ends, or even before that, but there is a determined effort by the White House and Congress to get that done and then resolve the international treaty’s details during a conference in June in Mexico City.

- Because the Senate requires 60 out of 100 votes and has grown sclerotic in its approach to anything like reform, it has become a challenge. There is good news, though: Some Republicans led by Senator Lindsay Graham have joined with Senator Kerry and Senator Boxer to arrive at consensus around a bill that will probably add some subsidies for nuclear and some provisions on natural gas.

- There is a chicken and egg relationship between Copenhagen and the legislation working its way through the Senate in the U.S. The climate bill isn’t as strong as I would have wanted but could achieve real reductions in emissions.

- I remember a story when I was a young congressman, 30 years old, I used to do townhall meetings all the time and most weekends I’d do lots. One Saturday I finished my fifth meeting and was driving home in Tennessee listening to the Grand Old Opry. Back in those days there was a famous comedienne named Sarah Cannon — she told a story as I was driving and I almost ran off the road. She told of a farmer in an accident who sued for damages and the driver of the other vehicle hired a lawyer that cross examined the farmer. He asked the farmer, isn’t it true that you said you felt fine after the accident? The farmer says he was driving his cow home and the other vehicle crossed the meridian. The lawyer cut him off and restated the question. The farmer starts over saying the truck hit him right on, throwing his cow out of the car. The cow was immediately shot in front of the farmer. So when he was asked how he felt, of course he said “I feel fine” — at least in comparison to the cow. This got big laughs…

- This relates to the global climate change conversation because it’s not as bad as it could be.

- The ice and snowy regions are in the process of melting — they are definitely beginning to melt at a more rapid rate. If that process crosses a tipping point then the sea level will reach a catastrophic rate. The other impacts, I won’t go through here, but more storms, deeper droughts, famine, tropical disease, a disruption of the basis for the conditions that have been favorable to the rise of human civilization. We really have to act.

- One of the reasons for rapid movement toward a need to act is that in our country, for example, there is a sense that solutions to the climate crisis will help with the economic crisis as well. A set of solutions that also enhance our national security by making us less dependent on the international oil market, controlled by sovereign states in the Persian Gulf which are not transparent about their operations.

- There are a lot of reasons to get very serious about solving the climate crisis. The book discusses in detail all the solutions to deal with the crisis — there is wind, solar, geothermal, biomass, I’m not going to go through all of them and you can come to your own conclusions. Nuclear option will play a limited role, but not as large as its advocates hope for.

- The single largest solution is efficiency and the Super Grid, or the Smart Grid, plays a crucial role in several aspects of a comprehensive plan to solve the crisis. It gives us access to the best solar areas of the South West by giving us more access to the lower-loss transmission lines. It gives us access to the best wind corridors that aren’t being used now. Most of the wind energy is not being produced in the best sites.

- By infusing the grid with intelligent devices and smartness, we will be able to deal more effectively with the intermittancy of these sources, and we can empower consumers to take charge of their energy use and respond to energy waste which is ubiquitous throughout our system. We have such large amounts of waste throughout our energy system.

- The Smart Grid will also empower an entirely new collection of devices and instruments that haven’t even been invented yet — just like when the internet was first born.

- The Smart Grid creates job, reduces our dependence on foreign oil and reduces emissions of global warming-causing pollution.

- The analogy to the internet is close to exact and very relevant. We are moving inexorably toward a widely distributed energy generation and storage model. Right now we’re still locked into the centralized model. But in some countries that use solar more, about 90 percent of solar is coming from rooftops of homes and businesses. New storage devices will make a major difference in connecting these with the Smart Grid.

- We’ve seen an increase in electricity use in the U.S. — the increase in the peak load has been even more. We have huge investments in standby generation just to reach peaks that arrive 400 hours per year, less than 5 percent of the time — more enormous waste and inefficiency.

- Speaking of smart storage, the wave of electric vehicles and hybrids will arguably serve a larger role as energy storage devices than transportation.

- Right here in San Mateo and Northern California, more than 10,000 smart meters are being installed every day — right here is one of the truest Smart Grid developments in the country.

- This new Smart Grid is cost effective in and of itself. Even if you discount some of the future projections, it immediately produces cost savings — proven over and over again. Our current infrastructure is outdated and vulnerable. And it’s costly when you account for unanticipated outages and grid failures like blackouts. Even small outages for some businesses are extremely costly — variations in power quality can even cost a tremendous amount. When you take the competitiveness impacts of these failures into account — our GDP is losing $1 trillion per year.

- Having a very effective Smart Grid is going to be a competitive advantage for the U.S. in the world community. The average transformer is estimated to be 42 years old. That’s unacceptable.

- The steps that are necessary serve multiple goals and should be undertaken for other reasons anyway. It will pay for itself over not many years. The innovation required will drive favorable developments in lots of other areas.

- Still, in many states where regulators and legislators still have antiquated laws and regulations, we are stuck thinking about the grid in terms of these large coal generating plants connected to consumers. The world is passing that model by. Many laws and regulations are just hopelessly out of date — another reason a federal initiative is absolutely necessary.

- We think of the grid as an exciting and wonderful thing. Our electrical system has been described as the most important engineering feat of the 20th century. But just as we’ve benefited from the building of the highway system and the internet, so this vision of a Super Grid with smart feature is going to be one of the most significant achievements of the 21st century.

- We will allow people to use the internet to connect to Smart Grid devices and appliances. Whirlpool will be delivering more than 1 million smart clothing dryers next year. Yesterday, California issued that law restricting use of big screen televisions. It takes 1 percent of the output of a coal-fired power plant to provide energy to televisions that aren’t even turned on in California. A Smart Grid would make it easier to solve problems like this.

- When homes are equipped with lots of smart appliances and new devices that have yet to be invented, we will live in an era where the use of the internet by things will exceed use of the internet by people. It’s already quite considerable.

- The intelligence out there in the world, in these devices is considerable. By giving them IP addresses and connecting them to the Smart Grid and employing strategies to cut energy waste we can accomplish several goals simultaneously. And by calling people’s attention to where savings are to be had on their bills and elsewhere in the system.

- China is building an 800-KW grid to connect every part of China. One of the reasons they are moving so quickly is because they see it will give them an enormous competitive advantage. There is also a program spreading in Europe to connect a transcontinental grid with renewable sources in Africa and the Middle East and consumers in Western Europe.

- This will help them become less dependent on Russian gas, and it creates more jobs in Northern Africa, which is the source and transit point for the largest numbers of undocumented immigrants coming into Europe looking for work, creating a lot of other issues.

- There are proposals to take solar energy from the deserts of India to the heavily populated areas. There are similar plans in China. Australia is starting on an aggressive plan of its own.

- A large amount of the U.S. stimulus project has been allocated to green technology and the Smart Grid. Now there is talk of a jobs bill that could also benefit these areas. But we also need to remember that these previous programs for cleantech are creating thousands of jobs in themselves.

- We cannot wait to begin working overtime to get this initiative completed. Here in this audience people are devoting their lives to making this a reality. A lot of you have exciting plans and ideas. I’ve seen some of them here and I feel the excitement at this conference.

- But in order for anything to happen, we have to deal with the policies involved. We need a federal initiative to remove obstacles, and we have to put a price on carbon. Our over-dependence on carbon runs through all of these issues. It is out of sight and out of mind without a price tag. No wonder we’re pumping 90 million tons of it into the atmosphere as if it were an open sewer.

- We have to remove the obstacles that our in our path: Political obstacles, as has ever been the case whenever a large new set of changes are being proposed. The good news is that many business leaders, especially at utilities, have become advocates for change. They have considerable political power in our system and especially in the U.S. Senate. We have to build up the pressure for change so we can overcome those obstacles.

- I want to urge everyone here to become more politically active. Its one thing to change your light bulbs and drive a hybrid cars — but we need to change the laws. [Big applause]

- The other set of obstacles are market obstacles. A brief word on the cap-and-trade system. It’s been demonized but more than half of people support it because it lets us use the marketplace as an ally. It worked incredibly well to reduce sulfur-dioxide pollution, a cause of acid rain. The cost of making those reductions was one-eighth of what is being estimated today, and it happened far faster than what is being projected. It works extremely well. A cap is set and those allocations are made. Those who don’t have enough emissions credit can buy from those companies that have not used up all of theirs.

- Company boards then will have a fiduciary motivation to manage carbon emissions. It is so much less costly to make changes in efficiency than to buy credits — every company will get on board to make the changes needed.

- Reductions have been incredible driven by the cap and trade system — it’s sort of like what Churchill said about democracy — it’s the worst system besides all the other systems that have been tried.

- There are other obstacles in the marketplace — the principal agent problem so that the incentives for decisionmakers are different than the incentives for the people who reap the consequences. There are a lot of people working on improving this situation.

- The final set of obstacles has to do with the way we think about the crisis — this is the most formidable set of obstacles. We have inherited a predisposition toward short-term thinking. Our predecessors survived previous threats, but we face very different threats than can be responded to immediately. Our chances of encountering a leopard are small — but the chance of encountering the climate crisis is 100 percent. We can only respond to this by using forethought, discussion and shared values.

- We have the capacity to create long-term goals and stay on track to achieve them. Cathedrals in the past were built over centuries. The Marshall plan created after WWII was spread across decade and we haven’t had any more world wars coming out of Europe. We have that same capacity but we have to cultivate it and resist distraction. We have to build consensus.

- There’s an old proverb: If you want to go quickly, go alone; if you want to go far, go together. We have to go far and quickly.

- An infant can recognize faces to a higher degree of accuracy than the largest super computers. We need to be able to visualize what needs to be done. Most people are simply not aware of enormous opportunities to save money, energy and have a higher standard a living at a negative cost — they will actually be making money. This information needs to be pushed out to the people.

- I was in Seattle speaking at Microsoft yesterday and people came through the line during the book signing, and a young man came up to me and said, “You know, we are going to solve this.” And I thought, thank you, I needed that. It made me remember, when I was 13, I heard president Kennedy announce the goal of putting a man on the moon and bringing him back. I heard people call that a mistake in the weeks after. But then Neil Armstrong set foot on the moon, and that day there was a big cheer at mission control in Houston — their average age was 26. They heard Kennedy’s challenge at age 18.

- The kids out there today need to see the potential, and it’s our responsibility to tell them. The Smart Grid is that important to the clean energy revolution.

- There will be a day when the next generation looks back and asks one of two questions: 1) If they see the climate crisis come to a devastating head, they will be justified in asking, “What were you thinking? Were you watching Dancing with the Stars? Didn’t you hear the scientists? Didn’t you care?” 2) But if they see a world in renewal with millions of new jobs building a new renewable energy platform and sustainable environment — if they feel in their generation a legacy that gives them a sense of purpose with a hopeful future, I want them to look back and say, “How did you find the moral courage to rise and solve a crisis that so many people said was impossible to solve?” I want the answer to be that smart men and women came together in places like San Mateo to make it happen — that they had the political will, which is in itself a political resource!

[STANDING OVATION]

Robert Gee of Gee Strategies went so far as to say, “Before anything is passed into law we need to get it past a panel of sixth graders, see if they can understand it. That is how simple we need to be going here.”

Unfortunately, Rick Counihan of Enernoc thinks the Red Sox will have more pennants than the New York Yankees before this happens. Pessimism aside, the legislation just isn’t there for the infrastructure changes that are starting to take place. If the power grids in this country are unified, there will be some availability and pricing problems to work out. We just can’t price Southeast nuclear power and Arizona Solar the same way, says Gee.

Counihan made the argument that non-financial benefits aren’t being discussed at the regulatory level.

“People forget, the smart grid is going to improve your life,” he said. “There are lots of convenience factors being totally ignored and people are focused on residential use but commercial and industrial sectors are 2/3 of consumption.” He went on to say “NIST (National Institute of Standards and Technology) has been a great help with their standardized protocols” and wonders whether cost recovery could be a part of the changeover, so that companies won’t wait until the last minute to upgrade to smarter utilities distribution.

Katherine Hamilton, president of the GridWise Alliance, was interested in the job improvement angle, citing a company that retrained their line workers instead of creating a bunch of temporary new jobs. Later, Hamilton said that in her view, transparency in metering is a civil rights issue and she equated the ability to make choices regarding energy to the right to decide how you use your cell phone.

“Most people don’t think they have choices but need to realize that they do — and the smart grid is key to this change in mentality,” she said.

Aside from NIST’s efforts, what Hamilton wants more than anything from the government (related to smart grid, anyway) is a single set of standards and legislation.

“Utilities can’t plan ahead without knowing their regulatory environment,” she said.

According to Lesh, we need legislation in place with regard to disconnection of power, brownout rights, timing of notices — a host of issues. We don’t know what all of this is going to look like when we have this great new set of capabilities, she says, and “you’d like to time it so that we don’t have a gap between these capabilities and the rules.”

Pamela Lesh of Graceful Systems calls decoupling (of revenues and power supplied) “stopping the car — it isn’t turning around yet.” When Lesh talks about the need for public process and legislation, it seems to be physically hurting her.

Seeming to have a gift for simplification, Gee summed it up: “Utilities companies need to step it up and realize what goes on with this legislation. It can be kind of petty and if you aren’t well versed in the thing, it can seem pretty unapproachable.”

Uh-huh.

The question now is what Cisco (a GreenBeat 2009 sponsor) will use that money for — currently, it looks like the company is racing to get in on every nook and cranny of the Smart Grid business, from hardware to IP networks to cybersecurity measures. Will its involvement become more focused as time goes on?

Ipsen didn’t drop any evidence of a cohesive strategy — choosing instead to emphasize the importance of coalition building, diverse pilot projects and more education — inside and outside the company. In addition to spending funds to dig deep into consumer demands, Cisco will need to reprogram regulators at every level of government to prove that Smart Grid models work efficiently and economically. Ipsen said the company is already bird-dogging the California Public Utilities Commission dream bigger when it comes to grid.

“It can’t just be done with incentives to consumers or tax credits — we need something new — we need ‘gridonomics,’” she said.

Ipsen also said that Cisco will be rolling out a raft of new grid related projects in 2010.

“We see an opportunity for IP and an end-to-end communications fabric that goes all the way from generation into the home,” she said. “As for the products, I think you’ll see us at every critical point where we can enhance operation of the grid.” She didn’t go into specifics.

Many of the questions asked by both VentureBeat editor Matt Marshall and members of the audience centered around Cisco’s competitive strategy — whether or not it believes it is going head-to-head with hardware providers like Honeywell or internet titans like Google. Ipsen dismissed the idea of rivalry in the Smart Grid space at this early stage — emphasizing that companies are going to have to work together in order for anyone to succeed.

“I hope there will be a lot of collaboration within the tech sector,” she said.

This support doesn’t just extend to other major companies working on revamping the grid — it could also entail the coddling of promising young startups (that Cisco may want to acquire someday, for instance). When asked whether Cisco will foster this type of company, like it did in the internet field in the 1990s, Ipsen said, “We’re trying to build a strong ecosystem of partners — not any one person is going to own the Smart Grid. If we miss the smaller companies and don’t look how to scale them with pilot projects, we’ll miss some good opportunities.”

She did note one major challenge that is often overlooked — one that was address earlier in the program as well — that many of the Smart Grid’s founding engineers and executives are approaching retirement, passing the baton to a younger generation that might have a different set of skills and perspectives.

“We really need to bridge those two together, and connect student with engineering degrees to green jobs,” Ipsen said. She said knowledge of how to converge electrical infrastructure with information technology will become invaluable in the future.

During a talk designed to counter Vinod Khosla’s Smart Grid skepticism in the session previous at GreenBeat 2009, he recalled putting solar panels up on president Jimmy Carter’s White House, and his heartbreak when president Ronald Reagan tore them down. Westly appears to be about emotional investment as much as financial investment. Now what is he actually saying about it all?

For starters, he dismisses the Flores lawsuit against PG&E — which claims that the installation of smart meters has hiked energy rates — as growing pains.

“Any startup technology is going to have it’s failures,” he said. “When the internal combustion engine first came out people thought it would never survive because it scared the horses, and how would they ever get around that?  A few years later, they drove cars and horses weren’t even in the picture.”

He makes a fair point: early failures and shortcomings don’t necessarily condemn anything in the long term.

When asked about the development of Smart Grid standards, Westly readily admits that the government “is going to mess the whole thing up,” but he’s glad for government involvement anyway — the incentives and grants are going to kick-start the transition to more intelligent utilities, he says.

He also stressed that there is a lot of money to be made: again and again the theme of profitability came up. He is, after all, a venture capitalist. “Bring your business plans,” he told the audience. So far, Westly has been enthusiastic about grid-related investments, choosing to back intelligent utilities vendor Eka Systems.

However, Westly says startups still need a clear idea of when their ideas will reach profitability, or the meetings he takes will be short. His smile manages to say “I’m joking around with you” and “I’m serious about that one, bud” at the same time. It’s business, even if this the Smart Grid has acquired a humanitarian and environmentalist halo.

Westly also predicts winners on the appliance side, which many in the industry have prematurely written off. After all, if people are given smarter refrigerators by their utility company, who will buy one from a retail store or brands like General Electric or Whirlpool? Westly responded to this point, saying, “You can get a free phone from AT&T too, but people will still buy the iPhone. When you see a really cool gadget, lots of people will want to buy it.”

He’s also expecting lots of apps to operate on the Smart Grid, with an open-source set of protocols and languages controlling it all. It’s as if he’s picturing it (as many are) as an extension of the internet — with the same players, money and challenges.

Asked what success in the Smart Grid will look like, Westly said, “The standard definition of success is how many of these things are deployed. We’re at 8 million, I think that number is going to quadruple in the next few years. But what I really want to see is the U.S., California and the Silicon Valley leading this whole thing. I want somebody like any of us, maybe somebody in this room, to think of the next big idea, to invent the next iPhone.”

Presumably, he also wants that person to come to him for an investment.

The key takeaway from Khosla’s short talk: Storage is the missing foundation that will make the Smart Grid a reality, and a more compelling opportunity for venture capitalists. He says he would be very interested in backing a storage solution that could make intermittent sources of energy like solar and wind better feeders for the grid — one that would also demonstrably lower costs for both consumers and utilities. As is, he says, the Smart Grid is sitting on a house of cards — it has no chance of encouraging conservation or cutting carbon emissions if it can’t properly store and use alternative energy in an economic way.

He says he is sure that there are Smart Grid winners in the works — the future Facebooks, Googles and Twitters of cleantech, but he doesn’t think any have emerged yet. One of the biggest hurdles to this development: closed networks and standards. In order for there to be productive experimentation on the edge of the industry, technologies have to be interoperable, open and collaborative. If this can happen, and the right technologies get the support they need, then there will be 95 losers for every 5 winners, but people will still make money.

Before this can take place though, Smart Grid companies also need to accept that consumer behavior is incredibly difficult to change, Khosla said. While 5 percent of the population will take the time to check in on their energy use and make an effort to conserve, another 80 percent will ignore it entirely. “When you ask how many people will worry about interest rates on their credit cards, the answer is not many — they don’t know what they are paying,” he said. “The one thing that does change behavior is dramatic changes in pricing — going from $2 to $4 for a gallon of gas — that creates change.”

Khosla said that analysts touting Smart Grid as a way to fight pollution are wrong. He went as far as to say that coal could be cleaned up to be even more carbon neutral than solar and wind sources. With carbon capture and other technologies — including one that can funnel greenhouse gases into producing green cement — coal, which will remain the most popular source of energy regardless of policy or technology, could be a route to prevent global warming.

Right now, investors and companies operating in the Smart Grid space seem to be biased against coal, charging full force toward green sources. He stressed that clean coal companies should get a piece of the Smart Grid pie in order to really make it a decarbonizing development.

“Be careful about the hype,” he said. “Always look at the economic proposition.”

The winner were selected by a panel of expert judges, including Accel Partners’ Rich Wong, PricewaterhouseCoopers’ Tim Carey, KPMG’s Craig Lobdell and Spring Ventures founder Sunil Paul. The Innovation Competition itself was hosted by Mayfield Fund and moderated by the firm’s managing director Navin Chaddha.

Locust Storage emerged from stealth mode today, launching an enterprise and data center energy storage system that promises to reduce energy use by up to 90 percent for its customers. It does this by “providing excess energy when driven under hard use and storing energy when demand is low,” according to founder and CEO Seth Georgion “the key is to power the discs down when they aren’t in use.” The company is looking for a first round of investment, with a plan to launch the product in beta in the first quarter, followed up by a general release in the third. Based in Campbell, Calif., the company has rightly attracted a lot of interest from data center owners. “Too many people are already writing us checks,” Georgion said following the competition.

The company says that its storage systems will easily handle petabytes (1 petabyte is equivalent to all Facebook photos right now) as well as exabytes, the equivalent of 10 trillion Facebook photos, 10billion YouTube videos, 129 trillion emails and 6 million blu-ray movies. Another feature that makes Locust’s systems unique: They are wireless.

CPower, a more established company that runs demand response programs, also took home the prize. Much like its competitors EnerNOC and Comverge, the New York-based firm provides financial incentives for industrial commercial companies to cut their power consumption when the grid experiences peak demand levels that could cause outages. It actually has the distinction of being the largest company who does this, even though it has yet to go public. It already enjoys extensive partnerships with utilities and grid operators, which should also help it gain more market share.

So far, CPower has raised two rounds of funding — the second, amounting to $10.7 million in April of this year. It is backed by Mayfield Fund, Bessemer Venture Partners, Expansion Capital Partners, Schneider Electric Ventures, New York City Investment Fund and Consensus Business Group.

Look for these two companies, and the other nine finalists — R2EV, Viridity Energy, Current Group, Grid Net, Consert, Xtreme Power, Econetix, Control4 and Building IQ — to make waves in the Smart Grid space in the next several months.

In spite of a difficult IPO market and the recession’s drag on the industry, Smart Grid companies are starting to get attention from both VCs and acquisitive technology giants, according to the speakers on the Follow the Money panel, moderated by VentureBeat’s lead writer for GreenBeat, Camille Ricketts (pictured at podium).

Peter Wagner, a partner at Accel Partners (second from right), compared the Smart Grid opportunities to those on technology platforms such as Apple’s iPhone. He says the utilities are like the cell phone network owners, and platform owners such as Silver Spring Networks — which makes wireless networks that transfer data from smart meters to utilities — make it possible to create lucrative apps that exploit the Smart Grid. A lot of the future opportunities for startups will be in the apps, he said. These are equivalent to “offdeck” apps as with the AppStore.

Right now, Wagner said he is looking for companies that can exploit the platform and create apps that can be sold directly to consumers. As with the iPhone, that enables startups to sell directly to consumers and bypass the gatekeeping process of the utilities.

“I encourage entrepreneurs to think of a customer that is not the utility, since the utility sales cycles are long and they move slowly on new business models,” Wagner said.

He pointed to Opower, a startup that shows people how they can save money on their energy bills. The idea of building social networks around saving energy is likely to lead to startup opportunities, Wagner said.

Don Wood (pictured, middle) , managing director at venture firm Draper Fisher Jurvetson, said the DFJ Network has 70 investments in cleantech companies, including a number of Smart Grid plays such as Enernoc, Solar City, Deeya Energy in India, and Prudent in China. He said that investments in local smart grids could prove fruitful. He noted there are 100,000 villages in India without electricity and that an effort to provide rural electrification is needed and could prove lucrative. DFJ invested in Husk Power, which is doing that.

He also said that he believes killer apps in the future will be in the storage of electricity, either in central storage repositories at the utilities, in individual homes, or in charging stations for electric vehicles.

Breakthroughs in that area depend on better battery technology, which has been exceedingly difficult to do since batteries don’t progress as other technologies do, Wagner said. Wood also said network control systems also have to be developed for better storage.

Bryce Lee (second from left), managing director at Credit Suisse, said he believes investments in hardware are necessary and important in the initial building of Smart Grids, but future opportunities will focus on the communications and intelligence that the grid makes possible. He also pointed to Silver Spring as an example of this.

Brian Bolster (picture far right), managing director at Goldman Sachs, said that smart metering companies and networking companies are doing well. He said those new technologies will inundate utilities with a huge amount of data. There should be opportunities in the companies that enable the utilities to manage and make sense of the data.

“We’re in the infrastructure phase now, but derivatives that come from the infrastructure will follow,” Bolster said.

The U.S. federal government has made $3.4 billion in stimulus funds available to Smart Grid companies, either as loan guarantees or grants. But Wood said that isn’t having a direct effect on his investment strategy. That’s because he believes companies should be able to stand on their own without the regulatory help.

Wagner said the stimulus announcements have succeeded in accelerating the market and helped it recover from the recession-induced stall in the market earlier this year. But he warned that startups should not become enamored with the possible mirage of getting stimulus money.

The bankers and VCs didn’t seem concerned that it might be a long time before there are exits. Mergers and acquisitions will likely be plentiful. Wagner, who is not an investor in Silver Spring, said he believes there “have to be” ongoing negotiations between Silver Spring and Cisco about an acquisition. Other big information technology players such as IBM, Oracle, SAP, Siemens and Google are likely to be acquisitive in this market, Wagner said.

Wood noted that players such as General Electric have made 400 acquisitions in the past decade and that there would likely be more in the Smart Grid industry. Big players such as GE have to look for big new markets constantly to keep growing. Wood expects that one of DFJ’s companies, Tang Energy, will likely go public in the coming year as demand increases for its turbine blades for wind power.

“There will be IPOs in this space,” Wood said. Added Lee, “I’m optimistic that 2010 will be a good year for the public markets, and hopefully cleantech will benefit.”

It’s still pretty early for IPOs. But the successful IPO of cleantech player A123 Systems earlier this year has given investors hope that there will be more to come. Asked if shocks to the system, such as a drop in commodity prices for oil or conventional electricity, could hurt the prospects, the panelists said that most of their investments aren’t contingent on soaring prices for energy.

“We’ve reached a tipping point on electricity,” Wagner said. “It’s got momentum, regardless of the price of oil.” [Photo credit: David Lin]

According to Ray Bell of WiMax for Smart Grid company Grid Net, it’s really about service. Cleaner energy, he claims, will become a marketable service because, even though it costs more, people will feel better about buying it. This has already proven true in many fields; Wal -Mart sells organic products as well as everyday bargains. But this is a subtle departure from most thoughts on global energy — the notion of green power as a desirable option as opposed to a necessity.

Rob Conant of networking software provider Trilliant considered it a matter of economics, taking the stance that implementation of cleaner power and smarter distribution is going to be predicated upon its economic viability and a positive regulatory environment. He also regarded Africa as having solid potential for growth that will only be accelerated by imminent technical breakthroughs.

Pilgrim Beart, CEO of home energy monitoring company and recent Google PowerMeter partner AlertMe, said he is concerned that the regulatory environment of the U.K. (which is legally obliged to reduce power consumption 30 percent by the year 2020) could breed apathy in customers. Seldom do people who are being dictated to choose to change their behaviors.

Consider the behavior of teenagers under over-strict parents — only the minimum possible behavioral change is normally seen. In this case, that means that people won’t end up saving any more power than they are forced to. In the U.K., this would mean probable failure at their 2020 deadline.

In the back of the room, keyboards are clattering as people type while Bell talks about the propagation and standardization of  the ZigBee protocol, wireless power data transmission and how it’s all on the same track that WiFi standardization was a couple years ago.

As a data center manager for an oil and gas concern, Georgion was working in a field where a single survey could contain up to 60 petabytes of information. To put that in perspective, Facebook occupies a single petabyte of photo data. The center drew an enormous amount of power, all discs spinning all the time. Of course, data was only being accessed a small fraction of the time the facility operated; most of the power drawn was simply wasteful. Georgion began to realize there was a better way… if only somebody could engineer it.

So, during free time, Georgion began the design work for Locust storage drives. Using both flash memory and spinning discs, the innovation is in the software controls and the ability of the disc to turn on and off on-demand. They are powered by Ethernet cable and as stated, draw only 5 to 10 percent of the power that traditional systems demand.

Georgion estimates that a medium sized data storage facility could save 400 kilowatts of steady load by switching entirely to his Locust drives, which last years longer than competing technologies. Since they operate partly in the solid state and are only generating heat when data is accessed (as opposed to full-time) HVAC requirements would be substantially lower as well.

Terry Klein, formerly of Dell, is on the board of directors.  Batteries are supplied by Inspired Energy, but that’s not an exclusive deal and Georgion says, “We are on the market for something more specialized, maybe moving to super capacitors for the commercial products.”

Lu spoke at VentureBeat’s GreenBeat 09 event today. Discussing Google’s Powermeter with Matt Marshall, Venture Beat Editor In Chief and CEO, he seemed to be playing his cards close to his vest on some topics but was smilingly helpful on others.

Marshall comments that PG&E might be getting nervous with Google’s entry into energy networks. After all, the startup that took years to reach profitability has now launched browsers, word processing software, email with integrated calendars, even an operating system coming soon. Google came out of nowhere and is now a clear and present danger to Microsoft. When David grows into a Goliath himself, giants everywhere begin to worry.

According to Lu, though, these fears are unfounded. He says “…clearly, we aren’t going to generate or distribute power.  Utilities are good at that. We are good at reaching lots of customers and we think this is where we can help — we can help utilities reach customers and customers to monitor their energy usage.”

Of course, this is a similar line to what Google said about the Android mobile phone software two years ago.  Today, many aren’t even sure who manufactures the Droid, but everyone knows it’s a Google phone. Google is reportedly planning its own Google-branded Android phone. Goliaths everywhere wonder if their utilities are about to suffer a similar ignominous fate.

During the Q&A, though, an interesting fact: Google.com isn’t developing PowerMeter. Google.org is. That difference in domain name is three letters with a lot of meaning. Google.org is the philanthropic wing of the company, funded with 1 percent equity and 1 percent profit from Google corporate. The success or failure of PowerMeter won’t be measured in financial terms, Lu says, but in whether or not it helps save a “socially relevant amount of energy”.

He goes on to say that Google’s main play in energy is it’s ability to scale. The goal is to provide the interface from physical power meter to the consumer’s laptop or mobile phone, not to do the metering itself. With this in mind, he says, Google’s mission is to help the Tendril and Opowers of the world to grow in scale and reach more customers. Consumer data is to be the exclusive property of the consumer, who has the right to delete records and stop using PowerMeter whenever they choose.

Lu’s talk made Google appear uninterested in the business side of PowerMeter, saying google saw it’s mission as “helping” utilities.  Of course, they had the same mission with mobile phones vast profits are ensuing. We’ll have to wait and see if the same fate is in store for PowerMeter.

Carvallo listed the many applications — some of which will be built by the utilities of themselves, some of which will be provided by third-party companies — that will be needed in order for utilities to become more reliable, and build cleaner, more efficient electricity transmission systems. These applications include home energy management monitors (ranging from Tendril to AlertMe to Google PowerMeter and Microsoft Hohm), as well as demand response programs, and mesh networking software made by companies like Trilliant and Silver Spring Networks. Customer will be expecting these capabilities, under the banner of Smart Grid 2.0, Carvallo said — a notion also backed by Southern California Edison vice president of advanced technology, Paul De Martini (above right).

“In the U.S. the average disruption time (blackout time) is 120 minutes. In the southeast it’s as much as 400 minutes,” Carvallo said. “In Japan, it’s 3 minutes.” That’s the kind of reliability that customers are already demanding.

Even though Austin Energy and SCE were not included among the companies receiving the Department of Energy’s $3.4 billion in Smart Grid grants (SCE didn’t apply because it wouldn’t have increased the number of jobs at the company), they are perhaps the farthest ahead in this race toward applications increasing conservation and reliability.

While utilities are competing for who will be the first to create the most important Smart Grid developments, application makers are competing for utilities’ attention. Carvallo highlighted exactly how challenging of a proposition this is. With so many companies in the space offering home energy management services, or even smart metering hardware, he said whoever is able to offer open and universal standards the best and earliest will win the coveted contracts. “Get in line,” he said, while at the same time acknowledging that utilities have no choice but to depend on third-party app makers in order to succeed.

SCE’s De Martini also had some words of advice for app makers looking to land utility deals. “We have 5 million residential customers and 30,000 industrial and commercial partners,” he said. “Any app needs to be able to be applied very broadly and still create value.” Carvallo followed this up, recommending that app companies send their engineers to speak with utilities first. “Send the sales guys at the end to close,” he said.

Panelist Dan Yates (top photo to left) is the CEO of one such third-party app company, OPOWER, which provides detailed energy consumption data reporting services, as well as consumer-facing recommendations for how to save energy and money. The company has deals with 20 utility companies, including Seattle City Light, and is currently serving 2 million homes — it’s one of the recipes that’s been more widely adopted.

“Utilities have so much to worry about — peak demand, distribution, reliability,” Yates said. “OPOWER has moved so quickly into the market because it actually yields demonstrative reductions in consumption.”

VentureBeat is hosting GreenBeat, the seminal executive conference on the Smart Grid, today, featuring keynotes from Nobel Prize winner Al Gore and Kleiner Perkins’ John Doerr. Register for your ticket today at GreenBeat2009.com.

[Photo credit: David Lin]

Duke, for instance, is already putting incentives in place, anticipating this shift. Rogers used his talk to stump for his company’s Save-A-Watt program — a proposal that is not quite decoupling (separating utility revenue from the amount of power they deliver) but rather providing financial incentives to both utilities and ratepayers for conserving energy. So far the plan has only been approved in Ohio, only one of a handful of states that Duke serves, though Rogers says that win will soon be a catalyst for others. This model, he believes, will help energy utilities and customers weather upheavals and price hikes in the US energy mix.

Save-A-Watt is superior to outright decoupling, he says, because the latter will no doubt lead to utility apathy — bad for the environment and equally tough on customers’ wallets. “Greatness is never a consequence of indifference,” he said. The one positive side effect from decoupling will be varying power rates, he said — people should start seeing energy prices being more closely pegged to time of day and demand rates. This is something both Rogers and Duke supports.

In addition to responding to money consumer behavior can also be shaped by convenience, he pointed out. There are two schools of thought on how to encourage conservation at the consumer level, he explained: one says you can reinforce new patterns with the right mix of technology and enforcement, the other says you can do it without the consumer even really knowing — meaning no change in their daily lives.

A prime example of this is installing refrigerators programmed to make ice only during off-peak times, when energy is cheapest. The ice is still there, regardless of whether it was frozen at 3 p.m. or 3 a.m. — that’s all the customer cares about. In reality their energy use has changed, without them actually changing. Rogers stressed that this is the path to victory.

For this reason, Duke is getting involved in every segment of the Smart Grid’s supply chain. The utility has teamed with companies like Echelon and Ambient to provide cutting-edge communication systems for its smart meters (the goal being to deliver energy use data in real time to both utilities and the customers themselves in an actionable format). Rogers went as far as to say the company would build its own software if that was necessary to improve and speed the transmission of helpful data.

“We have the ability to optimize technology against the mother grid,” he said. “That’s where there are savings that will make the grid and our economy more efficient — optimization of homes on the mother grid is what will create transformation.” He said Duke is bringing in all the experts it can to make sure this happens — and fast. Rogers seems to be all about speed. When his team tells him a smart metering roll out will take three years, he asks why it can’t be done in one.

“The scaling aspect is really critical,” he says. “I want to close that gap — I want people to see it, feel it, touch it — there’s a sense of urgency because we’re making significant investments in this area.”

Rogers predicts that Duke will have smart meters rolled out to its entire coverage area with an automated distribution in place within five or six years.

He added that the company is looking for innovative ways to shrink its own footprint while its at it — promising to convert its full fleet of vehicles to electric cars and plug-in hybrids between 2010 and 2020.

VentureBeat is hosting GreenBeat, the seminal executive conference on the Smart Grid, today and tomorrow, Nov. 18-19, featuring keynotes from Nobel Prize winner Al Gore and Kleiner Perkins’ John Doerr. Register for your ticket today at GreenBeat2009.com.

[Photo credit: Alexa Lee]