Getting Benefits from Smart Grid

Jan 23, 2009 - Carol Ray - UtiliPoint International, Inc.

We are all, with few exceptions, being asked to operate in a new economic environment where nothing is consistent but change. Economic models are rewritten and financial plans revised but the future is more uncertain. As our country and most of the world await an economic recovery, those of us in the utility industry press forward, striving not only to keep the lights on but to also help pave the way for a better future ushered in via a two-way digital smart grid network that promises operational efficiencies and environmental improvements compared to the existing system that our fathers and grandfathers engineered some fifty years ago. But are the benefits realistic given the economic change of the past quarter?

This question hit home as I opened my astounding electric bill for December last week and noticed the billing insert explaining that the transmission-distribution system provider was installing smart meters and I would be helping to pay for them over the coming years, even though the implementation for the rural area I live in won't be part of that strategic deployment for two or three years at best. It is not the amount of money that is the issue for me personally; it's the promise of operational savings and environmental improvements that had me asking questions of myself: if the smart meters are providing these savings, then why do rate payers pay for them?

What's really funny about that, other than I'm having an internal debate with myself is that I am in a better position to answer that question than 99% of the people in the business: it's what I do! As I work with utilities on strategic planning for smart grid project management offices (PMO), I caution them on the numerous changes to existing back office systems and the impact to existing business processes. My conservative estimate on just systems impact and a meter installation for a one million meter project is in the neighborhood of $375M over 6-10 years of implementation for the entire suite, or in the neighborhood of $300 - $375 per household, depending on the age of the existing systems in the back office and specifications on the meter and network. This includes minimum changes to the CIS and CRM systems, upgrading to service oriented architecture (SOA), systems integration, a meter and network, a meter data management system, expanded data warehouse, minimum mobile and GIS improvements (the new backbone for design engineering), workforce automation, asset optimization, some automation to the substations, improvements to distribution management, improvements to the outage management system, an upgrade or two to the settlements systems and web support for consumers and of course, home area network support.

On metering standards, I recommend that a utility invest in as much memory in the meter as possible, as security requirements and enabling technologies eat into the memory allocations. Get more channels than you think you need for the long haul as we move to more complex billing alternatives for reducing peak demand, implementing critical peak pricing and time of use rates; include power factor as a channel in addition to the fifteen minute interval data for residential customers and make scalability one of your most important success criterion. All of these add cost to the overall project. But I really believe it is the right thing to do for societal and operational benefits including energy efficiency and improved conservation with an overall goal of helping reduce foreign oil dependency.

The cornerstone for a smart grid initiative for most utilities is the advanced metering infrastructure. It is, indeed, the supporting system for enabling many of the programs that will enable utilization of alternative energy back into the grid, or distributed generation. One of the most needed and easily realized benefits of smart grid is the improved management of the distribution grid.

Survey says: Utilities believe in the benefits of Smart Metering supported by Smart Grid. Results from UtiliPoint Survey September 2008 shows that utilities responding ranked these five factors as important or very important.

I was working on demand response project and a trial of a time of use metering some ten or eleven years ago and learned a great deal about consumer response to the program, especially in focus groups. Saving money was not nearly as motivating to participants in the program as was having a positive impact on the environment. When they understood that peak demand was only one hour of time from 4:00 p.m. to 5:00 p.m., Monday through Friday, during July and August (due to extreme heat and demand for air-conditioning) and that the cost for accommodating that peak was nearly $100M plus the carbon, pollution and other negatives around building another fossil fuel plant, they finally understood: residential load was enough of a contributing factor that they could help offset that need of building more power plants by conserving energy during peak demand; by being aware and electing to cool the house until 3:59 p.m. and returning the HVAC to use after 5:00 p.m. It was explained by comparing the demand to matinee pricing at the movie when it's cheaper to go during mid afternoons than when it's in peak demand for the 7:00 p.m. or 9 p.m. showing on Friday and Saturday night.

Detailing Some of the Smart Grid Benefits:

Societal Benefits

* Improved convenience by greatly reducing if not eliminating the need for access to meters after changing to a Smart Meter that can be read and polled remotely.

* Fewer estimates, more reliable data for billing as data collection moves from at best 12 reads a year (assuming no estimates) to reading interval data as often as every hour or even in fifteen minute increments.

* Consumers become part of solution, not part of the problem, as they have more information about their consumption patterns, can compare usage patterns from year to year and even to their neighbors with similar size homes.

* Smart support for plug-in hybrid electric vehicles (PHEV) that uses alternative energy for charging when available and avoids charging during peak demand. Watch for new, innovative systems that allow remote billing options for charging your PHEV similar to cell phone models where you are charged where ever your vehicle is charging, similar to tower hopping in the cell world.

* New billing options will potentially allow consumers the ability to pay incrementally, move away from billing cycles that were based on manual reads, or even pay as you go with prepaid metering options.

* Enabling technologies for distributed generation

* Ability to provide near real time pricing and systems that are price responsive

* Move-in/move-out can be handled over the network, in near real time, eliminating the need for a manual final read and lagging invoice

* Reduced pollution, carbon reduction, and avoided cost of new power plants by implementing conservation measures for peak demand times

Management of the Distribution Grid:

* Moving from analog, one-way networks to two-way digital networks will improve reliability.

* Many of the distribution grid components were installed over 50 years ago and had an original life expectancy of 30 to 35 years. It's past the time for replacement for many utilities.

* Managing electrical losses on the grid will reduce green house gases and overall carbon emissions

o Flow patterns optimized
o More efficient components means less loss
o Measure power quality thereby addressing harmonics issues and phase balance issues

* Enabling of continuous monitoring of grid health, capturing data into data warehouse for analysis and improvements

* Improvements in analyzing forecasted reliability projections against historical network performance data for improved models and cost efficiencies

* The smart meter can help in outage detection by sending a last gasp or validate outage restoration without the need for a truck roll

Operational Efficiencies:

* Improved Safety

o Reduce traffic incidents by having fewer vehicles on the road by reducing or eliminating the need for truck rolls for:

+ move-in/move out
+ remote connect/disconnect (electric )
+ determining outage to be on consumer side of the meter, not a supply side issue
+ no meter read or read on demand

o Reduced accidents by reducing risk of injury at the home from dog bites, jumping fences or other residential accidents

* Improved decision making on grid efficiencies due to better monitoring and improved analysis of performance

* Theft detection at the time of new meter installation on daily with monitoring. Investigating theft alarms and tampering alerts are excellent ideas for deploying former meter readers.

* Reduced calls to Customer Service from utilizing the web or HAN for information about usage patterns.

* Fewer calls due to estimated bills and cancel/re-bill expense

* Reduced fleet cost by driving fewer miles

* Use power factor data for preventative and predictive maintenance.

* Improved collections with remote disconnect service and faster reconnects by being able to restore service remotely upon receipt of an electronic transaction

* New revenue stream by providing other utilities with meter reads from the electric system (gas and water services).

The list is practically endless and limited only by the lack of imagination and technical know-how. While benefits are still emerging, the reality is that it will take most utilities more than ten years to get where they want to be in terms of grid stability. Most are playing technological “catch up” after many years of being forced to do more with less; many were left with stranded costs and have had little opportunity to get cost recovery. The challenges are daunting, particularly around lack of communications standards, issues with scalability, and overall technical complexity, privacy issues, and security concerns. The solutions require research and innovation which come with inherent risk. Utilities implementing smart grid continue to experience problems with product reliability and place vendor reputation high on their list for selection criteria, although not particularly sole-sourcing.

Survey 9/2008 says: Utilities believe that product reliability and vendor reputation are very important in their decision making process, as is the total cost of ownership and interoperability. Fifth on the list is the approval for inclusion in rate base followed by the speed of regulatory approval.

It is clear that regulatory recovery is a major factor is a utility's decision to move forward with Smart Grid technology. With the economic pressures being greater than ever, utilities need to do a thorough job of defining the costs, but also the various benefits, societal and operational, for deployment of smart grid technologies to their consumers. In the end, we should end up with a more responsive, reliable energy system capable of supporting alternative energy, distributed generation, and reduced consumption through education and awareness.

With all that said, I guess I'll be happier to pay my part of smart grid, as I really believe that it will be essential to utilization of alternative energy and increased conservation; and that, after all, is a bargain at a monthly cost of can of soda on the plane these days, and it's less than 12 years. The cost and recovery tracking process and regulatory approval process is a complex one and one size never fits all in this market. Recovery rates exist in the United States from a few dollars a year to as much as $7 a month per customer, to flat percentage of the monthly bill. These are huge variances in recovery cost from state to state, even within states and left up to the various utility commissions for validation.

It's probably a good guess to say 50 to 60 percent of the cost of implementing these powerful new systems can be paid for from operational savings and long-term, societal saving will provide the additional benefits to make it a cost effective investment for energy efficiency, reduced carbon and pollution, and enabling technology to make the most of alternative energy. But the remaining dollars will likely be funded from consumers, just like you and me, but we'll also be benefiting from the implementation of smart grid technology.

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