In a recent report, McKinsey & Co. suggested that the deployment of grid applications will lag 3 to 5 years behind advanced metering infrastructure (AMI). According to McKinsey, "the benefits from AMI are relatively easier for the utility to capture."
Hidden Hurdles to AMI Benefits
But many utilities are beginning to ask themselves just how easy it really is to capture AMI benefits. There are several obstacles:
·The need for additional equipment. It's not enough to install a smart meter. Quite often, you also need a programmable thermostat (that talks to the meter) and a home energy monitor.
·The need for new pricing and regulations. Demand response programs don't operate unless you have some kind of dynamic pricing or incentive to induce customers to play along. Getting new rate structures can take years, especially in jurisdictions where advocacy groups have taken an adversarial stance.
·The need for additional consumer marketing and support. Our industry is just now coming to grips with the need to "sell" the smart grid to consumers; and to haveextensive customer support operations in place.
·The need for consumer behavior change. Even if you can get the additional equipment, the new pricing and the additional marketing, you still cannot be sure that consumers will change their energy usage behavior. As an industry, we have not yet mastered the science of consumer messaging and engagement.
The Flight to (Fast) Value
As a result, more and more utilities are considering grid applications as a place to start, especially if they have not yet launched smart metering projects. Denmark’s DONG Energy is a case in point. In the U.S., Progress Energy seems to be taking this path, as is Chattanooga-based EPB, which just signed a deal to buy as many as 1,500 S&C IntelliRupter PulseClosers along with S&C IntelliTeam software. (Use the comment form to tell colleagues about other utilities with a “grid-first” approach.)
For some utilities, smart meters make the most sense. For others, however, grid applications return benefits more quickly… and without the need to jump the hurdles described above. And for some others, the move toward grid applications is a defensive one. The advent of intermittent renewables, distributed generation and electric vehicles is forcing them to upgrade to a smarter, more flexible, more resilient grid.
The value-based thought process seems to be something like this. Utilities are asking where can we get value:
·Fastest?
·Most cost efficiently?
·Incrementally (start small, scale up as makes sense)?
·Without customer issues?
·While also preparing for future challenges?
What We’re Hearing from the Field
Many utilities are reluctant to reveal plans for fear of getting ahead of the rate-making process. So I turned instead to some of the sector’s leading vendors and asked whether they have been seeing this trend as well.
Ray Gogel, COO of Current Group, says the pendulum is indeed swinging. He likes to call this trend “consumer-less energy efficiency,” since grid optimization can occur with no impact on or involvement by the consumer. He points out that value-creating opportunities such as voltage optimization work “across the entire grid and 24x7x365… not just 60 hours per year of critical peak.”
Telvent Smart Grid Executive Andy Zetlan told me his company thought 2011 would be the banner year for grid applications “but it arrived a year earlier than expected.” When asked which applications can return value most quickly, he puts distribution management systems (DMS) on top, followed by Volt/VAR optimization and distribution automation.
Silver Spring Networks now promotes its offerings as a unified smart grid platform that applies “whether a utility starts with advanced metering or distribution automation or focuses on consumers with demand response or electric vehicle projects.”
S&C ElectricPresident and CEO John Estey confirms the uptick in interest in grid applications and automation, but argues that it is steady, sustainable growth, not a fad that will fade. Distribution automation, he told me, “is scalable and distributed. You don’t need a big-bang solution. You can put it where you need it the most and then grow from there.”
GTM Researchanalyst David Leeds confirms that distribution automation can have “very promising returns,” calling it a “large basket of low-hanging fruit for virtually all distribution companies.” He cites a survey that reveals distribution automation (DA) and demand response (DR) as “the second wave of the smart grid.”
Your turn. Was the smart meter emphasis the way to go? Or did we get it @ass backwards? Vote in the Quick Poll and leave your comments below.
And if you want to explore grid applications in more detail, the Smart Grid News editors have compiled some of the best resources from SGN and elsewhere. Click any of the titles below to read more:
Seems to me that AMI is indeed an easy vision for corporate boards. Thus we see deployment based on elimination of low cost jobs and assumed advantages rather than the more difficult to understand grid optimization advantages.
This article makes some powerful arguments that we are indeed starting at the wrong end of the smart grid system. In this case it's the easy end but not the optimum one.
Don MacConnel - 07/30/2010 - 07:46
Both ends are the right end
But, realistically, much of distribution automation requires a validated system model and telemetry in most or all of the system to be effective. Starting with or concurrently implementing AMI makes the upstream applications (particularly grid optimization and command & control) better and may be required for them to be even possible.
John Sell - 07/30/2010 - 08:08
Building Grid Backwards
By themselves distribution automation, meters, rates, and renewables are all standard practice. What distinguishes Smart Grid from standard practice are two things: (1) engaging the customer, and (2) integrating supply and demand. Starting with DA might be easier but it isn't Smart Grid.
Roger Levy - 07/30/2010 - 08:31
Political and Customer Pressures are Real
Focus on the grid WILL provide the fastest and most tangible benefits for most utilities but Political and Customer pressures are real drivers that a utility director must consider, especially a municipal or coop. The best way to satisfy those pressures is to consider metering/AMI investments through a voluntary and methodical deployment strategy, not full-system meter replacements.
Lucas McIntosh - 07/30/2010 - 08:37
Avoiding the Big-Bang Advanced Metering Infrastructure
Hi Jesse,
According to the EWPC article “Three Smart Grid Predictions for Initiating the Global Power Industry Transformation ( http://bit.ly/EWPC27 ),” which “update the comprehensive white paper written by… [you, but] named by the Edison Electric Institute as The First Push: How a utility positions itself for success as smart technologies transform markets means seeing what domino falls first,” this excellent piece is well is in synchronicity with a strategy based on Prediction #3: Repositioning the utilities that missed the opportunities to learn the lessons of other industries is bound to be in a restricted T&D Grid space that will sooner or later be ‘painfully consolidated.’"
Before making that specific prediction, in the comment Let's Initiate the SG Transformation While T&D Jobs Comeback, posted under the Intelligent Utility Inside article Baltimore G&E: AMI Comeback? ( http://bit.ly/EWPC26 ), by Phil Carsom, my conclusion was “For all of the above reasons, I suggest that DOE should shift the stimulus funds to BGE’s T&D construction investments. I think BGE should try to get DOE consent for filing construction projects to the Maryland PSC to meet the July 30 deadline. Those projects may generate many jobs and serve to stimulate the economy. Other states all over the world should follow the suggested shift.”
S&C Electric President and CEO John Estey critique that “You don’t need a big-bang solution. You can put it where you need it the most and then grow from there,” applies such big-bang perfectly well to what I named as the smart grid that is being pushed. As can be seen in the EWPC post “Synchronicity of the Emerging Whole Power Industry ( http://bit.ly/EWPC29 ),” under the EWPC-AF you don’t need a big-bang solution either:
“Instead of using a regulated standard (not smart but) brute meter attack to force customers, well in line with your affirmation and with the three predictions mentioned above, in the (architecture competition) market approach customers will end up behaving like a herd, where ineffective whole (that is what customers need) products and services are weeded out (maybe together with their meters) in The Chasm of the Technology Adoption Life Cycle (TALC). ..To make it truly effective, it is only those smart customers that lead the herd that need complete education to be able to exert full free choice…”
Best regards,
José Antonio
José Antonio Vanderhorst-Silverio, Ph.D. - 07/30/2010 - 08:50
Benefits from DA
With a SAIDI of 2 hours in average, the network is available 99,98 % of the time. Considering 80/20 law, utility did a great job with a dumb grid. The challenge is to get this 0,02 % of the time...good luck trying.
The potential for Voltage management and VAR management could not be much greater than the current losses on a system. Voltage drop and power factors are linked. Let's give 5 % energy reduction from VVO, PNNL found 2 %...I found myself 2 % by simuling the distribution network of my former employer.
I aggree that we should not only focus on meters. Smart meter may help to tap a certain reduction, but could we get more than the current elasticity of the demand ? 0,15 ? where 100 % increased of tarif would lead to 15 % energy reduction, only ?
Personnally, the fun will be in the building. Demand responsive loads will change the rules. This will be a competitive market. This is where we will reach more than 15 %-30 % of energy conservation. DR is the killer application of the SG and no meters are really required.
I left the utility industry because there is no real potential inside their boundary (their regulated market also). Still, we all now that important changes in regulation are required. We hope the US will lead the way.
David Beauvais
From Quebec
David Beauvais - 07/30/2010 - 09:27
Backwards??
Roger Levy has it right, but I'll get on my soapbox again and make a few other points.
First, all new meters should be capable of being read remotely and they should be capable of capturing data on intervals as short as five minutes. Any other features that make them "smart" are unwise and unnecessary. Utilities that expect to be able to extend their span of control past the meter to individual appliances are fooling themselves, and even if it turns out I'm wrong and they're not, there are ways to do it that don't require adding features to a meter.
Second, customer engagement requires pricing that reflects current and forecast grid conditions so that smart appliances, acting independently and autonomously but using price as a coordination mechanism, take appropriate actions at appropriate times that still leave customers in control.
Third, where smarts really matters most is at the customer site. Smart appliances, dynamic pricing, and most of the other smart grid concepts that consumers are ever likely to see are worthless until and unless we properly educate customers to take advantage of them.
Jack Ellis - 07/30/2010 - 11:31
Foundational
Roger and Jack have it covered - the consumer will rule. The consumer will decide what's important to them but the utility needs to monitor what's happening at the point that they serve the consumer. After that the investments in grid optimization and QoS improvements will be baselined and meaningful. Without metering and monitoring of the consumer QoS and product delivery its like trying to improve the wireless network without call detail and dropped call records.
Larsh Johnson - 07/30/2010 - 13:23
The Enterprise Side Should Drive DA Needs
I respect very much the important and intelligent persons that have commented. I only disagree with opinions that defend the Big-Bang AMI. Lets say this is my Prediction #4.
The EWPC-AF is a simple, holistic, and emergent system-of-systems that has two systems that are highly cohesive with low coupling among them. They are the competitive Enterprise side and the regulated T&D Grid side.
The Enterprise side has a value chain with central generation, Second Generation Retailers (2GRs) and prosumers with distributed generation. 2GRs have an architecture competition among them and also compete with generation to develop retail and wholesale markets that mutually reinforce each other.
As “Prediction #2: Rethinking the old utility compact with an obligation to serve to an emergent compact on the T&D Grid side of the EWPC-AF with an obligation to deliver, the end-to-end “smart grid” will play out as part of the Enterprise side of the EWPC-AF,” customer will have a relationship with 2GRs and 2GRs will have a relationship with the T&D Grid side.
David brought an important challenge to this discussion, getting raid off the 0.02 percent network unavailability. The challenge is better understood in terms of the number of nines. Three nines is 99.9%, four nines 99.99%, five nines 99.999%. One interesting question is how many nines can we get with DA.
One fact is that in the emerging power industry, average statistic like SAIDE might eventually be measure at every node, as it will make a lot of sense to have the optimal performance for each location. Such performance will necessarily come from the T&D Grid studies based on long term inputs from 2GRs. Depending on the long term performance needs of customers, the contracts with 2GRs will be part of the interface of the two systems. The DA needs at a given location for the T&D side will come from the aggregate long term needs of 2GRs.
José Antonio Vanderhorst-Silverio, Ph.D. - 07/30/2010 - 16:48
Common Denominator
From my experience on developing Smart Grid implementation plans, there is a common denominator that may actually be the best place to start. Whether you start in the distibution network with a distribution management system (DMS) or distribution automation (DA), or start with advanced metering infrastructure, they all need an integrated communications enabler. In AMI, we are seeing focus on the meter capabilities, SEP 2.0, and communications that serve the meters but little else. In DMS and DA, we are seeing separate communications infrastructure developed or used with little cross-over to metering needs. If we continue to build communications systems to suit individual applications, we will miss the communications solution that builds value in all. I think we are lagging in communications for the Smart Grid. Aside from various silver bullet claims, maybe, we should be solving this one first.
Steven W Pullins - 07/30/2010 - 16:54
Operability 1st and Interoperability 2nd
Steve, with a lot of respect, I think the first thing to be solved is operability before interoperability. Prediction #2 greatly simplifies both operability and interoperability requirements.
A divide and conquer approach is available under the EWPC-AF. Interoperability standards are needed for the delivery of electricity interface between the priority T&D side and the complementary Enterprise side. Grosso modo, end-to-end energy interoperability in the Enterprise side is responsibility of each 2GR as part of their architecture.
José Antonio Vanderhorst-Silverio, Ph.D. - 07/30/2010 - 17:47
Hawaii Dominoe is Shaking
The SmartGridNews,com News Analysis "Smart Meter Setback: Hawaii PUC Kicks Back Project, Tells Utility to Try It Again," leads to the original source "Hawaii regulators scuttle plan for expanded rollout of smart grid technology," by Mark Niesse on Canadian Business online.
To introduce another demand side perspective, that is against the Big-Bang AMI, I want to highlight the last four paragraphs that might start the dominoes run down:
Hawaii leaders could consider ways to use more decentralized power, such as rooftop solar panels, before the state spends on a costly smart grid system controlled by the electric utility, said Henry Curtis of the environmental group Life of the Land.
"This needs more public discussion before we jump in and pick a particular solution," Curtis said. "In the long run, when we can create power at homes and businesses that supply all the needs of those buildings, then the grid is going to become obsolete."
Hawaiian Electric, a subsidiary of Hawaiian Electric Industries Inc., had requested an additional 18 months to expand its smart grid test. The test would have charged ratepayers $1.35 million to install 5,000 new electricity meters on Oahu, adding to its existing pilot project of 9,400 smart meters.
With its ruling, the PUC closed the smart grid docket on Hawaiian Electric's initial 2008 request. That means the utility would need to start over with state regulators if it tries again.
José Antonio Vanderhorst-Silverio, Ph.D. - 07/31/2010 - 07:07
Start telling us Smart Metering is Smart Billing
The only thing Smart Meters do is provide interval data for electricity usage. If that's not being used for Smart Billing (i.e. TOU) then it's a waste of money.
You don't need a smart meter to have a demand reduction program that simply discounted the price for kwH by reducing usage as compared to their energy usage history.
Steven Harbauer - 07/31/2010 - 12:43
Strategy, not which fruit to pick is 1st
Steven W Pullins makes a valid point about the common denominator (comms) and I'd like to add strategy above it. AMI is a proper subset of a Smart Grid. Put demand response, TOU billing, etc aside for a minute, without fault reporting, PQ metrics, etc, AMI loses part of its benefit on the cost-benefit scales. Where to start is very utility specific. Requiring an overall SG strategy is common to all. The communication infrastructure is one component, where again there's no one-size-fits-all optimum solution. A good mix'n'match will often be ideal, but only under an overarching strategy.
AMI may not evem be required in some cases. There's a good example here in Australia where for a specific area (island with growing population and sub-marine transmission), distributed storage gave a better peak shaving result than AMI demand response, because deferring capital cost was the main objective.
Yochai Glick - 08/01/2010 - 20:33
Not just @ss backwards, but for the wrong reasons.
Many utilities want to get the meters deployed so that they can get them on the books and start recovering the cost through rates and fees. I know that sounds cynical, but I see it happening at a number of places. Many utilities are deploying meters without any real idea for what it does for them or the consumer. If I get fifteen minuted reads two days after the fact, how do I use that? I have a meter that is capable of two-way communication but my utility can't provision devices. We have meters that can be read on five minute intervals but I am still getting billed a flat rate based on a beginning-of-month read and an end-of-month read.
Very few of these projects have stopped to develop a real long-term strategy for any of these deployments. They are just trying to win funding and get the meters out there. What a mess. I am not sure anyone stopped to talk to the consumer along the way.
I hope people are beginning to see the limitations they are creating by getting so far over their skis. Slow down, take a breath, and build a plan. It will pay off in the long run.
Steve
www.iteresgroup.com
Stephen Daniels - 08/02/2010 - 13:13
Leadership Answers What to do First
I agree with Yochai, but to actually develop the strategy you need to work out on the essential requirement of the transformation of the power industry, which is how I help the EWPC-AF emerge. We have experienced so far what is very close to a total lack of leadership.
Two years ago, I wrote the EWPC article "Leadership Answers What to do First ( http://bit.ly/dzWFSU )," whose summary says:
"The answer to the question of what to do first is for the global power industry to get out of the wrong jungle to produce a EWPC [-AF] based EPAct as soon as possible. That is the kind of leadership needed to face the inevitable fundamental changes required to significantly reduce today’s legislative and regulatory uncertainty."
I invite all of you to take a look at the strategic insights that can be seen from that article.
José Antonio Vanderhorst-Silverio, Ph.D. - 08/02/2010 - 14:33
Cart before the horse, still need the carrot!
The cost to build out the smart grid infrastructure is very costly and in our times it won't go very far. Although maybe not the best approach, putting the AMI side out first brings on public awareness. All the behind the work required to bring the grid to the level where it can be used properly is the less glamorous side and harder for the public to swallow the cost, yet putting the AMI out ahead of a system that is ready for it will reealy destroy credibility in the utilities and the SmartGrid in general. Either way it's an expensive proposition and will require a lot of money put into it to make it work as envisioned. I'm afraid that the AMI may create the impression the public is wanting, but the system is not ready for.
Jim Hall - 08/03/2010 - 14:09
Roll-Outs Need to be Well Coordinated
Jim,
Your interesting message moves me to tell everyone about an insight that emerged under a parallel discussion, focused on this precise article, in the Smart Grid, AMI, HAN Group of LinkedIn.
This is my response to a group member:
...when you write “I expect most of the roll-out of ‘smart’ appliances to be fairly transparent to end users - incentives will be built into the selling price,” you have provided a great insight about the complementary roll out of the resources for the demand side, which is provided on the TALC. The smart grid roll and the ‘smart’ appliances roll-outs should be well coordinated
José Antonio Vanderhorst-Silverio, Ph.D. - 08/04/2010 - 12:35
Can't put the genie back in the bottle
While I've come to see the merits of implementing distribution automation and back end integration first (so full benefits can be gained when the meters are finally installed), utilities that are well-down the path on meter-first deployment cannot realistically switch direction. Government grants, PUC mandates and authorizations, shareholder approvals, vendor commitments, and huge programs that are already in process demand forward movement to comply with current obligations.
That is why I believe giving the public a compelling integrated vision is so critical coupled with LISTENING programs so utilities can understand and address consumer fears and legitimate concerns.
Adjusting the timing of cost recovery mechanisms may have to be part of the discussion as well.
Judith Schwartz - 08/08/2010 - 11:23
A Critical Compelling Integrated Vision
Hi Judith,
As can be seen in the discussion under Jesse’s commentary SmartGridCity Meltdown: How Bad Is It?, we have gone well beyond the above comments in important ways. In response to his request ‘…who should have seen this coming – if anyone...,’ I was able to generalize that situation of the insufficient capacity of regulators to handle leading (Smart Grid and) Big-Bang AMI’s projects under current regulations. Such a situation is the result of a lack of leadership of the power industry as a whole, with clear evidence of a retail market failure, in which customers are unable to select among alternative smart meter propositions as part of a whole product-service combination which may not even need a meter at all.
As "giving the public a compelling integrated vision is so critical," then to "address consumer fears and legitimate concerns," there is a need to restructure the power industry as soon as possible. So, as I wrote above, “Instead of using a regulated standard (not smart but) brute meter attack to force customers, ... in the (architecture competition) market approach customers will end up behaving like a herd, where ineffective whole (that is what customers need) products and services are weeded out (maybe together with their meters) in The Chasm of the Technology Adoption Life Cycle (TALC). ..To make it truly effective, it is only those smart customers that lead the herd that need complete education to be able to exert full free choice…”
Looking deeper on the weeding out process, as I understand you know, “the over-enthusiasm or ‘hype’ and subsequent disappointment that typically happens with the introduction of new technologies,” in the case of the Big-Bang AMI approach is that state regulators bypass The Chasm, that is according to Geoffrey Moore “by far the most formidable and unforgiving transition in the Technology Adoption Life Cycle, and it is the more dangerous because it typically goes unrecognized.”
Then, how do you define "well-down the path on meter-first deployment?" For those that satisfy the definition, I suggest they may continue their projects, but as non Big-Bang AMIs. I know that to do that there is a need to change state regulations, based on a strong coalition to start transforming the power industry. There is no time to lose if the US is to remain the leader of the global power industry.
Best regards,
José Antonio
José Antonio Vanderhorst-Silverio, Ph.D. - 08/09/2010 - 13:02
Smart Grid deployment varies by utility
I think it varies by utility to some extent. Some utilities have been mandated to go down the smart meter path due to commission mandates – California, Texas and Pennsylvania to name a few. To me, this is a bottoms up approach which is fine as long as the solutions include interoperability and adhere to what many of us believe to be overall Smart Grid requirements – of which include smart metering. I have seen other utilities come at Smart Grid from the top down, if you will – coming from a higher level network approach and picking up applications such as DA as low hanging fruit. These systems need to be interoperable as well with smart metering systems – most already are interoperable since many network providers can also provide IP based backhaul for smart meter systems as well as other applications. Certainly all the choices in the poll (above) – VVO and DMS are key Smart Grid applications – are becoming killer apps. To my point that it varies by utility, I know some utilities are looking at Smart Grid from these angles as well. Example: Dominion and VVO.
David Elve - 08/25/2010 - 13:12
Site Selection for Smart Grid
what all factors should be evaluated during site selection for a smart grid pilot in a utility
Sumedh Agarwal - 08/28/2010 - 23:01
Not enough focus on the 'foundation'
The amount of energy lost between generation and consumption is close to 80%. If the smart grid represents a true model of efficiency and optimization how can we build a high performance smart grid on such and inefficient power delivery foundation?
By moving to real time transmission line ratings, (with low cost, proven technology that’s available to day); we can safely maximize transmission flow to align this with the true capacity that existing lines were designed for. Often a load flow increase of up to 30% is not uncommon. This efficient improvement is easy to obtain and can translate into lower consumer energy costs, greater system reliability and lower capex spending.
This ‘low hanging fruit’ represents a small, but very achievable, step in firming-up the critical foundation of the evolving smart grid.
Rob Lamneck - 09/30/2010 - 07:07
Rob Lamnech comment
It would be interesting reading reference material related to this statistic / point:
Quote: The amount of energy lost between generation and consumption is close to 80%. End quote.
This seems a larger number than I've read in the past (unless we're considering boiler inefficiencies prior to the juice leaving the plant). Thank you.
Three new demonstration projects caught our attention - a smart grid effort in Albuquerque's business district, a rapid recovery transformer study in Texas and a trial involving low voltage current sensor technologies in the UK. They also got us to thinking: At this stage in the smart grid build out, if you could design a demonstration project, what would it entail? That's our latest Tuesday Topic; click for the details.
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