Xcel CIO to Vendors: Please Think Horizontal!

Michael Carlson is Vice President and Chief Information Officer (CIO) for Xcel Energy Inc. Xcel Energy is an investor-owned utility with assets in excess of $22B, operations in 8 Western and Midwestern states, 2006 sales of $9.8B and net income of $572M. It generates energy from multiple sources including renewables such as refuse and wind. It has 1.8M natural gas customers and 3.3M electricity customers.

Carlson is responsible for increasing the value business systems deliver to the organization by leveraging Xcel Energy’s IT portfolio. Carlson talked about the available technology for grid integration, not only for the generation side, but also for end-to-end management. Carlson is constantly looking at customer and shareholder requirements while balancing technology improvements against technology dangers. It is a brave new world with many demands, including an increasing need for horizontal technology instead of today's vertical solutions

Horizontal Technology
Carlson sees a need to address the complete end-to-end value chain, from coal in the ground all the way to the appliance in the consumer's home. His concern is how Xcel Energy puts these pieces together in an interoperable model that improves the system's capability and capacity.

While seeing a lot of vertical technology, Xcel Energy needs horizontal technology -- the middleware that pulls it all together. Carlson said, “There's a challenge to develop a neural network model that can create automated response management of the complete system.”

Real-time Access to Data

According to Carlson, data and real-time systems are the major drivers for Xcel's integration efforts. The gap occurs between integration and decision modeling. “As we look at all this data coming out, we've yet to see full end-to-end integration modeling decision-making, and that's where I think the next five years is going to bring us -- an integrated delivery system with automation,” Carlson said. “What that means is not just an end-to-end data flow of what's going on, but having the automation to move real-time data up into the decision-making curve. If you look at the data profiles, it's going to take automation to deliver that information.”

PHEVs for Generation
Xcel Energy is also looking at integration of technology on the generation side. Xcel and the National Renewable Energy Laboratory (NREL) just completed a study on plug-in hybrid electric vehicles (PHEVs). Carlson provided SGN with a further overview of Xcel Energy’s PHEV project. A computer-modeling program measured the impact of a mass penetration of PHEVs and how much energy would be required to charge them. According to Carlson, the study monitored over 220 vehicles with a GPS tracker for six months in the Denver metro area. NREL’s program simulated adding vehicles to the roads in large increments, under real driving conditions, simulating an increase in the market penetration of those vehicles. The study revealed that these cars, each equipped with a 9 kilowatt-hour battery, could reduce overall CO2 vehicle emissions by half, They also could save owners more than $450 in fuel costs each year compared to a traditional combustion engine vehicle. There also is a potential positive impact on power plant emissions.

Xcel Energy has now launched a new study of PHEVs potential. Six PHEVs will be on the road by the end of 2007 as part of a demonstration test of vehicle-to-grid (V2G) technology. Each PHEV will charge and discharge power to and from the grid in one of the nation’s first real-world demonstrations of the emerging technology.

Xcel Energy is in an industry that poses challenges to innovation, Carlson said. It has large fixed costs, a long industry life and not a lot of R&D even though the government is promoting innovation. Xcel Energy has taken a lead on the environment, always considering what its customers will respond to, such as time-of-use demand profiles, environmental pricing structures and optional service delivery plans “Our models also have to be responsive from a regulatory standpoint and to costs,” he said. SGN Note: On Oct. 16, Xcel announced that, beginning in 2008, all new transformers in communities throughout Xcel Energy’s eight-state service territory would use 100 percent renewable soy oil.

Still Missing: Risk-Reward Balance

“We’re seeing more and more engagement from the commercial side of the business, from suppliers and solution providers,” Carlson said. “We see an increasing ability to drive investment. However, we haven't seen the solution for how to get a recovery in that level of investment. We still have to market this in terms of looking for low-cost reliability.

“We need a risk-reward balance. As an investor-owned utility, Xcel Energy customers are footing the bill on the up side, and we have shareholders paying on the downside. Market incentives right now are limited. There is certainly technology out there that can deliver integration; but we have to solve the economics of it, we have to solve the risk profiles. But I think the opportunities for us as an industry are huge.”

Paul Jajan is a consultant and Contributing Editor at GlobalSmartEnergy.
   Email Paul Jajan
   Xcel Energy Inc. Web site
   PHEV/NREL study (PDF)