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Today’s utility companies are being driven to upgrade their aging transmission and distribution networks in the face of escalating energy generation costs, serious environmental challenges and rising demand for cleaner, distributed generation from both developing and digital economies worldwide.

The current utilities environment requires companies to drive down costs while increasing their ability to monitor and control utility assets. Yet, due to aging infrastructure, many utilities operate without the benefit of real-time usage and distribution loads – while also contending with limited resources for repair and improvement. Even consumers, with climate change on their minds, are demanding that utilities find more innovative ways to help them reduce energy consumption and costs.

One of the key challenges facing the industry is how to take advantage of new technologies to better manage customer service delivery today and into the future. While introducing this new technology, utilities must keep data and networks secure to be in compliance with critical infrastructure protection regulations. The concept of “service management” for the smart grid provides an approach for getting started.

A Smart Grid

A smart grid is created with new solutions that enable new business models. It brings together processes, technology and business partners, empowering utilities with an IP-enabled, continuous sensing network that overlays and connects a utility’s equipment, devices, systems, customers, partners and employees. A smart grid also enables on-demand access to data and information, which is used to better manage, automate and optimize operations and processes throughout the utility.

A utility relies on numerous systems, which reside both within and outside their physical boundaries. Common internal systems include: energy trading systems (ETS), customer information systems (CIS), supervisory control and data acquisition systems (SCADA), outage management systems (OMS), enterprise asset management (EAM); mobile workforce management systems (MWFM), geospatial information systems (GIS) and enterprise resource planning systems (ERP).

These systems are purchased from multiple vendors and often use a variety of protocols to communicate. In addition, utilities must interface with external systems – and often integrate all of them using a point-to-point model and establish connectivity on an as-needed basis. The point-to-point approach can result in numerous complex connections that need to be maintained.

Service Management

The key concept behind service management is the idea of managing assets, networks and systems to provide a “service,” as opposed to simply operating the assets. For example, Rolls Royce Civil Aerospace division uses this concept to sell “pounds of thrust” as a service. Critical to a utility’s operation is the ability to manage all facets of the services being delivered. Also critical to the operation of the smart grid are new solutions in advanced meter management (AMM), network automation and analytics, and EAM, including meter asset management.

A service management platform provides a way for utility companies to manage the services they deliver with their enterprise and information technology assets. It provides a foundation for managing the assets, their configuration, and the interrelationships key to delivering services. It also provides a means of defining workflow for the instantiation and management of the services being delivered. Underlying this platform is a range of tools that can assist in management of the services.

Gathering and analyzing data from advanced meters, network components, distribution devices, and legacy SCADA systems provides a solid foundation for automating service management. When combined with the information available in their asset management systems, utility companies can streamline operations and make more efficient use of valuable resources.

Advanced Reading

AMM centers on a more global view of the informational infrastructure, examining how automatic meter reading (AMR) and advanced metering infrastructure (AMI) integrate with other information systems to provide value-added benefits. It is important to note that for many utilities, AMM is considered to be a “green” initiative since it has the ability to influence customer usage patterns and, therefore, lower peak demand.

The potential for true business transformation exists through AMM, and adopting this solution is the first stage in a utility’s transformation to a more information-powered business model. New smart meters are network addressable, and along with AMM, are core components of the grid. Smart meters and AMM provide the capability to automatically collect usage data in near real time and to transport meter reads at regular intervals or on demand.

AMR/AMIs that aggregate their data in collection servers or concentrators, and expose it through an interface, can be augmented with event management products to monitor the meter’s health and operational status. Many organizations already deploy these solutions for event management within a network’s operations center environments, and for consolidated operations management as a top-level “manager of managers.”

A smart grid includes many devices other than meters, so event management can also be used to monitor the health of the rest of the network and IT equipment in the utility infrastructure. Integrating meter data with operations events gives network operations center operators a much broader view of a utility’s distribution system.

These solutions enable end-to-end data integration, from the meter collection server in a substation to the back-end helpdesk and billing applications. This approach can lead to improved speed and accuracy of data, while leveraging existing equipment and applications.

Network Automation and Analytics

Most utility companies use SCADA systems to collect data from sensors on the energy grid and send events to applications with SCADA interfaces. These systems collect data from substations, power plants and other control centers. They then process the data and allow for control actions to be sent back out. Energy management and distribution management systems typically provide additional features on top of SCADA, targeting either the transmission or distribution grids.

SCADA systems are often distributed on several servers (anywhere from two to 100) connected via a redundant local area network. The SCADA system, in turn, communicates with remote terminal units (RTUs), other devices, and other computer networks. RTUs reside in a substation or power plant, and are hardwired to other devices to bring back meaningful information such as current megawatts, amps, volts, pressure, open/closed or tripped. Distribution business units within a utility company also utilize SCADA systems to track low voltage applications, such as meters and pole drops, compared to the transmission business units’ larger assets, including towers, circuits and switchgear.

To facilitate network automation, IT solutions can help utilities to monitor and analyze data from SCADA systems in real time, monitor the computer network systems used to deploy SCADA systems, and better secure the SCADA network and applications using authentication software. An important element of service management is the use of automation to perform a wide range of actions to improve workfl ow efficiency. Another key ingredient is the use of service level agreements (SLAs) to give a business context for IT, enabling greater accountability to business user needs, and improving a utility’s ability to prioritize and optimize.

A smart grid includes a large number of devices and meters – millions in a large utility – and these are critical to a utility’s operations. A combination of IT solutions can be deployed to manage events from SCADA devices, as well as the IT equipment they rely on.

EAM For Utilities

Historically, many utility companies have managed their assets in silos. However, the emergence of the smart grid and smart meters, challenges of an aging workforce, an ever-demanding regulatory environment, and the availability of common IT architecture standards, are making it critical to standardize on one asset management platform as new requirements to integrate physical assets and IT assets arise (see Figure 1).

Today, utility companies are using EAM to manage work in gas and electric distribution operations, including construction, inspections, leak management, vehicles and facilities. In transmission and substation, EAM software is used for preventative and corrective maintenance and inspections.

EAM also helps track financial assets such as purchasing, depreciation, asset valuation and replacement costs. This solution helps integrate this data with ERP systems, and stores the history of asset testing and maintenance management. It integrates with GIS or other mapping tools to create geographic and spatial views of all distribution and smart grid assets.

Meter asset management is another area of increasing interest, as meters have an asset lifecycle similar to most other assets in a utility. Meter asset management involves tracking the meter from receipt to storeroom, to truck, to final location – as compared to managing the data the meter produces.

Now there is an IT asset management solution with the ability to manage meters as part of the IT network. This solution can be used to provision the meter, track configurations and provide service desk functionality. IT asset management solutions also have the ability to update meter firmware, and easily move and track the location and status of the assets over time in conjunction with a configuration database.

Reducing the number of truck rolls is another key focus area for utility companies. Using a combination of solutions, companies can:

  • Better manage the lifecycles of physical assets such as meters, meter cell relays, and broadband over powerline (BPL) devices to improve preventive maintenance;
  • Reconcile deployed asset information with information collected by meter data management systems;
  • Correlate the knowledge of physical assets with problems experienced with the IT infrastructure to better analyze a problem for root cause; and
  • Establish more efficient business process workflows and strengthen governance across a company.

Utilities are facing many challenges today and taking advantage of new technologies that will help better manage the delivery of service to customers tomorrow. The deployment of the smart grid and related solutions is a significant initiative that will be driving utilities for the next 10 years or more.

The concept of “service management” for the smart grid provides an approach for getting started. But these do not need to be tackled all at once. Utilities should develop a roadmap for the smart grid; each one will depend on specific priorities. But utilities don’t have to go it alone. The smart grid maturity model (SGMM) can enable a utility to develop a roadmap of activities, investments and best practices to ensure success and progress with available resources.

Empowering the Smart Grid

Trilliant is the leader in delivering intelligent networks that power the smart grid. Trilliant provides hardware, software and service solutions that deliver on the promise of Advanced Metering and Smart Grid to utilities and their customers, including improved energy efficiency, grid reliability, lower operating cost, and integration of renewable energy resources.

Since its founding in 1985, the company has been a leading innovator in the delivery and implementation of advanced metering infrastructure (AMI), demand response and grid management solutions, in addition to installation, program management and meter revenue cycle services. Trilliant is focused on enabling choice for utility companies, ranging from meter, network and IT infrastructures to full or hybrid outsource models.

Solutions

Trilliant provides fully automated, two-way wireless network solutions and software for smart grid applications. The company’s smart grid communications solutions enable utilities to create a more efficient and robust operational infrastructure to:

  • Read meters on demand with five minute or less intervals;
  • Improve cash flow;
  • Improve customer service;
  • Decrease issue resolution time;
  • Verify outages and restoration in real time;
  • Monitor substation equipment;
  • Perform on/off cycle reads;
  • Conduct remote connect/disconnect;
  • Significantly reduce/eliminate energy theft through tamper detection; and
  • Realize accounting/billing improvements.

Trilliant solutions also enable the introduction of services and programs such as:

  • Dynamic demand response; and
  • Time-of-use (TOU), critical peak pricing (CPP) and other special tariffs and related metering.

Solid Customer Base

Trilliant has secured contracts for more than three million meters to be supported by its network solutions and services, encompassing both C&I and residential applications. The company has delivered products and services to more than 200 utility customers, including Duke Energy, E.ON US (Louisville Gas & Electric), Hydro One, Hydro Quebec, Jamaica Public Service Company Ltd., Milton Hydro, Northeast Utilities, PowerStream, Public Service Gas & Electric, San Diego Gas & Electric, Toronto Hydro Electric System Ltd., and Union Gas, among others.

Customer Relationships and the Economy

A little over a year ago, the challenges facing the global energy and utilities market were driving a significant wedge between utilities and their customers. In Western European markets, price increases across gas, electricity and water, combined with increased corporate earnings, left many utilities in the uncomfortable position of being seen as profiteering from customers unable to change suppliers for significant benefit.

Headline-makers had a field day, with gross simplification of the many utilities’ business models. They made claims about “obscene profits,” while citing the “long-suffering” consumer position [1]. Now, more than a year later, gas and electricity prices are falling, but the severity and pace of the wider economic downturn has given no time for utilities to re-position themselves with customers. Brand and relationship-enhancing programs such as smart metering and energy efficiency are still largely in their infancy.

The evolving relationship with the customer base, where customer expectations are resulting in a more participatory, multi-channel engagement, comes at a time when the evolution of smart networks and metering solutions are on the cusp of driving down cost to serve and improving service levels and options. Significant benefits accrue from consumption measurement and management capabilities. Benefits also result from the opportunity to transform the consumer relationship by pushing into new areas such as home device management, more personalised tariffs and easier debt arrangements. The position for utilities, therefore, should be favourable – finally being seen as working on a more participatory relationship with their customers.

For consumers, the consequences of recession include an increased pressure on household spending. In competitive markets, there could be increased churn as the ever-changing “best-buys” attract customers. For utilities, increased churn rates are obviously bad news – the cost of new customer acquisition often wipes out profit associated with consumption by that customer for months, even years. Moreover, while utilities are working on marketing the best deals to acquire and retain customers – and on piloting smart technologies in the home – consumers’ familiarity with new technologies and their allegiance to some brands presents an opportunity for third parties to gain greater hold on the customer relationship.

Take the case of smart metering, for example, where many utilities are engaging upon pilot and larger rollouts. This is an area of innovation that should deliver benefits to both consumers and utilities. The assured business benefits to the utility companies come not only from applying the technology to lower operational costs, but also from enhancing their brand and customer service reputation. To the customer, smart technologies offer consumption details in an understandable form and give the promise of accurate commodity billing.

The risk is that the potentially lucrative relationship between customer and utility is currently damaged to a point where telecommunications providers, retailers or technology companies could step in with attractive, multi-service offerings. That could relegate the utility to simple supply activities, unable to gain a significant hold in home engagement. Certainly, utilities will still witness savings from automated meter reading and improved billing accuracy, but this commoditisation path for the utility company will limit profitable growth and push them further away from customers. Combine this with increased churn, and suddenly the benefits of smart technology deployment could be wiped out for the utility company.

This is not just an issue associated with smart technologies – the entire customer relationship journey with a utility is under threat from non-utility entrants (See Figure 1). Consider the area of consumer marketing and sign-up. Third parties that simply market other companies’ services have already taken a position in this part of the customer journey by providing Internet sites that allow tariff comparison and online switching of suppliers. The brand awareness of the comparison sites has already begun to gain the trust of the customer and the utility brand becomes more remote – the start of an uneasy decline. Additionally, in receiving fees for bringing customers to utilities, these companies thrive on churn – driving up utility cost and driving an even greater gap into the consumer-utility relationship.

Further credence to the challenges comes in the areas around presentation of information to customers. Any utility information channel will demand attention to “stickiness” when using technology such as the Internet for displaying utility bills and consumption data. This information has to be pushed to consumers in an attractive, understandable, and above all, personal format. Does the traditional utility information quality and flow have enough appeal for the average consumer to repeatedly view over time? It could be argued that third parties have the ability to blend in more diverse information to improve stickiness on, for example, handheld devices that give the consumer other benefits such as telephony, traffic and weather updates.

Customer Experience Risks

Traditionally, utilities are seen as relatively “recession proof,” operating on longer- term cycles than financial and retail markets. It is this long-term view that, coupled with an already disjointed customer relationship, poses a significant risk to utilities in the next two years. Customers will react in the competitive markets to the feeling of being “cornered” in an environment where few utilities truly differentiate themselves on customer service, product, tariff or brand. Research suggests that consumers are driving change in the relationship with their utilities, and it is this change that opens up opportunity for others (“Plugging in the Consumer”, IBM Institute for Business Value, 2007).

Reaction may not come soon; rarely do new entrants come into a recessionary market. But the potential for non-utilities to begin exploiting the gap between customer and utility should be cause for concern.

The parallel of these changes and risks was seen in the telco landline market over the last two decades. Several of the big, former-monopoly landline carriers are now perceived as commodity bandwidth providers, with declining core customer numbers and often-difficult regulatory challenges. Newer, more agile companies have stepped into the role of “owning” the consumer relationship and are tailoring the commodities into appealing packages. The underlying services may still come from the former-monopoly, but the customer relationship is now skewing toward the new entrant.

There are strategies that can be proactively deployed, individually or in combination, that improve the resilience of a utility through a recession, and that indeed redraw the client relationship to the point where profitability can increase without attracting the appearance of excess. These strategies resist the potential demise of the utilities to commodity providers, allowing for a value-add future based on their pervasive presence in the home.

The five steps outlined below revolve around the need to focus on the fundamentals, namely customer relationships and cash:

  1. Know Your Customer. Like most companies, utilities can benefit greatly by knowing more about customers. By engaging upon a strategy of ongoing information collection, customer segmentation and profitability analysis, plans can be put in place to detect and react to customer attrition risks. This includes early identification of changes to a customer’s circumstances, such as the ability to settle debt, allowing the utility to work proactively with the customer to address the issue. An active relationship style will show consumers that utilities care and understand, increasing brand loyalty, and hence, lowering the cost to serve.
  2. Free Up Locked Cash. Although recession-resistant in the short-term, identifying organic sources of improved cash flow can be an important source of funding for utilities that need to invest in improving customer relationships and capabilities. Industry benchmarks indicate that most utilities have opportunities to plug leaks in their working capital processes, with the potential of tapping into a significant and accessible source of free cash flow. For example, consider the traditionally neglected, under-invested area of consumer debt. With the economic downturn, debt levels are likely to rise, and, if unchecked, costs and cash flow will be adversely impacted.

    Focus areas for addressing the issue and freeing up locked cash include:

    • Using process management techniques such as activity-based management or Lean Six Sigma to identify opportunities for performance improvement across the billing, collections and credit-management processes;
    • Focusing on developing the skills and operational structures required to better integrate the meter to cash functions; and
    • Optimizing the use of utility-specific debt tools that work with the core systems.

Additionally, gaining insights through precision analytics to better manage debt functions – similar to best practices in banking and telecommunications – needs to be accelerated.

  1. Focus on the Future. Cost cutting is inevitable by many companies in this economic environment. It is important to understand the medium-to-long-term impact of any cuts on the customer relationship to determine if they could hurt profitability by increasing churn and related cost-to-serve metrics. Thus, utilities must achieve a clear understanding of their baseline performance, and have a predictive decision-making capability that delivers accurate, real-time insights so they can be confident that any actions taken will yield the best results.
  2. Innovate. Utilities traditionally work on longer investment cycles than many other businesses. When compared to consumer-facing industries, that can result in consumer perception that they are lacking innovation. Many consumers readily accept new offerings from retailers, telcos and technology firms, and the promise of a smart home will clearly be of strong commercial interest to these individuals. That’s why utilities must act now to show how they are changing, innovating for the future and putting control into the hands of the consumer. Smart metering programs will help the utilities reposition themselves as innovators. The key will be to use technology in a manner that bonds the customer better with the utility.
  3. Agility is King. Longer investment cycles in the utility sector, combined with the massive scale of operations and investment, often restrict a utilities’ ability to be agile in their business models. The long-term future of many utilities will depend upon being able to react to new consumer, technology and regulatory demands within short timescales. Innovation is only innovative for a short time – businesses need to be ready to embrace and exploit innovation with new business models.

Take Action Now

Many will argue that the current utility programs of change, such as core system replacement, smart metering and improving customer offerings, will be enough to sustain and even enhance the customer relationship. The real benefit, however, will be from building upon the change, moving into new products, delivering personalized services and tariffs, and demonstrating an understanding of individual consumer needs.

Still, utilities may struggle to capture discretionary spending from customers ahead of telcos, retailers, financial firms and others. Simply put, action needs to be taken now to prevent the loss of long-term customer relationships. For utilities, doing more of the same in this dynamic and changing market may simply not be good enough!

References:

  1. Multiple references, especially in the British press, including this one from Energy Saving Trust: http://www.energysavingtrust.org.uk/Resources/Daily-news/Gas-and-Electricity/Probe-demanded-into-energy-rip-off/(energysavingtrust)/20792

Be a People Person

I have to admit it. Despite all the exciting new technologies out there, I am finding myself to be a people person when it comes to building smarter grids and more intelligent utilities. Granted, technology is rapidly developing and the utility industry is finding itself in the middle of more and more automation. However, people – from linemen to consumers – will remain critical components for delivering information-enabled energy.

In the many conversations I have with utilities and other industry thought leaders, we often start out talking about smart technology, but eventually our chats settle on people. People can ultimately make or break even the most promising technologies – from personnel and consumers adopting and using the technology to executives driving technology investments. So, in a world buzzing with new technologies, it is important to reacquaint ourselves with people. This article traces some of my conversations about what an intelligent utility is, how people fit in – both on the consumer and utility personnel side – and what the utility industry can do to better involve people. As is my usual style, I will serve up these critical subjects with a side of humor and perspectives outside the utility industry. So be prepared to learn more about yoga, Nashville, crystal balls and the telecom industry, too.

What Is An Intelligent Utility ?

Before understanding the importance of people, let’s take a moment to understand where people fit into smart grids and intelligent utilities. Utilities are no longer exempt from change. From economic stimulus plans to carbon controls, to the impending electric vehicle flood, we must face the fact that the utility industry will undergo significant changes in the coming years, months and even minutes. Now, it is not so much a question of what changes will happen, but how – and how well – will the utility industry adapt to these changes?

A frequent answer to this question has been a “smart grid,” but most smart grid discussions inevitably lead to these questions:

  • How do we get to a smart grid?
  • When do we know when we are there?
  • What is a smart grid anyway?

These are not easy questions. Many groups define the smart grid, but how can you tell when a utility has one? Better understanding this challenge requires an unusual, but useful comparison: Nashville and Nirodha – a state of mind in yoga. Let’s say you are traveling to Nashville. You would see landmarks that you could only find in Nashville, such as the Grand Ole Opry, B.B. King’s Blues Club and the Bell- South Tower. Smart grid landmarks, however, are harder to come by. Utilities can install smart meters and other smart sensors on their grid, but having these technologies does not necessarily mean they have arrived at a smart grid. To add to the confusion, other smart grid components, such as demand response, distribution automation and more advanced metering, have already been around for years.

Although such technologies can support a smarter grid, the smart grid is more than just acquiring certain technology landmarks. So, although it is a nice place, you shouldn’t just think Nashville when you think smart grid. Think Nirodha. For those of you who aren’t yoga enthusiasts, Nirodha is a state of mind in yoga in which you become more focused and aware of an object. In the case of a utility, the object is primarily the transmission and distribution network. As a utility becomes more aware and ultimately more knowledgeable about its network, it can make better decisions about its operation.

Furthermore, as a company builds more knowledge about its grid, it develops not only a smarter grid, but also a more intelligent utility. An intelligent utility overlays information on energy that goes beyond the transmission and distribution network all the way from generation to end users, maximizing its reliability, affordability and sustainability. Essentially, utilities are delivering information-enabled energy. And technology is just one piece for delivering this sort of energy. Here is a quick run-down of the key components in an intelligent utility:

  • Process & technology: Utility objectives and their impact on business process change and smart technology deployment;
  • Economic models: The challenges and opportunities of new paradigms. So this is not just the changes involved with upgrading a technology – like a customer information or geographic information system – but the changes from initiatives like electrifying transportation and microgrids that could radically alter utility companies and the roles of generators and consumers;
  • Finance: Investment trends associated with smart technologies;
  • Public policy: The impact of politics on energy – including efforts by regulators and legislators. These groups ultimately set up the framework that determines whether and how intelligent initiatives move forward; and
  • People: The knowledge, skills and abilities required for both the workforce and consumers in an information-enabled environment.

Involving Workforce

The rest of this article will take a little bit closer look at the last component – people. As we move toward information-enabled energy, the utility workforce will undergo some significant changes – from new job titles, to new knowledge, skills and abilities (KSAs), to new people joining utility companies from other industries.

Ryan Cook, vice president of the employment services division at Energy Central, has pointed out that “In today’s utilities, employee KSAs are based primarily on providing electrical power as a product. These KSAs support the rules-based, process-oriented, functionally structured, and cost-focused business needs of today’s utility. In the future, however, there will be a massive paradigm shift from providing just a product to providing customers with customizable services and solutions for their unique energy needs. The result will be a shift toward KSAs that support a more agile, innovative, collaborative, cross-functional, service-oriented utility of the future. Employees will need to deal with constantly evolving technology.”

So, digitizing the grid will change personnel needs. We know that much, but the big unknown is how exactly will those needs change? And where is a good crystal ball when you need one? Since my snow globe wasn’t working, I thought about other industries that have gone through a digital revolution, which brought me to the telecom and cable industry. I learned much from Alan Babcock, president of Broadband Training Associates. As this industry digitized its grid over the last 13 years and began to focus more on services as opposed to products, it saw significant workforce changes – touching everyone from field crews, to executives, to marketing folks – that could happen to the utility industry as well.

Out In the Field

Before digitizing the telecom and cable industry, many field crews were still pencil and paper, and some still are today. But digitization changes weren’t just about figuring out how to use a truck-mounted laptop. The workforce has a whole new job to do today. In particular, they now have to troubleshoot new problems on multiple services in the network and become experts at devices on an end user’s premise.

Before digitization, field crews dealt with one service – like video in the cable industry – but now they have to balance multiple services in the same network, including voice, data and video. The decisions you make for one service will ultimately impact the others. So, with multiple services, it changes how you do regular maintenance, how you troubleshoot networks, and how you take the network down to make repairs. On top of that, technicians may not be able to take down certain parts of the network because of service level agreements with customers.

Besides dealing with multiple services, field crews have to better understand the devices that extend into customer premises – including modems for Internet or set-top boxes for cable. It can be embarrassing for a telecom or cable company when the consumer knows more about consumer devices than the technician.

Back In the Office

Digitizing the network not only changed KSAs for field crews, but has changed things in the back office of telecom and cable companies as well. These changes occurred in the areas of marketing, customer service, planning and IT.

  • Marketing to customers: Digitization provides cable and telecom companies with increased visibility into the customer premises. This is not only helpful with determining whether customers have service, but also understanding their entertainment preferences. These companies now better understand what entertainment you watch and when you watch it. Ultimately, they have a lot of information at their disposal to be able to better market to you. Telecom companies, however, weren’t traditionally in the entertainment industry, so better marketing to consumers required a new group of employees from outside telecom.
  • Customer service: Customer service has changed in many ways with the digitization of the telecom and cable industry. With a smarter grid, the utility industry often focuses on benefits that it will bring to the customer representatives in terms of access to more information, but there are other benefits to consider as well. An interesting twist in the telecom and cable industry is that as the network gets more complex, a customer service agent’s job gets somewhat simpler. Essentially, customer service representatives have to recall fewer technical details about the network than they did before. It is not as important that they understand how the networks function because they have better visibility into the premise and have more intelligent systems to walk them through trouble-shooting problems.
  • Capital and strategic planning: Digitization has changed the planning time horizon and knowledge requirements for telecom and cable executives. They must factor in the dizzying technology advancements in the industry; think about the rapid movement from 2G to 3G to 4G networks and beyond. The five-year plan now has to be the three-year plan. From a planning standpoint, they also need to better understand the networks in order to figure out how to best utilize and benefit from services that are enabled by those networks.
  • Designing and maintaining IT systems: Aside from learning how to design and maintain new technologies and systems, the technology personnel in telecom and the cable industry have learned some important lessons as they digitize the networks. The first is to more carefully consider the usefulness of new technologies. If a new technology comes along, it doesn’t mean that it has to be used. If a new technology does make sense to use, technology personnel need to consider the human aspects involved with making that change, including change management and making sure the technology is ready when people actually begin using it.

Involving Customers

Not only will the intelligent utility impact its own personnel, but it will impact consumers as well. In particular, utilities will have to help consumers to understand the value of changes and get them to participate in intelligent initiatives.

As I am sure many of you have realized from conversations with friends and family, many people do not understand smart grid benefits or even how the grid really works. Although more people are starting to realize the value, a key challenge is how to get consumers to grasp these concepts and support a smarter grid and more intelligent utility. Utilities have to figure out how to make these things real for people – and are finding many ways to do that. As one utility executive pointed out, “A technology center served to convince our community stakeholders and our PUC that this appears to be a worthwhile journey. The awareness to the consumer was a tremendous value. They were able to start thinking of the value of what we’re trying to build rather than what we’re trying to build.”

Many intelligent initiatives, from demand response to real-time pricing, focus on the end user and require some level of consumer effort. Consumer participation is key for success, but utilities are finding it challenging to get participation. Solutions range from more automation in controlling household appliances and HVAC systems to competition between neighbors regarding energy consumption, but there is still much work to be done in this area, depending on consumer demographics.

Be A People Person

It is easy to get caught up in the technology hype, but as the examples above demonstrate, it is important to keep people in the equation when looking at smart initiatives. People play a key role in determining their success or failure. By preparing for the people factor and considering them in smart initiatives, utilities can better ensure the adoption and success of new technologies and processes.

A Smart Strategy for a Smart Grid

Every year, utilities are faced with the critical decision of where to invest capital. These decisions are guided by several factors, such as regulatory requirements, market conditions and business strategies. Given their magnitude, decisions are not made hastily. Careful consideration is given to the financial and operational prudence of large capital projects, such as power plants and new infrastructure.

The utility also makes sure that it has the resources to support the implementation and on-going operation of large projects. This discipline is necessary to do what is best for the utility, and ultimately, the customer. This same discipline is essential in assessing the use of smart grid technologies, such as advanced metering infrastructure (AMI), distribution automation (DA) and home area networks (HAN).

In the last several years, the ubiquitous coverage of the smart grid has sparked the interests of many utilities looking to modernize their infrastructures and find new ways to interact with their customers. Most recently, the excitement around smart grid initiatives has accelerated as a result of its inclusion in the U.S. government’s economic stimulus package. However, utilities must remain cautious as they evaluate these new technologies.

The current "rush" can result in a lack of structure around strategy and planning for smart grid improvements. As utilities embrace smart grid technologies, many are tempted to develop a vision and strategies in a hurried, reactionary fashion rather than taking a rigorous, structured approach to determine what technologies will deliver the most value to the utility and its customer base.

Unlike planning for other capital projects, planning for smart grid is not simply about filing a regulatory business case; it is planning a business case for transformation. It is about implementing the right mix of smart grid technologies that delivers the greatest direct (operational savings) and indirect (customer benefits, customer satisfaction, reliability) benefits for the utility. Additionally, proper planning and strategy identifies risks and considerations that facilitate implementation of new technologies. Finally, a structured approach considers the organization’s capacity to complete the project. Just as you wouldn’t approve the construction of a power plant without ensuring that you have the resources to complete it, you shouldn’t begin the smart grid journey without a clear sense of where you are going and how you are going to get there.

A methodical approach to defining a smart grid vision can be accomplished through leadership workshops that define a portfolio of strategic options and establish the criteria to analyze the portfolio’s value (both quantitative and qualitative). These sessions assess the various smart grid technologies to determine what unique mix (technologies and geographies) is the best fit to meet the utility’s objectives.

The key steps to defining a smart grid vision are:

  • Define a decision framework;
  • Develop strategic options;
  • Analyze value; and
  • Ratify strategy.

Ultimately, this approach results in a richer smart grid strategy and decision making process that is consistent with other large capital projects.

Define a Decision Framework

The first step toward defining a smart grid vision is to develop a decision making process to establish the emphasis and focus of the smart grid program. Are upfront capital costs the main concern, or is selecting mature and proven technologies more crucial? Some utilities may seek technologies that can be implemented quickly, while others may be more focused on a multi-year rollout of smart grid initiatives.

Identifying these crucial drivers and understanding their importance is achieved by creating a baseline decision framework to evaluate smart grid technologies. The framework should be shaped by project management, sponsorship and subject matter experts (SMEs) from all functional groups (e.g., transmission and distribution, meter services, billing, call center, human resources, finance and information technology) within the organization. This ensures that the initiative has executive buy-in and input from all groups affected by a smart grid implementation.

A good decision framework incorporates company strategic priorities and consists of both qualitative and quantitative measures. Qualitative factors include customer satisfaction, technology maturity and obsolescence, implementation risks and alignment with business priorities. Quantitative factors examine product and resource costs, and product benefits and savings.

It is also important to understand and compare functionality available to functionality needed. For example, a utility might be interested in implementing HAN capabilities, but may ultimately realize that DA will generate greater value. In the end, the decision framework lays the foundation for the evaluation of a utility’s smart grid portfolio.

Finally, a decision framework should consider and evaluate the program risks and the organization’s ability to successfully execute the project (e.g., timeline, skill set required, availability of resources, competing projects, technological obsolescence/ maturity).

Develop Strategic Options

Smart grid is not a "one size fits all" initiative. Rather than view smart grid as an "all or nothing" proposition, each utility should define its own customized solution. The specific strategy and technologies of a smart grid program is driven by the needs of the utility. For instance, utilities focused on improving grid reliability will emphasize DA technologies, while others more interested in reducing operational costs will emphasize an AMI approach.

Once a decision framework has been created, the utility should begin to assess the advantages and disadvantages of smart grid technologies using a summary scorecard (Figure 1).

These scorecards provide a comprehensive view of the technology and identify risks, dependencies, resource effort, key benefits and costs associated with the technology. Once complete, scorecards can be used to identify different mixtures, or portfolios, of smart grid technology options.

The advantage of assembling technologies into a portfolio is that it enables an enterprise-wide perspective of the program. The value for each stakeholder organization can be identified and evaluated. The integration of smart grid technologies is made more apparent.

When selecting a portfolio, there are a few key points to keep in mind. First, a smart grid portfolio doesn’t have to incorporate all available technologies, only the ones that coincide with the business strategy. Next, smart grid technologies don’t have to be implemented uniformly across the entire service territory. For instance, a utility could elect to utilize substation automation only at critical or less reliable substations, or choose to install AMI meters in jurisdictions/areas where meter reading cost is high.

Finally, timing of the smart grid rollout is critical. A utility doesn’t have to provide all of the functionality on day 1. Subsequent capability releases can be planned many years in the future.

One of the major obstacles to implementing a smart grid program is the lack of maturity in emerging smart grid technologies. Utilities can counter this through the use of interim solutions. An interim solution helps the utility to recognize smart grid benefits in a "manumatic" environment, combining manual business processes and a degree of process and system automation, with the goal to transition to more integration and automation.

Examples of interim solutions include:

  • Advanced Metering Infrastructure (AMI) – If there is no regulatory structure for the use of interval data, a utility could initially use the technology for remote monthly register reads and remote connect/ disconnect with idea to transition to interval-based rates as they become required.
  • Meter Data Management System (MDMS) – If interval data is not yet needed, the utility may be able to defer investment in an MDMS. At a later date, a new CIS system/CIS modifications could provide MDMS functionality.
  • Wide Area Network (WAN) Communications Backhaul – A utility may start with a cellular backhaul and move to another technology (e.g., WiMax) as it evolves.
  • Direct Load Control – Initially, a utility could use a technology independent of AMI (e.g., paging network) and then transition to load control through the AMI meter.

Incorporating interim solutions gives utilities additional flexibility in what technologies can be included in its smart grid portfolio. Once a closer analysis is given to the technology portfolio, utilities can determine if and where interim solutions should be considered.

Analyze Value

Would a utility build a 2 GigaWatt power plant to satisfy a 100 MegaWatt demand? It’s safe to say most wouldn’t. The additional capacity of the plant does not justify the cost. Although this is an obvious example, it demonstrates that utilities have an existing decision process around large capital investments. In order to successfully define a smart grid strategy, utilities must find a way to transition this type of analysis to smart grid technologies. A qualitative and quantitative value analysis of smart grid portfolios will provide justification of which smart grid technologies to implement.

Qualitative review involves scoring the chosen technology portfolio(s) against the decision framework. This provides a sense of how the technologies match the utility’s risk profile, resource constraints and overall strategy. For instance, a utility may see that some technologies are cost-effective, but too risky to implement in the short-term. These factors are not captured in financial modeling and provide key information to aid in the transition from strategic planning to implementation.

Quantitative analysis assures cost effectiveness for smart grid technology portfolio(s) and is achieved through the use of a business case or financial model. This analysis factors in the various costs and benefits of the smart grid portfolio. For instance, a technology portfolio with AMI and DA would indicate significant costs for the purchase and deployment of new devices, but would calculate benefits on improved grid reliability and remote meter reading.

Figure 2 depicts an overview of a financial model that could be used for smart grid value analysis. As the cost-effectiveness of a particular technology portfolio is determined, the utility may find that the portfolio needs to be modified in order to achieve increased savings. For example, an advanced communications infrastructure to implement AMI alone may not be cost effective. However, if the same infrastructure was also used to enable DA and mobile dispatch it would become much more cost effective. The combination of financial data and qualitative options analysis will help the utility to determine the optimal mix of smart grid technologies to implement.

Ratify Strategy

The selection of a smart grid portfolio and the associated value analysis is only the starting point on the journey to a smart grid; it simply puts the building blocks in place for the utility to transition into implementation planning. The final step in developing a smart grid strategy is to understand how the project will be executed. Utilities should begin implementation planning by asking the following key questions:

  • What is the project scope?
  • What are the key success factors?
  • What is the timeline to complete the project?
  • Which technologies do we implement first (priority/critical path)?
  • What resources are going to do the work? What can be done with internal employees vs. consultants and contractors?
  • What are the risks? How will we manage them?
  • What are the key integration points?
  • What are the competing priorities/projects?
  • Are there regulatory constraints?

A final question leadership may want to ask is "What is the largest non-core project the company has ever undertaken?" and "Why was this project successful/ unsuccessful?" Considering this will allow the utility to consider lessons learned and better understand their capacity for change.

Once these questions have been answered, the utility is ready to begin a smart grid deployment roadmap. The purpose of this roadmap is to lay out the key initiatives over the project timeline, noting the key dependencies and integration points. At this point, it is crucial to transition the organization from a strategy focus to an implementation focus. Current project leadership/sponsorship and functional SMEs should not be released from the project, but rather retained to assist with implementation planning and execution in new roles within the utility’s smart grid organization.

For a variety of reasons, a utility may decide not to immediately begin its smart grid implementation once the vision and strategy have been defined. All is not lost as this analysis helps to identify the key drivers, benefits, risks and obstacles associated with the smart grid program. This can be used as a baseline for future analysis or planning once the utility is ready to continue its smart grid journey.

Conclusion

Implementing a smart grid strategy and plan is an enterprise-transforming endeavor. It may be one of the most pervasive programs a utility has ever attempted. It will impact most every energy delivery organization/function; from operations to customer service and from procurement to human resources. The information technology/operations technology boundary will be crossed many times. Appropriate evaluation of the options and alignment with the company’s strategic goals and challenges is perhaps the most critical step in the smart grid journey. Strategic decisions should be based on rigorous analysis of internal and external aspects, and not an industry trend.

Shaping a New Era in Energy

In the last few years, the world has seen the energy & utilities business accelerate into a significant period of transformation as a result of the smart grid and related technologies. Today, with some early proponents leading the way, the industry is on the verge of a step-change improvement that some might even classify as a full-scale revolution. Utilities are viewed not only as being a critical link in solving the challenges we face related to climate change and the care of our planet’s energy resources, but they’re becoming enablers of growth and innovation – and even new products, services and jobs. Clearly the decisions the industry is making today around the world’s electricity networks will impact our lives for decades to come.

If the current economic environment has muted any enthusiasm for this transformation, it hasn’t been much. With the exception, perhaps, of plummeting oil prices temporarily providing some sense of calm in the sector, there are probably few people left who don’t believe the world needs to urgently address its clean, smart energy future. As of this writing, fledgling signs of an economic recovery are emerging, and along with it, increases in fossil fuel prices. As such, enthusiasm is growing over the debate about how countries will utilize billions in stimulus funding to enable the industry to achieve a new level of greatness.

There is a confluence of events helping us along this path of dramatic and beneficial change. IBM’s recent industry consumer survey (selected findings of which are featured in this publication in "Lighting the Way" by John Juliano) signals a future that is being shaped in part by a younger generation of digitally savvy people who care about – and are willing to participate in – our collective energy future. They willingly engage in more open communication with utility providers and tend to be better at understanding and controlling energy utilization.

As utilities instrument virtually all elements of the energy value chain from the power plant to the plug, they will improve service quality to these customers while reducing cost and improving reliability to a degree never before achievable. Customers engage because they see themselves as part of a larger movement to forestall the effects of climate change, or to battle price instability. This fully connected, instrumented energy ecosystem takes advantage of the data it collects, applying advanced analytics to enable real-time decisions on energy consumption. Some smart grid projects are already helping consumers save 10% of their bills, and reduce peak demand by 15%. Imagine the potential total savings when this is scaled to include companies, governments and educational institutions.

While positive new developments abound, they also are creating a highly complex environment, raising many difficult questions. For example, are families and businesses truly prepared to go on a "carbon diet" and will they stay on it? How will governments, with their increased stake in auto manufacturers, effectively and efficiently manage the transition toward PHEVs? Will industry players collaborate with one another to deal with stealth attacks on smart grids that are no longer the stuff of spy novels, but current realities we must face 24/7? How do we responsibly support the resurgence of nuclear-based power generation?

Matters of investment are also complex. Will there be sufficient public/private partnership to effectively stimulate investment in new businesses and models to profitably progress safe alternative energy forms such as solar, tidal, wind, geothermal and others? Will we have the "smarts" – and the financial commitment – to build more smarts into the reconstruction of ailing infrastructures?

Leading the Way

IBM has been a leading innovator in smart grid technology, significantly investing in energy and environmental programs designed to promote the use of intelligent energy worldwide. We created the Global Intelligent Utility Network Coalition, a strategic relationship with a small group of select utilities from around the world to shape, accelerate and share in the development of the smart grid. With the goal to lead industry organizations to smart grid transformation, we actively lead and participate in a host of global organizations including the GridWise® Alliance, Gridwise Architecture Council, EPRI’s Intelligrid program, and the World Energy Council, among others. By coming together around a shared vision of a smarter grid, we have an unprecedented opportunity to reshape the energy industry and our economic future.

The IBM experts who engage in these groups – along with the thousands of other IBMers working in the industry – have contributed significant thinking to the industry’s progress, not the least of which is the creation of the Smart Grid Maturity Model (SGMM) which has been handed over to the Carnegie Mellon Software Engineering Institute (SEI) for ongoing governance, growth and evolution of the model. Furthermore, the World Energy Council (WEC) has become a channel for the global dissemination of the model among its worldwide network of member committees.

IBM’s own Intelligent Utility Network (IUN) solution enables a utility to instrument everything from the meter in the home to miles of power lines to the network itself. In fact, the IUN looks a lot more like the Internet than a traditional grid. It can be interconnected to thousands of power sources – including climate-friendly ones – and its instrumentation generates new data for analysis, insight and intelligence that can be applied for the benefit of businesses and consumers alike.

Our deep integration skills, leading-edge technology, partner ecosystem and business and regulatory expertise have earned us roles in more than 50 smart grid projects around the globe with showcase projects in the U.S. Pacific Northwest, Texas, Denmark and Malta (See "The Smart Grid in Malta" by Carlo Drago in this publication) to name just a few. IBM also has a role in seven out of the world’s 10 largest advanced meter management projects.

The IBM Solution Architecture for Energy (SAFE), is a specialized industry framework focused on the management, maintenance, and integration of a utility’s assets and information, inclusive of generation, transmission and distribution, and customer operations. This is complemented by a world-class solution portfolio based on the most comprehensive breadth of hardware, software, consulting services, and open standards-based IT infrastructure that can be customized to meet the needs of today’s energy and utilities enterprises around the globe.

These activities are augmented by the renowned IBM Research organization that engages in both industry-specific and cross-industry research that influences our clients’ progress. This includes new computing models to handle the proliferation of end-user devices, sensor and actuators, connecting them with powerful back-end systems. How powerful? In the past year IBM’s Roadrunner supercomputer broke the "petaflop" barrier – one thousand trillion calculations per second using standard chip sets. Combined with advanced analytics and new computing models like "clouds" we’re turning mountains of data into intelligence, making systems like the smart grid more efficient, reliable and adaptive – in a word, smarter.

IBM Research also conducts First-of-a-Kind research – or FOAKs – in partnership with our clients, turning promising research into market-ready products and services. And our Industry Solution Labs around the world give IBM clients the chance to discover how leading-edge technologies and innovative solutions can be assembled and proven to help solve real business problems. For example, we’re exploring how to turn millions of future electric vehicles into a distributed storage system, and we maintain a Center of Excellence for Nuclear Power to improve design, safety analysis, operation, and nuclear modeling / simulation processes.

IBM is excited to be at the forefront of this changing industry – and our changing world. And we’re honored to be working closely with our clients and business partners in helping to evolve a smarter planet.

The Smart Grid Maturity Model

The software industry has been using maturity models to define and measure software development capabilities for decades. These models have helped the industry create a shared vision for these capabilities. They also have driven individual software development organizations to set and pursue aggressive capabilities goals while allowing these groups to measure progress in reaching those objectives along the way.

As the utility industry embarks on the complex and ambitious transformation of the outdated power grid to the new smart grid, it has struggled to develop a shared vision for the smart grid end-state and the path to its development and deployment. Now, the smart grid maturity model (SGMM) is helping the industry overcome these challenges by presenting a consensus vision of the smart grid, the benefits it can bring and the various levels of smart grid development and deployment maturity. SGMM is helping numerous utilities worldwide develop targets for their smart grid strategy, and build roadmaps of the activities, investments and best practices that will lead them to their future smart grid state.

IBM worked closely with members of the Intelligent Utility Network Coalition (IUNC) to develop, discuss and revise several drafts of the SGMM. This team was assisted by APQC, a member-based nonprofit organization that provides benchmarking and best-practice research for approximately 500 organizations worldwide. The goal in the development process was to ensure the SGMM reflects a consensus industry vision for the smart grid, and brings together a wide range of industry experts to define the technical, organizational and process details supporting that vision.

APQC has a long history of benchmarking, performance measurement and maturity definition, and was therefore able to provide critical experience to drive development of a clear, measureable maturity model. IBM has worked on smart grid initiatives with numerous utilities around the world, and provided guidance and some initial structure to help start the development process. But the most important contributors to the SGMM were utilities themselves, as they brought a wealth of deep technical and strategic knowledge to build a shared vision of the smart grid and the various stages of maturity that could be achieved.

Because of this consensus development process, the SGMM reflects a broad industry vision for the smart grid, and it now gives utilities a tool for both strategic and tactical use to guide, measure and assess a utility’s smart grid transformation:

Strategic uses of the SGMM:

  • Establish a shared vision for the smart grid journey;
  • Communicate the smart grid vision, both internally and externally;
  • Use as a strategic framework for evaluating smart grid business and investment objectives;
  • Plan for technological, regulatory, and organizational readiness; and
  • Benchmark and learn from others

Tactical uses of the SGMM:

  • Guide development of a specific smart grid roadmap or blueprint;
  • Assess and prioritize current smart grid opportunities and projects;
  • Use as a decision-making framework for smart grid investments;
  • Assess resource needs to move from one smart grid level to another; and
  • Measure smart grid progress using key performance indicators (KPIs).

The SGMM structure is based on three fundamental concepts:

Domains: eight logical groupings of functional components of a smart grid transformation implementation;

Maturity Levels: five sets of defined characteristics and outcomes; and

Characteristics: descriptions of over 200 capabilities that are expected at each stage of the smart grid journey.

As Figure 1 shows, the domains span eight areas covering people, technology, and process, and comprise all of the fundamental components of smart grid capabilities.

Maturity levels range from an entry level of 1, up to a top level of 5, and can be summarized as follows:

Level 1 – Exploring and Initiating: contemplating smart grid transformation; may have a vision, but no strategy yet; exploring options; evaluating business cases and technologies; may have some smart grid elements already deployed.

Level 2 – Functional Investing: making decisions, at least at a functional level; business cases in place and investments being made; one or more functional deployments under way with value being realized; strategy in place.

Level 3 – Integrating Cross Functional: smart grid spreading; operational linkages established between two or more functional areas; management ensuring decisions span functional interests, resulting in cross-functional benefits.

Level 4 – Optimizing Enterprise-Wide: smart grid functionality and benefits realized; management and operational systems rely on and take full advantage of observability and integrated control, both across and between enterprise functions.

Level 5 – Innovating Next Wave of Improvements: new business, operational, environmental, and societal opportunities present themselves, and the capability exists to take advantage of them.

It is important to note that a utility may not choose to target maturity level 5 in every domain – in fact, it may not target level 5 for any domain. Instead, each utility using the SGMM must consider its own strategic direction and performance goals, and then decide on the levels of smart grid maturity that will support those goals to determine the target maturity in each domain. For example, a utility that is strategically focused on the retail side of the business may want to achieve relatively high maturity in the customer management and experience domain, but have a much lower target for maturity in the grid operations domain.

The key point is that the SGMM is not a report card with those utilities reaching the highest maturity levels "winning the game." Instead, each utility uses the SGMM to understand how the smart grid can help optimize its planning and investment to achieve its aspirations.

With over 200 characteristics describing the capabilities for each domain and maturity level, it is not possible to describe them here, but an example of a typical characteristic shown in Figure 2 provides a good sense of the level of detail in each characteristic of the SGMM.

Taken together, the domains, maturity levels, and characteristics form a detailed matrix that describes smart grid maturity across all critical areas.

Evaluating Smart Grid Maturity

A utility uses two surveys in conjunction with the SGMM structure described above to: assess its smart grid maturity; and track its progress and the resulting benefits during deployment. The first survey is the maturity assessment, which asks a series of about 40 questions that cover the current state of the utility’s smart grid strategy and spending, and the current penetration of smart grid capabilities into various areas of the business. The assessment yields a detailed report, providing the results for each domain, as well as higher-level reports that show the broader view of the utility’s current state and aspirations for the smart grid.

In this example, the utility’s current smart grid maturity is shown by the green circles, while its maturity aspirations are shown by the yellow circles. This highlevel view can be very useful as support for detailed plans on how to get from current state to aspirational state. It is also helpful for conveying maturity concepts and results to various stakeholders – both inside and outside the utility.

The second survey is the opportunity and results survey, which focuses on KPIs that track progress in smart grid deployment, as well as realization of the resulting benefits. For example, many questions in the survey cover grid operations, with the focus on cost, reliability and penetration of smart grid capabilities into the "daily life" of grid operations. The survey is expected to be completed annually, allowing each utility using the SGMM to track its deployment progress and benefits realization.

Using SGMM Results

The results from the SGMM can be applied in many ways to gauge a utility’s smart grid progress. From a practical management standpoint, the following important indicators can be derived directly from the SGMM process:

  • How the utility compares to other survey participants overall;
  • Where the utility has deficiencies in one domain that may adversely affect other domains;
  • Effects of being potentially projectoriented rather than program-driven, resulting in a jagged, "peaks and valleys" maturity profile with uneven advancement;
  • Indications that some domains are too far ahead of others, resulting in the risk of putting the "cart before the horse;" and
  • Confirmation of progress in domains that have been given particular focus by the utility, and indications of domains that may require increased focus.

More broadly, completion of the SGMM surveys provide a utility with the information needed to establish a shared smart grid vision with both internal and external stakeholders, mesh that vision with the utility’s overall business strategy to set maturity targets, and then build a detailed roadmap for closing the gaps between the current and target maturity levels.

Transition of SGMM Stewardship

IBM has been pleased to work with APQC and members of the IUNC to support definition and early roll-out of the SGMM. But as an important and evolving industry tool, IBM believes that the SGMM should be supported and maintained by a broader group. Therefore, we are planning to transition to a stewardship model with three organizations each playing a critical role:

  • Governance, Management, and Growth: the Carnegie Mellon Software Engineering Institute will govern the SGMM, working in conjunction with Carnegie Mellon University and the Carnegie Mellon Electricity Industry Center. The institute and its 500 employees will leverage its 20 years of experience as stewards of the Capability Maturity Model for software development.
  • Global Stakeholder Representation and Advocacy: the World Energy Council will provide representation for stakeholders around the globe. The council was established in 1923, represents 95 member countries and regularly hosts the World Energy Congress. Its mission is to promote the sustainable supply and use of energy for the greatest benefit of all people. This mission fits well with the development of the smart grid and the expanding use of the SGMM.
  • Data Collection and Reporting: APQC will provide further support for the SGMM survey process. With over 30 years of quality and process improvement research, APQC will continue the work it has done to date to assist utilities in assessing their smart grid maturity and tracking their progress during deployment.

Summary

All utilities should consider using the SGMM as they develop their vision for the smart grid and begin to plan and execute the projects that will take them on the journey. The SGMM represents the best strategic and technical thinking of a broad cross-section of the utility industry. We believe that the SGMM will continue to represent a thoughtful and consensus view as the smart grid – and the technology that supports it – evolves over the next few years.

The Smart Grid in Malta

On the Mediterranean island of Malta, with a population of about 400,000 people on a land mass of just over 300 square kilometers, power, water and the economy are intricately linked. The country depends on electrically powered desalination plants for over half of its water supply. In fact, about 75 percent of the cost of water from these plants on Malta is directly related to energy production. Meanwhile, rising sea levels threaten Malta’s underground freshwater source.

Additionally, in line with the Lisbon strategy and the other European countries, the government of Malta has set an objective of transforming the island into a competitive knowledge economy to encourage investment by foreign companies. Meeting all of these goals in a relatively short period of time presents a complex, interconnected series of challenges that require immediate attention to ensure the country has a sustainable and prosperous future.

In light of this need, the Maltese National Utilities for Electricity and Water – Enemalta Corp. (EMC) and Water Services Corp. (WSC) – reached a partnership agreement with IBM to undertake a complete transformation of its distribution networks to improve operational efficiency and customer service levels. IBM will replace all 250,000 electricity meters with new devices, and connect these and the existing water meters to advanced information technology applications. This will enable remote reading, management and monitoring throughout the entire distribution network.

This solution will be integrated with new back-office applications for finance, billing and cash processes, as well as an advanced analytics tool to transform sensor data into valuable information supporting business decisions and improving customer service levels. It will also include a portal to enable closer interaction with – and more engagement by – the end consumers.

Why are the utility companies in Malta making such a significant investment to reshape their operations? To explore this question, it helps to start with a broader look at smart grid projects to see how they create benefits – not just for the companies making the investment, but for the local community as well.

Smart Grid Benefits

A case is often made that basic operational benefits of a smart grid implementation can be achieved largely through an Advanced Metering Infrastructure (AMI) implementation, which yields real-time readings for use in billing cycles, reduced operational cost in the low voltage network and more control over theft and fraud. In this view, the utility’s operational model is further transformed to improve customer relationship management through the introduction of flexible tariffs, remote customer connection/disconnection, power curtailment options and early outage identification through low voltage grid monitoring.

But AMI extended to a broader smart grid implementation has the potential to achieve even greater strategic benefits. One can see this by simply considering the variety of questions about the impact of the carbon footprint of human activity on the climate and other environmental factors. What is a realistic tradeoff between energy consumption, energy efficiency and economic and political dependencies on the local, national and international levels? Which energy sources will be most effective with such tradeoffs? To what extent can smaller, renewable resources replace today’s large, fossil-based power sources? Where this is possible, how can hundreds or thousands of dispersed, independently operated generators be effectively monitored?

Ultimately, distribution networks need to be smart enough to distinguish among today’s large-scale utility generators; customers producing solar energy for their own needs who are virtually disconnected from the grid; those using a wind power generator and injecting the surplus back into the grid; and end-use customers requiring marginal or full supply. An even more dispersed model for distributed generation will emerge once electric vehicles circulate in towns, placing complex new demands on the grid while offering the benefit of new storage capabilities to the network.

Interdependence

Together, water and power distributors, transmission operators, generators, market regulators and final customers will interact in a much more complex, interconnected and interdependent world. This is especially true in a densely populated, modern island ecosystem, where the interplay of electricity, water, gas, communications and other services is magnified.

These points of intersection take numerous shapes. For example, on a national scale, water and sewer services can consume a large portion of the available energy supply. Water service, which is essential to customer quality of life, also presents distribution issues that are similar in many ways to those embedded in the electric grid. At a more local scale, co-generation and micro-CHP generation plants make the interdependency of electricity and gas more visible. Furthermore, utilities’ experience at providing centrally managed services that afford comfort and convenience makes the provision of additional services – communication, security, and more – imaginable. But how to make these interconnections effective contributors to quality of life raises real economic questions. Is it sensible to make an overarching investment in multiple services? How can this drive increased operational efficiency and bring new benefits to customers? Can a clear return on investment be demonstrated to investors and bill payers?

Malta is an example of an island that operates a vertically integrated and isolated electricity system. Malta has no connections with the European electricity grid and no gas pipelines to supply its generators. In the current configuration of the energy infrastructure, all of its demand must be fulfilled by the two existing power plants, which generate power using entirely imported fossil fuel. Because of these limitations on supply, and dependencies on non-native resources, electricity distribution must be extremely efficient, limiting any loss of energy as much as possible. Both technical and commercial losses must be kept fully under control, and theft must be effectively eliminated from the system to avoid unfair social accounting and to ensure proper service levels to all customers.

Estimates of current economic losses in Malta are in the millions of Euros for just the non-technical losses. At these levels, and with limited generation capacity, quality of service and ability to satisfy demand at all times is threatened. Straining the system even further is the reality that Malta, without significant natural water sources, must rely on a seawater purification process to supply water to its citizens. This desalinization process absorbs roughly one-third of the annual power consumption on the island.

But the production process is not the only source of interdependency of electricity and water as the distribution principles of each have strong ties. In most locations in the world, electricity and water distribution have opposing characteristics that allow them to enjoy some symbiotic benefits. Electricity cannot be effectively stored, so generation needs to match and synchronize in time with demand. Water service generally has the opposite characteristic: in fact, it can be stored so easily that it is frequently stored as pre-generation capacity in hydro generation.

But on an island like Malta, this relationship is turned on its head. There is no natural water to store, and once produced, purified water should be consumed rather quickly. If it is produced in excess, then reservoir evaporation and pipeline losses can affect the desalinization effort and the final efficiency of the process. So in Malta, unlike much of the rest of the world, water providers tend to view customer demand in a similar way as electricity providers, and the demand profiles are unable to support each other as they can elsewhere.

These are qualitative observations. But if electricity and water networks can be monitored, and real-time data supplied, providers can begin to assess important questions regarding operational and financial optimization of the system, which will, among other benefits, improve reliability and service quality and keep costs low.

Societal Implications

An additional issue the government of Malta faces is its effort to ensure that the population has a sufficient and diverse educational and technical experience base. When a company is attracted to invest in Malta, it benefits from finding local natives with appropriate skills to employ; costs increase if too many foreign nationals must be brought in to operate the company. Therefore, pervasive education on information and communication technology-related topics is a priority for the government, aimed at young students, as well as adult citizens.

Therein lies a further – but no less important – benefit of bringing a smart grid to Malta. Energy efficiency campaigns supported by smart meters will not only help its citizens control consumption behavior and make more efficient and effective electricity and water operations a reality, but they will prove to be a project that helps raise the island’s technology culture in a new dimension. Meter installers will deal with palmtop and other advanced IT applications, learning to connect the devices not only to the physical electrical infrastructure, but also to the embedded information infrastructure. From smart home components to value-added services, commercial and industrial players will look to new opportunities that leverage the smart grid infrastructure in Malta as well, adding highly skilled jobs and new businesses to the Maltese economy.

Benefits will expand down to the elementary education levels as well. For example, it will be possible for schools to visit utility demonstration centers where the domestic meter can be presented as an educational tool. This potential includes making energy efficiency a door to educational programs on responsible citizenship, science, mathematics, environmental sustainability and many other key learning areas. Families will find new incentive to become familiar with the Internet as they connect to the utility’s website to control their energy bill and investigate enhanced tariffs for more cost-effective use of basic services.

Conclusion

Malta is famed for its Megalithic Temples – the oldest free-standing buildings in Europe, older than the Pyramids of Egypt [1]. But with its smart grid project, it stands to be the home of one of the newest and most advanced infrastructure projects as well. The result of the Maltese smart grid effort will be an end-to-end electricity and water transmission and distribution system. It will not only enable more efficient consumption of energy and water, but will completely transform the relationship of Maltese consumers with the utilities, while enhancing their education and employment prospects. These benefits go well beyond the traditional calculation of benefits of, for example, a simple AMI-focused project, and demonstrate that a smart grid project in an island environment can go well beyond simply improving utility operations. It can transform the entire community in ways that will improve the quality of life in Malta for generations to come.

Reference:

  1. 1 The Bradshaw Foundation, 2009

An Australian Approach to Energy Innovation and Collaboration

Just as global demand for energy is
steadily increasing, so too, are the
recognized costs of power generation.
A recent report about the possibility
of creating a low-emissions future by Australia’s
Treasury noted that electricity production
currently accounts for 34 percent
of the nation’s net greenhouse gas emissions,
and that it was the fastest-growing
contributor to greenhouse gas emissions
over the period from 1990 to 2006 [1].

This growing realization of the true
cost of energy production will be brought
into stark relief, with the likely implementation
of a national emissions trading
scheme in 2010.

Australia’s energy producers are entering
an era of great change, with increasing
pressure to drive efficiencies in both the
supply and demand sides of their businesses.
These pressures manifest themselves
in the operation of energy and utilities
organizations in three basic needs:

  • To tighten the focus on delivering value,
    within the paradigm of achieving more
    with less, and while concentrating on
    their core business;
  • To exploit the opportunities of an industry
    in transformation, and to build new
    capabilities; and
  • To act with speed in terms of driving
    leadership, setting the agenda, managing
    change and leveraging experience
    – all while managing risk.

The net effect of the various government
initiatives and mandates around energy
production is to drive energy and utility
companies to deliver power more responsibly
and efficiently. The most obvious
evidence of this reaction is the development
of advanced metering infrastructure
(AMI) and intelligent network (IN) programs
across Australia. Yet a more fundamental
change is also starting to emerge – a
change that is leading companies to work
more openly and collaboratively toward a
smarter energy value chain.

This renewed sense of purpose gives
energy and utilities organizations an opportunity
to think and act in dynamic new ways
as they re-engineer their operations to:

  • Transform the grid from a rigid, analog
    system to a responsive and automated
    energy delivery system by driving operational
    excellence;
  • Empower consumers and improve their
    satisfaction by providing them with near
    real-time, detailed information about
    their energy usage; and
  • Reduce greenhouse gas emissions to
    meet or exceed environmental regulatory
    requirements while maintaining a
    sufficient, cost-effective power supply.

A Global Issue

In Australia, Country Energy, a leading
essential services corporation owned by
the New South Wales Government, is leading
the move to change not just its own
organization, but the entire electricity
supply industry.

With the strength of around 4,000
employees, and Australia’s largest power
supply network covering 95 percent of
New South Wales’ landmass, Country
Energy recognized the scale and scope of
this industry challenge meant no single
player could find all the answers by himself.

A Powerful Alliance

Formed by IBM, the Global Intelligent
Utilities Network (IUN) Coalition represents
a focused and collaborative effort
to address the many economic, social and
environmental pressures facing these
organizations as they shape, accelerate
and share in the development of the
smart grid. Counting just one representative
organization from each major urban
electricity market, the coalition will collaborate
to enable the rapid development of solutions, adoption of open industry-based
standards, and creation of informed
policy and regulation.

Not only does the coalition believe
these three streams of collaboration will
help drive the adoption of the IUN, or
smart grid, in markets across the planet,
but the sharing of best practice information
and creation of a unified direction for
the industry will help reduce regulatory,
financial, market and implementation
risks. And, like all productive collaborative
relationships, the rewards for individual
members are likely to become amplified as
the group grows, learns and shares.

Global Coalition, Local Results

As Australia’s only member of the coalition,
Country Energy has been quick to
capitalize on – and contribute to – the
benefits of the global knowledge base,
adapting the learnings from overseas
operators in both developed and emerging
markets, and applying them to the unique
challenges of a huge landmass with a
decentralized population.

From its base in a nation rich in natural
resources, the Australian energy and utilities
industry is quickly moving to adapt to
the emergence of a carbon economy.

One of Country Energy’s key projects in
this realm is the development of its own
Intelligent Network (IN), providing the
platform for developing its future network
strategy, incorporating distributed generation
and storage, as well as enabling consumer
interaction through the provision of
real-time information on energy consumption,
cost and greenhouse footprint.

Community Collaboration

Keen to understand how the IN will work
for customers and its own employees,
Country Energy is moving the smart grid
off the page and into real life.

Designed to demonstrate, measure and
evaluate the technical and commercial
viability of IN initiatives, two communities
have been identified by Country Energy,
with the primary goal of learning from
both the suitability of the solutions implemented
and the operational partnership
models by which they will be delivered.

These two IN communities are intended
to provide a live research environment
to evaluate current understandings and
technologies, and will include functionality
across nine areas, including smart meters,
electrical network monitoring and control,
and consumer interaction and response.

Demonstrating the Future

In preparing to put the digital age to
work, and to practically demonstrate to
stakeholders what an IN will deliver, Country
Energy has developed Australia’s first
comprehensive IN Research and Demonstration
Centre near Canberra.

This interactive centre shows what the power network of the not-too-distant
future will look like and how it will
change the way power is delivered, managed
and used.

The centre includes a residential setting
to demonstrate the “smart home of
the future,” while giving visitors a preview
of an energy network that automatically
detects where a power interruption
occurs, providing up-to-date information
to network operators and field crews.

An initiative as far-reaching as the IN will
rely on human understanding as much as it
does on technology and infrastructure.

Regional Delivery Model

In addition to the coalition, IBM and
Country Energy developed and implemented
an innovative new business model
to transform Country Energy’s application
development and support capability. In
2008, Country Energy signed a four-year
agreement with IBM to establish a regional development centre, located in
the city of Bathurst.

The centre is designed to help maximize
cost efficiencies, accelerate the pace of
skills transfer through close links with the
local higher-education facility, Charles
Sturt University, and support Country
Energy’s application needs as it moves
forward on its IN journey. The centre is also
providing services to other IBM clients.

Through the centre, Country Energy
aims to improve service levels and innovations
delivered to its business via skills
transfer to Country Energy. The outcome
also allows Country Energy to meet its
commitment to support regional areas
and offers a viable alternative to global
delivery models.

Looking to the Future

In many ways, the energy and utilities
industry has come to symbolize the crossroads
that many of the planet’s systems find themselves at this moment in time:
legacy systems are operating in an economic
and environmental ecosystem that
is simply unable to sustain current levels –
let alone, the projected demands of global
growth.

Yet help is at hand, infusing these systems
with the instrumentation to extract
real-time data from every point in the
value chain, interconnecting these points
to allow the constant, back-and-forward
fl ow of information, and finally, employing
the power of analytics to give these systems
the gift of intelligence.

In real terms, IBM and Country Energy
are harnessing the depth of knowledge
and expertise of the Global IUN Coalition,
collaborating to help change the way the
industry operates at a fundamental level
in order to create an IN. This new smart
grid will operate as an automated energy
delivery system, empowering consumers
and improving their satisfaction by providing
them with near real-time, detailed
information about their energy usage.

And for the planet that these consumers
– and billions of others – rely upon,
Country Energy’s efforts will help reduce
greenhouse gas emissions while maintaining
that most basic building block of
human development: safe, dependable,
available and cost-effective power.

Reference

  1. 1 Commonwealth of Australia. Commonwealth
    Treasury. Australia’s Low Pollution
    Future: The Economics of Climate
    Change Mitigation. 30 October 2008.

Author’s Note: This customer story is based
on information provided by Country Energy
and illustrates how one organization uses IBM
products. Many factors have contributed to
the results and benefits described. IBM does
not guarantee comparable results elsewhere.

Power and Patience

The U.S. utility industry – particularly the electric-producing branch of it, there also are natural gas and water utilities – has found itself in a new, and very uncomfortable, position. Throughout the first quarter of 2009 it was front and center in the political arena.

Politics has been involved in the U.S. electric generation and distribution industry since its founding in the late 19th Century by Thomas Edison. Utilities have been regulated entities almost since the beginning and especially after the 1930s when the federal government began to take a much greater role in the direction and regulation of private enterprise and national economics.

What is new as we are about to enter the second decade of the 21st Century is that not only is the industry being in large part blamed for a newly discovered pollutant, carbon dioxide, which is naturally ubiquitous in the Earth’s atmosphere, but it also is being tasked with pulling the nation out of its worst economic recession since the Great Depression of the 1930s. Oh, and in your spare time, electric utilities, enable the remaking of the automobile industry, eliminate the fossil fuels which you have used to generate ubiquitous electricity for 100 years, and accomplish all this while remaining fiscally sound and providing service to all Americans. Finally, please don’t make electricity unaffordable for the majority of Americans.

It’s doubtful that very many people have ever accused politicians of being logical, but in 2009 they seem to have decided to simultaneously defy the laws of physics, gravity, time, history and economics. They want the industry to completely remake itself, going from the centralized large-plant generation model created by Edison to widely dispersed smaller-generation; from fossil fuel generation to clean “renewable” generation; from being a mostly manually controlled and maintained system to becoming a self-healing ubiquitously digitized and computer-controlled enterprise; from a marginally profitable (5-7 percent) mostly privately owned system to a massive tax collection system for the federal government.

Is all this possible? The answer likely is yes, but in the timeframe being posited, no.

Despite political co-option of the terms “intelligent utility” and “smart grid” in recent times, the electric utility industry has been working in these directions for many years. Distribution automation (DA) – being able to control the grid remotely – is nothing new. Utilities have been working on DA and SCADA (supervisory control and data acquisition) systems for more than 20 years. They also have been building out communications systems, first analog radio for dispatching service crews to far-flung territories, and in recent times, digital systems to reach all of the millions of pieces of equipment they service. The terms themselves were not invented by politicians, but by utilities themselves.

Prior to 2009, all of these concepts were under way at utilities. WE Energies has a working “pod” of all digital, self-healing, radial-designed feeders that works. The concept is being tried in Oklahoma, Canada and elsewhere. But the pods are small and still experimental. Pacific Gas and Electric, PEPCO and a few others have demonstration projects of “artificial intelligence” on the grid to automatically switch power around outages. TVA and several others have new substation-level servers that allow communications with, data collection from and monitoring of IEDs (Intelligent electrical devices) while simultaneously providing a “view” into the grid from anywhere else in the utility, including the boardroom. But all of these are relatively small-scale installations at this point. To distribute them across the national grid is going to take time and a tremendous amount of money. The transformation to a smart grid is under way and accelerating. However, to this point, the penetration is relatively small. Most
of the grid still is big and dumb.

Advanced metering infrastructure (AMI) actually was invented by utilities, although vendors serving the industry have greatly advanced the art since the mid-1990s. Utilities installed earlier-generation AMI, called automated meter reading (AMR) for about 50 percent of all customers, although the other 50 percent still were being read by meter readers traipsing through people’s yards.

AMI, which allows two-way communications with the meters (AMR is mostly one-way), is advancing rapidly, but still has reached less than 20 percent of American homes, according to research by AMI guru Howard Scott and Sierra Energy Group, the research and analysis division of Energy Central. Large-scale installations by Southern Company, Pacific Gas and Electric, Edison International and San Diego Gas and Electric, are pushing that percentage up rapidly in 2009, and other utilities were in various stages of pilots. The first installation of a true two-way metering system was at Kansas City Power & Light Co. (now Great Plains Energy) in the mid-1990s.

So the intelligent utility and smart grid were under development by utilities before politicians got into the act. However, the build-out was expected to take perhaps 30 years or more before completed down to the smallest municipal and co-operative utilities. Many of the smaller utilities haven’t even started pilots. Xcel Energy, Minneapolis, is building a smartgrid model in one city, Boulder, Col., but by May, 2009, two of the primary architects of the effort, Ray Gogel and Mike Carlson, had left Xcel. Austin Energy has parts of a smart grid installed, but it still reaches only a portion of Austin’s population and “home automation” reaches an even smaller proportion.

There are numerous “paper” models existent for these concepts. One, developed by Sierra Energy Group more than three years ago, is shown in Figure 1.

Major other portions of what is being envisioned by politicians have yet to be invented or developed. There is no reasonably priced, reasonably practical electric car, nor standardized connection systems to re-charge them. There are no large-scale transmission systems to reach remote windmill farms or solar-generating facilities and there is large-scale resistance from environmentalists to building such transmission facilities. Despite some political pronouncements, renewable generation, other than hydroelectric dams, still produces less than 3 percent of America’s electricity and that percentage is climbing very slowly.

Yes, the federal government was throwing some money at the build-out in early 2009, about $4 billion for smart grid and some $30-$45 billion at renewable energy. But these are drops in the bucket to the amount of money – estimated by responsible economists at $3 trillion or more – required just to build and replace the aging transmission systems and automate the grid. This is money utilities don’t have and can’t get without making the cost of electricity prohibitive for a large percentage of the population. Despite one political pronouncement, windmills in the Atlantic Ocean are not going to replace coal-fired generation in any conceivable time frame, certainly not in the four years of the current administration.

Then, you have global warming. As a political movement, global warming serves as a useful stick to the carrot of federal funding for renewable energy. However, the costs for the average American of any type of tax on carbon dioxide are likely to be very heavy.

In the midst of all this, utilities still have to go to public service commissions in all 50 states for permission to raise rates. If they can’t raise rates – something resisted by most PSCs – they can’t generate the cash to pay for this massive build-out. PSC commissioners also are politicians, by the way, with an average tenure of only about four years, which is hardly long enough to learn how the industry works, much less how to radically reconfigure it in a similar time-frame.

Despite a shortage of engineers and other highly skilled workers in the United States, the smart grid and intelligent utilities will be built in the U.S. But it is a generational transformation, not something that can be done overnight. To expect the utility industry to gear up to get all this done in time to “pull us out” of the most serious recession of modern times just isn’t realistic – it’s political. Add to the scale of the problem political wrangling over every concept and every dollar, mix in a lot of government bureaucracy that takes months to decide how to distribute deficit dollars, and throw in carbon mitigation for global warming and it’s a recipe for disaster. Expect the lights to start flickering along about…now. Whether they only flicker or go out for longer periods is out of the hands of utilities – it’s become a political issue.