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.

Business Process Improvement

In the past, the utility industry could consider itself exempt from market drivers like those listed above. However, today’s utilities are immersed in a sea of change. Customers demand reliable power in unlimited supply, generated in environmentally friendly ways without increased cost. All the while regulators are telling consumers to “change the way they are using energy or be ready to pay more,” and the Department of Energy is calling for utilities to make significant reductions in usage by 2020 [1].

“The consumer’s concept of quality will no longer be measured by only the physical attributes of the product – it will extend to the process of how the product is made, including product safety, environmental compliance and social responsibility compliance.”

– Victor Fang, chairman of Li and Fang,
in the 2008 IBM CEO Study

If these issues are not enough, couple them with a loss of knowledge and skill due to an aging workforce, an ever-increasing amount of automation and technology being introduced into our infrastructure with few standards, tightening bond markets and economic declines requiring us to do more with less. Now more than ever the industry needs to redefine our core competencies, identify key customers and their requirements, and define processes that meet or exceed their expectations. Business process improvement is essential to ensure future success for utilities.

There is no need to reinvent the wheel and develop a model for utilities to address business process improvement. One already exists that offers the most holistic approach to process improvement today. It is not new, but like any successful management method, it has been modified and refined to meet continuously changing business needs.

It is agnostic in the way it addresses methods used for analysis and process improvement such as Lean, Six Sigma and other tools; but serves as a framework for achieving results in any industry. It is the Baldrige Criteria for Performance Excellence (see Figure 1).

The Criteria for Performance Excellence is designed to assist organizations to focus on strategy-driven performance while addressing key decisions driving both short-term and long-term organizational sustainability in a dynamic environment. Is it possible that this framework was designed for times such as these in the utility industry?

The criteria are essentially simple in design. They are broken into seven categories as shown in figure 2; leadership, strategic planning, customer focus, measurement, analysis and knowledge management, workforce focus, process management and results.

In this model, measurement, analysis and knowledge management establish the foundation. There are two triads. On the left hand side, leadership, strategic planning and customer focus make up the leadership triad. On the right hand side of the model, workforce focus, process management and results make up the results triad. The alignment and integration of these essential elements of business create a framework for continuous improvement. This model should appear familiar in concept to industry leaders; there is not a single utility in the industry that does not identify with these categories in some form.

The criteria are built to elicit a response through the use of how and what questions that ask about key processes and their deployment throughout the organization. On face value, these questions appear to be simple. However, as you respond to them, you will realize their linkage and begin to identify opportunities for improvement that are essential to future success. Leaders wishing to begin this effort should not be surprised by the depth of the questions and the relatively few members within your organization who will be able to provide complete answers.

In assessment of the model’s ability to meet utility industry needs, let’s discuss each category in greater detail, provide relevance to the utility industry and include key questions for you to consider as you begin to assess your own organization’s performance.

Leadership: Who could argue that the current demand for leadership in utilities is more critical today than ever before in our history? Changes in energy markets are bringing with them increased levels of accountability, a greater focus on regulatory, legal and ethical requirements, a need for long-term viability and sustainability, and increased expectations of community support. Today’s leaders are expected to achieve ever increasing levels of operational performance while operating on less margin than ever before.

“The leadership category examines how senior leaders’ personal actions guide and sustain the organization. Also examined are the organization’s governance system and how it fulfills legal, ethical and societal responsibilities as well as how it selects and supports key communities [2].”

Strategic Planning: Does your utility have a strategic plan? Not a dust-laden document sitting on a bookshelf or a financial budget; but a plan that identifies strategic objectives and action plans to address short and long-term goals. Our current business environment demands that we identify our core competencies (and more importantly what are not our core competencies), identify strategic challenges to organizational success, recognize strategic advantages and develop plans that ensure our efforts are focused on objectives that will ensure achievement of our mission and vision.

What elements of our business should we outsource? Do our objectives utilize our competitive advantages and core competencies to diminish organizational challenges? We all know the challenges that are both here today and await us just beyond the horizon. Many of them are common to all utilities; an aging workforce, decreased access to capital, technological change and regulatory change. How are we addressing them today and is our approach systematic and proactive or are we simply reacting to the challenges as they arise?

“The strategic planning category examines how your organization develops strategic objectives and action plans. Also examined are how your chosen strategic objectives and action plans are deployed and changed if circumstances require, and how progress is measured [2].”

Customer Focus: The success of the utility industry has been due in part to a long-term positive relationship with its customers. Most utilities have made a conscientious effort to identify and address the needs of the customer; however a new breed of customer is emerging with greater expectations, a higher degree of sensitivity to environmental issues, a diminished sense of loyalty to business organizations and overall suspicion of ethical and legal compliance.

Their preferred means of communication are quite different than the generations of loyal customers you have enjoyed in the past. They judge your performance against similar customer experiences received from organizations far beyond the traditional competitor.

You now compete against Wal-Mart’s supply chain process, Amazon.com’s payment processes and their favorite hotel chain’s loyalty rewards process. You are being weighed in the balances and in many cases found to be lacking. Worse yet, you may not have even recognized them as an emerging customer segment.

“The Customer Focus category examines how your organization engages its customers for long-term marketplace success and builds a customer-focused culture. Also examined is how your organization listens to the voice of its customers and uses this information to improve and identify opportunities for innovation [2].”

Measurement, Analysis, and Knowledge Management: The data created and maintained by GIS, CIS, AMI, SCADA and other systems create a wealth of information that can be analyzed to obtain knowledge sufficient to make rapid business decisions. However, many of these systems are incapable of or at the very least difficult to integrate with one another, leaving leaders with a lot of data but no meaningful measures of key performance. Even worse, a lack of standards related to system performance leaves many utilities that develop performance measures with a limited number of inconsistently measured comparatives from their peers.

If utilities are going to overcome the challenges of the future, it is essential that they integrate all data systems for improved accessibility and develop standards that would facilitate meaningful comparative measures. This is not to say that comparative measures do not exist, they do. However, increasing the number of utilities participating would increase our understanding of best practices and enable us to determine best-in-class performance.

“The measurement, analysis and knowledge management category examines how the organization selects, gathers, analyzes, manages and improves its data, information and knowledge assets and how it manages its information technology. The category also examines how your organization reviews and uses reviews to improve its performance [2].”

Workforce Focus: We have already addressed the aging workforce and its impact on the future of utilities. Companion challenges related to the utility workforce include the heavy benefits burdens that many utilities currently bear. Also, the industry faces a diminished interest in labor positions and the need to establish new training methods to engage a variety of generations within our workforce and ensure knowledge acquisition and retention.

The new workforce brings with it new requirements for satisfaction and engagement. The new employee has proven to be less loyal to the organization and studies show they will have many more employers before they retire than that of their predecessors. It is essential that we develop ways to identify these requirements and take action to retain these individuals or we risk increased training cost and operational issues as they seek new employment opportunities.

“The workforce focus category examines how your organization engages, manages and develops the workforce to utilize its full potential in alignment with organizational mission, strategy and action plans. The category examines the ability to assess workforce capability and capacity needs and to build a workforce environment conducive to high performance [2].”

Process Management: It is not unusual for utilities to implement new software with dramatically increased capabilities and ask the integrator to make it align with their current processes or continue to use their current processes without regard for the system’s new capabilities. Identifying and mapping key work processes can enable incredible opportunities for streamlining your organization and facilitate increased utilization of technology.

What are your utilities’ key work processes and how do you determine them and their relationship to creating customer value? These are difficult for leaders to articulate; but yet, without a clear understanding of key work processes and their alignment to core competencies and strategic advantages as well as challenges, it may be that your organization is misapplying efforts related to core competencies and either outsourcing something best maintained internally or performing effort that is better delivered by outsource providers.

“The process management category examines how your organization designs its work systems and how it designs, manages and improves its key processes for implementing these work systems to deliver customer value and achieve organizational success and sustainability. Also examined is your readiness for emergencies [2].”

Results: Results are the fruit of your efforts, the gift that the Baldrige Criteria enables you to receive from your applied efforts. All of us want positive results. Many utilities cite positive performance in measures that are easy to acquire: financial performance, safety performance, customer satisfaction. But which of these measures are key to our success and sustainability as an organization? As you answer the questions and align measures that are integral to obtaining your organization’s mission and vision, it will become abundantly clear which measures you’ll need to maintain and develop competitive comparisons and benchmarks.

“The results category examines the organization’s performance and improvement in all key areas – product outcomes, customer-focused outcomes, financial and market outcomes, workforce-focused outcomes, process-effectiveness outcomes and leadership outcomes. Performance levels are examined relative to those of competitors and other organizations with similar product offerings [2].”

A Challenge

The adoption of the Baldrige criteria is often described as a journey. Few utilities have embraced this model. However, it appears to offer a comprehensive solution to the challenges we face today. Utilities have a rich history and play a positive role in our nation. A period of rapid change is upon us. We need to shift from reacting to leading as we solve the problems that face our industry. By applying this model for effective process improvement, we can once again create a world where utilities lead the future.

References

  1. Quote from U.S. Treasury Secretary Tim Geithner as communicated in SmartGrid Newsletter
  2. Malcolm Baldrige National Quality Award, “Path to Excellence and Some path Building Tools.” www.nist.gov/baldrige.

Future of Learning

The nuclear power industry is facing significant employee turnover, which may be exacerbated by the need to staff new nuclear units. To maintain a highly skilled workforce to safely operate U.S. nuclear plants, the industry must find ways to expedite training and qualification, enhance knowledge transfer to the next generation of workers, and develop leadership talent to achieve excellent organizational effectiveness.

Faced with these challenges, the Institute of Nuclear Power Operations (INPO), the organization charged with promoting safety and reliability across the 65 nuclear electric generation plants operating in the U.S., created a “Future of Learning” initiative. It identified ways the industry can maintain the same high standard of excellence and record of nuclear safety, while accelerating training development, individual competencies and plant training operations.

The nuclear power industry is facing the perfect storm. Like much of the industrialized world, it must address issues associated with an aging workforce since many of its skilled workers and nuclear engineering professionals are hitting retirement age, moving out of the industry and beginning other pursuits.

Second, as baby boomers transition out of the workforce, they will be replaced by an influx of Generation Y workers. Many workers in this “millenials” generation are not aware of the heritage driving the single-minded focus on safety. They are asking for new learning models, utilizing the technologies which are so much a part of their lives.

Third, even as this big crew change takes place, there is increasing demand for electricity. Many are turning to cleaner technologies – solar, wind, and nuclear – to close the gap. And there is resurgence in requests for building new nuclear plants, or adding new reactors at existing plants. This nuclear renaissance also requires training and preparation to take on the task of safely and reliably operating our nuclear power plants.

It is estimated there will be an influx of 25,000 new workers in the industry over the next five years, with an additional 7,000 new workers needed if just a third of the new plants are built. Given that incoming workers are more comfortable using technology for learning, and that delivery models that include a blend of classroom-based, instructor-led, and Web-based methods can be more effective and efficient, the industry is exploring new models and a new mix of training.

INPO was created by the nuclear industry in 1979 following the Three Mile Island accident. It has 350 full-time and loaned employees. As a nonprofit organization, it is chartered to promote the highest levels of safety and reliability – in essence, to promote excellence – in the operation of nuclear electric generating plants. All U.S. nuclear operating companies are members.

INPO’s responsibilities include evaluating member nuclear site operations, accrediting each site’s nuclear training programs and providing assistance and information exchange. It has established the National Academy for Nuclear Training, and an independent National Nuclear Accrediting Board. INPO sends teams to sites to evaluate their respective training activities, and each station is reviewed at least every four years by the accrediting board.

INPO has developed guidelines for 12 specifically accredited programs (six operations and six maintenance/technical), including accreditation objectives and criteria. It also offers courses and seminars on leadership, where more than 1,500 individuals participate annually, from supervisors to board members. Lastly, it operates NANTeL (National Academy for Nuclear Training e-Learning system) with 200 courses for general employee training for nuclear access. More than 80,000 nuclear workers and sub-contractors have completed training over the Web.

The Future of Learning

In 2008, to systematically address workforce and training challenges, the INPO Future of Learning team partnered with IBM Workforce and Learning Solutions to conduct more than 65 one-on-one interviews, with chief executive officers, chief nuclear officers, senior vice presidents, plant managers, plant training managers and other leaders in the extended industry community. The team also completed 46 interviews with plant staff during a series of visits to three nuclear power plants. Lastly, the team developed and distributed a survey that was sent to training managers at the 65 nuclear plants, achieving a 62 percent response rate.

These are statements the team heard:

  • “Need to standardize a lot of the training, deliver it remotely, preferably to a desktop, minimize the ‘You train in our classroom in our timeframe’ and have it delivered more autonomously so it’s likely more compatible with their lifestyles.”
  • “We’re extremely inefficient today in how we design/develop and administer training. We don’t want to carry inefficiencies that we have today into the future.”
  • “Right now, in all training programs, it’s a one-size-fits-all model that’s not customized to an individual’s background. Distance learning would enable this by allowing people to demonstrate knowledge and let some people move at a faster pace.”
  • “We need to have ‘real’ e-learning. We’ve been exposed to less than adequate, older models of e-learning. We need to move away from ‘page turners’ and onto quality content.”

Several recommendations were generated as a result of the study. The first focused on ways to improve INPO’s current training offerings by adding leadership development courses, ratcheting up the interactivity of the Web-based and e-learning offerings in NANTeL and developing a “nuclear citizenship” course for new workers in the industry.

Second, there were recommendations about better utilizing training resources across the industry by centralizing common training, beginning with instructor training and certification and generic fundamentals courses. It was estimated that 50 percent of the accredited training materials are common across the industry. To accomplish this objective, INPO is exploring an industry infrastructure that would enable centralized training material development, maintenance and delivery.

The last set of recommendations focused on methods for better coordination and efficiency of training, including developing processes for certifying vendor training programs, and providing a jump-start to common community college and university curriculum.

In 2009, INPO is piloting a series of Future of Learning initiatives which will help determine the feasibility, cost-effectiveness, readiness and acceptance of this first set of recommendations. It is starting to look more broadly at ways it can utilize learning technology to drive economies of scale, accelerative and prescriptive learning, and deliver value to the nuclear electric generation industry.

Where Do We Go From Here ?

Beyond the initial perfect storm is another set of factors driving the future of learning.

First, consider the need for speed. It has been said that “If you are not learning at the speed of change, you are falling behind.”

In his “25 Lessons from Jack Welch,” the former CEO of General Electric said, “The desire, and the ability, of an organization to continuously learn from any source, anywhere – and to rapidly convert this learning into action – is its ultimate competitive advantage.” Giving individuals, teams and organizations the tools and technologies to accelerate and broaden their learning is an important part of the future of learning.

Second, consider the information explosion – the sheer volume of information available, the convenience of information access (due, in large part, to continuing developments in technology) and the diversity of information available. When there is too much information to digest, a person is unable to locate and make use of the information that one needs. When one is unable to process the sheer volume of information, overload occurs. The future of learning should enable the learner to sort through information and find knowledge.

Third, consider new developments in technology. Generations X and Y are considered “digital natives.” They expect that the most current technologies are available to them – including social networking, blogging, wikis, immersive learning and gaming – and to not have them is unthinkable.

Impact of New Technology

Philosophy of training has morphed from “just-in-case” (teach them everything and hope they will remember when they need it), to “just-in-time” (provide access to training just before the point of need), to “just-for-me.” With respect to the latter, learning is presented in a preferred media, with a learning path customized to reflect the student’s preferred learning style, and personalized to address the current and desired level of expertise within any given time constraint.

Imagine a scenario in which a maintenance technician at a nuclear plant has to replace a specialized valve – something she either hasn’t done for awhile, or hasn’t replaced before. In a Web 2.0 world, she should be able to run a query on her iPhone or similar handheld device and pull up the maintenance of that particular valve, access the maintenance records, view a video of the approved replacement procedure, or access an expert who could coach her through the process.

Learning Devices

What needs to be in place to enable this vision of the future of learning? First, workers will need a device that can access the information by connecting over a secure wireless network inside the plant. Second, the learning has to be available in small chunks – learning nuggets or learning assets. Third, the learning needs to be assembled along the dimensions of learning style, desired and target level of expertise, time available and media type, among other factors. Finally, experts need to be identified, tagged to particular tasks and activities, and made accessible.

Fortunately, some of the same learning technology tools that will enable centralized maintenance and accelerated development will also facilitate personalized learning. When training is organized at a more granular level – the learning asset level – not only can it be leveraged over a variety of courses and courseware, it can also be re-assembled and ported to a variety of outputs such as lesson books, e-learning and m-learning (mobile-learning).

The example above pointed out another shift in our thinking about learning. Traditionally, our paradigm has been that learning occurs in a classroom, and when it occurs, it has taken the form of a course. In the example above, the learning takes place anywhere and anytime, moving from the formal classroom environment to an informal environment. Of course, just because learning is “informal” does not mean it is accidental, or that it occurs without preparation.

Some estimates claim 10 percent of our learning is achieved through formal channels, 20 percent from coaching, and 70 percent through informal means. Peter Henschel, former director of the Institute for Research on Learning, raised an important question: If nearly three-quarters of learning in corporations is informal, can we afford to leave it to chance?

There are still several open issues regarding informal learning:

  • How do we evaluate the impact/effectiveness of informal learning? (Informal learning, but formal demonstration of competency/proficiency);
  • How do we record one’s participation and skill-level progression in informal learning? (Information learning, but formal recording of learning completion);
  • Who will create and maintain informal learning assets? (Informal learning, but formal maintenance and quality assurance of the learning content); and
  • When does informal learning need a formal owner (in a full- or part-time role)? (Informal learning, but will need formal policies to help drive and manage).
    • In the nuclear industry, accurate and up-to-date documentation is a necessity. As the nuclear industry moves toward more effective use of informal channels of learning, it will need to address these issues.

      Immersive Learning (Or Virtual Worlds)

      The final frontier for the future of learning is expansion into virtual worlds, also known as immersive learning. Although Second Life (SL) is the best known virtual world, there are also emerging competitors, including Active Worlds, Forterra (OLIVE), Qwag and Unisfair.

      Created in 2003 by Linden Lab of San Francisco, SL is a three-dimensional, virtual world that allows users to buy “property,” create objects and buildings and interact with other users. Unlike a game with rules and goals, SL offers an open-ended platform where users can shape their own environment. In this world, avatars do many of the same things real people do: work, shop, go to school, socialize with friends and attend rock concerts.

      From a pragmatic perspective, working in an immersive learning environment such as a virtual world provides several benefits that make it an effective alternative to real life:

      • Movement in 3-D space. A virtual world could be useful in any learning situation involving movement, danger, tactics, or quick physical decisions, such as emergency response.
      • Engendering Empathy. Participants experience scenarios from another person’s perspective. For example, the Future of Learning team is exploring ways to re-create the control room experience during the Three-Mile Island incident, to provide a cathartic experience for the next generation workforce so they can better appreciate the importance of safety and human performance factors.
      • Rapid Prototyping and Co-Design. A virtual world is an inexpensive environment for quickly mocking up prototypes of tools or equipment.
      • Role Playing. By conducting role plays in realistic settings, instructors and learners can take on various avatars and play those characters.
      • Alternate Means of Online Interaction. Although users would likely not choose a virtual world as their primary online communication tool, it provides an alternative means of indicating presence and allowing interaction. Users can have conversations, share note cards, and give presentations. In some cases, SL might be ideal as a remote classroom or meeting place to engage across geographies and utility boundaries.

      Robert Amme, a physicist at the University of Denver, has another laboratory in SL. Funded by a grant from the Nuclear Regulatory Commission, his team is building a virtual nuclear reactor to help train the next generation of environmental engineers on how to deal with nuclear waste (see Figure 1). The INPO Future of Learning team is exploring ways to leverage this type of learning asset as part of the nuclear citizenship initiative.

      There is no doubt that nuclear power generation is once again on an upswing, but critical to its revival and longevity will be the manner in which we prepare the current and next generation of workers to become outstanding stewards of a safe, effective, clean-energy future.

The Power of Prediction: Improving the Odds of a Nuclear Renaissance

After 30 years of disfavor in the United States, the nuclear power industry is poised for resurgence. With the passage of the Energy Policy Act of 2005, the specter of over $100 per barrel oil prices and the public recognition that global warming is real, nuclear power is now considered one of the most practical ways to clean up the power grid and help the United States reduce its dependence on foreign oil. The industry has responded with a resolve to build a new fleet of nuclear plants in anticipation of what has been referred to as a nuclear renaissance.

The nuclear power industry is characterized by a remarkable level of physics and mechanical science. Yet, given the confluence of a number of problematic issues – an aging workforce, the shortage of skilled trades, the limited availability of equipment and parts, and a history of late, over-budget projects – questions arise about whether the level of management science the industry plans to use is sufficient to navigate the challenges ahead.

According to data from the Energy Information Administration (EIA), nuclear power comprises 20 percent of the U.S. capacity, producing approximately 106 gigawatts (GW), with 66 plants that house 104 reactor units. To date, more than 30 new reactors have been proposed, which will produce a net increase of approximately 19 GW of nuclear capacity through 2030. Considering the growth of energy demand, this increased capacity will barely keep pace with increasing base load requirements.

According to Assistant Secretary for Nuclear Energy Dennis Spurgeon, we will need approximately 45 new reactors online by 2030 just to maintain 20 percent share of U.S. electricity generation nuclear power already holds.

Meanwhile, Morgan Stanley vice chairman Jeffrey Holzschuh is very positive about the next generation of nuclear power but warns that the industry’s future is ultimately a question of economics. “Given the history, the markets will be cautious,” he says.

As shown in Figures 1-3, nuclear power is cost competitive with other forms of generation, but its upfront capital costs are comparatively high. Historically, long construction periods have led to serious cost volatility. The viability of the nuclear power industry ultimately depends on its ability to demonstrate that plants can be built economically and reliably. Holzschuh predicts, “The first few projects will be under a lot of public scrutiny, but if they are approved, they will get funded. The next generation of nuclear power will likely be three to five plants or 30, nothing in between.”

Due to its cohesive identity, the nuclear industry is viewed by the public and investors as a single entity, making the fate of industry operators – for better or for worse – a shared destiny. For that reason, it’s widely believed that if these first projects suffer the same sorts of significant cost over-runs and delays experienced in the past, the projected renaissance for the industry will quickly revert to a return to the dark ages.

THE PLAYERS

Utility companies, regulatory authorities, reactor manufacturers, design and construction vendors, financiers and advocacy groups all have critical roles to play in creating a viable future for the nuclear power industry – one that will begin with the successful completion of the first few plants in the United States. By all accounts, an impressive foundation has been laid, beginning with an array of government incentives (as loan guarantees and tax credits) and simplified regulation to help jump-start the industry.

Under the Energy Policy Act of 2005, the U.S. Department of Energy has the authority to issue $18.5 billion in loan guarantees for new nuclear plants and $2 billion for uranium enrichment projects. In addition, there’s standby support for indemnification against Nuclear Regulatory Commission (NRC) and litigation-oriented delays for the first six advanced nuclear reactors. The Treasury Department has issued guidelines for an allocation and approval process for production tax credits for advanced nuclear: 1.8 cents per kilowatt-hour production tax credit for the first eight years of operation with the final rules to be issued in fiscal year 2008.

The 20-year renewal of the Price- Andersen Act in 2005 and anticipated future restrictions on carbon emissions further improve the comparative attractiveness of nuclear power. To be eligible for the 2005 production tax credits, a license application must be tendered to the NRC by the end of 2008 with construction beginning before 2014 and the plant placed in service before 2021.

The NRC has formulated an Office of New Reactors (NRO), and David Matthews, director of the Division of New Reactor Licensing, led the development of the latest revision of a new licensing process that’s designed to be more predictable by encouraging the standardization of plant designs, resolving safety and environmental issues and providing for public participation before construction begins. With a fully staffed workforce and a commitment to “enable the safe, secure and environmentally responsible use of nuclear power in meeting the nation’s future energy needs,” Matthews is determined to ensure that the NRC is not a risk factor that contributes to the uncertainty of projects but rather an organizing force that will create predictability. Matthews declares, “This isn’t your father’s NRC.”

This simplified licensing process consists of the following elements:

  • An early site permit (ESP) for locations of potential facilities.
  • Design certification (DC) for the reactor design to be used.
  • Combined operating license (COL) for the certified reactor as designed to be located on the site. The COL contains the inspections, tests, analyses and acceptance criteria (ITAAC) to demonstrate that the plant was built to the approved specifications.

According to Matthews, the best-case scenario for the time period between when a COL is docketed to the time the license process is complete is 33 months, with an additional 12 months for public hearings. When asked if anything could be done to speed this process, Matthews reported that every delay he’s seen thus far has been attributable to a cause beyond the NRC’s control. Most often, it’s the applicant that’s having a hard time meeting the schedule. Recently, approved schedules are several months longer than the best-case estimate.

The manufacturers of nuclear reactors have stepped up to the plate to achieve standard design certification for their nuclear reactors; four are approved, and three are in progress.

Utility companies are taking innovative approaches to support the NRC’s standardization principles, which directly impact costs. (Current conventional wisdom puts the price of a new reactor at between $4 billion and $5.5 billion, with some estimates of fully loaded costs as high as $7 billion.) Consortiums have been formed to support cross-company standardization around a particular reactor design. NuStart and UniStar are multi-company consortiums collaborating on the development of their COLs.

Leader of PPL Corp.’s nuclear power strategy Bryce Shriver – who recently announced PPL had selected UniStar to build its next nuclear facility – is impressed with the level of standardization UniStar is employing for its plants. From the specifics of the reactor design to the carpet color, UniStar – with four plants on the drawing board – intends to make each plant as identical as possible.

Reactor designers and construction companies are adding to the standardization with turnkey approaches, formulating new construction methods that include modular techniques; sophisticated scheduling and configuration management software; automated data; project management and document control; and designs that are substantially complete before construction begins. Contractors are taking seriously the lessons learned from plants built outside the United States, and they hope to leverage what they have learned in the first few U.S. projects.

The stewards of the existing nuclear fleet also see themselves as part of the future energy solution. They know that continued safe, high-performance operation of current plants is key to maintaining public and state regulator confidence. Most of the scheduled plants are to be co-located with existing nuclear facilities.

Financing nuclear plant construction involves equity investors, utility boards of directors, debt financiers and (ultimately) the ratepayers represented by state regulatory commissions. Despite the size of these deals, the financial community has indicated that debt financing for new nuclear construction will be available. The bigger issue lies with the investors. The more equity-oriented the risk (principally borne by utilities and ratepayers), the more caution there is about the structure of these deals. The debt financiers are relying on the utilities and the consortiums to do the necessary due diligence and put up the equity. There’s no doubt that the federal loan guarantees and subsidies are an absolute necessity, but this form of support is largely driven by the perceived risk of the first projects. Once the capability to build plants in a predictable way (in terms of time, cost, output and so on) has been demonstrated, market forces are expected to be very efficient at allocating capital to these kinds
of projects.

The final key to the realization of a nuclear renaissance is the public. Americans have become increasingly concerned about fossil fuels, carbon emissions and the nation’s dependence on foreign oil. The surge in oil prices has focused attention on energy costs and national security. Coal-based energy production is seen as an environmental issue. Although the United States has plenty of access to coal, dealing with carbon emissions using clean coal technology involves sequestering it and pumping it underground. PPL chairman Jim Miller describes the next challenge for clean coal as NUMBY – the “Not under my back yard” attitude the public is likely to adopt if forced to consider carbon pumped under their communities. Alternative energy sources such as wind, solar and geothermal enjoy public support, but they are not yet scalable for the challenge of cleaning up the grid. In general, the public wants clean, safe, reliable, inexpensive power.

THE RISKS

Will nuclear fill that bill and look attractive compared with the alternatives? Although progress has been made and the stage is set, critical issues remain, and they could become problematic. While the industry clearly sees and is actively managing some of these issues, there are others the industry sees but is not as certain about how to manage – and still others that are so much a part of the fabric of the industry that they go unrecognized. Any one of these issues could slow progress; the fact that there are several that could hit simultaneously multiplies the risk exponentially.

The three widely accepted risk factors for the next phase of nuclear power development are the variability of the cost of uranium, the availability of quality equipment for construction and the availability of well-trained labor. Not surprising for an industry that’s been relatively sleepy for several decades, the pipeline for production resources is weak – a problem compounded by the well-understood coming wave of retirements in the utility workforce and the general shortage of skilled trades needed to work on infrastructure projects. Combine these constraints with a surge in worldwide demand for power plants, and it’s easy to understand why the industry is actively pursuing strategies to secure materials and train labor.

The reactor designers, manufacturers and construction companies that would execute these projects display great confidence. They’re keen on the “turnkey solution” as a way to reduce the risk of multiple vendors pointing fingers when things go wrong. Yet these are the same firms that have been openly criticized for change orders and cost overruns. Christopher Crane, chief operating officer of the utility Exelon Corp., warned contractors in a recent industry meeting that the utilities would “not take all the risk this time around.” When faced with complicated infrastructure development in the past, vendors have often pointed to their expertise with complex projects. Is the development of more sophisticated scheduling and configuration management capability, along with the assignment of vendor accountability, enough to handle the complexity issue? The industry is aware of this limitation but does not as yet have strong management techniques for handling it effectively.

Early indications from regulators are that the COLs submitted to date are not meeting the NRC’s guidance and expectations in all regards, possibly a result of the applicants’ rush to make the 2008 year-end deadline for the incentives set forth in the Energy Policy Act. This could extend the licensing process and strain the resources of the NRC. In addition, the requirements of the NRC principally deal with public safety and environmental concerns. There are myriad other design requirements entailed in making a plant operate profitably.

The bigger risk is that the core strength of the industry – its ability to make significant incremental improvements – could also serve as the seed of its failure as it faces this next challenge. Investors, state regulators and the public are not likely to excuse serious cost overruns and time delays as they may have in the past. Utility executives are clear that nuclear is good to the extent that it’s economical. When asked what single concern they find most troubling, they often reply, “That we don’t know what we don’t know.”

What we do know is that there are no methods currently in place for beginning successful development of this next generation of nuclear power plants, and that the industry’s core management skill set may not be sufficient to build a process that differs from a “learn as you go” approach. Thus, it’s critical that the first few plants succeed – not just for their investors but for the entire industry.

THE OPPORTUNITY – KNOWING WHAT YOU DON’T KNOW

The vendors supporting the nuclear power industry represent some of the most prestigious engineering and equipment design and manufacturing firms in the world: Bechtel, Fluor, GE, Westinghouse, Areva and Hitachi. Despite this, the industry is not known for having a strong foundation in managing innovation. In a world that possesses complex physical capital and myriad intangible human assets, political forces and public opinion as well as technology are all required to get a plant to the point of producing power. Thus, more advanced management science could represent the missing piece of the puzzle for the nuclear power industry.

An advanced, decision-making framework can help utilities manage unpredictable events, increasing their ability to handle the planning and anticipated disruptions that often beset long, complex projects. By using advanced management science, the nuclear industry can take what it knows and create a learning environment to fi nd out more about what it doesn’t know, improving its odds for success.

Technology with vision for Today’s Utilities

Around the world, utilities are under pressure. Citizens demand that utilities provide energy and water without undermining environmental quality. Customers seek choice and convenience, and regulators respond with new market structures. Financial stakeholders look for operational efficiency at a time when aging workforces and infrastructures need replacement.

Pressures like these are forcing utilities to re-examine every aspect of the utility business, from supply to consumption. And no utility can handle those changes alone.

Oracle has positioned itself to become utilities’ software partner of choice in the quest to respond positively and completely to these pressures. To do so, Oracle brings together a worldwide team of utility experts, software applications that address mission-critical utility needs, a rock-solid suite of corporate operational software and world-leading middleware and technology.

The result: Flexible, innovative solutions that increase efficiency, improve stakeholder satisfaction and future-proof the organization.

Oracle has reshaped the utilities IT marketplace. During the past year, by acquiring two world leaders in utility-specific applications – SPL WorldGroup and Lodestar – Oracle has created Oracle Utilities, a new brand that establishes a unique portfolio of proven software, integrating industry-specific applications with the capabilities of Oracle Applications, Oracle Fusion Middleware and Oracle Database.

Oracle Utilities offers the world’s most complete suite of end-to-end information technology solutions for the gas, water and electric utilities that communities around the world depend on. Our revolutionary approach to providing utilities with the applications and expertise they need brings together:

  • Oracle Utilities solutions, utility-specific revenue and operations management applications:
    • Customer Care and Billing
    • Mobile Workforce Management
    • Network Management System
    • Work and Asset Management
    • Meter Data Management
    • Load Analysis
    • Load Profiling and Settlement
    • Portfolio Management
    • Quotations Management
    • Business Intelligence

These solutions are available stand-alone, or as an integrated suite.

  • Oracle’s ERP, database and infrastructure software:
    • Oracle E-Business Suite and other ERP applications
    • TimesTen and Sleepycat for real-time data management
    • Data hubs for customer and product master data management
    • Analytics that provide insight and customer intelligence
    • ContentDB, SpatialDB and RecordsDB for content management
    • Secure Enterprise Search for enterprise-wide search needs
  • Siebel CRM for larger competitive utilities’ call centers, specialized contacts and sales:
    • Most comprehensive solution for Sales, Service and Marketing
    • Complete out-of-the box solution that’s easy to tailor to your needs
    • Results such as percentage increase in sales pipeline, user adoption, opportunity-to-win ratios and doubled revenue growth

Stand-alone, each of these products meets utilities’ unique customer and service needs. Together, they enable multi-departmental business processes. The result is an unparalleled set of technologies that address utilities’ most pressing current and emerging issues.

THE VISION

Cross-organizational business processes and best practices are key to addressing today’s complex challenges. Oracle Utilities provides the path via which utilities may:

  • Advance customer care with:
    • Real-time 360-degree views of customer information
    • Tools to help customers save time and money
    • Ability to introduce or retire products and services quickly in response to emerging customer needs
  • Enhance revenue and operations management:
    • Avoid revenue leakage across end-to-end transactions
    • Increase the visibility and auditability of key business processes
    • Manage assets strategically
    • Bill for services and collect revenue cost-effectively
    • Increase field crew and network efficiency
    • Track and improve performance against goals
    • Achieve competitive advantage with a leading-edge infrastructure that helps utilities respond quickly to change
  • Reduce total cost of ownership through access to a single global vendor with:
    • Proven best-in-class utility management solutions
    • Comprehensive, world-class capabilities in applications and technology infrastructure
    • A global 24/7 distribution and support network with 7,000 service personnel
    • Over 14,000 software developers
    • Over 19,000 partners
  • Address the “Green Agenda”:
    • Help reduce pollution
    • Increase efficiency

STRATEGIC TECHNOLOGY FOR THE EMERGING UTILITY

Today’s utility is beset by urgent issues – environmental concerns, rising costs, aging workforces, changing markets, regulatory demands and rising stakeholder expectations.

Oracle Utilities can help meet these challenges by providing the leading mission-critical utilities suite in the marketplace today. Oracle integrates industry-specific customer care and billing, network management, work and asset management, mobile workforce management and meter data management applications with the capabilities of Oracle’s industry-leading enterprise applications, business intelligence tools, middleware and database technologies. We enable customers to adapt more nimbly to market deregulation, help them meet ever-evolving customer demands, enhance operational excellence and deliver on commitments to environmental conservation.

Oracle Utilities’ flexible, standards-based applications and architecture help utilities innovate. They lead toward coherent technology solutions. Oracle helps utilities keep pace with change without losing focus on the energy, water and waste services fundamental to local and global human and economic welfare.

Only Oracle powers the information-driven enterprise by offering a complete, integrated solution for every segment of the utilities industry – from generation and transmission to distribution and retail services. And when you run Oracle applications on Oracle technology, you speed implementation, optimize performance and maximize ROI.

Utilities today need a suite of software applications and technology to serve as a robust springboard from which to meet the challenges of the future.

Oracle offers that suite.

Oracle Utilities solutions enable you to meet tomorrow’s customer needs while addressing the varying concerns of financial stakeholders, employees, communities and governments. We work with you to address emerging issues and changing business conditions. We help you to evolve to take advantage of new technology directions and to incorporate innovation into ongoing activity.

Partnering with Oracle helps you to future-proof your utility.

CONTACT US

For more information, call +1.800.275.4775 to speak to an Oracle representative, or visit oracle.com/industries/utilities.

Copyright © 2008, Oracle. All rights reserved. Published in the U.S.A. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.

Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

About Alcatel-Lucent

Alcatel-Lucent’s vision is to enrich people’s lives by transforming the way the world communicates. Alcatel-Lucent provides solutions that enable service providers, enterprises and governments worldwide to deliver voice, data and video communication services to end users. As a leader in carrier and enterprise IP technologies; fixed, mobile and converged broadband access; applications and services, Alcatel-Lucent offers the end-to-end solutions that enable compelling communications services for people at work, at home and on the move.

With 77,000 employees and operations in more than 130 countries, Alcatel-Lucent is a local partner with global reach. The company has the most experienced global services team in the industry and includes Bell labs, one of the largest research, technology and innovation organizations focused on communications. Alcatel-Lucent achieved adjusted revenues of €17.8 billion in 2007, and is incorporated in France, with executive offices located in Paris.

YOUR ENERGY AND UTILITY PARTNER

Alcatel-Lucent offers comprehensive capabilities that combine carrier-grade communications technology and expertise with utility industry- specific knowledge. Alcatel-Lucent’s IP transformation expertise and utility market-specific knowledge have led to the development of turnkey communications solutions designed for the energy and utility market. Alcatel-Lucent has extensive experience in:

  • Transforming and renewing network technologies;
  • designing and implementing SmartGrid initiatives;
  • Meeting NERC CIP compliance and security requirements;
  • Working in live power generation, transmission and distribution environments;
  • Implementing and managing complex mission-critical communications projects;
  • developing best-in-class partnerships with organizations like CURRENT Communications, Ambient, BelAir networks, Alvarion and others in the utility industry.

Working with Alcatel-Lucent enables energy and utility companies to realize the increased reliability and greater efficiency of next-generation communications technology, providing a platform for – and minimizing the risks associated with – moving to SmartGrid solutions. And Alcatel-Lucent helps energy and utility companies achieve compliance with regulatory requirements and reduce operational expenses while maintaining the security, integrity and high availability of their power infrastructure and services.

ALCATEL-LUCENT IP MPLS SOLUTION FOR THE NEXT-GENERATION UTILITY NETWORK

Utility companies are experienced at building and operating reliable and effective networks to ensure the delivery of essential information and maintain fl awless service delivery. The Alcatel-Lucent IP/MPLS solution can enable utility operators to extend and enhance their networks with new technologies like IP, Ethernet and MPLS. These new technologies will enable the utility to optimize its network to reduce both capital expenditures and operating expenses without jeopardizing reliability. Advanced technologies also allow the introduction of new applications that can improve operational and workflow efficiency within the utility. Alcatel-Lucent leverages cutting-edge technologies along with the company’s broad and deep experience in the utility industry to help utility operators build better, next-generation networks with IP/MPLS.

THE ALCATEL-LUCENT ADVANTAGE

Alcatel-Lucent has years of experience in the development of IP, MPLS and Ethernet technologies. The Alcatel-Lucent IP/MPLS solution offers utility operators the flexibility, scale and feature sets required for mission-critical operation. With the broadest portfolio of products and services in the telecommunications industry, Alcatel-Lucent has the unparalleled ability to design and deliver end-to-end solutions that drive next-generation communications networks.

Meeting Future Utility Operating Challenges With a Smart Grid

The classical school of utility operations prescribes four priorities, ranked in the following descending order: safety, reliability, customer service and profit. Although it’s not hard to engage any number of industry insiders in an argument over whether profit in the classical model has recently switched places with customer service (and/or whether it should), most people accept that safety and reliability still reign supreme when it comes to operating a utility. This is true whether one takes a policy-, economic-, utility- or customer-oriented perspective.

Over many decades the utility industry has established a remarkably consistent pattern of power delivery based on the above-described priorities. Large, centralized generation facilities produce electricity from various sources interconnected via a networked transmission system feeding a predominantly radial distribution system. This classical power distribution system supports a predictable demand pattern that utilities can typically manage by using analytics such as similar day load forecasting. Moreover, future demand is also predictable, since average loads have been growing consistently by just a few percentage points annually, year in and year out.

To support this power delivery model, utilities also employ remarkably consistent system design and operational processes. Although any given utility might employ slightly different processes and procedures at varying degrees of efficiency and effectiveness – or deploy operating assets with slightly different design specifications – the underlying elements are generally consistent from one utility to another. They are engineered to either fail safe (safety) and/or not to fail at all (reliability) based on long-term operating patterns.

So why implement a smart grid? After all, the classical method of managing supply and demand has worked reasonably well over the decades. The system is safe and reliable, and most utilities are very profitable even in economic downtimes. However, a smart grid has three interrelated attributes – transparency, conditionality and kinematics – that together radically improve the “situational awareness” of the real-time state of the grid for both utilities and customers.

With this situational awareness comes the high system-state observability (transparency) that drives conditional management (conditionality) of the grid. All of this will ultimately support future power delivery patterns, which will be much more complex and difficult to predict and manage because demand and supply will fluctuate much more radically than at present (kinematics).

TRANSPARENCY

Price transparency is the foundation on which deregulated and competitive markets are built. However, until now price transparency has been limited primarily to wholesale transmission and generation domains. Indeed, the lack of price transparency at the point of distribution (that is, at retail) is a key reason deregulation has stalled in the United States.

Price transparency is of course only one aspect of the issue. Utilities must also synchronize usage transparency with price transparency based on time. That is, the value of knowing real-time pricing is diminished if a customer cannot also see their real-time usage and make energy usage behavior changes in relation to the real-time price signals.

From the utility’s perspective, usage transparency is limited. That’s because the distribution elements of most utility operations are largely opaque to operators. Once beyond the substation, usage disruptions are primarily identified by induction from fault conditions and usage patterns recorded a month after the disruption occurred via meter readings. For example, a distribution circuit may be substantially overloaded, but in most cases the utility won’t know until it fails. And when a failure does occur, utilities still depend on manual processes to determine the precise location and cause of the fault. The customer loads or network conditions that precipitated the failure can only be analyzed well after the event.

A smart grid significantly improves the level of visibility into the distribution grid. Smart meters, line sensors and the embedded processing that takes place within system assets such as switches and reclosers all provide a stream of real-time and near real-time data to the utility about the current operational state of the grid. The result: a dramatic improvement in utilities’ awareness of the state of the distribution grid.

CONDITIONALITY

As is the case with transparency, the consumer’s perspective of conditionality is more mature than the utility’s perspective. For example, the idea of the smart building is all about implementing a mini premise-side smart grid within the customer location and installing simple devices such as motion detectors that turn lights on or off in a room. Commercial energy management systems use even more sophisticated ways of optimizing the lighting, heating and other environmental parameters of a work or living space.

From the utility’s perspective, however, conditionality is much less advanced. In today’s operating world, most maintenance or repair activities take place either too late or too soon. When utilities wait until something in the infrastructure fails, it’s too late. If the grid is inspected based on some set time schedule irrespective of its condition, it’s too soon. Utilities thus fall into a pattern of either fault- or usage-based maintenance.

The alternative – condition-based maintenance – is already being used in many industries. The difference in the utilities industry is that outside of energy generation and transmission activities, there’s little data on the ongoing real-time condition of most of the assets a utility utilizes to provide its customers with service.

The chief benefit of conditionality is that it allows utilities to optimize asset utilization in both over- and under-use situations (Figure 1).

Conditionality also opens up opportunities for utilities to fully automate their utility distribution operations. Not only will this enable them to provide more reliable service to customers, it reduces the need for human intervention and thus dramatically cuts labor costs. In addition, automation can be used to mitigate the utilities industry’s looming problem of an aging workforce. For these and other reasons, conditionality is one of the most important contributions the smart grid will make to the industry.

KINEMATICS

In classical physics, kinematics studies how the position of an object changes with time. In today’s utility operations, neither load nor supply is particularly kinematical because changes to either take a long time and occur slowly (in normal operating conditions) and both can be reliably predicted.

Many industry observers, however, believe that this scenario is about to change dramatically. One thing that’s expected to drive this change is “distributed generation.” Under this scenario, instead of relying on large centralized generation, the industry will see significant growth in distribution-side generation technologies. Unlike today, much of this supply will not be centrally dispatched or under direct central control. The resulting energy supply will be much more complex to predict and manage. To the futurist this may seem like an exciting prospect, but to a grid operator or a utility, this represents a control and management nightmare, because it directly challenges the operational priorities of safety and reliability.

Hybrid and electric automobiles will also substantially alter the pattern of supply and load on the current grid. According to some predictions, electric automobiles will account for upwards of 20 percent of the automobile fleet in the United States in the coming decades. This means that millions of automobiles charging each night could increase customer load profiles over time by upwards of 30 to 50 percent. When coupled with even more futuristic ideas such as “vehicle to grid,” you end up with energy consumption scenarios that no one imagined when the grid was built.

CONCLUSION

The three attributes of the smart grid – transparency, conditionality and kinematics – are interrelated. Transparency provides situational awareness, which enables conditionality. And conditionality likewise is a requirement for managing the kinematic supply and load patterns of the future. But more importantly, the smart grid is the only way the classical operating priorities of the system can be sustained – or enhanced – given the upcoming expected changes to the industry.

Making Change Work: Why Utilities Need Change Management

Many times organizations are reluctant to engage change management programs, plans and teams. More often, change management programs are launched too late in the project process, are only moderately funded or are absorbed within the team as part-time responsibilities – all of which we’ve seen happen time and again in the utility industry.

“Making Change Work,” an IBM study done in collaboration with the Center of Evaluation and Methods at Bonn University, analyzed the factors for successful implementation of change. The scope of this study, released in 2007, is now being expanded because the project management and change management professions, formerly aligned, are now at a turning point of differentiation. The reason is simple: too many projects fail to consider both components as critical to success – and therefore lack insight into the day-today impact of a change on members of the organization.

Despite this, many organizations have been reluctant to implement change management programs, plans and teams. And when they have put such programs in place, the programs tend to be launched too late in the project process, are inadequately funded or are perceived as part-time tasks that can be assigned to members of the project management team.

WHAT IS CHANGE MANAGEMENT?

Change management is a structured approach to business transformation that manages the transition from a current state to a desired future state. Far from being static or rigid, change management is an ever-evolving program that varies with the needs of the organization. Effective change management involves people and provides open communication.

Change management is as important as project management. However, whereas project management is a tactical activity, change management represents a strategic initiative. To understand the difference, consider the following

  • Change management is the process of driving corporate strategy by identifying, addressing and managing barriers to change across the organization or enterprise.
  • Project management is the process of implementing the tools needed to enable or mobilize the corporate strategy.

Change management is an ongoing process that works in close concert with project management. At any given time at least one phase of change management should be occurring. More likely, multiple phases will be taking place across various initiatives.

A change management program can be tailored to manage the needs of the organizational culture and relationships. The program must close the gaps among workforce, project team and sponsor leadership during all phases of all projects. It does this by:

  • Ensuring proper alignment of the organization with new technology and process requirements;
  • Preparing people for new processes and technology through training and communication;
  • Identifying and addressing human resource implications such as job definitions, union negotiations and performance measures;
  • Managing the reaction of both individuals and the entire organization to change; and
  • Providing the right level of support for ongoing implementation success.

The three fundamental activities of a change management program are leading, communicating and engaging. These three activities should span the project life cycle to maintain both awareness of the change and its momentum (Figure 1).

KEY ELEMENTS OF A CHANGE PROGRAM

There are three best practice elements that make the difference between successful projects and less successful projects: [1]

Organizational awareness for the challenges inherent in any change. This involves the following:

  • Getting a real understanding of – and leadership buy-in to – the stakeholders and culture;
  • Recognizing the interdependence of strategy and execution;
  • Ensuring an integrated strategy approach linking business strategy, operations, organization design and change and technology strategy; and
  • Educating leadership on change requirements and commitment.

Consistent use of formal methods for change management. This should include:

  • Covering the complete life cycle – from definition to deployment to post-implementation optimization;
  • Allowing for easy customization and flexibility through a modular design;
  • Incorporating change management and value realization components into each phase to increase the likelihood of success; and
  • Providing a published plan with ongoing accountability and sponsorship as well as continuous improvement.

A specified share of the project budget that is invested in change management. This should involve:

  • Investing in change linked to project success. Projects that invest more than 10 percent of the project budget have an average of 45 percent success (Figure 2). [2]
  • Assigning the right resources to support change management early on and maintaining the required support. This also limits the adverse impacts of change on an organization’s productivity (Figure 3). [3]

WHY DO UTILITIES NEED CHANGE MANAGEMENT?

Utilities today face a unique set of challenges. For starters, they’re simultaneously dealing with aging infrastructures and aging workforces. In addition, there are market pressures to improve performance, become more “green” and mitigate rising energy costs. To address these realities, many utilities are seeking mergers and acquisition (M&A) opportunities as well as implementing new technologies.

The cost cutting of the past decade combined with M&As has left utilities with gaps in workforce experience as well as budget challenges. Yet utilities are facing major business disruptions going into the next decade and beyond. To cope with these disruptions, companies are implementing new technologies such as the intelligent grid, advanced metering infrastructure (AMI), meter data management (MDM), enterprise asset management (EAM) and work management systems (WMS’s). It’s not uncommon for utilities to be implementing multiple new systems simultaneously that affect the day-to-day activities of people throughout the organization, from frontline workers to senior managers.

A change management program can address a number of challenges specific to the utilities industry.

CULTURAL CLIMATE: ‘BUT WE’RE DIFFERENT’

A utility is a utility is a utility. But a deeper look into individual businesses reveals nuances in their relationships with both internal and external stakeholders that are unique to each company. A change management team must intimately understand these relationships. For example, externally how is the utility perceived by regulators, customers, the community and even analysts? As for internal relationships, how do various operating divisions relate and work together? Some operating divisions work well together on project teams and respect each other and their differences; others do not.

There may be cultural differences, but work is work. Only change management can address these relationships. Knowing the utility’s cultural climate and relationships will help shape each phase of the change management program, and allow change management professionals to customize a project or system implementation to fit a company’s culture.

REGULATORY LANDSCAPE

With M&As and increasing market pressures across the United States, the regulatory landscape confronting utilities is becoming more variable. We’ve seen several types of regulatory-related challenges.

Regulatory pressure. Whether regulators mandate or simply encourage new technology implementations can make a significant difference in how stakeholders in a project behave. In general, there’s more resistance to a new technology when it’s required versus voluntarily implemented. Change management can help work through participant behaviors and mitigate obstacles so that project work can continue as planned.

Multiple regulatory jurisdictions. Many utilities with recently expanded footprints following M&As now have to manage requests from and expectations of multiple regulatory commissions. Often these commissions have different mandates. Change management initiatives are needed to work through the complexity of expectations, manage multiple regulatory relationships and drive utilities toward a unified corporate strategy.

Regulatory evolution. Just as markets evolve, so do regulatory influences and mandates. Often regulators will issue orders that can be interpreted in many ways. They may even do this to get information in the form of reactions from their various constituents. Whatever the reason, the reality is that utilities are managing an ever-changing portfolio of regulations. Change management can better prepare utilities for this constant change.

OPERATIONS MATURITY

When new systems and technologies being implemented encompass multiple operating divisions, it can be difficult for stakeholders to agree on operating standards or processes. Project team members representing the various operating regions can resist compromise for fear of losing control. This often occurs when utilities are attempting to integrate systems across operating regions following an acquisition.

Change management helps ensure that various constituents – for example, the regional operating divisions – are prepared for eminent business transformation. In large organizations, this preparation period can take a year or more. But for organizations to realize the benefits of new systems and technology implementations, they must be ready to receive the benefits. Readiness and preparedness are largely the responsibilities of the change management team.

ORGANIZATIONAL COHESIVENESS

The notion of organizational cohesiveness is that across the organization all constituents are equally committed to the business transformation initiative and have the same understanding of the overarching corporate strategy while also performing their individual roles and responsibilities.

Senior executives must align their visions and common commitment to change. After all, they set the tone for change through their respective organizations. If they are not in sync with each other, their organizations become silos, and business processes are less likely to be fluid across organizational boundaries. Frontline managers and associates must, in turn, be engaged and enthusiastic about the transformations to come.

Organizational cohesiveness is especially critical during large systems implementations involving utility field operations. Leaders at multiple locations must be ready to communicate and support change – and this support must be visible to the workforce. Utilities must understand this requirement at the beginning of a project to make change manageable, realistic and personal enough to sustain momentum. All too often, we’ve heard team members comment, “We had a lot of leadership at the project kickoff, but we really haven’t seen leadership at any of our activities or work locations since then. The project team tells us what to do.”

Moreover, leadership – when removed from the project – usually will not admit that they’re in the dark about what’s going on. Yet their lack of involvement will not escape the attention of frontline employees. Once the supervisor is perceived as lacking information – and therefore power – it’s all over. Improving customer service and quality, cutting costs and adopting new technology-merging operations all require changing employees. [4]

For utilities, the concept of organizational cohesiveness is especially important because just as much technology “lives” outside IT as inside. Yet the engineers who use this non-IT-controlled technology – what Gartner calls “operations technology” – are usually disconnected from the IT world in terms of both practical planning and execution. However, these worlds must act as one for a company to be truly agile. [5]

Change management methods and tools ensure that organization cohesiveness exists through project implementation and beyond.

UNION ENGAGEMENT

Successful change occurs with a sustained partnership among union representatives throughout the project life cycle. Project leadership and union leadership must work together and partner to implement change. Union representation should be on the project team. Representatives can be involved in process reviews, testing and training, or asked to serve as change champions. In addition, communication is critical throughout all phases of a project. Frontline employees must see real evidence of how this change will benefit them. Change is personal: everyone wants to know how his or her job will be impacted.

There should also be union representation in training activities, since workers tend to be more receptive to peer-to-peer support. Utilities should, for example, engage union change champions to help co-workers during training and to be site “go to” representatives. Utilities should also provide advance training and recognize all who participate in it.

Union representatives should also participate in design and/or testing, since they will be able to pinpoint issues that will impact routine daily tasks. It could be something as simple as changing screen labels per their recommendation to increase user understanding.

More than one union workforce may be involved in a project. Location cultures that exist in large service territories or that have resulted from mergers may try to isolate themselves from the project team and resist change. Utilities should assemble a team from various work groups and then do the following to address the history and differences in the workforce:

  • Request ongoing union participation throughout the life of the project.
  • Include union roles as part of the project charter and define these roles with union leadership.
  • Provide a kickoff overview to union leadership.
  • Include union representation in work process development with balanced representation from various areas. Union employees know the job and can quickly identify the pros and cons of work tasks. A structured facilitation process and issue resolution process is required.
  • Assign a corporate human resource or labor relations role to review processes that impact the union workforce.
  • Develop communication campaigns that address union concerns, such as conducting face-to-face presentations at employing locations and educating union leaders prior to each change rollout.
  • Involve union representatives in training and user support.

Change management is necessary to sort through the relationships of multiple union workforces so that projects and systems can be implemented.

AN AGING WORKFORCE

A successful change management program will help mitigate the aging workforce challenges utilities will be facing for many years to come.

WHAT TO EXPECT FROM A SUCCESSFUL CHANGE MANAGEMENT PROGRAM

The result of a successful change management program is a flexible organization that’s responsive to customer needs, regulatory mandates and market pressures, and readily embraces new technologies and systems. A change-ready organization anticipates, expects and is increasingly comfortable with change and exhibits the following characteristics:

  • The organization is aligned.
  • The leaders are committed.
  • Business processes are developed and defined across all operational units.
  • Associates at all levels have received communications and have continued access to resources.

Facing major business transformations and unique industry challenges, utilities cannot afford not to engage change management programs. This skill set is just as critical as any other role in your organization. Change is a cost. Change should be part of the project budget.

Change is an ongoing, long-term investment. Good change management designed specifically for your culture and challenges minimizes change’s adverse effect on daily productivity and helps you reach and sustain project goals.

ENDNOTES

  1. “Making Change Work” (an IBM study), Center of Evaluation and Methods, Bonn University, 2007; excerpts from “IBM Integrated Strategy and Change Methodology,” 2007.
  2. “Making Change Work,” Center of Evaluation and Methods, Bonn University, 2007.
  3. Ibid.
  4. T.J. Larkin and Sandar Larkin, “Communicating Change: Winning Employee Support for New Business Goals,” McGraw Hill, 1994, p. 31.
  5. K. Steenstrup, B. Williams, Z. Sumic, C. Moore; “Gartner’s Energy and Utilities Summit: Agility on Both Sides of the Divide”; Gartner Industry Research ID Number G00145388; Jan. 30, 2007; p. 2.
  6. P. R. Bruffy and J. Juliano, “Addressing the Aging Utility Workforce Challenge: ACT NOW,” Montgomery Research 2006 journal.

The Distributed Utility of the (Near) Future

The next 10 to 15 years will see major changes – what future historians might even call upheavals – in the way electricity is distributed to businesses and households throughout the United States. The exact nature of these changes and their long-term effect on the security and economic well-being of this country are difficult to predict. However, a consensus already exists among those working within the industry – as well as with politicians and regulators, economists, environmentalists and (increasingly) the general public – that these fundamental changes are inevitable.

This need for change is in evidence everywhere across the country. The February 26, 2008, temporary blackout in Florida served as just another warning that the existing paradigm is failing. Although at the time of this writing, the exact cause of that blackout had not yet been identified, the incident serves as a reminder that the nationwide interconnected transmission and distribution grid is no longer stable. To wit: disturbances in Florida on that Tuesday were noted and measured as far away as New York.

A FAILING MODEL

The existing paradigm of nationwide grid interconnection brought about primarily by the deregulation movement of the late 1990s emphasizes that electricity be generated at large plants in various parts of the country and then distributed nationwide. There are two reasons this paradigm is failing. First, the transmission and distribution system wasn’t designed to serve as a nationwide grid; it is aged and only marginally stable. Second, political, regulatory and social forces are making the construction of large generating plants increasingly difficult, expensive and eventually unfeasible.

The previous historic paradigm made each utility primarily responsible for generation, transmission and distribution in its own service territory; this had the benefit of localizing disturbances and fragmenting responsibility and expense. With loose interconnections to other states and regions, a disturbance in one area or a lack of resources in a different one had considerably less effect on other parts of the country, or even other parts of service territories.

For better or worse, we now have a nationwide interconnected grid – albeit one that was neither designed for the purpose nor serves it adequately. Although the existing grid can be improved, the expense would be massive, and probably cost prohibitive. Knowledgeable industry insiders, in fact, calculate that it would cost more than the current market value of all U.S. utilities combined to modernize the nationwide grid and replace its large generating facilities over the next 30 years. Obviously, the paradigm is going to have to change.

While the need for dramatic change is clear, though, what’s less clear is the direction that change should take. And time is running short: North American Electric Reliability Corp. (NERC) projects serious shortages in the nation’s electric supply by 2016. Utilities recognize the need; they just aren’t sure which way to jump first.

With a number of tipping points already reached (and the changes they describe continuing to accelerate), it’s easy to envision the scenario that’s about to unfold. Consider the following:

  • The United States stands to face a serious supply/demand disconnect within 10 years. Unless something dramatic happens, there simply won’t be nearly enough electricity to go around. Already, some parts of the country are feeling the pinch. And regulatory and legislative uncertainty (especially around global warming and environmental issues) makes it difficult for utilities to know what to do. Building new generation of any type other than “green energy” is extremely difficult, and green energy – which currently meets less than 3 percent of U.S. supply needs – cannot close the growing gap between supply and demand being projected by NERC. Specifically, green energy will not be able to replace the 50 percent of U.S. electricity currently supplied by coal within that 10-year time frame.
  • Fuel prices continue to escalate, and the reliability of the fuel supply continues to decline. In addition, increasing restrictions are being placed on fuel selection, especially coal.
  • A generation of utility workers is nearing retirement, and finding adequate replacements among the younger generation is proving increasingly difficult.
  • It’s extremely difficult to site new transmission – needed to deal with supply-and-demand issues. Even new Federal Energy Regulatory Commission (FERC) authority to authorize corridors is being met with virulent opposition.

SMART GRID NO SILVER BULLET

Distributed generation – including many smaller supply sources to replace fewer large ones – and “smart grids” (designed to enhance delivery efficiency and effectiveness) have been posited as solutions. However, although such solutions offer potential, they’re far from being in place today. At best, smart grids and smarter consumers are only part of the answer. They will help reduce demand (though probably not enough to make up the generation shortfall), and they’re both still evolving as concepts. While most utility executives recognize the problems, they continue to be uncertain about the solutions and have a considerable distance to go before implementing any of them, according to recent Sierra Energy Group surveys.

According to these surveys, more than 90 percent of utility executives now feel that the intelligent utility enterprise and smart grid (IUE/SG) – that is, the distributed utility – represents an inevitable part of their future (Figure 1). This finding was true of all utility types supplying electricity.

Although utility executives understand the problem and the IUE/SG approach to solving part of it, they’re behind in planning on exactly how to implement the various pieces. That “planning lag” for the vision can be seen in Figure 2.

At least some fault for the planning lag can be attributed to forces outside the utilities. While politicians and regulators have been emphasizing conservation and demand response, they’ve failed to produce guidelines for how this will work. And although a number of states have established mandatory green power percentages, Congress failed to do the same in an Energy Policy Act (EPACT) adopted in December 2007. While the EPACT of 2005 “urged” regulators to “urge” utilities to install smart meters, it didn’t make their installation a requirement, and thus regulators have moved at different speeds in different parts of the country on this urging.

Although we’ve entered a new era, utilities remain burdened with the internal problems caused by the “silo mentality” left over from generations of tight regulatory control. Today, real-time data is often still jealously guarded in engineering and operations silos. However, a key component in the development of intelligent utilities will be pushing both real-time and back-office data onto dashboards so that executives can make real-time decisions.

Getting from where utilities were (and in many respects still are) in the last century to where they need to be by 2018 isn’t a problem that can be solved overnight. And, in fact, utilities have historically evolved slowly. Today’s executives know that technological evolution in the utility industry needs to accelerate rapidly, but they’re uncertain where to start. For example, should you install an advanced metering structure (AMI) as rapidly as possible? Do you emphasize automating the grid and adding artificial intelligence? Do you continue to build out mobile systems to push data (and more detailed, simpler instructions) to field crews who soon will be much younger and less experienced? Do you rush into home automation? Do you build windmills and solar farms? Utilities have neither the financial nor human resources to do everything at once.

THE DEMAND FOR AMI

Its name implies that a smart grid will become increasingly self-operating and self-healing – and indeed much of the technology for this type of intelligent network grid has been developed. It has not, however, been widely deployed. Utilities, in fact, have been working on basic distribution automation (DA) – the capability to operate the grid remotely – for a number of years.

As mentioned earlier, most theorists – not to mention politicians and regulators – feel that utilities will have to enable AMI and demand response/home automation if they’re to encourage energy conservation in an impending era of short supplies. While advanced meter reading (AMR) has been around for a long time, its penetration remains relatively small in the utilities industry – especially in the case of advanced AMI meters for enabling demand response: According to figures released by Sierra Energy Group and Newton-Evans Research Co., only 8 to 10 percent of this country’s utilities were using AMI meters by 2008.

That said, the push for AMI on the part of both EPACT 2005 and regulators is having an obvious effect. Numerous utilities (including companies like Entergy and Southern Co.) that previously refused to consider AMR now have AMI projects in progress. However, even though an anticipated building boom in AMI is finally underway, there’s still much to be done to enable the demand response that will be desperately needed by 2016.

THE AUTOMATED HOME

The final area we can expect the IUE/SG concept to envelope comes at the residential level. With residential home automation in place, utilities will be able to control usage directly – by adjusting thermostats or compressor cycling, or via other techniques. Again, the technology for this has existed for some time; however, there are very few installations nationwide. A number of experiments were conducted with home automation in the early- to mid-1990s, with some subdivisions even being built under the mantra of “demand-side management.”

Demand response – the term currently in vogue with politicians – may be considered more politically correct, but the net result is the same. Home automation will enable regulators, through utilities, to ration usage. Although politicians avoid using the word rationing, if global warming concerns continue to seriously impact utilities’ ability to access adequate generation, rationing will be the result – making direct load control at the residential level one of the most problematic issues in the distributed utility paradigm of the future. Are large numbers of Americans going to acquiesce calmly to their electrical supply being rationed? No one knows, but there seem to be few options.

GREEN PRESSURE AND THE TIPPING POINT

While much legitimate scientific debate remains about whether global warming is real and, if so, whether it’s a naturally occurring or man-made phenomenon (arising primarily from carbon dioxide emissions), that debate is diminishing among politicians at every level. The majority of politicians, in fact, have bought into the notion that carbon emissions from many sources – primarily the generation of electricity by burning coal – are the culprit.

Thus, despite continued scientific debate, the political tipping point has been reached, and U.S. politicians are making moves to force this country’s utility industry to adapt to a situation that may or may not be real. Whether or not it makes logical or economic sense, utilities are under increasing pressure to adopt the Intelligent Utility/Smart Grid/Home Automation/Demand Response model – a model that includes many small generation points to make up for fewer large plants. This political tipping point is also shutting down more proposed generation projects each month, adding to the likely shortage. Since 2000, approximately 50 percent of all proposed new coal-fired generation plants have been canceled, according to energy-industry adviser Wood McKenzie (Gas and Power Service Insight, February 2008).

In the distant future, as technology continues to advance, electric generation in the United States will likely include a mix of energy sources, many of them distributed and green. however, there’s no way that in the next 10 years – the window of greatest concern in the NERC projections on the generation and reliability side – green energy will be ready and available in sufficient quantities to forestall a significant electricity shortfall. Nuclear energy represents the only truly viable solution; however, ongoing opposition to this form of power generation makes it unlikely that sufficient nuclear energy will be available within this period. The already-lengthy licensing process (though streamlined somewhat of late by the Nuclear Regulatory Commission) is exacerbated by lawsuits and opposition every step of the way. In addition, most of the necessary engineering and manufacturing processes have been lost in the United States over the last 30 years – the time elapsed since the last U.S. nuclear last plant was built – making it necessary to reacquire that knowledge from abroad.

The NERC Reliability Report of Oct. 15, 2007, points strongly toward a significant shortfall of electricity within approximately 10 years – a situation that could lead to rolling blackouts and brownouts in parts of the country that have never experienced them before. It could also lead to mandatory “demand response” – in other words, rationing – at the residential level. This situation, however, is not inevitable: technology exists to prevent it (including nuclear and cleaner coal now as well as a gradual development of solar, biomass, sequestration and so on over time, with wind for peaking). But thanks to concern over global warming and other issues raised by the environmental community, many politicians and regulators have become convinced otherwise. And thus, they won’t consider a different tack to solving the problem until there’s a public outcry – and that’s not likely to occur for another 10 years, at which point the national economy and utilities may already have suffered tremendous (possibly irreparable) harm.

WHAT CAN BE DONE?

The problem the utilities industry faces today is neither economic nor technological – it’s ideological. The global warming alarmists are shutting down coal before sufficient economically viable replacements (with the possible exception of nuclear) are in place. And the rest of the options are tied up in court. (For example, the United States needs 45 liquefied natural gas plants to be converted to gas – a costly fuel with iffy reliability – but only five have been built; the rest are tied up in court.) As long as it’s possible to tie up nuclear applications for five to 10 years and shut down “clean coal” plants through the political process, the U.S. utility industry is left with few options.

So what are utilities to do? They must get much smarter (IUE/Sg), and they must prepare for rationing (AMI/demand response). As seen in SEG studies, utilities still have a ways to go in these areas, but at least this is a strategy that can (for the most part) be put in place within 10 to 15 years. The technology for IUE/Sg already exists; it’s relatively inexpensive (compared with large-scale green energy development and nuclear plant construction); and utilities can employ it with relatively little regulatory oversight. In fact, regulators are actually encouraging it.

For these reasons, IUE/SG represents a major bridge to a more stable future. Even if today’s apocalyptic scenarios fail to develop – that is, global warming is debunked, or new generation sources develop much more rapidly than expected – intelligent utilities with smart grids will remain a good idea. The paradigm is shifting as we watch – but will that shift be completed in time to prevent major economic and social dislocation? Fasten your seatbelts: the next 10 to 15 years should be very interesting!