future of intelligent energy grids - energy insights

July 2006, Energy Insights #EI202543 Energy Insights: Energy Delivery Strategies: Looking Ahead

Moving Beyond the Hype: The Future of the Intel l igent Grid

E n e r g y D e l i v e r y S t r a t e g i e s

LOOKING AHEAD #EI202543

Rick Nicholson H. Chr is t ine Richards

E N E R G Y I N S I GH T S O P I N I O N

This Energy Insights report studies the implications of intelligent grid technologies for utilities. First, the report covers the drivers that brought the intelligent grid to where it is today, the current marketplace, factors influencing the adoption of intelligent grid technologies, and future challenges for the intelligent grid. Then, to help readers understand how utilities should respond to these issues, Energy Insights provides intelligent grid actions for companies to consider. Although many intelligent grid technologies are still in the testing stages, utilities can prepare themselves now to better handle more advanced intelligent grid technologies that will likely come onto the market soon by:

● Allowing for upgrades: Because of the long life cycle of transmission and distribution (T&D) assets, utilities should provide options for upgrading components to support intelligent grid technologies.

● Focusing on interoperability: Utilities should focus on increasing the integration abilities of their information technology.

● Targeting "quick wins" first, but remembering scalability: To minimize risk and gain more confidence in intelligent grid technologies, utilities should target select areas � such as a business process bottleneck � for initial deployment to achieve quick wins. In targeting these smaller areas, though, utilities should ensure the intelligent grid technologies offer the ability to expand.

● Informing themselves and directing technology: With so many intelligent grid consortia, utilities should take the time to participate in such groups not only to better understand the direction of the intelligent grid technologies, but also to guide their direction.

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#EI202543 ©2006 Energy Insights, an IDC Company

T A B L E O F C O N T E N T S

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In This Report 1 Brief Description of the Solution ............................................................................................................... 1 Situat ion Overview 4 Introduction............................................................................................................................................... 4 A Brief History........................................................................................................................................... 5 Current Environment................................................................................................................................. 7 Factors Affecting Adoption........................................................................................................................ 10 Future Outlook 12 Remaining Challenges.............................................................................................................................. 12 Future Adoption Patterns.......................................................................................................................... 13 Potential Pitfalls ........................................................................................................................................ 15 Essential Guidance 16 Actions to Consider................................................................................................................................... 16 Learn More 17 Related Research..................................................................................................................................... 17

©2006 Energy Insights, an IDC Company #EI202543

L I S T O F T A B L E S

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1 Current Intelligent Grid Partnerships ............................................................................................ 8


L I S T O F F I G U R E S

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1 Today's Electric Grid .................................................................................................................... 3

2 How the Intelligent Grid Changes Today's Electric Grid............................................................... 4

3 U.S. Electricity Demand, 2005�2030 ........................................................................................... 6

4 Internal and External Pressures on a Utility When Evaluating Intelligent Grid Technologies ....... 14

©2006 Energy Insights, an IDC Company #EI202543 Page 1

I N T H I S R E P OR T

B r i e f D e s c r i p t i o n o f t h e S o l u t i o n

Defining the Intelligent Grid

Smart grid, intelligent network, Grid 2030. Many terms are floating around today, but they all describe an electric T&D network that � through the use of information technology � is "smart" enough to predict and adjust to network changes. Therefore, an intelligent grid could recognize a potential problem � such as an abnormal operating condition � and communicate this problem to a decision maker (i.e., computer) that would automatically work to correct the problem. A corrective action may include automatically dispatching the nearest available field crew to the problem site or automatically reconfiguring the switched state of the network.

Components of Intel l igent Grid

Several components and technologies contribute to the foundation of the intelligent grid:

● Remote asset monitoring and measurement including sensors, smart meters, and intelligent electronic devices (IEDs)

● Real-time data transmission including fiber-optic networks, wireless networks, and broadband over power line (BPL)

● Real-time decision making including modeling, simulation, visualization, and analytics

● Control and execution including SCADA, distributed energy resources, and demand response programs

Technologies That Enable These Components

● Smart metering: This two-way communication system uses a meter as both the sender of time-series meter data and the receptor of control signals. Smart metering allows utilities to track where power is consumed, understand demand requirements, and enable real-time pricing. Another term that is used to describe this sort of system is automated metering infrastructure (AMI).

● Common platform/architecture: A utility's ability to integrate various applications and technologies across the company is crucial for a successful intelligent grid. A common platform allows for easier integration.

● IP-enabled controls and standard communication infrastructure: Along the same line as a common platform, by


using standard communication paths, utilities can better integrate the many intelligent grid components including applications, sensors, and different parts of the company. Such communication structures may include BPL.

● Mobile workforce management: These applications and technologies automate field crew management. Mobile workforce management can stream asset and power flow information to field crews, allowing the crews react quickly to problems and perform maintenance effectively.

● Sensors to monitor and control remote assets: Sensors on remote assets can report information back to the control room. These sensors can detect, for example, when a remote asset begins to fail or an atypical event takes place.

How the Intelligent Grid Changes T&D

These intelligent grid components and technologies have the potential to transform today's grid in four key ways (see Figures 1 and 2):

● Increased visibility into the grid: Control rooms today have a narrow view of the grid's condition � often limited to a view of just the transmission system and larger distribution assets such as substations. As the intelligent grid increases the number of sensors on the grid, however, utilities will be able to track many more grid components, such as meters and smaller substations. More data points mean more information that utilities can use to increase their visibility into the grid's operational condition.

● More automation in decision making: Today's grid often depends on people taking the limited information available about the grid and quickly reacting to problems. This requires people to first recognize a problem, decide whether to take action, and then determine how to best react. Yet this process may not move fast enough � as discussed below � and has the increased potential for human error. Through more automated decision making, the intelligent grid allows for quicker, more accurate responses to grid events.

● Improved reaction time to events: During the August 2003 Northeast Blackout, it took 9 seconds for the blackout to spread from Ohio to New York. Reactions to critical grid events such as this often need to take place in milliseconds, not minutes. Yet as discussed above, today's grid largely relies on people to make critical decisions about the grid based on limited information. Therefore, decisions will likely not be reached at the speed required to avoid major problems. As the intelligent grid begins to automate more decisions about the grid and provide more visibility


into grid components, utilities will be able to react faster to grid events and better avoid major problems.

● Greater ability to control demand: While utilities have historically been able to control the grid supply, they have limited abilities to control grid demand or consumer use. By employing end-user controls � such as grid-friendly appliances (GFAs) � or demand response programs, the intelligent grid allows end users and the grid to interact with one another. Ultimately, intelligent grid technologies will allow grid demand to change in response to grid events.

F I G U R E 1

T o d a y ' s E l e c t r i c G r i d

Crews manually scheduled

Only critical distribution assets visible

Control room technology only

displays information

Slower reactions to grid events

End-users and portions of distribution system not visibleGeneration/transmission

systems visible

Personnel determine

and respondto problems

Source: Energy Insights, 2006


F I G U R E 2

H o w t h e I n t e l l i g e n t G r i d C h a n g e s T o d a y ' s E l e c t r i c G r i d

Ability to controldemand

Crews automatically

scheduled

Personnel input as needed

More sensors along the grid

Automated decision-making

Faster reactions to grid events

Increased visibility into grid

Smart meters connect end-users and control room

Mobile workforce management for better connections


S I T U A TI O N O VE R VI E W

I n t r o d u c t i o n

With the recent flood of consortia, research, and pilot projects, the intelligent grid is finally beginning to move beyond its initial hype and into the marketplace. Many in the utility industry are greeting the concept of the intelligent grid with optimism, but there are still many uncertainties about the ultimate direction and feasibility of intelligent grid technologies.

First, to help readers better understand the direction of the intelligent grid, this report covers the drivers that brought the intelligent grid to where it is today, the current marketplace, factors influencing the adoption of intelligent grid technologies, and future challenges for the intelligent grid. Then, to demonstrate how utilities and technology vendors should respond to these issues, Energy Insights provides intelligent grid actions for companies to consider. This report focuses largely on North American utilities but highlights efforts from other regions as well.


A B r i e f H i s t o r y

Underlying Drivers of the Intelligent Grid

No single driver pushed the intelligent grid to where it is today. The culmination of many different issues has influenced its development, including:

● Aging assets: With much of today's T&D infrastructure installed in the 1950s, 1960s, and 1970s, many grid components have reached the limits of their useful life. Utilities have long deferred T&D upgrades in favor of investments that provide a better ROI � such as generation development � but many utilities cannot further postpone T&D investments. However, utilities cannot afford to replace all of their T&D infrastructure. Using intelligent grid concepts, however, utilities could potentially better leverage their T&D investments by using technology to compensate for the shortfalls of aging infrastructure and determine which assets truly need replacement.

● The inability to meet demand for more and higher-quality electricity: Today's grid is unprepared to meet not only increasing electricity demands (see Figure 3), but also the needs of an information economy. Although the grid is reliable � more than 99% reliable � any outage can be detrimental to today's energy-dependent economy. For example, according to some sources, the 2003 Northeast Blackout cost the U.S. economy $6 billion to $10 billion. As the U.S. economy depends more and more on utilities to "keep the lights on," the intelligent grid allows utilities to increase the grid's reliability through innovative, cost-effective technologies.

● The need to understand the grid at a national level: On a national scale, the grid is a collection of regional, relatively independent grids with a few strategic connections. Furthermore, operators of each grid � which may rely on shared transmission lines and power sources � cannot readily communicate with one another. This reality not only threatens reliability when operators cannot easily communicate problems, but creates security issues as well. By using intelligent grid technologies, local grids could readily communicate with one another and the federal government could track all grids at a national level.

● Increasing interest in alternative and distributed energy technologies: Currently, most utilities transmit electricity from large central power plants to load centers. Yet this approach has many disadvantages, such as significant energy losses from voltage changes and transporting electricity over long distances and potentially widespread reliability problems from transmission system shortcomings. Public interest in alternative energies is increasing, and some utilities are paying more attention to


distributed energy. Yet most utilities do not have the technology to track many smaller, distributed power sources. Intelligent grid technologies would allow utilities to cost-effectively track and communicate with widely distributed plants. In addition, wind � the fastest-growing alternative energy � provides intermittent energy, which can create problems with ramp rates. As wind speed increases, the ramp rate can rise quickly and may put the transmission system out of balance if the grid does not react quickly enough to this change. Through greater automation, intelligent grid technologies could potentially allow the grid to more quickly react to fluctuations in wind power.

● Lost revenue from theft: Currently, utilities cannot track where energy is leaving their system. As a result, electricity theft is a problem � particularly in India and China � that means lost revenue for utilities. Intelligent grid technologies would allow utilities to obtain feedback on where energy leaves the system and better track down energy thieves.

● The availability of appropriate technology: Technology has developed enough to allow utilities to practically address the above problems through intelligent grid technologies. Such technologies include the ability to integrate devices from a variety of vendors, IP ubiquity and enterprisewide communication, service oriented architecture (SOA), adequate sensor technology, and smart meters.

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Source: Energy Information Administration, 2006


C u r r e n t E n v i r o n m e n t

These drivers brought the intelligent grid to where it is today and continue to drive its development. Even with all of this motivation, however, most of today's intelligent grid work � particularly in North America � is still in the testing and piloting stage. This section covers recent intelligent grid activity, including regulatory actions, developing consortia, and projects under way.

Regulators Are Becoming More Involved

Today, regulators are beginning to take action and promote the use of intelligent grid technologies, particularly smart metering. Regulatory actions include:

● U.S. Energy Policy Act of 2005 (EPAct): The EPAct established mandatory reliability standards, which will ultimately push utilities to better monitor their T&D assets. Fines for failing to meet reliability standards could cost utilities $1 million a day for each violation. Also, the EPAct encourages investment in transmission capacity � such as transmission system monitoring, sophisticated transmission technologies, and advanced power system technology incentive programs.

● Ontario, Canada: Ontario will require smart metering throughout the province by 2010.

● Texas: The State of Texas recently passed legislation to help create a market for advanced meters. The state is requiring the Public Utility Commission of Texas (PUCT) to establish a surcharge for recovering reasonable and necessary costs incurred in deploying advanced meter networks to residential customers and smaller commercial customers.

● Victoria, Australia: In 2004, the Victorian government issued a mandate for utilities to deploy interval metering to all large commercial and industry customers by 2008, small commercial and large residential customers by 2011, and remaining residential customers by 2013. More recently, however, the Victorian government abandoned the previous interval metering rollout program and instead is drafting legislation to mandate the deployment of smart metering. The government commissioned a cost-benefit study to look at the incremental operational and customer service benefits of smart metering and is pushing distribution companies to begin smart metering trials later this year. Full deployment to 2.35 million customers is expected to run from 2008 to 2012.


More Partnerships to Develop Cost-Effective Technologies

The number of partnerships among utilities, vendors, universities, and the government to research and develop intelligent grid technologies has grown substantially over the last few years. Many of these groups are working to make technologies practical and cost-effective for utilities to implement. Some of these partnerships are listed in Table 1.

T A B L E 1

C u r r e n t I n t e l l i g e n t G r i d P a r t n e r s h i p s

Partnership Description

Center for the Commercialization of Electric Technologies (CCET)

This electricity and university consortium was formed in September 2005. Through bringing together a diverse group of existing companies and organizations, CCET is working to advance technologies in transmission, distribution, and end-use areas.

Consortium for Electric Reliability Technology Solutions (CERTS)

CERTS is working to research, develop, and disseminate new methods, tools, and technologies to protect and enhance the reliability of the U.S. electric power system and efficiency of competitive electricity markets.

Demand Response and Advanced Metering Coalition (DRAM)

This group consists of public interest groups, demand response technology companies, and utilities that focus on demand response education and outreach.

Distribution Vision 2010 (DV2010)

This group of utilities is working together to develop new distribution network designs, methods, and devices to increase energy delivery reliability at the distribution level.

Galvin Electricity Initiative By working to combine traditional electricity infrastructure with advanced technologies, this group seeks to define a systemic solution for reliable and robust electric services that best meet 21st-century consumer needs.

The GridWise Alliance This group of public and private stakeholders is working together to provide real-world technology solutions that support the U.S. Department of Energy's vision of the future grid. Their efforts also include the GridWise Expo, which builds upon their original "Constitutional Convention."

Advanced Grid Applications Consortium (GridApp)

This group of utilities is working to modernize the U.S. electrical grid by transitioning the best technologies and practices into broader use through member utilities.

IntelliGrid Consortium Formed by the Energy Policy Research Institute (EPRI) to support its IntelliGrid transmission architecture, this international alliance of utilities, manufacturers, researchers, and government agencies is working to transform today's grid into a sophisticated delivery system.

Office of Electricity Delivery and Energy Reliability (OE)

In 2005, the Office of Electric Transmission and Distribution and the Office of Energy Assurance joined together to form the OE. The OE seeks to modernize the electric grid, enhance security and reliability of transmission infrastructure, and expedite recovery from supply disruptions.


T A B L E 1

C u r r e n t I n t e l l i g e n t G r i d P a r t n e r s h i p s

Partnership Description

Smart Energy Alliance This group of six technology companies � Capgemini, Cisco Systems, GE, HP, Intel, and Oracle � is working together to develop intelligent solutions for power distribution businesses.

SmartGrids � Electricity Networks of the Future

This group is working to develop a single European grid. Specific actions include increasing the network's compatibility with new energy resources and carriers, using innovative techniques to increase the overall system's efficiency, and implementing widespread information and communication technologies to develop new services and innovative markets.


Pilot Projects Still Dominant in North America

Despite the efforts of these groups, in North America, intelligent grid technologies are still in the early implementation stages. Although intelligent grid initiatives are not widespread, there are still many pilot projects and substantial research investments. Recent examples include:

● Alabama Power Company (APC) and Advanced Metering Data Systems (AMDS): AMDS recently delivered 50,000 Sensus iCon meters to APC and is under contract to provide advanced metering infrastructure and monitoring for APC.

● CCET: CCET recently approved a $1.3 million study of how to precisely and accurately monitor grid performance and power flow through global positioning systems.

● CenterPoint Energy Houston Electric and IBM: As a follow-up to its BPL pilot project, CenterPoint is deploying intelligent grid technologies � including smart meters, remote connection and disconnection of electric service, and automated outage detection and restoration. CenterPoint will test these technologies on 44,500 electric and 22,500 gas customers.

● Eastern Interconnect Phasor Project (EIPP): In response to the 2003 Northeast Blackout, EIPP is working to develop more real-time uses of information and resolve the inability of operators to visualize an event that impacts the entire system.

● Georgia Power Company (GPC): For more than 10 years, GPC has been running the world's largest real-time pricing program with 1,700 volunteer commercial and industrial customers.


● Michigan Electric Transmission Company (METC): To enhance its grid, METC is working with IBM to develop business intelligence analytics that would turn critical operations into real-time information. For example, METC could monitor substation activity and respond more quickly to power outages.

Other Regions Outpace North America

Internationally, utilities are not only implementing pilot projects, as seen in North America, but also undertaking large-scale deployments of intelligent grid technology. Recent examples include:

● China: In March 2006, OSIsoft announced a seven-year, $300 million contract to provide its real-time performance products to FibrLINK Communications � a State Grid Corporation of China company. China will implement real-time grid performance monitoring at a national level.

● Italy: Enel, Italy's major utility, has installed 23 million PLC Smart Meters since 2003 � a rate of 40,000 per day. By the end of the project, Enel will have installed a total of 30 million smart meters.

● Poland: PSE-Operator SA initiated the world's first IntelliGrid transmission architecture demonstration project. This effort will assist EPRI with refining its framework for an intelligent, self-healing network.

F a c t o r s A f f e c t i n g A d o p t i o n

With the flurry of research and development of intelligent grid technologies, why are North American utilities not gobbling up these technologies right now? Although intelligent grid technologies offer exciting opportunities, the nature of the energy industry makes utilities reluctant to adopt new technologies. However, some regulators are stepping in to push utilities to adopt more intelligent grid technologies.

Utilities Are Risk Aware

Negative public perceptions � from issues such as blackouts and their cost to the economy � can damage a utility's reputation, but public pressure alone cannot force a utility to adopt intelligent grid technologies. For example, FirstEnergy suffered from its role in the 2003 Northeast Blackout, but the company quickly recovered.

There are also more tangible pressures directly impacting utilities � such as aging infrastructure, concerns about meeting future energy demands, lost revenue from theft � that push them to more seriously consider intelligent grid technologies as a cost-effective way to address these pressures. Yet regardless of all these pressures, utilities


remain a risk-aware industry as they deal with volatile energy prices, regulator demands to keep consumer prices low, and limited options for improving profits. Specific risks intelligent grid technologies pose to utilities include:

● Are intelligent grid technology investments prudent? That is the question regulators � which are interested in keeping prices low � will ask utilities. Utilities have to determine whether intelligent grid technologies will provide an adequate return on their investment. Regulators need to provide a way for utilities to recover their costs for investing in intelligent grid technologies.

● Many intelligent grid technologies still have not received enough testing for most utilities to feel confident in making large-scale implementations. With the long lifetime of grid assets, utilities want to know they are making the right investment.

● These technologies often require upgrading and changing legacy systems and business processes. Utilities often have trouble overcoming the embedded inertia of existing systems and practices.

Regulations Can Force Utilities to Adopt Technologies

Since many utilities have not implemented intelligent grid technologies on their own, government can step in and has done so to represent the public's interest. As earlier examples such as Victoria, Australia, and Ontario, Canada, demonstrate, many governments are requiring utilities to step up the implementation of these technologies, particularly for smart metering.

Differences Between the North American Market and Other Regional Markets

The rate of intelligent grid technology adoption varies across regions because of different environments that utilities operate within:

● Asia/Pacific and Latin America: With many developing countries in these regions, utilities are building new infrastructure. Therefore, if utilities have to install something anyway, it would make sense to install the latest technology. Also, the structure of some governments allows for a more widespread implementation of intelligent grid technologies. For example, China's strong central government controls the entire grid at a national level and can easily standardize the network.

● Europe: European countries are generally more interested in and better able to implement small-scale, distributed alternative energies and renewable energy technologies, particularly wind energy systems that produce intermittent power. The need to


integrate these technologies into the existing grid is driving these countries to focus more on intelligent grid technologies.

F U T U R E O UT L O O K

As for the intelligent grid's future, it is not a question of whether companies will implement these new technologies, but rather when the grid's information technology revolution will take place. Because many challenges still surround the intelligent grid, the "revolution" will likely be more of a slow "evolution." Many utilities will still be hesitant to adopt new technologies in the near future. The current intelligent grid environment focuses on the testing and development of practical technologies, and as they are proven, utilities are likely to adopt more of them. However, some utilities will begin to prepare for the intelligent grid today by adopting some technologies � particularly communication capabilities � now so they have the necessary backbone to quickly implement more uncertain technologies once they are accepted.

R e m a i n i n g C h a l l e n g e s

Although the intelligent grid appears to be taking off, many challenges still lie ahead. Key challenges in North America include regulators that are reluctant to allow utilities to experiment with these new technologies, the reality that utilities will not likely change their risk-aware behavior soon, intelligent grid technologies that will continue to rapidly evolve, and the practicality of alternative and renewable energy.

Double-Edged Sword of Regulators

Regulators can push utilities to invest in intelligent grid technologies, but they still want to keep consumer prices as low as possible. Therefore, regulators hesitate in allowing utilities to accept the risk of experimenting with new technologies. Furthermore, the complexity of these regulatory bodies can inhibit the implementation of intelligent grid technologies. Several regulatory bodies may have overlapping jurisdiction over one area and conflict with one another on the sensibility of a utility's investment.

Utilities Will Always Be Utilities

The environment that North American utilities operate within is not likely to change dramatically in the near future; therefore, utilities will remain risk aware. Most utilities will still consider investing in new intelligent grid technologies to be risky and avoid these technologies until they are better proven. Furthermore, economic costs to the public will most likely not become a factor in a utility's equation for determining the value of an intelligent grid investment.


Technology May Expire Quickly

When utilities invest in T&D assets, they are often making 40-year investments. Therefore, it is risky for utilities to make long-term investments in technologies that are unproven or may rapidly change as intelligent grid research and development moves forward. Utilities will likely not know for a while if today's intelligent grid technologies will be useful for the life of an asset. Furthermore, utilities face challenges when deciding what communication method � cellular technology, existing phone lines, or BPL, for example � should link intelligent grid technologies. As integration across business segments and companies becomes more important, a utility wants to ensure it does not choose the "wrong" technology or method of communication.

Realities of Renewable and Distributed Energy

Some forms of distributed energy � particularly natural gas�powered microturbines � face significant challenges in today's market. High natural gas prices make such power sources costly, especially when compared with low-priced coal. Furthermore, end users are typically uninterested in these more complicated power sources and electric utilities adamantly oppose them. While distributed energy will potentially become more competitive in a future carbon-constrained marketplace, today these power sources are likely to remain limited in their use.

On the other hand, renewable energy is rapidly growing, with wind leading the way. Yet these distributed alternative energies may not be as practical in North America as in other regions because the best places for alternative energies � solar from the desert and wind from offshore and the Great Plains � tend to be located far from load centers. Development in these remote areas will necessitate considerable investment in grid expansion and upgrades and, in the near term, likely crowd already strained transmission capacity. Finally, alternative energies are still more expensive than retail electric throughout much of the United States.

F u t u r e A d o p t i o n P a t t e r n s

Despite the promise of the intelligent grid, challenges such as those listed above will mean a slow but increasing adoption rate in North America as intelligent grid technologies are proven. However, some utilities will actively prepare for the intelligent grid by adopting some technologies now so they are ready to quickly implement today's more uncertain technologies once they are accepted.

Slow But Increasing Adoption Rates in North America

With increasing internal pressures � such as aging assets � and external pressures � such as the need to understand the grid at a


national level � utilities will begin to seriously consider more intelligent grid technologies (see Figure 4). Even as utilities' interest in these technologies grows, however, most utilities will want to be the third utility to use the technology, not the first. Therefore, sales cycles will likely take years as utilities conduct one pilot project, then conduct another, undertake a limited rollout, and so on. Yet as intelligent grid technologies are tested and proven, adoption among utilities will increase at a greater rate.

F I G U R E 4

I n t e r n a l a n d E x t e r n a l P r e s s u r e s o n a U t i l i t y W h e n E v a l u a t i n g I n t e l l i g e n t G r i d T e c h n o l o g i e s

Use existing technologies

Adopt intelligent grid technologies

Internal pressures

External pressures

Regulator demand forincreased reliability

Regulator desire to keep prices low

Negative public perception of outages

Many technologies not tested enough

Costs to replace aging assets

Lost revenue from electricity theft

Electricity theftIncreasing demand for quality electricity

Need to understand grid at national level

Interest in alternative, distributed energy

Uncertain about intelligent grid ROI

Embedded inertia of legacy systems

Lack of strong central authority

Challenges of alternative, distributed energy

Concern about selecting �wrong� technology

Long life cycle of assets

or

Utility company

Use existing technologies

Adopt intelligent grid technologies

Internal pressures

External pressures

Regulator demand forincreased reliability

Regulator desire to keep prices low

Negative public perception of outages

Many technologies not tested enough

Costs to replace aging assets

Lost revenue from electricity theft

Electricity theftIncreasing demand for quality electricity

Need to understand grid at national level

Interest in alternative, distributed energy

Uncertain about intelligent grid ROI

Embedded inertia of legacy systems

Lack of strong central authority

Challenges of alternative, distributed energy

Concern about selecting �wrong� technology

Long life cycle of assets

or

Utility company



Many Leading Utilities Will Adopt Technologies to Prepare for the Intelligent Grid

While many utilities will wait for proven technologies, some utilities will take steps today to prepare for rapidly deploying intelligent grid technologies that are still currently under testing. The most common preparations utilities will make for the intelligent grid are establishing adequate communication infrastructure and installing assets that allow for easy upgrades to adapt to future technology needs.

TXU Electric Delivery � a subsidiary of TXU Corp. � demonstrates that such preparations are already under way for some utilities. This delivery company recently signed a contract with CURRENT Communications Group LLC to install the nation's first broadband-enabled intelligent grid. The $150 million project will provide BPL to approximately 2 million customers. The company's reasons for undertaking this substantial investment include:

● The intelligent grid will require utilities to push around not only kilowatts, but megabytes as well. Therefore, TXU Delivery sought to develop an effective method for handling both electricity and data.

● While some intelligent grid technologies have not yet been invented and the company cannot know what specific applications may be used in the future, installing BPL allows TXU Delivery the flexibility to adapt to changing technologies.

● BPL will help TXU Delivery in achieving its intelligent grid targets, such as 100% automatic meter reading by 2010�2011 � approximately 3 million meters.

● BPL will allow TXU Delivery to rapidly install intelligent grid technologies the company is currently developing.

P o t e n t i a l P i t f a l l s

While more and more utilities will invest in technologies to prepare for the intelligent grid, forging ahead too quickly and on too large of a scale may create problems. Since many intelligent grid technologies are still rapidly developing and not yet established, adopting unproven technologies may be risky since these technologies may rapidly change. Also, utilities may face problems if their preparation does not focus on developing better integration techniques. For example, if applications cannot readily communicate with one another, their effectiveness in real-time interactions will be inhibited.


E S S E N T IA L GU I DA N C E

A c t i o n s t o C o n s i d e r

For Utilities

Although many intelligent grid technologies are still in the testing stages, utilities can prepare themselves now to better handle more advanced intelligent grid technologies that are likely come onto the market soon by:

● Allowing for upgrades: Because of the long life cycle of T&D assets, utilities should provide options for upgrading components to support intelligent grid technologies.

● Focusing on interoperability: Utilities should focus on increasing the integration abilities of their information technology.

● Targeting "quick wins" first, but remembering scalability: To minimize risk and gain more confidence in intelligent grid technologies, utilities should target select areas � such as a business process bottleneck � for initial deployment to achieve quick wins. In targeting these smaller areas, though, utilities should ensure the intelligent grid technologies offer the ability to expand.

● Informing themselves and directing technology: With so many intelligent grid consortia, utilities should take the time to participate in such groups not only to better understand the direction of the intelligent grid technologies, but also to guide their direction.

For Vendors

Vendors should not only become more involved in developing intelligent grid technologies, but also � depending on their size � focus on ways to better integrate their technologies:

● Larger vendors: Since the intelligent grid emphasizes integration, larger vendors should begin to rethink any proprietary mindsets. As intelligent grid technologies spread, those vendors that are best able to integrate technology from many sources will likely succeed.

● Smaller vendors: Again, with this emphasis on integration, smaller vendors should work to develop partnerships and complementary technologies with larger vendors. Another option for smaller vendors is to become an expert at integrating devices from many vendors and adding their own products to the mix.


L E AR N MO R E

R e l a t e d R e s e a r c h

● Smart Metering: Impact on Distribution Companies (Energy Insights #EI201167, April 2006)

● Top 10 Predictions for the Energy Industry in 2006 (Energy Insights #EI10084, January 2006)

● Metering Gets Smart � Managing Smart Metering Data to Serve the Customer (Energy Insights #EI10058, September 2005)

● Broadband over Power Line: Impact for Utility Companies (Energy Insights #EI10050, July 2005)

● U.S. Energy Delivery Market Overview (Energy Insights #EI10044, June 2005)

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