Smart Grid 201: A Revolutionary Vision
By Erich W. Gunther, IEEE Fellow and Chairman and CTO EnerNex, and Doug Houseman, VP Technology Innovation
The next-generation smart grid represents not only a multi-layer engineering challenge of historic proportions but also a significant change in the way utilities have conducted business over many decades.
For utility operations professionals, the job of translating the long-term, revolutionary vision of the smart grid into compelling business cases for valuable (but expensive) projects worthy of investment is mostly new ground. While people who work on business cases on a daily basis understand the “whys” and “hows” of demonstrating and quantifying business value, most of the transmission and distribution community has not much history in this area. On the other hand, the professionals who are seasoned in defining and conveying the value proposition of a given project typically do not understand the relationship between the business case and the electrical and intelligence infrastructure that is being effectively merged in the field toward creation of the smart grid.
Such gaps must be closed for smart grid deployment and innovation to accelerate. There must be seamless, clearly defined linkages from perceived needs for grid modernization, to actual sets of measurable business benefits and on to the individual projects that need to be initiated to achieve the desired goals for utilities to make the heavy investments that the smart grid will demand over the next decades.
Identifying Issues That Exist in the Grid Today
Asset management and on-line equipment monitoring … demand response and dynamic pricing … distributed generation and alternative energy sources … participation in energy markets … real-time simulation and contingency analysis … self-healing wide-area protection and islanding … Potentially hundreds of powerful new applications could be supported by the next-generation smart grid that is taking shape in market to market around the globe today.
But no utility can afford to do it all at once. For the most successful smart grid implementation, a utility must carefully pursue the right projects in the right order for its particular business environment. And that means that the first step that utilities must undertake is homing in on the particular issues that they are most pressed to address today, based on their own local conditions and policies. These could be as simple as reliability issues or as complex as trying to integrate large numbers of photovoltaic systems in a dense residential area. The primary questions to be asked are, What is right and wrong with the grid today, and what really needs to be solved immediately? It is important for utilities to adopt a disciplined process to identify their specific requirements in grid modernization—business, social and regulatory, alike—so that appropriate choices can be made in terms of the technologies they should deploy.
The challenge here is that utilities are, by and large, more accustomed to telling their customers what they are going to get than they are experienced in asking those business and residential consumers what they need in terms of reliability and power requirements, rate flexibility, etc. In the regulated environment, utilities are incentivized by a fixed rate of return for capital projects. In broad strokes, utilities have rendered a very sophisticated and complex grid increasingly easy to deploy and operate via very well-defined engineering practices. New feeders and new loads can be added relatively simply and without much business analysis, for example.
But identifying issues to be solved and projects to be undertaken in order to deliver on customer desires is something of a culture shift for utilities. The smart grid, ultimately, must evolve into a market-driven engine of innovation for momentum to gather, and that means a new way of business thinking for utilities.
Exploring Benefits, Setting Priorities
While the smart grid is a globally shared phenomenon, its implementation will play out differently from utility to utility and region to region around the world. The benefits of grid modernization that prove the most compelling will prove specific to a given locale.
For example, empowering business and residential customers to manage their usage and costs might be the highest-value application for a utility to implement—but perhaps only if that utility is in a region where energy prices are very high or transmission and generation constraints are appearing. California is such an example in the United States. Whereas, in the U.S. Pacific Northwest, energy costs are low enough already that customers may not be moved by the opportunity to better manage their electricity and costs. Instead, a utility-side, distribution-improvement program so that electric vehicles could be more widely used or outages could be minimized might be more compelling to ratepayers in these areas.
Once a utility’s most pressing issues are identified, the next step is understanding what benefits will be realized if the issues in question are solved. The list of benefits is typically longer than the issues. Mapping benefits back to issues is usually a case of mapping many to many rather than one to one, and then mapping projects to desired benefits reveals the linkages along the chain.
For example, efficiency in metering and billing are often identified in the typical business case for deploying smart-metering technology. Unfortunately, such under-developed business cases frequently do not pass internal muster for utilities to invest sufficiently for a smart-metering deployment of maximum impact. The value of smart metering is significantly more far-reaching—with potential positive effect on construction and capital expenses, outage management, forecasting and settlement, network maintenance management and a wide variety of other key functional areas of distribution. There is considerable return to be reaped in even the early stages of smart-metering deployment, if such a project’s potential benefits in relation to a given utility’s particular issues are sufficiently explored.
Too often, however, utilities do not develop such business cases so fully, and the business impact of such projects is muted.
The next-generation smart grid that is taking shape around the world is a marvel:
- distributed across traditional geographic and organizational borders;
- integrated in terms of monitoring, control, protection, maintenance, energy and distribution management systems (EMS and DMS), marketing and IT;
- more secure from attack;
- optimized to make best use of resources and equipment;
- predictive, rather than reactive, to prevent or mitigate the impact of emergencies, and
- self-healing and adaptive (interactive with consumers and markets).
But realizing that ambitious and sweeping vision for grid modernization is more than just an engineering problem to be solved. The business transformation for utilities that grid modernization is setting into motion is just as complex and monumental a challenge.
Erich Gunther, member of the IEEE Smart Grid Task Force, chairman of the IEEE PES (Power & Energy Society) Intelligent Grid Coordinating Committee, an IEEE PES Governing Board Member and chairman and Chief Technology Officer of EnerNex, offers insight on the challenges and benefits of Smart Grid implementation.
Doug Houseman, VP of Technical Innovation, is working with clients all over North America and Australia on issues related to Smart Grid/Metering/Homes and other related issues. He works with regulators, utilities and vendors to the market to help move the industry to the next generation grid, as well as the next generation of customer relationship.