Interview with Wanda Reder
In this interview, Wanda Reder explains that Smart Grid has an important role to play in helping bolster economic vitality and an improved way of life. She urges the utility industry and ecosystem participants to work together to make the electric grid modernization investments and policy changes needed to bring Smart Grid to reality.
Question: Consumer electricity usage has changed substantially in recent years. How is consumption changing and how does this influence the need for Smart Grid?
It’s true that customer electricity usage characteristics are changing. We’re now in a digital society and the consumer electronics category represents one of the largest single sources of domestic electricity consumption in developed regions. Furthermore, electricity consumption associated with digital devices in the residential sector is expected to increase significantly in coming years.
This trend will influence the general expectations consumers have regarding their electricity services. With more and more electronic products driving electricity demand, more consumers will expect uninterrupted power availability and near-perfect power quality. And more commercial businesses, including home-based businesses, will need electric service assurances in order to fully operate and compete.
According to IEEE Smart Grid Newsletter Chairman Massoud Amin, electric service outages for a typical customer, depending on where they live in the country, range from 90 to 214 minutes or more per year. And those figures don’t even include rare events and extreme storms like Hurricane Sandy. The industry must accommodate the need for increased electrical reliability to support consumers’ digital lifestyles and ensure the economic viability of the country’s businesses that are heavily dependent on computers and information technologies.
The shape of the load has also changed, due in large part to increasing penetration of air conditioners that create occasional but severe peak electrical loading conditions. How does this impact today’s grid?
Utilities have deployed additional, centralized generation along with the necessary transmission and distribution facilities to accommodate these conditions but the strategy is costly because peaks typically occur less than one percent of the time per year. The industry must find ways to accommodate load growth and deal with peak conditions without building capital-intensive centralized infrastructure that is used so infrequently.
Centralized generation is also inefficient because approximately 15 percent of power transmitted today is lost as it travels across the grid from generation to end use. These losses are in addition to those that occur during the generation process. The combined losses are staggering: For example, when a home consumes 1 kWh of electricity, 3.4 kWh are used to generate and distribute it, according to the U.S. Department of Energy. Losses of this magnitude exacerbate the costs to supply power centrally to meet peaking conditions.
Inefficiency of centralized asset utilization in the United States was characterized in a 2012 study by Paul Centolella, published by ElectricityPolicy.com, which found that the average electric generation capacity factor has been below 50 percent since 2002. According to Centolella, many transmission and distribution facilities have average utilization rates that are even lower. These rates are well below the average rates of other capital-intensive industries, which generally exceed 75 percent.
How does Smart Grid address these issues?
The Smart Grid will improve customer power reliability and power quality by employing network-connected sensors to anticipate and respond to outages in real time and nearly instantly. Smart Grid technologies will substantially minimize the number and duration of outages so that services will be more robust and available.
Smart Grid also holds potential to evolve the industry away from centralized infrastructure. It will augment existing capacity with distributed solutions based on resources such as solar or wind power, combined with battery storage, to meet local power needs and alleviate peak loads. Because distributed generation is located close to the customer, it reduces the electrical losses that are inherent with distributing power from a centralized generation infrastructure. This not only reduces costs but can be used to support utilities’ and customers’ environmental sustainability objectives. Smart Grid technologies enable customers to interconnect their own distributed generation, such as rooftop solar panels, to the system and sell their excess capacity back to their local utilities.
Smart Grid also relies on customers to help improve grid utilization and management. What strategies are needed to make customer participation succeed?
Customers can become active partners in grid utilization and management by employing smart meter and home automation technologies – or even smartphone applications. These tools are being developed to allow appliances to operate in conjunction with the grid’s needs and enable customers to more actively participate in demand-response programs that help shift their demand off-peak or reduce their energy costs.
Embedded intelligence is needed, however, so consumers do not have to be in the middle of every demand-response decision. There is often not enough difference between the cost for peak- and off-peak power to really capture the consumer’s attention and create significant behavior change. The industry needs to devise ways to incorporate automatic end-use-load participation into the business model so customers are not bothered by these programs and decisions and so their lifestyles are not inconvenienced.
What kind of cost savings can a typical household achieve from Smart Grid programs?
Last year, the Perfect Power Institute issued a report that presented a real and viable business case for Smart Grid. PPI reported that consumers should be able to realize financial benefits that exceed the investment costs by a factor of three or more if they, along with local governments and innovators, are engaged as partners in grid modernization. PPI estimated the potential benefits of investments to be about $1,200 per year for a typical household while the costs are an estimated $400 per year per household. The institute noted that the estimated benefits would be even higher if the impact on public health, safety and security could be precisely quantified and included. It spread the investment costs across three main grid categories: power supply, power delivery and end-use consumption. The greatest investments would be made at the consumption level. End-use investments would include local clean power supplies, smart meters and home automation.
The 2009 American Recovery and Reinvestment Act has helped increase Smart Grid awareness and expedite the acceptance and use of Smart Grid technologies. What must the industry do now to extend its services and benefits?
ARRA projects did achieve notable progress in Smart Grid acceptance and deployments. The industry’s challenge now is to continue the grid modernization movement by scaling the deployments to more markets and connecting the various components together to fully enable smart and interactive services.
This will require substantial financial investments, representing hundreds of billions of dollars in modernization costs between now and 2030, because the industry still operates with many infrastructure components and systems that should have been replaced years ago. Much of this infrastructure must be upgraded as the industry moves to Smart Grid.
How should regulators respond to help facilitate grid modernization?
While the industry must unleash the needed funding to pave the way for modernization of the grid, the regulatory environment, was generally designed for least-cost decision-making. The framework often is challenged to consider all of the value streams introduced by Smart Grid investments and can stand in the way of this work.
For example, the economic benefits expected from consumers’ adaptation to Smart Grid technologies and participation are achievable only if market reforms are adopted to empower consumers to benefit from their actions and realize revenue from grid services.
Furthermore, the least-cost framework that has traditionally formed the basis of utility investment regulations is a barrier to many Smart Grid innovations. As the industry moves to Smart Grid, least-cost policies will become less relevant and regulations will have to adjust to encapsulate the overall value of Smart Grid technology or services. Elements such as the environmental benefits, loss avoidance, increased system utilization and consumer costs avoided as a result of mitigating outages need to be factored into the analysis to support related electrical system investments.
What should participants in the electric utility ecosystem do now to help fulfill the Smart Grid vision?
It is time for the industry to find solutions to the modernization issues I’ve described and for local governments to adapt their policies accordingly so that motivated utilities can forge ahead with their strategies to realize Smart Grid’s promise. Local governments must become partners to advance market reform, develop policies that enable grid investments, specify local needs and coordinate infrastructure projects. It is important that consumers, local government officials, entrepreneurs and system operators collaborate to initiate the changes necessary to realize full potential benefits.
The vision of a better performing and environmentally responsible power supply that provides economic benefits to consumers and business is a realistic one and can be achieved if all participants in this new industry and ecosystem collaborate. By working together to push ahead with electric grid modernization, participants will also play vital roles in helping build a more vibrant and prosperous national economy.
Wanda K. Reder is vice president of the Power Systems Services Division at S&C Electric Company as well as the global architect for S&C’s global service operations. She has more than 27 years of expertise in the electric utility industry. She has authored numerous articles for industry publications and regularly participates in important industry events in order to share her experiences, stay up-to-date with current trends, and educate power system professionals.