Being Smart about the Smart Grid

A Frost & Sullivan White Paper

2 Frost & Sullivan

TABLE OF CONTENTS

Introduction .................................................................................................... 3

Where are We Today? The Reality of the State of Smart Grid Initiatives....... 3

The Elusive Promise of the Smart Grid: Expected Benefits and Justification for Smart Grid Investments ........................................................ 4

Improve Power Availability by Minimizing Interruptions in Power Delivery .... 5

Increase Operating Efficiency ...................................................................... 5

Address Growing Demand for Electricity Driven by Growth in Data Centers, Population, and Electric Vehicles ..................................................... 5

AMI............................................................................................................. 7

Demand Side Management .......................................................................... 8

Distribution Automation Systems.................................................................. 9

Making the Grid Smarter: Layering in Communications Technologies ........... 10

The Systems Integration is a Key Enabler to Realizing the Promise of the Smart Grid ............................................................................................ 11

Case Examples of Successful Utility Smart Grid Initiatives ........................... 13

Austin Energy, Texas ..................................................................................... 13

CenterPoint Energy, Texas ............................................................................ 14

Oncor, Texas ................................................................................................ 15

Dong Energy, Denmark’s Largest Energy Company ........................................ 16

Conclusions on Smart Grid: High Expectations, Great Potential, Proven Effectiveness ........................................................................................ 17

INTRODUCTION

The demand for energy in the U.S. continues unabated, yet the aging power generation,transmission and distribution infrastructure is increasingly unable to keep up with thisdemand. Utilities are at the center of this imbalance and are looking for solutions toaddress this problem.

Utilities are dealing with a range of internal and external issues that add complexity tothis challenge. Externally, utilities must deal with the impact of regulatory pressures, state-level adoption of energy efficiency resource standards (EERS) and renewableportfolio standards (RPS), as well as growing costs associated with peak generation,decaying infrastructure, and an aging labor force. This is compounded by internal issuessuch as gaining more efficiency from their existing resources, reducing waste, andincreasing the return on their capital expenditures through implementing strategies for improving energy delivery, efficiency and utilization.

Following their pursuit of a solution, utilities across the U.S. are looking at smart grid as aviable option to improve grid monitoring and overall asset performance. Frost & Sullivandefines smart grid as technologies aimed at automating, improving the efficiency, andincreasing the availability of the electric grid, ranging from generation, to transmissionsystems, to distribution levels. Utilities are in different stages of evaluating, pilot testingand implementing smart grid technologies, even as the smart grid as a comprehensive gridsystem is only now emerging from the concept stage into live commercial applications.Utilities recognize the complexity involved in implementing a successful smart gridstrategy, confronting issues such as unprecedented cross line of business initiatives,consumer benefits, vulnerability to security breaches, and data accuracy and management.Hence, utilities are recognizing the benefits of partnering with system integrators to helpthem develop their smart grid solutions.

This paper will explore how utilities are considering smart grid as the solution to themodern day challenges of an inefficient and aging system. First, we will discuss theconcept of the smart grid itself, and what it promises for both utilities and consumers.Next, we will examine how the concept is being implemented and what the implicationsof these early actions will be for utilities and consumers. Following that, we will examinethe role of the system integrator as a central player in helping utilities move forward with smart grid strategies. Along the way, several case study examples will be noted to illustrate these activities. Finally, we will abstract the key success factors necessary for utilities’ smart grid strategies to deliver on the promises to the utilities and their customers.

WHERE ARE WE TODAY? THE REALITY OF THE STATE OF SMART GRID INITIATIVES

There is regulatory pressure at the federal and state levels to move forward with smartgrid projects. The Energy Policy Act of 2005 was introduced following the August 2003Northeast Blackout, which cost the U.S. economy up to $10 billion. This act requires each

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state’s regulatory authority to look at advanced meter infrastructure. The act started theball rolling by recognizing that the current system of traditional meters and flat rates wasoutdated, and was then followed by the Energy Independence and Security Act of 2007,which expanded this mandate to declare smart grid as a major policy objective of theUnited States. In 2009, the American Recovery and Reinvestment Act allocated $4.5 billionin stimulus money toward smart grid-related projects.

At the state level, utilities feel pressure from standards aimed at cleaner and moreefficient power systems. Various RPS require electric utilities to have a proportion oftheir electricity come from a renewable power source, such as wind, solar, biomass, orgeothermal energy. Many states are mandating these changes be met as early as 2015. The electric grid will need to support these new, more diverse and often less consistentsources of electricity that will require additional monitoring and intelligence, which thesmart grid can provide.

In addition to the RPS, there are states with EERS in place. In some instances, states haveexpanded their renewable portfolio standard to include energy efficiency. The EERS aredesigned to reduce or flatten electric load growth through energy efficiency measures,which can be addressed by a smarter grid.

One example of a state that has an integrated EERS is Maryland, which has mandated theMaryland Energy Efficiency & Conservation Act of 2008, called Maryland EmPower. Thisrequires statewide peak demand and electricity reduction of 15 percent by 2015, such aspeak demand reduction of 5 GW and electricity savings of 10.5 GWh. Texas is anotherexample, with electricity-restructuring laws requiring electric utilities to offset 10 percentof their demand growth through end-user energy efficiency. The Public Utility Commissionof Texas (PUCT) is offering rewards to electric utilities that exceed their minimumdemand-reduction goals. The state of Virginia is also expected to reward utilities forinvesting in energy efficiency. In Pennsylvania, Act 129 of 2008 requires a 3 percentelectric consumption and a 4.5 percent peak demand reduction by 2013. And dating backto the 1970s, California has made energy efficiency a part of their resource planning andeconomic dispatch modeling.

THE ELUSIVE PROMISE OF THE SMART GRID: EXPECTED BENEFITS ANDJUSTIFICATION FOR SMART GRID INVESTMENTS

Clearly there is much anticipation in the promise of the smart grid to modernize the U.S.power system. It is worth examining the expectations that the utilities and the regulatorshave for the benefits that the smart grid can bring. Chart 1 highlights the issues smartgrid is expected to solve.

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Chart 1: Current Issues that Smart Grid is expected to Solve

Improve Power Availability by Minimizing Interruptions in Power Delivery

Much of today’s transmission and distribution infrastructure build-out dates back as far asthe 1950s. According to the Electric Power Research Institute (EPRI) the strain on thisaging system is beginning to show in terms of monetary drawbacks as well as theinconvenience of poor power reliability. According to Galvin Electricity Initiative, the gridis rated to be only 99.97 percent reliable, which translates power outages andinterruptions to cost at least $150 billion per year.1 Under-investment in generation,transmission, and distribution infrastructure in recent years has led to an increasedfrequency of voltage fluctuations and power interruptions affecting residential homes andbusinesses. A study prepared for the U.S. Department of Energy by Litos StrategicCommunication states that “more blackouts and brownouts are occurring due to slowresponse times of mechanical switches, a lack of automated analytics, and “poor”visibility.” Furthermore, it states that 41 percent more outages affected 50,000 or moreconsumers in the second half of the 1990s than the first half of the decade.

Increase Operating Efficiency

With the increasing addition of renewable power and distributed generation (electricitygenerated closer to the usage point), large centralized power plants are no longer goingto be the only source of electricity to the grid. Utilities are at risk of compromisingoperating efficiency if they do not have the proper plans for integrating renewable anddistributed power. Solutions considered consist of evaluating energy storage for stabilizing grid fluctuations, as well as substation automation for reducing transmissionand distribution power losses.

Address Growing Demand for Electricity Driven by Growth in Data Centers,Population, and Electric Vehicles

Over the next 10 years, demand for electricity is expected to increase by approximately18 percent, whereas generation capacity is expected to grow by only 6 percent.

Improve Power Availability

Increase Operating Efficiency

Address Growing Demand for Electricity

Source: Frost & Sullivan

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1 Galvin Electricity Initiative, “Fact Sheet: The Electric Power System is Unreliable,” Galvin Electricity Initiative,http://www.galvinpower.org/resources/galvin.php?id=26.

Numerous factors will contribute to the power supply and demand challenge. The needfor new generation sources due to anticipated retirement of older plants will be a mainfactor. Population growth and shifts in habitation patterns, such as anticipated movestoward more southern U.S. states, will increase demand for air conditioning.

Contributing to this, as well, is the rise in power-draining data centers and the influx of electric vehicles. In 2007, the installed base for servers for Internet Data Centersaccounted for 1.5 percent of the national energy demand in North America. The EPAestimates that energy consumption in data centers, which in 2006 used 61 billion kilowatt hours (kWh) of power, could reach as much as 100 billion kWh by 2011, putting additional strain on the nation’s grid.

Electric vehicles could make a significant impact on the grid as well. Though currentlybeing produced in very small numbers, Frost & Sullivan estimates sales of electric vehiclesto reach as much as 900,000 units in North America by 2015. Charging nearly a millionvehicles, even during off-peak hours, would require the utilities to have better informationand control over their grids.

The problem of the growing disparity between supply and demand is not only an issue ofgeneration. It is not always feasible to support this excess growth by adding or expandingpower plants. Environmental concerns and stringent regulatory environments make itincreasingly difficult to find suitable sites, obtain permits and construct power plants.Uncertainty regarding upcoming climate change and carbon legislation also has stalleddecisions about which fuels would be best used for new generation, which, along with theeconomic downturn, has further delayed new construction. For generation that is built,the grid also has to be able to support the additional energy flowing across its cables in away that is safe and efficient.

The benefit of the smart grid will be derived from a fundamental upgrade and expansionof the technology underlying the current grid. At a conceptual level, the proposedtechnologies for the smart grid consist of a mix of new, developing, and maturetechnologies. Chart 2 illustrates the Smart Grid Conceptual Model, which categorizessmart grid into seven different domains and several sub-categories under the macro-leveldomains. Most of the industry’s attention has been directed at the macro level,particularly advanced meter infrastructure (AMI), its related information andcommunication networks, demand side management, and automation systems.

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Chart 2: Smart Grid Conceptual Model—Top Level Analysis

AMI

Advanced meter infrastructure (AMI) supports bi-directional information flow from thesmart meter at the customer site back to the utility business systems. As stated before,the smart grid is expected to play an important role in solving power availability,operating efficiency, and power demand. AMI is expected to address at least two of these issues: operating efficiency and demand.

Through AMI, utilities will be able to monitor and document electricity usage on a time-differentiated basis, exchanging information between the electricity supplier and thecustomer. This enhanced level of information can help utilities direct grid power betterfrom supply to demand, increasing overall efficiency in the system. AMI may aid theadoption of renewable power, such as enabling power generated on the customer side (e.g., from solar panels) to be sold back to the utility at prices reflecting the avoided costof generation at the time of delivery.

AMI is also expected to encourage consumers to be more accountable—and therebypotentially mitigate some of the rising demand—for their power consumption by allowingthem to easily monitor their power usage, such as through an online portal. Eventually, it will allow consumers to program smart home appliances to control their home power consumption during peak power periods. Over time, smart meters may becomeelements in home communication gateways, similar to an energy management system in an enterprise or institutional facility. These systems would interface with major power-hungry appliances, including water heaters, air conditioning, and washing machines,and could help monitor and control other home systems such as security and health monitors.

Source: Report to NIST on Smart Grid Interoperability Standards Roadmap

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However, smart meters alone may not be enough to carry customer-side powermanagement activities. Indeed, AMI and power management programs must be integrated ina utility’s smart grid strategy in order to fully meet the greater expectations placed on it.

Demand Side Management

Typically, power management programs (e.g., demand side management or DSM) aredifferentiated by the tools and incentive plans offered for reducing and managing powerconsumption during peak power periods. Until recently, demand response programs weredominated by medium and large commercial and industrial players. With the advent ofsmart meters, utilities are increasingly able to provide dynamic pricing programs toresidential customers, offering them differentiating price points during off-peak and peakpower periods. Currently, utilities are testing various new pricing methods andexperiencing benefits. Connecticut Light & Power, for instance, claims that customers whowere put on time-based rates were able to reduce their power consumption by 11percent during peak power periods.

The industry recognizes that there is a high probability of customers signing up for theseprograms if they have access to energy management systems in the form of smartappliances. Already, manufacturers such as GE and Whirlpool have announced goals tointroduce smart home appliances such as clothes dryers and water heaters as soon as2011. These appliances will be able to operate in a variety of modes and will beconnected to the smart grid, allowing them to either shut off or go into an energy savingmode during peak power demand periods. Frost & Sullivan’s consumer survey2 of 600homeowners across the U.S. showed that nearly 60 percent of residential energyconsumers are either likely or somewhat likely to adopt smart appliances. However, 75percent predominately plan to wait until their appliances are due for replacement beforepurchasing a smart appliance.

Through a smart grid strategy, utilities have the opportunity to partner with customers tosolve excess power consumption and help them manage their own power consumptionand cost. This is facilitated by growing environmental awareness among residentialconsumers, as well as an interest in controlling their electric bills. The Frost & Sullivanend-user survey revealed that almost two-thirds of respondents rate use of green/renewable resources as important or very important to them personally. Green energytechnologies can be employed to help reduce peak power loads, thereby improving theoverall supply and demand equation for a utility.

It is also very likely that, given the opportunity, the residential energy user will monitorhis or her electricity consumption. In the same survey noted above, Frost & Sullivan found

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2 Source: U.S. Smart Grid Market –A Customer Perspective on Demand Response (N72B-14)

that 73 percent of residential energy users are very or somewhat likely to monitor theirelectricity consumption. Similarly, 60 percent proclaim themselves somewhat or very likelyto change their energy-use habits for savings on their electric bills. Charts 3 and 4 showthese questions and responses to the Frost & Sullivan survey.

Chart 3: Liklihood of Monitoring Electricity Consumption Online (N=512)

Chart 4: Likelihood of Changing Electricity Use Habits (N=600)

Distribution Automation Systems

Alongside demand side management and advanced meter infrastructure plans, utilitieshave also considered strategies to implement distribution automation to mitigate and

Survey Question: How likely would you be to monitor your electricityconsumption online, if that capability were provided by your electricity supplier?

Very Likely

Somewhat Likely

Undecided

Somewhat Unlikely

Very Unlikely

Source: Frost & Sullivan

Survey Question: What is the likelihood you would be willing to change thetime you do your most energy-consuming housework for a savings on yourelectric bill?

Very Likely

Somewhat Likely

Undecided

Somewhat Unlikely

Very Unlikely

Source: Frost & Sullivan

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reduce power interruptions as part of their smart grid strategy. Primary functions ofdistribution automation include:

• Volt/VAR Control• Fault Detection• Service Restoration• Self-Healing Grid

According to the DOE, the electric distribution market received approximately $508million from the U.S. Smart Grid Stimulus Funding in 2009. The challenges previouslynoted that are expected to face the grid in coming years, namely electric vehicles, greateradoption of distributed generation, and renewable power, require utilities to monitor andcontrol power along the grid. Distribution automation will allow the handling of real-timecoordination between distributed energy, such as solar panels on a commercial facility,and the traditional powerplant-centric generation system.

Distribution networks were traditionally designed with a one-way flow of energy andinformation. The U.S. grid was based on a wheel-and-spoke system, with the centralpowerplant generating the electricity and sending it in one direction over the grid. These networks are good for supplying power within a defined demand range, but are not well-equipped to handle unexpected peaks in supply or demand. A dynamicdistribution network, on the other hand, would be able to handle the increasing demandplaced on it, such as what can be expected when more electricity is being generated notat a central station, but at end-user locations and certain points along the grid.

MAKING THE GRID SMARTER: LAYERING IN COMMUNICATIONS TECHNOLOGIES

Utilities may decide to address one or multiple issues at a time. Planning andimplementation of these technologies involves employing asset management planningtools, implementing a communications layer, as well as taking security measures.

Successful smart grid implementation depends on interconnecting the seven domains ofthe grid (noted in the section above) and its devices with a robust communicationsnetwork. Similar to modern voice and data communications networks, thecommunications layer in the smart grid follows a wide area network (WAN), local areanetwork (LAN), and home area network (HAN) typology. As the smart grid takes shape,many communications technologies are being considered by utilities, but it is not yet clearwhich would be most appropriate, as it is doubtful that a single most appropriatetechnology exists. Indeed, it may be necessary to use different technologies and protocolsfor different utilities’ strategies. Additionally, public network options should be evaluatedwith private ownership models. Utilities must make the right technology choices becausemistakes can affect the data rate performance across the smart grid, increase the cost ofimplementation, and impair the identification of security holes in the network.Furthermore, the communication layer must adopt standardized interfaces to accept newtechnology and remote configuration capabilities within the distribution domain. This

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enables the smart grid’s bi-directional communication flow between distribution andoperations domain to manage the power flows in real time.

Security in the smart grid communications layer is another area in which technology choice and implementation is critical. When creating the smart grid, utilities must takemeasures against potential cyber security risks, as interconnecting elements throughoutthe domains of the smart grid can increase its vulnerability to cyber attacks. These caninclude deliberate attacks, such as from disgruntled employees, industrial espionage, andterrorists, as well as unintentional sources of threat such as user errors, equipmentfailures, and natural disasters. Cyber security must also take into account the lifecycle ofthe equipment. There is a concern that it may be economically prohibitive to modifylegacy equipment according to the new standards for cyber security.3 Hence, smart gridcyber security strategy should address the addition and upgrade of cyber security needsduring the lifecycle of the equipment.

THE SYSTEMS INTEGRATOR IS A KEY ENABLER TO REALIZING THEPROMISE OF THE SMART GRID

The smart grid is expected to solve a number of problems apparent in the aging andinadequate U.S. power grid. Most utilities are creating their strategies around adding new elements to their transmission and distribution systems, and layering in advancedcommunications technologies to form an intelligent and interconnected network.However, utilities are largely unable to design or implement such a complex strategy ontheir own. Upgrading to a full scale smart grid is uncharted territory for the utilityindustry, and it is imperative that utilities engage with a solution provider that can helpthem maintain a holistic and enterprise view of their smart grid initiatives and helpdevelop and implement new business processes across utility lines of businesses by pullingtogether the experience, resources, and partners to ensure their strategies are executedsuccessfully. Building on decades of work designing, constructing, and managing the world’scomplex communications and IT networks, a systems integrator is the key enabler forrealizing the promise of the smart grid.

IBM is one example of a systems integrator that can deliver that value proposition. In2009, IBM unveiled a new standards-based industry software platform and businesspartner validation program that enables utility companies to implement new technologymore efficiently and accelerate the development of their smart utility solutions. TheSolution Architecture for Energy and Utilities Framework (SAFE) is an open frameworkdesigned to integrate software platforms that match specific utility needs. The frameworkalso enables faster business solution deployment with lower project risk, expanded choicethrough a validated ecosystem of partners, and accelerated adoption of business ITstandards. The framework focuses on seven key areas, including:

1. Asset, device and service monitoring2. Asset lifecycle management3. Informed decision making

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3 Report to NIST on the Smart Grid Interoperability Standards Roadmap, June 17, 2009

4. Improved customer experience5. Business process automation6. Regulatory, risk and compliance management7. Security solution

Chart 5: IBM’s Energy and Utility Solution Portfolio

IBM offers a full range of software, hardware, research, integration, and consulting offeringstailored for the smart grid mark et and grouped in a set of categories, illustrated in Chart 5.IBM has demonstrated a long-term commitment to the utility industry by forming a solidpractice with experienced professionals across the globe. As a technology solutionprovider, IBM has been at the forefront of developing industry standards and expeditingthe adoption of smart grid technology. In 2007, IBM initiated the Global Intelligent UtilityNetwork (IUN) Coalition by forming strategic relationships with a small group of selectutilities on five continents, including CenterPoint Energy, Dong Energy, Progress Energy,Pepco Holdings, Inc., Oncor, Sempra, and North Delhi Power Limited, among others. Thepurpose of this global coalition is to shape, accelerate, and share in the development ofthe smart grid, including rapid creation of solutions, adoption of industry-based standards,and informed policy regulation. This group developed the Smart Grid Maturity Model,which details the domains that must be addressed in a comprehensive smart gridtransformation. IBM realized the significance of this model to the industry andcontributed the Smart Grid Maturity Model to Carnegie Mellon for management andfuture enhancements. In addition to the IUN Coalition, IBM also participates as the chairof the GridWise Alliance, chair of the GridWise Architecture Council, and is an activemember of such organizations as the Department of Energy Electricity Advisory Committee.

Source: IBM

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CASE EXAMPLES OF SUCCESSFUL UTILITY SMART GRID INITIATIVES

As mentioned earlier, most utilities are in different stages of retrofitting and upgrading their electric grid network. The following case studies are examples where IBM supported utilities’ initiatives for improving operating efficiency and power availability,improving response to electricity demand, and planning for integrating renewable anddistributed power.

Austin Energy, Texas

Business Issue

Austin Energy is an example of a pioneer and an early adopter of smart grid technology.The company has taken a visionary approach for transforming its existing infrastructure.

Austin Energy is the nation’s ninth largest municipally owned electric utility. Its customersare spread out between the city of Austin, Travis County, and a small portion ofWilliamson County—totaling a million consumers and 43,000 businesses. Austin Energy isalso a utility with a green conscious. Over the years, the company has created one of thetop performing renewable energy programs in the nation. The company also owns thenation’s first and largest green building program.

The company’s vision is to transform its entire operating model to one that promotes a sustainable grid. The execution of this vision will enable Austin Energy to centrallymanage, monitor, and control the grid to an unprecedented degree. Other tangible goals include:

a) To improve utilization of its resourcesb) To improve service to its customersc) To become more responsive to outagesd) To encourage conservation

The utility realizes the task requires a multifaceted approach. This will also require AustinEnergy to build a strong technology foundation that has the ability to accommodate notonly current goals and initiatives, but also growth and new projects far into the future.

Solution

To minimize risk, work within a given timeframe, and to maximize output, Austin Energy is partnering with IBM. A solid technology foundation was formed by developing aroadmap and Business Process Management solution by using IBM’s service-orientedarchitecture (SOA)-based SAFE Framework. The SAFE framework allows IT to become an integral part of the business as well as facilitate the addition of new services andcapabilities. SAFE offers the openness, flexibility and adaptability that are necessaryattributes for integrating information and data communications throughout the grid.

The initial engagement provided the architectural groundwork for a series of ongoingprojects and involved a team comprised of Austin Energy, IBM, and IBM Business Partner

Frost & Sullivan 13

Ascendant Technology. The groundwork they did includes the development of a SOAreference model as well as a Web application server, process integration, and portal andsecurity products.

To put in a robust software platform, Austin Energy is deploying a suite of software fromthe SAFE framework, including:

• IBM WebSphere®: Application Server, Business Modeler, Enterprise Service Bus, Portal v6, Portal Enable, Portal Server, and Process Server

• IBM Rational®: ClearCase®, ClearQuest®, RequisitePro®, Software Architect, and Unified Process

• IBM Tivoli®: Access Manager for Business Integration, Directory Integrator, and Identity Manager

• IBM Lotus®: Quickr™, Sametime®, Web Content Management, and Web Content Manager

This provides Austin Energy powerful, end-to-end, enterprise-wide capabilities that willenable it to bring new applications online faster and respond more quickly to changingbusiness needs. IBM’s role has been pivotal for developing the technology foundationnecessary for Austin Energy’s multi-phased smart grid project.

Benefits

With the support of IBM’s SAFE framework, Austin Energy has successfully implementedwhat it refers to as smart grid 1.0. Smart grid 1.0 consists of advanced meterinfrastructure, smart meter installation and Web portals. An advanced meterinfrastructure permits improved visibility and oversight of the grid; this allows the grid to “heal” itself by automatically rerouting power in the event of a failure. Powerconservation is achieved by empowering customers to make better choices, and Webportals give customers feedback on their energy usage and demand response program.

Currently, Austin Energy’s smart grid is able to service one million consumers and 43,000 businesses through the management of 500,000 devices (meters, sensors,computers, and network equipment) that generate about 100 terabytes of data annually.Through its demand management initiatives, Austin Energy has been able to save morethan 660 megawatts.

The next phase of the program is called smart grid 2.0, which aims to go beyond themeter and into the premises, integrating electrical devices themselves into the system.IBM’s deep industry knowledge and Austin Energy’s pioneering sprit has led bothcompanies to become thought leaders in smart grid sector.

CenterPoint Energy, Texas

Business Issue

CenterPoint Energy, Inc. is an energy delivery company that includes electric transmissionand distribution, natural gas distribution, competitive natural gas sales and services, with

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an annual capital expenditure is $1.05 billion. The company is based in Texas but alsoserves Arkansas, Louisiana, Minnesota, Mississippi, and Oklahoma. CenterPoint Energy has very aggressive plans to make adjustments to its current transmission and distributionsystem. The utility has an ambitious plan to deploy 2.4 million advanced electric meters in the Houston area between 2009 and 2014. These smart meters aim to improveoperations, give consumers more control over their energy consumption, and provide thefoundation for retail electric providers to offer new competitive services and products.

Solution

CenterPoint is working with IBM Global Business Services and IBM Global TechnologyServices to deploy an advanced metering solution that is supported by IBM Tivoli®Netcool®/Impact software. The new system delivers near-real-time data on energy usage and supports dynamic time of use rates and other pricing options.

Benefits

CenterPoint is expected to increase energy efficiency and savings due to customers’ability to monitor electricity usage in near real time. CenterPoint is also discoveringunexpected benefits from deploying smart meters, such as reducing field visits to turn onpower to new customers, and an opportunity to deal with high-impedance faults causedby downed power lines that are still energized, trees touching lines, and short circuits instreet lights. In the past it was extremely difficult to detect these faults, so CenterPointworked with IBM to develop and test a monitoring system capable of spotting them.

Oncor, Texas

Business Issue

Oncor is considered the sixth largest regulated electric delivery utility in the U.S. andoperates the largest distribution and transmission system in Texas. Coverage areas include401 cities and 91 counties in East, North Central, and West Texas. In 2008, the utilityspent approximately $275 million on transmission grid expansion alone. Oncor isscheduled to replace 3.4 million conventional meters with smart meters by 2012.

Solution

IBM was selected as a system integrator for the smart meter deployment because of itsexpertise in smart metering and system integration, along with its understanding of largemeter data management, business analytics, and security solutions. Through IBM’s SAFEframework, Oncor chose to implement:

• IBM Websphere Data Power®• IBM Tivoli Maximo®• IBM Tivoli Identity Manager®• IBM Tivoli Compliance Manager®

These technologies aim to enhance the security and reliability of the informationtechnology solution.

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Abroad, IBM has experienced much success in Denmark.

Dong Energy, Denmark’s Largest Energy Company

Business Issue

Dong Energy is Denmark’s largest energy company. Dong Energy is looking for ways tobetter manage and utilize its electrical distribution network in order to respond tooutages faster and more efficiently.

The utility faces increasing marketplace and regulatory demand. More specifically:

• Regulations require Dong Energy to meet benchmarks for capital and operating expenditures

• New regulations for quality of service (outage frequency and duration) that went intoeffect in 2008

• As a publicly traded company, Dong Energy will have to meet not only regulatorystandards, but shareholder expectations as well

These factors drove Dong Energy to look for ways to optimize its operations, specificallywith regard to quality of service. Furthermore, the company needed to improve its abilityto identify problems in the grid and reduce repair/maintenance time.

Solution

Improving Visibility

IBM worked with Dong to implement an Intelligent Utility Network (IUN), installingremote monitoring and control devices to give Dong Energy current information aboutthe state of the grid. This included sensors and monitors through the electrical systemand connecting to them via data communications networks. Through this, Dong Energy isable to pinpoint the exact location and the type of problem, including overload conditionand other faults. Key components of the IBM solution include:

• IBM WebSphere® Application Server• IBM WebSphereMQ• IBM WebSphere MQ Explorer• IBM WebSphere Message Broker• IBM WebSphere Message Broker Toolkit• IBM WebSphere Eclipse Platform• IBM Rational® Software Architecture• JRules Software

Benefits

Following the implementation, Dong Energy has been able to reduce the minutes ofpower lost by up to 50 percent and cutting the time it takes to find faults by one-third.Other benefits include:

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• Estimated capital savings of up to 90 percent, when fully implemented• Provided a competitive advantage by improving the quality of electrical service

through faster, more efficient response to outages• Allowed Dong Energy to more fully utilize existing assets to respond to surges in

demand, helping the company avoid capital expenditures for additional capacity• Enabled more effective long-term capital investment planning based on live data,

helping Dong Energy invest in new infrastructure more wisely

CONCLUSIONS ON SMART GRID: HIGH EXPECTATIONS, GREATPOTENTIAL, PROVEN EFFECTIVENESS

Today utilities are facing strong pressure to comply with state and federal regulatorystandards to improve energy efficiency, accommodate renewable power, and maintain highpower availability. Customers have become more influential through vote and voice at thestate-level public utility commission. Digital-savvy customers are becoming more aware ofthe choices they can make to lower bills and reduce energy consumption by activelymonitoring their power consumption, installing smart home appliances, purchasing electricvehicles, and using renewable power, among other things. The transition to this newenergy economy is complex but necessary, demanding utilities carefully plan and evaluatethe best possible smart grid solution.

Several solutions exist that make up the smart grid system. Multiple solution elementstouching all seven domains are all necessary to better monitor and control the grid,allowing it to take on a more diverse influx of power supply and handle growing andvaried demand. These solutions need to be integrated into a comprehensive system basedon a solid information platform and directed by a visionary roadmap. Utilities will look tothe early adopters and leading suppliers to plan and create a smarter grid that is a moreefficient, reliable, and effective system.

IBM is a key systems integrator choice for utilities because it has a long history ofsupporting and investing in the energy industry. From its involvement in establishing smart grid standards and promoting their implementation, to its broad ecosystem of energy industry partners, to its suite of solutions that have proven success in the global utility market, and its differentiating innovation across hardware, software, servicesand research, major utilities embarking on smart grid strategies have placed their trust in IBM’s capabilities.

Author

Farah Saeed, Senior Consultant

Energy & Power Systems

Frost & Sullivan

Contributing Editors

Roberta Gamble, Director Brian Cotton, Vice President

Energy & Power System Information Communication

Frost & Sullivan and Technologies

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