Realizing the “Smart Grid”: What It Will Take

RMEL 105th Annual Fall ConventionSeptember 8, 2008

Vail, Colorado

ROBERT W. GEEPRESIDENT

GEE STRATEGIES GROUP LLC

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Overview

• What is the “Smart Grid”? What are its characteristics, and what technologies does it cover?

• What are the federal and state responsibilities in deploying the Smart Grid?

• How will Advanced Metering Infrastructure (AMI) change the utility paradigm?

• What are the challenges to Smart Grid/AMI deployment?

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Origins Of The “Smart” Grid

• Early 2000’s – Increasing awareness of aging power delivery infrastructure to meet surge in electricity demands and digital technologies

• June 2001: EPRI Report stated that power outage and power quality disturbances cost US economy $120 billion annually for all business sectors

• Security and vulnerability of power delivery system heightened after 9/11

• January 2002: EPRI launched “Consortium for Electric Infrastructure to Support a Digital Society (CEIDS)” to promote public/private partnerships to digitize power delivery system (now called “Intelligrid”)

• President George W. Bush, Feb 23, 2002, Radio Address:

“America can’t meet tomorrow’s energy needs with yesterday’s infrastructure.”

• Energy Secretary Spencer Abraham, May 8, 2002, releasing the DOE National Transmission Grid Study :

“America’s electricity infrastructure is ill equipped to sustain our country’s needs today, and wholly insufficient to handle the growth in demand that is projected over the next few decades.”

• 2002 National Research Council Report commissioned by the National Academies: “Making the Nation Safer: The Role of Science and Technology in Countering Terrorism” recommended technology be developed “for an intelligent, adaptive power grid”

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What Does The System Look Like Today?

“ . . [L]ocal distribution systems that connect the power supply to each consumer are effectively a last bastion of analog, electromechanically controlled industry. This is a particularly notable paradox given the fact that the nation’s electricity supply system powers the digital revolution on which much of the current and future value depends.” -- The U.S. Electricity Enterprise: Past, Present, and Future Prospects, Galvin Electricity Initiative (August 2005).

Central Plant Step-Up Transformer

DistributionSubstation

ReceivingStation

DistributionSubstation

DistributionSubstation

Commercial

Industrial CommercialResidential

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What is the “smart grid”?

• Definitions and characteristics vary among stakeholders

• In H.R. 6, The Energy Independence and Security Act of 2007 (EISA), Congress defines the “Smart Grid” as embracing:

. . . increased use of additional information controls to improve operation of the electric grid; optimizing grid operations and resources to reflect the changing dynamics of the physical infrastructure and economic markets, while ensuring cybersecurity; using and integrating distributed resources, including renewable resources; developing and integrating demand response, demand-side resources, and energy-efficiency resources; deploying smart technologies for metering, communications of grid operations and status, and distribution automation; integrating “smart” appliances and other consumer devices; deploying and integrating advanced electricity storage and peak-shaving technologies; transferring information to consumers in a timely manner to allow control decisions; developing standards for the communication and the interoperability of appliances and equipment connected to the electric grid; identifying and lowering of unreasonable or unnecessary barriers to adoption of smart grid technologies, practices, and services.

• This is too wordy

• Fundamentally, it involves the integration of advanced communications and information technology into the electric grid (from generation to consumer) for enhanced grid operations, customer services, and environmental benefits.

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Vision of the “Smart Grid”: 7 Characteristics

• Enabling informed participation by customers

• Accommodating All Generation and Storage Options (“Plug & Play” Capable)

• Enabling New Products, Services and Markets

• Providing the Power Quality For the 21st Century

• Optimizing Asset Utilization and Operating Efficiency

• Addressing Disturbances – Automated Prevention, Containment, and Restoration

• Operating Resiliently Against Attacks and Natural Disasters (“Self-healing”)

Source: DOE Smart Grid Implementation Workshop June 2008

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Schematic of the Smart Grid

Source: EPRI (circa 2002)

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Smart Grid Technology Areas

1. Advanced Metering Infrastructure (AMI)– Smart Meters– Two-way Communications– Consumer Portal– Home Area Network– Meter Data Management– Demand Response

2. Advanced Distribution Operations (ADO)

– Distribution Management System with

advanced sensors

– Advanced Outage Management (“real-time”)

– DER Operations

– Distribution Automation

Source: NETL Modern Grid Strategy

3. Advanced Transmission Operations (ATO)

– Substation Automation

– Geographical Information System for Transmission

– Wide Area Measurement System (WAMS)

– Hi-speed information processing

– Advanced protection and control

– Modeling, simulation and visualization tools

4. Advanced Asset Management (AAM)– Advanced sensors

– Integration of real time information with other processes

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Organizations Working on Smart Grid Today

FERC

DOE-OEGrid 2030

GridWiseAlliance

EEI

NERC(FM)

DOE/NETL Modern Grid Strategy

GridWiseProgram

GridWorks

NW GridWise Testbed

GridApps

CERTS

DOE-OE CEC PIER

NYSERDA

CPUCAMI

Galvin Initiative

EPRIIntelligrid

PSERC

NIST

GWACUtilityAMI

Open AMI

CEC PIER

EPACT05 Hearings

Nat'l Labs

EISA-2007

IEEE

DOESmartGridTaskForce

Source: Eric Lightner, DOE Office of Electric Delivery and Energy Reliability

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EISA: The Federal Role In Deploying The Smart Grid

• Policy Statement:

It is the policy of the United States to support the modernization of the electric transmission and distribution system to maintain reliability and infrastructure protection.

• DOE Tasks:

– Submit Smart Grid System Report after first year and every two years

– Form Smart Grid Advisory Committee

– Manage Smart Grid Task Force comprised of DOE, FERC, and National Institute of Standards and Technologies (NIST)

– Lead Smart Grid Technology Research, Development, and Demonstration program

– Submit Study of security aspects of Smart Grid systems

– Submit study of effect of private wire laws on CHP facilities

• NIST: Coordinates development of framework for protocols and model standards for information management for interoperability of smart grid devices and systems

• Secretary of Energy shall establish a program to reimburse 20 percent of qualifying Smart Grid investments – as yet unfunded

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State Responsibilities for Smart Grid Deployment under EISA Section 1307

• PURPA Directive -- each state must consider requiring electric utilities to demonstrate that, prior to investing in non-advanced grid technologies, Smart Grid technology is determined not to be appropriate

• States required to consider allowing recovery of costs of qualified Smart Grid investments and recovery of remaining book value of assets made obsolete by Smart Grid

• Requires consideration within first year of enactment, and concluded in 2 years

• But state commission answer to all of these could still be: “NO”

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The Landscape for AMI

• Automatic Meter Infrastructure (AMI)

– First generation “smart grid” technology– Will pioneer the “platform” for customer interface with emerging

technologies

• Currently, 74 “Smart Grid” initiatives in 33 states, which include utility-sponsored Automatic Meter Infrastructure (AMI) pilot programs at different stages

• California taking most aggressive approach in authorizing deployment and cost recovery of AMI; other states (DC, Maryland, Michigan, Texas) have pilots underway

• One estimate: 50 million existing meters replaced by “smart meters” by 2010 at $18 billion cost (Deutsche Bank)

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AMI Deployment: a New Utility Paradigm

DYNAMIC PRICING

DEMAND RESPONSENEW SERVICES

REVENUE DECOUPLING

SMART METER/AMI

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Essential Smart Grid Elements

TECHNOLOGY

REGULATORY POLICY

CUSTOMERSUPPORT/

INVOLVEMENT

MANAGEMENT CULTURE

BUSINESS CASE

SMART GRID REALIZATION

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Challenges to Smart Grid Deployment

• Technological

– Lack of consistent standards and protocols means most systems can communicate only with technologies developed by same manufacturer

– Limits interoperability of Smart Grid technologies and limits future choices for new technologies

– Need to “future proof” technology or risk having technology choice rendered obsolete

• Management Culture

– Some utilities embarked on aggressive deployment strategies (e.g., those exclusively in wires business)

– But most risk averse, not wanting to bear entrepreneurial and technology risks; not customarily “early adopters”

– Timing of market entry is key – not too soon or risk making ‘wrong choice” on technology

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Challenges (con’t.)

• Regulatory Policy/Business Case Alignment

– Groundwork essential to support utility capital expenditures

– Regulators will be focused on cost-to-benefit ratio of capital expenditures, and not necessarily on utility’s revenue growth potential

– Will regulators recognize societal benefits?

– Cost allocation issues between customer classes benefiting from technology

– Regulatory support essential for creation of new services envisioned from emerging technologies

– February 2007 NARUC Resolution --guidelines for state commissions seeking to deploy “cost-effective AMI includes consideration of “intangible benefits”, timely cost recovery of AMI expenditures, and accelerated cost recovery of existing metering infrastructure to generate cash for AMI deployment

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Challenges (con’t.)

• Customer involvement and support

– Early Pilots -- too early to tell whether customer involvement can be sustained year to year

– Uncertainty whether costs can justify benefits

– Question of whether technology will create a “digital divide” between higher income and lower income customers

– Will customers be better off with new technologies?

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Final Thoughts

• Experience from AMI pilots needs to be validated and tested

• Lessons learned from multiple Smart Grid initiatives needs to be shared – a collaborative information clearinghouse is being planned for establishment by DOE/EPRI

• Consensus on the value of advanced Smart Grid technologies will be required of all stakeholders (utilities, regulators, customers) for merits to be realized

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Robert W. GeePresidentGee Strategies Group LLC7609 Brittany Parc CourtFalls Church, VA 22304U.S.A.703.593.0116703.698.2033 (fax)rwgee@geestrategies.comwww.geestrategies.com