The smart grid in review
The past year has been a tremendously exciting and tumultuous period for the U.S. energy industry. Oil prices peaked and then bottomed out. Investments in renewable energy reached all-time highs and then began to decline as the U.S. economy experienced severe setbacks. Energy businesses began to consolidate due to the rapid fluctuations in the market and because of natural disasters that negatively impacted business, particularly the hurricanes that hit Texas. Still, the triumvirate challenges of climate change, increasing energy demand, and improving an outdated energy infrastructure remained as issues to address. Within this context, the development of a U.S. smart grid has steadily gained momentum and recognition as a holistic solution to the intertwining nature of the challenges facing the U.S. energy industry. Over the past twelve months, a broad consensus has developed amongst energy experts regarding the need for developing a smart grid and a number of first steps were taken towards the deployment of a smart grid. It has moved from being a debated ideal, to the first phases of implementation.
The following is a review of the current level of smart grid deployment and the key drivers, trends and barriers involved.
Defining the smart grid
Over the course of the past year, a consensus has gradually come together to identify and define the characteristics of the smart grid. In June 2008, the participants of the smart grid Implementation Workshop reaffirmed the "seven key defining functions" of the smart grid that had been developed by the smart grid Task Force of the U.S. Department of Energy. This affirmation has served as a basis for further discussion and collaboration towards creating a smart grid amongst key stakeholders. The seven functions of the smart grid will:
enable active participation by consumers
accommodate all generation and storage options
enable new products, services and markets
provide power quality for the digital economy
optimize asset utilization and operate efficiently
anticipate & respond to system disturbances (self-heal)
operate resiliently against attack and natural disaster.
It is important to note, however, that the seven functions do not constitute a definition of the smart grid. Indeed, a good deal of confusion remains within the energy industry regarding what precisely is the smart grid. The general public, as well, continues to hear a wide variety of news and opinions regarding the smart grid. To this effect, KEMA has developed its own definition of the smart grid: "The smart grid is the networked application of digital technology to the energy delivery and consumption segments of the utility industry. More speci?cally, it incorporates advanced applications and the use of distributed energy resources, communications, information management, and automated control technologies to modernize, optimize, and transform the electric power infrastructure. The smart grid vision seeks to bring together these technologies to make the grid self-healing, more reliable, safer, and more efficient, as well as to use intelligent meters and devices to empower customers to use electricity more efficiently. It also seeks to contribute to a sustainable future with improvements to national security, economic growth, and climate change."
Barriers
A number of obstacles exist that currently bar the full-scale implementation of a smart grid. The challenges range from regulatory and policy issues to technical and financial concerns. Determining what the appropriate regulations are for how utilities replace the existing grid with a smart grid is a difficult challenge. Regulatory policy needs to spur implementation and development in the short-term and at the same time, create a framework that is sustainable and farsighted. One particular barrier is the division in regulatory oversight of the transmission and distribution networks in the U.S., with the Federal Energy Regulatory Commission (FERC) regulating the wholesale transmission system and the states regulating distribution. Furthermore, current regulatory and ratemaking models base revenue flows on gross energy throughput that cannot account for the two-way flow of energy that a smart grid entails. FERC, the states and utilities will all need to work in coordination in order to overcome these regulatory barriers.
Communications is also a major barrier. A smart grid cannot operate unless all of the participants in the grid are able to communicate with each other. The challenge is to make the instantaneous submission and processing of real-time information happen via a common protocol or operating standard that is universally accessible. The development of the Worldwide Web offers an example of the benefits of harmonizing and unifying requirements into a common environment. The problem is that the communications network necessary for a smart grid must be implemented and incorporated into an existing communications infrastructure.
Traditionally, utilities purchase and own their communications systems. The result is that substations and transformers have become individual silos with specific communication abilities particular to each site. While this approach has its drawbacks, it has afforded the utilities a controllable safe and reliable communications network. Communications have been a stable commodity for utilities. However, in order to develop a smart grid, utilities will need to relinquish control of their communications. Naturally, there is a great deal of concern amongst utilities in switching to a third-party provider for communications. Will the new communications providers provide reliable service? What happens if a wireless network crashes? What if the network is too busy because of other users? These are valid concerns and answering them will be one of the significant challenges to overcome in order to fully deploy a smart grid.
An additional barrier to smart grid deployment is the current economic situation. In the past year, access to capital for infrastructure investments has become increasingly restricted. The level of investment the smart grid requires is significant. Estimates of the total cost of investment have ranged from $400 hundred billion over ten years (Al Gore’s estimate) all the way up to $2 trillion over twenty years (Brattle Group estimate). Many businesses and utilities are investing into research, development and implementation of smart grid technologies. However, due to the current economic recession, many utilities and businesses are hesitant to spend capital. As a result, government investment and incentives is critical. Securing a financial commitment at the federal level is a major hurdle to overcome due to economic and political considerations.
Key drivers
There are a number of key drivers for smart grid deployment that can be divided up into different segments. The primary internal driver for a smart grid is the fact that the current electric generation, transmission and distribution infrastructure is rapidly aging and is out-of-synch with new digital technology. The reliability outlook of the current grid is increasingly grim. Grid failure in the past has cost billions of dollars to the U.S. economy. There is a clear need for preventive action rather than corrective action when it comes to the current state of the grid. In addition, the core utility workers that are needed to operate and maintain the grid are also aging and getting more difficult to replace. The combination of these two factors, the aging of the U.S. grid and the aging of the grid workforce, underscore the need for the deployment of a smart grid.
Primary external factors include the development of a Federal policy towards creating a smart grid and the current state of the economy (the economy cuts both ways) which has greatly increased the likelihood of an economic stimulus bill in the coming months. There are widespread expectations that one of the primary goals of the economic development plan of the incoming Obama Administration is the continued development of a U.S. smart grid. The expectation of an economic incentive plan for smart grid technologies has spurred investment and research in smart grid technologies in the second half of the year and several notable partnerships (GE and Google, IBM and AEP) have recently formed in anticipation of more federal involvement.
In terms of active federal policies, the Energy Policy Act of 2005 (EPAct 2005) and the U.S. Energy Independence and Security Act of 2007 (EISA 2007) have served as two primary policy drivers for smart grid implementation in 2008. EPAct 2005 jump-started to offer smart meters to their customers, while EISA 2007 specifically described and laid out policies towards smart grid implementation. According to Title XIII of the EISA 2007, the Act calls for "increased use of digital technology to improve reliability, security, efficiency, and deployment of ‘‘smart’’ technologies for metering, communications of grid conditions and distribution automation." In addition, the Energy Improvement and Extension Act (EIEA), signed in October 2008, amended the Internal Revenue Code of 1986 to shorten the period of cost recovery from twenty years to ten. This tax code adjustment allows for utilities to take larger tax deductions on smart grid investments. The combined effect of these three acts has positively impacted U.S. efforts towards a smart grid. The table below offers a brief overview of the impact of certain sections of EISA 2007 that have been crucial to the implementation of smart grid technologies.
Trends
Over the past year, certain trends have emerged in smart grid deployment. The current trend for utilities is to leverage the value of AMI and smart grid technologies to achieve key business objectives. To date, a number of well established companies have begun advanced metering pilot programs. These programs are occurring throughout the U.S. and are not confined to a specific state or region. Looking at smart grid activities by region, it appears that the West Coast, Northeast, and Southwest (including Texas) have taken a more active role in implementing smart grid initiatives. Several Midwest states, particularly Michigan and Indiana, have also undertaken efforts to implement smart grid initiatives. However, the Deep South and most of the Midwest are lacking in this area. At the local level, the City of Boulder is attempting to become the first "Smart City." No other cities have announced "Smart City" plans.
An additional trend of particular importance is the continuing spread of Demand Response (DR) and Demand Side Management (DSM) programs throughout all regions of the U.S. The role of Demand Response within a smart grid is particularly crucial. DR programs induce customers to reduce loads during periods of critical grid conditions or periods of high power costs. In return for reducing load, customers receive payment. In other words, Demand Response programs serve as the primary function for rewarding utilities and customers for the efficiency of their smart grid investments. Demand Response programs have been adopted and implemented by most regional transmission organizations (RTOs) and the utilities that operate in the RTO jurisdictions. The continued penetration and widening scope of demand response programs throughout the U.S. is a positive trend for smart grid implementation. At the moment, the only RTO that does not have a demand response program is the Southwest Power Pool where DR is under consideration.
In terms of implementing smart grid communications technologies, there are three general approaches that are being used. These include a low-bandwidth Point-to-Point Radio Frequency setup or hierarchy, a medium bandwidth Radio Frequency Mesh and Broadband communications over power lines. While there is no clear obvious choice for a technology, there is a growing trend to use a Mesh network because of its self configuration and self-healing nature. Additionally, the ability to find alternate routing is a key feature. Early in the evolution, there was an interest in Broadband over power line, as a leading means to provide high bandwidth networking capability by injecting high frequency signals over the distribution network. Despite its ambition and capability, many of the original systems (such as Oncor, CenterPoint, Cinergy- Duke) that anticipated the costs of the system elements and ongoing maintenance and support, have placed these systems in a position of lesser favor.
Overall, it appears that smart grid deployment picked up over the course of the past year. There is a discernibly strong focus at the federal, state, and utility level on towards developing a smart grid. Furthermore, many small businesses and consumers are actively implementing energy efficiency strategies and technologies. KEMA has been working on a number of smart grid projects with utilities and it has become increasingly evident that a growing number of utilities are seriously examining the value proposition of the smart grid as it relates to extending their assets, meeting federal requirements and maintaining their load and generation capabilities. In reviewing the 2008 deployment of smart grid technologies, it is clear that certain utilities, cities and states are quickly becoming first adapters or first movers in smart grid implementation. The trials, challenges and successes of these first movers will be fundamental to the eventual full-grown implementation of a national smart grid. The tipping point for smart grid implementation has not arrived but significant progress has been made, especially in the past year.
Major Smart Grid Deployments in 2008
Pacific Gas and Electric Company’s SmartMeter Program
Goal: 10.3 million electric and gas smart meters by 2011 (meter/customer)
Program started in 2006 using Power line carrier technology (PLC) which is a proven technology but has limited bandwidth.
300,000 electric PLC meters have been installed
PG&E is now seeking to upgrade to more advanced AMI technologies
$572 million upgrade plan is currently awaiting approval from California Public Utilities Commission.
New Plan calls for Radio Frequency (RF) mesh technology
Mid-band technology: 50 to 100 kilobits per second.
PG&E experience with Smart Meter/Grid technology is a good example of the risks taken by early AMI adopters. Initial deployment of PLC meters was better suited to AMR then to AMI. PG&E quickly recognized this issue and has moved quickly to change meter deployment to advanced, higher-bandwidth technologies.
Alliant Energy’s Advanced Metering Infrastructure Program
Goal: 1.1 million AMI electric meters
Smart meter implementation began in March 2008 in Wisconsin with deployment picking up throughout the year.
Radio Frequency Hierarchy Point to Point Technology (fixed network)
Uses portion of 900 Mhz radio frequency band
Licensed by the FCC. No interference issues with other devices
Large coverage umbrella. Low risk of interference
Example of why RF Point to Point technology is a smart solution for rural service territory – large coverage umbrella, low risk of interference, high powered.
Duke Energy’s Indiana Smart Grid Initiative
Goal: 809,000 smart meters for Duke’s Indiana customers
May 2008 filed for regulatory approval. Waiting for approval.
Cost recovery is rated based
Five year deployment initiative calls for:
Investments in AMI and automated distribution infrastructureCombining power delivery hardware with sensing and monitoring technology to enhance grid performance
Full-scale, system-wide "Smart Grid" initiative. The initiative includes plans to invest in the complete stable of Smart Grid technologies and not just smart meters.
Oncor’s AMS Deployment Plan
In August 2008 the Public Utilities Commission of Texas (PUCT) approved full deployment of 3.4 million smart meters over four years
$2.21 surcharge for residential customers
$10 million for low income customers
$14 million for customer education
September 2008 concluded pilot project of 5,200 advanced meters in Rockwall, Texas
Pilot validated the meter, RF mesh technology, backhaul telecommunication capability, and ability to get 15-minute interval data from meters.
Oncor plans to have 160,000 advanced RF meters installed by end of the first quarter 2009.
Oncor and Texas are one the leading states and utilities in deploying smart meters with RF mesh technology. PUCT approval was key victory for Oncor and Smart Grid deployment.
Southern California Edison’s Advanced Metering Infrastructure Project
In September 2008, the California Public Utilities Commission approved SCE plan to deploy 5.3 million AMI meters
CPUC decision allowed for $1.63 billion in ratepayer funding
Home Area Network (HAN) system with wireless radio chips in meters
Proposed AMI technology is compatible withbroadband over power line and includes interface with a Home Area Network \
SCE attested that the HAN system and the meters it plans to deploy are being used by other utilities across the country
SCE estimated base of 11-20 million meters using the same communications technology
Pacific Northwest National Laboratory GridWise Demonstration Projects
Tested smart appliances in 112 homes for one year
Key findings:
Customers (including residential) will respond to 5-minute real-time prices
Able to cap net demand 15% less than normal peak via auction of available capacity to customers
Established that real-time engagement of customer DR is key
Key pilot project that demonstrated how consumers respond to real-time pricing.
About Automation Insight
Automation Insight is a complimentary monthly publication designed specifically for the utility industry and those serving the utility industry. For comments or suggestions on future article topics, please e-mail automation.insight@kema.com.
To receive Automation Insight by e-mail, please e-mail automation.insight@kema.com with 'subscribe' in the subject line.
Automation Insight is an opt-in subscription. KEMA does not sell or otherwise make public subscriber information and honors all ‘unsubscribe’ requests. To unsubscribe, please e-mail automation.insight@kema.com with 'unsubscribe' in the subject line.