Navigant Research Blog

ComEd Plans Major Smart Meter Push

— May 29, 2012

Chicago-based utility ComEd filed plans recently with its state regulator (Illinois Commerce Commission) to deploy 4 million smart meters throughout northern Illinois over the next 10 years in a long-range bid to upgrade its system.

If approved by ICC, approximately 130,000 customers living along the Eisenhower Expressway would have the new meters installed as early as the end of summer 2012.  ComEd would then install 370,000 meters in 2013 and the following year some 500,000 meters would be deployed.  From that point, the utility would continue connecting new meters across its territory at that 500,000 annual clip until 2021.  (The utility has already deployed more than 131,000 smart meters in a pilot project that was completed in May 2011.)

The ambitious meter deployment – one of the largest in the country – would coincide with rate increases during the coming decade that will finance $2.6 billion in overall infrastructure upgrades, which include the new meter rollout.

ComEd expects, of course, to reduce operational costs by deploying the meters, which would be read remotely and not require sending meter readers to households or commercial sites.  The meters would also enable remote connect and disconnect of service, reducing the need to send a crew to a physical location for such purposes.  For customers, the new meters would enable them to take part in demand-response programs that could reduce their bills.

Clearly, ComEd has a roadmap to a full smart meter deployment, and now its cards are on the table.  But it needs to proceed with some caution here.  According to published reports, no one will be able to opt out of the deployment – at least not yet.  But if things proceed like they have in similar deployments in California and elsewhere, an opt-out program might be required.  As we’ve witnessed during Pacific Gas & Electric’s smart meter deployment in California, some vocal consumers won’t have anything to do with smart meters because of health-related fears or worries about privacy invasion.  And they were instrumental in getting PG&E to offer an opt-out option.  So, while ComEd’s plan may appear to be unfettered at this point, the potential for consumer backlash is valid, and the utility should have alternate plans – especially if the outcry is loud enough to stir local politicians.


Security in the Cloud

— May 29, 2012

Some myths just won’t die. Even today, if you mention cloud computing, inevitably somebody responds, “The Cloud is just too insecure to put anything in there.”

First, as I’ve mentioned before, there is no “The Cloud”.  There are many clouds – some public, some private, some shared, some hybrids of other clouds.  NIST Special Document 800-145 is an excellent definition of cloud computing.  If your computing environment meets that definition, you can rightly claim that you have a cloud.  If it does not, please don’t call it a cloud.

As for the claim that cloud computing is insecure, my reply is, “Compared to what?”  In two decades of cyber security work, I’ve examined several hundred large global corporations and seen first-hand the chronic underinvestment and shortcuts taken with in-house cyber security.  Nearly every conference that I attend includes a progression of cyber security officers lamenting their inability to get anything funded.  It’s not possible that those same people who cannot get anything funded have managed to deploy such wonderful cyber security in-house.

The most sophisticated cyber security for traditional closed networks with PC-based storage is beyond the reach of all but the largest companies.  Yet cloud vendors implement it as a matter of course because they spread the costs across a client base.  The incremental cost of adding one more client to a cloud is much lower than standing up a complete in-house environment.  Also, the continued existence of a cloud provider is much more dependent upon its cyber security than the continued existence of a utility.  So the investment case for a cloud vendor’s cyber security is easier to write.  Otherwise the company will fail.

Some of those expensive security features include:

What’s more, security teams at cloud vendors usually have a broader view of threats and vulnerabilities, simply because they see what is happening at many clients.  In-house departments often do not have this visibility into threats in the wild.

Some in-house IT departments may fear the loss of control that comes with any type of outsourcing.  That is understandable.  However it is equally true that managers of many in-house systems – AMI or otherwise –have taken shortcuts when deploying cyber security, betting on the relative isolation of the system to protect them – the now discredited security by obscurity.  Conversely, smaller utilities that cannot afford in-house systems face most of the same security threats as do large utilities.  And yet, it’s rare to hear a smaller utility cite security concerns as an obstacle to cloud computing.  This may have less to do with utility size and more to do with pragmatism.  And when a lot of smaller utilities operate in a single private cloud, it begins to look an awful lot like the operating environment for one large utility.  Cloud computing can provide a secure environment.

But does that prove that clouds are more secure than other environments?  Of course not.  Like anything else, good security depends upon how effectively it is planned and implemented.  But cloud computing certainly presents the opportunity to have a more secure system.  For smaller utilities, it may be the only opportunity.


Eye of the Storm: Why Utilities Can’t Ignore Social Media

— May 29, 2012

In the wake of Facebook’s belly-flop of an IPO, it’s a good time to update the evolving role of social media in the utility business.  The benefits in terms of customer service and brand reputation from improving emergency response and outage management using social media are well-understood.  It was made clear at the recent Social Media in the Utility Sector conference, in London, that utilities are also grasping the relevance of social media to broader changes in their business.  The conversational approach to customer engagement that characterizes social media is in tune with the transformation that utilities are already making to becoming more customer-centric businesses.  However, in the social media realm, consumers drive the conversation around their service providers and the utility has no choice but to become customer-centric.  The question for utilities is whether they become and active and trusted participants in these new conversations.

My role at the conference as chairperson was to set the context for a series of lively discussions as well as presenting the findings from our own Social Media and Utilities report.  Isaac Pigott, Communications Strategist with Alabama Power, delivered a presentation that provided insight into the use of social media and also connected with real life and death issues.  Pigott explained how Alabama Power used social media to help its customers following a disastrous storm in April 2011.  Over 30 tornadoes devastated the region within 14 hours, leaving 240 people dead and over 400,000 customers without power and many without homes at all.  Alabama Power was able to use Twitter and other tools to provide advice, reassurance and information on how it was progressing in the momentous task of restoring power to the stricken communities.  This clearly demonstrated the potential of such channels as a means of delivering speedy responses to public concerns and delivering up-to-date information on restoration work.  Simply asking for people to retweet important safety messages was a good example of social media’s ability to reach beyond traditional platforms.

It was also valuable to see how Alabama Power learnt as it went along how best to use these new tools.  This was a recurring theme of the event.  The use of social media is an emerging practice, with all organizations still finding their way in terms of the resource and internal governance requirements.  They are also facing the challenge of deciding which social media platforms they should focus on.

In the UK’s highly competitive energy supply market, utilities like British Gas, EDF Energy and E.ON are adapting quickly to the new possibilities.  However, the consumer focus of these energy retailers makes social media a more natural fit.  It’s a bigger challenge for the infrastructure-focused and still heavily regulated electricity distribution and water utilities.  One of the core issues for these utilities is how to make their engineers, who are the real stars of the operation, part of the dynamic and fast moving information flows of Twitter and other platforms.  The most oft-repeated advice at the conference was to trust people and to remember that the usual norms of corporate behavior still stand.  Embedding strong ethical principles in a communication culture is more important that an extensive and stringent rule list.

We often hear about how the smart grid is changing the utility business, but this is not the only driver changing the way utilities relate to their customers.  As with smart grid technologies, social media is moving utilities from a highly controlled environment based on one-way flows of information and simple relationships between suppliers and customers to a multi-stakeholder, multi-directional, multi-platform world, where control and communication lines are much less clear.


New Pathways for Advanced Batteries in the Southern Hemisphere

— May 25, 2012

According to the Pike Research Energy Storage Tracker, there are over 6,000 megawatts (MW) of grid storage installed in the Southern Hemisphere, most of which is traditional pumped storage.  Likely market suspects populate the list of installations – including Australia and South Africa – but the Tracker doesn’t tell the whole story of the role electricity storage can play in emerging markets like Chile, South Africa, and island nations across Southeast Asia.  Nor does it highlight the budding business case for battery storage in these emerging markets.  The debate around economic growth, utilization of domestic resources, and clean electricity generation presents an interesting opportunity for electricity storage, particularly advanced battery storage, in markets where grid conditions are unreliable, economic growth is unrelenting, and commitments to resource conservation are on the rise.  The value proposition of advanced battery storage – which is, to be sure, unproven at this time – could give emerging markets in the Southern Hemisphere inroads to the broader utility market globally.

With growth rates over 3% in the last several years, both Chile and South Africa have navigated the global financial struggle relatively well.  A handful of other countries display the same market conditions as Chile and South Africa.  Each serves as a driver for economic growth in its respective region and is building industries that support global infrastructure and commerce.  Meanwhile, utilities in both Chile and South Africa increasingly struggle to keep the lights on.  Here is where the evolving debate around economic growth and resource utilization could lead strategies for expanding the power sector, the lifeblood of economic growth, to a pivot point.

Innovations in solar, wind, and transmission infrastructure have expanded the menu of power generation options from which emerging economies can choose.  The economic development model, on the other hand, hasn’t changed significantly, leaving bulk energy generation, whether from fossil fuels or renewable sources, as the primary solution to accommodating rising electricity demand.  But the forces of social change, new financing models, and global drivers for cleaner environments have the potential to drive forward new power sector paradigms.  If the building blocks of the future grid in Chile and South Africa were distributed solar and advanced batteries instead of coal-fired power plants and long-distance transmission lines, the resulting power sector could exploit local, renewable resources and deliver them efficiently.

Distributed generation and advanced battery storage present a unique value proposition to both developed and developing countries in economic transition.  Likewise, these new power sectors could be ripe for additional technological innovation in 21st century, while preserving local landscapes, natural resources, and indigenous ways of life.

Ultimately, countries like Chile and South Africa present ideal conditions for dispelling preconceived notions about the market barriers to advanced batteries in the utility industry – high CAPEX, lack of empirical operations data, and unclear value streams.  But much of this potential hinges on the path the governments in Cape Town and Santiago take for power sector development.


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