Navigant Research Blog

India’s Power Sector Moves into the 21st Century

— January 14, 2015

In December, ABB announced a $55 million project win in the Indian states of Behar and West Bengal.  ABB will install both transmission and distribution (T&D) substations, incorporating ABB substation technologies with fiber optic telecommunications systems and new substation automation systems.  As a part of an overall goal to meet growing demand, improve access, and reduce losses, the facilities will support generation and other transmission investments in Northern India.  And ABB isn’t alone – big wins in India have also been announced by Alstom and Tata Consulting Agency.

India has seen a lot of activity in terms of electric infrastructure investment over recent years, and the nation is on its way to becoming a global leader in the installation of smart grid technologies.  As my colleague James McCray describes, these Investments are benefiting from several large-scale efforts to expand electrification, reduce the environmental impacts of generation, and decrease power system losses.  In 2009, The World Bank and POWERGRID (India’s transmission operator) introduced the Fifth Power System Development Project, a series of transmission investment projects set up to bolster India’s then-troubled economy through providing resources for industrial and agricultural enterprises.   Now in its fifth year, the planned $16 billion program has funded regional projects in both Northern and Southern India.

Acceleration

In terms of expanding and updating its distribution grid, India’s central government has begun the second stage of its Restructured Accelerated Power Development and Reform Programme (also known as R-APDRP).   This two-phase project has supported individual state utilities in an initial stage of data gathering for information and planning, as well as the aforementioned second stage of new grid construction and upgrades, including advanced metering infrastructure and distribution automation rollouts.  Investments under this plan are expected to total around $10 billion.

If you haven’t noticed yet, the sums of money involved are tremendous.  The global smart grid market for distribution was forecast at $15 billion in 2014, indicating that if India is allocating between $10 to $20 billion (of the $26 billion total for T&D) over the course of a few years, that would make the country one of the world’s largest spenders, the United States, Western Europe, and China.  Yet, India’s Power Minister, Piyush Goyal, stated in November that India needed to put even more into its T&D infrastructure – $50 billion over the next 5 years.

The Big Shift

India has several primary drivers for investment: growing demand and a need to increase electrification; reduction of fossil fuel consumption (the majority of India’s electricity is coal-fired according to the U.S. Energy Information Administration, and the country wants to install more solar); and reliability (India has suffered heavily from rolling blackouts in recent years).  At the moment, India’s grid is constrained due to limited and aging infrastructure – some estimate that generation plants are utilized as little as 70% because of this.

Investing in new infrastructure and smart grid projects, India is targeting efficiency while simultaneously extending its grid.   For the time being, India will increase coal-fired capacity to meet its demand challenges, but the country is also promoting renewables both directly (through government investment) and indirectly as it improves its transmission infrastructure.  With these investments and states such as Gujarat leading the way in progressively supporting renewables, it is possible that India could soon shift from an underdeveloped energy infrastructure heavily dependent on fossil fuels to a leading example of clean and efficient energy at a national scale.

 

Outage Management Technology Looks to an Integrated Future

— December 30, 2014

First deployed in the 1970s, outage management systems (OMSs) were originally designed to incorporate outage notifications from external sources to create a map view of the outage and generate an optimized power restoration plan.  Today, with smart grids revolutionizing power delivery through telecommunications and automation, OMSs have evolved into something much more sophisticated.  However, it’s also become less and less clear what an OMS actually is.

Conventional OMSs understand the outage, determine the correct course of action to take, and issue switching orders for the control room operator and/or distribution management or supervisory control and data acquisition (SCADA) system.  Though these systems can be linked, each one typically maintains a separate database, meaning that no system holds a complete understanding of the network state or restoration process.  Now, vendors are combining outage management with distribution management and SCADA, creating what is often called an advanced distribution management system (ADMS).  Incorporating a single system map and database, ADMSs can manage the engineering grid with the restoration process in real time, resulting in faster, more informed action to restore power.

Real-Time Resilience

On the communications side, new OMSs may integrate real-time, two-way information from the customer call center, the interactive voice response (IVR) system, smart meters, mobile crews, and even social media.  This enables the system to update itself immediately upon the reception of outside information and exchange pertinent notifications and updates with mobile crews and customers.  Again, OMSs have traditionally not managed these different communications media; they’ve only exchanged limited information with them.  Now, due to proliferating open standards, the pace of this exchange has increased, and new platforms, such as social media, are increasingly involved.

Analytics solutions represent another game-changer for OMSs and grid resiliency/reliability efforts.  Analytics technology combines notifications, voltage readings, and outside sources, such as weather, to inform preventive maintenance efforts, increase the accuracy of damage assessment, and improve the efficiency of the restoration plan.  Analytics systems can be integrated into a combined DMS/OMS/SCADA, ADMS, or purchased as a separate overlay to enhance systems.

All Together Now

Navigant Research expects growth for standalone OMSs to decline as more utilities adopt ADMS strategies, but market demand for improved reliability and lowering outage costs will continue to drive adoption of products and services to support advanced outage management — analytics, customer engagement tools, and distribution automation. As Navigant Research’s report, Outage Management Systems, makes clear, these systems certainly aren’t what they used to be.  Not only are they more dynamic, reliable, and flexible, but they’re also used by utilities in new ways that require traditionally siloed departments that manage engineering, operations, and communications to work closely together.

Not all utilities will adopt a full ADMS solution from a single vendor—it’s likely that many will configure systems in a more integrated fashion and will move toward a combined management philosophy, where outage management is one application within a platform that manages operations, engineering, and even customer engagement during events.

 

Warily, Utilities Go Digital

— December 10, 2014

Utility customers are changing their behavior rapidly, increasingly viewing the utility much in the same manner they would their bank, cellular provider, or – even worse – preferred online retailer.  J.D. Power affirmed this in July with the publication of its 2014 Electric Utility Residential Customer Satisfaction Study.  Consumer engagement technologies are also detailed in Navigant Research’s white paper, Smart Grid: 10 Trends to Watch in 2015 and Beyond.  These other types of providers, the banks and the cellular providers, have at least one thing in common: they’ve completely rearranged their strategy and operating model around a growing digital environment.  But utilities by and large are behind in developing effective and user-friendly digital presences, and I would argue that this is largely due to not having approached digitization as a firmwide strategy.

What is digitization?  It’s a broad topic, including everything from advanced gathering and analysis of data to social media.  The slowest movers have been government and public service organizations, such as utilities, simply because they’ve had more or less inelastic demand and monopoly status.  But now deregulation and growing expectations are forcing utilities to improve their public image and provide services in a more competitive manner by enhancing historically low/declining customer satisfaction.  These changes include the ability to easily monitor all activity and make services changes online, incorporate services such as prepay and prosumer options, and develop specific and targeted web/mobile-based marketing campaigns.

Resistance in the C-Suite

A couple of barriers are keeping utilities from becoming better digital organizations.  Probably the greatest barrier has been the resistance of utility executives.  It’s no longer possible to assign an intern to maintain a Facebook page and call that a digital strategy – digitization needs to involve all parts of the firm, and will probably change the business model altogether.  Utilities are not only characteristically slow adopters of change, but also traditionally siloed both functionally and informationally.

At the heart of a digital strategy is the information that is gathered to guide it.  The utility must consolidate comprehensive internal and external information from distributed sources like smart meters, customer information systems, intelligent electronic devices located on the grid, social media, and weather reports, just to name a few.   If this information is located within different parts of the utility and structured differently than other types of data, it can be nearly impossible to analyze in one place, and utilities will only see a half-formed image of demand patterns and customer preferences.

Beyond the Web Site

Once this information is in place, however, the utility still faces a second and even greater challenge of determining if and how to restructure its offerings in order to provide services in a different manner.  This can trigger investments in reorganization efforts, such as human capital investment, cross-functional collaboration, IT purchases, and outsourcing.

It comes as no surprise that many utilities are reluctant to consider these sorts of reorganizations, as they already operate with relatively low margins and typically have restricted investment budgets.  In those cases, managed services can ease the cost of digitization through highly focused products and outsourcing.

Managed services companies can assist utilities in developing firmwide digital strategies and provide resources that allow them to do so at a lower cost (with less risk of faulty investing) than integrating internally.  Until recently, the majority of these companies’ services have been adopted for very specific programs and needs, but more competitors are ramping up to offer enterprise service models where customer-facing digitization only scratches the surface.   In our report, Smart Grid as a Service, Navigant Research provides an in-depth assessment of the utility IT services market globally.  It will be worth watching how this market forms as more utilities ease, or are shoved, into the full transition to digital.

 

Tug of War over Utility Customers Intensifies

— November 5, 2014

In the last few years, residential demand response (DR) has become a thriving market.  Recently, Constellation and Honeywell rolled out a service for all customers in areas that the companies serve designed to encourage consumers to purchase Honeywell thermostats and network them into Constellation’s platform.  Initially introduced only to Startex customers (a Texas subsidiary of Constellation) earlier this year, this service highlights the rising competition for energy customers.

Constellation claims that the program has the potential to shave upwards of $128 annually from customers’ electric bills.  Such services could help utilities reach energy efficiency targets as well as assemble an effective pool for residential DR programs.

There’s only one problem here, and it’s exacerbating tensions between utilities, energy service companies, and regulators.  The problem is that this type of program, also referred to as a hybrid DR model, blurs the lines around who exactly “owns” the customer, as well as who is providing the resource.

The New Disruptors

It seems natural for utilities to be receptive to the continued expansion in resources used to target electric customers for energy efficiency and DR programs.  But many utilities, particularly those in regulated markets, see this as encroaching on an established model in which the utility acts as the face of the service in all cases (regardless of who’s actually providing the service).  As utilities shift from vertical producers and deliverers of kilowatt-hours to being providers of electric services (the Utility 2.0 model), the general consensus is that they want to maintain their statutory ownership of their customer base.  Having already given up so much, it’s likely that utilities will put up a fight in holding onto at least this little bit of status quo and margin.

But that’s not how the many disruptive participants, which have evolved within the energy and utility industry or entered from the broadband and IT spheres, want to play.  They want the customer, too, either to expand their business and gain more margin or because they already own the customer through their primary business (think broadband providers).

Not Letting Go

Looking at it from an economic perspective, some argue that allowing non-regulated service vendors to compete will eventually favor the customer.  Others point out that, while an electric services model does have the characteristics of a highly competitive market, the fact remains that delivering electricity requires substantial and expensive infrastructure, therefore limiting the number of competitors, which could disfavor the end user.  Regulators have been understandably reluctant to institute any sort of rapid overhaul.

I’d argue that regulators and utilities are highly aware that they must change the way they do business in order to facilitate the transition of the energy industry to a lower-carbon state.  But it’s not surprising that they still want to defend their end-user relationships.  Customers like having a single point of contact for their energy services – not separate contacts and bills for delivery and energy efficiency.  Furthermore, as utilities lose revenue associated with dismantled vertical business models, energy efficiency and DR are among the few areas where they have the ability to supplement losses.  As hybrid DR models spread, it’s unlikely that incumbents will let their customer relationships go easily.

 

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