Navigant Research Blog

SAP to Resell Siemens’ MDM on Its HANA Platform

— April 14, 2017

The Announcement Is a Change in Direction for SAP

SAP has historically maintained an arm’s length distance from meter data management (MDM), which is responsible for the collection, storage, and processing of smart meter data. I have always been puzzled by SAP’s approach. The company’s IS-U product set is the undisputed leader in the utility billing software market, so its lack of enthusiasm for a complementary MDM system was surprising. A SAP MDM would allow for seamless integration from the communications headend system to the bill.

SAP has historically preferred a partnership strategy with various MDM vendors, working to ensure integration between its MDM systems and IS-U via its SAP AMI Integration for Utilities module. However, at its 2017 International Conference for Utilities, SAP announced SAP Meter Data Management by Siemens. Launching in 2Q 2017, the deal effectively makes SAP a reseller of Siemens’ EnergyIP MDM system. SAP and Siemens said they will align roadmaps to ensure the product evolves with utilities’ changing requirements.

SAP’s Drive to Sell HANA Is Behind This Change in Strategy

There are numerous drivers for this strategy. First, there is a convincing commercial argument. SAP’s reticence came at a time where it had no database product in its portfolio. Fast forward 7 years and SAP is now heavily promoting its in-memory database, HANA. MDM running on HANA is a compelling proposition for SAP.

SAP and Siemens also share similar visions for their go-to-market strategies. Both companies see a future with greater IT/OT convergence, where cloud-based integration of data from multiple sources allows for access across an organization.

A Match Made in Heaven?

SAP’s dominance in IT makes it an attractive partner for Siemens. Conversely, Siemens’ strategy to expand the functional scope of its EnergyIP MDM aligns with SAP’s HANA Cloud Platform (HCP) vision. Siemens intends to develop a highly scalable platform that collects and stores time series data from multiple types of connected devices, including wind turbines, EVs, solar PV, submeters, and other Internet of Things (IoT) devices. SAP wants HCP to be the platform of choice for this type of data.

At launch, SAP Meter Data Management by Siemens will be an on-premise solution. Yet, the roadmap includes integration with SAP’s Cloud for Energy to make EnergyIP fully compatible with HANA and a cloud-based MDM solution.

The choice of Siemens as SAP’s MDM partner is a no brainer. There is enormous potential to add value by creating non-conflicting use cases for its products—and the potential to reduce costs and complexity for clients.

Jemena Plots MDM’s Inexorable Path to the Cloud

Midsize Australian utility Jemena has been working with SAP as a development partner for MDM in HCP, and it has been running a project since 2016. With limited funds and no internal data scientists, Jemena historically struggled to open up its smart meter data across its business. As a result, users exported data from its MDM system into Excel for analysis.

The company wants to become more customer-focused and needed a way to use existing company data to create new business cases. For example, Jemena lacked the tools for marketing to create customer segmentations from consumption profiles or for engineers to profile transformer loads.

Now Jemena’s advanced metering infrastructure (AMI) data is uploaded to HCP from its MDM, allowing access across its business. As a cloud-based model, it offered what Jemena called a very low cost of entry into the world of meter analytics. Eventually, Jemena wants to intake AMI data directly into HCP, where it will perform data validation.

Jemena’s use of HCP for MDM is separate from the SAP/Siemens announcement. However, it provides insight into MDM’s seemingly inexorable move to the cloud.

 

Not Interested When Telcos Acquire Tech Companies? You Should Be

— April 12, 2017

A recent post on my LinkedIn news feed demonstrates how an emerging trend in the technology industry will affect the pace of utilities’ digital transformation. Crucially, it had little to do with utilities: it was the acquisition of data startup Statiq by Telefonica. Statiq’s specialty is the analysis of geo-locational and other consumer data to assist with online marketing. Telefonica has 300 million customers worldwide and is rapidly building up its advertising business.

On first reading, it seems to have very little impact on the industry: “telco giant buys advertising data business” doesn’t sound like the kind of headline that will grab the attention of many utility CEOs. However, “a network operator—as part of its digitization strategy—has acquired a data and analytics business to help it develop products and services beyond its core supply-based business model” sounds a lot closer to home.

Historically, the growth curve of analytics companies would follow a similar path: each company starts with a great idea to tackle a gap in the market, gains initial funding, grows a significant client base, then gets acquired by a tech giant. IBM, SAP, and Oracle have all made analytics-focused acquisitions over the past decade, and the trend shows little sign of abating. But one tech company buying another tech company should have little impact on end users. The technology remains commercially available and, one would hope, being part of a larger organization means that there will be sufficient development resources to improve the product.

Utilities Are Steadily Becoming Tech Companies

However, there has been a significant shift in the types of companies investing in technology startups. Rather than tech giants swallowing up successful startups, utilities are getting in on the act. As we’ve said many times before, utilities are becoming technology companies. My colleague Alexandre Metz has analyzed different utilities’ digitization strategies, and both equity investments in and outright acquisitions of technology companies by utilities are becoming commonplace.

There will be significant implications for the industry should this trend continue: there are finite resources in terms of the number of successful startups, robust technologies, and excellent staff—particularly in the field of data and analytics. As a result, some technology-focused utilities will emerge with significant competitive strength. They will either sell these technologies to other utilities or, if it is to their advantage, keep the technologies for themselves. Does anyone expect Telefonica to share the market insights its Statiq acquisition will bring with its competitors?

Risks Abound When Utilities’ Digitization Strategies Involve Mergers and Acquisitions

So why refer to a telco-based acquisition at all? Telefonica brings into focus the fact that utilities are not the only companies undergoing a digital transformation. The competition for limited investment opportunities is heating up, and it will not be restricted to the utility industry. Utilities will have to compete against tech vendors and other industries to acquire at least some technology companies.

The main challenge for utilities is that they are not used to rapid change, and acquisitions have largely been restricted to other utility companies. There are significant risks involved in technology company acquisitions, to which most utilities have no previous exposure. Thus, technology acquisition will not be for every utility. However, those utilities that want to acquire technology companies must recognize the risks involved, understand how the target acquisition supports their corporate strategy, and ensure they have the requisite skills to succeed. Utilities must choose trusted advisors who understand their overall corporate strategy; have deep knowledge of target markets, companies, and technologies; can help identify important targets; have experience in technology-specific due diligence; and can support the successful integration of the acquisitions within their corporate structure.

 

Australia Moves Forward with Transactive Energy

— March 29, 2017

Last month saw an announcement of another Australian transactive energy trial, led by the Australian Renewable Energy Association (ARENA) and distributed energy resources (DER) management software specialist GreenSync. The transactive energy trials, which will be run alongside network operators United Energy and ActewAGL, will use GreenSync’s DER management software as a market platform. The trial marks another step in the evolution of DER management: from managing the physics of DER to also managing financial transactions. By trading grid services from their DER with local network companies, residential and commercial customers will benefit from direct financial incentives that GreenSync believes will help justify the investment in DER.

A Hotbed

Australia is a hotbed for transactive energy. There are numerous transactive energy trials underway in the country—certainly more per capita than anywhere else in the world. And there is good reason:

  • At 15%, residential solar PV penetration is high.
  • There is abundant sunshine in most cities.
  • Critically, residential PV makes up a significant proportion of all PV, so is relatively important and gets plenty of regulatory attention.
  • Network charges are high, due to the extraordinarily long distances power has to travel for relatively small numbers of customers.
  • Blackouts are not uncommon—a recent heat wave in South Australia caused a surge in demand that could not be met by existing thermal generation led to the market operator to demand 100 MW of load be shed.

Future Resources

Energy Networks Australia (ENA) and Australia’s national science agency CSIRO co-wrote the recent Electricity Network Transformation Roadmap, which details a series of integrated measures that will expand customer choice, decrease emissions, lower costs, and improve security and reliability. ENA expects residential DER participation rates of 40% by 2027, with 29 GW of solar PV and 34 GWh of batteries. By 2050, Australian generation is expected to be virtually entirely renewable.

DER are regarded as important future resources that—when aggregated—will balance the networks, reward their owners, remove the need for green subsidies, and reduce the need for network infrastructure investments.

While the Australian market has some unique characteristics that have encouraged the early adoption of transactive energy, the continued falling costs and improving efficiency of solar PV and storage will make a viable economic case in more and more geographies. It is vital that vendors develop trustworthy, robust, and scalable platforms if transactive energy is to mature from its current embryonic state to a widely accepted market mechanism. Over the next few years, regulators, network operators, energy suppliers, and DER vendors will all be watching the Australian market with close interest.

 

Understanding Peer-to-Peer, Blockchain, and Transactive Energy

— March 9, 2017

Coauthored by Richard Shandross

These days, clean energy media and the utility industry are abuzz with talk about peer-to-peer (P2P) energy, the idea that power generation and consumption can be fully decentralized. More specifically, startups in multiple places around the globe have latched upon the concept of utility customers who own renewable energy resources—prosumers—selling their power directly to their neighbors or others in their town or city. They promise platforms that empower customer choice, support local green energy, and sometimes even save or make the customer money in the process. It’s a very appealing idea, and the customer excitement it generates has not escaped the eyes of utility management. Many utilities are considering their own play in this space, and several have announced products and/or partnerships.

Invariably, the solutions involve blockchain technology. Blockchain is the epitome of decentralization, and some implementations allow users to enter into smart contracts as part of a complete transaction platform. Because of this pairing of P2P energy transactions with blockchain technology, many people equate transactive energy with blockchain P2P. However, transactive energy represents a broad set of activities that includes much more than this type of solution.

Possibility of True P2P Energy Transactions

A more fundamental question is whether true P2P energy transactions are even possible. Traditionally, P2P transactions occur when peers make their resources directly available to other participants without central coordination. There are a few select scenarios in which this can occur between prosumers and consumers (for instance, in microgrids that can be isolated from the main distribution grid). Yet, for the majority of customers, this is not how distributed power transactions will work. Two factors typically prevent transactions that are being labeled as P2P to deviate from true P2P:

  1. Unless the two parties run their own power line between their respective sites—which is highly unlikely—the power generated by prosumers and the power used by consumers must travel over a utility’s distribution network. The operation of this network is coordinated by the distribution utility, not the peers in the transaction.
  2. Because the distribution network is used, the prosumer will be paid for the power it exports, and the consumer will pay for the power it uses, according to the utility tariffs applicable to them. The two parties do not determine the price; rather, they use the blockchain platform to negotiate and implement their own, separate transaction. That transaction is in addition to, rather than in place of, the standard transaction with the utility.

In other words, the distributed nature of blockchain technology does not mean that everything about what is being called blockchain P2P is distributed. The purchase and sale of power on a distribution grid involves centralized control.

We will discuss situations in which a true P2P energy transaction is possible in a separate blog. But for the vast majority of cases, a different type of connection between prosumer and consumer is needed to achieve the goals of customer choice, support of local generators, green energy, etc. An alternative already exists, which is to intentionally include distribution and/or supply companies in the transaction. An example of this would be a model in which:

  • Consumers pay their current retail tariff—including taxes and distribution charge—or a shade below it (as an incentive) for locally sourced power. This tariff could incorporate pricing signals that incentivize behavior that supports grid operation.
  • The distribution network operator receives a small fee for the use of its infrastructure.
  • The supply company earns a small fee for operating the transactive platform—which could be based on blockchain to save on transaction and processing costs.
  • Prosumers are paid a price significantly above wholesale, but below retail.

Role of Blockchain and Transactive Energy

What about the role of blockchain in the electric power industry? That is a big subject, one that is currently under construction by many parties in the industry. Here are a few possible ways to employ blockchain—any of which could have a significant impact on the power industry or portions of it:

  • Data logging: For example, Grid Singularity in Austria is setting up a platform for monitoring and sharing of power/energy production data worldwide.
  • Asset valuation: Another Grid Singularity innovation, the blockchain would store immutable performance data for an asset.
  • Certificates: P2P market ledger for renewable energy certificate trading and purchase.
  • Bill payment: Would allow unbanked customers to pay bills via cryptocurrency. Another use would be third-party bill payments by NGOs, charities, relatives, etc.
  • Conditional energy supply: Smart contracts could be employed to allow condition-based choice of generation sources involving weather, prices, or other complex conditions.

Transactive energy and blockchain are both exciting, emerging technologies that are currently in nascent states. There is potential for them to be employed together to positive effect. However, they should not be equated with each other and, except in rare situations, they do not enable true P2P energy transfer.

 

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