Navigant Research Blog

Why One-Third of Utilities Have No Smart Grid Strategy

Richelle Elberg — March 3, 2015

Black & Veatch (B&V) released its 2015 Strategic Directions: Smart Utility report earlier this month. The report shares data collected in a survey of decision makers at electric, water, and municipal utilities and commercial organizations across North America who were asked about the status of automation initiatives, analytics, and supporting communications infrastructure.

I was frankly a little surprised by some of the results. Those of us immersed in the smart grid industry tend to think that everyone is doing it, but in fact, that’s not so. While the majority of those surveyed are planning and investing in smart grid technology upgrades, as B&V COO Fred Ellermeier notes in this video, “Our report also identifies a surprisingly large number of organizations that have yet to move forward with smart initiatives.”

According to the survey, 63% of electric utilities are planning on building, upgrading, or replacing their communications infrastructure over the next 5 years. But 18% are not, and another 18% are unsure. Of those with plans, the top three reasons for the upgrades were (in order) to support smart grid technology, support mobile workforces, and replace obsolete technology. Yet, only 70% of electric utilities surveyed operate their own private communications network; another 10% weren’t sure, but fully 20% answered no. Also noteworthy: 37% are using public cellular connectivity for at least one application.

Patchwork

B&V highlights the transition to Internet Protocol (IP) technology and increased security requirements as underlying reasons for the need to upgrade grid communications networks—but the report also points out that, while some utilities are embracing a converged, shared infrastructure model for communications, nearly half are still building separate networks for relaying and other mission-critical applications. Longer term, I believe utilities will want to rely upon fewer, more robust communications networks for their many grid applications, rather than the current patchwork of application-specific connectivity solutions. For that to happen, however, long-term planners need to embrace robust systems—like Long-Term Evolution (LTE) or Multiprotocol Label Switching (MPLS)—that can accommodate bandwidth demands (for, say, video) and also signal prioritization for those mission-critical relays.

What really caught my eye, however, was that more than 34% of respondents indicated that they are not implementing smart grid or automation projects at all.

Smart Grid Implementation Survey

(Source: Black & Veatch)

The Unconvinced

According to the report, “Some utilities, understandably focused on the costs of maintaining and replacing outdated equipment, are unconvinced that smart grid technologies and automation are critical. Others are kept away by investment-return pressures … Black & Veatch finds that a surprising number of utilities, city governments and other service providers have no plans to implement smart grid projects, believing the advances are not applicable to their business model … Still others may recognize the benefits of automation but believe customers would resist paying for both the replacement of aging infrastructure and an automation layer on top of it.”

Utilities may be underestimating their constituents when it comes to their willingness to accept (and pay for) these advances. Educating consumers on how they benefit is something of a hurdle—one that can be easily surmounted, in my opinion, with an industrywide effort. To think that the average homeowner won’t understand the benefits of fewer—and shorter—outages and efficiency programs like time-of-use pricing or demand response is backward-looking and, frankly, condescending.

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