Navigant Research Blog

Coming to the Motor City: A Smarter Grid

— July 13, 2014

The smart grid in Detroit is about to get smarter – and so are utility industry executives exploring options for real-time grid data and analytics.  Distribution grid sensor developer Tollgrade Communications recently announced a $300,000 project to deploy its LightHouse sensors and predictive grid analytics solution across DTE Energy’s Detroit network.  The companies aim to demonstrate how outages can be prevented.

The 3-year program was selected as a Commitment to Action project by the Clinton Global Initiative (CGI) at the recent CGI event in Denver, where Tollgrade CEO Ed Kennedy took to the stage with former president Bill Clinton to discuss the project.  Tollgrade, Kennedy said, will make public quarterly reports on the project, beginning in 1Q 2015, identifying best practices and sharing detailed performance statistics.

Cheaper Than Building a Substation

With 2.1 million customers and 2,600 feeder circuits, DTE Energy has already begun piloting the system around Detroit, and Tollgrade says that it hopes to prevent 500,000 outage minutes over the next 3 years.  Because of the heavy concentration of auto manufacturing in the Detroit area, those saved minutes should translate into substantial economic benefits.  The system will leverage several communications protocols, including DTE’s advanced metering infrastructure communications network, reducing the startup cost and improving the return on investment.

The sensors will be placed along troublesome feeders as well as outside substations where older infrastructure increases the likelihood of outages.  Combined with the predictive analytics solution, the sensors cost just a few thousand dollars per location and could help DTE Energy avoid or defer replacing a million-dollar substation.  Both investors and regulators are sure to like those stats.

Predicting Change

Predictive grid analytics has been a hot topic in the industry for the last few years, but only recently have the prices of solutions and sensors fallen to a level where utilities can justify the cost to deploy them widely throughout the distribution network.  Navigant Research expects the market for distribution grid sensor equipment to grow from less than $400 million worldwide today to 4 times that amount by 2023.  (Detailed analysis of distribution grid sensors can be found in Navigant Research’s report, Asset Management and Condition Monitoring.)

Since its first meeting in 2011, CGI America participants have made more than 400 commitments valued at nearly $16 billion when fully funded and implemented.  The Modern Grid was one of 10 working groups this year; others include efforts in Sustainable Buildings and Infrastructure for Cities and States.

Another CGI Commitment to Action grant announced last week will fund a market-based, fixed-price funding program for solar and renewable technologies.  The Feed-Out Program from Demeter Power will support solar-powered carports with electric vehicle charging stations at a net-negative cost to the customer.  In other words, eligible businesses pay a fixed monthly fee to Demeter Power (lower than their previous monthly electricity bill) and their employees and customers enjoy free car charging while parked there.  Demeter will own and maintain the infrastructure.

The program will initially make financing available to commercial properties located in Northern California communities participating in the California FIRST property assessed clean energy (PACE) Program, which is offered through the California Statewide Community Development Authority.  Interested participants must register with Demeter Power Group to participate in the program, which is expected to launch in the first quarter of 2015.

 

To Win, Utilities Must Play Offense as well as Defense

— July 10, 2014

Since I’m originally from the Netherlands and spent several years living in Brazil, the semifinal results of this week’s World Cup soccer (or football, as we Europeans call it) matches have been disappointing, to say the least.  One thing that’s clear from the tournament ‑ one of the most exciting World Cups in my memory, by the way ‑ is that to succeed at this level, teams must play well on both ends of the field: offense and defense.  The Netherlands squad, the Orange, played superb defense on Argentinean superstar Lionel Messi, but failed to muster a goal in 120 minutes of regular and extra time and lost on penalty kicks.  As for Brazil, it played neither offense nor defense.

The same is true for utilities in today’s rapidly transforming power sector.  Playing defense – by sticking with established ways of operating and traditional forms of customer service – is no longer enough to succeed.  Utilities must also play offense; they must proactively develop new capabilities and innovative business models to thrive in a world of proliferating distributed energy resources (DER), greater customer choice, and rising competition from new players.

A Shifting Landscape

Widespread coal plant retirements, stiff renewable portfolio standards in many U.S. states, and the spread of renewable generation are all irrevocably changing the mix of generation assets while increasing the need for load balancing and frequency regulation on the grid.  Navigant forecasts that cumulative solar capacity in the United States will reach nearly 70,000 MW – 60% of it distributed – by the end of 2020.

At the same time, the U.S. Environmental Protection Agency’s (EPA’s) proposed limits on CO2 emissions from existing power plants will drive further changes in the generation landscape.  These limits will bring new natural gas capacity online, put upward pressure on wholesale electricity prices, and make demand response and energy efficiency programs key parts of the answer.

(Source: Navigant Consulting)

Today’s centralized, one-way power system is quickly evolving into an energy cloud in which DER support multiple inputs and users, energy and information flows two ways across the system, and market structures and transactions grow more complex.  The energy cloud is more flexible, dynamic, and resilient than the traditional power grid, but it also brings new challenges to a power sector that until recently has changed little in its fundamental structure for almost a century.

Lead or Lose

Facing declining revenue as customers consume less and produce more of their own power, utilities are faced with large investments to build new transmission capacity, upgrade distribution systems, and invest in new DER businesses.  Given these challenges, utilities must be adept at playing offense and defense.  An updated defensive strategy will entail:

  • Engaging with customers and regulators to understand customer choices vis-à-vis price and reliability
  • Improving customer service and grid reliability at the lowest prices possible
  • Finding equitable ways to charge net metering customers for transmission and distribution services
  • Developing utility-owned renewable assets to appeal to environmentally conscious customers

Playing offense is even more important.  Utilities must:

  • Create new revenue streams through the development of new business models, products, and services
  • Transform their organizations and culture in order to fully integrate sales, customer service, and operations
  • Upgrade the grid and operations to facilitate the integration of DER

These objectives can only be accomplished by implementing new business models that include developing, owning, and operating DER such as rooftop solar, customer-sited storage, and home energy management systems; providing third-party financing for DER; and offering new products and services focused on energy efficiency and demand response.

There is no going back to the old ways of doing business.  Utilities must lead – by playing both offense and defense – or they run the risk of being out of the competition.

 

Virtual Power Plants Harness the Power of the Energy Cloud

— May 29, 2014

Among the elements of the emerging energy cloud – i.e., the assembly of dynamic networks that can enhance the efficient allocation of distributed energy resources (DER) benefits across a broad customer base – virtual power plants (VPPs) are among the most powerful and flexible.  Enabling power providers to take advantage of economies of scale through aggregation and optimization, VPPs maximize the value of electrons flowing across the system.  Schneider Electric, which is among the long list of companies exploring the VPP opportunity, , likes to use the analogy of Amazon when discussing VPPs: while the store may be virtual, the assets delivered, whether books or CDs or electricity, are real.

The primary goal of a VPP is to achieve the greatest possible profit for asset owners while at the same time maintaining the proper balance of the electricity grid.

Navigant Research’s new analysis, which tracks spending on software networking products and services for VPPs, forecasts that the market will grow from just over $1 billion in annual revenue in 2014 to more than $5.3 billion by 2023.

Total VPP Vendor Annual Revenues, Base Scenario, World Markets: 2014-2023

 

(Source: Navigant Research)

Unifying the Cloud

Vendors such as Ventyx, a subsidiary of ABB, now offer asset performance software for managing assets, operations as well as smart grid analytics as a cloud-based software-as-a-service (SaaS) – the ultimate virtualization of our energy services.  Today, virtually every major regional power grid in the United States relies on Ventyx’s software analytics to manage complexity at the transmission level.  Yet the company is moving away from customized software solutions to a more standardized, unified smart grid architecture that reaches down to the retail customer level.

In May, Ventyx announced that it will roll out some of its product offerings via Microsoft’s Azure cloud platform.  Asset Health, the predictive analytics component of Ventyx Asset Performance Management, is already available as SaaS on the Ventyx website.  It’s offered under a single quarterly subscription fee, delivered via Azure and accessed from the customer premises using the Internet.  Its cloud-based demand response management system service, developed in collaboration with Deutsche Telekom, has also been commercialized at the T-City project in Friedrichshafen, Germany.  Additional Ventyx Asset Performance Management applications will be available in the cloud over the coming months.

This move is significant for the growth of VPPs because it will enable electric utilities and power generation companies to invest in smart grid functionality without costly investments in IT infrastructure, workforce, and ongoing maintenance.  According to Ventyx, the cloud model is also highly configurable, highly secure, and highly scalable.

Navigant Research’s webinar, “The Energy Cloud,” will explore VPPs and other elements of this emerging distributed architecture, on June 3rd at 2 p.m. ET.  Click here to register.

Taylor Embury contributed to this blog.

 

For Utilities, New Value from DR

— May 8, 2014

After an active 2013-2014 season for demand response (DR), including a summer full of activations that spilled into September and the most winter dispatches ever, the industry has been wondering how DR customers will respond and how they can hedge against weather and price risk. At the Peak Load Management Alliance (PLMA) Spring Conference in Denver, multiple sessions addressed these concerns.

A panel of speakers from investor-owned utilities, including Duke Energy, Baltimore Gas and Electric (BGE), Pacific Gas and Electric (PG&E), Tucson Electric, and Xcel Energy, discussed DR program trends and customer experiences.  The most eye-opening comment came from Andrew Hoffman at PG&E, who noted that the company’s studies have shown that DR customers who participate in actual DR events exhibit higher customer satisfaction than customers who do not.  This somewhat surprising finding may be attributed to those customers feeling a sense of achievement in being part of the solution to an energy problem.  There is certainly a tipping point, beyond which customers may feel they are participating in too many events, but it is helpful to consider that DR is not an immediate turnoff.

The DR Effect

The most out-of-the-box session considered how DR could be used as a hedge against extreme weather impacts on electricity and natural gas markets.  The polar vortex this winter led to tremendous spikes in prices, which hit both energy suppliers and end users.  Utilities and suppliers typically purchase financial hedging instruments, like swaps and options, to cover themselves in unusual temperature circumstances.  Brian Beebe from Swiss RE posed the question of whether these entities could also employ DR as a physical hedge in those situations.  This theory holds new sources of potential value for DR in the financial and insurance industries.

Breaking away from the utility mindset, a panel of competitive energy suppliers explained their DR offerings and how they combine them with commodity products to increase customer loyalty and satisfaction.  Constellation has a suite of solutions for commercial and industrial customers to reduce supply bills through DR and energy efficiency.  Reliant offers Nest thermostats to residential customers and has plans that include free nights and weekends, akin to cell phone plans.  TriEagle Energy partners with ecobee and Weatherbug to provide energy management services.  Innovations in business models will flow more from these types of companies than from the utilities directly because they have the freedom to experiment and the profit motive to take the risk.

Spring is a good time to reflect on the winter’s activity and ponder the summer’s impending action.  Then, we can do it all over again in the fall and see how our predictions played out.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Electric Vehicles, Energy Storage, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Smart Grid Practice, Smart Transportation Practice, Utility Innovations

By Author


{"userID":"","pageName":"Conferences & Events","path":"\/tag\/conferences-events","date":"8\/1\/2014"}