Navigant Research Blog

From Ownership to Outsourcing: An Evolution of AMI

— April 10, 2018

More than a decade after the earliest models of smart electric meters were deployed, the market for advanced metering infrastructure (AMI) is undergoing a major shift. Utilities have historically preferred to acquire their own physical assets and any software required to manage these assets, store all related data in house, and use their own staff to perform related business processes.

However, numerous utilities do not have capital to finance a full-scale deployment or lack the internal skills or IT infrastructure necessary to support smart meters. With utility revenues flattening around the globe, these financial concerns are only increasing. Some of these utilities—particularly smaller companies—are now looking to service-based delivery models to implement smart metering.

Market Landscape

Utilities are increasingly turning to these flexible deployment models to help them mitigate technology risks and reduce costs. In North America, Wisconsin Public Service and the City of Roseville, California recently contracted with Landis+Gyr and Itron, respectively, to manage various aspects of their AMI deployments. Internationally, energy retailers like Solarplicity (UK) and Trustpower (New Zealand) are demonstrating the demand for as a service solutions in deregulated markets.

Regarding these service-based delivery models, there are a number of potential configurations, including:

  • Data services: The collection, storage, and analysis of data in the cloud.
  • Cloud-based software: The delivery of software as a service or enterprise-hosted software.
  • Fully managed services: The delivery of physical assets and business processes as a fully managed service.

While the assets (meters) themselves will largely remain within the utility domain, there are a number of AMI operations being outsourced to third parties, including:

  • Smart grid communications (Silver Spring Networks, Sensus, and Trilliant)
  • Network headend systems and meter data management software (Itron, Landis+Gyr)
  • Smart meter data services (Opower, DataRaker, Trove, SAP, and C3 IoT)

Growth Enables Growth

Looking forward, the market for service-based delivery models will remain strong. This comes in part from three market growth considerations: new smart meter growth, replacement smart meter growth, and growth from emerging markets:

  • New: Navigant Research expects the smart meter market to remain strong and grow over the next decade, with global penetration expected to climb from approximately 39% at the end of 2018 to 57% by the end of 2027. These new deployments will facilitate higher levels of spending around smart meter communications and management; this leaves considerable upside in the market for service-based delivery models.
  • Replacement: The market for smart meters as a service is not just limited to new deployments. The earliest smart meter deployments will soon enter their first replacement cycle, as seen in Italy and Sweden. After a decade of direct ownership, some utilities are looking to the as a service model as a way to flexibly introduce new technology (e.g., the migration from an owned radio mesh network to public cellular).
  • Emerging Markets: In the US, most major investor-owned utilities and cooperatives have or are in the process of rolling out smart meters. This leaves an untapped market of primarily smaller public utilities, which to date have shown a propensity to adopt service-based delivery models for the ongoing management of those new meters. Emerging markets, including Eastern Europe, Asia Pacific, Latin America, and the Middle East & Africa, will account for the majority of new project growth; utilities in these markets are more likely to lack the requisite human and financial capital to deploy and manage their own smart metering network.

Considering the Future

When considering these market drivers, it should be noted that vendors are also paying attention and adjusting their product strategies to this changing business landscape. Perceptions and demand for these service models have changed at a pace that is truly astounding. While not the norm quite yet, the future of service-based delivery models is bright.

 

Postcard from Puerto Rico

— November 1, 2017

It has been more than a month since Hurricane Maria swept through Puerto Rico. The majority of this US territory remains without reliable electricity and is facing a crisis of unprecedented proportions. The lack of power in Puerto Rico, as well as the hurricanes that struck Florida and Texas, have turned up the heat on utilities, regulators, and the federal government regarding how best to rebuild power grids for greater resilience to protect against future outages during natural disasters.

While companies such as Tesla proclaim that Puerto Rico provides the perfect opportunity to deploy solar PV plus energy storage microgrids to rebuild regional power supplies, others argue the quickest way for restoration lies with fixing the traditional hub-and-spoke centralized transmission grid. Where does the truth stand? As is often the case, somewhere between these two extremes. Though I personally would invest more heavily into microgrids, I would not restrict them to solar energy because hurricanes can both damage and limit power production. Nonetheless, wind-powered mobile microgrids were part of the immediate response, smart dual-fuel generators should also be vital parts of the microgrid solution mix.

Can Lessons from the Military Rebuild Puerto Rico?

There are some important lessons that Puerto Rico can benefit from if it listens to the US military, a key responder to the crisis in Puerto Rico.

As I noted in a recent blog, the US Department of Defense (DOD) and data centers have been wrestling with how to maintain uptime while scaling back its reliance upon diesel generation. In a new Navigant Research white paper sponsored by Schneider Electric, I argue that innovative business models, such as microgrids as a service, may be the ticket to transforming industries reluctant to embrace distributed energy resources (DER) innovations. Likewise, military bases are following similar pathways forward, eliminating capital costs and financing upgrades through energy efficiency savings. Case in point is the Marine Corps Logistics Base in Albany, Georgia, which is the DOD’s first net zero energy military base.

The military microgrid market was viewed as an early adopter before budget issues helped stall the market. While a uniquely US market in terms of adoption for stationary bases, its effect is global since the DOD has sites scattered across the globe. Forward operating bases and mobile tactical microgrids can operate as standalone systems or interconnect with traditional grids and have been featured in recent conflicts in both Afghanistan and Iraq. A new report from Navigant Research notes that momentum for DOD microgrids is picking up.

Military Technology – Civilian Implications

The DOD has played a remarkably consistent role in commercializing new technologies that provide tremendous social benefits within the larger civilian realm. The Internet, created by the Defense Advanced Research Projects Agency (DARPA) in 1969, is perhaps the most ubiquitous of the DOD’s contributions to consumer markets. Along with accelerating the commercialization of traditional manufactured products such as aircraft, the DOD has also pushed the envelope on IT. These advances have been vital to all smart grid platforms, including microgrids.

Hurricanes and related rain and wind do pose challenges to all forms of power supply, including microgrids. Yet, developing a distributed and diverse portfolio of resources is always the best bet, whether one is talking about the wholesale or retail delivery system (note that Cuba’s reliance on microgrids limits outages compared to its Caribbean neighbors). While the Trump administration favors traditional energy pathways, the DOD has forged new ground in DER. One option for Puerto Rico could be to carve out a lead role for the DOD in rebuilding its power system, showcasing lessons learned from both domestic bases and remote power bolstering national security, while at the same time delivering the humanitarian services so direly needed by the local population.

 

Accurately Measuring Savings from Integrated Distributed Energy Resources Offerings

— January 31, 2017

AnalyticsEnergy efficiency and demand response (DR) programs have long been administered by utilities, third parties, and local governments using taxpayer or ratepayer funds. Most recently, integrated offerings that span energy efficiency, DR, and other program areas have become more feasible due to the advent of the smart grid. The integration of information and communications technologies with the power system is enabling a better balance between demand and supply side resources.

Integrated offerings are key indicators of a broader integrated distributed energy resources (iDER) future. Identifying program design and savings attribution methodologies for harnessing the benefits of these resources are critical to enabling public support for the innovators that will populate this future with integrated offerings that bundle value streams into streamlined solutions. While existing program design and funding constraints may not be able to seamlessly support these emerging technologies, avenues are opening and should be explored so as not to thwart the iDER future.

In a new white paper, Navigant presents a methodology to account for all of the energy and demand savings from an integrated energy efficiency and DR offering on an annual basis. The methodology separates the attributes of each program type while avoiding double counting of savings across programs. It also proposes methods to accurately portray the costs and benefits of each program.

Methodology Breakdown

Methodology BF

 (Source: Navigant)

Navigant recognizes that each jurisdiction has its own policies and protocols for operating an  iDER offering. Ongoing activities in New York and California provide relevant lessons in light of the states’ recent focus on iDER. Navigant used examples of these lessons to identify key considerations across three areas that integrated offerings focusing on energy efficiency and DR should consider when developing implementation plans:

  • The importance of data granularity for analysis
  • Exploring legislative channels to support integrated offerings
  • A focus on avoiding double counting benefits

Navigant draws the following conclusions from this assessment for consideration by relevant stakeholders, including utilities, other program administrators, regulators, customers, and third parties:

  • Well-established methodologies and protocols exist for quantifying energy and demand savings for energy efficiency and DR offerings across North America.
  • Advanced generation thermostats have a proven market track record of providing demonstrable benefits for energy and demand savings through established methodologies and protocols to verify and attribute savings.
  • Energy efficiency and DR programs are funded and evaluated through individualistic incentive budgets; a structure that confounds shared budgeting for cross-program functionality and hampers integrated offerings from capitalizing on their multiple value streams to gain market traction.
  • To avoid discouraging innovators from pursing integrated offerings, regulators and utilities without integrated evaluation methodologies should consider the methodology to develop interim polices and protocols for iDER offerings to count savings in two or more program areas until an integrated methodology can be developed through official channels.
 

New York’s Grid Restructuring Begins to Take Shape

— November 28, 2016

GeneratorAfter numerous rounds of conferences, discussions, and announcements, concrete results from New York’s Reforming the Energy Vision (REV) initiative have begun to emerge. Despite the initiative’s ambitious goals, limited on-the-ground changes have been made. The recent announcement that Green Charge Networks will deploy a network of 13 MWh of distributed energy storage marks one of the most significant developments to date and adds Green Charge to the growing list of companies driving the initiative.

The REV initiative aims for major reforms to both utility business models and market regulations to enable a transformation to a grid built around distributed energy resources (DER). Near-term targets include allowing for greater use of renewable generation and other DER to reduce emissions, improve the resiliency of the grid, and limit costs for upgrades passed onto customers. New York City and other urban areas face extremely high costs for replacing or upgrading underground electrical infrastructure, hence the initiative’s focus on using local DER.

Ambitious Goals

Perhaps the most notable project through REV thus far is the Brooklyn Queens Demand Management Program. This program seeks to defer a proposed $1.2 billion substation upgrade through a combination of 52 MW of demand reductions and 17 MW of DER investments. Most of the projects supporting this effort involve conventional demand response (DR), energy efficiency, and other demand-side management solutions. Utility Consolidated Edison is also looking at more reliable options, including distributed energy storage and microgrids. It first announced requests for information and proposals in March 2016. Following this request, the first major announcement of new DR capacity was released in August 2016, accounting for 22 MW of peak demand reduction capacity, with payments to providers ranging from $215/kW to $988/kW each year. This announcement is noteworthy for including distributed energy storage from leading providers Stem and Demand Energy.

The program has also established incentives for thermal energy storage, with system vendor Axiom Energy offering subsidized solutions to grocery stores throughout New York city. Through the program, customers can save on their monthly bills by using stored ice to provide cooling for refrigeration at times of peak grid demand rather than compressors; the utility is then able to reduce peak demand in constrained areas. These incentives are expected to result in 6 MWh to 8 MWh of utility-controlled demand reduction capacity.

Building on Success

The announcement for a further 13 MWh of distributed storage capacity from Green Charge Networks further builds on the progress made through the REV initiative. This progress positions New York as a leading state in shaping the structure of the emerging distributed energy ecosystem. A successful transition to a DER-centric grid requires a two-pronged approach. It’s necessary to both facilitate the integration of new technologies and also to reform utility business models so that all stakeholders—including utilities—benefit from the efficiency and resiliency that DER can provide. These recent developments have made New York’s efforts much more tangible, and it will be exciting to see what else the state has in store.

 

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