Navigant Research Blog

Rio de Janeiro’s System of Systems

— November 17, 2011

At the IBM Smarter Cities forum in Rio de Janeiro last week, I had the chance to go behind the scenes and take a first-hand look at Rio’s smart city project. My main impression is that the project represents one of the purest emerging examples of a smart city project that is simultaneously developing smart solutions on multiple fronts – natural disaster management, public safety, health, utilities, to mention a few – and is starting to achieve a true “system of systems” – nirvana in smart city terms. This level of integration and interoperability across city agencies – and the successes Rio has had so far – bodes well for the smart city opportunity not only in emerging markets but worldwide.

The City of Rio de Janeiro has accomplished this by deploying smart technologies ranging from broad, continental-scale weather tracking down to mobile device-enabled notification systems for potholes and burnt-out streetlights. The centerpiece, of course, is the Rio Operations Center, which features Latin America’s largest screen and dozens of stations that provide visualizations of real-time data feeds. Within the center, 35 city agencies work together to synergize their responses to city events. (One interesting detail is that the operators wear uniforms modeled after NASA that create a sense of camaraderie and homogeneity across the historically separate city agencies, which creates something of a spectacle.)

To provide an example of how this works: If heavy rains cause flooding in a specific portion of the city, the operations center coordinates teams that notify citizens ahead of time via text message, close down the streets, mobilize ambulances, and shut down electricity distribution systems in the neighborhood to prevent electrocution. These processes are all pre-determined via standard operating procedures (SOPs). On the city side, bringing all these agencies under one roof helps break the silos that perennially plague the smooth delivery of city services. And, on the citizen side, it certainly helps that Brazil’s mobile device and networks are exploding, providing the platform for vigorous smart city app development and citizen involvement.

But technology is only one part of the winning recipe for a smart city. One persistent barrier echoed many times at the event is that smart city projects often rely heavily on the vision and initiative of specific mayors and administrations, which typically face four-year election cycles. The timetables required for certain types of infrastructure – particularly those involving high-tech and high initial capital expenditures – don’t always fit neatly into mayoral terms. Indeed, Rio’s mayor, Eduardo Paes, who spoke at the event, described the challenges of making progress on the project despite his uncertain future as mayor. Selecting smart city technology measures that optimize in terms of high net-present value, ease of deployment within a tight timeframe, and high PR benefits for the mayoral office seem to be emerging as the most pragmatic smart city solutions that address this challenge.

What differentiates Rio from other smart cities is the added challenge of managing its favelas – shantytowns perched on steep hillsides throughout the city that have historically received little in the way of city services or regulation – and integrating them with Rio’s urban fabric. These areas are among the most vulnerable to disasters such as mudslides as well as important symbolic testing grounds for Rio’s ability to serve even its poorest citizens as scrutiny of the city mounts in the lead-up to the 2014 World Cup and 2016 Olympics. From the perspective of a smart city, the favelas also provide opportunities for infrastructural “leapfrogging,” installing smart systems that could catapult these portions of the city to levels found in the rest of the city using state-of-the-art technology.

All in all, though, the event provided a clear picture of the concrete progress that’s being made on the smart city front and, in particular, the unique opportunities afforded by cities in emerging markets.


IT and Operations Meet in Smart Grid Projects

— November 1, 2011

The evolving relationship between information technology and operations technology in utilities is a hot topic in current smart grid discussions.  The worlds of IT and OT teams have historically been distinct within utilities.  IT has been primarily focused on business process and customer management systems, while operational systems for managing and monitoring power networks have been the domain of operational teams, with only limited input from the IT department.  That situation is changing for a number of reasons.  

The role of IT in the rollout of smart meters, including the deployment of MDM and new customer management and billing applications, has enhanced its standing within the business.  It’s also becoming evident that realizing the benefits of smart meter deployments – such as flexible pricing, improved customer understanding, and the deployment of new services – requires a significant investment in IT.  These developments are driving organizational and cultural changes as IT and OT teams learn to work together to meet common goals.  The need to define and deploy new IT systems to support the smart grid is driving greater collaboration between IT and OT and is also providing a set of common objectives that can bring diverse teams together. 

I had a chance to explore these issues at the recent Distribution Automation Europe conference in London.  At the conference, several distribution network operators – including ESB Networks in Ireland, Helsingin Energia in Finland and Stedin in the Netherland – presented on the work they have been doing on network self-healing systems to reduce the impact of network failures.  There were also overviews of automation programs for MV and LV networks from SP Energy Networks in the UK, Vattenfall Finland, Alliander (the Netherlands) and Endesa and Gas Natural Fenosa and in Spain. 

I was keen to understand how an audience largely made up of distribution power engineers saw the role of IT.  As I listened to the speakers, it became evident that IT is having an impact on distribution network management at three different levels.

The first, and most obvious, impact is via the deployment of new IT systems to support increased levels of automation and intelligence in the network.  Many of the projects described at the conference covered engineering solutions requiring little or limited IT support.  However, as these trials move into larger scale deployments, IT will have a vital role in monitoring and managing a more automated network.  Deploying distribution automation and other smart grid technologies requires consistent, accurate and accessible data on the state of the network.  Several speakers alluded to the fact that this is driving investment in new or upgraded distribution management systems (DMS), as well as new outage management and asset management systems. 

The second and less tangible influence that IT is having is on the way engineering solutions are designed and deployed.  Utilities and grid operators must move away from a traditional project-by-project view of network engineering improvements to a platform perspective more familiar to IT projects.  The smart grid requires an architectural approach in terms of standardization and the use of common communication and integration platforms.  The increased adaptability required of distribution networks also means that “loosely-coupled” integration will become more important at the network data level, allowing new applications and projects to share data in a rapid, cost effective and yet secure manner.

The third level of impact is organizational.  The importance of improving cooperation across IT and operational technology (OT) functions within utilities was evident in the discussion following my own presentation on smart grid IT.  How will IT and OT work together in future, I asked, and how can the historic barriers between departments be overcome?  Even in the smallish group of utilities present, several paths were being explored for IT/OT collaboration, including bringing IT innovators into the operations team and giving the CIO a greater role in helping define a smart grid strategy. 

These discussions about IT/OT relationships in Europe echoed similar conversations we have had with North American utilities during the research for the new Pike Research report on Smart Grid Enterprise Architecture.  This is an area that is gaining growing attention in utilities around the world as they adapt to the requirements for successful smart grid deployments.  How the relationship between IT and OT evolves will be one of the shaping factors for the utility business of the future.


European Smart Meter Projects: Steady Progress Through Choppy Seas

— October 7, 2011

I spent the week at the Metering, Billing/CRM Europe conference in Amsterdam, the largest gathering of suppliers and utilities focused on the development of smart metering in Europe.  The event provides an excellent opportunity to assess the progress of the European energy industry with regard to smart meters and smart grids.

This year’s conference had perhaps less of a buzz than last year, but this seemed to reflect a lack of surprises as much as anything else.  The temperature of the event is really set by how European utilities are progressing on their smart meter plans, their experiences with current projects and their plans for the future.  The general message from the utilities can be summarized as “Steady progress, choppy seas ahead.”  Financial crisis in the Eurozone hung like the autumn clouds over the conference hall, but it seems to have had little impact so far on the smart meter and smart grid programs in Europe. 

The announcement by the French government that it is going ahead with the rollout of 35 million meters provided a welcome message of confidence in the potential for the smart grid to be a key factor in the future development of European industry.  We also heard positive messages from the two major projects in Spain, led by Iberdrola and Endesa respectfully.  Together these will account for another 30 million meters.  Before the conference I’d also heard more about the impressive work EDP is doing in Portugal on its smart grid pilots; it will also be stepping up its meter deployments in the coming year.  Meanwhile, the U.K.’s government’s project to deliver smart meters to 27 million homes in Great Britain continues in its unique fashion, with initial tenders now let for the communications infrastructure (split into three regions) and the central information management component.  Germany is also making slow progress towards a national program and is seeing some initial results from its E-Energy projects and other pilots.  Other parts of Europe continue to progress at different rates, with the Nordic countries, for example, now beginning to show benefits from early deployments.

The Netherlands, where the conference was held, has had a bumpy ride to smart meter acceptance.  Initial attempts to legislate for compulsory smart meters in 2008 led to a backlash against what were seen as draconian penalties for non-compliance and concerns over data privacy.  Now it too seems to be on the road to a widespread mart meter rollout, albeit a cautious one with a strong emphasis on consumer rights and privacy safeguards.

There were also interesting examples from across Europe of innovative integration of renewable energy resources, demand management applications, and preparation for the growth in electric vehicle numbers. 

So there was a general feeling of steady, if not accelerated, forward movement.  Inevitably this is too slow for many impatient suppliers, but it has to be seen as a positive message given the broader economic outlook and the well-known potential stumbling blocks to large scale meter rollouts.  Delivering those large scale deployments, while managing customer expectations and concerns, is the obvious short- and medium-term challenge for the industry.  However, the biggest hurdle to realizing the broader European smart grid vision will not be met for a couple of years.  As the current and planned smart grid pilots come to an end, the move to large-scale deployment of integrated smart grid technologies will need a new approach to financing network improvements.  Everyone hopes that, at that point, the current economic crisis will be long resolved, but even so the European Commission, national governments, regulators and utilities will face tough decisions on investments, funding, and tariffs.


Allez Linky!: France Greenlights Smart Meter Program

— October 5, 2011

The French government has formally approved the deployment of 35 million electricity meters, starting in 2013 with completion by 2018.  Deploying the Linky meter to customers across France will cost an estimated €4.3 million ($6.2 million).  The government also confirmed that the cost of the rollout is expected to be borne by Électricité Réseau Distribution France and recouped through new network efficiencies.

The project follows the completion of a successful trial of 300,000 meters around Lyon and the Indre-et-Loire department, involving Atos Origin, Itron, Landis+Gyr, and Iskraemeco.  There had been concerns that the government might delay plans for deployment given the financial crisis in the Eurozone and a presidential election beckoning next year.  The announcement that the project will create around 10,000 new jobs will help sweeten the pill politically.

The major challenge in France will be to ensure consumer acceptance.  There is a perception amongst consumer groups that the meters are primarily for the benefit of the electricity industry (dominated in France by nationwide utility EDF and its subsidiaries) and that in the end consumers will be bear the price of the meters.  Only minimal support for consumer energy efficiency is required in the basic rollout and energy retailers can charge more for additional information services.  A lot more work will need to be done if the meter is to play a role in reducing household costs and improving energy efficiency. 

These challenges reinforce more general issues that are becoming evident in the European push to deploy smart meters.  The arguments in favor of smart meters are well rehearsed, but as European deployments accelerate, it’s clear that aligning the interests of all the potential stakeholders is no easy task.  In Europe, the European Commission has promoted smart meters as part of its overall energy policy – with the new technology seen as helping address energy efficiency and also market liberalization.  The basic concept is that if consumers are more aware of the price they are paying for electricity then they will both reduce energy consumption and also be able to find better rates from other suppliers in a deregulated market.  That’s the theory anyway.

But European policy has also promoted the disaggregation of energy suppliers, with distribution networks and energy retails provided by separate players or between regulated and non-regulated entities from single suppliers (as in France).

This separation highlights a disconnection between the goals of the distribution systems operators and the energy retailers.  Where this split is most developed – as in the United Kingdom – it raises issues as to how a holistic view of the requirement for smart grid investment can be achieved.  Smart meters in the United Kingdom are largely being cost-justified by the potential benefits to consumers and retailers.  Distribution system operators (DSOs) have been involved in the specification but it remains a secondary concern for them compared to the work that needs to be done on improving the network to support renewable integration, for example.

However in most of Europe, it is the distribution company that is responsible for smart meter deployment. As someone from a German DSO said last week, they can’t justify smart meters purely in terms of the benefits to network improvements, as they can achieve the same ends in a more cost-efficient manner (for example, by the strategic placement of many fewer network sensors).  That is not to say the smart meters have no benefits.  DSOs will happily use any data that can be provided, but they can’t make a standalone business case.  ERDF is reported as saying that it will take 20 years to achieve payback on the Linky deployments from improvements in network efficiency.

It is clear that if European countries are to meet the target of deploying smart meters to 80% of customers by 2020, then they need to focus equally and consistently on the two challenges of consumer engagement and providing incentives to network operators.  The need for a holistic view of the smart grid is a commonplace, but realising it within specific market structures is the real challenge.

Moving towards a European smart grid is a huge engineering challenge, but given the social, environmental and market issues also at stake it sometime looks more like an exercise in advanced plate spinning.


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