Navigant Research Blog

Smart Grid Vendors Embrace Life in the Big City

— December 2, 2013

Smart meter manufacturer Itron and smart grid networking provider Silver Spring Networks (SSN) have both recently embraced new smart city initiatives, becoming the latest vendors to focus attention on a market that is expected to grow to $20.2 billion by 2020, according to Navigant Research’s Smart Cities report.

Itron has joined Microsoft’s CityNext effort, which aims to encourage cities around the world to chart a new future where technology combines with creative ideas to do “new with less.”  The lofty ambitions of CityNext include bringing municipal governments, citizens, and businesses together to build more efficient and sustainable urban areas and do so at lower costs.  Itron’s focus will be on the intersection of energy and water – the nexus, as it’s known – where the company’s technology can be brought to bear to help cities better manage these two vital resources.

City of Light

Silver Spring announced a new network-as-a-service (NaaS) product as part of its smart city solution.  The new service offering aims to help cities avoid upfront capital and deployment costs, and it can become a foundation for adding new smart city applications over time.  The company says its smart city solution helps cities meet some of the key challenges they face in four areas: environmental sustainability, transportation management, health and safety, and economic growth.  The company notes that both Paris, France, and Copenhagen, Denmark, have chosen SSN for projects.  For Paris, the company is providing a new street lighting and traffic control program as the city attempts to cut public lighting consumption by 30% during the next 10 years.  Copenhagen chose the company to deploy a citywide network for connecting 20,000 street lights, which can be leveraged for future smart city services.

Both Itron and SSN join a long list of other smart city technology vendors targeting this market, including Cisco, IBM, Schneider Electric, and Siemens, among others.  (See the Navigant Research Leaderboard Report: Smart City Suppliers for our ranking of this group of companies).

With these initiatives, Itron and SSN are looking to broaden their reach beyond the U.S. market for smart metering and networking, which has peaked for now with the winding down of federal stimulus money.  Different opportunities lie elsewhere, and often the need is for solutions that solve urban problems not often found in the United States.  For instance, Itron is supplying new advanced water meters to areas of New Delhi, India,  in a project aimed at providing a continuous water supply where, before, water was only available for several hours each day.  In China, Itron has supplied smart water, heat, and gas meters, along with networking gear, for the Sino-Singapore Tianjin Eco-City – a city built with efficiency and sustainability squarely in mind.  We can expect to see more of these types of city-centric and integrated solutions in coming years.


Among Executives, Fears of Cyber Crime Rise

— August 23, 2013

According to Vito Corleone, “A lawyer with his briefcase can steal more than a hundred men with guns.”  That was 1972.  One can only wonder what he would make of today’s cyber thieves.

The recent Lloyd’s 2013 Risk Index makes it likely that Don Corleone would be right in the middle of the action.  To quote the introduction to this third biennial edition, “The findings are based on a global survey of 588 C-suite and board level executives conducted by Ipsos MORI for Lloyd’s during April and May 2013.”  The report summarizes priority and preparedness within each respondent company for a number of business risks.

Strikingly, cyber risk has risen from #20 in the original 2009 risk index, to #12 in the 2011 report, to #3 in the current report.  If this were the Billboard Hot 100, cyber risk would have a bullet.  The only corporate risks given higher priority than cyber risk are high taxation and loss of customers.  Respondents view cyber risk as more pressing than inflation, cost of credit, excessive regulation, and far more pressing than risks such as fraud, protectionism, or strikes.

The Lloyds study appeared in the same week that The Economist cover story was “The Curious Case of the Fall in Crime”.  As an example, The Economist reported that during 2012 there were only 69 armed robberies of banks, building societies and post offices in all England and Wales.  That amounts to one armed robbery every 5 days, over a population of 56 million.

From this evidence it seems there are fewer criminals, and those that remain have gone online.  Rob a bank?  That’s so last millennium.  Maybe the dearth of traditional criminals is another victim of aging Baby Boomers.  Or is it a predictable outcome of a generation raised on technology?  Regardless, the new criminal is savvy:  Why risk injury or death when you can steal millions from your balcony overlooking the Neva River?

Infrastructure? We Got This

Oddly, in the Lloyd’s survey, critical infrastructure failure comes in at #22 on the executives’ priority list, essentially unchanged from 2011.  Yes, #22 – behind failed investment, reputational risk, and internal oversight failure.  Even worse, the C-suiters rate their preparedness for infrastructure failure much higher than they rate its priority.  In other words, “It’s no big deal; we got this covered.”

Cyber security for utility infrastructure remains weak.  As this blog has often repeated, control systems security has yet to solve some key problems.  Yet in a 2010 presentation, Scott Borg, CEO of the U.S. Cyber Consequences Unit, pointed out that 72% of the U.S. gross domestic product (GDP) is directly dependent upon electric power.  Surely three-fourths of the GDP should rate higher than #22 on our hit list?

I could be an optimist here and be thrilled to see cyber risk at #3 priority.  Or I could be a pessimist and despair to see critical infrastructure failure at #22.  But instead I’ll take Door Number Three:  realist.  Cyber security is a critical element of critical infrastructure protection, so raising the profile of cyber risk is likely raise the profile of infrastructure cyber security over the long run as well.

One huge question remains:  How long is too long?


Great Britain Plan Scuppers Iceland Interconnect

— August 23, 2013

Iceland’s abundant geothermal and hydro resources make it an energy powerhouse. For example, energy-hungry greenhouses can be powered by geothermal energy, producing tomatoes, bananas, and other fruits in a cold climate.  It’s been proposed that Iceland could build out more generating capacity and lay a submarine high voltage direct current (HVDC) transmission line to export clean, low-cost energy to power-hungry cities in Great Britain.

According to Askja Energy, Hörður Arnarson, the CEO of Landsvirkjun (the power company that operates 13 hydropower stations and two geothermal stations across Iceland) said recently that a submarine interconnector to Europe represents “one of the biggest business opportunities Iceland has faced.”  However, Great Britain might take a pass on the opportunity to tap Iceland’s abundant resources.

How About a Datacenter?

On July 12, the U.K. Department of Energy and Climate Change (DECC) published a memorandum that lays out requirements for the geographical location of generating units that can participate in Britain’s Capacity Market.  “It is currently intended to restrict the Capacity Market to units located in Great Britain,” the memo said, “but this is subject to further consideration.”

Evidently the DECC wishes to build out Britain’s own infrastructure of smart grids and renewable generation first. The DECC recently announced plans to roll-out smart meters in 30 million homes. And according to the U.K. government’s Round 3 of offshore wind license announcements, the country aims to have 18 GWs of offshore wind by 2020.

At minimum, this will delay any plans for Iceland to build new generating units and an HVDC interconnector. In the meantime, perhaps Iceland will build more power-hungry datacenters that run efficiently on arctic cooling and cheap, clean energy.


Utilities Aim for Brilliant Grids

— August 14, 2013

There are generally two types of smart grid deployments:  those with smart meters only, and those that also implement distribution automation (DA).  The first has an automated metering infrastructure (AMI), a grid populated with intelligent endpoints that transform the utility’s  data collection.  The second transforms the way a utility tackles outages (and improves grid efficiency) by automating the entire distribution infrastructure – from the substation down to the new endpoints.  DA is the brains and backbone that enables and controls a neural network of power distribution.

The U.S. Department of Energy’s Smart Grid Investment Grant (SGIG) program has transformed around 10,000 distribution circuits to date.  As the SGIG program nears completion, vendors and utilities are taking aim at hundreds of thousands of aging, poor-performing circuits across the world.  And distribution automation will play a crucial role in upgrading these antiquated systems.

The Navigant Research report Distribution Automation analyzes and forecasts the global DA market, covering switchgear, intelligent electronic devices, communications, and popular systems such as integrated Volt/VAR (IVVC/CVR), fault detection/isolation, and feeder protection/control (FLISR).  Navigant Research forecasts that global DA revenue will grow from $6.3 billion in 2013 to $11.3 billion in 2020.  Reliability, a theme throughout the report, is more relevant than ever as utilities and regulators try to strike a meaningful balance between cost and benefits for smart grids.

Upping the Value

In a recent blog, I wrote about the outages during the tornados in Oklahoma.  A regulatory filing from OG&E shows a guaranteed utility savings of over $10 million in 2013.  (Not bad, since utility benefit estimates tend to be conservative.)  DA deployments will also reduce outage times –saving OG&E customers many times that amount every year.  Reduced outage time is a real benefit, but because the benefit of avoided outages does not affect rates directly, they cannot be included in the formal cost/benefit business case.  The Oklahoma Corporation Commission tracks outage durations in Oklahoma, and will find some great benchmarking tools in the SGIG reports to estimate customer benefits.

Lessons learned from smart grid deployments, backed by billions in Department of Energy (DOE) grants and company matching, are being tallied and molded into available best practices.  At the 2013 Smart Grid Distribution Automation Conference chaired by Navigant Research, the DOE presented initial findings on reliability improvements.  Data from four projects showed that the average outage duration dropped 18%.  The DOE findings suggest how utilities and regulators could consider the value of reduced outages.  More specifically, the DOE suggests using a value of service (VOS) coefficient of $373 per hour (technically per kilowatt-hour) for customers in the commercial customer class (that’s up from $250 in my previous blog).  The VOS coefficient is a metric used to describe the estimated average customer interruption cost.  An 18% improvement in VOS – reducing the annual outage duration from 100 minutes to 82 minutes – results in a combined annual total VOS improvement of $45 million for 20,000 commercial customers with an average load of 20 kW.

VOS improvements justify significant investments in DA.  Such proven reliability improvements are likely to result in favorable rate case rulings for more utilities as regulators are directed by their bosses – the customers – to modernize an aging infrastructure and allow utility investments in grids that are brilliant throughout.


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