Navigant Research Blog

No Love for Utilities in FCC Spectrum Auctions

— November 26, 2014

As a wireless industry analyst who spent years following the FCC’s monetization of spectrum via competitive auctions, I’ve been struck by the dramatic increase in spectrum values implied by the ongoing Advanced Wireless Services (AWS) Auction in Washington, D.C.  The sale of more than 1,600 licenses nationwide, which began November 13, has now raised more than $38 billion—a tally that has risen by more than $2 billion since I started writing this blog!  That’s 2 to 3 times the total analysts were calling for prior to the sale and implies values of more than $2 per megahertz per population unit (MHz POP) for paired licenses; some large markets are already going for $5 per MHz POP.

(Value per MHz POP is a metric commonly used to compare the values of various spectrum licenses; it is equal to the price of the license divided by the total number of MHz for a given license divided by the population of the licensed market.  Paired licenses come with two swaths of spectrum, one each for uplink and downlink, and are typically more valuable than unpaired licenses, which have only one spectrum swath.  For detail on the licenses currently up for sale, click here.)

To put that in perspective, in the last major spectrum auction, held in 2008, spectrum values leveled off at $1.22 per MHz POP.  And while the bidding is blind – we don’t know which companies currently hold the top slot for which licenses – rest assured that Verizon and AT&T are near the top of that list.  Smartphone penetration and data usage have grown stunningly over the past 6 years, and the top wireless carriers are willing to pay (almost) any price to ensure they can continue to meet demand.  Without adequate spectrum, they simply won’t be able to keep up.

What About the Grid?

In my current role, as a smart grid communications analyst, I can’t help but wonder what happened to the FCC’s oft-discussed plans to allocate spectrum to electric utilities for smart grid connectivity.  Proceeds from the current auction will go to support build out of a nationwide public safety communications network at 700 MHz; public safety organizations were awarded those licenses, free of charge, a few years ago.  The so-called FirstNet initiative is expected to provide interoperable communications for first responders (police, fire, EMTs) – but apparently, the FCC doesn’t consider the electric grid to be critical to public safety.

The Utilities Telecom Council (UTC) has lobbied for years to convince the Commission that the power grid nationwide is critical infrastructure, and that utilities struggling to make upgrades to ensure improved reliability and efficiency are in need of dedicated spectrum to enable the communications between new grid devices.  But it appears the last time the FCC seriously considered such a move was in 2012.  At that time, the Commission was dismayed by the underuse of 4.9 GHz unlicensed spectrum and considered awarding the licenses to utilities.  But in the end, it didn’t.  In 2009, the UTC asked for 30 MHz of dedicated spectrum, also to no avail.

The DIY Option

Some utilities have owned their own spectrum licenses in the past – but that was the exception, not the rule.  San Diego Gas & Electric had plans to build its own communications network using wireless communications services (WCS) spectrum a few years back, but it opted instead to sell the licenses for the San Diego market to AT&T.  Many utilities across the United States have used unlicensed 900 MHz spectrum for their smart meter deployments, and many cooperative utilities own licenses for the 220 MHz band.  Smart grid networking system vendor Tantalus offers a system that leverages that spectrum for connectivity in difficult terrain.

But utilities have been left on the sidelines as the government works to maximize spectrum utilization, promote rural broadband access, and ensure public safety organizations have the communications they need in times of disaster.  But a resilient, reliable, efficient power grid plays a major role in our nation’s ability to respond to natural and man-made disasters.  That would seem to be worthy of dedicated spectrum.

 

British Smart Meter Rollout Hits a New Snag

— November 24, 2014

There is another delay in the rollout of smart electric and gas meters in Great Britain.  The deployment of more than 50 million meters was expected to begin in the fall of 2015, but now that starting date could be up to a year later, meaning the fall of 2016.

The delay comes as the entity in charge of the communications system, known as the Data Communications Company (DCC), has said it is not feasible to meet the fall 2015 start date.  The DCC, which is run by outsourcing vendor Capita, blames the delay on U.K. government officials who changed the specifications that required redesigns for parts of the systems.  The delay is expected to add an additional $140 million to the expected $17 billion cost of the multiyear project.

This new delay follows an earlier postponement announced in 2013.  This new delay could mean that the mandatory completion target year of 2020 will not be met. However, the U.K. Department of Energy and Climate Change (DECC) maintains that the deadline will still be met.

Pushback for Vendors

For meter vendors and technology providers involved like Sensus, Landis+Gyr, and Trilliant, the new delay pushes out their delivery cycles and could negatively affect their financial pictures as well.

So far, the other large European smart meter deployment in France (as noted in Navigant Research’s report, Smart Meters) is still on schedule, with the installation of the first 3 million meters expected to begin sometime in the third quarter of 2015.

No doubt there is plenty of frustration among the parties involved in the British project, but what they plan to do is undeniably complex.  Connecting one type of smart meter, electric for instance, poses enough of a challenge, but connecting both an electric and a natural gas meter at the same time and expecting the communications elements to run smoothly is asking a lot.  Further delays, or at least a speed bump or two, are more than likely.

 

Eastern Approaches to Smart Grid Development

— November 20, 2014

Japan and South Korea have emerged as leaders in smart grid technology development and deployments.  On a recent trip to East Asia I noted some similarities and some marked differences between the two countries’ approaches and styles.

At Korean Smart Grid Week in Seoul, I spoke about global demand response (DR) trends.  The Expo hall for the conference was as big as any I’ve seen, including large players like Korean Electric Company (KEPCO), Samsung, and LG exhibiting enormous booths and showing off cutting-edge technologies.  There were also a plethora of smaller companies and startups displaying their innovations to challenge the status quo and create the next-generation electric grid.

Next, I traveled to Jeju Island, the so-called “Hawaii of Korea.”  I got to enjoy the palm trees and volcanic landscape only by bus as we traveled to the Smart Grid Information Center, where KEPCO laid out its vision of the grid of the (not too distant) future.

Then we caught a quick ferry ride to tiny Gapa Island, which is only about 1 square mile in size but has an immense amount of solar, wind, and energy storage packed into a microgrid test bed, complete with a state-of-the-art operation center.

All of the Above

Next I embarked for Tokyo.  Japan is undertaking an “all of the above” energy strategy after the Fukushima nuclear accident in 2011.  Restarting the country’s nuclear plants is still on the table, but Japanese companies and government agencies are also deregulating the retail electricity market and designing opportunities for renewables, energy efficiency, DR, and energy storage.

Both countries, and the companies within them, have a laser focus on energy storage as a key solution, which is not surprising given their level of technological advancement.  Grid-scale energy storage is still a few years away in the United States, but Japanese and South Korean vendors are intent on leapfrogging Western suppliers and exporting their expertise.

Hare and Tortoise

The two countries’ business cultures, however, are quite divergent.  South Korean companies tend to take an aggressive, American-style approach to forming a plan, executing on it, and tweaking it along the way.  For instance, the country opened its DR market in November after a relatively short design phase, and U.S. provider EnerNOC has already entered the fray.

Japan, on the other hand, has been studying DR for a few years and it will take a couple more years of pilot programs until the market is ready.  Japanese firms tend to take a much more measured approach to development, trying to perfect the model before setting it free.  In the long term, both methods may work; but in the short term, the real action is in South Korea.

These developments are outlined in the new Navigant Research report, Demand Response for Commercial & Industrial Markets.  The report was actually published while I was abroad, so it includes updates from the trip.

 

Massive Outage Highlights Bangladesh Grid’s Fragility

— November 11, 2014

On November 1, the Bangladesh power grid suffered a massive, country-wide blackout, which took well over a day to restore.  Only the most critical or prepared institutions and government agencies that had adequate diesel generation backup power had electricity, while the rest of the 160 million people in the country were totally in the dark.  The power outage brought much of normal life to a standstill, forced hospitals to rely on back-up generators, and even plunged the prime minister’s official residence into darkness.  Meanwhile, the garment industry and other manufacturers that represent 80% of Bangladesh’s exports were idled.

Initial reports suggested that the outage occurred when protective relays tripped at the interconnect substations between the India transmission grid and the Bangladesh transmission grid, where much of Bangladesh’s power is supplied.  While Power Grid of India, the India transmission grid operator, reported that its high-voltage transmission grid was operating normally, the Bangladesh Power Grid on the other side of the substation was down.  This sounds remarkably like the 2003 situation in United States, where much of the Eastern grid suffered an outage.

In the Dark

In my recent research, I have been looking into next-generation technologies and wide-area situational and visualization tools that transmission grid network operators are beginning to deploy to better anticipate and detect critical disturbances of the sort that likely led to this massive outage.  The Bangladesh outage was likely the largest on the Subcontinent since the Indian blackout in 2012, where two severe power outages affected most of northern and eastern India.  The July 31, 2012, India blackout was the largest power outage in world history, reportedly affecting over 620 million people — about 9% of the world’s population.  More than 32 GWof generating capacity went offline during this outage.

In the wake of that failure, the latest 10-year transmission plans in India call for the installation of over 1,300 synchrophasor phasor measurement units (PMUs) and associated analytics installed on India’s high-voltage transmission grid to manage sub-second disturbances.

The scope of the Bangladesh outage is yet to be determined, and it will require extensive transmission grid and generation forensic analysis, using available monitored information from the hours and minutes prior to the outage.  One can only wonder whether these next generation of PMU and synchrophasor analytics technologies, implemented on the Bangladesh side of the interconnected transmission network, could have prevented this crisis.

 

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