Navigant Research Blog

Innovators Wanted for DER Solutions

— April 18, 2017

Coauthored by Ken Horne and Laura Vogel 

Distributed energy resources (DER) are a hot topic in the energy industry these days. Some industry players take it as gospel that there will be an inevitable transition from centralized electricity generation to dispersed sources of both producing and reducing power to manage the bulk of grid supply—including Navigant Research.

The Energy Cloud and Changing Relationships

The Energy Cloud will most likely be the result of a fundamental shift in the way electricity is generated and distributed. It will signify an evolution in the traditional relationship between stakeholders across the electrical grid, particularly between utilities and their customers.

The Energy Cloud

(Navigant Consulting, Inc.)

Such a change may occur in the long term, but there are plenty of challenges that need to be overcome that invite numerous opportunities for innovation from current and new players in the energy industry. The issues range from technical to economic, regulatory, and consumer-based.

Energy Cloud Issues: Opportunities for Innovation

(Navigant Consulting, Inc.)

Technical Issues Facing the Energy Cloud

On the technical side, many hardware and software questions need to be answered. It is not so simple as to throw DER onto the existing grid—which was designed for one-way power flow. If clusters of DER on one feeder or substation occur, which is more likely than perfectly dispersed resources, voltage and reverse power flow issues must be dealt with. Visibility to DER on the grid will be key, along with real-time state estimation for behavior of the grid under near-term changes—for example, a switching operation. Communication standards (such as OpenADR) for different vendors, devices, and resource types will be necessary so that the grid operators do not need to rely on each DER vendor’s proprietary system. Big data management will be paramount for optimizing transactions, telemetry, prices, and controls on the grid.

Capturing Value Streams in the Energy Cloud

Assuming all the technical hurdles can be met, policy and economics will determine the types of business models that will succeed in a DER environment. No two countries in the world or even states in the US have identical regulatory structures. Thus, in order to scale up efficiently, flexible business models that can capture multiple value streams will be required. In some markets, the regulated utility may be allowed to own and finance projects, while in others the utility may be prohibited from such activity. Measuring the value of DER will vary by market as well, so creative financing mechanisms will be necessary. Finally, a new type of transactional platform will be imperative to accurately enact deals between suppliers and consumers—or even from consumer to consumer—in a timely manner.

 

SAP to Resell Siemens’ MDM on Its HANA Platform

— April 14, 2017

The Announcement Is a Change in Direction for SAP

SAP has historically maintained an arm’s length distance from meter data management (MDM), which is responsible for the collection, storage, and processing of smart meter data. I have always been puzzled by SAP’s approach. The company’s IS-U product set is the undisputed leader in the utility billing software market, so its lack of enthusiasm for a complementary MDM system was surprising. A SAP MDM would allow for seamless integration from the communications headend system to the bill.

SAP has historically preferred a partnership strategy with various MDM vendors, working to ensure integration between its MDM systems and IS-U via its SAP AMI Integration for Utilities module. However, at its 2017 International Conference for Utilities, SAP announced SAP Meter Data Management by Siemens. Launching in 2Q 2017, the deal effectively makes SAP a reseller of Siemens’ EnergyIP MDM system. SAP and Siemens said they will align roadmaps to ensure the product evolves with utilities’ changing requirements.

SAP’s Drive to Sell HANA Is Behind This Change in Strategy

There are numerous drivers for this strategy. First, there is a convincing commercial argument. SAP’s reticence came at a time where it had no database product in its portfolio. Fast forward 7 years and SAP is now heavily promoting its in-memory database, HANA. MDM running on HANA is a compelling proposition for SAP.

SAP and Siemens also share similar visions for their go-to-market strategies. Both companies see a future with greater IT/OT convergence, where cloud-based integration of data from multiple sources allows for access across an organization.

A Match Made in Heaven?

SAP’s dominance in IT makes it an attractive partner for Siemens. Conversely, Siemens’ strategy to expand the functional scope of its EnergyIP MDM aligns with SAP’s HANA Cloud Platform (HCP) vision. Siemens intends to develop a highly scalable platform that collects and stores time series data from multiple types of connected devices, including wind turbines, EVs, solar PV, submeters, and other Internet of Things (IoT) devices. SAP wants HCP to be the platform of choice for this type of data.

At launch, SAP Meter Data Management by Siemens will be an on-premise solution. Yet, the roadmap includes integration with SAP’s Cloud for Energy to make EnergyIP fully compatible with HANA and a cloud-based MDM solution.

The choice of Siemens as SAP’s MDM partner is a no brainer. There is enormous potential to add value by creating non-conflicting use cases for its products—and the potential to reduce costs and complexity for clients.

Jemena Plots MDM’s Inexorable Path to the Cloud

Midsize Australian utility Jemena has been working with SAP as a development partner for MDM in HCP, and it has been running a project since 2016. With limited funds and no internal data scientists, Jemena historically struggled to open up its smart meter data across its business. As a result, users exported data from its MDM system into Excel for analysis.

The company wants to become more customer-focused and needed a way to use existing company data to create new business cases. For example, Jemena lacked the tools for marketing to create customer segmentations from consumption profiles or for engineers to profile transformer loads.

Now Jemena’s advanced metering infrastructure (AMI) data is uploaded to HCP from its MDM, allowing access across its business. As a cloud-based model, it offered what Jemena called a very low cost of entry into the world of meter analytics. Eventually, Jemena wants to intake AMI data directly into HCP, where it will perform data validation.

Jemena’s use of HCP for MDM is separate from the SAP/Siemens announcement. However, it provides insight into MDM’s seemingly inexorable move to the cloud.

 

Not Interested When Telcos Acquire Tech Companies? You Should Be

— April 12, 2017

A recent post on my LinkedIn news feed demonstrates how an emerging trend in the technology industry will affect the pace of utilities’ digital transformation. Crucially, it had little to do with utilities: it was the acquisition of data startup Statiq by Telefonica. Statiq’s specialty is the analysis of geo-locational and other consumer data to assist with online marketing. Telefonica has 300 million customers worldwide and is rapidly building up its advertising business.

On first reading, it seems to have very little impact on the industry: “telco giant buys advertising data business” doesn’t sound like the kind of headline that will grab the attention of many utility CEOs. However, “a network operator—as part of its digitization strategy—has acquired a data and analytics business to help it develop products and services beyond its core supply-based business model” sounds a lot closer to home.

Historically, the growth curve of analytics companies would follow a similar path: each company starts with a great idea to tackle a gap in the market, gains initial funding, grows a significant client base, then gets acquired by a tech giant. IBM, SAP, and Oracle have all made analytics-focused acquisitions over the past decade, and the trend shows little sign of abating. But one tech company buying another tech company should have little impact on end users. The technology remains commercially available and, one would hope, being part of a larger organization means that there will be sufficient development resources to improve the product.

Utilities Are Steadily Becoming Tech Companies

However, there has been a significant shift in the types of companies investing in technology startups. Rather than tech giants swallowing up successful startups, utilities are getting in on the act. As we’ve said many times before, utilities are becoming technology companies. My colleague Alexandre Metz has analyzed different utilities’ digitization strategies, and both equity investments in and outright acquisitions of technology companies by utilities are becoming commonplace.

There will be significant implications for the industry should this trend continue: there are finite resources in terms of the number of successful startups, robust technologies, and excellent staff—particularly in the field of data and analytics. As a result, some technology-focused utilities will emerge with significant competitive strength. They will either sell these technologies to other utilities or, if it is to their advantage, keep the technologies for themselves. Does anyone expect Telefonica to share the market insights its Statiq acquisition will bring with its competitors?

Risks Abound When Utilities’ Digitization Strategies Involve Mergers and Acquisitions

So why refer to a telco-based acquisition at all? Telefonica brings into focus the fact that utilities are not the only companies undergoing a digital transformation. The competition for limited investment opportunities is heating up, and it will not be restricted to the utility industry. Utilities will have to compete against tech vendors and other industries to acquire at least some technology companies.

The main challenge for utilities is that they are not used to rapid change, and acquisitions have largely been restricted to other utility companies. There are significant risks involved in technology company acquisitions, to which most utilities have no previous exposure. Thus, technology acquisition will not be for every utility. However, those utilities that want to acquire technology companies must recognize the risks involved, understand how the target acquisition supports their corporate strategy, and ensure they have the requisite skills to succeed. Utilities must choose trusted advisors who understand their overall corporate strategy; have deep knowledge of target markets, companies, and technologies; can help identify important targets; have experience in technology-specific due diligence; and can support the successful integration of the acquisitions within their corporate structure.

 

First (Nearly) Nationwide LPWA Network Now Available for Utility Applications

— April 4, 2017

On March 31, Verizon launched the first commercial LTE-Cat-M1 network across 2.4 million square miles in the United States. LTE-Cat-M1 is a cellular-based, low power wide area (LPWA) network designed to support the burgeoning Internet of Things (IoT) industry. Other LPWA solutions include ultra-narrowband systems such as SIGFOX, RPMA technology from Ingenu/Trilliant, the LoRA standard, and others.

Verizon said that the service will run at $2 per month per device (or less for large-scale deployments)—less than existing 2G or 3G cellular services that may be in use today by electric utilities. Chipsets and modules are available from Sequans, Telit, Qualcomm Technologies, Encore Networks, Link Labs, and NimbeLink. Modules from Qualcomm are also available with Verizon’s ThingSpace IoT cloud platform integrated.

In addition to low cost, LPWA solutions such as LTE-Cat-M1 are also known for very long battery life (10-20 years), as well as improved in-building/underground penetration. Click here to see an infographic highlighting the features of Verizon’s LTE-Cat-M1 offering. Rival AT&T has been trialing LTE-Cat-M1 in San Francisco since last fall and said in January that it would deploy to “most” of its network by mid-year and nationwide by year-end.

The LTE-Cat-M1 standard, along with the yet to be launched narrowband IoT (NB-IoT) and the GSM-based Extended Coverage-GSM-IoT (EC-GSM-IoT) standards, will be deployed via a software upgrade to existing LTE or GSM cellular networks. LTE-Cat-M1 is expected to be popular across North America, while many European cellular operators are more focused on the NB-IoT standard, which is expected to launch in 2018 along with EC-GSM-IoT.

IoT Comes of Age – for Utilities Too?

For power utilities, LPWA technologies promise to make widespread sensor networks an economic reality throughout the distribution grid. With costs as low as a dollar or two per year for some standards (SIGFOX and LoRA), depending upon data volume, utilities may finally be able to make a sound ROI argument for ubiquitous sensors.

As described in Navigant Research’s report, Low Power Wide Area Networks for Power Utility Applications, the LTE-Cat-M1 service may be appropriate for utility applications such as smart metering, distribution line monitoring and control, fault location, isolation, and restoration (FLISR), Volt/VAR optimization, smart solar inverter connectivity, and wide-scale asset management and monitoring functions.

Navigant Research expects the market for LPWA services and equipment among power utilities to grow by more than an order of magnitude over the next decade, from $23.4 million this year to nearly $280 million in 2026. The market is projected to be valued at more than $1.5 billion over this timeframe.

Total Utility LPWA Revenue by Region, World Markets: 2017-2026

(Source: Navigant Research)

 

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