An Ignoble Experiment

2. Consumers put clean energy above reliability

More than two-thirds of utility executives believe that the benefits of smart grids and smart meter deployments -- which include improved customer service, reliability and outage response -- will exceed original industry forecasts, according to a new global survey by Accenture. A large majority of executives surveyed (85 percent) also expect the industry's competitive landscape to change in the next five years, with more new entrants in the areas of energy efficiency and demand response, data services and distributed power generation.

The Digitally Enabled Grid survey of 54 global utility executives in 13 countries found that for 98 percent of the utilities represented, the smart grid is a natural extension of the ongoing upgrades to the electricity network, confirming that smart grid technology has become a core part of their investment strategy.

"To ensure the delivery of safe, reliable and affordable energy to consumers, utilities will need to make significant investments in grid infrastructure and technology, in order to accommodate new sources of supply and demand, such as electric vehicles, distributed solar power, microgrids and energy storage," said Jack Azagury, global managing director of Accenture Smart Grid Services. "Our research confirms that executives expect smart grid solutions to reduce the cost of grid maintenance and upgrades and improve the reliability of the grid, while allowing it to support new technologies."

Nearly two-thirds (60 percent) of the executives said that, for their company, analytics solutions will be the highest priority smart grid investment in the coming years. Among North American executives surveyed that number is even higher at 75 percent.

Further analysis by Accenture indicates that for a representative North American utility, an investment in smart grid analytics can result, conservatively, in an estimated $40 to $70 in savings per electric meter per year. The analysis shows that asset management analytics provide the greatest value, followed by grid operations analytics, revenue protection analytics and outage analytics. According to Accenture's research, utility executives share a similar point of view: 96 percent of global respondents rank grid operations analytics and 92 percent rank asset management analytics as the two types of investments that will create the most value from smart grid analytic solutions.

Unlocking the full benefit of smart grids requires an enterprise-wide view of systems and data through the integration of traditional IT solutions with the operational technologies required to manage the grid. The convergence of information technology and operations technology is critical to managing an increasingly complex and data-driven utility, but Accenture's research shows that the vast majority of utilities do not have the necessary capabilities to handle such complexity.

Global utility executives view access to the right IT skills as the most critical factor to managing and integrating increasingly large volumes of data, but only 25 percent feel they are currently well positioned to compete for analytic skills in the market. In addition, more than 80 percent say that current analytic capabilities such as data governance, data integration and analysis toolsets need some or significant improvement.

The path to a lower-cost and more reliable grid is not without obstacles. The future for utilities is becoming increasingly complex with increased competition predicted over the next five years in areas such as beyond-the-meter services, data-related services, and distributed generation. With these new technologies creating both opportunities and challenges, executives are evenly divided as to whether the technologies will drive up revenues or cannibalize the current business model: 43 percent of respondents believe that distributed generation will provide more upside revenue opportunities, 43 percent believe it will drive a reduction in revenue and 14 percent see no impact.

"Utilities will have to choose whether to embrace these developments as they emerge or attempt to control their impact through legislation and regulation," Azagury said. "The leading utilities will be the ones that embrace the potential offered by new smart grid technologies and adapt their business model to leverage these into new business opportunities for growth."

Accenture's research identifies the following actions for network utilities to help them position their businesses to realize the full benefit from the opportunities of the digital grid.

Review and renew operating models to support the new capabilities, processes and data provided by smart solutions.
Understand the drivers and barriers that can significantly alter the smart grid investment landscape, particularly trigger points that could result in a major change to your smart grid strategy.
Understand the new competitive threats and leverage these to position for growth with emerging opportunities.
Address the need for new skills, tools and capabilities requirements without compromising on asset and financial performance.
Leverage analytic capabilities to fully achieve the potential value of the digital grid.
Secure access to skills that blend IT and OT, which will be critical to addressing the opportunity associated with analytics.

For more:
- see this report

Read more about: Accenture, digital utility
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By Barbara Vergetis Lundin

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3. EIM to strengthen western grid reliability

More consumers are willing to pay extra to invest in and support alternative energy than to improve reliability. That is according new nationwide research from the Smart Grid Consumer Collaborative (SGCC) conducted by Market Strategies International. Specifically, the research determined that more than 60 percent of consumers are willing to pay an extra $2, $5 or $15 a month to support deployment of alternative energy, but less than 60 percent were willing to pay those amounts to improve reliability.

This can be attributed, in part, to a consumer mindset about the job of the utility itself. Consumers who believe that reliability is part of what a utility should deliver as a basic responsibility and competence will not be willing to pay extra for it. Further, given that consumers are receiving more positive messaging surrounding renewable energy and its environmental benefits makes it more attractive and worth the premium.

For expansion of clean energy sources, support ranges from a high of 67 percent supporting a $2 increase to 58 percent supporting a $10 increase. For solar generation, support is strongest for a $5 per month increase (65 percent) and lowest for $10 (51 percent). For reliability, willingness to pay is strongest at $2 per month (58 percent), and weakest at $10 per month (48 percent). In each case, support is higher at $15 per month than at $10 per month.

The research also revealed that consumers favor critical peak rebate pricing programs over time-of-use pricing programs. In particular, critical peak rebate programs continues to have a higher level of interest (55 percent) than a time-of-use program (43 percent), though interest in both programs is down significantly since previous SGCC research two years ago.

What has remained relatively consistent over the last two years is consumer awareness of smart grid. Currently, 53 percent of respondents have never heard the term "smart grid;" however, 54 percent of respondents who are aware of smart grid and its benefits are supportive, the results of which are consistent with past SGCC research. Another one-fifth (22 percent) say that they have heard the term but don't know what it means. Awareness levels are similar for smart meters: 48 percent have never heard the term and 17 percent don't know what it means.

Among those familiar with the term smart grid, 54 percent say that their general feelings about smart grid are favorable; 23 percent are neutral; 14 percent are unfavorable; and 9 percent don't know. General impressions of smart meters are about the same, at 53 percent favorable, 21 percent neutral, and 19 percent unfavorable. There are no significant changes compared to previous SGCC research.

The research results bear the need for continued education and outreach on the part of utilities, as well as other industry stakeholders.

"The results from this study illustrate the importance of promoting the understanding and benefits of modernized electrical systems to all stakeholders in the U.S.," said Patty Durand, SGCC executive director.

For more:
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Read more about: Smart Grid
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By Barbara Vergetis Lundin

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4. Smart homes becoming more accessible

The ISO Board of Governors has approved the design framework for a California Independent System Operator Corporation (ISO) energy imbalance market (EIM), which will allow western grid operators, known as "balancing authorities," to voluntarily participate in a real-time energy market that enhances grid reliability and responsiveness, effectively integrates renewable power and saves wholesale energy costs.

Credit: U.S. Census/Wikimedia Commons

"EIM marks a step forward in the West to more ably manage current complexities as the electric industry undergoes transformative changes to create a significantly cleaner energy network that enhances the utilization of renewables," said ISO Board Chair Bob Foster. "By leveraging the ISO's real-time market, a broad array of resources can be shared and economically dispatched. This strengthens grid reliability through enhanced real-time visibility across neighboring grids while matching energy needs with the lowest cost resources."

EIM partners and ISO customers will benefit from the frequent and accurate dispatching of EIM participating resources, which is based upon economic bids. Significant increases in the amount of wind and solar power in recent years require grid operators to hold flexible generation in reserve to account for the variability of renewable resources, which are dependent on weather conditions. Without an EIM, operators must rely on generation assets within their balancing authority for any last minute balancing.

The EIM design will enhance the Federal Energy Regulatory Commission (FERC) Order 764, which fosters better integration of renewables within electric regions. The ISO is already on course to implement Order 764 market changes in the spring of 2014. As such, the EIM will reflect those changes and include a 15-minute and a 5-minute market that dispatches across a wide area, automatically identifying and adjusting to find the best resource to meeting fluctuating demand. The EIM is expected to go live on October 1, 2014.

For more:
- see this report

By Barbara Vergetis Lundin

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5. ISO New England's system plan approved

The number of new smart home installations in North America is on track to reach 2.3 million in 2013 -- an increase of 66 percent year-on-year, according to Berg Insight. The strong growth is expected to last years, driving the number of new installations each year to 12.8 million by 2017. As a result, penetration of smart home systems in North American households will increase from just 3.2 percent at the end of 2013 to 16.6 percent in 2017.

A smart home electrical panel. Credit: Kuzmin.os/Wikimedia Commons

The European market for smart home systems is about three years behind North America in terms of penetration and market maturity, according to Berg Insights. In 2012, there were .5 million new smart home installations in Europe and installations are expected to reach just .7 million in 2013.

However, Berg Insight believes that the European market is on the brink of entering a strong growth phase similar to that of North America. Berg forecasts the market to grow at a compound annual growth rate of 78 percent during the next five years, reaching 8.7 million new smart home installations in 2017. Berg predicts the penetration of smart home systems in European households will increase from .4 percent in 2012 to 5.9 percent by 2017.

Home automation technologies have been around for decades, but have been a niche segment mainly for the affluent until recently due to the cost of traditional whole-home automation systems which have typically been in the tens of thousands of dollars. In recent years, more affordable whole-home systems have emerged, relying on smartphone apps as a primary user interface. This has enabled more user-friendly systems and price tags in the hundreds of dollars, which is making whole-home automation accessible to the vast majority of the population.

"Whole-home solutions…have already captured the lion's share of whole-home system installations in both Europe and North America. In addition to whole-home systems, smart home products that address just one functionality, such as heating control or security, are becoming more common. In fact, several of the most popular smart home systems on the market today are point solutions of this type," said Lars Kurkinen, senior analyst, Berg Insight. "Smartphone apps will soon be an integral part of the user experience for a number of household products. Alarm systems and thermostats are the most popular categories today, but the trend is spreading to a wide range of products as diverse as light bulbs, home appliances, wall plugs and garage doors."

For more:
- see this report

Read more about: smart home, Berg Insight
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By Barbara Vergetis Lundin

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