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Smart Grid Deployment Evaluations

Wired Group

Findings and Implications for


Regulators and Utilities

MADRI Meeting April 20, 2012


Wired Group

Preview Wire Group

 Wired Group Introduction


 Deployment Evaluations and Methodologies
 Findings: Benefits, Costs, Drivers, Impacts
 Implications for Regulators and Utilities
 Regulatory Trends

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Wired Group

Wired Group Introduction Wire Group


Visioning
 History
Goals Metrics
 Background
 Distribution
Strategies
Modernization
Optimize Best Practice Business
Perspective Adoption Case
Bang for
Buck

Evaluate Implement
Benefits Quantification Change Management
Effectiveness Review Project Management

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Wired Group

Deployments and Evaluations


Xcel Energy Methodology/Framework Development
46,000 customers Emerging frameworks
Full deployment (Customer to Power Utility business cases
Plant) on selected circuits
Regulatory orders, initiatives
Evaluation encouraged by Colorado PUC
Supplier white papers/studies
Complete and free rein

Specific Examinations
Duke Energy Ohio
Existing Research
800,000 customers (400,000 gas)
Guidelines (NIST)
Partial deployment on all circuits
Standards (IEEE; UL; AICPA, etc.)
Mid-deployment review ordered by Ohio
PUC upon initial approval in 08

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Wired Group

Benefit Quantification Wire Group


 Economic Benefits, Reliability Benefits, Costs
 Establish Value Propositions (hypotheses)
 Gather data
 Examine existing research
 Interviews (internal/external SMEs, suppliers, etc.)
 Pre-/post-deployment operational data queries; meter tests
 Translate data to $ (Fuel/O&M/Capital/Rev) or Cust. Minutes Out
 Associate Hypotheses to Systems, Costs
HAN AMI DM DA IVVC SM
*Strong resource: EPRIs
Methodological Approach
to Measuring Cost and
Benefits of Smart Grid
VP VP VP VP
VP VP VP VP Demonstration Projects
VP VP VP VP
VP VP VP VP
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Wired Group

Effectiveness Review Wire Group


 Customer Service*, Operational^, IT Risk~, Intangibles
 Establish Value Propositions (Hypothesis)
 Gather Data
 Market Research (Qualitative, Quantitative)
 Interviews/Process Documentation pre- and post-deployment
 Data Utilization/Systems Integration reviews
 Identify gaps from emerging best practices
 Provide options for consideration

*Strong Resource: The ^Strong Resource: The ~Strong Resource: NISTs


Environmental Defense Funds Smart Grid Maturity Model Guidelines for Smart
Evaluation Framework for from the US DOE and Grid Cyber Security
Smart Grid Deployment Plans Carnegie Mellon University
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Wired Group

Findings: Economic Benefits (Drivers)


Wire Group

All Other
Meter Reading:
Mostly
Manual reads
distribution
prior to
capital
deployment?
Insufficient on its
Distribution
own for strong
Efficiency (IVVC):
business case
Circuit Load
Circuit Voltage
Circuit Power
Factor
TOU Rates:
Participation Rate
Findings seem to indicate that the size Degree of behavior change
of anticipated benefits are consistently Recruiting & retention costs
being over-estimated in available IOU Benefit split between participants
business cases and non-participants
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Wired Group

Findings: Reliability BenefitsWire


(Drivers)
Group
How Prepared Should the Grid Be?
 CMO reduced ~ 20%
(60% from DA, 40%
from DM)
 Drivers: baseline
performance;
granularity; data
frequency
 At 99.98% reliability,
20% = 20 minutes
annually(!)
 Greater DA/DM value is
more likely in the future
(EVs, PV Solar)

Findings seem to indicate that reliability benefits will be noteworthy


but insufficiently large to be recognized by most customers
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Wired Group

Findings: Costs (Drivers) Wire Group

 AMI: Relative Capital and Technology Risk by Capability

Features
Communications
 All Other:
 Extent of
Deployment
 Employ 20/80
Rule!
See notes for this chart in the Appendix

Findings seem to indicate that the initial capital and ongoing O&M costs of smart grid
capabilities are consistently being under-estimated when compared to business cases
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Wired Group

Findings: Organizational/Operational
Wire Group
Formal change management is critical to maximizing Organizational
value of smart grid capabilities! Structures and
Capabilities
Adjusting budgets between departments to ensure
resources are available to maximize new capabilities Operational
Processes and
Building personnel capabilities and new skill sets Governance
Establishing new processes to take advantage of new
Data Utilization,
capabilities and data
Systems, and
Modifying incentives to encourage use of new capabilities Tools

Integrating systems and data to facilitate their use Customer


Programs and
Translating new capabilities into program and service Services
enhancements for customers
Failure to conduct formal change management is directly correlated with failure to
maximize the value of new capabilities
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Wired Group

Findings: Customer Services (Quantitative)


Wire Group

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Wired Group

Findings: Customer Services (Qualitative)


Wire Group

TOU Rates
 Customers dont want the additional responsibility
 Customers dont like being placed at risk
 Customers anticipate much greater savings for
behavior change than is generally available
 When presented with multiple TOU options,
customers most often choose those that fit
existing behaviors (Free Riders in DSM terms)
 The Texas experience

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Wired Group

Implications for Regulators, Wire


Utilities
Group
 Smart Grid investments are different!
 IODU* (business) performance is subjective as
well as objective
 New regulatory models may be called for
 If the value of smart grid investments is to be
maximized:
 IODUs need greater motivation than simply the
absence of disincentives
 Some rules/constructs need to change

*Investor-Owned Distribution Utility


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Wired Group

Smart Grid Investments Are Wire


Different!
Group

Traditional Investments in G, T, & D (Value is Black and White)


Customer
Fairly
Needed + + Commissioned = Value
Procured
Assured
Smart Grid Investments (Value is Highly Dependent on Choices)
Customer
Bang for Change Best Practice
+ + = Value
the Buck Mgmt. Adoption
Assured
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Wired Group

Performance is More Subjective than Ever . . .


Wire Group

Biggest Bang for Change Best Practice


Buck Management Adoption
(Strategy) (Implementation) (Optimization)

Structure and
Communications Data Access
Capabilities

Processes and
Volt/VAr Control TOU Pricing
Governance

Data Utilization and


Sectionalization Outage Information
Systems Integration

Customer Programs
Remote Disconnect DSM Designs
and Services

( . . .making the absence of disincentives insufficient to drive performance)


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Wired Group

Examples of Needed Rule Changes


Wire Group

 Disconnect for non-payment rules


 DSM program rules (IVVC satisfies DSM definition
but utility efficiency generally excluded)
 Net metering rules that compensate generation
owners at retail rates
 How to encourage customer service innovation?

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Wired Group

Regulatory Trends Wire Group


Distribution Trend State Regulator
Smart Grid benefit Oklahoma First smart grid authorization to
measurement Corporations include cost reduction performance
Commission rewards and penalties for IOU
Increased activism California PUC Required smart grid business plans
and set aggressive rules for data
access (including 3rd party access)
Smart Grid benefit Ohio PUC Above plus mandated IOU to complete
maximization and annual change mgmt. & program
transparency optimization plans (in deliberation)
Increased legislative Illinois Commerce Legislature approved law encouraging
oversight Commission IOUs to deploy smart grids with no
significant economic benefit measures
Increased judicial Michigan PSC Appeals Court overturned PSCs
oversight approval of DTE Energys smart grid
cost recovery and ordered benefit
measurement (April 12)
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Wired Group

Regulatory Trends Wire Group

Regulators Motivated
Increasing Customer Risk

to Measure Benefits

Increasing Utility Risk


Rider Rider w/Limits Rate Case
(Illinois, Texas) (Ohio, Oklahoma) (California, Nevada)

Utilities Motivated to
Measure Benefits

Are regulators/legislators moving to the middle?

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Wired Group

Best Practices in Value Maximization


Wire Group

 Establish goals and relevant performance metrics


 Get the rules and motivations right
 Make extensive efforts to maximize the use of new
data and capabilities
 In organizational capabilities, operating processes,
and systems (formal Change Management)
 In customer programs (DSM, Pricing), customer care
 Measure and report on progress!

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Wired Group

Wired Group Smart Grid Services


Wire Group

 Visioning (goals, metrics)


 Strategy (business case development)
 Implementation (Project Mgmt., Change Mgmt.)
 Performance Measurement
 Benefits Quantification
 Effectiveness Review (capabilities, processes,
data/systems, customer programs/services)
 Optimization Action Planning & Execution Support
(best practice adoption)

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Wired Group

Overall Observations Wire Group


 Utilities smart grid business cases are overly optimistic
 Reasonable payback periods are available, but
 Extensive efforts are required to realize anticipated benefits,
maximize the value of available capabilities, and minimize
payback periods for customers

Wired Group
Paul Alvarez, President
palvarez@wiredgroup.net
www.wiredgroup.net
720-362-3522 Office
720-308-2407 Mobile

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Wired Group

Notes to Costs Shown on Slide 9


Wire Group
Amounts indicated do not include fixed infrastructure capital costs.
*Distribution Monitoring capital cost estimate assumes transformer-based
sensing; the portion above the break indicates capabilities and costs that
might be duplicated with the installation of smart meters with certain sensing
capabilities. (Note that the use of meters as sensing devices is contingent
upon readily- and cost effectively-available data, which is in turn based on
communications infrastructure design choices.)
~Smart Metering capital cost estimates include communications-enabled meter
and premise-variable communications costs per premise.
^Demand Response capital cost estimates assume that customers purchase
home energy management equipment; amounts indicated consist of
equipment rebates likely paid by utility.

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