The Growing use of Technology in the Utility Sector


Published on

Overview of Iberdrola USA
Increasing need for capital investment
Advanced metering infrastructure (AMI, also called smart meters)
Network automation

Published in: Business, Technology
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • Group EBITDA (earnings before interest taxes depreciation and amortization) was approximately $10 billion in 2011, with over 50% coming from its regulated businesses. Their U.S. business, comprised of Iberdrola USA, for which I am responsible, and their U.S. renewables business, combined, accounted for 13% of Group EBITDA.
  • Iberdrola USA is made up of three utilities, two here in NY, NYSEG and RG&E, and Central Maine Power, the largest utility in Maine. Our 4,000 employees serve about 2.4 million electric and natural gas customers, and our EBITDA and net profit for 2011 were about $800 million and $280 million, respectively. In 2011, we invested nearly $1 billion to upgrade and automate our system.
  • Like our nation’s highways and bridges, the utility industry faces an aging infrastructure. There are a number of reasons for this. One of them is the high commodity prices during the past decade which put pressure on customer rates and resulted in utilities putting a tremendous focus on reducing O&M and capital costs. It’s also important to note that the utility sector is unique in that investments made today have implications for decades, adding a layer of risk not seen in many other industries. Add to that the regulatory uncertainty of cost recovery and you get a sense for why utilities have been slow to invest and introduce technology to the grid. Today the average age of our transformers is 30 years, and for poles and conductors it is 40 years. Our infrastructure in the U.S. is, in fact, well behind our sister utilities in Spain, the U.K. and Brazil in automation and the use of technology. But I believe all this is changing and quite frankly we don’t have a choice. China, for example, is expected to spend $2 trillion over the next 5 years on technology and clean energy. From a policy standpoint, I don’t believe the U.S. can, or will, be left behind.
  • As you can see, based on estimates by the Edison Electric Institute, the U.S. utility sector as a whole is expected to increase spending nearly 50% from a decade ago.
  • At Iberdrola USA, our spending will increase more than 3 fold from just 10 years ago. We are, in fact, at the cusp of a technological shift in our industry.
  • By now I am sure you have heard about the concept of smart grid. At Iberdrola, we see the issue of smart grid affecting all aspects of our industry – from the generator to the consumer. I could spend hours focusing on any one of these areas, so what I will do today is discuss at a high level a couple of projects that we are involved in that demonstrate how technology will change the way utilities do business. So let me start at the top and talk about how our interaction with customers is changing.
  • In Maine, we are one year into the full deployment of automated or “smart” meters. This is a $192 million project, 50% funded by the Department of Energy. We have completed the installation of nearly 620,000 meters and are finishing up installation of the remaining network systems.
  • We are planning a second quarter rollout of a customer portal which we call “Energy Manager.” This website will allow customers to monitor their usage in 15-minute intervals, compare usage to other similar customers, set usage goals and get alerts when they use more electricity than targeted.
  • In Phase II of this project, working with the DOE, we will be doing several pilot studies on how energy information affects customer behaviors and usage. We will also leverage the system for several initiatives such as remote turn-on/turn-off and dynamic pricing to improve the overall customer experience. Just think about the situation today if you call a utility to have new service connected. You would probably be told we can be there Thursday between 9:00 a.m. and noon. The utility then needs to schedule and roll a truck to the home to connect service. At CMP, we can now press a button on a computer to turn on/off service. And beyond the obvious efficiency and customer benefits, the societal benefits are enormous. For example, smart meters will reduce our CO2 footprint by eliminating 2 million vehicle miles per year.
  • Customer awareness of the capabilities and benefits of smart meters is essential to its success and we, as an industry, are making progress in this area. Based on a nationwide survey done by JD Power and Associates, there is a strong correlation between customers who have smart meters and a higher level of satisfaction with utility service.
  • Also, when asked what the benefits of smart meters are, the most prevalent response from customers focused on: Price and Value (saves costs) Managing electricity usage (customer conservation)
  • Lastly when asked the extent to which they agree with certain statements posed to them, the two statements receiving the highest customer agreement were: I would like to monitor my usage at any point to control my bill, and I want the utility to suggest ways to lower bills When I first saw these results, it reminded me of a quote from the late Steve Jobs. When asked about the success of Apple he said, “We don’t ask customers what they want. It’s not their job to know.” The key message is we as utilities are responsible for demonstrating to consumers the value that smart meters/smart grid can and will deliver.
  • Smart meters will also help us tremendously with field operations. During storms, it will allow us to pinpoint outages, optimize crew response and restoration times, enable customers to know on a real-time basis the status of an outage in their area, and allow us to know when restoration is completed and an area can be cleared of crews. These are just a handful of ways that smart meters will enhance efficiency and the overall customer experience.
  • Beyond the meter, much work is being done to modernize and automate our electric T&D system; from the lines, to substations, to our control centers and to needed telecommunications networks. Two examples of these efforts at Iberdrola USA are automation initiatives for a major transmission project in Maine and a new energy control center we are developing right next door for our NY operations.
  • In Maine we are in the second year of a $1.4 billion transmission upgrade we call the Maine Power Reliability Program, or MPRP. When completed in 2015, our substations will be fully automated and in compliance with IEC 61850, which is an international best practice for substation automation and communication. Automation will enable remote monitoring and control of critical system assets, and allow us to address many system issues before an outage occurs.
  • The control center project next door is a $25 million multi-year project that will result in one integrated control center platform for all of Iberdrola USA’s operations in NY. It will provide for integrated GIS mapping, trouble/outage control and transmission, distribution and substation remote control. Once completed in 2014, the system will provide real-time transmission, substation and distribution situational awareness, that can detect issues before they result in an outage, and reroute power if possible; in essence a self-healing system. Couple this with the deployment of mobility applications for our field personnel and we will have a centralized, real-time view and control of our systems and our field resources, so that if an outage does occur, we can be more efficient in crew mobilization and customer notification.
  • As you can see, technology will clearly provide significant benefits to customers in terms of efficiency, reliability and service quality. But before those benefits can be fully realized, there are several issues utilities must address. First, utilities need to address both the age demographics of our workforce, where about 40% of utility employees nationwide are eligible to retire in the next 5 year, and the skills gaps that the utilization of new technologies creates. This means a significant emphasis on training and partnering with institutions like Binghamton University to ensure the next generation of utility employees are well prepared for the technological challenges of the 21st century grid. The issue of Cyber Security is a critical aspect of any new technology and cannot be underestimated, particularly in our sector given the essential nature of the products we deliver. Distributed generation and storage poses both real opportunities and challenges to the traditional utility model, particularly when, as I said earlier, investment decisions made today have implications for decades to come. Ensuring our technology investments are adaptable is essential. And last, but certainly not least, the regulatory environment in which we operate will go a long way in deciding the pace at which technological advancements occur. Aside from the obvious issue of providing a compelling cost/benefit assessment, probably the biggest issue we face is that policies regarding the use of technology/smart grid are largely dictated on a state-by-state basis. Smart meters are a perfect example. While fully embraced in Maine, NY (aside from a few pilots) has taken a wait and see approach to smart meters. Our goal is to use our experiences in Maine to convince regulators in NY that smart meters are a technology whose time has come. Given the similarities in geography and demographics, we believe that our experiences in Maine will be a good barometer of what one can expect in upstate NY, but ultimately we will need to work with regulators to convince them of the value this technology can provide consumers. Our goal is to develop a comprehensive smart grid solution across our entire system.
  • In conclusion, technology is coming to the utility sector, but it will be incumbent upon utilities to demonstrate the economic and societal benefits that technology can provide in the form of operational efficiency, reliability, energy management and new products and services. This will require a shift in thinking by utilities from the traditional operations focus to a service mentality so customers truly understand and utilize the benefits of a 21st century grid. And this is where partnering with government, educational institutions and vendors will be critical to ensure we put our best foot forward and develop the technologies and the workforce that will improve the quality of life for our customers. I thank you once again for the opportunity to speak to you today, and I would be glad to respond to questions.
  • The Growing use of Technology in the Utility Sector

    1. 1. The Growing Use of Technology in the Utility Sector©IBERDROLA
    2. 2. Agenda• Introduction/Overview of Iberdrola USA• Increasing need for capital investment• Advanced metering infrastructure (AMI, also called smart meters)• Network automation• Other considerations• Conclusion 2
    3. 3. About Us: Iberdrola Group• Headquartered in Spain • Strategic focus on U.S., U.K., Spain and Latin America• 109-year history • Leading wind producer with 6% of world’s installed capacity• 32,809 employees in 40 countries 3
    4. 4. About Us: Iberdrola Group 2011 EBITDA* ≈ $10 billion Regulated networks is a Regulated key focus Regulated – • – U.S. U.K. 11% 7% Regulated Over 50% of Group EBITDA – Brazil 12% in 2011 • Regulated – Spain U.S. (regulated and renewables) 20%Corporate Renewables contributes about 13%and Other 19% 1% Liberalized – Liberalized – Mexico 5% Spain 21% Liberalized – U.K. 4% * Earnings before interest, taxes, depreciation and amortization 4
    5. 5. About Us: Iberdrola USA• Customers served: 2.4 million• Service area (square miles): 34,000• Employees: 4,000• EBITDA: $800 million• Net Profit: $280 million• Investment: $950 million 5
    6. 6. Aging Utility InfrastructureHow did we get here?• Cost pressure from rising commodity prices curbs spending on operations and maintenance, capital investment• Risk of long-term investment decisions• Uncertainty of regulatory treatmentThe result:• Aging plant: • Transformers – 30 years • Poles – 40 years • Overhead conductor – 40 years• Behind other developed countries in use of automation and technology 6
    7. 7. Electric Transmission and Distribution Spending –U.S. Utilities $ Billion 40.0 35.0 30.0 25.0 20.0 15.0 10.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 7Source: Edison Electric Institute (EEI) Financial Department
    8. 8. Electric Transmission and Distribution Spending –Iberdrola USA$ Million 900 800 700 600 Maine Power 500 Reliability Project (MPRP) 400 Iberdrola USA 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 E 2013 E 2014 ESource: Iberdrola USA 8
    9. 9. The Concept of Smart Grid in Iberdrola Group Level 5: Smart Customers • Customers aware and actively participating Customers Level 4: Smart Energy Management • Management of end-use energy efficiency, aggregation, retail Distributors and Energy Service Companies Level 3: Smart Integration Functional level SMART GRIDS • Renewable energy, distributed generation, electric vehicles, electricity storage and aggregation Distribution Level 2: Smart Network and Processes Network • More automated 32-kilovolt and distribution lines with Operator self-healing capabilities • Monitored and controlled line transformers Information technology-supported monitoring process Level 1: Smart Transmission Network Transmission • Innovative transmission grid architectures Network • State-of-the-art transmission/power technologies Operator • Novel monitoring, control and storage methodologies • Shared electricity market simulators Electricity Level 0: New Generation Technologies (Distributed Generation) generation 9
    10. 10. AMI “Smart Meter” Investment Our AMI project in Maine is on time and budget• $192 million project Installs Reads (50% Department of Energy funded) 600• Major milestones: 500 • Meter installation complete 400 • Full meter-to-bill process implemented 300 • Enabled remote disconnect/ 200 reconnect capabilities 100• Current status: 0 • Completing final network installation Apr- Ma y- Jun- Jul - Aug- Sep- Oct- Nov- Dec- Ja n- Feb- Ma r- 11 11 11 11 11 11 11 11 11 12 12 12 • Controlled rollout of remote service orders • Customer web portal in place (second quarter 2012) 10
    11. 11. Energy Manager 11
    12. 12. Energy Information Pilot – Phase II• Department of Energy collaboration – study impact of energy information on customer use• Opportunity to leverage customer research to further our progress on several Iberdrola USA customer service initiatives: • Improve collections • Migrate customers to self-service options • Achieve best-in-class customer satisfaction• Development of dynamic pricing 12
    13. 13. Smart Meters and Satisfaction: U.S. 734 709 Satisfaction 649 630 Have smart Do not have Aware of smart Not aware of meter installed smart meter meter efforts smart meter installed effortsNote: Satisfaction is measured on a 1,000 point scale.Source: 2012 J.D. Power Electric Utility Business Press Release. National sample. N = 24,385 13
    14. 14. Customer Expectations Question: What benefits, if any, do you see with a smart meter? “It would save money for the power company, and hopefully reduce costs across the board” 41% Price and Value “It can tell you when you use the most electricity” 22% Energy Management 7% Meter Accuracy “It should be more accurate” 7% Customer Service 15% None “Fewer drivers have to come out to 11% Dont Know read my meter so I have fewer estimated reads” 18% Other 14Source: JD Power Smart Energy Study, July/August 2011 Central Maine Power residential customers N=333
    15. 15. Customer Interest in Energy Use Information Percent Agree with Statement 0% 20% 40% 60% 80% Would like to monitor usage at any point 68% so I can control my bill Want utility to suggest ways 74% to lower billSource: J.D. Power Smart Energy Study, July/August 2011 Central Maine Power residential customers N=575 15
    16. 16. Benefits of AMI on Outage Management Enables our customers to know their Pinpoint the "start here" point for our real-time outage status restoration through AMI data Able to verify areas are cleared before Automate outage reporting byleaving them during day-to-day outages leveraging AMI data GOAL ACTUAL RESULTS 5YR AVG CAIDI 2.18 1.97 Meet Goal 2.00 SAIFI 0.57 0.49 Meet Goal 0.55 SAIDI* NA 0.97 NA 1.10 * CAIDI: Customer average interruption duration index SAIFI System average interruption frequency index SAIDI: system average interruption duration index 16
    17. 17. Network Intelligence –Beyond Smart Meters• Network modernization, automation, remote control and supervision• New substation projects as well as substation modernization projects include remote control and supervision• Supported by a state-of-the-art control center which completes intelligence• Improved telecommunications to support automation and supervision 17
    18. 18. MPRP Smart Grid Technologies • IEC 61850 – Communication language for building advanced integrated substation systems • Substation Automation – System to automate the monitoring and control of critical power grid assets • Maintenance Automation – System to automate the retrieval of routine maintenance data to define conditional and preventative based maintenance plans MPRP Smart Grid Example: • Automates retrieval of event records from all affected devices throughout the system with uploads to corporate servers for analysis and diagnostics 18
    19. 19. NY Energy Control Center ProjectSingle, integrated Iberdrola USA control center platform• $25 million project • Full integration of energy management system, SCADA, outage management and Geographic Information System (GIS) • Unified trouble and outage distribution control center • Real time transmission, substation and distribution system information – issue detection before power interruptions • Online customer outage information • Improved crew mobility and dispatch 19
    20. 20. Other Considerations• Workforce implications • Age demographics – 40% retirement eligible in five years • “Skills Gap”• Cyber-security• Distributed generation/storage• Regulatory issues • Value/cost propositions • Differing state policies 20
    21. 21. Conclusions• Technology is here• Utilities must develop a service mentality• Utilities must demonstrate the economic and societal benefits of “Smart Grid”• Partnering with government, educational institutions, vendors, etc. critical to success Smart Grid will improve the quality of life for consumers 21
    22. 22. Legal NoticeLEGAL NOTICE ON SOLE AUTHORISED USES OF THIS CONTENTThis content has been elaborated by Iberdrola, S.A. (“Iberdrola”). Its use (including its disclosure) forany other purpose requires the express written consent of Iberdrola.Information, opinions and statements made in this content have not been verified by independent thirdparties; therefore no express or implied warranty is made as to the impartiality, accuracy, completenessor correctness of the information or the opinions and statements expressed herein. Neither this contentas a whole nor any part of it constitutes a contractual document, nor may it be used for incorporation intoor interpretation of any contract or any other type of undertaking. In particular, this content does notconstitute an offer or invitation to purchase, subscribe, sell or exchange shares in any jurisdiction.Use of this content is subject to all general conditions of access and use published on the corporatewebsite at ( Iberdrola, nor its subsidiaries or other companies of the Iberdrola Group or companies in whichIberdrola holds an interest, nor its advisors or representatives shall assume liability of any kind, whetherfor negligence or any other reason, for any damage or loss arising from any use of this content notexpressly authorised in this legal notice. 22