Energy, Utilities & Chemicals the way we see itSmart Metering: A FreshApproach to Managing PeakDemand and System SecurityA Call to Action ■ benefits that motivate consumersIn the near future, all North American to embrace conservation andutilities will adopt smart metering load management;and the supporting advanced metering ■ business cases that look beyond theinfrastructure (AMI) at some level meter-to-cash process for benefits toor another. justify investments in advanced meters, communications and dataSome utilities will inevitably take a management infrastructure; andbare bones approach, doing just ■ transparency in the market thatenough to meet the minimum enables consumers to align in blocksrequirements set forth in the Energy of load that system operators dispatchPolicy Act of 2005 and other regulatory more effectively as part of an efficientmandates. The more visionary economic dispatch model.companies, however, will use smartmetering as an opportunity to positively Though the utility industry is ofteninfluence their destinies, and ultimately, accused of being slow to adopt andthe direction of the North American resistant to change, a new study byelectrical system. Encouragingly, it Platts and Capgemini suggests just theappears that most utilities favor the opposite. According to the study, inlatter option based on the innovative which more than 120 senior executivesprograms being initiated at large at U.S. and Canadian utilitiesutilities throughout North America. participated, AMI is the leading “new technology interest” for the majorityThe only sure thing is that doing of the surveyed executives.1nothing is not an option. The currentstate of the electrical infrastructure in The State of the MarketNorth America is not sustainable. To The compliance-based industry inchange its course, utility companies which utilities operate simply doesn’tmust embrace a fresh approach to offer enough incentive for consumers,managing peak demand and system regulators or utilities to take thesecurity—one that will drive market difficult steps necessary to makeefficiency while supporting economic, electrical energy markets operateenvironmental and social priorities. efficiently. For example: ■ Consumers want lower prices,Certainly it’s a tall order. But Capgeminibelieves utilities can meet all of their higher quality service and absolutelypriorities (and likely realize a host of expect the power to flow 24x7.other benefits) if the approach they ■ Some regulators imposeadopt in managing peak demand and long-term rate caps in ansystem security includes: attempt to please consumers.
■ Regulated rates are not tied to Customer Expectations These investments must be leveraged to wholesale markets where utilities As household electricity consumption support a broader set of benefits such as: purchase all or a portion of the increases year over year, peak loads are ■ Aggregating demand response and power they sell. increasing and changes in consumption allowing it to be dispatched to reduce■ In some wholesale markets, prices patterns are causing load factors to the need for peak generating capacity are set based on the cost of the high- decrease. At the same time, consumers and ancillary services. cost producer. expect higher quality power to operate ■ Refining grid planning processes to■ Incentives for consumers to conserve the increasing number of digital devices improve the efficiency and effectiveness that we amass each year. Finally, are not significant enough to change of investments the grid. consumers are demanding this their behavior. ■ Improving grid monitoring and control improved quality at the low, stable■ Regulators impose conservation processes to improve reliability, power price levels of the past while, at the program requirements on utilities, same time, wanting a voice in how the quality and reduce losses. and as a result, utilities suffer from power they consume is generated. ■ Providing new value-added services to decreased revenues which are directly consumers that generate new streams tied to consumption. Aging Infrastructure of revenue and income. Much of the transmission andDespite these current realities, a distribution infrastructure in North In addition to leveraging investmentsnumber of factors are converging that America is more than 50 years old over a larger benefits base, performancewill enable and provide the right types and was designed to provide power in measures for market participants mustof incentives for utilities, regulators and be better aligned; we must create a a different era. For many years, utilitiesconsumers to adopt innovative “win-win” environment. Good examples typically underinvested in the gridapproaches to demand management of this include the decoupling underway infrastructure or neglected to make theand market efficiency. in a number of areas to allow significant, ongoing investments required distribution companies to separate their to sustain the infrastructure over theConvergence in the Marketplace revenue from consumption. DecouplingUtilities face a range of converging next decade. As a result, most utilities gives distribution utilities incentives toissues that will have a profound are now at a crossroads, facing a decision truly embrace conservation and demandimpact on their futures. that will be crucial to their futures. response programs without jeopardizing their ability to earn a return onRegulation and Legislation The Opportunity their investments in distributionGovernments around the world are Make smart metering programs the grid infrastructure.making energy conservation, energy foundation of Smart Grid or Intelligentindependence and global warming top- Network initiatives by looking beyond The Challengeof-mind issues. A wide range of taxes, the meter-to-cash process to generate Utilities that structure their smartlegislation and other policies designed value for all participants in the electrical metering programs strictly from ato reduce the combustion of fossil fuels energy market (including generators, revenue management perspective areare being considered across the globe. system operators, transmission and selling themselves short. There’s much distribution service providers, retailers, more to smart metering programs thanGlobal Climate Change energy service companies, consumers, interval reads and time-of-use (TOU)As a society, we increasingly recognize regulators and legislators). rates. Utilities should leverage theirhow burning carbon-based fossil fuels smart metering programs to make nearadversely affects the environment. The investments required to implement real-time, point-of-use consumption dataMomentum is building on many fronts smart metering are substantial and available to all participants in electricalto limit carbon emissions. Government, usually cannot be justified based solely energy markets. Access to data improvesmajor corporations, citizen groups on the benefits realized from the transparency in the market, and as aand utilities alike are promoting elimination of manual meter reading, result, drives market efficiency. Efficientenvironmentally-friendly, green efficiency improvements in the revenue markets offer incentives to both management process, improved control generators and consumers that stimulatesolutions. Many are insisting that over tampering and theft, and improved balanced investment and consumptionbehavior must change and adoption outage notification and restoration. decisions and in turn, support economic,a conservation culture is critical. environmental and social priorities.1 Platts/Capgemini Utilities Executive Study, 20062
Energy, Utilities & Chemicals the way we see it But today’s utilities need to look beyond ■ Engaging other stakeholders in their the technology into the opportunities markets and developing consensus and incentives the technology unlocks. around synergies, critical success Indeed, utilities must take a more factors, required incentives and comprehensive view of smart metering. alignment of performance measures. More important than the technology ■ Formulating a business solution itself is the role it plays in enabling that is capable of meeting today’s system operators, retailers, load serving requirements while being scalable“The current state of the entities, aggregators and customers to deliver against future demand.electrical infrastructure to use real time load data improve market efficiency. ■ Organizing a team capable ofin North America is not implementing the chosen Another key challenge is influencing the business solution.sustainable. To change its behavior of consumers. When programscourse, utility companies provide meaningful and rewarding The Smart Solution incentives, customers can, and will, In Capgemini’s view, effective smartmust embrace a fresh embrace conservation, and as a result, metering solutions share a number of loads can be more effectively and key components:approach to managing efficiently managed. ■ Meters: Standards-based,peak demand and two-way communication, Capgemini believes the strategy for remote connect/disconnect andsystem security.” utilities should be proactive and that interoperability with in-premise programs for action should include: networks and devices. ■ A long-term approach around ■ In-premise data presentment and smart metering and its linkages control: Near real-time display of to operational improvements, usage and cost, receives market rate conservation programs, demand signal, supports customer demand response, capacity planning and response interaction. new revenue opportunities. End-to-End Smart Metering Solution DR End Devices ooooo 55BBOI Private Legacy Applications WiMax Electric Wireless CIS, OMS, DMS, GIS, EAM, MWFM, etc. Smart Meter Wireless Head- Concentrator DR Broadband End Event Enterprise Service Bus (ESB) End Devices Management ooooo 55BBOI WAN Gas PLC/BPL DB Replication Smart Meter Meter Data Demand Data Third- Management Response Analytical Installers DR Warehouse/ Party Customers End Devices System Control Reporting ODS Presentment Retailers (MDMS) System Regulators Wireless Aggregators ooooo 55BBOI Firewall Firewall Electric Smart Meter Cellular End External Points Telecommunications Enterprise Applications ParticipantsSmart Metering: A Fresh Approach to Managing Peak Demand and System Security 3