Future Of Intelligent Energy Grids - Energy Insights

Moving Beyond the Hype: The Future of
the Intelligent Grid
Energy Delivery Strategies

LOOKING AHEAD #EI202543
www.energy-insights.com

Rick Nicholson H. Christine Richards

ENERGY INSIGHTS OPINION
This Energy Insights report studies the implications of intelligent grid
technologies for utilities. First, the report covers the drivers that
F.508.988.7881

brought the intelligent grid to where it is today, the current
marketplace, factors influencing the adoption of intelligent grid
technologies, and future challenges for the intelligent grid. Then, to
help readers understand how utilities should respond to these issues,
Energy Insights provides intelligent grid actions for companies to
P.508.935.4400

consider. Although many intelligent grid technologies are still in the
testing stages, utilities can prepare themselves now to better handle
more advanced intelligent grid technologies that will likely come onto
the market soon by:
Global Headquarters: 5 Speen Street Framingham, MA 01701 USA

● Allowing for upgrades: Because of the long life cycle of
transmission and distribution (T&D) assets, utilities should provide
options for upgrading components to support intelligent grid
technologies.

● Focusing on interoperability: Utilities should focus on increasing
the integration abilities of their information technology.

● Targeting quot;quick winsquot; first, but remembering scalability: To
minimize risk and gain more confidence in intelligent grid
technologies, utilities should target select areas — such as a
business process bottleneck — for initial deployment to achieve
quick wins. In targeting these smaller areas, though, utilities should
ensure the intelligent grid technologies offer the ability to expand.

● Informing themselves and directing technology: With so many
intelligent grid consortia, utilities should take the time to
participate in such groups not only to better understand the
direction of the intelligent grid technologies, but also to guide their
direction.

July 2006, Energy Insights #EI202543
Energy Insights: Energy Delivery Strategies: Looking Ahead

TABLE OF CONTENTS

P

In This Report 1
Brief Description of the Solution ............................................................................................................... 1

S i t u a t i o n O ve r v i e w 4
Introduction............................................................................................................................................... 4
A Brief History........................................................................................................................................... 5
Current Environment................................................................................................................................. 7
Factors Affecting Adoption........................................................................................................................ 10

Future Outlook 12
Remaining Challenges.............................................................................................................................. 12
Future Adoption Patterns.......................................................................................................................... 13
Potential Pitfalls ........................................................................................................................................ 15

Essential Guidance 16
Actions to Consider................................................................................................................................... 16

Learn More 17
Related Research ..................................................................................................................................... 17

#EI202543 ©2006 Energy Insights, an IDC Company

LIST OF TABLES

P
1 Current Intelligent Grid Partnerships ............................................................................................ 8

©2006 Energy Insights, an IDC Company #EI202543

LIST OF FIGURES

P
1 Today's Electric Grid .................................................................................................................... 3
2 How the Intelligent Grid Changes Today's Electric Grid............................................................... 4
3 U.S. Electricity Demand, 2005–2030 ........................................................................................... 6
4 Internal and External Pressures on a Utility When Evaluating Intelligent Grid Technologies ....... 14

#EI202543 ©2006 Energy Insights, an IDC Company

IN THIS REPORT

Brief Description of the Solution

Defining the Intelligent Grid
Smart grid, intelligent network, Grid 2030. Many terms are floating
around today, but they all describe an electric T&D network that —
through the use of information technology — is quot;smartquot; enough to
predict and adjust to network changes. Therefore, an intelligent grid
could recognize a potential problem — such as an abnormal operating
condition — and communicate this problem to a decision maker (i.e.,
computer) that would automatically work to correct the problem. A
corrective action may include automatically dispatching the nearest
available field crew to the problem site or automatically reconfiguring
the switched state of the network.

Comp on ent s of I n te ll ige nt G r id
Several components and technologies contribute to the foundation of
the intelligent grid:

● Remote asset monitoring and measurement including sensors,
smart meters, and intelligent electronic devices (IEDs)

● Real-time data transmission including fiber-optic networks,
wireless networks, and broadband over power line (BPL)

● Real-time decision making including modeling, simulation,
visualization, and analytics

● Control and execution including SCADA, distributed energy
resources, and demand response programs

T echn o lo g ie s T h at E n ab le T h e se C o mp o n en t s
● Smart metering: This two-way communication system uses a
meter as both the sender of time-series meter data and the receptor
of control signals. Smart metering allows utilities to track where
power is consumed, understand demand requirements, and enable
real-time pricing. Another term that is used to describe this sort of
system is automated metering infrastructure (AMI).

● Common platform/architecture: A utility's ability to integrate
various applications and technologies across the company is
crucial for a successful intelligent grid. A common platform allows
for easier integration.

● IP-enabled controls and standard communication
infrastructure: Along the same line as a common platform, by

©2006 Energy Insights, an IDC Company #EI202543 Page 1

using standard communication paths, utilities can better integrate
the many intelligent grid components including applications,
sensors, and different parts of the company. Such communication
structures may include BPL.

● Mobile workforce management: These applications and
technologies automate field crew management. Mobile workforce
management can stream asset and power flow information to field
crews, allowing the crews react quickly to problems and perform
maintenance effectively.

● Sensors to monitor and control remote assets: Sensors on
remote assets can report information back to the control room.
These sensors can detect, for example, when a remote asset begins
to fail or an atypical event takes place.

How the Intelligent Grid Changes T&D
These intelligent grid components and technologies have the potential
to transform today's grid in four key ways (see Figures 1 and 2):

● Increased visibility into the grid: Control rooms today have a
narrow view of the grid's condition — often limited to a view of
just the transmission system and larger distribution assets such as
substations. As the intelligent grid increases the number of sensors
on the grid, however, utilities will be able to track many more grid
components, such as meters and smaller substations. More data
points mean more information that utilities can use to increase their
visibility into the grid's operational condition.

● More automation in decision making: Today's grid often
depends on people taking the limited information available about
the grid and quickly reacting to problems. This requires people to
first recognize a problem, decide whether to take action, and then
determine how to best react. Yet this process may not move fast
enough — as discussed below — and has the increased potential
for human error. Through more automated decision making, the
intelligent grid allows for quicker, more accurate responses to grid
events.

● Improved reaction time to events: During the August 2003
Northeast Blackout, it took 9 seconds for the blackout to spread
from Ohio to New York. Reactions to critical grid events such as
this often need to take place in milliseconds, not minutes. Yet as
discussed above, today's grid largely relies on people to make
critical decisions about the grid based on limited information.
Therefore, decisions will likely not be reached at the speed
required to avoid major problems. As the intelligent grid begins to
automate more decisions about the grid and provide more visibility

Page 2 #EI202543 ©2006 Energy Insights, an IDC Company

into grid components, utilities will be able to react faster to grid
events and better avoid major problems.

● Greater ability to control demand: While utilities have
historically been able to control the grid supply, they have limited
abilities to control grid demand or consumer use. By employing
end-user controls — such as grid-friendly appliances (GFAs) — or
demand response programs, the intelligent grid allows end users
and the grid to interact with one another. Ultimately, intelligent
grid technologies will allow grid demand to change in response to
grid events.

FIGURE 1

Today's Electric Grid

Control room
technology only
displays
information
End-users and portions of
Generation/transmission distribution system not visible
systems visible

Personnel
determine
and respond
Only critical distribution to problems
assets visible

Slower reactions to grid events

Crews manually
scheduled

Source: Energy Insights, 2006


FIGURE 2

How the Intelligent Grid Changes Today's Electric Grid

Increased visibility into grid

Automated
decision-
making
Smart meters connect end-
users and control room

Personnel
input as
Ability to needed
More sensors control
along the grid demand

Faster reactions to grid events Mobile workforce
management for
better connections
Crews
automatically
scheduled


SITUATION OVERVIEW

Introduction

With the recent flood of consortia, research, and pilot projects, the
intelligent grid is finally beginning to move beyond its initial hype and
into the marketplace. Many in the utility industry are greeting the
concept of the intelligent grid with optimism, but there are still many
uncertainties about the ultimate direction and feasibility of intelligent
grid technologies.

First, to help readers better understand the direction of the intelligent
grid, this report covers the drivers that brought the intelligent grid to
where it is today, the current marketplace, factors influencing the
adoption of intelligent grid technologies, and future challenges for the
intelligent grid. Then, to demonstrate how utilities and technology
vendors should respond to these issues, Energy Insights provides
intelligent grid actions for companies to consider. This report focuses
largely on North American utilities but highlights efforts from other
regions as well.


A Brief History

Underlying Drivers of the Intelligent Grid
No single driver pushed the intelligent grid to where it is today. The
culmination of many different issues has influenced its development,
including:

● Aging assets: With much of today's T&D infrastructure installed
in the 1950s, 1960s, and 1970s, many grid components have
reached the limits of their useful life. Utilities have long deferred
T&D upgrades in favor of investments that provide a better ROI —
such as generation development — but many utilities cannot
further postpone T&D investments. However, utilities cannot
afford to replace all of their T&D infrastructure. Using intelligent
grid concepts, however, utilities could potentially better leverage
their T&D investments by using technology to compensate for the
shortfalls of aging infrastructure and determine which assets truly
need replacement.

● The inability to meet demand for more and higher-quality
electricity: Today's grid is unprepared to meet not only increasing
electricity demands (see Figure 3), but also the needs of an
information economy. Although the grid is reliable — more than
99% reliable — any outage can be detrimental to today's energy-
dependent economy. For example, according to some sources, the
2003 Northeast Blackout cost the U.S. economy $6 billion to $10
billion. As the U.S. economy depends more and more on utilities to
quot;keep the lights on,quot; the intelligent grid allows utilities to increase
the grid's reliability through innovative, cost-effective technologies.

● The need to understand the grid at a national level: On a
national scale, the grid is a collection of regional, relatively
independent grids with a few strategic connections. Furthermore,
operators of each grid — which may rely on shared transmission
lines and power sources — cannot readily communicate with one
another. This reality not only threatens reliability when operators
cannot easily communicate problems, but creates security issues as
well. By using intelligent grid technologies, local grids could
readily communicate with one another and the federal government
could track all grids at a national level.

● Increasing interest in alternative and distributed energy
technologies: Currently, most utilities transmit electricity from
large central power plants to load centers. Yet this approach has
many disadvantages, such as significant energy losses from voltage
changes and transporting electricity over long distances and
potentially widespread reliability problems from transmission
system shortcomings. Public interest in alternative energies is
increasing, and some utilities are paying more attention to


distributed energy. Yet most utilities do not have the technology to
track many smaller, distributed power sources. Intelligent grid
technologies would allow utilities to cost-effectively track and
communicate with widely distributed plants. In addition, wind —
the fastest-growing alternative energy — provides intermittent
energy, which can create problems with ramp rates. As wind speed
increases, the ramp rate can rise quickly and may put the
transmission system out of balance if the grid does not react
quickly enough to this change. Through greater automation,
intelligent grid technologies could potentially allow the grid to
more quickly react to fluctuations in wind power.

● Lost revenue from theft: Currently, utilities cannot track where
energy is leaving their system. As a result, electricity theft is a
problem — particularly in India and China — that means lost
revenue for utilities. Intelligent grid technologies would allow
utilities to obtain feedback on where energy leaves the system and
better track down energy thieves.

● The availability of appropriate technology: Technology has
developed enough to allow utilities to practically address the above
problems through intelligent grid technologies. Such technologies
include the ability to integrate devices from a variety of vendors,
IP ubiquity and enterprisewide communication, service oriented
architecture (SOA), adequate sensor technology, and smart meters.

FIGURE 3

U.S. Electricity Demand, 2005–2030

2,500
(Billions of kilowatt-hours)

2,000

1,500

1,000

500

0
2005 2008 2011 2014 2017 2020 2023 2026 2029
Residential
Commercial
Industrial

Source: Energy Information Administration, 2006


Current Environment

These drivers brought the intelligent grid to where it is today and
continue to drive its development. Even with all of this motivation,
however, most of today's intelligent grid work — particularly in North
America — is still in the testing and piloting stage. This section covers
recent intelligent grid activity, including regulatory actions,
developing consortia, and projects under way.

Regulators Are Becoming More Involved
Today, regulators are beginning to take action and promote the use of
intelligent grid technologies, particularly smart metering. Regulatory
actions include:

● U.S. Energy Policy Act of 2005 (EPAct): The EPAct established
mandatory reliability standards, which will ultimately push utilities
to better monitor their T&D assets. Fines for failing to meet
reliability standards could cost utilities $1 million a day for each
violation. Also, the EPAct encourages investment in transmission
capacity — such as transmission system monitoring, sophisticated
transmission technologies, and advanced power system technology
incentive programs.

● Ontario, Canada: Ontario will require smart metering throughout
the province by 2010.

● Texas: The State of Texas recently passed legislation to help
create a market for advanced meters. The state is requiring the
Public Utility Commission of Texas (PUCT) to establish a
surcharge for recovering reasonable and necessary costs incurred
in deploying advanced meter networks to residential customers and
smaller commercial customers.

● Victoria, Australia: In 2004, the Victorian government issued a
mandate for utilities to deploy interval metering to all large
commercial and industry customers by 2008, small commercial
and large residential customers by 2011, and remaining residential
customers by 2013. More recently, however, the Victorian
government abandoned the previous interval metering rollout
program and instead is drafting legislation to mandate the
deployment of smart metering. The government commissioned a
cost-benefit study to look at the incremental operational and
customer service benefits of smart metering and is pushing
distribution companies to begin smart metering trials later this
year. Full deployment to 2.35 million customers is expected to run
from 2008 to 2012.


More Partnerships to Develop Cost-Effective Technologies
The number of partnerships among utilities, vendors, universities, and
the government to research and develop intelligent grid technologies
has grown substantially over the last few years. Many of these groups
are working to make technologies practical and cost-effective for
utilities to implement. Some of these partnerships are listed in Table 1.

TABLE 1

Current Intelligent Grid Partnerships

Partnership Description

Center for the This electricity and university consortium was formed in September 2005. Through bringing
Commercialization of together a diverse group of existing companies and organizations, CCET is working to
Electric Technologies advance technologies in transmission, distribution, and end-use areas.
(CCET)

Consortium for Electric CERTS is working to research, develop, and disseminate new methods, tools, and
Reliability Technology technologies to protect and enhance the reliability of the U.S. electric power system and
Solutions (CERTS) efficiency of competitive electricity markets.

Demand Response and This group consists of public interest groups, demand response technology companies, and
Advanced Metering utilities that focus on demand response education and outreach.
Coalition (DRAM)

Distribution Vision 2010 This group of utilities is working together to develop new distribution network designs,
(DV2010) methods, and devices to increase energy delivery reliability at the distribution level.

Galvin Electricity Initiative By working to combine traditional electricity infrastructure with advanced technologies, this
group seeks to define a systemic solution for reliable and robust electric services that best
meet 21st-century consumer needs.

The GridWise Alliance This group of public and private stakeholders is working together to provide real-world
technology solutions that support the U.S. Department of Energy's vision of the future grid.
Their efforts also include the GridWise Expo, which builds upon their original quot;Constitutional
Convention.quot;

Advanced Grid This group of utilities is working to modernize the U.S. electrical grid by transitioning the best
Applications Consortium technologies and practices into broader use through member utilities.
(GridApp)

IntelliGrid Consortium Formed by the Energy Policy Research Institute (EPRI) to support its IntelliGrid transmission
architecture, this international alliance of utilities, manufacturers, researchers, and
government agencies is working to transform today's grid into a sophisticated delivery
system.

Office of Electricity Delivery In 2005, the Office of Electric Transmission and Distribution and the Office of Energy
and Energy Reliability (OE) Assurance joined together to form the OE. The OE seeks to modernize the electric grid,
enhance security and reliability of transmission infrastructure, and expedite recovery from
supply disruptions.


TABLE 1

Current Intelligent Grid Partnerships

Partnership Description

Smart Energy Alliance This group of six technology companies — Capgemini, Cisco Systems, GE, HP, Intel, and
Oracle — is working together to develop intelligent solutions for power distribution
businesses.

SmartGrids — Electricity This group is working to develop a single European grid. Specific actions include increasing
Networks of the Future the network's compatibility with new energy resources and carriers, using innovative
techniques to increase the overall system's efficiency, and implementing widespread
information and communication technologies to develop new services and innovative
markets.


Pilot Projects Still Dominant in North America
Despite the efforts of these groups, in North America, intelligent grid
technologies are still in the early implementation stages. Although
intelligent grid initiatives are not widespread, there are still many pilot
projects and substantial research investments. Recent examples
include:

● Alabama Power Company (APC) and Advanced Metering
Data Systems (AMDS): AMDS recently delivered 50,000 Sensus
iCon meters to APC and is under contract to provide advanced
metering infrastructure and monitoring for APC.

● CCET: CCET recently approved a $1.3 million study of how to
precisely and accurately monitor grid performance and power flow
through global positioning systems.

● CenterPoint Energy Houston Electric and IBM: As a follow-up
to its BPL pilot project, CenterPoint is deploying intelligent grid
technologies — including smart meters, remote connection and
disconnection of electric service, and automated outage detection
and restoration. CenterPoint will test these technologies on 44,500
electric and 22,500 gas customers.

● Eastern Interconnect Phasor Project (EIPP): In response to the
2003 Northeast Blackout, EIPP is working to develop more real-
time uses of information and resolve the inability of operators to
visualize an event that impacts the entire system.

● Georgia Power Company (GPC): For more than 10 years, GPC
has been running the world's largest real-time pricing program with
1,700 volunteer commercial and industrial customers.


● Michigan Electric Transmission Company (METC): To
enhance its grid, METC is working with IBM to develop business
intelligence analytics that would turn critical operations into real-
time information. For example, METC could monitor substation
activity and respond more quickly to power outages.

Other Regions Outpace North America
Internationally, utilities are not only implementing pilot projects, as
seen in North America, but also undertaking large-scale deployments
of intelligent grid technology. Recent examples include:

● China: In March 2006, OSIsoft announced a seven-year, $300
million contract to provide its real-time performance products to
FibrLINK Communications — a State Grid Corporation of China
company. China will implement real-time grid performance
monitoring at a national level.

● Italy: Enel, Italy's major utility, has installed 23 million PLC
Smart Meters since 2003 — a rate of 40,000 per day. By the end of
the project, Enel will have installed a total of 30 million smart
meters.

● Poland: PSE-Operator SA initiated the world's first IntelliGrid
transmission architecture demonstration project. This effort will
assist EPRI with refining its framework for an intelligent, self-
healing network.

Factors Affecting Adoption

With the flurry of research and development of intelligent grid
technologies, why are North American utilities not gobbling up these
technologies right now? Although intelligent grid technologies offer
exciting opportunities, the nature of the energy industry makes utilities
reluctant to adopt new technologies. However, some regulators are
stepping in to push utilities to adopt more intelligent grid technologies.

Utilities Are Risk Aware
Negative public perceptions — from issues such as blackouts and their
cost to the economy — can damage a utility's reputation, but public
pressure alone cannot force a utility to adopt intelligent grid
technologies. For example, FirstEnergy suffered from its role in the
2003 Northeast Blackout, but the company quickly recovered.

There are also more tangible pressures directly impacting utilities —
such as aging infrastructure, concerns about meeting future energy
demands, lost revenue from theft — that push them to more seriously
consider intelligent grid technologies as a cost-effective way to
address these pressures. Yet regardless of all these pressures, utilities


remain a risk-aware industry as they deal with volatile energy prices,
regulator demands to keep consumer prices low, and limited options
for improving profits. Specific risks intelligent grid technologies pose
to utilities include:

● Are intelligent grid technology investments prudent? That is the
question regulators — which are interested in keeping prices low
— will ask utilities. Utilities have to determine whether intelligent
grid technologies will provide an adequate return on their
investment. Regulators need to provide a way for utilities to
recover their costs for investing in intelligent grid technologies.

● Many intelligent grid technologies still have not received enough
testing for most utilities to feel confident in making large-scale
implementations. With the long lifetime of grid assets, utilities
want to know they are making the right investment.

● These technologies often require upgrading and changing legacy
systems and business processes. Utilities often have trouble
overcoming the embedded inertia of existing systems and
practices.

Regulations Can Force Utilities to Adopt Technologies
Since many utilities have not implemented intelligent grid
technologies on their own, government can step in and has done so to
represent the public's interest. As earlier examples such as Victoria,
Australia, and Ontario, Canada, demonstrate, many governments are
requiring utilities to step up the implementation of these technologies,
particularly for smart metering.

Differences Between the North American Market and Other
Regional Markets
The rate of intelligent grid technology adoption varies across regions
because of different environments that utilities operate within:

● Asia/Pacific and Latin America: With many developing
countries in these regions, utilities are building new infrastructure.
Therefore, if utilities have to install something anyway, it would
make sense to install the latest technology. Also, the structure of
some governments allows for a more widespread implementation
of intelligent grid technologies. For example, China's strong
central government controls the entire grid at a national level and
can easily standardize the network.

● Europe: European countries are generally more interested in and
better able to implement small-scale, distributed alternative
energies and renewable energy technologies, particularly wind
energy systems that produce intermittent power. The need to


integrate these technologies into the existing grid is driving these
countries to focus more on intelligent grid technologies.

FUTURE OUTLOOK
As for the intelligent grid's future, it is not a question of whether
companies will implement these new technologies, but rather when the
grid's information technology revolution will take place. Because
many challenges still surround the intelligent grid, the quot;revolutionquot;
will likely be more of a slow quot;evolution.quot; Many utilities will still be
hesitant to adopt new technologies in the near future. The current
intelligent grid environment focuses on the testing and development of
practical technologies, and as they are proven, utilities are likely to
adopt more of them. However, some utilities will begin to prepare for
the intelligent grid today by adopting some technologies —
particularly communication capabilities — now so they have the
necessary backbone to quickly implement more uncertain technologies
once they are accepted.

Remaining Challenges

Although the intelligent grid appears to be taking off, many challenges
still lie ahead. Key challenges in North America include regulators that
are reluctant to allow utilities to experiment with these new
technologies, the reality that utilities will not likely change their risk-
aware behavior soon, intelligent grid technologies that will continue to
rapidly evolve, and the practicality of alternative and renewable
energy.

Double-Edged Sword of Regulators
Regulators can push utilities to invest in intelligent grid technologies,
but they still want to keep consumer prices as low as possible.
Therefore, regulators hesitate in allowing utilities to accept the risk of
experimenting with new technologies. Furthermore, the complexity of
these regulatory bodies can inhibit the implementation of intelligent
grid technologies. Several regulatory bodies may have overlapping
jurisdiction over one area and conflict with one another on the
sensibility of a utility's investment.

Utilities Will Always Be Utilities
The environment that North American utilities operate within is not
likely to change dramatically in the near future; therefore, utilities will
remain risk aware. Most utilities will still consider investing in new
intelligent grid technologies to be risky and avoid these technologies
until they are better proven. Furthermore, economic costs to the public
will most likely not become a factor in a utility's equation for
determining the value of an intelligent grid investment.


Technology May Expire Quickly
When utilities invest in T&D assets, they are often making 40-year
investments. Therefore, it is risky for utilities to make long-term
investments in technologies that are unproven or may rapidly change
as intelligent grid research and development moves forward. Utilities
will likely not know for a while if today's intelligent grid technologies
will be useful for the life of an asset. Furthermore, utilities face
challenges when deciding what communication method — cellular
technology, existing phone lines, or BPL, for example — should link
intelligent grid technologies. As integration across business segments
and companies becomes more important, a utility wants to ensure it
does not choose the quot;wrongquot; technology or method of communication.

Realities of Renewable and Distributed Energy
Some forms of distributed energy — particularly natural gas–powered
microturbines — face significant challenges in today's market. High
natural gas prices make such power sources costly, especially when
compared with low-priced coal. Furthermore, end users are typically
uninterested in these more complicated power sources and electric
utilities adamantly oppose them. While distributed energy will
potentially become more competitive in a future carbon-constrained
marketplace, today these power sources are likely to remain limited in
their use.

On the other hand, renewable energy is rapidly growing, with wind
leading the way. Yet these distributed alternative energies may not be
as practical in North America as in other regions because the best
places for alternative energies — solar from the desert and wind from
offshore and the Great Plains — tend to be located far from load
centers. Development in these remote areas will necessitate
considerable investment in grid expansion and upgrades and, in the
near term, likely crowd already strained transmission capacity. Finally,
alternative energies are still more expensive than retail electric
throughout much of the United States.

Future Adoption Patterns

Despite the promise of the intelligent grid, challenges such as those
listed above will mean a slow but increasing adoption rate in North
America as intelligent grid technologies are proven. However, some
utilities will actively prepare for the intelligent grid by adopting some
technologies now so they are ready to quickly implement today's more
uncertain technologies once they are accepted.

Slow But Increasing Adoption Rates in North America
With increasing internal pressures — such as aging assets — and
external pressures — such as the need to understand the grid at a


national level — utilities will begin to seriously consider more
intelligent grid technologies (see Figure 4). Even as utilities' interest in
these technologies grows, however, most utilities will want to be the
third utility to use the technology, not the first. Therefore, sales cycles
will likely take years as utilities conduct one pilot project, then
conduct another, undertake a limited rollout, and so on. Yet as
intelligent grid technologies are tested and proven, adoption among
utilities will increase at a greater rate.

FIGURE 4

Internal and External Pressures on a Utility W hen Evaluating
Intelligent Grid Technologies

External pressures

Internal pressures
Need to understand
grid at national level
Uncertain about Regulator desire
intelligent grid ROI to keep prices low
Regulator demand for Costs to replace
increased reliability aging assets
Concern about selecting Many technologies not
“wrong” technology tested enough
Negative public Lost revenue from
perception of outages electricity theft
Long life cycle Lack of strong
of assets central authority
Increasing demand
Electricity theft
for quality electricity
Embedded inertia Challenges of alternative,
of legacy systems distributed energy
Interest in alternative,
distributed energy
Utility company

Use existing Adopt intelligent
or
technologies grid technologies



Many Leading Utilities Will Adopt Technologies to Prepare
for the Intelligent Grid
While many utilities will wait for proven technologies, some utilities
will take steps today to prepare for rapidly deploying intelligent grid
technologies that are still currently under testing. The most common
preparations utilities will make for the intelligent grid are establishing
adequate communication infrastructure and installing assets that allow
for easy upgrades to adapt to future technology needs.

TXU Electric Delivery — a subsidiary of TXU Corp. — demonstrates
that such preparations are already under way for some utilities. This
delivery company recently signed a contract with CURRENT
Communications Group LLC to install the nation's first broadband-
enabled intelligent grid. The $150 million project will provide BPL to
approximately 2 million customers. The company's reasons for
undertaking this substantial investment include:

● The intelligent grid will require utilities to push around not only
kilowatts, but megabytes as well. Therefore, TXU Delivery sought
to develop an effective method for handling both electricity and
data.

● While some intelligent grid technologies have not yet been
invented and the company cannot know what specific applications
may be used in the future, installing BPL allows TXU Delivery the
flexibility to adapt to changing technologies.

● BPL will help TXU Delivery in achieving its intelligent grid
targets, such as 100% automatic meter reading by 2010–2011 —
approximately 3 million meters.

● BPL will allow TXU Delivery to rapidly install intelligent grid
technologies the company is currently developing.

Potential Pitfalls

While more and more utilities will invest in technologies to prepare for
the intelligent grid, forging ahead too quickly and on too large of a
scale may create problems. Since many intelligent grid technologies
are still rapidly developing and not yet established, adopting unproven
technologies may be risky since these technologies may rapidly
change. Also, utilities may face problems if their preparation does not
focus on developing better integration techniques. For example, if
applications cannot readily communicate with one another, their
effectiveness in real-time interactions will be inhibited.


ESSENTIAL GUIDANCE

Actions to Consider

For Utilities
Although many intelligent grid technologies are still in the testing
stages, utilities can prepare themselves now to better handle more
advanced intelligent grid technologies that are likely come onto the
market soon by:

● Allowing for upgrades: Because of the long life cycle of T&D
assets, utilities should provide options for upgrading components
to support intelligent grid technologies.

● Focusing on interoperability: Utilities should focus on increasing
the integration abilities of their information technology.

● Targeting quot;quick winsquot; first, but remembering scalability: To
minimize risk and gain more confidence in intelligent grid
technologies, utilities should target select areas — such as a
business process bottleneck — for initial deployment to achieve
quick wins. In targeting these smaller areas, though, utilities should
ensure the intelligent grid technologies offer the ability to expand.

● Informing themselves and directing technology: With so many
intelligent grid consortia, utilities should take the time to
participate in such groups not only to better understand the
direction of the intelligent grid technologies, but also to guide their
direction.

For Vendors
Vendors should not only become more involved in developing
intelligent grid technologies, but also — depending on their size —
focus on ways to better integrate their technologies:

● Larger vendors: Since the intelligent grid emphasizes integration,
larger vendors should begin to rethink any proprietary mindsets.
As intelligent grid technologies spread, those vendors that are best
able to integrate technology from many sources will likely
succeed.

● Smaller vendors: Again, with this emphasis on integration,
smaller vendors should work to develop partnerships and
complementary technologies with larger vendors. Another option
for smaller vendors is to become an expert at integrating devices
from many vendors and adding their own products to the mix.


LEARN MORE

Related Research

● Smart Metering: Impact on Distribution Companies (Energy
Insights #EI201167, April 2006)

● Top 10 Predictions for the Energy Industry in 2006 (Energy
Insights #EI10084, January 2006)

● Metering Gets Smart – Managing Smart Metering Data to Serve
the Customer (Energy Insights #EI10058, September 2005)

● Broadband over Power Line: Impact for Utility Companies
(Energy Insights #EI10050, July 2005)

● U.S. Energy Delivery Market Overview (Energy Insights
#EI10044, June 2005)

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