Neil Armstrong named the electrification of the world as of the single biggest engineering accomplishment of the 20th Century at a national press club event in Washington D.C held on February 20, 2000. Armstrong’s proclimation was based on a comprehensive survey conducted by the United States National Academy of Engineering.
The irony that the first man on the moon called out the accomplishments of our industry ahead of computers, aviation, and even landing on the moon is obvious. What we do in the power industry isn’t rocket science, it’s even better!
Contrast this with the fact that the vast majority of power companies have no idea a consumer’s lights are out unless they call to let them know. How can that be true? How can the electrification of the world and our electric grid be recognized as such a wondrous accomplishment and yet we have virtually no ability to ‘see’ into its distribution systems? Newton Evans Research estimates that distribution communication systems and SCADA are deployed to only 75% of North American substations and that distribution automation at the system feeder level is less than 20%. We can lose entire distribution feeders and not know about it until enough customers call in to complain allowing our outage management systems to predict the problem. Compound this with the fact that less than a third of customers actually bother to call in outages.
Less than 10% of the meters in North America are ‘smart’ - meaning that they can
communicate their status and basic parameters back to our utility control systems in real time. Utilities are literally blind to any event that occurs below the feeder breaker level. For over 90% of the more than 2 million miles of wire that make up North American distribution systems, we have absolutely no idea that an event or an outage has occurred unless our customers call and tell us. As an industry, we talk about three 9’s of reliability and cite the fact that, compared to any other product, the price of electricity has stayed dramatically low over the past few decades.
These are not valid reasons for the status quo.
Let’s talk turkey. Let’s agree on some things that many of us will agree to privately but we are often afraid to carry into the boardroom (or to state in an article). The simple fact is that the power industry is incredibly risk averse, and we evaluate and re-evaluate opportunities well past the point when a decision should be made.
This is a conundrum we lovingly refer to as ‘paralysis by analysis.’ However, this process has transitioned in the last 10-20 years from a ‘knock’ on the engineers that are protecting the system from new technologies or concepts to a ‘knock’ on the finance, legal and managerial staff that are responsible for next quarter’s earnings instead of the long-term health of the connected grid.
Our industry is rampant with examples of insufficient investment leading to significant grid issues including brownouts, rolling blackouts and complete blackouts. Yet, with all of these front page examples that persist in recent years, utilities continue to cut budgets and staff in the face of declining grid performance and an aging workforce issue of epic proportions. At perhaps the single most critical point we are going to be dramatically short of experienced personnel to help us determine the best path forward. Nonetheless, we consistently see utilities laying people off as they merge and ‘right size.’
I’ve laid out an argument to this point that we have limited technology deployed, we can’t get sufficient money to invest in new infrastructure, and we’re running short on experienced staff to run it anyway…so what’s next? In the face of this backdrop, residential customer expectations keep rising, regulators demand more and more from us, and business customers are now demanding that the utility industry belatedly join the digital revolution. The reality is that the continued use of decade old or, in many cases, century old technology solutions and business processes to attempt to meet these needs is a path to failure and disappointment.
If this is true, where do we go from here? The answer is simple: we need an intelligent grid. Utilities that embrace this challenge in the next decade will be the market leaders 10 to 20 years from now. In the post PUHCA merger and acquisition era, utilities with ‘smart grid’ programs will be the long term survivors -- the buyers. Unfortunately, it is quite possible that Wall Street and others will spend the first 5 years beating these forward thinking players and their stock down because they are actually out spending money on the future of their system rather than maximizing current profits. This is a situation that should be remedied as progressive utilities move forward with significant smart grid initiatives.
At this point you are likely asking yourself: why should we invest in smart infrastructure? Aren’t we going to have the proverbial magic bullet solution, such as low cost distributed generation, that will obsolete this entire generation, transmission and distribution infrastructure? Assume for a moment that we will be predominantly dependent on central generation in a 30 year time frame. I doubt anyone would argue vehemently against this premise. In this circumstance, it’s difficult for even the most ardent distributed generation advocates to argue for anything less than significant and dramatic improvements in the distribution -- and even transmission -- infrastructure to support these facilities.
My opinion is that the ‘last mile’ of the distribution grid will be around for much longer than the next 30 years, and yet it is the single most ignored and neglected portion of our integrated system. We’ve spent over 100 years of ‘good enough’ and now it’s time to take the dive into the grid of the future. We need to begin significant and necessary investments in distribution infrastructure.
The ‘tipping point’ for our industry’s success or failure is rapidly approaching. Energy industry researcher Mark Mills recently commented, “We thus find ourselves facing what might be termed the ‘perfect storm’ — a confluence of three fronts: rising power demand, declining spending on power networks, and new threats from hostile forces. All this is occurring at a time when electricity is ever more critical to a modern economy and city.” United States Federal policy makers have recognized this, and they have passed the Energy Policy Act of 2005. The spirit and intent of EPAct is to encourage and reward technology advancement and infrastructure investment for energy in the United States. Likewise, the Ontario Ministry of Energy has put forth its Energy Conservation and Responsibility Act, with key provisions supporting the deployment of advanced metering infrastructure (AMI). And, according to the Center for Smart Energy’s Jesse Berst, “Grid automation represents a huge market opportunity, as utilities, regulators, and vendors struggle to overcome three decades of under-investment.” The stage has been set and there is a convergence of industry opinion, but the next act of this play is even more crucial. How will state and provincial regulators, local policy makers, and utility executives respond?
As an industry we need to help regulators understand the need for infrastructure investment and the necessary price increases that will come as part of this investment. The political drive at the local level to keep electricity rates steady for customers could eventually help push the grid that serves them into failure. Utilities continue to blame regulators, market uncertainty and the infamous regulatory lag for their unwillingness to invest in new or upgraded infrastructure. Will customers just get used to rolling blackouts at peak summer loads and stop complaining about it? Will we accept mediocrity in our grid’s ability to provide affordable, clean, efficient and reliable power?
There have been many studies performed and many articles written about our problems of today. Most of this work seeks to solve the symptoms rather than examine the root causes. A few utilities had the courage a decade ago to stand up and recognize the importance of their distribution franchises and were unwilling to divest, cut T&D capital investment and manage by the “book of the month club,” or to next quarter’s earnings. Rather than being rewarded for actually focusing on their core business, they were punished in a variety of fashions. Each of those players looks brilliant today because they don’t have a backlog of tens of millions of dollars of infrastructure projects that needed to be built yesterday, and they aren’t having rolling blackouts.
Is the answer to the core problem really that simple? Invest in our infrastructure. Yes, and unfortunately No.
As an industry we’ve struggled greatly with defining what a smart grid looks like and how it will operate. The result has been a slow evaluation and adoption of new technologies.
As a result, the vendor community has been conditioned to be extremely measured in how far they push the envelope with technology and how much money they spend ahead of utility purchases. Vendors have been shown in years past that payback is often years down the road. But the academic phase of this smart grid effort has officially come to an end. The Electric Power Research Institute and Department of Energy have provided significant thought leadership and guidance through ESFF and Grid 2030. Utility industry executive leaders must, in turn, take the reigns and work with the vendor community to innovate and deploy the technology now that we need to meet the needs of the new digital economy for the next 30 to 50 years.
The utilities that are willing to proactively pursue the smart grid, buck the ‘run to failure’ trend, and effectively partner with their regulators to do the right thing for energy infrastructure will be the big, long-term winners.
Many far sighted state and provincial regulators and utility leaders out there understand how critical energy infrastructure is to our entire economy and to our way of life. They are partnering together to ‘fight the good fight’ to invest and develop our North American grid into the grid of the future that it needs to be. I am holding out hope for a smart future.
About the Author
Chris Hickman, Head of Regulatory Affairs & Business Solutions
Cellnet Technology, Inc.
Chris Hickman has worked in the utility industry for 15 years. He has managed all aspects of transmission and distribution system engineering design, construction, maintenance & standards for both gas & electric utilities. In addition, he managed all R&D activities for PNM as well as Right-of-Way, Environmental, CAD/GIS, Safety, DOT and regulatory compliance and a variety of other groups.
Hickman served on the board of Avistar, PNM’s unregulated subsidiary, and was a board member for IEEE’s Power Engineering Society. He is currently the chair of the Electric Utility Management Program board at NMSU and is also a member of the Engineering Academy and the vice-chair of the Dean’ s Advisory Council for NMSU. He received his BSEE and MSEE from NMSU, his MBA from UNM, and holds three patents for energy industry inventions and ran his own consulting firm before joining Cellnet in 2005. In his spare time during school, Chris was the captain of the 1992 NMSU Men’s Basketball Sweet Sixteen Team.
http://www.cellnet.com
The irony that the first man on the moon called out the accomplishments of our industry ahead of computers, aviation, and even landing on the moon is obvious. What we do in the power industry isn’t rocket science, it’s even better!
Contrast this with the fact that the vast majority of power companies have no idea a consumer’s lights are out unless they call to let them know. How can that be true? How can the electrification of the world and our electric grid be recognized as such a wondrous accomplishment and yet we have virtually no ability to ‘see’ into its distribution systems? Newton Evans Research estimates that distribution communication systems and SCADA are deployed to only 75% of North American substations and that distribution automation at the system feeder level is less than 20%. We can lose entire distribution feeders and not know about it until enough customers call in to complain allowing our outage management systems to predict the problem. Compound this with the fact that less than a third of customers actually bother to call in outages.
Less than 10% of the meters in North America are ‘smart’ - meaning that they can
communicate their status and basic parameters back to our utility control systems in real time. Utilities are literally blind to any event that occurs below the feeder breaker level. For over 90% of the more than 2 million miles of wire that make up North American distribution systems, we have absolutely no idea that an event or an outage has occurred unless our customers call and tell us. As an industry, we talk about three 9’s of reliability and cite the fact that, compared to any other product, the price of electricity has stayed dramatically low over the past few decades.
These are not valid reasons for the status quo.
Let’s talk turkey. Let’s agree on some things that many of us will agree to privately but we are often afraid to carry into the boardroom (or to state in an article). The simple fact is that the power industry is incredibly risk averse, and we evaluate and re-evaluate opportunities well past the point when a decision should be made.
This is a conundrum we lovingly refer to as ‘paralysis by analysis.’ However, this process has transitioned in the last 10-20 years from a ‘knock’ on the engineers that are protecting the system from new technologies or concepts to a ‘knock’ on the finance, legal and managerial staff that are responsible for next quarter’s earnings instead of the long-term health of the connected grid.
Our industry is rampant with examples of insufficient investment leading to significant grid issues including brownouts, rolling blackouts and complete blackouts. Yet, with all of these front page examples that persist in recent years, utilities continue to cut budgets and staff in the face of declining grid performance and an aging workforce issue of epic proportions. At perhaps the single most critical point we are going to be dramatically short of experienced personnel to help us determine the best path forward. Nonetheless, we consistently see utilities laying people off as they merge and ‘right size.’
I’ve laid out an argument to this point that we have limited technology deployed, we can’t get sufficient money to invest in new infrastructure, and we’re running short on experienced staff to run it anyway…so what’s next? In the face of this backdrop, residential customer expectations keep rising, regulators demand more and more from us, and business customers are now demanding that the utility industry belatedly join the digital revolution. The reality is that the continued use of decade old or, in many cases, century old technology solutions and business processes to attempt to meet these needs is a path to failure and disappointment.
If this is true, where do we go from here? The answer is simple: we need an intelligent grid. Utilities that embrace this challenge in the next decade will be the market leaders 10 to 20 years from now. In the post PUHCA merger and acquisition era, utilities with ‘smart grid’ programs will be the long term survivors -- the buyers. Unfortunately, it is quite possible that Wall Street and others will spend the first 5 years beating these forward thinking players and their stock down because they are actually out spending money on the future of their system rather than maximizing current profits. This is a situation that should be remedied as progressive utilities move forward with significant smart grid initiatives.
At this point you are likely asking yourself: why should we invest in smart infrastructure? Aren’t we going to have the proverbial magic bullet solution, such as low cost distributed generation, that will obsolete this entire generation, transmission and distribution infrastructure? Assume for a moment that we will be predominantly dependent on central generation in a 30 year time frame. I doubt anyone would argue vehemently against this premise. In this circumstance, it’s difficult for even the most ardent distributed generation advocates to argue for anything less than significant and dramatic improvements in the distribution -- and even transmission -- infrastructure to support these facilities.
My opinion is that the ‘last mile’ of the distribution grid will be around for much longer than the next 30 years, and yet it is the single most ignored and neglected portion of our integrated system. We’ve spent over 100 years of ‘good enough’ and now it’s time to take the dive into the grid of the future. We need to begin significant and necessary investments in distribution infrastructure.
The ‘tipping point’ for our industry’s success or failure is rapidly approaching. Energy industry researcher Mark Mills recently commented, “We thus find ourselves facing what might be termed the ‘perfect storm’ — a confluence of three fronts: rising power demand, declining spending on power networks, and new threats from hostile forces. All this is occurring at a time when electricity is ever more critical to a modern economy and city.” United States Federal policy makers have recognized this, and they have passed the Energy Policy Act of 2005. The spirit and intent of EPAct is to encourage and reward technology advancement and infrastructure investment for energy in the United States. Likewise, the Ontario Ministry of Energy has put forth its Energy Conservation and Responsibility Act, with key provisions supporting the deployment of advanced metering infrastructure (AMI). And, according to the Center for Smart Energy’s Jesse Berst, “Grid automation represents a huge market opportunity, as utilities, regulators, and vendors struggle to overcome three decades of under-investment.” The stage has been set and there is a convergence of industry opinion, but the next act of this play is even more crucial. How will state and provincial regulators, local policy makers, and utility executives respond?
As an industry we need to help regulators understand the need for infrastructure investment and the necessary price increases that will come as part of this investment. The political drive at the local level to keep electricity rates steady for customers could eventually help push the grid that serves them into failure. Utilities continue to blame regulators, market uncertainty and the infamous regulatory lag for their unwillingness to invest in new or upgraded infrastructure. Will customers just get used to rolling blackouts at peak summer loads and stop complaining about it? Will we accept mediocrity in our grid’s ability to provide affordable, clean, efficient and reliable power?
There have been many studies performed and many articles written about our problems of today. Most of this work seeks to solve the symptoms rather than examine the root causes. A few utilities had the courage a decade ago to stand up and recognize the importance of their distribution franchises and were unwilling to divest, cut T&D capital investment and manage by the “book of the month club,” or to next quarter’s earnings. Rather than being rewarded for actually focusing on their core business, they were punished in a variety of fashions. Each of those players looks brilliant today because they don’t have a backlog of tens of millions of dollars of infrastructure projects that needed to be built yesterday, and they aren’t having rolling blackouts.
Is the answer to the core problem really that simple? Invest in our infrastructure. Yes, and unfortunately No.
As an industry we’ve struggled greatly with defining what a smart grid looks like and how it will operate. The result has been a slow evaluation and adoption of new technologies.
As a result, the vendor community has been conditioned to be extremely measured in how far they push the envelope with technology and how much money they spend ahead of utility purchases. Vendors have been shown in years past that payback is often years down the road. But the academic phase of this smart grid effort has officially come to an end. The Electric Power Research Institute and Department of Energy have provided significant thought leadership and guidance through ESFF and Grid 2030. Utility industry executive leaders must, in turn, take the reigns and work with the vendor community to innovate and deploy the technology now that we need to meet the needs of the new digital economy for the next 30 to 50 years.
The utilities that are willing to proactively pursue the smart grid, buck the ‘run to failure’ trend, and effectively partner with their regulators to do the right thing for energy infrastructure will be the big, long-term winners.
Many far sighted state and provincial regulators and utility leaders out there understand how critical energy infrastructure is to our entire economy and to our way of life. They are partnering together to ‘fight the good fight’ to invest and develop our North American grid into the grid of the future that it needs to be. I am holding out hope for a smart future.
About the Author
Chris Hickman, Head of Regulatory Affairs & Business Solutions
Cellnet Technology, Inc.
Chris Hickman has worked in the utility industry for 15 years. He has managed all aspects of transmission and distribution system engineering design, construction, maintenance & standards for both gas & electric utilities. In addition, he managed all R&D activities for PNM as well as Right-of-Way, Environmental, CAD/GIS, Safety, DOT and regulatory compliance and a variety of other groups.
Hickman served on the board of Avistar, PNM’s unregulated subsidiary, and was a board member for IEEE’s Power Engineering Society. He is currently the chair of the Electric Utility Management Program board at NMSU and is also a member of the Engineering Academy and the vice-chair of the Dean’ s Advisory Council for NMSU. He received his BSEE and MSEE from NMSU, his MBA from UNM, and holds three patents for energy industry inventions and ran his own consulting firm before joining Cellnet in 2005. In his spare time during school, Chris was the captain of the 1992 NMSU Men’s Basketball Sweet Sixteen Team.
http://www.cellnet.com
