The importance of a corporate vision for smart grid

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By James McClanahan, IEEE

There are so many business, technology and regulatory components to a smart grid implementation that any utility embarking on a smart grid deployment must have a vision in place to guide the effort.

James McClanahan

There is a saying that if you don't know where you're going, you'll probably wind up there. The utilities that have been most successful with their smart grid implementations have had clear and cohesive visions for their deployments. Their visions have been accepted across their companies and used to guide smart grid business strategies across their organizations. Conversely, other utilities have deployed smart grid without considering how their systems fit into the larger business picture or affect individual business groups. These utilities have struggled to demonstrate the value gained from their deployments.

But adopting a smart grid vision is not, by itself, a recipe for success. A utility must also have a champion for the vision in the company. Ideally the champion would be a key executive, but companies can also rely on large groups representing all levels of the organization to share the vision and champion it together to bring it to reality.

The vision must also allow for and support an incremental implementation of smart grid technologies and services. Most successful deployments start as proof-of-concept tests or limited-scale trials. Out of dozens of tests or trials, just one or two might move on to broader use. Utilities need to follow a "crawl-walk-run" deployment progression. Today, certain utilities and technologies have reached the "run" stage, but there are also some that are at the "crawl" stage. That's how it should be. Companies that try to take on too much, too fast, often find it difficult to scale their deployments and integrate the new systems.

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Adopting a smart grid vision is not, by itself, a recipe for success. A utility must also have a champion for the vision in the company. ___________________________

Crafting a telecom infrastructure strategy

Telecommunications infrastructure will play a fundamental role in smart grid and individual utilities have realized that they need cohesive telecommunications strategies for their companies. This is becoming the norm.

The trend is important because in general, one size does not fit all when it comes to serving utility telecommunications needs. A typical utility might employ fiber optics, licensed or license-free wireless or other technologies, for example, to meet the specific performance or other requirements for advanced metering infrastructure, distribution automation, or substations. While they are using a variety of technologies, most utilities today are building single "umbrella" systems that consolidate provisioning, monitoring, management and optimization for their various telecommunications technologies. They're pursuing their telecommunications needs more holistically and abandoning the traditional practice of using separate management systems for each implementation.

Every major utility that I'm working with either has a telecommunications strategy in place that they're executing on or they are developing their strategy. The days of "silos" within the utility—each having its own telecom preference and solution that it operates and maintains in isolation of the others—are ending quickly.  

Innovative customer relations strategies

Smart grid gives utilities a new opportunity to redefine their relationships with their customers and utilities need strategies to craft these new relationships.

For a century now, utilities' customer interactions have largely been limited to meter reading, billing or outage reporting. But smart grid introduces new methods of engaging with customers, such as user-friendly web portals for accessing demand-response programs and smartphone apps for changing home thermostat settings. Smart grid also gives customers access to new services. For example, community energy storage will support reliability-based "premium" services and distributed generation will support customers' peak demand while reducing the burden on utility infrastructure and, potentially, reducing customer electricity bills.

Companies should think about how they want to use these new capabilities to interact with their customers and devise their customer programs accordingly. They should be innovative in their approaches. We've seen how the smartphone industry developed a unique and pleasant "customer experience" for its users and the enormous impact this has had. With smart grid, the utility industry can offer something similar for its customers.

Pitch smart grid as a win-win

It's not often that you get to pitch win-win situations to customers, but with smart grid there are many win-wins that we can and should emphasize. Utilities should communicate the value of smart grid to customers in this context and use plain language to ensure customers understand the message.

This can be done. I was involved in an early trial deployment of AMI and demand-response programs that included time-of-use (TOU) rates. Surveys of customers after the trial was completed showed nearly universal acceptance of the TOU concept. We had almost 1,000 participants, but we also spent face-to-face time with each customer. We explained that 20 percent of their annual electricity costs were driven by less than 100 hours of peak usage each summer. They "got it" and by working together we saved money for both the utility and the customers.

The win-win approach can also be used to explain that technologies like distribution automation, switching and AMI benefit utilities and customers alike.

If a downed power pole causes an outage in a neighborhood, for example, distribution automation technologies can locate the problem and perform the switching needed to isolate the damaged line and restore service for as many customers as possible, all within a few seconds. The utility can then dispatch a crew to fix the problem.

With AMI, utilities also have automatic outage notification capabilities that detail when outages occur and which houses are affected. The utility's interactive voice response system will know if a calling customer is experiencing an outage, give the caller an update on the situation and the option of talking to a customer service representative.

These technologies are much more efficient than the traditional model, which relied on customer calls to report service problems and dispatching series of crews to the field to find problems and then manually restore services. Customers will appreciate these benefits and support them.

Develop strategies to transition operations staff to smart grid

Workforce issues are among the biggest challenges utilities face as they transition to smart grid. Utilities must devise strategies to evolve their operations staff to smart grid.

Initially, this issue was not fully understood. For example, in some early automated meter reading trials I was involved in, employees viewed AMR as something that took away meter readers' jobs. At the time, meter reading was a utility career entry point and people who started in these roles often moved on to apprentice linemen or other jobs. Some utilities didn't think this through and realized too late that their source of apprentice linemen dried up when they moved to AMR. Fortunately these cases were not widespread, but they highlight why utilities must have career progression plans as they move their organizations to smart grid.

People across the organization are impacted by smart grid solutions. Protection engineers must understand how to coordinate new distribution automation options. Customer service representatives must be able to support remote connect or disconnect requests. Distribution system operators can now see in real-time whether an outage is caused by a phase-to-phase or phase-to-neutral fault. To realize smart grid's full potential, each of these groups must incorporate the new information and capabilities offered by technology into their day-to-day work practices. This will require training.

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Workforce issues are among the biggest challenges utilities face as they transition to smart grid. Utilities must devise strategies to evolve their operations staff to smart grid. ___________________________

It also takes a lot of people to deploy, commission, maintain and optimize smart grid equipment. Today, the industry has a large number of employees that are within a decade of retirement. We have an increasing number of young people coming into the industry, but knowledge transfer will take time. As an industry, we need to make sure that the lessons our veteran employees have learned over the years are passed on to the next generation of management and staff. 

Adapting the business environment to accommodate smart grid benefits

The utility business environment presents one of the biggest challenges for smart grid because utilities must consider their technology investments within a traditional regulatory framework, and smart grid solutions don't always fit that model.

For example, while utilities and regulators employ SAIDI and SAIFI indices to measure outages, it is difficult to put a dollar value on the customer costs Smart Grid avoids by preventing an outage or restoring service in 30 seconds instead of 30 minutes. And focusing on utility revenue losses is a poor way to measure the customer impact of an outage because even a 30-second outage will inconvenience most customers in some way even if revenue losses are minimal.

Utilities have to move to a "value-based" approach for their smart grid businesses so they can offer differentiated levels of services, such as a promise of fewer outages per year for a few more dollars a month. But utilities must have ways to quantify and price these services when they introduce smart grid.

I believe that if customers have access to some type of "value-based pricing" and understand smart grid's benefits, they will support new regulatory models that depart from minimizing costs and that move, instead, toward optimizing the value the customer receives for their dollar.

For that to happen, the regulatory environment must change to recognize and allow for value-based rate making.

About the Author
James McClanahan is an IEEE smart grid technical expert, a member of the IEEE Power & Energy Society and he has served as an IEEE officer at the local chapter level. In industry, he has helped pioneer advanced metering infrastructure and many telecommunications technologies that will be used in smart grid. He is director of smart grid services in the power system services division at S&C Electric Company. 

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