TODAY’S STUDY: UTILITY TRENDS TO WATCH

Smart Utilities: 10 Trends to Watch in 2014 and Beyond

Richelle Elberg, Brett Feldman, Lauren Callaway, Neil Strother, Kris Torvik, Bob Lockhart, 4Q 2013 (Navigant Research)

Executive Summary

2013: A Year of Change

The year 2013 saw several new trends emerge in the smart utilities market – some encouraging, some disturbing. Utilities’ traditional business models face threats from all sides.

Meanwhile, vendors that sell to utilities are challenged to understand what their future markets may look like based upon all this change. “Business as usual” appears to be a thing of the past.

click to enlarge

Some key developments of the past year:

» U.S. utilities spent the last of the stimulus funding from the American Recovery and Reinvestment Act (ARRA) of 2009, leaving vendors to wonder where the next market push will come from in North America.

» Utilities that installed advanced metering infrastructure (AMI) systems with stimulus funding are beginning to use those telecommunications networks for enhanced distribution automation (DA) functions.

» A raging global debate has emerged over net metering and residential feed-in tariffs (FITs). Utilities face a loss of revenue as more residential and business customers generate their own energy. In many cases, utilities are legally mandated to pay customers generously for excess energy generated. Utilities are applying pressure to reduce FITs, for which the utilities are being characterized – rightly or wrongly – as anti-green.

» The deadline for Europe’s 20-20-20 by 2020 initiative drew 1 year closer with little measurable progress toward that program’s directed outcomes.

click to enlarge

» The home energy management (HEM) market finally started showing some signs of life after several successful pilot programs that combined HEM and demand response (DR). While not the level of growth some expected to see by this time, this constitutes at least a viable direction for the HEM market.

» Meanwhile, DR load curtailment numbers are finally becoming significant somewhere besides North America. Outside North America, commercial and industrial (C&I) customers are driving the DR uptake.

» Transmission and distribution vendors continue to innovate in technologies that lead toward more efficient grids, such as conservation voltage reduction (CVR) and hybrid circuit breakers for high-voltage direct current (HVDC) networks. The following section presents 10 key smart utilities trends to watch during 2014 and beyond.

click to enlarge

Navigant Research selected these particular topics because they stood out during 2013 research projects as likely to have a business impact for smart grid vendors and utilities.

1-AMI Networks Supporting Distribution Automation

Following the rapid deployment of smart meters that the American Recovery and Reinvestment Act (ARRA) inspired between 2009 and 2012 in the United States (and including some ongoing rollouts), North American utilities are taking a step back and reassessing their investments. Many now see the communications networks installed alongside their advanced metering infrastructure (AMI) systems as a platform to be leveraged for distribution automation (DA) applications, particularly in the low-voltage (LV) distribution network. Forcing the communications network into double duty (for meter data collection and as a new set of eyes and control in the LV network) is expected to improve returns on investment (ROIs), while at the same time reducing grid operating expenses and improving reliability.

Those utilities that have not yet deployed smart meters (both in North America and elsewhere globally) are increasingly planning those networks with multiple uses in mind from day one. While AMI communications vendors caught on to the AMI/DA integration trend some time ago by touting a multitude of DA functions enabled by their systems, the bottom line is that not all legacy communications networks offer the robustness needed for certain DA applications. That said, communications technology continues to evolve. Looking ahead, many applications will be enabled by or benefit from AMI communications, including all but the most critical protection scheme applications…

2-Net Metering Brouhaha Escalates and Possible Solutions Emerge

Net metering is a blanket term describing the compensation a utility most provide to customers who generate their own energy and deliver their excess energy to the grid. With net metering, a customer’s meter begins to spin (or record) backwards when his system is generating more power than is being consumed on the premise. In Europe, independent energy generation is generally compensated under feed-in tariffs (FITs). Globally, the growing capacity of independent generation is placing heavy strains on utilities and, in many cases, on the utility’s non-DG customers as well.

This could be the year that a solution to the growing controversy over net metering policy emerges; if nothing else, expect a flurry of proposed formulas designed to deal more intelligently with the problem. The stakes are high and growing higher for utilities, which have been largely demonized in the debate over how to compensate the fast-growing number of independent energy producers worldwide. These prosumers are generating their own electricity primarily with solar panels, but a myriad of policies also cover wind generation, biofuels, and other DG…

click to enlarge

3-Smart Grid IT Spending on the Rise

As the one-way electric grid of old is upgraded with communications, sensors, and control devices, the amount of data available to utilities is growing exponentially. And while access to such granular information holds great promise, without intelligent information technology (IT) to manage and route that data – and in some cases make autonomous operating decisions – the grid is not really smart but rather just more complex and more expensive…In response, IT solutions are emerging and advancing at a breathtaking pace.

4-Utilities’ Business Models Are Shifting

Recent market changes have introduced new pressures upon utilities’ traditional business models. Net metering, discussed earlier in this white paper, is one example. On a policy level, energy efficiency and carbon dioxide (CO2) emissions reduction targets have forced utilities to increase their use of cleaner but more costly forms of generation, often with no offsetting increase in their rate structures. On the customer side, more sophisticated tools for home energy management (HEM) such as smart thermostats and energy efficient appliances yield intentional reductions of energy use. In addition, the growth of distributed energy resources have complicated load forecasting and grid stability, as well as opened up a number of policy- related questions that challenge the economic structure of the energy industry. Utilities’ roles in this brave new world could change in a number of ways…

click to enlarge

5-Distributed Energy and Microgrids Begin to Affect Utilities

Traditionally, electric utilities manage power generation and grid control assets. These utilities have long been granted monopoly power over local areas based on economic efficiencies and guarantees to provide non-discriminatory service. Over the past 40 years, the regulatory structure in many jurisdictions has shifted toward deregulation on varying levels to allow for differing levels of competition in sales of wholesale or retail power based upon markets led by centralized generation facilities…

6-Utilities’ Secret Weapon in Energy Efficiency: Conservation Voltage Reduction

Between 1991 and 2010 American utilities spent over $43 billion on electric energy efficiency (EE) measures according to the 2012 annual report from the U.S. Department of Energy (DOE) and the Energy Information Administration (EIA). The total annual average spending was $1.9 billion between 1991 and 2005. Since 2005, EE spending has grown consistently by roughly $0.5 billion per year and broke $4 billion in 2010…

click to enlarge

7-Hybrid HVDC Breakers Bring Innovation and Efficiency

In late 2012, ABB unveiled a new direct current (DC) breaker, a hybrid of mechanical- and semiconductor-based switches that enables flexibility in high-voltage direct current (HVDC) topologies at high transmission efficiency. Siemens and Alstom are developing their own solutions with the same target in mind: to stop DC fault currents in 5 ms… In practice, the hybrid HVDC circuit breakers can dramatically reduce the number of converters necessary for multiterminal HVDC applications…

8-Demand Response outside North America Will Begin to Grow

The vast majority of DR takes place in North America today, but activity in Europe and Asia Pacific will grow at a faster rate over the next several years. Total load curtailment in the world from DR programs in 2013 is estimated to be 57,764 MW; North America contributes roughly 71%. By 2020, global load curtailment is expected to reach 140,472 MW at a CAGR of 13.5%...Forecasts show strong growth for the global DR market, especially in the emerging geographies…

click to enlarge

9-Smart Meter Market to Expand Globally

For much of the past few years, deployments of smart electric meters have taken off in North America and China, creating a frenzy of market activity and expectations of fast growth in other regions. Chinese utilities continue to deploy meters at a rapid clip as they seek to install some 300 million meters by mid-decade. However, the pace has slowed in the United States as federal stimulus money for projects has nearly run its course. For the next 10 years, the new focus for smart metering will shift to Europe where Great Britain and France are just starting major deployments that combined will amount to some 65 million devices. Japan will also be a new focus of smart meter rollouts, with Tokyo Electric Power Company (TEPCO) making plans to install 27 million smart meters…

10-Home Energy Management Market Will See a Steady Uptick

During the next 10 years, the HEM market is likely to expand at a steady pace, as new industry participants introduce innovative products. Utilities are likely to mimic what Oklahoma Gas & Electric, NV Energy, and Baltimore Gas and Electric have begun by offering HEM products or services linked with DR programs. In Europe, Great Britain has mandated that each home receiving new smart electric and gas meters will get in-home displays (IHDs) as well, which the U.K. government hopes will drive greater consumer awareness of energy use and encourage greater efficiency…

Tweet