TODAY’S STUDY: SMART GRID TRENDS COMING IN 2015

Smart Grid: 10 Trends to Watch in 2015 and Beyond

4Q 2014 (Navigant Research)

The Smart Grid Industry In 2015 – And Beyond

Smart Grid Industry Outlook

As one executive interviewed by Navigant Research in 2014 put it, when it comes to smart grid technology, “not much is new, and yet everything has changed.” Indeed, it is a fast-moving industry in many respects – technological breakthroughs and innovations emerge almost daily – and yet, the utilities expected to implement these new systems and build ever more intelligent (reliable and efficient) grids move at a relatively slow pace.

This is not to say that utilities are dragging their feet when it comes to upgrading their systems. The harsh truth of the matter is that most utilities worldwide are saddled with 100 years of embedded regulatory schemes, infrastructure designs, and industry culture. It just does not change overnight – and yet, looking ahead, it must.

Electric utilities are facing upheaval on a number of fronts: Deregulation is a global trend, even as distributed generation (DG) cuts into the utility’s core business of selling electricity to businesses and consumers. The proliferation of DG installations, along with electric vehicles (EVs), is changing the load profile of distribution circuits, often in concentrated neighborhoods, which can mean reduced grid stability and increased need for infrastructure upgrades. Meanwhile, environmental concerns are forcing utilities to rely upon more eco-friendly generation – often at a higher cost – even as they must implement programs designed to cut electric power consumption even further. This dichotomy is not sustainable.

These factors and others are behind the major trends that Navigant Research has identified for the smart grid industry in 2015 and beyond. This white paper outlines these major trends and market forces affecting utilities and smart grid vendors worldwide. The selection of these major trends was based on industry research conducted throughout 2014. Additional information, analysis, and market forecasts are available in a number of Navigant Research reports; these are identified, as appropriate, for each trend in Section 2.1 through Section 2.10.

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10 Smart Grid Trends To Watch

2.1 Prosumers Prod the Traditional Model

Once passive electric utility customers are becoming proactive consumers, or prosumers. No longer captive customers of their local utility, prosumers generate their own energy onsite – with rooftop solar systems, for example – and the number of people (and businesses) doing just that is growing. With federal tax credits for solar panels set to expire at the end of 2016, growth in the number of prosumers will likely accelerate through 2015 and 2016…Solar panels are but one technology changing the traditional residential power industry. Others are converging to create an emerging set of residential innovations that pose new challenges and opportunities for many stakeholders. New stationary and mobile electricity storage capabilities, for instance, and enhanced energy management tools are expected to provide residential customers more options to control electricity usage and lower costs. In addition, residential combined heat and power (resCHP) systems embody another DG technology customers might consider…

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2.2 Smart Metering 2.0: Maximizing the Bang for the Advanced Metering Infrastructure Buck

Smart metering is not a new trend, but utility use of advanced metering infrastructure (AMI) networks for a whole host of new applications is certainly one that is growing. From consumer engagement to analytics, from demand response (DR) to time-of-use (TOU) pricing, the ways that utilities are leveraging that last mile of connectivity and intelligence is morphing and growing. This has several implications for utilities, including the need for increasingly complex and interoperable IT systems, the need for more robust communications networks, and greater collaboration between formerly siloed teams…

2.3 Smart Edge: More Utility Solutions Leverage Distributed Intelligence and Automation

Smart meters are proliferating and, as noted above, grid-edge intelligence can provide a lot of value to utilities. But there are many other devices throughout the medium- and low-voltage networks that utilities have historically been unable to see from the operations center. Leveraging an AMI network to bring device or sensor data back to the control center is one way to remove those blind spots. But deploying advanced devices with the intelligence to monitor conditions and automatically react, without waiting for control center personnel or even a centrally located system to respond, presents an even greater opportunity to improve grid efficiency and reliability as well as reduce truck rolls. Navigant Research sees growth in distributed intelligence and automation as a new trend in grid technology with the potential to have dramatic long-term effects…

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2.4 “Your Power Is Out; We Are Working on It.”: Utilities Get Jiggy with Social Media and Mobile Devices for Customer Engagement

Historically, utilities did not have to concern themselves much with the public, but that is quickly changing. Utilities are now under the gun to establish a stronger rapport with their customers…

2.5 Smart Grid as a Service: Moving from Hype Cycle to Real World Product

Managed services for utility applications – whether for full AMI deployments, asset monitoring, communications network management, or other applications – were a hot topic in 2014, and a number of major grid vendors expanded, or implemented for the first time, offerings that fall under the smart grid as a service (SGaaS) umbrella. But while the noise in the space was loud, Navigant Research did not observe a crowd of utilities climbing on board the SGaaS wagon. In 2015, however, traditionally conservative utilities may just start to acknowledge – with their wallets – the many advantages of the outsourcing model. And as the decade progresses, the criticality of many smart grid innovations and capabilities will rise to the point that even smaller, budget-constrained utilities will be forced to adapt…

2.6 The Push and Pull of DR: Default Dynamic Pricing and Federal Energy Regulatory Commission Order 745

Federal Energy Regulatory Commission (FERC) Order 745 machinations notwithstanding (more on that below), the DR market is poised for meaningful growth – albeit off a still small base. Navigant Research believes that dynamic pricing and default TOU rate programs will grow substantially through the end of the decade, thanks in large part to the proliferation of smart metering…

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2.7 Just the FACTS, Ma’am: Flexible Alternating Current Transmission System Deployments Rise in Step with Power Plant Decommissioning

A large number of central generating plants around the world, both coal and nuclear, are being forced to retire early due to clean air objectives and anti-nuclear regulations, as well as due to age as they reach the end of their useful life. Flexible alternating current transmission system (FACTS) technologies and automation hold enormous potential to deal with the challenges these retirements pose, based on their ability to create a more flexible network, and are expected to see increased use globally…

2.8 High-Voltage Transmission Getting in Synch

The adoption of synchrophasors and wide area situational awareness (SWASA) applications will grow in 2015, setting the stage for acceleration later in the decade, as new, cheaper digital technologies and prebuilt analytics and automation applications are introduced. SWASA technologies and applications are part of the next wave of transmission grid applications made possible by digital phasor measurement units (PMUs), phasor data concentrators (PDCs), and upstream super phasor data concentrators (super PDCs)…

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2.9 Holistic Health for Utilities: Regulators Tweaking the Utility Recipe, but Are There Too Many Cooks in the Kitchen?

While there were not as many doomsday “utility death spiral” articles in the mainstream media in 2014 as in 2013, there are nonetheless still very real pressures for the power industry’s century-old model to change. Regulators want better efficiency and resiliency as well as smaller carbon footprints; consumers want lower costs and more control and also support for their solar panels and EVs (but only when they need it, and they would rather not pay extra for it). Meanwhile, utility executives and investors are scrambling to preserve the bottom line in a business that has never before faced so many new challenges and uncertainty…

2.10 A More Worldly Smart Grid Industry: Europe and Asia Pacific Especially Poised for Growth over the Next Several Years

North America has been a leading region for smart grid investments for the past several years, thanks at least in part to the American Recovery and Reinvestment Act (ARRA) stimulus funding awarded in 2009. And while the United States and Canada remain critical to the growth of the industry (and host some of the more innovative pilot projects in the world), the 20-20-20 initiative in Europe and massive spending on grid upgrades/new electrification in China and India are expected to make the European and Asia Pacific regions key to future market growth. Also, Latin America, which has seen minimal smart grid investment to date, is expected to support double-digit CAGRs between 2014 and 2023…

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