By Perry Stoneman, Vice President and Global Leader of Capgemini’s Smart Energy Services team
Organizations need to do more to capitalize on the potential of smart energy.
As the green shoots of economic recovery begin to emerge, industry leaders are starting to peer out of the bunker, and survey the damage done by the worst recession since the 1930s. For utilities, the legacy of the recession will be a significant slowing of investment programs, with companies across the globe revising timelines for development, and cutting funds earmarked for future growth. So what next?
Our view is that the way ahead for utilities is leveraging emerging technologies to reduce costs, improve operational performance, and to take advantage of potential new revenue streams offered by smart energy. Inspired by countries like Sweden and Italy, and various “smart city” projects cropping up worldwide, the public and private sector alike is jumping at the opportunity to adopt smart energy solutions. Utilities cannot afford to miss the boat.
So what exactly is “smart energy?” In simple terms, it is an umbrella expression that encompasses the end to end process of delivering energy to consumers in an intelligent, cost effective and environmentally friendly way. It encapsulates “smart grid,” the delivery of electricity from a supplier to a consumer levering digital technology; “smart meter,” a device that measures energy consumption in more detail; and “smart home,” the use of in-home automation devices to control demand response and energy usage. It also refers to “distributed generation,” or the creation of energy close to the point of use to enable the economic use of renewable energy sources and reduce inefficiencies borne out of transporting power over long distances. Smart energy has two-way benefits, with consumers better able to control the money they are spending on energy, and utilities better able to manage the distribution and measurement of supplies.
So far, the geographical spread of smart energy adoption has been ad hoc, and this is almost exclusively due to different regional regulatory environments. Countries such as Italy and Sweden for example each boast close to 100 percent penetration of smart metering implementation, with the UK, Netherlands, Ireland, Norway, Finland, France and Spain taking significant steps to follow in their footsteps. In the U.S., the government has been strongly pro-smart energy, pledging $3.4 billion in government grants funding for smart grid projects in October, 2009. By way of contrast however, Switzerland, Russia and Ukraine are all behind the curve owing to the different regulatory pressures and market dynamics experienced in those regions. Across the board, smart energy is growing in momentum, but there is still a long way to go before it reaches anything close to its potential.
Aside from immediate regulatory concerns, many utilities are coming up against barriers preventing them from cashing in on a potentially lucrative new revenue stream. Short-termism is one of smart energy’s biggest enemies. Accepting the financial burden of investing in smart grids and smart metering is something utilities are finding difficult to stomach. It can be a long and costly process, requiring considerable capital expenditure. A lack of interoperability is also a put-off for utilities as few registered open standards currently exist that cover all of the relevant functions including metering, communications, presentation and network. In this context, developing a solid business case has been an ongoing challenge for utilities.
In spite of these barriers, smart energy has gained huge political momentum over the past year. Despite not reaching a binding agreement, COP 15 in Copenhagen played an important role in ensuring media coverage and political attention were focused on the issue of climate change. Following the meeting, and on behalf of the international community, Italy and South Korea are taking the lead on the development of a smart grids plan with the aim of establishing a platform to enable cross-country and cross-regional development and coordination of smart grid technology standards. Throughout the two week event, widespread adoption of smart energy techniques such as smart grid and smart metering was acknowledged as an achievable, realisable objective for the global community to strive for. Political pressure means obstacles for the utility will begin to dissipate. Utilities that are slow off the mark will be too late to the party.
So what about the business case? The four facets of smart energy – smart grid, smart metering, smart home and distributed generation – all offer benefits for the utility that cannot be ignored. Firstly, distributed generation is a key technology with important benefits for utilities. On a smart grid with distributed generation, energy can be generated close to the point of use, allowing the grids to harness renewable energy such as solar, wind and thermal. Though renewable energy resources are less predictable than the power generated by traditional means, hybrid systems can utilize both renewable and traditional power. Moreover, on a smart grid, the technology for generating energy from renewable resources can be installed in small increments, and it has extremely low ongoing costs overcoming the financial barriers discussed earlier on.
Smart grid represents the merging of multiple technologies into a system that provides reliable and cost effective energy. Unlike the local and manual operation of equipment on a traditional grid, the smart grid enables operators to manage and monitor millions of devices and sensors. The smart grid has extensive communications capabilities that enable smart metering, as well as grid automation and sensing devices. Remote monitoring and data collection is useful for customer relationship management and data analysis, making it possible for utilities to assess service levels constantly using information from sensors located throughout the distribution grid. Grid automation and sensing devices collect information about grid activity that can be analyzed and applied to avoid failures, extend equipment life, and lower costs.
With smart meters, usage and event-related data from customer locations are collected by a meter data management system. Regular updates are automatically transmitted from the smart meter, and they support on-demand meter reads for customer service support as well as remote alerts. Monitoring of the entire service area through smart meters enables service providers to determine when a customer is out of power and when power has been restored. Alerts inform utilities when a customer deviates from his or her base profile. This information can help identify customer usage patterns that result in unnecessary customer energy costs or instances where users may be diverting power. Reduced operating costs can be achieved for the utility by minimizing the expense related to meter reading, as well as losses due to tampering and theft.
Billing can be confusing. Consumers receive electricity bills once a month, typically several weeks after they have used the energy. The customer has limited capability to correlate the amount of money spent on electricity with how it was used, leading to frustration and often a lengthy, and costly, call to a utility’s customer services helpline. Furthermore, for those customers who have purchased renewable energy systems, there is limited, if any, ability to directly measure the amount and value of energy produced from renewable resources. The smart home represents the convergence of energy efficient, controllable appliances and real-time access to energy usage data. This integration of smart devices and smart grid enables customers to proactively manage energy production and use in ways that are convenient, cost effective, and good for the environment. Crucially, they also allow enhanced communication with the utility through messages sent via a customer portal. These messages could include energy saving tips and weather warnings, as well as updated information about when power outages will be restored.
There’s no question smart energy represents a bright future for the energy industry, particularly the utility. In spite of regulatory barriers, and cost concerns, it is imperative utilities continue to press ahead with plans to implement smart energy solutions within their organisations. As consumer demand for more flexible and efficient energy options increases, utilities risk severe brand damage if they don’t deliver. In addition, as governments start to regulate carbon emissions, utilities need to ensure they are complying and doing their part to address global sustainability. Now is the time for utilities to act in order to take full advantage of the financial and business opportunities that smart energy represents.