Next Steps To The Next-Generation Utility: The Role Of Information And Communications Technology


Communications technologies are central to this system automation movement: Automatic Meter Reading (AMR), Advanced Metering Infrastructure (AMI), supply automation and supply control and optimisation applications are all enabled by advanced communications and will help utilities to cut costs, maximise assets, and improve customer service and power reliability.

This dramatic change in the business environment offers tremendous opportunity for utilities, but the task is large and complex and the risks are great. To assist utilities to move into the future the Washington, DC-based Utilities Telecom Council (UTC) and The Shpigler Group, a consulting firm in Pearl River, NY, have undertaken a review, “Next Steps to the Next- Generation Utility: An Assessment of Information and Communications Technologies Aiding Migration to Next-Generation Critical Utility Infrastructures”, to define this critical investment cycle, which is expected to dominate at least the next two decades.



Aldo Morri, director of research,
Utilities Telecom Council

Aldo Morri, director of research at the UTC, explains that several recent events, among them Hurricane Katrina, the 2003 Northeast blackout that left 50 million consumers in the US and Canada without power, and the California energy crisis, have exposed the vulnerabilities of ageing utility infrastructures in the US. Indeed the US Department of Energy has estimated that losses to the economy due to utility outages, quality disturbances and other events total approximately $188 billion annually.

At the same time energy demand is continuing to increase, and there are also a number of other factors pressuring utilities to upgrade infrastructures: regulators are moving to increased industry competition, consumer groups are making greater demands on pricing and other issues, and governments are pressing for cleaner, more reliable energy. In short consumers, governments and society want more energy, at better prices, and delivered more reliably.

Morri says the keys for the utility of the future are the advent of ‘intelligent’ sensors, albeit that they are too costly currently for widespread deployment, and two-way communications, which together will lead ultimately to a future ‘self healing grid’.


  • The opportunity for utilities to explore automation deployment is greater than ever given the drive to address consumer demand, and environmental and energy supply concerns.
  • Each utility must be mindful of its unique circumstances as it designs a technology roadmap. Most utilities will begin with the implementation of an advanced communications network followed by AMR/AMI, supply automation, and supply control and optimisation.
  • A gradual approach to automation helps ensure that acquisition of systems or technologies do not limit future opportunities or create ‘stranded investments’ that become tomorrow’s failed legacy systems. Systems implemented must be upgradeable, scalable and interoperable.
  • Differing utility scenarios have resulted in varying specific applications. Increasing customer satisfaction is often cited as a reason to embark on automation, but each utility must consider its own priorities as it designs a system.
  • Building a sound business case for next generation upgrades is critical. Each utility is different and must take those differences into account in performing economic due diligence. An illustration in the report shows one example – a utility with one million electric and gas meters that embarks on an automation programme that yields a Net Present Value (NPV) of $184 million, an Internal Rate of Return (IRR) of 32%, and a monthly operational savings of $2.70 per meter, with a peak investment of $100 million.
  • State commissions are seeking to implement advanced metering rules in the wake of the passage of the Energy Policy Act 2005 (EPAct 2005). US utilities that take the initiative by offering proposals to state commissions will likely fare much better than utilities that wait for rules to be imposed upon them.

“Communications networks serve as the blood vessels of the automation and information system of the next-generation utility. Two-way communications establish a platform for all the different devices to send information back and forth, ideally enabling all of the elements of the utility’s network and operations to work in tandem.”

Morri says that efforts to turn the vision of the nextgeneration utility into reality are already beginning, with advances in metering the obvious first step beyond advanced communications.

“One-way communications systems are being replaced with robust, two-way communications networks that make a widespread move to AMI possible.”


Critical communications networks

Thereafter subsequent steps that can be expected are supply automation, and then supply optimisation and control. And all of them will be brought together in the self-healing grid, which will continuously send, receive and process data on system condition and components’ health and pass information among intelligent electronic devices, generators, system operators, and even marketers and consumers. However, this may take a while, Morri says. “Real selfhealing grids are unlikely to be reached in the next 20 years or so.”

Morri says that most of the right technology is already available now but that it is a question of economies of scale before its use will become more widespread. “We have the data management and communication tools and we have the intelligent sensors, but they are too expensive to install on the thousands of substations, and tens of thousands of kilometres of transmission and distribution lines across the US. However, with volumes, particularly with the globalisation of the concept and expansion of the pool of potential customers, prices [of equipment] should decrease.”

There is uncertainty about intelligent network investment, as the technology is largely unproven and the business case is not clear. On top of this, utilities have legacy systems that are robust and still working well, and will need to interoperate with new systems.

Then there is also the traditional mindset that is prevalent, and which is exacerbated by the ageing workforce in the industry. “Many senior people are near retirement, and the industry is struggling to find replacements while maintaining the flow of power and investigating upgrades.”

But, Morri notes, the presence of an increasing number of IT people in senior positions in utilities is a positive sign.

When it does come to the rollout, Morri cautions that there is not a single, fit all model: “Every utility is different in terms of geographic coverage, regulatory framework, or in its legacy technologies, but for most utilities, smart metering that is enabled by advanced communications will represent the first advanced automated application.”

The next-generation utility communications network must accomplish a number of things, including:

  • Minimise costs without compromising features, functionality and reliability
  • Provide reliable transmission over wireless microwave and fibre optic systems
  • Support critical existing utility
  • Time Division Multiplex (TDM) services
  • Support new IP-based applications and services
  • Provide scalability (allowing utilities to increase services and grow the number of users over time)
  • Ensure network and operational system security
  • Enable scalable Quality of Service (QoS) to prioritise mission critical applications’ data transmissions over other non-critical traffic, and
  • Be highly survivable and resilient.

Various communications technologies are available for system automation. Wireless communications, Power Line Communications (PLC), or Broadband over Power Line (BPL) are currently the most preferred, but a variety of other technologies are available to satisfy different needs, e.g. wireless radio for voice communications, fibre optic networks for ultra-fast critical transmissions, and LANs for communications within a limited area. Most utilities are likely to adopt a hybrid system that combines technologies such as Wi-Max wireless technologies interlinked in a ‘mesh’ network and PLC/BPL.

New IP-based services that should be supported include:

  • Critical SCADA and e-SCADA traffic
  • AMR
  • LMR for internal operations
  • VoIP telephony and collaboration
  • Traditional voice services (digital and analogue)
  • Wireless IP data access points for workforce mobility
  • Alarm circuits for all remote sites
  • TDM digital/analogue bridging
  • Virtual Private Networks (VPNs), and
  • Customer relationship management.

These applications are driving the need for increased bandwidth that is more flexible and efficient. While core utility operational networks can be based on a number of technologies, e.g. Synchronous Optical Net (SONET)/Time Division Multiplex (TDM), Asynchronous Transfer Mode (ATM), increasingly these services will be delivered over an Internet Protocol/Multi-Protocol Label Switching (IP/MPLS) architecture that can enable the delivery of multiple IPbased applications and services over a network.