Smarter grids, cleaner power, and the future of utility asset management

Smarter grids, cleaner power, and the future of utility asset management

INDEX 3 5 5 6 7 7 8 9 The state of the U.S. electrical grid what s at stake? The trends and challenges ahead What is the smart grid and how will it impact utility operations? Understanding the impact of the clean power plan Improving utility asset management Breaking down organizational silos New and more assets to manage Preparing for the influx of data

The U.S. electrical grid is a countrywide network of power plants, substations, transformers and transmission/distribution lines that deliver electricity from the generation source to end users: The millions of homes, businesses and municipalities across the country. The whole grid is estimated to be worth about $876 billion, and is comprised of almost 7,000 power plants that send electricity over 450,000 miles of high-voltage transmission lines and an additional 2.5 million miles of distribution lines. Throughout the U.S., there are about 3,300 utilities serving 150 million customers. Managing a system of this size is an enormously expensive and complicated task one that is only getting more difficult as time goes on. The physical assets that make up the key components of the grid from power generation, to substations, to transmission and distribution lines are aging rapidly. Some parts of the U.S. power grid can trace their construction back to the late 1800s. In addition, utilities and various levels of government are working rapidly to modernize the grid. One part of this effort includes the incorporation of clean energy generation, such as utility-scale solar and Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 2

wind farms and even clean-burning natural gas facilities. Another major facet of grid modernization is the advent of smart technologies that will help utilities better manage the load placed on the grid. As of now, all of this adds up to a power grid that is more of a patchwork of new and old assets, rather than a fully upgraded, modern system that can handle the energy challenges the U.S. is facing today and will continue to deal with in the near future. This whitepaper will examine the current state of the U.S. electrical grid and what utilities are facing today, trends that will have a transformative effect on utility operations in the future and show how smarter asset management will be of the utmost importance for utilities moving forward. The state of the U.S. electrical grid what s at stake? The primary goal and purpose of utility companies is simple and straightforward: To ensure maximum uptime reliability for end users while keeping costs low. Widespread grid deterioration, however, has introduced crippling fragilities into the U.S. system. Consider the following examples: In June 2013, a storm left households in the Minneapolis-St.Paul, Minnesota area without power for up to six days. In September 2013, a raccoon got into a substation in Cookeville, Tennessee and caused an explosion that left 6,000 residents without power. In April 2012, high winds caused a three-day outage in southeast Michigan that forced 111,393 residents to lose power. The examples are numerous, but they all point to one conclusion: Huge portions of the grid can be knocked offline by something as simple as animal interference, vandalism or even just occasional bad weather. As the grid continues to age, the number of outages is rising dramatically. System failures caused by outdated grid assets have caused the number of significant power outages in the U.S. to increase from 76 in Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 3

U.S. outages are up 285 percent since 1984, and the country ranks last out of the top nine Western industrialized nations in the average length of outages. 2007 to 307 in 2011. Additionally, weather-related outages as a result of strong storms that knocked vulnerable assets out of commission have also increased. U.S. outages are up 285 percent since 1984, and the country ranks last out of the top nine Western industrialized nations in the average length of outages. The consequences of this are dire: The U.S. Energy Information Administration said power outages cost businesses as much as $150 billion a year. The problem of more frequent outages will be compounded by the rising demand from end users being placed on the grid. Projections from the U.S. Energy Information Administration based on current population growth show that demand for electricity is expected to rise by 8 to 9 percent between 2011 and 2020. By 2016, the country is expected to add about 108 gigawatts of generation capacity. This means that the U.S. grid is expected to meet demand until 2020. But after that, the state of the grid is uncertain. As of now, it s expected that generation capacity will not be able to meet the demands of the U.S. population unless significant investments are made in increasing capacity. Already, congestion at key points in the system is leading to unplanned outages in high-demand areas. The investments and innovations that are made toward improving the grid must solve these problems. Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 4

The Department of Energy and utilities across the country are investing over $8 billion into modernizing the electrical grid, bringing the smart grid to a greater number of Americans. The trends and challenges ahead The two trends that will have the most noticeable effects on utility operations both now and in the future will be the expanding smart grid and the rollout of the Obama administration s Clean Power Plan. Both are aimed at increasing grid reliability by removing some of the weaknesses that are making the grid so vulnerable to disruptions today. As part of the The American Recovery and Reinvestment Act of 2009, the Department of Energy and utilities across the country are investing over $8 billion into modernizing the electrical grid, bringing the smart grid to a greater number of Americans. The CPP, which establishes state-level electricity sector CO2 emissions standards, is expected to cost between $1.4 billion to $2.5 billion in 2020, and $5.1 billion to $8.4 billion in 2030. This is the two part challenge that both initiatives seek to solve: How can utilities move to cleaner power sources per CPP requirements while maintaining an optimal level of grid uptime? At the outset, it appears that renewables and natural gas-fired generation facilities will provide carbon-free and low carbon sources of power as coalfired plants are phased out, while smart grid technologies will allow for more effective management of the infrastructure. The next two sections will discuss these two trends in more detail. What is the smart grid and how will it impact utility operations? Changing demand patterns, the rise of distributed generation and strict reliability requirements are the major forces that created the need for a smarter grid. The electrical grid is made of electricity-generating power plants, substations, transmission lines, distribution lines, endpoint meters and other infrastructural components that ensure electricity gets from the generator to the end user. To make the grid smart, utilities are adding a layer of sensors, RFID tags and other Internetconnected devices to these traditional assets. Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 5

The purpose of these new technologies is to facilitate automatic realtime communication and control between the various parts of the grid and central management. Essentially, it makes the entirety of the infrastructure work together more efficiently. One of the core benefits here will be greater grid resilience. For example, if a storm knocks out part of a region s transmission lines, the grid s sensors will be able to instantly tell the local grid operator where the source of the outage is. Additionally, these sensors will be able to automatically reroute the flow of power from the downed lines to another line, thereby keeping the flow of electricity moving while utility line workers fix the issue. But even routine operations will see an overhaul. Sensors and embedded communications technology will enable utilities to collect data on even the most remote assets without having to send someone out to do inspections. This could be something as simple as a smart meter on a customer s house that instantly lets the utility know how much power that household is using and when. Or, it could be for internal purposes when assets use their communications arrays to relay performance data, allowing utilities to perform preventive maintenance on vulnerable equipment. Understanding the impact of the Clean Power Plan The CPP will require all 50 states to demonstrate compliance with carbon reduction plans by 2022. But even before then, state energy departments will have to present a plan to the EPA in the summer of 2016 showing how the state plans on achieving the goals outlined in the CPP. Utilities, along with the federal and state governments, will have to make substantial investments in the grid over the next decade if the U.S. wants to avoid further power outages while still achieving the carbon reduction goals laid out in the CPP. For this, utilities will have to take on the arduous process of retiring old assets while rotating in new ones to replace them without significant disruptions, and with the EPA s deadlines looming, they will have to do it in a very short timeframe. Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 6

Renewable energy generation, such as wind, solar and hydropower, as well as cleaner-burning natural gas plants, are quickly coming online as part of the plan to make up for the fast-closing coal plants around the country. Renewable energy generation, such as wind, solar and hydropower, as well as cleaner-burning natural gas plants, are quickly coming online as part of the plan to make up for the fast-closing coal plants around the country. In addition, thousands of miles of new transmission lines will be required to connect the new capacity to the grid. This massive project will be on top of the repairs and replacement of older lines. Improving utility asset management Effective management of utility assets has always been a critical component of utility operations. A balance must be achieved between building and maintaining assets at an optimal level to ensure maximum uptime reliability and delivering services to end users at the lowest cost possible. When we look at both the development of the smart grid and the installation of new generation sources and transmission lines, we can see that the mission of utility asset management hasn t changed, but it has become more complex. The following sections will detail how these overarching trends will play out for utility asset management strategies. Breaking down organizational silos Utility asset management has relied on tools like work management software, fixed asset accounting, geographic information systems and other similar yet separate systems to handle various asset management processes. The problem with this is the systems are implemented without much regard for each other, leading asset data to be siloed within different parts of the organization. This leads to inefficient asset management, since coordination between different business units is difficult, if not impossible, without some way to centralize critical asset data. New asset management solutions, however, have entered the market as a way to consolidate all of these disparate tools into one integrated interface. Instead of units making their own decisions, the entire organization can be more aligned under one system to better allocate limited resources to the highest-priority activities. This kind of Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 7

Integrating all of the utility s business units will be essential for better asset management that fulfills its key objective of minimizing both downtime and assetrelated costs. unified approach can more easily manage asset deployment, list out key specifications, allow for condition monitoring, simplify costing and provide greater data-driven insights for planning purposes. For example, better condition monitoring makes it possible to streamline the maintenance department significantly. If a sensor placed on a transformer sends data to the central system showing how it is falling to a suboptimal level of performance, a manager can see the anomaly and quickly create a work order to perform maintenance before the equipment fails. This allows the utility to schedule planned downtime and make arrangements for it so customers don t experience outages. Additionally, it allows for greater financial oversight of the asset lifecycle, since the finance and accounting departments can access the data as well. Everyone can work from one version of the truth, rather than working in different directions based on incongruent data throughout the organization. Integrating all of the utility s business units will be essential for better asset management that fulfills its key objective of minimizing both downtime and asset-related costs. New and more assets to manage Utilities are very familiar with the traditional assets they ve had to manage, such as substations, breakers, transformers, switches, meters, etc. These will continue to exist and require utilities attention, Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 8

but now there are new, unfamiliar asset types that will also be under each utility s purview. Solar arrays, wind farms, natural gas plants, a whole layer of IT hardware and software, new transmission and distribution lines all of these and more are increasingly making their ways onto the ever-growing list of assets that utilities must be responsible for. These new assets have different depreciation rates, maintenance needs and spare parts and different use cases within the organization. Additionally, the incorporation of digital technologies into physical assets is creating a situation where utilities must contend with multiaged assets, in which the different components can have depreciation rates that vastly differ. Utilities will need to deploy asset management systems that can help them consolidate all of this asset classification information and determine how to best approach the management of each asset from a financial, operational and maintenance standpoint. Preparing for the influx of data Perhaps the most dramatic impact that these trends will have on utility asset management is the deluge of asset data that utilities will need to manage going forward. As data collection and storage become easier than ever, the focus for utilities will be on making that data actionable. Data should provide insights that drive operational and maintenance excellence while reducing costs. A computerized maintenance management system will facilitate data analytics and business intelligence, but the key is in creating a holistic data strategy that will incorporate multiple sources of data old and new for asset management and risk analysis. But beyond the data and technology, utilities will need to align their managers and staffs with the goal of using asset data to drive preventive maintenance and proactive asset management practices. Asset management strategies often fail because there is insufficient buy-in from key stakeholders. Maintenance staffs may feel that the new system is too difficult to adapt to, so they revert to older Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 9

practices. Management may expect to see ROI from their investments in too short a timeframe, and when it doesn t appear in financial statements, they will abandon the project. Becoming a data-driven organization doesn t happen overnight, and certainly not without a learning curve. But the long-term benefits of better asset management in the age of the smart grid and CPP will be felt keenly as operations continue to increase in their complexity. Having the right systems and training in place will go a long way to making sure that data doesn t become another burden to manage, but the lifeblood of a better-run organization. Smarter grids, Cleaner Power, and the Future of Utility Asset Management // Page 10

www.genesissolutions.com 203.431.0281 100 Danbury Road, Suite 105 Ridgefield, CT 06877 Sources http://www.bloomberg.com/bw/articles/2014-07-10/u-dot-s-dot-utilities-start-to-invest-insmarter-power-grid Ibid. Ibid. http://insideenergy.org/2014/08/18/data-explore-15-years-of-power-outages/ http://www.infrastructurereportcard.org/a/documents/energy.pdf http://www.bloomberg.com/bw/articles/2014-07-10/u-dot-s-dot-utilities-start-to-invest-insmarter-power-grid http://www.infrastructurereportcard.org/a/documents/energy.pdf http://energy.gov/oe/technology-development/smart-grid/recovery-act-smart-grid-investmentgrants http://www.ucsusa.org/global-warming/reduce-emissions/how-much-will-clean-power-plancost#.vfrfhdjviko http://www.utilitydive.com/news/epa-will-extend-clean-power-plan-compliancetimeframe/403114/ http://energy.gov/epsa/downloads/quadrennial-energy-review-full-report http://www.elp.com/articles/powergrid_international/print/volume-19/issue-6/features/smartgrid-asset-management-an-integrated-approach-to-maximize-asset-utilization.html