Podcast: Embracing disruption: how utilities can future-proof investment

The shift in mindset required to deliver the kind of digital transformation required of the energy industry is already well underway, according to the latest Engerati podcast on disruptive technology.

30 Jan 20 by Caroline Gentry

Three US experts in energy technology development give their views on where utilities should focus, how to plan for the future and avoid investing in risky project. Convergence, collaboration, enterprise architecture and data management are all critical, they conclude.

In our last podcast utilities were advised to start with some ‘quick wins’ to deliver fast payback and generate revenue for further projects. This is a good start, but a more strategic and collaborative approach should also be considered, our advisory board members say.

Data management is critical

Grid operators are going to have to cope with a torrent of data coming from the estimated 11 billion assets and devices that will be connected to the grid of the future, says Shuli Goodman, executive director of LF Energy. Managing that data using artificial intelligence and other technologies is going to be critical, as is the ability to manage and settle micro-transactions. One project LF Energy is working on is a digital substation, which will have a very important role to become an edge node router between the grid and edge devices, she says.

There are very exciting opportunities to make the edge of the grid part of grid operation, which will be very disruptive, agrees Mark McGranaghan, vice president, integrated grid at the Electric Power Research Institute (EPRI). Communities are now becoming a resource to the grid. EPRI is working on an Energy Management Circuit Breaker – a breaker that goes in a customer’s electric panel to do revenue grade metering, power quality monitoring. It gives an indication of a household’s response in load to any disturbance, which will have applications for energy efficiency and new services.

It is really the combination of technologies that is being the most disruptive, says David Groarke managing director of Indigo Advisory. It is the convergence of devices and sophisticated software which is most interesting.

More convergence is needed to unleash efficiencies of scale, agrees Goodman. “Fragmentation is leading to repetitive investments in lower parts of the stack. What I see happening in Europe that I don’t see as much happening not in states is a commitment and collaboration at scale. There’s still a lot of going it alone.”

A soon-to-be-announced new type of middleware software that facilitates interoperability is already being used in the Netherlands to manage microgrids. “That’s the level of preparation utilities need to be building capacity around, not the “I’m going to build a grid because I know exactly what it’s going to look like” but  “I’m going to begin building out capacity for multiple kinds of innovation that none of us have even imagined.” Possibly the most important thing a utility can do is to hire digital engineers who can really imagine the future, Goodman says.

Utilities should also focus on enterprise architecture, McGranaghan says. Figuring out how to manage data upfront, dealing with privacy issues and how data should be managed to enable AI, and enabling an interface to planning and operations all the way to customer level would all be valuable preparatory measures that could be undertaken now. An enterprise architecture should allow for portfolio optimisation, and eliminate redundancy so that a utility makes sure it does not acquire capabilities for one department that it already owns in another.

Up to 80% of utility data is unstructured, Groarke says, but if that can be structured and fed into self-service analytical systems it would allow for better decision making and new use cases. If people can be upskilled to use these data sets in an engaging manner it will lead to a quick win and culture of innovation.  Further, utilities could monetise their data and make it available across siloes, which might be the biggest win of all.

However, Goodman warned of potential unintended consequences of too much transparency at a very granular level, and urged ethical oversight to ensure that actions taken now do not create a ‘monster’ in future. Ethics is an important issue, but this is more of a general technology discussion that has cross-sectoral implications.

Future-proofing investment

The decision about where and when to invest in innovative technology is mired in risk that rapid advancement will render it obsolete long before return on investment is realised, as happened with the $1 billion Crescent Dunes solar farm in Las Vegas which never made it online. The US is facing a particular challenge under the current administration which is rolling back climate change legislation, for example changes to the National Environmental Policy Act which would mean some projects did not have to be assessed for greenhouse gas emissions by the Army Corps of Engineers, which is “extremely short-sighted”, Goodman says.

“The sighting of infrastructure and investment needs to consider the future. It can’t be designed looking in the rear-view mirror – that’s going to waste billions and billions of dollars if utilities are not considering that seriously.”

Communication technology is moving very fast and so should be deployed particularly carefully, McGranaghan says. Security should be built in to 5G networks and other public investments.  The US secure internet project could be a big benefit.  Utilities should beware of investing in their own communications networks when they could be obsolete in a very short period of time and bypassed by public infrastructure, he warns.

Indigo Advisory helps utilities future proof investments for example in grid congestion management even if they cannot be rate-based by building scenarios with business planning and sophisticated risk models to allow them to become more commercially savvy. One of its clients is rolling out a large electric vehicle infrastructure platform, which is challenging to get the timing right, predict market demand, where new stations needed, and decide should utilities own and operate them or third parties, and how should they be financed? These questions are harder to answer when they hinge on customer demand based on sentiment, Groarke says.

One way utilities are keeping current on technology development is to join forces with start-ups in various different ventures. EPRI took over the Department of Energy’s Incubate Energy programme, which coordinates with start-up incubators and accelerators. Recently 160 companies submitted ideas that will be boiled down to six projects later this year to demonstrate technology. Collaboration is the key to harnessing these capabilities and delivering the energy transformation, McGranaghan says.

Long payback cycles and a lack of access to data have left wave after wave of start-ups struggling to commercialise. But utility support can make a big difference. In return, setting up venture arms to invest or take stake in a start-up company allows a utility to get a potential return and keep pulse on the market and what’s new.  While there are some success stories such as Silver Springs and Opower for demand management, big infrastructure and communications are still dominated by grid giants like Siemens and ABB or the large cell providers, Groarke says. There are some interesting exceptions however such as Smarter Grid Solutions or Smart Wires which were effective at working with utilities very early.

Another example of good start-up/utility partnership is Estfeed, which is a joint venture with Estonian TSO Elering. The commercial and industrial sector will also be critical to increase capacity to work at scale, Goodman says.

A paradigm shift

Harnessing the capabilities of digital technologies to drive more efficient use of energy has become paramount in order to meet the increasingly urgent need to address climate change.

“It is a no choice situation and the realisation is showing up at board level,” McGranaghan says. EPRI has an initiative called Project 2x to 2050 looking at what needs to be done to double the emissions reduction of 14% over the last decade by 2030 and then achieve even greater cuts beyond that. The 2030 targets are achievable by continuing down the path of increased renewables and electrification, which require effort but are not really a paradigm shift. But beyond 2030, hydrogen, long-term storage and very high penetration of renewables will need to be big focus areas requiring utility investments of hundreds of millions of dollars.

“It has to happen and the whole industry realises that. You can’t assume it’s going to happen without some work,” McGranaghan says.

Microsoft’s recent announcement of a $1 billion climate investment fund and a carbon negative goal and Arizona’s APS joining six other utilities to set a carbon free target by 2050 are brave commitments that will further spur the development of digital technologies and a radical overhaul of the energy system.

“The pace of change is suggesting that by 2040 we’re looking at a very different world,” Groarke says.