Paving the way to efficient consumption

From Atlanta to Zurich, the smart grid is big news. If all the claims made about it by some of its more evangelical exponents are to be believed, it is a virtual panacea for much of the world's energy woes. The smart grid will help consumers to monitor and reduce their power consumption, allow utilities to better cope with peak demand, promote energy-efficiency and reduce operational costs.

“It's incredibly important that this be a business-led, business-sponsored, business-staffed programme. If you try to approach it as just a technology project, you will fail.”
-Jeff Johnson

But as with many new technologies, there remains the persistent challenge of defining exactly what it is. Jeff Johnson is Deputy CIO at Constellation Energy, one of America's largest power providers and a frontrunner in the smart grid race. Even he agrees that the smart grid can mean different things to different people. "It is something of a Rorschach test," he confirms when I speak to him at his Baltimore office. "Everybody sees something different in it and I would argue that there are a couple of different themes. One, it does enable much better real-time information from an operational perspective. So the actual management of the transmission/distribution grid is much more real time, and thus able to support higher operational capability and ultimately grid reliability. It also enables us to manage the grid as it evolves. Where it was in the past, a hub-and-spoke kind of network, it's now moving to a multi-nodal network where you've got distributed generation, renewable sources, even potentially fleets of electric vehicles."

Whatever confusion remains over the smart grid's exact nature, Johnson is excellently placed to cut through it. Constellation's subsidiary regulated utility, Baltimore Gas & Electric (BGE), is currently engaged in one of the biggest grid innovation projects anywhere in the world. At the time of writing, some protracted wrangling with the Maryland Public Service Commission has just been resolved, allowing BGE to use US$200 million (€156 million) of federal stimulus money to roll out the smart grid throughout its Central Maryland service territory.

While Johnson is understandably relieved that a significant potential brake on the project has been removed, he nonetheless understands that the smart grid does raise some very real concerns. "There is the question of are we too early? Is the technology mature?" he says. "Is it really going be good for the consumer? There's always a negotiation with the utility about how much of this is going to go into the rate base and come out of the consumer's pocket. There are legitimate questions and concerns for everybody to get comfortable around."

But despite these concerns, Johnson firmly believes that the benefits outweigh any potential downsides. "We've successfully completed a smart-grid pilot," he explains. "We are currently engaged in pilot programs around home energy management, and the evaluation of a couple of different approaches and technologies in that space. We've demonstrated that there are significant consumer savings and behavioural changes that can occur, based on the information that then can be provided to the consumer. We've seen that in a real-world context."

According to BGE's estimates, smart grid implementation will lead to consumer savings of at least US$2.5 billion (€1.95 billion) over the course of the project. While the US$200 million (€156 million) in stimulus money is currently grabbing headlines, it is really just a part of Constellation and BGE's long march towards the grid of tomorrow. "We have this multi-year program to re-engineer our whole service delivery approach from a utility perspective." Johnson explains. "We are currently replacing our whole monolithic customer care and billing system and our meter data management system. That's all being done based on the requirements that we have defined for a smart grid. It is a major platform for enabling of smart-grid capability and functionality. We are also re-engineering our approach to how we do e-commerce and customer-facing, web transaction support."

It is this long-standing commitment to re-imagining the entire energy business that resulted in the Department of Energy's decision to award BGE with federal funds in the first place. "BGE is clearly ahead of most utilities in terms of a very due diligence-based approach to understanding what does a smart grid mean to our territory," Johnson confirms. "How might it work? What sort of value proposition might it generate? And then, how do we scope and plan for an implementation in a risk-managed way?" Now that the final regulatory hurdle seems to have been cleared, the stage is set for all this hard work to finally pay off.

Promise

For Johnson, the true promise of the smart grid centres around two main threads. First is its ability to provide a higher operational capability, which in turn delivers grid reliability in a safe and effective manner, compensating for fluctuations in demand and the need to react in emergency situations. The second is the ability to provide pricing signals to the consumer, allowing them to more efficiently consume energy and consequently reduce their bills. In some cases, this can even see consumers being compensated for reducing their energy use through a demand response. "There are advantages to the end consumer beyond just higher reliability of the grid and enablement of new functions," Johnson says. "There's also the fact that they are then enabled, through better information, to manage their energy consumption in such a way that they reduce their utility bill without sacrificing significantly in terms of their comfort and lifestyle."

For many on the outside, the idea of a utility encouraging its customers to use less energy seems counterintuitive, like turkeys voting for Christmas. However, energy efficiency has become such an important long-term goal that regional and national governments are stepping in to promote it. "Maryland is lead-edge from a regulatory perspective in this space," Johnson explains. "California was one of the first but Maryland adopted a decoupling approach, meaning that the utility is incentivised to reduce consumption."

Decoupling is a concept that has been catching on throughout the United States for a while now. It breaks the link between the utility's ability to recover its agreed-upon fixed costs, including the profit margin, from the actual volume of sales that occur through a rate adjustment mechanism. If a utility promotes less energy use, they are rewarded rather than punished.

Under decoupling, there are a number of ways to compute the rate adjustment, but the basic principle is that if the actual sales are less than forecasted, there is a slight upward adjustment in rates to compensate the utility. Adjustments typically would only be between two or three percent and some jurisdictions have applied caps on possible adjustments to protect consumers.

As a result of Maryland adopting decoupling in 2007, much has already been done to promote reduced energy use in the service area. "BGE has a variety of programmes under way today to help manage consumption with existing technologies that surround load response and demand management programs for their customers," Johnson says. This has been under way for several years and has been providing valuable groundwork ahead of the smart grid's ultimate implementation.

In fact, it is possible to go even further than that and view energy-efficiency programs as a vital component in smart grid development. "Smart grid is not just flipping a switch, and it's not brand new," Johnson explains. "It's more of an incremental approach. The stimulus funding and the grant money has created maybe a perception in the marketplace that somehow this is all brand new and nothing has been done to date. That's not the case. Utilities have been working towards smart-grid type concepts for years. I think the focus now of trying to accelerate that has created awareness in the consumer's mind to a much higher degree."

Change

Another thing that is far more than just flipping a switch is the amount of organizational and process change a move to a true 21^st century grid requires. As part of its ongoing business transformation project, Vision 2020, BGE has been breaking down silos and fostering a closer relationship between IT and the business. For example, rather than gas delivery and power delivery operating largely independently of one another, they instead share certain components and functions. As a result, processes can be organized more around end-to-end services than discrete siloed functions.

"It's important because you start to drive towards more integrated, real-time management of the operations," says Johnson. "That has implications from a process and an organisation perspective. The last part is something Gartner has been talking about for several years, where you start to see a convergence of two siloed domains. Traditionally, there's been a split between the operations side of the business, and the IT side of the business. As you start to deploy a smart grid, you begin to see a convergence between the traditional operational technologies and the more IT technologies. They start to become one. Gartner calls that the convergence of OT and IT."

Having access to the kind of detailed data the smart grid allows becomes important in order to response to rapid changes in demand and in emergency situations. There are several different types of load response that are emerging," Johnson says, "but the most common one that has been supported is the concept of emergency demand/response and load shedding in an extreme situation. For example, if we have a series of 38-degree-plus days, like we just recently just had here in Baltimore, the system is stressed. In that kind of case, the ISO can declare a demand/response event, and within minutes, we can notify customers that have signed-up as demand/response enabled. Then we can have them shed load, or to allow us to make the predefined decisions to shed load.

"They get compensated for providing that load back to the grid, thus avoiding either spinning up much more expensive and dirtier resources in the best case, or outright potential grid reliability issues if the utility did not have that capability. That is the area where most utilities often first focus, provided their territory supports those kinds of programs and tariffs.

"As you move forward, there are other kinds of load response scenarios where certain customer types can sign up to provide a more discretionary type of load shifting. These can be load management functions where, depending on market price, sheer power demand or power regulation needs, they can manage their demand in such a way to help manage the grid. That kind of thing is more transactional day-to-day load response. That's a more sophisticated approach that is just beginning to be recognized in various markets."

Johnson points out that within this process, Constellation is thinking in terms of architecture and thus platform. "First of all, there's an architected approach to thinking about the business process. Especially in our utility, we're thinking about what is the re-engineering of the business process first, and starting from there. And then you drill into what is our technology strategy to enable that from an application perspective, and then from a technical architecture perspective, and a vendor partnership perspective.

"It's incredibly important that this be a business-led, business-sponsored, business-staffed programme. Because, ultimately, you're re-engineering the business. If you try to approach it as just a technology project, you will fail."

In the clouds

Jeff Johnson on the potential of cloud computing in the utility sector

Another big business buzz phrase currently rivaling 'smart grid' in ubiquity is 'cloud computing'. Everyone and their dog is talking it up as a game-changing technology but, as with the smart grid, there is a certain degree of debate as what exactly it is.

"There really are a couple of ways to think about so-called cloud computing," says Johnson. "There's software as a service. There are external IT clouds for IT capacity, such as Amazon, Google or Verizon which are providing those services. And then there's also the capability to build so-called internal clouds, where you have IT loads that need to exist for various reasons - such as IT security or operational realities - within the confines of the four walls of a corporate data centre.

"My belief is that major companies, especially utilities which have high data security issues, will for the foreseeable future need to maintain many of their operational systems within their own corporate data centres. Thus, we are looking at how we evolve towards the capability to provide IT services on demand through internal clouds, while leveraging external clouds where appropriate, to provide services as part of our solution set.

"For example, we haven't completely solved this problem of whether we want all of our historical data around, say, meter reads and meter data, which is potentially a very significant data volume, on-site in our data centres, or is that something that we buy in a secure manner through external cloud providers?

"You can start to build these hybrid approaches to how you leverage this IT service on-demand capability, whether it's through your own internal cloud and/or external cloud providers where appropriate.

"And then, on top of that, you can also say, 'Maybe there are some services that we want to buy as a software as a service,' which is extending cloud IT on-demand capacity concepts up to the actual solution level.

"The classic example is salesforce.com, but I think there are emerging other SaaS providers in the ERP space, the messaging and collaboration space, email, or some of the other kinds of common function systems."