Plugging in to the future

Rapid shifts in demand, soaring energy costs and the need for greater operational efficiency are placing huge pressures on existing utility networks. Can Portugal’s approach to the smart grid provide the blueprint for a brighter future?

“With the right level of standardisation we can build a common platform by working together”
-Joao Torres, President and CEO of EDP

The energy and utility industry has been talking about the development of the smart grid for years - from the early days of smart metering through to today's vision of the intelligent utility. But now, thanks to a rising acknowledgement of the importance of energy efficiency and the need to modify our power consumption behaviours, the discussion has moved very much into the public domain. And according to Joao Torres, President and CEO of Portuguese energy giant EDP, this has only increased pressure on the industry to respond.

"We feel the pressure, for sure," he says. "We have been working on improving organisational efficiency and quality of service for a number of years, and for the last 10-15 years we have been working under strong regulatory guidelines as well, so pressure is nothing new; however, we now feel we need to build a new utility, using technology to go forward with more automation in the grid. Consumers want to know how they use their energy, so it's time to look to implement smart grids as a priority."

Of course, it's not easy, and Torres concedes that there are a number of challenges still to be addressed. "We have some work on standardisation to do, and we need to discover who will provide the investment," he says. "We feel that the DSO [distribution system operator] can lead the movement, but there are a number of other stakeholders that can also realise significant benefits from this, and so we need to communicate this better. We need to explain exactly what smart grids are, the benefits as well as the costs, in such a way that we can get everyone looking at the challenges to generate a common vision."

Portugal is one of Europe's leading practitioners of smart grid thinking, and EDP has led the way with its innovative InovGrid project. Instead of resisting change, the electrical distribution operator chose to anticipate the inevitable technological revolution in smart grids - which will be widespread in European Union countries over the next few years - and embrace the concept. InovGrid promises to reduce clients' electrical bills by about 20 percent and, even with the lost revenue potential taken into account, Torres believes the net result will be positive because it will ultimately allow a significant decrease in network maintenance costs, as well as reduce technical and commercial losses.

The rollout is still at a relatively early stage but is progressing rapidly - the utility expects to have 200,000 smart meters installed by the end of 2010 - and Torres believes the benefits will be wide-ranging. The project addresses three key issues, he explains, with the first being micro-generation. The Portuguese government has pushed forward a big programme of micro-generation in recent years, and while EDP has been at the forefront of this movement to date - over 2000 micro-generators have come onto the network in the last year alone - Torres feels that in the future the only way to increase the micro-generation capacity is through the implementation of smart grids. "Smart grid equipment, automation and information and communication technologies can provide the control you need to be able to manage that micro-generation at the local level," he says. "That's a significant issue for us, so this is the first question we want to solve with InovGrid."

The next issue surrounds automation of the grid. "This is the main advantage of the smart grid," he says. "We need to know what's happening in the grid. We need to increase the quality of service, so we need to be able to solve the problems we have faster. We need to know how the equipment is performing, not least because we have a problem with aging infrastructure and in order to make better investment decisions we need better information about where to invest - this transformer or that substation or this line or that interrupter."

The third issue is that of smart metering - and not just using metering to better collect usage readings. "It's using smart metering in such a way that we can give more power to the consumer," explains Torres. "And in this instance, power means information - information about pricing, about usage, about efficiency. Of course, there are some other benefits too; if the regulation can design a new rule for the market, the supplier can make a new model of tariffs for weekends or nights or for daytime consumption. There are also benefits to us as a provider of the grid with costs of our own - smart meters mean we have no readings to do. We have some control of our grid in a way. We can decide better how we work on it. So there are a number of benefits."

Torres feels there a number of stakeholders that could take advantage of the smart grid paradigm, from the DSO to energy suppliers to consumers. In addition, he sees the implementation of the smart grid having a beneficial impact on the economy in general - an invaluable stimulus given the current climate. "I think it could have a noticeable economic effect because it creates new actors," he says. "It creates new ways of working and I think there is some activity in the economy that this concept of smart grids can help promote."

And while challenges exist around getting the public and private sectors to work together effectively, Torres feels the early signs are positive. "So far we've worked with government every step of the way, and they've been very positive about this initiative," he says. "We are also speaking with our regulator and are currently in the field testing the technology pilot in small towns and in rural environments. By the beginning of next year, we hope to roll that out to a further 50,000 consumers." EDP's management team expects that if all goes according to plan, the whole country will be benefiting from this new technology by 2014 - six years ahead of the deadline announced by Brussels recently under its European SmartGrids Technology Platform initiative that aims to have all electrical networks operating under this model by 2020.

"I think that all DSOs must be prepared to run this way," he confirms. "However, we need standardisation of processes and technologies; with the right level of standardisation we can build a common platform by working together. We have contacts with a lot of DSOs in Europe and I think we are going well in this regard. Even at the level of the European Commission in Brussels we are making some good progress, as they recognise that the smart grid is an important strategy. So it's time to stand together to build a common vision and work on that with the European Commission and the regulators."

Indeed, Brussels sees the development of the smart grid as fundamental to the future development of a globally competitive Europe, and the concept of the intelligent utility is emblematic of the faith the EU is placing in the power of information and communication technologies. Putting intelligence into networks for real-time communications among network elements, while at the same time accessing millions of metres, is key to the industry's development. "It's a big challenge, but the only way to improve is to increase the use of ICT," asserts Torres. "That is the main question: how to increase to the right level of ICT, to deal with rising volumes of information, to decide which information is really important. We need to organise our information better, and organise the company in a different way because with the increase in technology we are now generating a lot more information. We must choose the right information to decide the investment, to make operational decisions, to answer questions from consumers, from regulators, from government institutions. So in fact ICT will be critical for our company and for all DSOs alike."

Even so, Torres concludes with a reminder that technology is only as good as the people who use it, and that the human side to the smart grid transformation cannot be forgotten in the rush to embrace new solutions and technological advances. "We always talk about technology, but people are really still the most important part in this," he says. "The staffing demographic has changed a lot during the last few years as technology has become more ubiquitous. I think the sector is now seen as much more sexy; it's not so traditional, and I feel that young people are looking at EDP in a different light. They want to work with us because smart grids offer a different approach to the future. I receive a lot of proposals from young engineers that want to work with InovGrid because they understand it's different. It's a new utility, as I said. This is good because we need different people for the future.

"But we need to bridge the transition from the older employees, because they have a lot of knowledge about the industry that is incredibly valuable," he continues. "We can't let them leave the industry without preparing properly for it. They have an important role to play in building the future and transferring information to the younger generation of workers."

"You're talking about creating a whole new business model, and I think inevitably there will be some resistance to change," he explains, adding that the battle for hearts and minds is often one of the most challenging parts of any large technology rollout. "There is always reticence when you try to change anything. For instance, we are now working with a new workforce management tool and have more than 2000 of our technicians working with it, but training and communicating the value and the importance of changing the ways of working is a challenge. We also need to prepare our managers to work with remote teams. So it's a different company to the one it was years ago, and we need to explain and communicate that."

As such, Torres believes maintaining and improving internal communication is fundamental to the future success of the firm. "It's not easy, but when I look to the past and what we have achieved over that time - the changes we have implemented during the last 20-25 years - I remain extremely positive about the future," he says. "Aligning the right technologies and skills is key, and I have a lot of confidence in the ability of our people to deal with that. As long as we continue to invest in our people, we can solve the technical challenges for sure."

InovGrid: how it works

EDP believes the energy paradigm of the future will be based on renewable energies and on the efficient use of distribution networks that will have smart search management mechanisms built in. Consumers will be more informed and participative being that they can also play a role as energy producers (through micro-generation).

In each consumer/producer's house, there will be a so-called Energy Box, the true brain of the domestic management of electricity. Other than being a two-way telemetry system - measuring the energy that is consumed and the energy that is introduced through micro-generation - this system will allow the consumer to have a more effective participation in domestic energy consumption. For instance, the consumer will be able to subscribe to new tariffs (benefiting from plans with advantageous price plans at certain hours of the day or week, or even benefiting from the subscription of prepaid packages). This is a useful option for a second house, for instance.

The energy box will work as a local network that provides web services, house automation and that facilitates the intelligent management of consumption (system demand control) of electrical equipment. Through remote telemetry, the suppliers will measure the energy correctly and provide information to users throughout the day.