Energizing Utilities for the Economic Stimulus Plan

Strategies for Greater Energy Efficiency, Sustainability

by Maureen Coveney, SAP AG

With the passage of the American Recovery and Reinvestment Act (ARRA), more than $11 billion is allocated to create a bigger, better, smarter electric grid. The investment will allow for the use of more renewable energy, increased use of efficiency technologies and a reduction in electric congestion. As a result, each U.S. utility has an opportunity to leverage public funds.

While executives sort out ARRA implications, they tackle industry issues and economic volatility: energy inefficiencies and costs, regulatory requirements and aging infrastructures.

Most utilities use robust meter, network and customer service infrastructures designed to support well-defined work routines and functions. In many cases, they use conventional meters with life cycles of up to 40 years—devices that worked well when energy markets were largely regulated and characterized by price regulations, easy access to energy resources and sufficient infrastructure capacity. In that environment, organizations could rely on manual processes for everything from checking meter readings to anticipating demand without as much concern about margins, ensuring customer retention, energy efficiencies and sustainability.

But recent industry changes make it increasingly difficult to operate effectively using traditional infrastructures and processes. Resources and infrastructures capacities are becoming more marginal, and inelastic demand is restricting revenue growth. And, there is the focus on carbon footprints.

Current assets are aging, and a more adaptable infrastructure is needed. For the near term, utilities must optimize current asset efficiency and availability. Downtimes must be limited to planned shutdowns and necessary overhauls. Stringent maintenance processes can help ensure equipment reliability. Proactive planning can establish a stability where personnel, contractors, parts and tools can be optimized.

Future increases in bulk transmission capacity, however, require improvements in transmission grid management. A smart grid, for example, can upgrade the use of capital assets while minimizing operations and maintenance costs. Smart grids precisely limit electricity power down to the residential level. Optimized power flows reduce waste and maximize use of lowest-cost generation resources. But how can utilities—and consumers—better understand and manage energy use?

Technology Leads the Way

Enter technology. Because technology is seen as a critical enabler for implementing the economic stimulus plan, with some $100 billion in funding to be spent incrementally during the next five years, it can help utilities see, think and act more clearly to develop and execute the necessary strategies to:

  • Optimize energy efficiencies. New energy-grid technologies can help utilities balance supply and demand while improving the efficiency of energy delivery and consumer usage. These systems, however, require real-time communications and greater interoperability.
  • Respond to sustainability concerns. The adoption of sustainable energy practices is becoming a business imperative. Utilities are challenged to simultaneously addresses compliance, environmental impact and energy politics. Visibility into all aspects of a utility’s operations and end-to-end process control are keys to success.
  • Develop higher-performing assets. Managing aging infrastructure for peak efficiency while making energy investments that will deliver maximum value are basic tenets of the stimulus program. Utilities must maintain existing equipment, model current and future assets and analyze complex energy scenarios.

Technology and Demand Management

Regarding optimizing energy efficiencies, advanced metering infrastructure (AMI) technologies can help utilities and consumers understand and manage energy use. With AMI, energy consumption is recorded at regular intervals (e.g., every 15 minutes) and then billed at different rates based on peak and off-peak hours. As a result, consumers and suppliers collectively can lower overall energy requirements and reduce carbon emissions.

With these technologies, energy providers can improve the demand-supply balance. AMI data helps utilities better profile energy requirements during peak and off-peak hours and predict energy usage spikes because of environmental changes. Smart grid technologies also are supported. These improve the delivery of energy by providing greater control over load shedding, energy leakage and outage management.

AMI also can help utilities stay competitive in ways that older metering and data-exchange technologies cannot. But without a proper IT infrastructure that enables companies to implement and work cost-effectively with AMI, utilities find it difficult to deliver the flexible pricing options the market demands. AMI requirements for data management and real-time information exchange call for improved communications and collaboration between customers and utilities. It also requires greater interoperability of systems within a utility’s IT landscape and across enterprise boundaries.

Upgrading metering and data-exchange infrastructure can increase the quality of a company’s sales and customer service processes. In addition, automated business-control processes can help utilities manage the variations between peak and off-peak production, thus reducing the overall cost to serve while lowering the cost per kilowatt hour.

Take, for example, Lansing, Mich.,-based Consumers Energy, the principal subsidiary of CMS Energy. The utility, which provides natural gas and electricity to nearly 6.5 million of Michigan’s 10 million residents in all 68 Lower Peninsula counties, found that its consumers were using 8 percent more electricity than a decade ago. Consumers Energy decided to become an early adopter of the latest smart metering software that will help the utility improve efficiencies and provide customers with timely information to help them better manage their energy usage. With this installation, Consumers Energy is also creating a platform for a future smart grid and the automation of manual processes.

The Path to Cleaner Energy

As other utilities follow Consumers Energy’s example, the thirst for energy continues to grow across the globe, even as traditional sources of energy generation, such as fossil fuels, are waning. This consumption contributes significantly to climate change and other environmental concerns. A major obstacle utilities face is how to migrate cleaner technologies in a cost-effective, time-efficient way.

During the past few years, the global business climate has fundamentally changed. Protecting the environment is no longer just a philanthropic or moral issue, but a highly relevant element of the core business. The primary factors driving businesses to adopt sustainability, however, are compliance with government regulations such as the U.S. Clean Air Act; cost and profit, which drive companies to reduce costs through more efficient uses of resources; and reputation, which means companies are redefining their respective brand images to demonstrate social and environmental responsibility, and, therefore, appeal to an increasingly concerned consumer base.

The push for sustainability is being seen across all levels of government and in every economic sector. For example, many U.S. Environmental Protection Agency initiatives are underway to promote more efficient energy use and to improve environmental quality without disrupting energy supplies. These efforts include programs to explore renewable energy sources and advance the sustainable production of biofuels.

Federal agencies also are helping states and local communities foster urban sustainability by supporting such initiatives as:

  • Smart-growth projects that include sustainability metrics for urban development,
  • Green building and infrastructure design, and
  • Energy efficiency in homes and commercial buildings.

Businesses can take a proactive approach, as well. Many companies participate in international committees working on global standards for calculating environmental impact. The Greenhouse Gas Protocol Initiative (GHG Protocol Initiative, Scope 3), for example, is drawing up a set of standardized guidelines for measuring carbon dioxide emissions for individual products and services—an initiative that has the support of the World Resource Institute and World Business Council for Sustainable Development.

Transforming Energy Transmission

With utilities maintaining and retooling aging infrastructures to make them more adaptable to advanced technologies, utilities must address assets for the future.

Harmonizing local distribution with interregional energy flows and transmission traffic can further reduce grid congestion and bottlenecks, resulting in consumer savings. Such improvements can help create an open marketplace where alternative energy sources from many distant locations are sold easily to consumers wherever they are located. Intelligence in distribution grids can enable small producers to generate and sell electricity at a local level using alternative sources, such as rooftop photovoltaic panels, small wind turbines and micro hydro generators.

Intermittent power sources, however, require sensors and software designed to react instantaneously to imbalances to ensure system quality with such distributed generation strategies. In addition, operators and managers must have the right tools to effectively and efficiently operate a grid with an increasing number of variables. Technologies include visualization techniques that reduce large quantities of data into easily understood visual formats, software that provides multiple options when operator actions are required and simulators for operational training and what-if analysis.

The Road Ahead

As utilities develop and execute the necessary strategies that can help them see, think and act more clearly to wisely spend some $100 billion in economic stimulus funding during the next five years, they need to execute those strategies decisively and effectively to endure the current environmental conditions and emerge in a stronger, more competitive stance. To gain this clarity, utilities need visibility to refocus business strategies and streamline operational execution and transparency to demonstrate compliant and sustainable business practices.

Such clear utilities understand what is going on in every aspect of their business and business networks. They operate with increased speed, relevance and accuracy. They are prepared for risk and uncertainty and can adjust operations nimbly as market conditions change. In short, they are transparent and accountable, lean and agile and customer-centric and collaborative.

Emerging as such an enterprise improves every aspect of managing a utility and helps it survive and thrive in the near term and over the long haul. Sustainability, for example, presents both significant risks and new opportunities to improve operational efficiencies. But being sustainable is more than knowing a carbon footprint. It requires real-time knowledge of the business and business network, as well as having the confidence to share this information with customers, stockholders and other stakeholders. With broader insight, improved efficiency and more flexibility, utilities today will become the utilities of the future, acting with great efficiency and sustainability to face whatever challenges this dynamic environment brings.


Maureen Coveney is industry director and senior principal for the utilities industry for SAP AG, headquartered in Walldorf, Germany.

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