Is an Intelligent Utility Really Worth It?

By Michael Valocchi and Marija Zivanovic-Smith, IBM

The concept of an intelligent utility network continues to gain momentum with key industry stakeholders. Customers, utilities, retailers and policy makers realize the importance of the intelligent grid in securing our energy future. The ability to connect information from the customer to the energy source has never been more important. Concerns about commodity availability, volatile energy pricing, increased pressures on reliability and continued environmental concerns provide a perfect underpinning for this transformation. While these forces are compelling, questions still linger on the quantitative and qualitative benefits of an intelligent utility network.

The qualitative benefits are not only significant, but are available to all of the participants in the energy ecosystem. Studies and pilots conducted to-date identify a number of different benefits. These benefits are best viewed from the eyes of the various stakeholders.

Customers

While the customer gains tremendous visibility into their energy choices, there are certain key tangible benefits:

  • The ability to decrease peak load usage (estimated at 4 percent to 9 percent decrease) by making better choices resulting in lower energy bills; and,
  • Reduce the time the utility needs to restore power to all classes of customers.

Retailers (in competitive markets)

The type of visibility afforded provides a critical underpinning to the truly competitive market, resulting in:

  • Increased ability to switch customers on a near real-time basis;
  • Transparency of customer usage patterns allowing for better tailoring of solutions; and,
  • Increased and more detailed knowledge of usage patterns, allowing for more sophisticated risk management and hedging activities.

Utility Providers

Numerous operational benefits result from grid transformation, including:

  • Real-time equipment monitoring, resulting in lower repair and maintenance costs and deferral of capital spending;
  • Better and more up-to-date knowledge, resulting in workforce efficiencies;
  • Increased and more accurate asset knowledge, resulting in a more finite approach to grid planning, which allows for capital avoidance and deferral; and,
  • Ability to plan for generation additions on a more granular level.

Regulators

  • The increased observability of the grid provides the regulator a new view and a greater ability to understand customer concerns on a proactive basis.

While many of these benefits are quantifiable and will be monetized over the coming years, the qualitative benefits of the transformation represent an important component. The intelligent utility network represents one of the most critical elements of the future of energy in the United States, particularly in view of environmental concerns. First, significant benefits exist in lowering energy usage, especially at peak times, because of the enablement of true demand response programs. Equally important is the ability to better integrate renewable generation sources into the grid.

All of these benefits are real and tangible, but they will need a real commitment from all stakeholders if they are to be achieved. Energy policies at the U.S. federal and state remain an important consideration. At the federal level, specific incentives are needed-such as accelerated depreciation and tax credits-to drive investment in a more intelligent grid. There also needs to be an impetus toward standards that will incent innovation and a more rapid pace of adoption at the local level. At the state level, policy makers need to examine current rate policies and amend them to not only allow, but encourage, necessary capital investment. State policy makers need to drive toward time-of-use rates. They need to allow for the fact that the entities making these investments will not necessarily be the ones that reap all the benefits. This factor should not slow down the adoption.

Overall, the movement toward an intelligent utility network represents a much-needed transformation of the electricity grid. While the investment amounts may appear daunting, the benefits realized for each of the relevant stakeholders are well worth it.

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Michael Valocchi is the Global Leader for IBM’s Energy & Utilities Global Business Services, which provides strategic consulting to clients regarding technology, process and regulatory issues.

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Marija Zivanovic-Smith is the Intelligent Utility Network Strategy Executive for the IBM Global Energy & Utilities team.

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