Spurred by rapidly evolving technology, improving business cases, legislative impetus and stimulus funding; we have seen a number of large scale and wholesale replacements of utility metering systems with new smart meter deployments.
As more and more utilities complete their initial mass deployments of advanced metering infrastructure networks and smart metering technologies, the paradigm of how potential future smart grid technologies are deployed may evolve again.
Technology refresh cycles are accelerating and additional benefits are achievable through some of the incremental new functions that are being introduced to smart grid and smart metering systems such as HAN, service disconnects, DA, prepayment, etc. Thus, useful life and obsolescence curves are shortening.
The sharp contrasts and the resulting gap between technical obsolescence and functional obsolescence are growing. While no system can be completely obsolescence-proof, prudent investment and deployment decisions require consideration of the steps that utilities and vendors should be taking to ensure that today’s systems are upgradable.
The recent paradigm of universal deployment programs that require replacement of an entire metering population every 15 years, and the necessary re-integration of the smart metering applications that accompany this investment, is likely to become untenable. Many utilities who proactively invested in fixed network AMR systems are facing this same situation in justifying the upgrades to AMI. Producing a solid business case for full system replacement is challenging as they have already taken many of the operational benefits available.
This premise therefore suggests a more continuous investment approach for utilities to regularly upgrade their smart grid’s functional capabilities and thereby consider more surgical deployments of incremental new capabilities. Thus, a surgical deployment strategy aims to deploy newer technology in specific areas to target the costs and the benefits to much more precise locations.
To take advantage of this type of a continuous improvement strategy, prudent initial investment in a highly scalable, interoperable and flexible system design are required to enable an alternative to complete replacement.
Surgical deployment is not a new phenomenon as many utilities took a surgical approach to improved meter reading automation with the introductions of remote metering and AMR. Hard to access meters were amongst the first to be automated for remote reading as they carried distinct business case benefits relative to the entire service territory population. In this way, utilities could match the required investment more directly to the anticipated benefits to be achieved.
This was a viable strategy as the targeting of the investment and the benefits were highly reliable based on discernible demographic characteristics (i.e. hard to access premises with indoor or remote meters). Utilities did not require a ubiquitous investment to extract highly targetable benefits.
Thus, without continued funding or regulatory incentives, utilities may want to reconsider this “old” paradigm and more closely examine the merits and implications of migrating an existing AMI system from “basic” smart meters to more “advanced” smart meters with incremental functional improvements.
The implications of being an early adopter
Having moved assertively to adopt newer smart grid and AMI technologies, many utilities have deployed a solid foundation of sophisticated underlying technologies that they are able to leverage for further operational improvements. These will include their new AMI communications network, deeper integration with IT systems and other operational technologies, expansion of more sophisticated data and analytical capabilities, and improved security and interoperability.
With this new foundation in place, new capabilities being developed by AMI technology vendors have the potential to be assessed based solely as incremental improvements. The “incrementalism” of the potential new investment is highly dependent on the forward compatibility, scalability, flexibility, and interoperability of the underlying AMI system deployed.
In this way, the potential of future surgical assessments can now be considered where only the specific benefits of the added function can be weighed against the incremental added costs of that function alone. Examples of these kinds of incremental functionalities might include deploying HAN communications capability into the AMI system or via smart meters, adding new meters with integrated service disconnect functions, adding distribution automation capabilities, integrating prepayment capabilities, or upgrading smart meters to improved voltage or power quality measurement capabilities.
The first step in evaluating a potential deployment strategy is the business case justification that each potential upgrade may offer. Given the initial investment in an AMI system, when presented with “upgrade” opportunities utilities may face difficulty in developing a business case to justify another full-scale replacement of their smart meter technology for more limited functional gains.
As new capabilities are introduced, a surgical deployment business case will examine the potential business benefits and incremental costs that arise from deploying these incremental capabilities. The benefits considered are based on both the impact and the frequency of how the new capability can be used.
The incremental costs to be incurred are based solely on what needs to be deployed and to how many sites in order to achieve the expected benefit and the unit cost of realizing the benefit. Thus, a surgical deployment strategy is dependent on a close relationship between benefit achievement and incremental costs incurred.
The correlation and direct relationship between targeted benefits and limited costs is the key aspect of the assessment as it will determine if there is a prudent deployment strategy, with a reasonable probability of targeting success that is also logistically viable.
As a utility embarks on this analysis, it will become quickly evident that the greatest dependency, and the most difficult aspect of proving this surgical strategy, is the availability of data to accurately develop correlation relationships between the potential surgical deployment strategies and the targeted benefit achievement. The ability to establish this correlation with reliable repeatability in the field is the single most important variable to a successful business case and surgical deployment strategy.
In lieu of having strong historical evidence to validate the expected targeting effectiveness, pilot studies or “virtual” pilot analysis of historical data may provide the insight necessary to improve confidence in potential surgical strategies.
Of course, regulators and interveners will hold keen interest in the basis of fairness in any targeting strategies considered. Thus, the rationale and demographic basis for the surgical strategy may need to be based on both customer and utility benefits to be acceptable.
Surgical deployment of new smart meter capabilities may become a consideration in future smart grid programs. This is especially true for utilities who have already invested in the underlying foundational system(s), network, and integration efforts required to support an AMI.
Based on the effectiveness of the benefit-to-cost correlation and its basis for an effective targeting strategy, there can be a strong business case for a surgical deployment strategy for new smart grid or smart meter functions that are not universal in nature.
The future paradigm of full replacement strategies of new devices with new functional capabilities will become more difficult to justify simply on the basis of a small degree of incremental benefits alone. Utilities will either face a scenario whereby they wait for large scale, step changes in capabilities to consider technology upgrades, or they will adopt a more continuous investment strategy which considers incremental improvements in smart grid capabilities based on specific use benefits.
Author: Jeff Buxton is an executive consultant with Black & Veatch. He has 30 years of industry experience with a primary focus on smart grid and AMI solutions. His expertise includes strategic business planning, technology roadmapping, deployment and organization planning, and regulatory support. He holds a BS in Electric Engineering with an MBA in Marketing. Reach him at BuxtonJT@BV.com