Utilities need more asset management, IBM leader says

By John Geoghegan, IBM’s leader of Energy and Utilities for Europe, Middle East and Africa

May 1, 2002 — The network is a core asset and for many years it has been operated by distributions operations systems such as Supervisory Control and Data Acquisition (SCADA) systems.

The use of wireless, connected sensors and autonomic technologies can complement existing SCADA systems to provide better security and information on the condition of assets. Significant cost savings can be realised by either enhancing the existing operational ‘push’ model or within a new IBM proposed operational ‘pull’ model.

Besides security issues there is a significant financial case for protecting the network. Whilst Trading and Customer Service functions are seen by many as the ‘exciting’ areas of energy and utilities it is hard to argue that the ‘boring’ networks is actually where the profits are made. In general 80% of profits for utilities (electricity, gas and water) are generated from the core network business i.e. transportation of the commodity.

For instance the ScottishPower interim results November 2001 showed that more than 90% of its profits came from the Power Systems business (Electrical Transmission and Distribution Business) and Southern Water business. Both businesses rely heavily on their network/transportation assets.

Geoghegan suggests that the after shock of Enron’s demise will give extra incentives for utilities to get back to basics and chase the profits. It is time to safeguard the valuable network asset and in the wake of September 11th there are serious security implications to consider. So how do utilities safeguard against crippling interruptions and provide for smarter working procedures whilst significantly extending the life of the network?

Push Model
At the heart of every networks business is a SCADA system that assists operators (usually via a graphical display) to control the network by re-routing energy or water flows and detecting alarms where networks are not performing within safe limits.

These operational systems are generally called SCADA systems however SCADA is a generic name for Supervisory Control and Data Acquisition and could mean a number of systems. In this article SCADA will relate to the operational systems that control the network.

SCADA systems have been in use over many decades and are proven to be very reliable (>99%). SCADA systems mainly show the real time operational state of the network.

There are some basic status alarms on SCADA systems showing assets that are not performing within a tolerance. This can be used to trend the Mean Time Between Failure (MTBF) to schedule a date when the asset will be replaced. These SCADA alarms are primarily based on the condition of the physical network.

Generally the systems that carry out the operational control do not detect the condition of the asset in terms of physical security, environment (humidity – wet, damp, dry), oil levels, viscosity, and corrosion rates… These and other factors can be lead indicators on problems that will arise on the network.

The SCADA information and/or customer complaints can be used to initiate work orders for maintenance and repair of the network. Unfortunately this has been primarily on a failed service basis which is much too late i.e. ‘I smell gas . .’ ‘We have a flood in our street’ or ‘my lights have gone out …’

Enhanced Push Model
How much more effective it would be to use connected sensors to show the actual status of an asset so that it could alert in advance of a failure or when an asset actually needed maintaining (not a guess using MTBF)? Geoghegan thinks there is a lot of benefit in doing this.

Conditioned based maintenance can extend the asset life by up to 30%. Savings are huge when the utility asset values are usually in the billions of dollars/euros, and in national transportation and water businesses they are many tens of billions of dollars/euros. Assets historically have been depreciated over a 20 year life but the regulators are challenging asset businesses to plan for assets with lives of more than 30-40 years. This has a big impact on the allowable capital expenditure programmes.

Conditioned based maintenance can be achieved by using modern advances in connected sensors and wireless communication. Connected sensors will record actual conditions (physical security, environment (humidity – wet, damp, dry), oil levels, viscosity, corrosion rates… ) at network assets (transformer sub-stations, gas compressors, water treatment plants) and this data can be sent via the SCADA network or a mobile network back to the centralised control centre. This additional data would be used together with the SCADA information to schedule work orders for mobile field crews.

The following schematic shows how IBM Global Services has implemented some of these applications with industries such as utilities, energy and government.


For instance, IBM is working with a large energy organisation to automate the station forecourt so that machines such as fuel pumps, car washing machines, lights are controlled via a wireless LAN and provide regular feed back to the central control centre.

IBM is working with a government agency to use a wireless application and connected sensors to utilise the vast array of public buildings and other real estate to measure the environment as an early warning system of bio-terrorist activity such as poisonous gas or organism spreading disease.

Automating the interaction with distributed field staff is delivering real benefits in many industries and operational staff savings of 10-15% per annum can be achieved delivering a payback within 1 year. IBM is working with many utilities in wireless/mobile workforce automation so that field staff have access to central systems such as Geographical Information Systems (GIS), materials ordering etc… and for field staff to receive work orders for maintenance and operational repairs.

The big prize however is implementing condition-based maintenance which can drive huge savings on the regulated asset base. Other obvious areas are in supply chain management and procurement.

For a typical UK utility with a regulated asset base of $1000M, Operating Expenditure $100m and Capital Expenditure of $80m the benefits for capital and operational expenditure are shown below.

The savings are derived from extending the life of the asset by 30% using condition-based maintenance, inventory improvements by 5% and mobile workforce improvement by 10%.

There is a compelling financial case for using wireless solutions and connected sensors but this could just be the start. Up to now the discussion has been about how a utility can augment the existing ‘push’ model of the industry i.e. fault recognised, send something to the central controller, something is scheduled to fix it and then after a period of time something happens to the asset

Pull Model
A significant change in the cost base requires a complete change in the existing working methods – the industry needs a ‘Pull’ operational model.

A large proportion of the Utilities staff and contractors are used to maintain and repair the existing assets and build the new assets. If a utility can significantly extend the life of an asset with an automated self-diagnostic maintenance programme the utility can achieve double savings on capital and operational expenditure. Although it is early days IBM Global Services estimates that there are substantial savings on top of the above savings to be made.

The savings are derived from extending the life of the asset by 60% using condition-based maintenance, inventory improvements by 20% and mobile workforce improvement by 25%.

The ‘Pull’ model is based on distributed intelligence to the asset site – it becomes automated. Using machine-to-machine communications with connected sensors and autonomic computing the asset does self-diagnostics, self maintain and repair, re routes energy flows, schedules non-routine maintenance and reports on any out of the ordinary activity that poses a security threat.

Does this technology exist? Yes – IBM has invested many 100s of millions in its project eLiza to create chips for its computers to carry out self-diagnostic and self-healing activities. IBM calls it autonomic computing where machine to machine communications take place to optimise the performance of computing and network resources. The technology exists and IBM is setting it to work for other industries.

In Utilities the asset intensive network business in the future could be a series of automatically controlled assets that maintain and repair themselves and ensured that their security is not compromised.

Whichever approach you take from the incremental savings from an enhanced ‘push’ model or the more organisationally challenging but fundamentally changing ‘pull’ model. Utilities will be looking closely at their networks to make sure they are protected and maintained. Others may be looking at this ‘ugly duckling’ business in an admiring new light.


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