executive summary: smart grid it systems · executive summary: smart grid it systems utility it and...

Eric WoodsResearch Director

Bob GohnVice President, Research

EXECUTIVE SUMMARY: Smart Grid IT Systems Utility IT and Operational Systems, Software and Services, Business Drivers, Policy Trends, Supplier Profiles, Market Analysis and Forecasts

NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Pike Research at [email protected].

Published 2Q 2012

Smart Grid IT Systems

© 2012 Pike Research LLC. All Rights Reserved. This publication may be used only as expressly permitted by license from Pike Research LLC and may not otherwise be accessed or used, without the express written permission of Pike Research LLC.

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Section 1 EXECUTIVE SUMMARY

1.1 Smart Grid IT and the New Utility

Around the world, billions of dollars are being invested in technologies to transform electricity networks. Much of this investment is being made in core infrastructure such as high-voltage power lines or intelligent devices for monitoring and managing power flows. However, the true value of these dollars can only be realized by a parallel investment in a new generation of utility information technology (IT) systems that can help collect, manage, and analyze the vast amounts of data generated by smart grid technologies.

The concept of the smart grid has many facets. One of the most important is the recognition that energy companies must become as focused on data and information management as other industries, such as finance, telecommunications, and retailing, have become over the last two decades.

As in those industries, the impact of IT on utilities is most evident in the realm of customer management. The relationship between utilities and their residential and business customers is being transformed as a result of rising energy costs, environmental concerns, and the development of new services. IT is an essential part of the conversion of the industry to a customer-centric perspective. Such a conversion depends on utilities understanding their customers better, communicating with them effectively, and delivering new services that realize the benefits of smart grid investments.

Yet, the role of IT in the smart grid is not limited to the transformation of customer relationships or the deployment of smart metering systems. IT is becoming an important part of the transformation of network operations as utilities exploit new data sources in order to improve network efficiency. Siloes of operations are being broken down and new capabilities are emerging based on large-scale information management, real-time data analysis, and the move to closed-loop systems for managing, monitoring, and controlling the smart grid. Applications such as outage management and asset management are also being radically overhauled by the integration of IT and operational technology (OT).

1.2 The Evolution in Smart Grid IT

Smart grid IT is not a set of well-defined application or infrastructure components. It is a rapidly evolving area of innovation and experimentation.

The need to support smart meters has already driven significant change in the utility IT landscape with the introduction of advanced metering infrastructure (AMI) and meter data management (MDM) applications and the replacement and upgrading of existing billing and customer information systems (CIS). However, the evolution of the smart grid from the initial deployment of smart meters to a dynamic, intelligent network supporting bi-directional communications between utilities and customers is only just beginning. Other focal points for IT transformation include distribution management systems (DMS) and the merging of enterprise IT and OT to improve operational efficiencies and move toward the goal of a closed-loop network management operation.

Some of the biggest changes in smart grid IT are being driven by new application requirements such as electric vehicle (EV) charging systems, demand-side management applications, and distributed generation (DG) management, including virtual power plants



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(VPPs) and microgrids. The infrastructure supporting smart grid applications is also evolving. One of the biggest challenges is the move to more distributed intelligence, which enables in-field systems to understand and respond to events much more quickly and eases the data handling demands placed on centralized systems. Such systems will allow event processing to be delegated to the substation and/or transformer level.

1.3 The Challenges

1.3.1 IT and OT: Finding New Ways of Working Together

The worlds of IT and OT teams have historically been distinct within utilities. IT has been primarily focused on business process and customer management systems. Operational systems for managing and monitoring power networks have been the domain of operational teams, with only limited input from the IT department. That situation is changing for a number of reasons.

Above all, the smart grid requires a more holistic view of how a utility operates at both a business and field level, which translates to greater cooperation between IT and OT teams. IT’s part in the rollout of smart meters, including the deployment of MDM and new customer management and billing applications, has enhanced its standing within the business. Realizing many of the benefits of smart meter deployments – such as more flexible pricing, improved customer understanding, and the deployment of new services – requires a significant investment in IT.

If IT has a leading role in the development of customer management systems, it is also playing a growing role in delivering operational efficiency in areas such as outage management, asset management, and workforce management systems, where there are clear benefits from a broader integration of enterprise and operational data. Even in core operations systems like DMS and energy management systems (EMS), there is a trend toward greater integration across systems. IT capabilities related to system security and large-scale data management and analysis are also required.

These developments are driving organizational and cultural changes as IT and OT teams learn to work together to meet common goals. IT and OT are not simply different departments. They also reflect different skills and different priorities. The need to define and deploy new IT systems to support the smart grid is driving greater collaboration between IT and OT and is also providing a set of common objectives that can bring diverse teams together.

1.3.2 Data Management and Data Integration

The prime driver for smart grid IT investment is to realize the maximum benefits of AMI and network infrastructure investment through better use of the large volumes of data that can be accessed on customer usage and network performance.

Much has been written about the volumes of data that are generated by AMI systems and other improvements to the intelligence of the grid. However, the quantity of data is likely to prove to be a secondary issue compared to the problems of data quality, consistency, and integration with legacy systems. Data quality is particularly important where an accurate model of the network is required (e.g., for grid optimization and the implementation of self-healing systems). Inaccurate information on device deployments and asset status will have knock-on effects on additional applications and reduce the effectiveness of other operational improvements.



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In addition, smart grid data requirements – like speed and scalability – often go beyond traditional data architectures and conventional storage practices and procedures. The rate of data generation can make traditional database and data warehouse systems too costly and too slow for advanced, interactive analytics. These new and more stringent data demands are still poorly understood by most utility companies.

1.3.3 Security

The importance of ensuring the security of the electricity grid – a key part of any national infrastructure – cannot be underestimated. Work done by the industry, in conjunction with organizations like the National Institute of Standards and Technology (NIST), aims to ensure that the right standards and frameworks are in place to bolster the security of the grid as we move to more intelligent devices, open platforms, and integrated systems.

The benefits of open, standards-based field systems are substantial, but their openness means they are potentially vulnerable to cyber-attacks. Ensuring the separation between IT and OT networks is therefore a critical element of any security strategy. A different set of problems is raised in areas where information is being exchanged between operational and IT systems. The use of enterprise IT security systems will be particularly important for controlling and managing information flows between systems and managing access to data and applications. Moreover, the use of standard protocols and proven IT security technologies means that advances made in enterprise and Internet security are applicable within a smart grid context.

1.3.4 Standards

The dependency of smart grids on the bi-directional flow of information across disparate systems makes the definition and adoption of standards for data interchange a vital requirement. Much work is already being done by government agencies, utilities, and suppliers in areas such as cyber security and device interoperability. Yet, further work is needed to refine their suitability for emerging requirements and extend their adoption across all utilities and on an international level. Particularly important for smart grid IT is the development of standards for the integration of data across applications and devices. International standards such as IEC 61968 and IEC 61970 for a Common Information Model (CIM) are not only making it easier for utilities to specify interoperable systems, but are also creating a more open market for suppliers. Emerging requirements for EV charging and distributed generation will further complicate this picture.

1.4 Market Dynamics

The dynamic nature of smart grid IT – with new applications and new requirements emerging rapidly – makes for a particularly volatile market landscape. This is reflected in the complicated overlapping of vendors from different backgrounds.

Considerable merger and acquisition (M&A) activity in recent times emphasizes how players are maneuvering for a position in the market. These acquisitions show power equipment vendors making moves to extend their software and services capabilities. Such activity reflects the need to be able to provide advanced IT solutions in order to exploit the benefits of intelligent hardware solutions. Equipment providers are not the only companies extending their footprint in this market. IT software and service companies have been acquiring expertise in utility systems in an attempt to get closer to the core operational and business requirements of their customers. Suppliers are also extending their geographical reach through acquisitions due to the opportunities offered by the greater standardization



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of utility solutions with the advent of smart grids. Pike Research expects to see more M&A activity as companies attempt to broaden and deepen their energy market portfolios. In addition, we anticipate more startups will be acquired as technical requirements and priorities become clearer.

These moves also reflect an uncertain jostling for position between IT and OT vendors. IT vendors such as IBM, Hewlett-Packard (HP), and Oracle are expanding further into areas of operations management, while grid infrastructure suppliers such as ABB, Siemens, and Schneider are beefing up their IT capability. This is not so much a head-on clash as a gradual reshaping of the landscape. Partnerships and collaboration will be as important, if not more important, in this regard. Many smart grid projects require deep skills in both IT and OT. Needless to say, this environment is presenting systems integrators with significant opportunities.

1.5 Market Forecast

Smart grid IT is a diverse market spanning a range of applications and infrastructure software, enterprise IT and operations systems, and dedicated communications and hardware. This report and Pike Research’s forecasts focus on the core application requirements to support key smart grid goals around customer service, energy efficiency, and operational efficiency. The forecasts complement those in other Pike Research reports on specific applications such as MDM, data analytics, and cyber security, as well as our reports on smart grid communications, smart meters, and distributed automation.

The focus on AMI deployments around the world is driving investment in MDM and CIS software. Utility CIS will be a significant growth area throughout the forecast period of this report. Outage management systems (OMS) and asset management systems (AMS) are also among the fastest-growing application segments, but from a relatively small base. United States utilities in particular are seeing AMI and network automation investments, which provide for new integrated forms of outage management. On the operations side, the DMS is the hub for many of these developments. As well as providing a centralized view of the network of monitoring and planning, DMS will become more integrated into a web of systems – from SCADA to AMI to enterprise IT.

While the fundamental aspects of smart grid IT are common across regions, there are differences in the speed of adoption, the priority of objectives, regulatory and market environments, and legacy issues. In general, North America is leading the initial market in many smart grid IT innovations, but the European and Asia Pacific markets will become more significant over the next 5 years. Europe’s drive toward its 20-20-20 targets is focusing innovation on the issues around renewable integration, energy efficiency, and energy security. In Asia Pacific, the scale of Chinese investments in grid infrastructure is yet to be matched by an impact on the IT market, but Pike Research expects to see China becoming a more active player in the market in coming years. Japan and South Korea are both looking at the smart grid in terms of importance to the national infrastructure and future opportunities for technology exports.



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Pike Research estimates the global smart grid software market will be worth $1.1 billion by the end of 2011 and will reach $2.9 billion by 2017 at a CAGR of 15.2%. The total software and related IT services market is forecast to reach $3.6 billion by the end of 2011 and grow to over $8.6 billion by 2017 at a CAGR of 15.5%.

Chart 1.1 Total Smart Grid IT Software and Services Expenditures by Region, World Markets: 2011-2017

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$1,000

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$10,000

2011 2012 2013 2014 2015 2016 2017

($ M

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Europe

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(Source: Pike Research)



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Section 8 TABLE OF CONTENTS

Section 1 ...................................................................................................................................................... 1 Executive Summary .................................................................................................................................... 1

1.1 Smart Grid IT and the New Utility .................................................................................................. 1 1.2 The Evolution in Smart Grid IT ...................................................................................................... 1 1.3 The Challenges ............................................................................................................................. 2

1.3.1 IT and OT: Finding New Ways of Working Together .............................................................. 2 1.3.2 Data Management and Data Integration ................................................................................. 2 1.3.3 Security .................................................................................................................................... 3 1.3.4 Standards ................................................................................................................................ 3

1.4 Market Dynamics .......................................................................................................................... 3 1.5 Market Forecast ............................................................................................................................ 4

Section 2 ...................................................................................................................................................... 6 Market Issues .............................................................................................................................................. 6

2.1 IT and the Transformation of the Grid ........................................................................................... 6 2.2 The Scope of the Smart Grid ........................................................................................................ 7 2.3 Smart Grid IT Today ...................................................................................................................... 8 2.4 Smart Grid IT and the New Customer Focus .............................................................................. 10

2.4.1 The Transformation in Customer Relationship Management ............................................... 10 2.4.1.1 Improved Billing and Revenue Protection .................................................................... 11 2.4.1.2 Understanding the Customer ........................................................................................ 11 2.4.1.3 Customer Monitoring and Control of Energy Usage ..................................................... 11

2.4.2 Demand Management ........................................................................................................... 12 2.5 Smart Grid IT and Operational Transformation ........................................................................... 12

2.5.1 IT and the Move to a Smart Grid ........................................................................................... 12 2.5.2 Network Intelligence and Distributed Automation ................................................................. 13 2.5.3 Operational Efficiency ........................................................................................................... 13

2.5.3.1 Outage Management .................................................................................................... 13 2.5.3.2 Asset Management ....................................................................................................... 15 2.5.3.3 Workforce Management ............................................................................................... 15

2.6 IT and New Smart Grid Services ................................................................................................. 15 2.6.1 Electric Vehicle Charging ...................................................................................................... 15 2.6.2 Distributed Generation .......................................................................................................... 16

2.7 The Challenges ........................................................................................................................... 16 2.7.1 Organizational and Cultural Barriers ..................................................................................... 16 2.7.2 Data, Data, Data .................................................................................................................... 17 2.7.3 Security .................................................................................................................................. 18 2.7.4 Standards .............................................................................................................................. 18

2.8 Regional Trends .......................................................................................................................... 19 2.8.1 North America ........................................................................................................................ 19 2.8.2 Europe ................................................................................................................................... 20 2.8.3 Asia Pacific ............................................................................................................................ 21

2.8.3.1 China ............................................................................................................................. 21 2.8.3.2 Japan ............................................................................................................................ 22 2.8.3.3 South Korea .................................................................................................................. 22 2.8.3.4 India .............................................................................................................................. 22 2.8.3.5 Australia and New Zealand .......................................................................................... 23

2.8.4 Latin America ......................................................................................................................... 23



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2.8.5 Middle East and Africa .......................................................................................................... 23 2.9 Key Players ................................................................................................................................. 24

2.9.1 A Market in Transition ........................................................................................................... 24 2.9.2 The IT Giants ......................................................................................................................... 25 2.9.3 Grid Infrastructure Suppliers ................................................................................................. 26 2.9.4 Systems Integrators .............................................................................................................. 26 2.9.5 Operational IT Suppliers ........................................................................................................ 26 2.9.6 MDM Suppliers ...................................................................................................................... 27 2.9.7 Smart Meter Suppliers ........................................................................................................... 27 2.9.8 Other Enterprise Software Players ........................................................................................ 28

Section 3 .................................................................................................................................................... 29 Technology Issues .................................................................................................................................... 29

3.1 The Evolution of Smart Grid IT .................................................................................................... 29 3.2 Core Application Areas ............................................................................................................... 30

3.2.1 Meter Data Management ....................................................................................................... 30 3.2.2 Customer Information and Billing Systems ........................................................................... 31 3.2.3 Energy Market Management Systems .................................................................................. 32 3.2.4 Outage Management Systems .............................................................................................. 33 3.2.5 Asset Management Systems ................................................................................................. 34 3.2.6 Mobile Workforce Management ............................................................................................ 34 3.2.7 Distribution Management Systems........................................................................................ 35 3.2.8 Transmission Management Systems / Energy Management Systems ................................. 35 3.2.9 SCADA Systems ................................................................................................................... 36 3.2.10 Distribution Automation and Distribution Optimization ...................................................... 37 3.2.11 Business Intelligence and Data Analytics ......................................................................... 38

3.3 Forecasting and Planning ........................................................................................................... 40 3.4 Security Systems......................................................................................................................... 40 3.5 Emerging Applications ................................................................................................................ 41

3.5.1 Demand Management ........................................................................................................... 41 3.5.2 Managing Distributed Generation, Microgrids, and VPPSs .................................................. 42 3.5.3 Electric Vehicle Charging IT .................................................................................................. 42 3.5.4 Distributed Intelligence Platforms .......................................................................................... 44

3.6 Standards .................................................................................................................................... 44 3.6.1 IEC 61970 and IEC 61968 CIM ............................................................................................. 45 3.6.2 NRECA MultiSpeak ............................................................................................................... 46 3.6.3 IEC 61850 .............................................................................................................................. 46 3.6.4 Distributed Network Protocol (DNP) ...................................................................................... 47

Section 4 .................................................................................................................................................... 48 Key Industry Players ................................................................................................................................. 48

4.1 Overview ..................................................................................................................................... 48 4.2 ABB ............................................................................................................................................. 48 4.3 Accenture .................................................................................................................................... 49 4.4 Atos ............................................................................................................................................. 50 4.5 eMeter (Siemens) ........................................................................................................................ 50 4.6 Grid Net ....................................................................................................................................... 51 4.7 Hewlett-Packard .......................................................................................................................... 52 4.8 IBM .............................................................................................................................................. 53 4.9 Itron ............................................................................................................................................. 54 4.10 Landis+Gyr .................................................................................................................................. 55 4.11 Logica .......................................................................................................................................... 56 4.12 Open Systems International, Inc. (OSI) ...................................................................................... 57 4.13 Oracle .......................................................................................................................................... 57 4.14 SAIC ............................................................................................................................................ 58



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4.15 SAP ............................................................................................................................................. 59 4.16 Siemens Energy .......................................................................................................................... 60 4.17 SUBNET Solutions Inc. ............................................................................................................... 61 4.18 Survalent Technology ................................................................................................................. 61 4.19 Telvent (Schneider Electric) ........................................................................................................ 62

Section 5 .................................................................................................................................................... 63 Market Forecasts ....................................................................................................................................... 63

5.1 The Scope of Pike Research’s Market Forecast ......................................................................... 63 5.2 The Global Market for Smart Grid Software and Services .......................................................... 64 5.3 The Market by Application Type .................................................................................................. 65 5.4 Regional Markets ........................................................................................................................ 66

5.4.1 North America ........................................................................................................................ 66 5.4.2 Latin America ......................................................................................................................... 67 5.4.3 Europe ................................................................................................................................... 68 5.4.4 Asia Pacific ............................................................................................................................ 70 5.4.5 Middle East and Africa .......................................................................................................... 72

Section 6 .................................................................................................................................................... 74 Company Directory ................................................................................................................................... 74 Section 7 .................................................................................................................................................... 74 Acronym and Abbreviation List ............................................................................................................... 74 Section 8 .................................................................................................................................................... 81 Table of Contents ...................................................................................................................................... 81 Section 9 .................................................................................................................................................... 84 Table of Charts and Figures..................................................................................................................... 84 Section 10 .................................................................................................................................................. 85 Scope of Study .......................................................................................................................................... 85 Sources and Methodology ....................................................................................................................... 85 Notes .......................................................................................................................................................... 86



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Section 9 TABLE OF CHARTS AND FIGURES

Chart 1.1 Total Smart Grid IT Software and Services Expenditures by Region, World Markets: 2011-2017 ............................................................................................................................... 5 Chart 5.1 Smart Grid IT Software Expenditures by Region, World Markets: 2011-2017 ..................... 64 Chart 5.2 Total Smart Grid IT Software and Services Expenditures by Region, World Markets: 2011-2017 ............................................................................................................................. 64 Chart 5.3 Smart Grid Software Expenditures by Application, World Markets: 2011-2017 ................... 65 Chart 5.4 Smart Grid Software and Related Services Expenditures, North America: 2011-2017 ........ 66 Chart 5.5 Smart Grid Software Expenditures by Application, North America: 2011-2017 .................... 67 Chart 5.6 Smart Grid Software and Related Services Expenditures, Latin America: 2011-2017 ......... 67 Chart 5.7 Smart Grid Software Expenditures by Application, Latin America: 2011-2017 ..................... 68 Chart 5.8 Smart Grid Software and Related Services Expenditures, Europe: 2011-2017 ................... 69 Chart 5.9 Smart Grid Software Expenditures by Application, Europe: 2011-2017 ............................... 70 Chart 5.10 Smart Grid Software and Related Services Expenditures, Asia Pacific: 2011-2017 ............ 71 Chart 5.11 Smart Grid Software Expenditures by Application, Asia Pacific: 2011-2017 ........................ 71 Chart 5.12 Smart Grid Software and Related Services Expenditures, Middle East and Africa: 2011-2017 ............................................................................................................................. 72 Chart 5.13 Smart Grid Software Expenditures by Application, Middle East and Africa: 2011-2017 ....... 72

Figure 2.1 Smart Grid IT: The Pike Research Model ............................................................................... 8 Figure 3.1 The Evolution of the Smart Grid IT Landscape ..................................................................... 29 Figure 3.2 MDM in Context of AMI and Back-End Systems ................................................................... 30 Figure 3.3 The New CIS Handles More Complex Customer Management ........................................... 32 Figure 3.4 High-Level Diagram of a SCADA Implementation ................................................................ 37 Figure 3.5 EV Charging Data Sharing .................................................................................................... 43

Table 2.1 Smart Grid Components: The Pike Research Model .............................................................. 7 Table 2.2 The Main Smart Grid IT Applications ...................................................................................... 9 Table 3.1 Standards and Specifications from NIST Framework ........................................................... 44



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Section 10 SCOPE OF STUDY

This report primarily examines the IT systems that are essential to the realization of the smart grid vision. Such systems include:

Enterprise IT systems that support business processes and systems procured, deployed, and managed by the IT department.

OT IT systems that have traditionally been under the purview of operational teams. OT IT systems are defined as those running on common software platforms (e.g., UNIX and Windows) and standard hardware platforms. Note that Pike Research does not cover embedded software within field devices in this report.

The report provides global and regional forecasts for the period from 2011 to 2017. The report’s forecasts focus on the core application requirements for key smart grid goals around customer service, energy efficiency, and operational efficiency. These forecasts complement those in other Pike Research reports on specific applications such as MDM and broader markets such as data analytics and smart grid cyber security.

This report does not look at the technical details of networking technologies. Rather, it addresses the more general impact of networking technologies on the IT aspects of utility network operation. Also note that the report does not discuss hardware innovations at length – either in terms of general IT or operational specific systems such as SCADA and DA. These areas are covered in other Pike Research reports.

SOURCES AND METHODOLOGY

Pike Research’s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Pike Research’s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community.

Additional analysis includes secondary research conducted by Pike Research’s analysts and the firm’s staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report.

These primary and secondary research sources, combined with the analyst’s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Pike Research’s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients.

Pike Research is an independent market research firm whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. The firm is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets.



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NOTES

CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value ÷ Start Year Value)(1/steps) – 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well.

Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2012 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.



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Published 2Q 2012

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This publication is provided by Pike Research LLC (“Pike”). This publication may be used only as expressly permitted by license from Pike and may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed or used without the express written permission of Pike. Notwithstanding the foregoing, Pike makes no claim to any Government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). If you do not have a license from Pike covering this publication, please refrain from accessing or using this publication. Please contact Pike to obtain a license to this publication.

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