Smart Grid: LeveragingTechnology to TransformT&D Operating ModelsEnergy, Utilities and Chemicals the way we see itContentsIntroduction 3The State of the Market 4Regulation and Legislation 4Global Climate Change 4Customer Expectations 5Aging Infrastructure 5Power Quality and non-technical losses 5The Opportunity 6The Vision 7The Roadmap 10The Business Case 11Starting the Transformation Journey 12Glossary 142007 Capgemini. No part of this document may be modified, deleted or expanded by any process or means without prior written permission from Capgemini.Smart Grid: Leveraging Technology to Transform T&D Operating Models 3Energy, Utilities and Chemicals the way we see itIntroductionWhat will the future hold?This is a question we would all likeanswered with some assurance. As weall know, it is nearly impossible topredict the future but it is possible tolook at trends and activities takingplace in our lives and get a goodindication of the direction we aretraveling. The same is true in theelectric utility industry and the futureof the electric distribution grid.It is clear that dramatic change iscoming in the future for the electricutility industry and the way energy isgenerated, delivered and consumedsubstantially changing the wholebusiness model. This change is comingto a piece of the industry that hasntbeen known for radical change over its120 plus year history. Electricdistribution has been basically thesame industry since the time of Edisonand Tesla, both would easily recognizewhat is installed today. The utilityindustry is often accused of being slowto adopt and resistant to change, a newstudy by Platts and Capgeminisuggests just the opposite. Accordingto the study, in which more than 120senior executives at U.S. and Canadianutilities participated, a majority of thesurveyed executives reported that theyare embracing new technology as ameans of improving overall gridperformance.Another key indicator of futuredirection is actions being taken bylegislators and regulators. This year wehave seen the United States House ofRepresentatives pass the Smart GridFacilitation Act of 2007.This legislation provides a nationwidefocus on the development of anElectric Smart Grid. In Europe similarefforts are underway, in parts of Asiathe situation is even more advanced,Tokyo has completed theimplementation of a smart grid. Theonly sure thing is that doing nothing isnot an option since an increasingelectricity demand is pushing the agingelectric grids to the breaking points;the current state of the electricalinfrastructure is not sustainable. Tochange its course, utility companiesmust embrace a fresh approach tomanaging the grid, peak demand andsystem security - one that will drivemarket efficiency while supportingeconomic, environmental and socialpriorities.4technologies the market/retail side is the primarybeneficiary.Despite these current realities, anumber of internal and external factorsare converging that will enable andprovide the right types of incentives forutilities, regulators and consumers toadopt innovative approaches todemand management and marketefficiency. Those factors will drive theelectric power infrastructure toradically change.Regulation and LegislationGovernments around the world aremaking energy conservation, energyindependence and global warmingtop-of-mind issues. A wide range oftaxes, legislation and other policiesdesigned to reduce the combustion offossil fuels are being considered acrossthe globe.The Smart Grid Facilitation Act of2007 establishes a Federal GridModernization Commission, requires(unlike EPACT 2005) utilities toconsider ways to encourage SmartGrids, energy efficiency and demandresponse; it provides a nationwidefocus on the development of a SmartGrid. In California the CaliforniaPublic Utility Commission (CPUC) Energy Action plan I and II required allutilities to submit a business case, thegoal is completion of a 20 millionsmart meter deployment prior to theend of 2012. This deployment ismandated not for utility billing, but fordemand response in a powerconstrained market.In Ontario, Canada the EnergyConservation Responsibility Act fromthe Parliament issued a directiveimposing conversion of meters. Theschedule is to convert all meters(residential and business) to smartmeters by 2010. Again Ontario is apower constrained market with strongresistance to any new power plantconstruction.In a number of states in the US, theregulators have implemented incentivebased rates to force utilities to improvereliability to their customers.In Quebec and Manitoba in Canada,the regulators are pushing forwarddistribution automation and smart gridinitiatives to allow for the placement ofdistributed generation and to improvereliability of the grid.Global Climate ChangeAs a society, we increasingly recognizehow burning carbon-based fossil fuelsadversely affects the environment.Momentum is building on many frontsto limit carbon emissions.Government, major corporations,citizen groups and utilities alike arepromoting environmentally-friendly,green solutions. Utilities are lookingfor alternative generation that willforce the grid to become much moredistributed. Many are insisting thatbehavior must change and adoption ofa conservation culture is critical.Current generation stations are locatedclose to where the demand for poweris, in many cases it is close to majorcities and major transportation routesthat makes it easy to move fuel to thecentral stations. On the contrary, greenpower exists where nature put it, inmany cases long distances from majordemand locations, meaning that thepower from wind farms will have totravel long distances to the customers.This transportation may be on majorhigh voltage routes, or it may be on thedistribution network. The best place inthe world to make solar power is in thedeserts near the equator, hot, drylocations that have few electricThe reality is that the compliance-based industry in which utilitiesoperate doesnt offer enough incentivefor consumers, regulators or utilities totake the difficult steps necessary tomake electrical energy markets operateefficiently.IConsumers want lower prices, higherquality service and absolutely expectthe power to flow 24x7.ISome regulators impose long-termrate caps in an attempt to pleaseconsumers.IRegulated rates are not tied towholesale markets where utilitiespurchase all or a portion of the powerthey sell.IIncentives for consumers to conserveare not significant enough to changetheir behavior.IRegulators impose conservationprogram requirements on utilities,and as a result, utilities suffer fromdecreased revenues which are directlytied to consumption.INetworks are constrained enoughthat true pricing is not possible theEnron games in California show whathappens when the incentives are highenough for market participants.IConstruction difficulties linked tocomplex local regulations.IPublic resistance to the addition ofnew transmission lines, while theywant the power, they do not want tosee the lines.Incentives for grid operators willdepend on the ownership model, inNordics where grid operator is amonopoly there are very few incentivesto commit to lower prices for theconsumer, their primary interest isefficiency, quality, control and lowoperating cost. In situations like thisthe grid operators are only indirectlytied to the consumptions and theyare not benefiting fromthose newThe State of the MarketSmart Grid: Leveraging Technology to Transform T&D Operating Models 5Energy, Utilities and Chemicals the way we see itconsumers. That means either movingthe people or moving the power to thelocation.The ability to build conventional fossilfuel based power generation willdecline over the next decade, alreadymore than 50% of the coal fired powerplants that have been announced to bebuilt in the US over the last 5 yearshave been cancelled. It is not that theuse of coal is being reduced rather the rate that the use of coal will go upis slowing down. With Green housegases being a high priority topic, theability of utilities around the world tobuild as much fossil fuel generation asthey like will be constrained byenvironmental concerns. By 2030, itmay be very difficult to build newfossil generation in most of thedeveloped world.Customer ExpectationsAs household electricity consumptionincreases year over year, peak loads areincreasing and changes inconsumption patterns are causing loadfactors to decrease. At the same time,consumers expect higher qualitypower to operate the increasingnumber of digital devices that weamass each year. Finally, consumers aredemanding this improved quality atthe low, stable price levels of the pastwhile, at the same time, wanting avoice in how the power they consumeis generated.The fastest growing sector for powerconsumption is residential.Commercial and Industrial customershave the financial incentives needed toreduce power consumption.Residential customers to a large extentstill see power as a low cost necessity.In many household cable televisionand internet access cost much morethan electricity.Aging InfrastructureMuch of the transmission anddistribution infrastructure is more than50 years old and was designed toprovide power in a different era. Formany years, utilities typicallyunderinvested in the gridinfrastructure or neglected to make thesignificant, ongoing investmentsrequired to sustain the infrastructureover the next decade. As a result, mostutilities are now at a crossroads, facinga decision that will be crucial to theirfutures.Aging WorkforceA significant percentage of the currentutility workforce is nearing the age ofretirement. In some companies morethan 70% of the workforce will retirebetween 2001 and 2010. With the lossof these resources comes the loss of ahuge pool of operating and networkknowledge. Much of this knowledgehas not been adequately captured incorporate records. It will be necessaryto capture this information and be ableto communicate it to a whole newworkforce. This is also compoundedby the fact that the current generationhas been raised on a differentcommunication media. Todays papermaps and network diagrams meannothing to them. They are use tocomputer access and graphic userinterfaces. A means will have to becreated to quickly and cost-effectivelytrain these new resources. This changeis driving up the need to provide datato the field workforce at a rapid rate.Power Quality and non-technicallossesIt used to be that residential customersmostly used power in lighting, heating,refrigeration, and analogentertainment. Today there isincreasing use for digitalentertainment. Harmonics and otherpower quality issues were confined, toa large extent to the industrial segmentof power delivery and so could behandled with a small number ofindustrial sized solutions. Today withPlasma televisions, and otherelectronic devices creating harmonics,the problem has moved frommanageable to unmanageable.Additionally, the non-technical lossesare climbing and many utilities are juststarting to understand the real extentof the non-technical losses. In thetoday world the extent of bothproblems is mostly reported by urbanmyth and small samples, but there is agrowing body of evidence that in thiscase the smoke hides a growing fire.6Nobody can tell you today exactlywhat technologies the future SmartGrid will incorporate but we have beenable to compile a list of keycharacteristics. We expect each utilityto have its own version of the SmartGrid but it is clear it will have thefollowing characteristics:IAutonomous restoration,IResist attacks both physical andcyber,ISupports distributed resources (generation, storage, demandreduction),ISupports renewable energy sources,IProvides for power quality,IProvides for security of supply,ISupports lower operations costs,IMinimizes technical losses,IMinimizes manual maintenance andintervention.To deliver on those characteristics, agrid with more intelligence has to bedesigned. The challenge is very clear;the old electro-mechanical networkcannot meet the needs of the newdigital economy. The future gridshould be able to produce faster faultlocation and power restoration, hencelesser outage time for the customer andmanage many small power generationsources.The system network architecture willneed to change to incorporate multi-way power flows, and will be muchmore intelligent than a series of radiallines that just open and close. Thefuture data volumes will require largedata communications bandwidth andcommunication network technologieswill be a key.The regulatory environment and theconvergence in the marketplace havecreated a great opportunity for theelectric utility industry to recreate itselfand transform the Electro-mechanicalGrid into Digital Smart Grid.If we are going to embrace the SmartGrid we first need to understandexactly what is it. Many industrygroups (more than 40 at last count!)have been formed to help define avision of the future Smart Grid. Mostof these efforts have been focusedaround the technology. While theSmart Grid will utilize the latesttechnology to achieve its goals, it is notjust about technology. Implementationof the Smart Grid will require acomplete rethinking of the utilitybusiness model and businessprocesses.The OpportunityThe technologies for tomorrows SmartGrid are evolving and being createdtoday. But, based on a report by EPRI -more than 7,000 pilots are underwaytoday and more than 1,000 of them aremore than a decade old. There is onlyone utility that has truly created asmart grid, that one is Tokyo ElectricPower, and their implementation isspecific to the needs of Tokyo.Technology will continue to advance,and utilities will continue to invest.This is not a revolution, but anevolution. Any deployment of a newsmart grid technology will probably bemeasured in years or decades, ratherthan months. Since utilities mustinvest today the key is to build a visionand architecture that allows them toleverage todays investment whilemaintaining flexibility to evolve theGrid as technology advances. To waitfor the perfect answer is notacceptable, since the perfect answerwill never appear.Smart Grid: Leveraging Technology to Transform T&D Operating Models 7Energy, Utilities and Chemicals the way we see itfunctions include operational andmonitoring activities like loadbalancing, detection of energizeddowned lines, and high impedancefaults and faults in undergroundcables. Non real-time functionsinclude the integration of existing andnew utility databases so operationaldata can be fused with financial andother data to support asset utilizationmaximization and life cyclemanagement, strategic planning,maximization of customer satisfaction,and regulatory reporting.Electric utilities already have many ofthe data sources needed to supportanalytics for these functions, but thesedata sources are usually siloed and,therefore, very difficult to combine.Worse, the operational data is usuallysequestered in the Supervisory Controland Data Acquisition (SCADA) systemand not readily available to supportanalytics or business intelligence tools.Some elements of an intelligent powergrid already exist in most electricThe VisionIn order to make meaningful progresstoward addressing the current gridchallenges and delivering on the futuregrid characteristics, Utilities shouldfocus on four main activities:1. Gather Data: Data will be collectedfrom many sources on the grid(Sensors, Meters, Voltage Detection,etc.), in-home sensors for highconsuming appliances, and externalinformation like weather.2. Analysis / Forecasting: The datathat is gathered from all thosesources will be analyzed foroperational and business purposes.For operational purpose analysiswill have to be done in real-time ornear real time and for businessanalysis purpose analysis can bedone on non real-time data.3. Monitor / manage / act: In theoperational world data that comesfrom the grid hardware will trigger apredefined process that will inform,log or take action. Those are SCADAapplications that sits at the operationcenter and use for monitoring theTransmission and Distribution Grid.In the business analysis world thedata is analyzed for usage and ratepurpose.4. Rebuilding the grid to supportbi-directional power flow andtransfer of power from substationto substation: The first three stepswill have little impact to the endcustomers, if the information that iscollected and analyzed can not beacted on. This will be the mostexpensive part of the smart griddeployment and will in most casestake 20 years or more to completeacross a whole service territory.These activities fall into both real-timeand non real-time categories. Real-timeutilities, but the effort to transform anelectric power grid into an intelligentpower grid involves much more thanjust hardware and software. Figure 1Smart Grid Conceptual Architectureprovides a conceptual view of all thecomponents that will be needed todeliver on the Smart Grid vision.Grid Hardware: Sensors on existinghardware on the grid, from meters atthe home to reclosers andsectionalizers, transformers andsubstations will need to be deployed ina prioritized fashion. The easiest wayto do this is to change the purchasingstandards for new and replacementequipment to include the sensors, sothat they are automatically deployedwith each device. Then you can fill inwith additional sensors as required as aretrofit. They key is to understandwhat sensor readings can bringoperational value to your smart grideffort, there is no reason to bring backdata that you can not act on, eitherbilling a customer, changing settings inthe grid, or planning maintenance.Figure 1: Smart Grid Conceptual ArchitectureGrid HardwareLoad Management Control AlarmNotificationDistributed Rescores Revenue Metering ProtectionCommunication BackboneNetworks Transport - Wired Transport - WirelessData StandardsCommon Information Model(CIM) for UtilitiesMulti -SpeakData ManagementStorage Routing / Integration EventsKnowledge ContinuumOperational /Analytical Front Office Back Office8Data Management: Smart Grid will bethe largest increase in data any utilityhas ever seen; the preliminary estimateat one utility is that the smart grid willgenerate 22 gigabytes of data each dayfrom their 2 million customers. Justcollecting the data is useless knowingtomorrow what happened yesterday onthe grid does not help operations. Datamanagement has to start at the initialreception of the data, reviewing it forevents that should trigger alarms intooutage management systems and otherreal-time systems, then and only then,should normal data processing start.Storing over 11 Gigabytes a day permillion customers is not typicallyuseful, so a data storage and roll offplan is going to be critical to managingthe flood of data. Most utilities are notready to handle this volume of data.For a utility with 5 million customers,they will have more data from theirdistribution grid, than Wal-Mart getsfrom all of their stores and Wal-Martmanages the worlds largest datawarehouse.Knowledge Continuum: Data comingfrom the field has different values todifferent parts of the company todifferent users on different timing.Outage data is best served to theoutage management system as rapidlyas possible. Load information might bebest served on a 15 or 30 minute basis.Engineering analysis may not find theyhave useful data until they have a fullyear of data available to analyze. Thiscontinuum can be simplycharacterized into three majorcategories:1. Operational/Analytical: Those areall the real-time/near real-timeoperational type of applications.Those are the application thatmonitor / manage and act base onevents that comes from the smartgrid hardware. Most of theCommunication Backbone: Tosupport all those data sources on thegrid a communication infrastructuremust be in place. A wide range ofwired and wireless communicationstechnologies are available to transportdata. There are more than 20communication technologies that anelectric utility might considerincluding MPLS, WiMax, BPL, opticalfiber, mesh, WiFi and multi-pointspread spectrum. There is no perfectcommunications method. The one bestchoice for how to communicate withthe electric grid does not exist, andwith the exception of satellite, there isno single system today that covers thewhole service area of a utilitys grid,including adequate coverage to handleevery meter and other device thatmight be deployed. The future datavolumes will require large datacommunications bandwidth andcommunication network technologieswill be the key.Any smart grid initiative will have topick 2 or 3 communications methodsand mix and match as required to getto the level of coverage required, somemay be owned and operated by theutility (e.g. fiber to the substations)and some may be commercialnetworks (e.g. cellular phones).Data Standards: These data sourcesdo not always communicate viacommon standards. The two dominatestandards are the common informationmodel (CIM) standard and Multi Speak.Both define a standard data interfacethat supports batch and real time dataexchange. Multi Speak originate withthe National Rural Electric CooperativeAssociation and CIM is an open-sourcestandard through the IEC. Those datastandards will need to define astandard data structure for each datasource on the grid to communicate.applications in this category areSCADA applications that sit at theoperation center and used formonitoring the Transmission andDistribution Grid.2. Front Office: Those functions thathelp the business operate beyondmanagement of the grid in real time load data to feed to forecastingmodels that support generationplanning and spot market powerpurchases or demand managementprograms. These uses of data aretypically same day, same hourapplications, but there is time toscrub the data and even try again toget information from the field.3. Back Office: Those are all the nonreal-time applications that providerate analysis and/or decisionsupport, based on the processing ofintelligent Smart Grid data. Theanalytics functions transform datainto actionable information. This iswhere the accountants, engineers,planners and standards engineerswill go for the data they need to dotheir jobs.Most of the Smart Grid applications atthe knowledge continuum layer are intheir infancy and innovation is highlydesired. The applications listed beloware some of the applications that mightcomprise the smart grid capabilities.IDistribution Monitoring and ControlSystem (DMCS): This is the mastersystem that takes feeds from all theother systems in the grid, to provide asingle view of what is going on in thegrid. Normally the distributionoperations manager would be sittingat a console with this as his primaryview on the status of the grid.IDistribution Substation MonitoringSystem (DSMS): This system wouldbring back and manage all of the datafrom the substations and feed theSmart Grid: Leveraging Technology to Transform T&D Operating Models 9Energy, Utilities and Chemicals the way we see itsystems data flows in from themeters and is managed within thesystem. MDMS were designed tocollect information from meteringsystems that were designed purely forbilling. With the change to therequirements that the utilities areplacing on metering systems demanding operational abilities inaddition to billing support MDMSsystems are finding that they havesignificant gaps in the ability tosupport the new requirements. Real-time and full two way round trips tothe meters in near-real time arebeyond what the current generationof MDMS systems were designed tosupport. This rapid change inrequirements is forcing rapidreengineering by MDMS vendors.IDistribution Forecasting System(DFS): This system would takeinformation from the DGMS and theMDMS to support load and supplyforecasting on the grid. It is expectedto be a bottom-up system that woulduse the actual data from the points onthe grid to supply forecasts fordemand and for supply.ISmart Grid Work ManagementSystem (SGWMS): This system isused to manage work orders for partsof the Smart Grid sensor network(meters, controls, communicationsnetwork, etc) that are in need ofmaintenance or repair. It wouldnormally feed the overall distributionwork management system.ICommunications NetworkMonitoring System (CNMS): Thissystem talks to the variouscommunications vendors systems todetermine communications outagesand manages the information oncommunications outages. It feeds theDMCS information oncommunications blackout areas, theAMOS to allow for the removal ofcommunications related meterfailures, and the DSMS for the samepurpose.IMinor Equipment Monitoring System(MEMS): This system monitorscapacitor banks, transformers,voltage regulators, re-closers,sectionalizers, and other minorequipment that are outside thesubstation fence. The systemsupports the DMCS with fault reportsand in the cases where the minorequipment has controls, allows foroperation of those controls.ISmart Grid Planning System (SGPS):This system records long-term trendsand fault patterns so that they can bereviewed by planning andengineering as a baseline forconstruction, maintenance and otheractivities.ISmart Grid Operational Data Store(SGODS): This system houses thehistorical data from all the systemsthat are used to manage the SmartGrid. This allows data mining,engineering studies, regulatoryreporting (e.g. IEEE SAIDI, CAIDI,etc.) and other activities where largeamounts of historical data are usefulfor analysis.The Smart Grid will be built as a seriesof related projects, with each projectbringing a large amount of value to theutility, ultimately transforming fromfocusing on energy value to focus oninformation value while touching andchanging many of the utility processesas you know them today. The key firststep is to collect the timing and datarequirements and determine what thecommunications backbone will needto look like, otherwise, every projectwill be burdened with that aspect andthe business cases for each will bemuch harder.DMCS. It would also relay the ordersto the controls in the substation.With many utilities there are multiplevendors of substation equipmentalready installed. Consequently, theremight be two or more copies of theDSMS in operation to allow thelegacy equipment in the substationsto continue to perform.IAutomated Feeder Switch System(AFSS): This system would monitor,operate and control the automatedfeeder switches. Typically it would beautonomous in its control andoperation, feeding changes to theDMCS. Unlike manyimplementations today, it would notonly balance substation and systemload but have the ability to balancecircuit loadings between phases, afunctionality that wise future griddesigners will leverage.IDistributed Generation MonitoringSystem (DGMS): This system wouldmonitor the status of the variousdistributed generation sources on thegrid. It would feed status to theDMCS and to the DistributionForecasting System.IAutomated Meter Operations System(AMOS): This system is the real-timemonitoring system for meters andother devices deployed beyond themeters in the field. Its job is tomanage the meter operations,conduct outage determinations,manage demand management eventsand communicate to end userdevices. It feeds the OutageManagement System (OMS) and theDMCS.IMeter Data Management System(MDMS): This system would beresponsible for management of thedata collected from the automatedmeters deployed in the field. Theprimary purpose of this system is tosupport billing operations. MDMSsystems are expected to be one-way10means of providing high speedInternet, Voice over IP (VoIP), Videoon Demand (VOD) and otherbroadband services to home andbusiness - to augment the Smart Gridbusiness case.Many utilities today are starting downthe road of Smart Metering (AMI).Smart metering comes in many flavorswith very different capabilities. Thetraditional systems installed by severalutilities in the last 5 years will notadvance smart grid very much, sincethey are designed to report daily or lessfrequently. It is very hard to do realtime operations and short-termforecasting based on data that is daysold. It is also very hard to do realdemand management on the grid ormanagement of small distributedgeneration sources, with data that isdays old. For AMI to be effective, thewhole system needs to be able toreport at each interval. This means thatthe AMI system has to be designed,including the backbonecommunications, to support regularreporting based on the operatingintervals of the utility. In France that ishalf-hourly, in Ontario the wholesalemarket operates on a 15 minute cycle,and in most of the rest of the worldhourly is the typical operating cycle.Even receiving outage information anhour late is not as helpful as it can befor operations support.Utilities should start by designing asecure, robust, scaleable andextendable integration infrastructurebased upon reusable industry standardservices, data and message structures.At the rate that technology is changingCapgemini believes that this approachis the best solution for criticalintegration infrastructures. If you startwith AMI, the integrationThe RoadmapAs utilities face the growing pressuresof electricity distribution in the 21stcentury, difficult issues are sure to ariselike regulatory barriers and financialconstraints. The technical challenge isvery clear; the old electro-mechanicaldistribution network cannot meet theneeds of the digital economy. Thebusiness challenge for the electricdistribution utility executives andregulators is the timing when to seizethe opportunity before it becomes aproblem. The confusing patchwork ofoverlapping federal, regional, state andmunicipal agencies and on top of thisthe industry is neither fully regulatednor completely deregulated causeinvestors and entrepreneurs to oftenhold back investments in Smart Grid.In the past regulators reward investor-owned utilities for building new powerplants but not for energy efficiency orgrid automation, this environment ischanging very rapidly in the lastseveral years.From a financial point of view the gridis capital intensive and faces problemsimposed by utilities constrainedbalance sheets and difficulty to financelarge projects like the Smart Grid.Without regulatory push and ability torecover some of the investments IOUswill not be able to take on large SmartGrid projects. Utilities that haveregulatory approval for AMI will beable to leverage their infrastructureinvestments in communicationbackbone and data managementframework to get incremental benefitsfrom grid operations by implementingSmart Grid solutions like substationand feeder automation, grid operationsand intelligent application. In NorthAmerica Capgemini is exploringalternative financial models likerevenue generating concepts use theelectric grid to offer and alternativeinfrastructure that you build forAMI/DRI will form the foundation forfuture Smart Grid initiatives. If youstart with other smart grid buildingblocks (e.g. automated feeder switches,distribution automation, etc) then theyshould take into account the otherblocks you might put in place, likeAMI. This approach has a lower totalcost of ownership when compared tomore traditional integrationalternatives. Utilities will experiencesignificant cost savings and benefitsutilizing this integration infrastructureas complex legacy applications like CISand billing systems are replaced orunbundled and new applications likegrid monitoring, analysis and controlare implemented.While each utility will have somevariations, the business caseframework is one that is wellunderstood by the captains of theindustry: utility executives, regulators,and government/owners. In todaysmulti-stakeholder, balanced scorecardworld, business cases are no longerpure numbers games. Planners andanalysts constantly struggle attemptingto put dollar values on non-economicpolitical, societal, environmental costsand benefits.Smart Grid: Leveraging Technology to Transform T&D Operating Models 11Energy, Utilities and Chemicals the way we see itSystem benefits are those benefits thatcan be achieved through theoperations of the grid system likereduction of congestion cost, reductionof restoration time and reduction ofoperations and maintenance due topredictive analytics and self healingattribute of the grid, reduction of peakdemand, increase integration ofdistributed generation resources andhigher capacity utilization andincreased asset utilization. Societalbenefits are those benefits that accrueto non-utility stakeholders (i.e. theregion at large) and represent suchthings as fewer outages resulting inavoidance of lost revenue to localbusinesses, job growth, and an increasein high-tech businesses that requireand value high power reliability(e.g., biotech, pharmaceutical andresearch and development) and theresultant economic developmentattributes. There are other areas thatwill benefit from smart grid concepts one example is asset management thatis an important component of theholistic smart grid approach.It is obvious that smart gridinvestments will pay in the long run dividends to utilities, shareholders,customers and society at large. Thesmart grid serves an important role infacilitating energy efficiency programsand distributed/renewable energyintegration: both key trends that willhelp ensure improved environmentaloutcomes in the future. However thecapital costs and operations andmaintenance costs are substantial andthis level of effort is very challenging toa utility especially considering othersignificant projects in progress. Eachinitial technology investments willrequire a ROI but utilities mustremember that these initialinvestments build the smart gridinfrastructure that will position themfor larger future ROI for smallerincremental investments. Currentprojects that can be positioned forregulatory rate relief (i.e. smartmetering) should be considered inlight of the long term advantage as wellas the immediate return. The questionfor any investments today should be:does it leverage the utilities position inthe future?Sequencing and running the smart gridprogram as deployment programs overa long, steady period of time representsthe lowest risk. However, programslonger than 3 years have a tendency tobecome sluggish and are open to manychanges in scope, which can greatlyreduce the effectiveness of the overallprogram.Getting a handle on the smart gridbusiness case is tricky; there is noconsensus on what kind of benefits toexpect. Early business cases at severalutilities show a range of partial and fulldeployment concepts using differentstandards and most interestingly anticipating different results. Thatmakes comparing these business casesdifficult. It is very obvious that there isno one-size-fits-all recipe for utilities todevelop a business case and aroadmap, each utility must take stockof its current efforts, strategy,infrastructure, and regulatorycircumstances while tailoring a smart-grid technology road map and businesscase to meet particular circumstances.However, recent study by The EnergyPolicy Initiative Center in San Diegofrom October 2006 outlines a scenarioof smart grid implementation on theSan Diego electric grid. This studyshows that an initial $490Minvestment would generate $1.4B inutility system benefits and nearly $1.4Bin societal benefits over 20 years.The Business Case12A strategic focus should be appliedwhen developing the Smart Gridtransformation roadmap. Recentworkshops run by Capgemini for anumber of utilities around the world,have shown that smart grid is strategicin nature and requires involvementfrom a broad cross section of thecompany. AEP and EdF are both takingthis approach to the smart grid, withthe initiatives being driven by seniorexecutives in the company. Acomprehensive approach to thedevelopment, support and validationcan yield a blueprint/roadmap for thedevelopment of the Smart Grid.Capgemini Smart Grid roadmap hasthree stages (1) planning includesdeveloping the Smart Grid strategy andblueprint, (2) common infrastructure includes experimenting and pilotingwith different technologies,establishing the benefits realizationframework, and change managementplanning, and (3) execution includesbuilding the foundation and SmartGrid applications.Planning: Pursuing incremental stepswithout the benefit of the biggerpicture can lead to suboptimalsolutions. Implementation can beincremental and spread over time, aslong as each step is a part of the largerstrategy. The key to developing yourSmart Grid strategy is to focus on howit will enable your Transmission andDistribution (T&D) strategy thendetermine the required capabilities. Atthis point the utility can establishstrategic goals, along with process orinvestment strategies. As part of theplanning stage the utility will start withthe as-is and to-be states withrespect to process, application, data,organization, standards, andgovernance. The gaps between the as-is and to-be determine the high-level timeline based on requirements,resource availability, constraints, anddesired benefit timing.Common Infrastructure: Pilotprojects are used to validate andmitigate business process, technical,adoption, cost and project risksassociated with the Smart Grid. Theycan reach from a limited small-scaledeployment to a large end-to-enddeployment. It is very important thatvery early on during the pilot theutility will establish a formal benefitsrealization framework and governancestructure so they have a way toevaluate the success or failure. It isimperative to address the changemanagement aspects of the program asearly as you can and selectivelytransform the processes andorganization to align with and take themaximum advantage of the availabilityof the Smart Grid. Do notunderestimate the planning and effortsrequired to manage such change in theorganization, employees should bemade part of the design.Execution: Execution is a series ofprojects that are planned, sequencedand coordinated based on the roadmapthat was defined in the planning stage.The Smart Grid foundation andapplication will be built as a series ofrelated projects, with each projectdelivering some value, this is evolutionnot revolution. Careful roadmapdevelopment and project managementis essential.Startingthe Transformation JourneySmart Grid: Leveraging Technology to Transform T&D Operating Models 13Energy, Utilities and Chemicals the way we see itIn most IOUs capital spending hasfailed to keep pace withstraightforward annualized renewal.The annual network renewalinvestment of a typical IOU is aboutone percent of its asset base, thisamount to a renewal cycle of about 100years well beyond the design lifespan of network assets.As your firm faces the growingpressures of electricity distribution inthe 21st century business as usual isno longer an option you probably areasking your self:IHow to respond to the growth ofdistributed generation?IHow do I meet today and future peakdemand?IWhat do I need to do to prepare tothe smart grid transformation?IAt the rate that smart grid technologyis changing, what is the best scalableand interoperable solution?IWho needs to be involved in thesmart grid planning?IHow do I involve the regulator?IHow do I make the training andprocess changes that are needed?Reduce operating expenses:Automated meter management willlower operation and maintenancecosts, reduce theft and improverevenue collection. Remote assetmonitoring will help avoid emergencymaintenance and replacement ofassets.Higher grid reliability: Accuratedemand forecasting will improve real-time configuration of the network,allowing components to operate withintheir actual capabilities. Detailed, real-time information from the sensors onthe grid will prevent blackoutswhenever possible, and to keep themas short as possible when they occur.Productive People: Excellentinformation and good displays helppeople do their job, better and fasterwith fewer safety issues. Smart grid isnot just about technology, there is lotsof technology available, it is also aboutpeople, people who can do their job ina more professional fashion with lessguessing and less concern about whocan respond to a specific situation.Today much of the success of thedistribution grid relies on people whohave decades of experience, and areclosing in on retirement. Replacing thisexperience in todays world isimpossible; it will take mostcompanies years to recover from theloss of this knowledge. Technology isnever a substitution for motivated andinvolved people, but good informationcan help them do their jobs better.Most utilities have successfullycompleted some Smart Grid projects.However, the process is not astraightforward, standalone, install-some-technology project it is aBusiness Transformation of the electricdistribution utility - the ultimate targetis reinvention of the electric utility. Thetransformation will reach an audienceas wide as it is deep from the boardto the field worker and from the utilityto the customer, regulator, electedofficial, supplier, educator, and societyat large. The Smart Grid will enablenew applications we cannot yetpredict. Underneath all missionsetting, strategic planning, organizing,controlling, and coordinating lie thebusiness, people, and technicalparadigms how a firms executives,managers, and workers perceive theutility world now and into the future.This transformation is certainly a tallorder, but Capgemini believes utilitiescan meet all of their priorities andlikely realize a host of other benefits.One example of a technology is smartmetering. Lets look at how it canimpact your company from a smartgrid perspective.Reduce capital expenses: Lower peakdemand by using smart meters andimprovement in load management.Improve asset utilization by replacingcomponents that are approaching theend of their annual life spans. Supportdistributed generation with remoteasset monitoring and control.14GlossaryBroadband over Power Line (BPL):Also known as power-line internet orPower-band, is the use of Power LineCommunication (PLC) technology toprovide broadband Internet accessthrough ordinary power linesCustomer Average InterruptionDuration Index (CAIDI): Reliabilitymeasure - CAIDI is the average numberof hours per interruption. Theseindices are electric utility industrystandards. CAIDI and ASAI arereported on a rolling 23-monthaverage.California Public UtilityCommission (CPUC): The PUCregulates privately ownedtelecommunications, electric, naturalgas, water, railroad, rail transit, andpassenger transportation companies, inaddition to authorizing videofranchises. The CPUC serves the publicinterest by protecting consumers andensuring the provision of safe, reliableutility service.Customer Information systems(CIS): Software application thataddress the customer interaction callcanter, billing, etc for gas, electric andwater utility companies.Common Information Model (CIM):a standard developed by the electricpower industry that has been officiallyadopted by the InternationalElectrotechnical Commission (IEC),aims to allow application software toexchange information about theconfiguration and status of an electricalnetwork.Demand Management: Energydemand management, also known asdemand side management (DSM) orDemand Response Infrastructure(DRI), entails actions that influence thequantity or patterns of use of energyconsumed by end users, such asactions targeting reduction of peakdemand during periods when energy-supply systems are constrained. Peakdemand management does notnecessarily decrease total energyconsumption but could be expected toreduce the need for investments innetworks and/or power plants.Electricity de France (EdF):The main electricity generation anddistribution company in France.Energy Conservation ResponsibilityAct: The Energy ConservationResponsibility Act received RoyalAssent in March, 2006. Under the Act,ministries, agencies and broader publicsector organizations will be required toprepare energy conservation plans on aregular basis, and report on energyconsumption, proposed conservationmeasures, and progress. The proposedLegislation also provides theframework for the government'scommitment to install 800,000 smartmeters in Ontario homes andbusinesses by 2007 and to have theminstalled in all homes and businessesby 2010.American Electric Power (AEP):IOU in Columbus, Ohio - provideselectricity to customers in Arkansas,Indiana, Kentucky, Louisiana,Michigan, Ohio, Oklahoma,Tennessee, Texas, Virginia, and WestVirginia.Advanced Metering Infrastructure(AMI): Means the infrastructureassociated with the installation andoperation of electricity metering andcommunications including intervalmeters designed to transmit data toand receive data from a remote locality.Alternative Generation: Generationof electricity from nature (greengeneration) that does not emit largeamount of CO2 in the atmosphere,example are solar, wind, hydro etc.Average System Availability Index(ASAI): Reliability measure - ASAI isthe percentage of time the powersystem is available. These indices areelectric utility industry standards.CAIDI and ASAI are reported on arolling 23-month average.Balance Scorecard: A concept formeasuring whether the activities of acompany are meeting its objectives interms of vision and strategy. Byfocusing not only on financialoutcomes but also on the humanissues, the balanced scorecard helps toprovide a more comprehensive view ofa business which in turn helpsorganizations to act in their best long-term interests.Investor Owned Utility (IOU):A utility owned by private investors, asopposed to one owned by a publictrust or agency; a commercial, for-profit utility as opposed to a co-op ormunicipal utility. IOU is rarely used inthe energy industry to refer to apromissory note, and utility by itselftypically refers to a public utility.Mesh Network: Mesh networking is away to route data, voice andinstructions between nodes. It allowsfor continuous connections andreconfiguration around broken orblocked paths by hopping from nodeto node until the destination isreached.Multi Protocol Label Switching(MPLS): is a data-carrying mechanismthat belongs to the family of packet-switched networks. MPLS operates atan OSI Model layer that is generallyconsidered to lie between traditionaldefinitions of Layer 2 (data link layer)and Layer 3 (network layer), and thusis often referred to as a "Layer 2.5"protocol.MultiSpeak: MultiSpeak is a softwarespecification designed to help electricutilities, automate their businessprocesses and exchange data amongsoftware applications. The MultiSpeakspecification helps vendors andutilities develop interfaces so thatsoftware products from differentvendors can interoperate withoutrequiring the development of extensivecustom interfaces.Return on Investment (ROI):A performance measure used toevaluate the efficiency of an investmentor to compare the efficiency of anumber of different investments. Tocalculate ROI, the benefit (return) ofan investment is divided by the cost ofthe investment; the result is expressedas a percentage or a ratio.Customer Average InterruptionDuration Index (SAIDI): Reliabilitymeasure - CAIDI gives the averageoutage duration that any givencustomer would experience. CAIDIcan also be viewed as the averagerestoration time.Smart Grid Facilitation Act of 2007:H.R 3237: A bill in the US Congress:To facilitate the transition to a smartelectricity grid.Supervisory Control and DataAcquisition (SCADA) Systems:SCADA systems are typically used toperform data collection and control atthe supervisory level and placed on topof real-time controls.WiFi: a wireless technology intendedto improve the interoperability ofwireless local area network productsbased on the IEEE 802.11 standards.Worldwide Interoperability forMicrowave Access (WiMax):A telecommunications technologyaimed at providing wireless data overlong distances in a variety of ways,from point-to-point links to full mobilecellular type access. It is based on theIEEE 802.16 standard.Energy Policy Act of 2005 (EPACT)2005: A statute that was passed by theUnited States Congress on July 29,2005 and signed into law by PresidentGeorge W. Bush on August 8, 2005 atSandia National Laboratories inAlbuquerque, New Mexico. The Act,described by proponents as an attemptto combat growing energy problems,provides tax incentives and loanguarantees for energy production ofvarious typesElectric Power Research Institute(EPRI): EPRI was established in 1973as an independent, nonprofit center forpublic interest energy andenvironmental research. EPRI bringstogether members, participants, theInstitute's scientists and engineers, andother leading experts to workcollaboratively on solutions to thechallenges of electric power.Green House Gases: Greenhousegases are components of theatmosphere that contribute to thegreenhouse effect. Greenhouse gasesinclude in the order of relativeabundance water vapor, carbondioxide, methane, nitrous oxide, andozone. The majority of greenhousegases come mostly from naturalsources but is also contributed to byhuman activity.Institute of Electrical andElectronics Engineers (IEEE): Theworld's leading professionalassociation for the advancement oftechnology.Smart Grid: Leveraging Technology to Transform T&D Operating Models 15Energy, Utilities and Chemicals the way we see itwww.capgemini.com/energyCapgemini, one of theworlds foremost providersof Consulting, Technology andOutsourcing services, has a unique wayof working with its clients, called theCollaborative Business Experience.Backed by over three decades of industryand service experience, the CollaborativeBusiness Experience is designed to helpour clients achieve better, faster, moresustainable results through seamless accessto our network of world-leading technologypartners and collaborationfocused methodsand tools. Through commitment to mutualsuccess and the achievement of tangiblevalue, we help businesses implement growthstrategies, leverage technology, and thrivethrough the power of collaboration.Capgemini employs approximately80,000 people worldwide and reported2006 global revenues of 7.7 billion euros.With 1 billion euros revenue in 2006 and8,000+ dedicated consultants engaged inEnergy, Utilities andChemicals projectsacross Europe,North America and AsiaPacific,Capgemini's Energy, Utilities &Chemicals Global Sector serves thebusiness consulting and informationtechnology needs of many of the worldslargest players of this industry.More information about our services,offices and research is available atwww.capgemini.com/energyAbout Capgemini and theCollaborative Business ExperienceEUC20070918If you like to discuss ideas you can use to start your smart grid transformation pleasecontact us at info-energy@capgemini.com.This Point of Viewis based on the vast experience and knowledge of the global networkof Capgemini. The authors wish to especially thank Tom Anderson and Joe DeCrowfor their helpful input based on their experience through conversations and suggestionson the topic.Gord ReynoldsPractice LeaderSmart Energy Servicesgord.reynolds@capgemini.com+1 416.732.2200