Monthly Archives: June 2013

Business Case for the SG is About Automation and Control

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Dom Geraghty


A Final "Pivot" in the Definition of SG 2.0

We’ve come some way in defining what the SG is, and what it is not, but we are not quite there yet  - it is time for a (hopefully) final “pivot”, the purpose of which is to propose a definition of the SG that provides a solid and clear foundation upon which to develop our SG 2.0 business cases.

DSC_1310-150x150Here, we’ll first summarize our key conclusions derived from the series of previous dialogs about the “State of the Smart Grid”. Then we’ll propose a new (narrower) definition of SG 2.0 applications. Please click on the Smart Grid 2.0 "Category" to the right if you would like to see all of the previous SG dialogs.


Some Key Conclusions So Far About the SG, Based on Our Previous Dialogs

SG Costs/Deployment Duration

(1)    It will cost about $400 billion to implement the SG nationally

(2)    Required power system infrastructure replacement will cost about $1.6 trillion over the same period

(3)    Full implementation of the SG will take about 30 years, and will evolve as a hybrid of legacy and new systems, with increasing interoperability being supported by a combination of custom APIs and the development and promulgation of new standards

(4)    The total cost estimate above likely includes everything but the kitchen sink, and we might expect that the costs, while very substantial, will not be quite as high, based on a more thorough, and more granular, evaluation of a practical and economically viable deployment plan. We will suggest such an approach in what we are calling “A Managed Deployment Strategy for the SG” in our next dialog

SG Definition

(5)    In everyday conversations, the definition of the SG is plastic – the SG is viewed as including many elements that are only peripherally, at best, “smart”. For example, depending on the individual, the SG connotes or includes renewable energy, sustainability, CleanTech, electric vehicles, distributed generation, AMI, energy storage, distribution automation, and/or demand response

(6)    We’ve pointed out that AMI is not the SG – it is infrastructure – see the previous presentation of our new definition of SG 2.0

Power System Control

(7)    Power systems have used closed loop control for decades for generation and transmission in the form of the AGC software application on an EMS. ISO dispatch decisions are based on load forecasts (every 5 minutes, hour, day) and tight, reactive, management of Area Control Error (ACE) and system frequency. The electric distribution system does not use closed loop control.

(8)    Demand forecasts have become increasingly uncertain and volatile as customers begin to self-optimize their power usage


(9)    Policy changes necessary to enable the realization of SG benefits have lagged the deployment of the SG, thus negatively impacting its ability to achieve its own fundamental policy goals

Policy and the SG

(10) The SG and CleanTech policies are symbiotic – while the SG is not CleanTech, some CleanTech elements, e.g., RPS mandates, end-use customer choice, require that the electricity grid be “smarter” if we are to maintain our present service level reliability

(11) SG capability is also needed because of other policy-created changes in the power system, e.g.,  increasingly dynamic loads, increased intermittency of distributed power production, charging of EVs, penetration of ADR, smart appliances and HANs, and the increased potential for electricity distribution system instabilities -- we will discuss this latter concern in an upcoming dialog


As we’ve shown, the SG is not infrastructure, or CleanTech, or AMI.

The real business of the SG consists of automation and control systems:

  1. Sensors with embedded smart control firmware for local control
  2. Communications to enable systems control for a variety of time domains
  3. Control software with embedded algorithms for operations management
  4. M2M (fast response) and hybrid M2M/human control loops (slower response)
  5. “Big data” mining for critical control loop information
  6. Power system and sub-system control loop simulations and analysis (including customer response to market prices -- market response is one of the control loops and it interacts with, and affects, physical system control loops)

Trans-15-almost-purple-New-Image-150x150Thus, SG 2.0 provides the requisite control systems to support and integrate the operations of (a) CleanTech power installations, (b) the traditional power system infrastructure, and (c) power markets.

SG 2.0 automation sits on top of these three operations. It is a prerequisite to the success of the Smart Grid and power-related CleanTech policy, broadly defined.

Ironically, if we consider AMI to be a system of sensors, then it can be viewed as falling under the rubric of “automation” since AMI provides data that can be used for control systems with slower required response times. That is, under our new “stripped-down” definition of SG 2.0 as automation and control -- if the SG is really a smart control system, AMI is part of the SG’s system control infrastructure.

SG 2.0 As “Automation and Control”: Business Opportunities and Cases

Defining SG 2.0 as automation and control disentangles the evaluation of SG 2.0 applications businesses from investments in traditional power infrastructure, AMI, and CleanTech.

It provides us with a logical connection between SG 2.0 and existing AMI systems that provide some of the necessary inputs for SG 2.0 automation applications.

It clarifies and focuses the context within which we must develop and evaluate business cases for SG 2.0 applications.

There are numerous automation and control business opportunities across the entire SG value chain. We will present the more interesting of these in subsequent dialogs.

As always, comments are appreciated, in the box below.

Distributed Storage II: Power System Simulation Of The Benefits Of Distributed Storage

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Dominic Geraghty


Types of Storage Systems

Energy storage is available in the form of commercial bulk storage, e.g., CAES, pumped storage, large battery systems. It is also available as distributed energy storage (DES) systems, e.g., dispersed small batteries located at the facilities of industrial, commercial or residential energy users.  Sometimes these DES systems are operated in conjunction with distributed PV generation.

Bulk energy storage can create benefits for energy-users, utilities, regional power system operators (ISOs), and society as a whole. For example, bulk storage, operated by power system operators (ISOs, integrated utilities, transmission system operators, and distribution utilities), can reduce operating costs, defer capital expenditures, increase system reliability, and reduce price volatility. These benefits can be quantified using an integrated power system/market model.

To date, most of the studies of bulk storage conclude that the value that it provides to the system does not justify its high costs, while caveating that there may be situation-specific locations where net value is created

Benefits of Distributed and Bulk Energy Storage Systems

DSC_0184 150-x150DES can reduce customers’ electricity bills, shave peaks, reduce power system costs, increase reliability, reduce price volatility, reduce required reactive power support, and, when aggregated, provide an arbitrage opportunity in electricity markets.

Here, we present a scenario depicting the deployment of DES and present a preliminary quantification of its value, based on a detailed power system and market simulation model, and contrast this result with the preliminary quantification of the value of a bulk storage system in the same region.

Scenario Description

Location/year: ERCOT/2015

DES system:

  • Installed cost, post any incentives/subsidies: $1,600/kW
  • Amount: 120 x 2 MW systems, distributed across 60 buses

Bulk storage system:

  • Installed cost, post any incentives/subsidies: $1,250/kW
  • Amount: 100MW, located at a transmission bus

Preliminary Scenario Results

The DES system reduced peak Locational Marginal Prices (LMPs) at all 60 buses – the largest reduction at a node was $3.50/MWh. The bulk storage system produced an average LMP reduction of $1.50/MWh.

The DES system created production cost-savings to the power system (net societal benefits) of approximately $171 million for the year, with higher cost-savings occurring in the high-demand summer months. The sources of these savings were peak shaving, reduced peak hour LMPs, ancillary services, and lower consumer bills. The bulk storage system experienced insufficient arbitrage opportunities and did not provide any significant benefits to the system.

The present value of the ratio of 15-year benefits to costs was 3.02 for the DES system, and 0.28 for the bulk storage system. The internal rate of return (IRR) for both types of installations was modest: the DES system was estimated at 4.6%, and the bulk storage system, 0.78%.

The following table summarizes the main results:

System Wide Savings

Bulk Storage ($millions)

Distributed Storage ($millions)

 Production Costs Savings/Net  Societal benefit



 Changes in Producer Surplus



 Changes in Consumer Surplus



 Congestion Cost Savings



This quantification does not include the value of increased local reliability for end-use customers related to DES, or the reduction in price volatility and potential deferrals of transmission or distribution capital expenditures for both types of storage installations.

11. DSC_0118-150x150-150x150Given the very large societal benefits of DES, consideration could be given to transferring some of that benefit to further increase the incentives provided to DES systems -- the objective would be to increase the IRR for such investments until volume production presumably reduces their $/kW cost. Of course, this consideration is based on the assumption that such systems are not owned/rate-based by utilities. In order to spread the risk fairly, this incremental incentive could be structured contractually to be paid out in performance-based increments over the life of the system, instead of as an up-front reduction of the capital cost.

All of the above simulations were conducted using the UPLAN software suite of LCG Consulting, and sponsored by EPRI (unpublished, but with permission).

Smart Grid Cyber-Security: Where’s The Business Opportunity?

Cyber-Security – Part II: Characterizing the Market Opportunity in the Power Sector



Dom Geraghty



  • Vulnerability of the power system to cyber-attacks is increasing
  • It isn't yet clear how the market structure for cyber-security products and services will evolve for the power sector
  • Two important national programs that address the vulnerability of critical infrastructure of the power system to cyber-attacks have been underway at NERC and NIST
  • The market opportunity is large, estimated variously at >$1 billion per year
  • Large mature cyber-security companies from other sectors are now active in the power sector, with strong expertise in physical-and IT-related cyber-security protection products and services
  • There may be less competition in the area of specialized power engineering for protecting distribution management systems, and equipment upstream of the distribution system
  • There are a number of significant industry-specific market barriers for cyber-security businesses
  • There is an unresolved cultural issue in utilities regarding the allocation of responsibility for IT-related versus power engineering-related cyber-security measures


For our initial SGiX cyber-security business case dialog, we presented “Cyber-Security – Part I: Simulation Results for the Costs of a Coordinated Attack on a Regional Power System” (link). In Part II of the business case dialog, we discuss the market for power systems cyber-security products and services.

Cybersecurity (ongoing)

Cybersecurity (ongoing)

Industry’s Potential Vulnerability to Cyber Attacks Is Increasing

There is considerable and visible concern within the electric power industry and among government policy-makers and regulators about the possibility of a coordinated cyber-security attack on the U.S. power system infrastructure, and the extent to which the system is vulnerable to such an attack.

Today’s power system is vulnerable to cyber-attacks for a number of reasons.

As the power system transitions into a smart grid, by definition its elements are becoming more inter-operable, providing new access pathways into utility operating systems for hackers.  In addition, the deployment of Advanced Metering Infrastructure (AMI) significantly increases the number of the outer “attack edges” of the power system, making it more vulnerable to a multiple-point, coordinated cyber-attack at its edges. AMI itself creates vast amounts of granular data, providing another rich source for would-be hackers.

The system is also vulnerable because it consists of a mixture of communications and control systems of different vintages (“legacy systems” designed before cyber-security was an issue) -- it is in the middle of a transition from these legacy systems to smart grid systems with more protection, but it is far from completing that transition.

Adding to these risks is the increasing sophistication of cyber-attack teams and individual hackers.

Is There a New Business Opportunity for Smart Grid Cyber-Security? Continue reading