Monthly Archives: November 2013

The Elephant in the Room: Addressing the Affordability of a Rejuvenated, Smarter Grid

Final Avatar 80x80-Logo-SG-1-and-2-and-IX-LOGO-e1363114874895-150x150

 

Dom Geraghty

 

Adding Up All Of The Costs

The cost of transitioning to Smart Grid (SG) 2.0 is high. The cost of replacing aging power system infrastructure is high. The cost of complying with new energy policy and regulations is high. For the most part, all three of these major cost burdens on the electric power system have been analyzed separately. We need to look at the whole picture.

In the tables below, we construct a 30-year cumulated budget and net benefits forecast for the U.S. power system, integrate all three of the above major cost burdens, and suggest a practical cost management strategy that could save as much as $750 billion.

Business-As-Usual Cost

If we take a business-as-usual approach to the replacement of aging power system infrastructure and concurrent deployment of the SG, the 30-year total net costs (costs minus benefits) for the transition to the SG are estimated to be about $1.2 trillion, based on our integration and curation of numerous credible studies -- see here and here. So, despite the considerable benefits generated by the SG, they are dwarfed by the costs of deployment.

Making Electricity Bills More Affordable in the SG Era

The net result is a large and economically debilitating increase in consumer’s electricity bills, and questions around the grid operators’ ability to maintain present-day levels of service reliability.

We were sufficiently concerned by the current "silo-ed" approach to costs, and the size of totaled costs, that we decided to explore an optimized least-cost deployment strategy, the goal of which would be to trade-off ubiquitous deployment of the SG against a more “surgical” deployment that optimizes the value of SG applications.

According to our estimates, if we optimize the deployment of SG applications in a least cost deployment strategy, the net costs of this new smart/automated power system can be reduced substantially. In the calculations below, we estimate that the net costs over the 30-year period could be as low as $450 billion, plus or minus some as-yet unaccounted-for costs and savings as presented at the end of this dialog.

8. DSC_0873-150x150Even with a least cost strategy, electricity bills will not be reduced from today’s levels (see also here) – but they will grow at a slower rate, and it would seem that they will be manageable, based the assumptions below.  Note that in all scenarios, there is no avoiding the front-end loading characteristics of the transition to the SG. What we can do, though, is to first deploy those SG applications that have the highest potential for creating near-term cash savings.

Here is a sequence of seven fairly self-explanatory tables that tell the story. Assumptions used in the forecasts are provided after the tables at the end of this dialog. All dollar amounts in the tables below are in nominal $ billions, undiscounted.

Cost of Replacing Aging Infrastructure and Deploying SG 2.0

Tables 1 and 2 below present business-as-usual net cash flows for rejuvenating power system infrastructure and deploying SG 2.0.

Table 1: Budget Forecast for Power System Infrastructure*

Cash Flow Through Each 5-Year Period

Year 1- 5

Year 6 - 10

Year 11-15

Year 16-20

Year 21-25

Year 26-30

Power system infrastructure investments -- Aging Infrastructure Replacement + Capacity to Serve Demand Growth (G,T, and D) ($1.6 trillion in total)

-267

-267

-267

-267

-267

-267

Cyber-security ($22 billion in total) -- also, see here

- 4

- 4

- 4

- 4

- 4

- 4

Environmental compliance ($110 billion) -- see also here and here and here

-17

-17

-17

-17

-17

-17

Total infrastructure investment by period

-288

-288

-288

-288

-288

-288

Grand total (nominal, undiscounted $)

-1728

 

 

 

 

 

Table 2: Budget Forecast for Transitioning to SG 2.0* Continue reading

Interoperability of Smart Grid (SG) Applications Is Mission-Critical, And Good For Business Too

Final Avatar 80x80-Logo-SG-1-and-2-and-IX-LOGO-e1363114874895-150x150

 

Dom Geraghty

 

It is clear to us that energy policy and regulations are the key drivers of the business case for SG applications, and not technologies. These policies/regulations promote, for example, RPS mandates, dynamic pricing, demand response, competitive market structures, self-optimizing customers (e.g., distributed generation and storage, smart appliances, micro-grids), electric vehicles, cyber-security, and data privacy. It is a kind-of “policy-push” market, with SG applications in a “catch-up” mode.

In order to implement the new policies and regulations in all of their complexities and not-designed-for impacts on the traditional electricity grid, while still maintaining the current levels of service reliability, stability and security, the grid needs to be smarter, and react faster. We will be operating “closer to the edge”.

The SG is at its core about automation, control, and optimization across the power system operations – both physical and market operations. For example, it comprises smart sensors, intelligent electronic devices, communications systems, M2M interfaces, data analytics, situation awareness and alerts, and control systems.

In its ideal form, the SG is a system of systems that in essence have the potential to optimize power system operations and capacity requirements. To realize this potential, i.e., for the grid to be “smart”, these systems ultimately need to be interoperable since the SG is an interconnected system from generation all the way to end-use of electricity.

The above new policies/regulations are out ahead of the SG in terms of technology, interoperability, and grid operations – the SG is playing “catch-up”. But more importantly, we also need the SG in order to realize the full benefits of these new policies and regulations.

The “catch-up” situation can lead to unintended/undesirable consequences related to the operation and reliability of the power system.

Fortunately, SG applications have the capability, if not yet the readiness, to mitigate these risks, provided they are interoperable.

The Transition to an “Ideal” SG Architecture Will Be Messy -- We Are Going To Feel Uncomfortable

DSC_1253-150x150As engineers, we like tidiness. In a perfect world, the transition to a fully-functional SG would be orderly and paced to accommodate new applications while protecting grid integrity: perhaps a three-stage transition -- from today’s operations’ data silos in utilities to a single common information bus, then to many common, integrated buses, and finally to a converged system.

But in a non-perfect world, i.e., reality, the SG will evolve as a hybrid of legacy and new systems -- it will not be an optimized process – there will not be a “grand plan” – clusters of interoperability will appear here and there across the SG.

The transition will take perhaps 30 years -- not for technology-based reasons, but because the “refresh cycle” for utility assets is lengthy – so, there’s time for a whole career for all of us in deploying SG applications! Continue reading