Alcatel-Lucent Smart Grids Final

8/8/2019 Alcatel-Lucent Smart Grids Final

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The Economic Benefits of Smart Grids and the Role of

Communications

Author

Max Bryan Alcatel-Lucent Australia

Presenter

Matt Bostwick Alcatel-Lucent New Zealand

EEA Conference & Exhibition 2009, 19-20 June 2009,

Christchurch


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1. IntroductionRecent concerns with the global economy have raised questions about what people might be

prepared to give up in response to tougher economic times. While many familiar items maybe considered, it is unlikely that electricity would be included or even contemplated in most

cases. Of the many important items essential to our daily existence, few would come closeto the fundamentally critical position that electricity occupies. It is so pervasive and still

relatively cheap that it almost passes unnoticed, that is until something goes wrong or we are

faced with significant price hikes.

As we move into the early part of the 21st

century, there will be an increased focus on the role

that electricity plays in our daily existence. Our collective attraction to more and more

electronic goods, from PCs, wide screen TVs, white goods, electric vehicles, heating and air-

conditioning, and increasing demand from more office buildings, large shopping centres and

manufacturing plants is putting pressure on electricity utilities. Increased usage is pushing the

need for expensive, additional generation capacity and straining distribution networks. Whilewe take electricity for granted most of the time, we are less tolerant of supply problems and

expect unquestionable reliability. Electricity underpins the digital economies of the 21st

century and causes significant economic impact when it is not available.

Equally, if not more important, is the impact that electricity production has on the climate,

particularly where it is based on coal.

The seemingly endless need for more capacity, efficiency and reliability coupled with more

greenhouse gas emissions is no longer a sustainable model. Change is required.

Smart Grids are seen as one response to the challenges of increased capacity, efficiency and

reliability. They also include distributed power generation, based more on renewable

resources, thereby addressing some of the climate change issues.

The challenges of implementing Smart Grids are significant, more than a single electricityutility or vendor can address by themselves. There are major Smart Grid initiatives underway

in the USA and Europe, with participation from governments, utilities and industry. Recent

initiatives in this area have been seen in some of the stimulus packages announced by the US

Government.

2. Challenges for Electricity UtilitiesIt is interesting to observe the increase in the use of electricity since the 1950s. At that time,

electricity was primarily used for lighting, motors, refrigeration and a few entertainment

devices in the home. This was relatively consistent across a number of sectors, including

industry, retail, business, finance and healthcare (reference: The Electric Economy; GlobalEnvironment Fund August 2008). This has completely changed over the last 50 years and it

is now difficult to find any device that does not use electricity in some way.

The seemingly never-ending spiral, which will affect both developed and developing

countries, has led to predictions of a doubling of worldwide electricity demand in the next 40

to 50 years, requiring the construction of tens of thousands of generating plants.


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In developed countries, virtually everything depends on electricity in some way and the

impact of supply problems can be quite significant. One estimate put the impact on the US

economy at just a little more than 1% of GDP (reference: NETL Modern Grid Initiative

April 2007).

To address the challenges facing the electricity industry the emerging Smart Grid can be

characterised as:

More reliable: providing power dependably and with a high quality; More secure: able to withstand physical and cyber attacks without resulting blackouts; More economic: operating under the laws of supply and demand and providing fair

prices;

More efficient: reduced transmission/distribution losses and improved asset utilisation; More environmentally friendly: based on initiatives in generation, distribution, storage

and consumption and an increased usage of renewable resources; and,

Safer: no harm to users or grid workers and sensitive to those who use it as a medicalnecessity. (reference: NETL Modern Grid Initiative April 2007)

While it is not fair to say that electricity networks in developed countries perform poorly in

relation to any or all of the above benchmark areas, it is clear that their current capabilities

are not acceptable when considering the importance of electricity, increasing demand and theneed for the industry to lower its collective environmental impact, either through more

efficient operation or increased use of renewables.

Given the diverse nature of the Smart Grid objectives, one of the other challenges facing

electricity utilities will be: where to start. No one can implement a Smart Grid as a single

project. The implementation of a Smart Grid will be achieved as a series of projects over a

long period. Indeed, it could be argued that a Smart Grid implementation is really a

continuous improvement process for generally risk-averse electricity utilities, in part because

improvements must be achieved in manageable steps but also because improvements inelectricity network technology and equipment, network management capabilities and

communications technology will also be an ongoing process. The Grid 2030 paper from the

US Department of Energy (July 2003) addresses this area and plots improvements in

electricity network technologies stretching out to 2030.

3. Smart Grid InitiativesImplementation of an electricity network that achieves the objectives of the Smart Grid will

be a costly and complex exercise. No single organisation has the experience or knowledge to

address all of the applications, network infrastructure and communications issues that arise

out of such an undertaking.

Recognising this, governments, utilities, industry groups and others in America and Europehave begun taking various Smart Grid initiatives.


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3.1. United States of AmericaThe US government and industry has been very active in addressing Smart Grids. Most

notably, the US government stimulus package from February 2009 includes approximately

USD4.5B in funds targeted specifically at Smart Grids.

However, the US government understood the importance of Smart Grids some years ago and

had already passed legislation to advance the concept.The Energy Information and Security Act (EISA) of 2007 had as a primary objective toincrease energy efficiency and the availability of renewable energy. It established a

federal policy to modernise the electric utility transmission and distribution system to

maintain reliability and infrastructure protection. It also included a definition of the scope of

a Smart Grid:

Smart Grid is defined to include a variety of operational and energy measures

including smart meters, smart appliances, renewable energy resources, and energy

efficiency resources.

Specific initiatives related to Smart Grids included:

The establishment of a federal policy to modernise the electric utility transmission anddistribution systems; Reporting requirements on Smart Grid deployments and barriers, reporting requirements

to Congress;

Requirements to conduct Smart Grid research, design and development; Incentives for Smart Grid investments (reimbursements of 20%); Encouragement for utilities to employ Smart Grid technology and recover Smart Grid

investments through rates; and,

Requirements on the Department of Energy to report to Congress on the potential impactsof Smart Grid deployment on the security of electricity infrastructure and operating

capability.

While not mandatory, it certainly set a direction for the industry.

A number of other initiatives, with various levels of participation by government, utilities and

others have also been put in place. These include:

NETL Modern Grid Strategy: The National Energy Technology Laboratory (NETL) is a part

of the US Governments Department of Energy (DoE). The NETL conducts research and

development to support the strategic goals of the DoE related to the availability of reliable,

affordable and environmentally sound energy. NETL is active in developing a national grid

modernisation framework and in the management of electricity transmission and distribution

projects. Importantly, it is also working with other parts of the US government on the Modern

Grid Strategy initiative which looks at the benefits of state of the art technologies and aims todevelop a shared national vision for the modern grid. (reference: NETL;

www.netl.doe.gov/moderngrid/)

The GridWiseAlliance is a consortium of public and private stakeholders working towards

a vision of an electric system that integrates the infrastructure, processes, devices,

information and market structure so that energy can be generated, distributed and consumed


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more efficiently and cost effectively; thereby achieving a more resilient, secure and reliable

energy system. (reference: GridwiseAlliance; www.gridwise.org).

Their membership includes more than 70 companies covering energy equipment vendors,

consulting firms, IT and telecommunications vendors among others. Working with the DoE,

the consortium has an action plan which covers areas such as the deployment of innovative

technologies and the support of innovation within the industry.

3.2.European UnionWithin the EU, the European Commission Seventh Framework program for Research is seen

as a key initiative related to general growth and employment objectives. A number of

technology platform programs have been established to support the above objectives and

one of these is the Smart Grid Technology Platform.

The platform comprises representatives from industry, utilities, research bodies and

regulators and was established to create a joint vision for the European networks of 2020

and beyond. (reference: European Smart Grids Technology Platform Vision and Strategy for

Europes Electricity Networks of the Future 2006).

Key elements of the vision include:

Creating a toolbox of proven technical solutions that can be deployed rapidly and cost-effectively, enabling existing grids to accept power injections from all energy resources;

Harmonising regulatory and commercial frameworks in Europe to facilitate cross-bordertrading of both power and grid services, ensuring that they will accommodate a wide

range of operating situations;

Establishing shared technical standards and protocols that will ensure open access,enabling the deployment of equipment from any chosen manufacturer;

Developing information, computing and telecommunication systems that enablebusinesses to utilise innovative service arrangements to improve their efficiency and

enhance their services to customers; and,

Ensuring the successful interfacing of new and old designs of grid equipment to ensureinteroperability of automation and control arrangements

The establishment of the technology platform has led to a number of strategic research

activities covering areas including Smart Distribution Infrastructure, Smart Operation and

Smart Grid Assets and Asset Management.

Another activity within the Smart Grid Technology Platform, known as ADDRESS is

specifically targeted at energy utility requirements, communications technologies and

architectures to support the Smart Grid.

In Australia, most government activity in the Smart Grid domain has been focussed on Smart

Meters, primarily through the Ministerial Council on Energy. A number of papers dealing

with meter functionality and Smart Meter Cost Benefit Analysis have been prepared over thelast few years. Although to date there has been little government activity specifically targeted

at Smart Grids, there is some groundswell activity within the industry. For example, Smart

Grid Australia is actively pursuing the topic. The CSIRO and various universities are also

working in Smart Grid related areas.


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4. The Role of Telecommunications in Smart GridsThe range of activities undertaken by electricity utilities can be quite diverse, depending on

the part of the network in which they operate.

Operational networks include SCADA, teleprotection, smart metering, voice and video and

security services including access control and CCTV. Also included can be a workforcemanagement and an operational data network. Corporate networks can include LAN services,

voice and video, call centres and Internet services.

Because electricity is required virtually everywhere, from large cities to remote dwellings, the

geographic range of networks is extensive. Further, operational parts of the utility network

include substations, depots, roadside and pole mounted transformers and a range of other,

challenging physical locations.

These two network types, operational and corporate, and the services and applications they

support, may share common network resources. However, the different services may have

very different requirements in terms of availability, bandwidth, transaction rates, latency and

security. As an example, teleprotection requires extremely high reliability and has

particularly tight latency requirements. Operational voice is also a critical service and can beparticularly important in grid recovery during natural or other disasters. The ability to manage

various network characteristics for each type of service is very important, particularly when

the communications network is critical to the reliable operation of the electricity network.

Recognising the importance of the communications infrastructure, some countries have

introduced very strict regulatory requirements. The North America Electric Reliability

Corporation Critical Infrastructure Protection standards (NERC CIP) are a good example of

this.

The diagram below shows the various parts of a network that underpin the operation of

electricity utilities.

Figure 1: Telecommunications Network Example


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Because of the diverse nature of the services and their wide geographic spread, appropriate

communications technologies, either owned by the utility or using public network operators,

must be chosen carefully. This is especially the case today where siloed types of

implementations can no longer be tolerated.Network technology is critical to the evolution of the next-generation utility. The intelligent

utility network (SmartGridNet) must support the following key requirements.

Virtualisation Enables operation of multiple virtual networks over commoninfrastructure and facilities, while maintaining mutual isolation and distinct levels of

service.

Quality of Service (QoS) Allows priority treatment of critical traffic on a per network,per service, per user basis.

High Availability Assures constant availability of critical communications, transparentrestoration, and always on service - even when the Public Switched Telephony

Network (PSTN) or local power supply suffers outages.

Multi-Point to Multi-Point Communications Provides integrated control and datacollection across multiple sensors and regulators via synchronised, redundant control

centres for disaster recovery.

Two-Way Communications Supports growing sophistication of interactions betweencontrol centres and end customers or field forces to enable new capabilities (e.g. customer

sellback, return, or credit allocation for locally stored power; improved field service

dispatch, information sharing and reporting).

Mobile Services Improves employee efficiency, both within company facilities and inthe field.

Security Protects the infrastructure from malicious and inadvertent compromise fromboth internal and external sources, assures service reliability and continuity, and complies

with critical security regulations (e.g., NERC CIP).

Legacy Service Integration Accommodates the continued presence of legacy RemoteTerminal Units (RTUs), meters, sensors and regulators, supporting circuit, X.25, Frame

Relay (FR) and Asynchronous Transfer Mode (ATM) interfaces and communications.

Future-Proofing Capability and scalability to meet not just todays but also tomorrowsapplications as driven by regulatory requirements (such as Smart Metering) and new

revenue opportunities, such as utility delivery of business and residentialtelecommunications (U-Telco) services.

One further point reinforces the importance of appropriate telecommunications technologyand network architectural choices. The Smart Grid will be implemented as a series of

improvement projects. The implementation of an appropriate telecommunications

infrastructure by an electricity utility can be used as the basis for supporting multiple, diverse

Smart Grid projects, saving cost through re-use of existing capabilities and potentially

speeding up the delivery times of the Smart Grid projects.


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5. Economic BenefitsIt is arguable that the level of investment in electricity networks has been lower than it might

otherwise have been over the last 20 to 30 years, although this situation will vary from

country to country. While, in most cases, the performance of the networks is adequate,

demands of 21st

century economies and 21st

century customers are forcing changes in the

industry.

Smart Grid initiatives, implemented as a series of improvement projects over many years are

expected to deliver a range of benefits. Due to the relatively early stages of Smart Grid

initiatives, it is difficult to be too quantitative about the real benefits at this stage. However, a

number of expected economic benefits can be identified.

Energy Efficiency: this can be explained in a number of ways. Better asset utilisationshould lead to more efficient operation of power plants, better use of capital and a

lowering of operational costs. Further, better control of the network should lead to lower

transmission losses and the delivery of higher quality power, both reducing economic

losses.

Environmental: Some countries have established targets for power derived fromrenewable resources; typically in the order of 20% by the year 2020. The overall affect ofachieving these targets will be to reduce the reliance on coal and other sources of

greenhouse gases and help to achieve global targets for reductions in this area. This will

be particularly challenging since predictions for energy growth in countries such as China

show a very heavy reliance on coal.

Electricity Usage and consumer incentives: the introduction of Smart Meters as a SmartGrid initiative will change the way in which customers interact with their energy provider.Providing electricity consumers with better information on their electricity usage through

the use of In Home Displays, coupled with tariff incentives, offers the hope of a reduction

(or a slower increase) in energy demand in the home. Further, encouragement of

consumers to reduce their power consumption at peak times, or allowing the utility totake this action as part of a tariff incentive should assist in lower energy demand peaks,

which occur for short periods but require massive investments in generation capacity.

These initiatives are not necessarily new since energy utilities have, for decades,

encouraged their bulk users to spread their energy demands more evenly across any day.

The new dimension is the involvement of the average consumer through two way

communication via Smart Meters. In Australia, at least, we have already seen how

government and community action can change water usage patterns; other initiatives,

coupled with appropriate investments are needed to achieve similar results in electricity

usage. The benefits are lower long term capital requirements for new generation capacity.

Workforce: a study by KEMA (Reference: The US Smart Grid Revolution, KEMAsPerspectives for Job Creation - 2008) prepared for the Gridwise Alliance investigated theimpact on job opportunities with investments in Smart Grids. The study concluded that,

with reasonable Smart Grid investments, approximately 280,000 new positions, primarily

in direct utility suppliers and indirect utility supply chain, would be created in the period

up to 2012. Further, once the main Smart Grid deployments had been completed,

approximately 140,000 new jobs would persist as ongoing, high value positions.


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Distributed Generation: home systems, comprising solar cells and a means of deliveringpower into the grid are already available. While still expensive, these systems offer a

degree of independence from the grid for the ordinary consumer. The benefit for the

consumer comes from reduced electricity bills through their ability to supply their own

power and to sell any excess back to the utility. The benefit for the utility is potentially

reduced peaks in demand and ultimately deferred investment in additional capacity. High

levels of distributed power generation do, however, provide significant control problemsfor the electricity utility.

Just as the investment levels and current network performance will differ between countries,

so will the range and level of economic benefits.

6. ConclusionSmart Grids are steadily increasing in their visibility, particularly in recent times with

significant investment commitments. Further, a general awareness of Climate Change issues

and a realisation of the contributions of the electricity generation industry have forced

attention onto our seemingly insatiable appetite for all things using electricity.

Growth of electricity usage in the western world and the forecast usage in emergingeconomies, particularly China and India, results in projected electricity usage over the next

20 years which will be extremely difficult to fund, even if it was physically possible to build.

In many countries, particularly the USA and in Europe, considerable effort by utilities,

universities and industry and backed by governments is being directed into developing and

deploying Smart Grids.

Smart Grids, built using improvements in grid infrastructure, applications and intelligent

devices offer a hope of addressing these issues. This will be achieved by better efficiency and

control in developed economies and applying Smart Grid technologies more effectively in

developing countries. The selection and deployment of appropriate telecommunications

technologies underpins the implementation of Smart Grid projects.

All of this will happen in parallel with the increased usage of renewable resources and a gridarchitecture which relies on distributed generation, from smaller power plants down to

individual homes.

One thing is clear, the way the industry has evolved over the last fifty years is no longer a

sustainable model for future development.

Smart Grids are one of the key ways in which economic growth, built around a sustainable

electricity future can be achieved.


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Alcatel-Lucent Smart Grids Final