Smart Grid Benefits Herman Zampariolo...Smart Grids will transformthe Utilities business Utilities will be able to cut their costs by more than 30% whilst increasing revenues Smart

Smart Grid Benefits

Herman ZamparioloChairman

[email protected]

Bogotà

February 21, 2007

2

Executive Summary

�Smart Grids will transform the Utilities business

�Utilities will be able to cut their costs by more than 30% whilst increasing revenues

�Smart Grids create more than € 1,000 of value for every meter

�Smart Grids can be implemented quickly, using existing meters

3

Smart Grids integrate AMM and BPL

Automated Meter Management(AMM)

Broadband Technologies(BPL)

Asset Monitoring and SCADA Systems(Solutions for the High and Medium Voltage networks)

Takes the intelligence of IT to any meterEnables any meter to be an IP node

Applies Advanced AnalyticsCuts costs by at least 33%

Can be self-financed

Enables broadband InternetServices and VOIP

using existing electrical wiresdelivering the benefits of

3 investments with the cost of 1

ILIGHT scope of work

4

Smart Grids enable three parallel innovation streams

IntelligentAppliances

IntelligentBuildings

IntelligentNetworks

SMART GRID COMPONENTSReal Time control of Low Voltage NetworkInteractive Load and Service management

TELECOMMUNICATION COMPONENTS200 MBps data connection

VoIP

5

Most economies need to address three priorities

- Broadband universal access to sustain economic growth

- Access to Voice over Internet Protocol for everyone

- Electrical grid improvement

1

2

3Three benefits with just one investment:

Smart Grids

6

Governments and Regulators are favouring the introduction of Smart Grids to achieve multiple benefits

Disposable Income

Elimination of Commercial Losses

Distribution Efficiency,Customer Choice

Smart GridSupply

ReliabilityGDP

Growth

7

Investments in Smart Grids are driven by four inevitable forces

Overall demand isincreasing

with the economy.Peaks are already

exceedingCapacity

Smart Grids are the only sensiblereplacement alternative

Generation Capacity islimited by environmental

andpolitical factors

Most Assets should have beenreplaced already a decade ago

8

In 5 years no Utility will dare managing the Network with tools of the ’50s

� Staying blind on Low Voltage operations?

� Relying on annual manual readings that tell you nothing of users dynamics?

� Ignoring where your assets are and which is their operating condition?

� Fixing your assets only after they broke with unmanageable customer damages?

� Investing according to historical patterns instead of real criticalusage?

� Having a fragmented, inconsistent and scarce data base of customer events and network events?

� Growing the top line selling the same services with rates continuosly reduced by the Regulator?

Would you envisage…..

9

The key issue for many utilities is which is the best path to arrive to the Smart Grid vision

� Invest in metering? In communication? In application? Which is the right sequence?

� Scale the investment from pilots to universal roll-outs? Which is the minimal size of economic investment in Smart Grids?

� Invest now or invest later?

� Which is the correct time-frame for the investment?

� Which generation of technology should I invest in? Can I move from 3G to 4G? Is there a 5G around the corner?

10

Smart Grids are the fourth generation technology in Distribution networks management

1° Generation:Standalone meters

2°Generation:Remote Reading

3°Generation:AMM

Narrow Band

4°Generation:Smart Grids

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The first generation is structurally limited



3°Generation:AMM

Narrow Band


Manual Reading

1 data per read(from once a month to

once a year)

As reliable as the meterreader

No customerintelligence

No Network Monitoring

12

The second generation is a mere substitution of labour costs with capital costs



3°Generation:AMM

Narrow Band


Manual Reading


once a year)




One-way remote reading


once a year)

Up to 24 hrs to read a meter with proprietary

protocols



No Integration withLegacy systems

13

The third generation has already proven its Value



3°Generation:AMM

Narrow Band


Manual Reading


once a year)






once a year)


protocols




Two-ways remote management

At least 8 data every 15 min

2.4 Kbps band,Asyncronous mgnt with

proprietary protocols

AsymcronousCustomer intelligenece

Asyncronous Network Monitoring

Legacy Integration

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But only Smart Grids can maximise performance with flexible real-time Network management



3°Generation:AMM

Narrow Band


Manual Reading


once a year)






once a year)


protocols




Two-ways remote management

At least 8 data every 15 min

2.4 Kbps band,Asyncronous mgnt with

proprietary protocols

AsymcronousCustomer intelligenece

Asyncronous Network Monitoring

Legacy Integration

Full grid management

Any data with anyfrequency

200 Mbps band with open Internet protocol and open IT architecture

Always-on customermanagement

Always-on Network Management

Legacy Integration

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Only Smart Grids enable major functionalities



3°Generation:AMM

Narrow Band


Peak Load Management

Flexible Tariffs

FraudDetection

OutageManagement

Network Planning

BB Services

X

X

X

X

X

X

X

X

X

X

X

X

X

Y

Y

X

X

X

Y

Y

Y

Y

Y

Y

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Two business models are sustainable

CURRENTPOSITION

-Unstainable for the Regulator

-Unstainable for the Customers

SMART GRIDSSMART GRIDSSMART GRIDSSMART GRIDS

-Broadband Services-Real Time Mgmt

-Energy Mgmt-Continuous Evolution

AMM AMM AMM AMM -Basic services-Narrow Band-Asyncronous

-Static services

Level of ServiceLOW HIGH

Investment

LOW

HIGH

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Smart Grids generate a much higher Net Present Value

than previous technologies

Solution Completeness

Val

ueto

Util

ity

€ 10

€ 100

€ 1,000

Present ValuePer Metering Point

Investment

Value



3°Generation:AMM

Narrow Band


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Savings from Energy Management can already justify the investment in Smart Grids

Savings per meter per annum (€)

0

20

40

60

80

100

Savings Hi Savings Low SavingsReasonable

CommercialLossesCustomerOperationsDisasterAvoidanceNetworkOperationsField Operations

3 yearspay-back

19

Smart Grids create more than € 1,500 of benefits per meter just out of pure electricity management

0

100

200

300

400

500

600

700

800

SystemicBenefits

End UserBenefits

Utility Benefits

Regulatory benefits

Provision of BB VAS

Savings on Telephony andVASNetwork management

Field Operations

Commercial losses

GDP growth

Home gateway

Peak Power Reduction

Critical Outage

Flexible rates

€ per Metering Point(for the 15 yrs. Life-cycle)

Illustrative example for EmergingMarkets

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Smart Grids may enable to double the revenue per user and increase the average margin

Revenue evolution

010203040506070

Electrictyuser

Networkcustomer

SmartGrid pal

€/m

onth

Other ValueAdded ServicesInternet access

Base revenue

Net Margins are wellabove average

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Broadband PLC services are sustainable and competitive

Competitive Map - Italy

0

10

20

30

40

50

0 5 10 15

Download bandwidth (Mb)

€/m

onth

TIMTele2WindTiscaliASM BresciaFastweb

PLC Price - performance

22

Broadband PLC services are sustainable and competitive

Competitive Map - Switzerland

0

20

40

60

80

0 1 2 3

Download bandwidth (Mb)

€/m

onth

BluewinEasynetInit7AMB Bellinzona

PLC Price - performance

23

When the benefits of Value Added Services are added to Energy Management, the investment is repaid 20x

0

200

400

600

800

1000

1200

1400

1600

SystemicBenefits

End UserBenefits

Utility Benefits

Regulatory benefits

Provision of BB VAS


Field Operations

Commercial losses

GDP growth

Home gateway


Critical Outage

Flexible rates



24

The investment in Smart Grids requires some upfront strategic decisions

� Smart Grid, AMM or just AMR?

� Universal coverage or selected customers?

� Single technology or multiple technologies?

� Single supplier or multiple suppliers?

� Intense deployment or diluted deployment?

� Compliance or Transformation?

25

The Leadership Team of iLight has already implemented a Smart Grid at ASM Brescia

220K customers fully managed for theirelectricity, gas, hot water and Broadband internet services

BroadbandInternet servicesare sold at € 17 per month per customer…

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iLight can implement a Smart Grid using existing meters and sensors

13DIGITAL NETWORKS PLC

EVOLUTION OF THE COMMUNICATION CHANNELS THANKS TO BROADBAND COMMUNICATION

COMMUNIC.GATEWAYAMR-PLUS

RADIO ORSERIAL LINKS

CONCENTRATORCU-PLUS

Electric grid

CENTRAL APPLICATIONSERVER

Ethernet/IP

GAS METER

WATERMETER

BPL

BPL

CUSTOMER SITE TRANSFORMER SITE CENTRAL SITE

GPRS-WMAX-FIBER

M-BUS

Domoticappliances

Sensors

Video surveillance

PLCNB

27

Size matters and risks can be reduced in various steps, without sacrificing scale economies

� Technology test 1 – 5 K meters 2 months

� Benefit Assessment 30 – 50 K users 1 year

� Training 200 – 300 K users as above

� Transformation Universal 3 – 5 years

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To size the possible Value Creation, a thorough business case should be prepared

� Analyses of current cost base

� Saving model adapted to the specific utility situation

� Broadband services strategy

� Investment strategy

� Technology and Partners selection

� Financial model

� Investment approval management

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The most important part is the quantification of the major sources of value

0

200

400

600

800

1000

1200

1400

1600

SystemicBenefits

End UserBenefits

Utility Benefits

Regulatory benefits

Provision of BB VAS


Field Operations

Commercial losses

GDP growth

Home gateway


Critical Outage

Flexible rates



30

iLight can provide a full life-cycle, modular Smart Grid services offering

2 M 6 M 12 M 18 M 2 to 4 Years

FinancialCommitment

Business Case

Investment DetailedDesign

Technical Verifications

Project Financing

Contract Negotiation

Deployement

Possible way outs

Time

Regulatory Management

Documents

Smart Grid Benefits Herman Zampariolo...Smart Grids will transformthe Utilities business Utilities will be able to cut their costs by more than 30% whilst increasing revenues Smart