2018 Strategic Directions:Smart Cities & Utilities Report
Grid Modernization: Increasing Capital Investments To Decrease Risk
Growing commitment to distributed energy resources (DER) is forcing continued modernization of the grid — and the effort shows no signs of letting up. Whether by regulatory mandate or stakeholder pressure, system upgrades are being made worldwide to support the increase in renewable energy, while making infrastructure smarter and more resilient. Historically, attention to the grid’s distribution system focused on poles and wire maintenance and upkeep, but growing connectivity between assets is requiring a more holistic approach.
Modernizing grid management using connected technology is becoming more important — both to the distributed utility and the digital utility — as more sensors and controls are installed throughout the networks. Today, system reliability and efficiency remain the top priorities, but these priorities are now being reimagined in a much more distributed paradigm with augmented third-party involvement.
Results from the 2018 Strategic Directions: Smart Cities & Utilities Report survey show that this new grid management paradigm is causing more utility managers in the United States to plan accordingly and maintain the new systems they’ve put in place.
The majority of utility respondents (76 percent) is busy developing grid modernization plans or already have a strategy for electric distribution in place. Of these, 40 percent already have a grid modernization plan in place and are implementing it, while 36 percent are in the process of putting theirs together. Of the 24 percent not currently engaged in grid modernization, more than half are considering it (Figure 10).
Figure 10. Is your utility developing or does it already have a Grid Modernization strategy/plan for electric distribution? (Select one choice.)
Security, Distribution Automation Drive Modernization Efforts
What are the driving elements in today’s modernization efforts? According to survey results, 70 percent of utilities point to cybersecurity and physical security — a growing “must have” in protecting the influx of wireless technology and other communication devices. Once efforts to protect the grid are in place, respondents are interested in improving grid reliability and efficiency through the use of automation and providing deeper understanding of grid operations. Thus, distribution automation (66 percent), advanced metering infrastructure (53 percent), data analytics (48 percent), DER integration (46 percent) and substation automation (44 percent) all were reported as strong motivators (Figure 11).
Figure 11. What are the primary use cases of your grid modernization strategy/plan? (Select all that apply.)
Putting Strategy into Practice
Both federal and state-based drivers have served to accelerate the transition to the digital utility over the past decade through subsidization of grid modernization projects and growing regulatory support. Starting with the Department of Energy’s Smart Grid Investment Grants, which poured billions of dollars into grid upgrades and fostered partnerships to make them more manageable, many state legislatures and regulators have provided new mandates and regulatory constructs to facilitate recoverable investments in grid modernization technologies.
Many of these projects have focused on multi-year smart grid initiatives, including advanced metering, distribution automation, substation automation, ubiquitous communications networks, microgrids and DER integration. More often, these projects are integrating with third parties such as universities, cities and municipalities, and third-party resource aggregators become key partners in developing the grid of the future. Leveraging many first-generation grid automation technologies, these projects now combine second-generation communications networks, automated grid controls, demand response, renewable generation resources and energy storage.
Addressing Challenges: Aging Systems, Funding, Stability
In many cases, the move to more advanced grid technologies is hampered by the capacity and capabilities of current communications networks supporting the grid. The equipment has aged and systems may be outdated, making renewable integration, distribution automation or network convergence difficult to implement without more reliable and robust communications. Further, the transformation from serial communications to internet protocol (IP) has demanded a network that not only distributes better but also contains enough bandwidth to support the monitoring of itself with the proper transparency and control. More than 58 percent of utilities believe their current communications network is not adequate; 4.5 percent of that group admitted not knowing where to start.
When looking to upgrade, utilities appear to be poised to invest the needed capital and report much higher investment levels than last year. While most utilities say they plan to invest less than $50 million in their electric distribution systems over the next three years, a quarter of respondents will spend more than $100 million (Figure 12). Some larger utilities in that reporting segment plan to spend over a billion dollars. In stark contrast, 70 percent of the previous year’s respondents reported they were planning to invest less than $20 million.
Figure 12. How much capital do you plan to invest in the electric distribution system over the next three years? (Select one choice.)
The path to grid modernization can be challenging. The ability to support a high penetration of ubiquitous sensors, automated controls and DER within the current distribution system requires focus on many levels. Nearly half (49 percent) of respondents report system stability as the biggest obstacle, while troubles with analyzing DER load flows, business modeling and standardizing interconnections were called out.
How utilities tackle these upgrades also seems to make a difference. The active networks that constitute many segments of a “smart” distribution system are best served with a more holistic approach rather than focusing on the separate pieces of the generation and distribution process. Responses to the report survey indicate utilities that view their systems holistically and use an integrated systems approach (i.e., one integrated contractor to install the system) — rather than a segmented, uncoordinated approach perhaps involving separate contractors designing and installing equipment — can potentially reduce costs by between 75 and 150 percent.
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