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2020 Strategic Directions: Electric Report

A Rapidly Evolving Energy Landscape Paints a New Scenario for Distribution Needs

A Rapidly Evolving Energy Landscape Paints a New Scenario for Distribution Needs

The global energy landscape is changing rapidly, and the shift towards a smarter, more sustainable, reliable and resilient grid is occurring at an accelerating rate. Huge changes are needed in the nation’s power distribution infrastructure to deliver a modern network that is advanced enough to meet today’s rapidly changing expectations, yet flexible enough to one day enable a range of next-gen capabilities.

This balancing act will require more than just new distribution equipment — utilities will need to recalibrate how they approach new grid technologies, design, finance, management and security. Today’s grid must carry, control and monitor the bi-directional flow of power while also meeting regulator and customer demands for safe, sustainable, reliable, resilient and affordable power.

Distribution a Top Challenge for Utilities

Historically, distribution was wrapped up in the traditional approach of overhead/underground, distribution automation and substation automation. But the conversation has changed, and now utilities are asking, “How can we integrate and handle distributed energy resources (DER)? How do we make the grid self-healing and more resilient? How do non-wire alternatives (NWAs) and other solutions fit into the new distribution equation? What’s their real application?”

There’s no one right answer, as the scope and scale of distribution projects vary wildly. A project can be as small as a utility-developed microgrid with a battery energy storage component on top of a middle school, or as large and complex as an entire transmission line deferral.

Distribution issues also are becoming more localized, making it difficult to deal with them in a centralized fashion. Utilities need the flexibility to match load and generation, to have distributed and NWA alternatives, and to have the ability to pull levels in specific locations versus at the system level.

With this in mind, it’s no surprise that utilities see upgrading and modernizing their distribution systems as one of the top challenges facing the industry today. According to Black & Veatch’s 2020 Strategic Directions: Electric Report survey, distribution system upgrades and modernization rank fourth behind aging infrastructure, renewables and an aging workforce, and just ahead of environmental regulation, cybersecurity and energy storage.

These responses reflect utilities narrowing their focus on distribution, especially as the bulk of responses — aged infrastructure, renewables, distribution system upgrades and modernization, DER, reliability, grid stability, resiliency and grid congestion — all roll up into the conversation around distribution.

2020 Strategic Directions: Electric Report

IT/OT Integration is Key to Success

So how can utilities deliver this next-gen distribution system? Success will rely on putting in place the advanced communications infrastructure necessary to enable more effective asset management programs that will allow utilities to deliver at a more localized level and meet regulator and customer demands. This will require integrated planning and convergence across a utility’s information technology (IT) and operational technology (OT) systems.

The industry is seeing enough activity that may change how it views the benefits of integrated IT/OT systems. Survey data supports this, with a combined 68 percent of respondents agreeing that the integrated planning of IT/OT systems will provide their utility with meaningful benefit. And support for IT/OT integration was even greater among larger utilities — those that serve 2 million people or more — with 75 percent agreeing that they will see meaningful benefit from integration.

Most utilities admit that the ability to forecast, monitor and manage owned or third-party DER is one of the most challenging issues today, but integrated IT/OT planning will be critical to enabling this effort. IT/OT convergence also will be necessary for asset management; no matter if it’s electric vehicles, pole attachments or any other type of grid-connected device, OT/IT convergence provides the foundation that will enable utilities to use these assets to improve return on investment (ROI).

But utilities still have a lot of work to do when it comes to pulling those two pieces together. In a rather short timeframe, utilities have gone from operating a relatively static grid to biting off a massive amount of complexity (e.g., investing in next-generation AMI, replacing SCADA, and implementing ADMS).

The proliferation of DER now is driving investment in DERMS and grid-edge control capabilities. As they run these initiatives and pilots in tandem, utilities may be making technology decisions based only on concurrent projects. Utilities are recognizing that the interdependencies of the many efforts must be coordinated to translate to deliver the advanced capabilities and locational benefits of the future distribution system.


2020 Strategic Directions: Electric Report

Prioritizing Investment in Distribution

Utilities also will have to revise how they allocate their funding, particularly as the industry continues to deal with natural disasters — hurricanes, storms, wildfires— and global pandemics such as COVID-19. Some utilities are eyeing their investment decisions and responding accordingly, with a combined 45 percent saying they plan to reprioritize “some or most” of their investment in existing assets (27 percent) or new assets (18 percent).

The remaining 48 percent said they have no plans to reprioritize investment, while 6 percent said they plan to defer investment until at least next year. Does this mean that utilities are comfortable with their current investment strategy? Or does it invite caution, if the utility is simply deferring maintenance or replacement efforts, forcing their assets to endure another hurricane, storm or fire season and, if so, could this cause some type of catastrophic failure down the road?

Of those who plan to re-prioritize investment in existing assets, nearly half of respondents (49 percent) said they plan to upgrade their transmission and substation infrastructure, which could involve substation hardening as part of grid modernization efforts or the integration of DER. This response suggests that maintaining reliable, consistent service remains the driving force behind investment plans, particularly through COVID-19.

Automation ranked second, demonstrating its growing value to utilities, particularly during times of unrest — not just with COVID, but when dealing with hurricanes, storms, wildfires and other disasters. To adhere to social distancing guidelines, utilities’ field crews are smaller and spread more thinly; by allowing utilities to operate remotely, automation can remove the need to put crews in harm’s way, benefiting everyone from a public safety standpoint.

Automation also can be paired with data analytics to improve — and drive down the cost — of day-to-day operations. Support for some of the other responses (e.g., increased remote monitoring and diagnostics (No. 5) and conversion of analog systems to digital systems (tied for sixth), support this idea by suggesting that utilities are looking for any solution — whether its automation, remote monitoring or diagnostics — that will help move them closer to a self-healing grid, or enable them to respond more surgically to issues, and this will be a huge priority moving forward.

Moving the Needle

In short, utilities have a long road ahead as they work to handle distribution in a more localized fashion. Integrated systems planning will remain key to their success as they work to overcome silos and incorporate more DER and NWAs. Advanced communications infrastructure will be critical to enable utilities to run effective asset management programs, deliver at the localized level and meet demands. Meanwhile, utilities are working to balance investment as they strive to adapt to a rapidly changing world riddled with challenges, from hurricanes, storms and wildfires to COVID-19.

So, what will move the needle on distribution? Last year, resiliency was pinned as driving decisions in distribution; this year, that mantle goes to policy and regulation. Regulation is increasingly driving decarbonization goals and customer control. Compelling events such as hurricanes, storms or wildfires will drive investment, but ultimately progress may come down to customer satisfaction.

Historically, customer expectations were considered a novel concept, viewed through the lens of usage, billing, outage management and, more recently, the ability to control one’s smart thermostat. But today’s utility customers have evolved, and their hierarchy of needs has changed. Now customers are asking: Where does my energy supply come from? Is it reliable and resilient? Is it green and sustainable? Is it cost-effective?

Change increasingly is being driven from the customer side of the meter. The utility will have to connect the dots back through the regulatory process to meet these expanding customer needs for safe, sustainable, reliable, resilient and affordable power. Alignment between the utility and the customer will drive the next-gen distribution system.

About the Authors

Kevin Prince leads Black & Veatch’s global distributed generation business overseeing the strategic direction, growth and execution of the company’s DER offerings serving both commercial and industrial customers as well as utilities. Solutions include onsite solar, energy storage, electric vehicle infrastructure, fleet electrification and CHP. He has more than 18 years of experience in the energy industry and has developed and closed more than $1 billion in projects for Fortune 500 companies and public and governmental entities.

Leslie Ponder is the technology portfolio director for global distributed energy at Black & Veatch, where she is responsible for evaluating and delivering technology solutions within distribution, asset management and distributed generation. Ponder has more than 30 years of experience and has led systems strategy and planning for communications, grid analytics, and grid control and security systems.

Mark Von Weihe is a senior managing director with Black & Veatch Management Consulting, where he is working to expand the company’s technology offering portfolio into new industry segments. With more than 20 years of experience, Von Weihe is recognized throughout the utility industry for his strategic work in technology, commercial trading, renewable energy and electric distribution operations consulting.

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