What each electric utility’s business will look like 20 years from now must be conceived of – and planned for – today, writes Richelle Elberg
The Energy Superhighway will be foundational in the energy cloud future
Depending upon who you ask, the electric utility industry is headed into an accelerating death spiral, soon to be marginalized by burgeoning distributed generation – or it will look almost exactly as it does today, even a decade from now.
In a recent survey conducted for a report by Navigant, nearly six out of ten utility executives indicated that they believe the role of utilities in 2025 will be approximately the same as it is today.
But for many utilities, the existential threats are real. As managing director Jan Vrins of Navigant’s Global Energy Practice says: “The transformations facing the utility industry today go beyond the physical – renewables, proliferation of distributed energy resources (DER) and phasing out of coal capacity – and expand into the digital realm with destabilizing impact on traditional revenue streams.
“Even for the most forward-thinking utilities, keeping pace with the rate of innovation and capitalizing on the full scope of opportunities will be an ongoing challenge.”
These seemingly contradictory views may both be true – depending upon management vision. Indeed, what can be said about all utilities today is that what each electric utility’s business looks like 10 to 20 years from now must be conceived of and planned for today.
Utility executives need to visualize that business, factoring in their unique operating conditions, and then design the path forward in a proactive manner. And for those faced with a rapidly changing operating environment-a potential death spiral-one of the most critical building blocks for that path forward will be a robust communications infrastructure, also known as the Energy Superhighway.
The Energy Superhighway will be foundational to the platform-based environment in which utilities will operate in the energy cloud future. Indeed, Vrins and Mackinnon Lawrence, senior research director at Navigant Research, point this out in ‘The Energy Cloud Playbook’, an article in Public Utilities Fortnightly published in July. As stated in the article: “While this evolution will be measured in decades, current innovations are sowing the seeds of disruption today. Disruption need not imply negative consequences for incumbent players. Utilities deeply invested in power infrastructure and directly serving diverse customers have much to gain. But they will need to embrace uncertainty and risk.”
In short, the power industry is changing whether utility executives want to acknowledge it or not. Innovation is moving beyond one-off, standalone technologies, such as renewables, and pairing of these technologies (solar plus storage) toward the orchestration of complex ecosystems of technologies working in concert to deliver more flexible, responsive, and customer-centric services.
In order to become network orchestrators, utilities need to develop a holistic strategy for participation in this highly networked, intelligent paradigm. The utility of tomorrow needs to plan its Energy Superhighway – today.
The Energy Superhighway concept was first introduced in my white paper, ‘Communications in the Energy Cloud: The Energy Superhighway and the Future of Grid Connectivity.’ Essentially, the Energy Superhighway is created when a utility proactively deploys (or leases) high bandwidth, low latency communications throughout its territory-creating a future-proof network upon which it can layer a multitude of services and applications as its operating priorities evolve.
The Energy Superhighway may support smart cities, community solar, microgrid integration, behind-the-meter energy services and more, in addition to more traditional smart grid communications needs. What’s important is that the network be robust enough to support any of the applications indicated below-as well as others that may not have yet emerged.
The Energy Superhighway can be contrasted with what I’ve dubbed Smart Grid Communications v1.0 – where siloed, application-specific communications networks are constructed in an ad hoc manner, typically using the least expensive technology choice for a given application. This is how most utilities operate today, and it’s also how their regulators approve investments.
But remember what Vrins said about capitalizing on the full scope of opportunities? The full scope of opportunities goes well beyond the smart grid technology of today.
A well-conceived, holistically planned Energy Superhighway promises to support economic growth as utilities move beyond the commodity electron business into the realm of energy-tied (or not) services. It represents one leg of a multipronged strategy that will become increasingly important to utilities wishing to determine their own fate as the industry evolves.
And, as described further in the white paper, much as the Interstate Highway System in the US delivered huge, oft-unanticipated economic returns ($6 in economic benefit for each $1 in investment), the Energy Superhighway sets the stage for economic growth well beyond the cost savings often associated with old-school smart grid technology.
So what exactly does an Energy Superhighway look like? It may take many forms, but there are certain characteristics required and only a few technologies available today that meet those requirements.
Navigant’s survey of utility executives
Credit: Navigant, Public Utilities Fortnightly
High bandwidth and low latency can be found with fibre to the premises. This technology is admittedly expensive, but virtually unlimited in terms of the services it can support-including triple play (voice, video, and internet). This is what I meant when I referred to non-energy-related services. Cable industry opposition is strong, but a growing number of (mostly municipal) utilities are adopting this bundled strategy.
On the wireless front, private 4G LTE is another option gaining some traction. Last February, AT&T partnered with Nokia (formerly Alcatel-Lucent) to provide spectrum and infrastructure for utilities wishing to go this route; my contacts say there has been strong interest to date.
Coming down the pike is the much vaunted 5G wireless standard that vendors promote as the foundation for a truly ubiquitous Internet of Things.
Finally, private spectrum ownership is another path a utility may choose if it’s concerned with potential congestion in widely used unlicensed bands.
Most of these strategies are more expensive than the more commonly chosen smart grid communications technologies of today. But remember the most important characteristic of all: the Energy Superhighway not only needs to be a backbone for those applications and services utilities are considering today – it also needs to have extra lanes for the growth in traffic that new applications will bring.
It needs to be future-proof if utilities intend to embrace the platform-based energy cloud opportunity and build a road to economic growth versus the very real risk of stagnant or declining income from traditional generation and distribution services.
Utilities will be challenged by their stakeholders and pressured by regulators to justify the larger up-front investments required for an Energy Superhighway.
Creative partnering such as the deal made between Google Fiber and Huntsville Alabama Utilities last winter may offer one way that utilities can make the investment more palatable. At the end of the day, the management teams at every power utility will decide where they fit in a changing operating environment. Take the long view as you build that path forward and remember that, as recently as 2005, there were more landline connections than wireless connections in the US.
Today, the ratio is about one to five, with roughly 80 million landlines in homes and businesses versus roughly 380 million wireless subscriptions. Things can change more rapidly than you expect.
Does your utility have a holistic, enterprisewide strategy for an Energy Superhighway? Every utility should determine how best to drive toward a compelling role in the evolving energy economy.
Richelle Elberg is a principal research analyst contributing to Navigant Research’s Utility Transformations program and heading up the Grid IT and Communications research service.