Energy utilities are increasingly looking at ways of releasing the trapped value in their assets. Until recently, the cost and availability of technology to read meters or other devices remotely have been inhibitors. But technology company IBM now argues that thanks to low cost wireless devices, utilities have a huge opportunity to improve earnings performance.
The basic infrastructure of an electricity grid and the method of judging demand has remained basically unchanged for over a century. Even the recent burst of investment activity prompted by deregulation has bypassed the grid in favour of retail aspects such as customer billing and open trading systems. In the USA, the reputation of the workforce operating the transmission and distribution network has given rise to the less-than-flattering acronym, “Doug” (dumb old utility guy). But attitudes may be about to change. Utilities are increasingly making IT investments that get more value and better productivity out of the grid. We may be about to experience the revenge of the Dougs!
Leading the way in the provision of information-based technology to customers in the field of power transmission and distribution is the Global Energy and Utilities Industries division of IBM. The division is one of 24 industry sectors within
Figure 1. Implementing predictive and reliability-centered asset maintenance assumes real-time information, such as can be extracted through the deployment of remote asset monitoring capability throughout the T&D network
IBM and looks to sell value-added services to the electricity, gas, water and wastewater industries through a thorough understanding of the markets. General Manager of the division is David Samuel, an American based in Massachusetts with a background in the electricity industry. During a recent visit to London, he outlined some his division’s activities as well as his vision of how power grid operators might extract more value from their assets in future.
“A lot of effort has gone into getting businesses ready for competition over the past five or six years along with much merger and acquisition activity and what has emerged is a variety of company models,” said Samuel. “This type of investment has now slowed considerably and there is now a realisation that insufficient investment has gone in the infrastructure. Our utility customers are asking us how they can release the trapped value of their assets, how they can reduce costs and at the same time serve customers better. They are going back to basics,” explained Samuel.
Impact of deregulation
The trend towards deregulation and the break up of state monopolies in various parts of the world has thrown up a wide array of companies within the power sector. These range from integrated utilities concerned with generation through to retail, to companies just focusing on one or other aspect, as well as hybrid models. Many regulatory authorities have yet to establish firm market rules and the uncertainty that this creates means businesses must be prepared for a number of eventualities. “We are being asked by customers what the common fundamentals are that they must have in place,” said Samuel.
To be able to give this advice, David Samuel spends much of his time talking to customers to understand their needs and then translating this to a customer driven approach within his organization. “We see one of the basic requirements for our customers as a need to balance investments in reducing costs with increasing service. It is not enough to slash costs. They must be managed effectively and enable an improved service to be delivered,” argued Samuel. “I have experienced maintenance cutback programmes that have gone too far and where that balance wasn’t right. Thisled to a series of extended outages.”
Samuel also believes that a high priority should be given to the integration of IT assets and applications. “Y2K and M & A activity has left many companies with systems operating as islands. There is a great need to get value out of these assets by integrating to allow them to communicate,” he said. Samuel also thinks that companies should build their organisational ability to share knowledge, as increasingly the value delivered by utilities is knowledge-based. “At IBM we see these issues as imperatives and offer solutions that allow companies to both better balance costs and get value out of technology investments,” he said.
In the asset intensive T & D industry, IBM is focusing its consulting services on improving asset maintenance. The cost of maintenance of poles, wires, pipes and trucks is a large part of the business but technology has opened up new ways of approaching maintenance that can drive costs down, improve reliability of assets and add to customer satisfaction. “Looking at the Maintenance Continuum (see Figure 1), we have seen over the past 20 years, companies abandoning the most expensive emergency/corrective maintenance approach, in favour of adopting predictive maintenance,” explains Samuel. “Under this, assets are replaced automatically short of their predicted life span, broken or not. This delivers a seven to one cost benefit but still leaves a lot of waste with some assets over-maintained and others under-maintained.”
The third stage is condition-based maintenance, which involves imbedding sensors and other kinds of predictive technologies into assets that can define the real condition of assets. This delivers a big improvement in costs, reliability of performance and customer satisfaction,” explained Samuel. IBM is seeking to help its customers move towards this third stage but, beyond this, foresees even greater savings in a reliability-centred maintenance programme that takes into account how important each individual asset is within the grid system. The ultimate goal, which by Samuel’s own admission is still some way off, would be self-diagnosis, under which machines interact with machines and initiate self-healing. “We are already working on a lot of this self-diagnosis technology,” revealed Samuel.
IBM offers a variety of remote asset monitoring solutions using monitoring devices, supplied by manufacturers with whom IBM partner. Asset data is communicated to the middleware environment in the office and converted to a form, which can be used by the back-end environment for making fact-based decisions.
IBM also operates partnerships for the systems element with companies such as SAP and PeopleSoft. “The action, interest and risk is the middle part that ties the data into the back-end systems. By providing a set of services and software partnerships we can offer the customer an end-to-end solution which they like,” said Samuel.
IBM has implemented this asset maintenance model in a variety of countries and differing regulatory environments. In Brazil and North America the model is in operation for electricity grids while in Japan it has been applied to gas pipelines. A number of discussions are underway with European utilities to introduce the technology. In Italy, a project is in place covering street lamp maintenance.
Technological advances are also being implemented at the user end with IBM operating several pilot projects where devices are in place to monitor energy usage in both residential and commercial/industrial environments. The utilities involved have offered discounted rates to customers in exchange for being able to control usage, within pre-determined parameters. By being able to influence demand, utilities can better manage their own supply/demand balance. Intelligent meters, capable of transmitting readings, allow for real-time monitoring, as well as eliminating the costs associated with manual meter reading. Italy’s main power provider has put in place some 26 million of these intelligent meters.
Figure 2. Eliminate the information-based delays that constrain work crew utilization
Intelligent meters can also be used to better manage the distribution system and to drive better design decisions. “Intelligent meter technology means that utilities would be instantly aware when power was out, instead of relying on a call from the customer,” said Samuel. By having usage data building by building, it means that grid upgrades and expansions can be better planned. “In the last five years the technology has become cheaper but now it also allows management of the system,” commented Samuel.
IT can also have a role to play in improving the effectiveness of a grid operator’s mobile workforce which, on average, accounts for 50 per cent of people employed. IBM has done research on workforce utilization from which it concludes that field crews are actually on site and ready to work 45 per cent of their time. The productive period is reduced by delays, which are all information-based e.g. having the wrong work plan or address or incorrect tools/equipment. If these delays can be prevented and productive time can be increased by just five per cent, this represents a huge increase in value to a utility. IBM estimates the saving could be worth $20m a year to a large utility.
“IBM has designed a whole range of techniques to help get delays moved to productivity,” says Samuel. These include linking field teams to call centres by using mobile devices to exchange information. Customers are also benefiting by getting accurate estimates of the time required to resolve a problem. “Getting the right piece of information to the right place at the right time can take big chunks of cost out of the equation,” argued Samuel.
David Samuel predicts that in the future, customers could have a dial next to their thermostat showing the current price of electricity per kWh. Given the wide seasonal and time-of-day variations in the cost of power such a development may well influence customer behaviour. “The technology is there that could lead to a radical change in the way information is gathered. Change depends on companies adopting the technology.”
David Samuel: General manager, IBM Global Energy and Utilities Industries