1. business and industrial
2. energy
3. renewable energy

VOLUME 11 // ISSUE 6
NOVEMBER 14 //
DECEMBER 14
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20
14
33
40
Features
13NEXT
10TH ANNIVERSARY ISSUE
SPECIAL REPORT
Departments
OUR TAKE
4 Next
BUSINESS EDGE
New business models, surging deployment of renewables, the utility of
the future, water and energy — all are topics of top concern to utilities,
their investors and customers. To mark our 10th anniversary of publication, a stellar array of thought leaders addresses these topics.
5 Bring on SMRs
14 The Next Business Model
10 Next in Connectivity
6 Betting on Distributed Power
8 Smart Meters’ Operational Gains
16 The Utility Of The Future
20 The Water Energy Dependency
32 Solar-powered Microgrid
22 Pursuit Of Integration
33 Ocean-powered Pelamis
26 Ramping Up Renewable Energy
36 Building Efficiency
56 10th Anniversary – Letters of Congratulations
TECHNOLOGY FRONTIER
INTRODUCING
40 Wisconsin Energy’s Symphony
LEGAL ARENA
48 Regulators Tackle Emissions
and the Death Spiral
FINAL TAKE
Vol. 11, No. 6. Copyright 2014 by Energy Central. All rights reserved. Permission to reprint or quote excerpts granted by written request only.
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2 E N E RGYB I Z November/December 2014
54 Bismarck Training
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» OUR TAKE
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Next
EDITOR-IN-CHIEF Martin Rosenberg
[email protected] 303.228.4725
A THOUGHTFUL RESPONSE TO A CHANGING ENVIRONMENT
ONE DECADE AGO, Lawrence M. Kellerman, then managing director of Gold-
man Sachs, declared in the first issue of EnergyBiz, “‘Following the crowd’ is
not a plan. It is the end result of the absence of a planned and thoughtful response
to a changing environment.”
This issue marks the 10th anniversary of EnergyBiz. Since November 2004,
scores of utility executives, state and federal regulators, members of Congress and
state legislatures and brilliant men and women have used these pages to candidly
offer you thoughtful responses to a profoundly changing energy environment.
We have once again invited Mr. Kellerman along with several other industry
thought leaders to share their insights with you in this issue and in our January/February 2015 publication. In his commentary, “The Next Business Model,’’ Kellerman
says it would be a mistake to believe utilities are ossified and headed for the tar pits
of business failure.
“The next utility business model will be more likely to incorporate not only new
and innovative sources of supply, but will increasingly involve the utilities’ expanding
reach behind the customers’ meters,” Kellerman writes.
David Crane, of NRG Energy, has recently predicted that 50 million American
rooftops could soon be graced with solar panels. Navigant Research recently released a study that said U.S. homeowners may invest $625 billion — with a “b” — in
distributed generation equipment.
Clearly, the stakes, the pace and the scope of future change are breathtaking.
In this space 10 years ago, I wrote, “Our mission is to deliver the most insightful,
relevant and useful magazine for a new generation of power industry leaders. … The
industry you face today and in decades to come will pose unprecedented challenges. You will need a journal prepared to walk you
through new terrain.”
Just as the energy business is changing, so is
the world of media and information. Over the years,
we have embraced those changes, launching online
news, conferences and webcasts to engage you, our
EnergyBiz community, in diverse ways that appeal to
busy women and men.
We will continue to evolve. As we said 10 years ago,
we will conduct “a deep and sustained dialog with the
most informed, connected and articulate leaders in the
industry. Consider us your informed voice helping you
shape our nation’s energy future.”
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Martha Collins, Meaghan Shaw
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2012 Eddie Gold Best Magazine Energy/Utilities/Engineering
Martin Rosenberg, Editor-in-Chief
[email protected]
4 E N E RGYB I Z November/December 2014
2012 Eddie Silver Best Online Blog by B-to-B Publication
2012 ASBPE Silver National Medal for Editorial Excellence
» BUSINESS EDGE
Bring on SMRs
FUTURE BASELOAD SUPPLY // BY DOUGLAS HUNTER
THROUGH ITS SMART ENERGY initiative, Utah
Associated Municipal Power Systems constantly assesses and forecasts future electrical
energy needs of member utilities.
To meet those needs, UAMPS
investigates all possible energy
sources, including alternative
resources such as wind and
solar, along with increased
conservation and efficiency.
UAMPS owns and operates a
diverse and balanced energy resource mix, including coal plants,
hydro, combined cycle natural
gas, wind and waste heat. UAMPS also purchases
power on the open market and, along with its members, has implemented aggressive conservation and
efficiency programs.
Because major baseload projects require years to
plan, construct and bring online, decisions must be
made today to ensure adequate supplies a decade
from now for an energy-hungry society featuring electric vehicles and myriad mobile computing devices.
After much sophisticated resource planning and
hard-nosed analysis, UAMPS’ 46 member utilities
have concluded it is time to seriously study small
modular reactors (SMRs) as a future source of baseload electrical supply. We believe SMR technology
has advanced to the point that it may be the cleanest,
safest and most cost-effective long-term solution to
ensure stable, reliable, well-priced electrical power for
UAMPS members over the next several decades.
Our coal properties have been baseload workhorses for decades. But they are reaching the end
of their life cycles, and stringent carbon and environmental regulations will make them impossible to
operate within 10 to 15 years.
We also own and operate a 145-megawatt
combined cycle natural gas-fired generating facility,
and will consider building more. But we can’t rely on
natural gas for long-term baseload supply because of
price volatility that will occur as natural gas becomes
a global commodity. And although cleaner than coal,
natural gas still produces carbon and emits pollutants and will face increasingly stringent regulations.
We strongly support clean energy sources, including wind, solar, micro-hydro, waste heat, biomass
and geothermal. We are aggressively promoting
efficiency and conservation — the cheapest way to
keep energy costs low.
Still, our careful projections indicate that we
will need more stable baseload supply to keep the
economy humming and to meet the needs of energyintensive manufacturing plants, computer server
farms and the electrification of transportation.
Nuclear energy has long been attractive because
it emits no carbon or pollutants and produces massive amounts of reliable, stable energy, decade after
decade. But the promise of a nuclear renaissance
was dramatically interrupted by the March 2011 catastrophic failure at the Fukushima, Japan, nuclear plant.
Today, however, a new generation of small, modular reactors promises a new phase of the nuclear
renaissance. We believe the technology being developed by NuScale Power of Oregon will produce
small reactors that are safe, relatively inexpensive
and simple. SMRs are as different from the enormous large-reactor plants built in the 1960s as a
2014 Prius hybrid is from a1960s-era Cadillac with
its enormous fins and terrible gas mileage.
UAMPS has entered into a teaming agreement
with NuScale and Energy Northwest outlining the
parties’ intent to investigate developing a small
modular reactor project, possibly at the U.S. Department of Energy’s Idaho National Laboratory near
Idaho Falls. It could be the first SMR project in the
world. INL, whose mission is the development and
deployment of advanced nuclear technologies, has
energybiz.com E N E RGYB I Z 5
» BUSINESS EDGE
immense reactor experience, sufficient water resources, access to transmission lines, environmental
data needed in the DOE permitting process, and
strong local political support.
Our project could consist of up to 12 45-megawatt
SMRs (540 megawatts total). Each reactor sits
within a containment vessel measuring 76 feet tall
by 15 feet in diameter. Each reactor and containment
vessel operates independently of the other reactors
inside a water-filled 8 million-gallon water pool that
is built below grade.
The reactor operates using the principles of
natural circulation; hence, no pumps are needed to
circulate water through the reactor. The system uses
the natural physics convection process, providing
the ability to safely shut down and self-cool, indefinitely, with no operator action, no AC or DC power,
and no additional water. The design simplicity allows
the NuScale power module to be factory-built, earthquake-proof, and transported to the site on trucks.
The design makes the plants faster to construct
Betting on
Distributed
Power
BIG ROLE FOR INFORMATION MANAGEMENT
BY MARTIN ROSENBERG
DISTRIBUTED POWER IS coming on like
gangbusters as energy users look for new ways
to bolster reliability in the face of possible severe
weather or cyberattack outages. We recently discussed the trend with Lorraine Bolsinger, president
and chief executive officer of GE Power & Water’s
distributed power business. Her comments, edited for
style and length, follow.
What kind of growth is ahead for distributed generation?
ENERGYBIZ
6 E N E RGYB I Z November/December 2014
and less expensive to operate. The footprint of a
540-megawatt plant is small, only 44 acres. NuScale
recently won a $217 million DOE grant to develop
the SMR and apply for Nuclear Regulatory Commission design certification approval.
No final decision regarding an SMR plant should
be expected before 2017. But the UAMPS board
of directors has directed management and staff to
carefully investigate the possibilities and to monitor
the certification and licensing process. A plant would
not be likely to become operational before the end of
2023, when UAMPS coal plants will most likely need
to be retired.
Publicly owned utilities such as UAMPS are
under tremendous pressure to provide cleaner
energy and reduce reliance on carbon-based fuels.
UAMPS believes it is prudent and wise to carefully investigate SMR nuclear energy options as
possible safe, clean, emission-free and reliable
baseload supply.
Douglas Hunter is general manager of UAMPS.
When you talk
about the distributed power
market you have to define
what you mean because
distributed power is, by its
very nature, quite distributed.
There are oil and gas markets,
gas engines and gas turbines,
co-generation and independent power producers. This
space is enormous. Each one
of those segments ebbs and
flows and will have strong
years and less strong years.
On balance, we are seeing
growth rates of 4 to 5 percent.
It’s growing about 45 percent
faster than the rest of the more traditional energy markets — coal and combined cycle plants.
BOLSINGER
What we need
to think about
and get more
active in is
helping utilities
think about what
they look like in
the future
ENERGYBIZ
How does growth vary around the world?
I was in Jakarta a few months ago
and they are looking at 8 to 9 percent energy growth
rates. The United States is fairly flat. Western Europe
is flat. Argentina and Brazil have a 7 to 8 percent
growth rate. Distributed power is exactly what it is.
Therefore, everything that affects it is also distributed.
If you are going in with a one-size-fits-all strategy, you
will be lost. At GE, I have engines that range from
200 kilowatts all the way up to roughly 110 megawatts.
I’ve got gas turbines and gas engines. I’ve got rich
burn and lean burn, with a full suite of emissions capabilities. That product portfolio lends itself to a very
distributed and divergent kind market that we are in.
BOLSINGER
ENERGYBIZ
In the United States, will microgrids and
distributed generation — and greater grid intelligence — be game changers?
Yes. It is a reality. Rooftop solar and solar in general are here to stay. Energy efficiency could
have an impact of 10 to 20 percent. What we need to
think about and get more active in is helping utilities
think about what they look like in the future. How do
we get them information about generation — not only
about the machines that we have installed but patterns of usage and how that could change over time?
BOLSINGER
ENERGYBIZ
What kind of innovations are you
exploring?
BOLSINGER
The utility now looks at combined heat
and power at an industrial plant as competing gen-
eration. They can invest in that and it becomes part
of their rate base. It helps with the energy efficiency
mandate as well as it helps grow their business.
ENERGYBIZ What are the biggest changes going to
be as you see it?
BOLSINGER
It’s going to be about information management and understanding the Internet of Things.
We need to understand deeply the technologies that
are going to be deployed. I’m thinking in terms of
home efficiency, commercial customer efficiency and
then industrial efficiency. How you do this is a tough
nut to crack. How do you figure out the way you live
with renewables? Today people with solar on the roof
are not paying for their transmission costs. That needs
to be revisited and thought through. How is that going
to work in the future? Because we see that it hasn’t
worked well in Europe. That’s not a good destiny for
our utilities.
A second concern that we’ve talked with utilities
about is resiliency. After Superstorm Sandy there
was a lot of discussion about how long it took certain
customers to get their electricity back on line. There
was a real backlash. The customers were very disappointed that in some places they couldn’t get power
restored for weeks. The only way to guard against that
kind of situation is to have some sort of backup that
is very resilient. There is an opportunity for fast start
power to be located around the country. It is up to the
utilities to figure out what’s the best mix and where
you could have these units installed. Make it part of
the rate base. That way, when it’s necessary, you can
deploy these assets within a day or so.
So when you look at energy storage, do
you think the economics and the technology of that
are going to be solved in the next five to 10 years?
ENERGYBIZ
BOLSINGER
I hope that we figure it out in the
next five years. The ability to store renewables energy
is the Holy Grail. Right now, it’s still too expensive.
I don’t remember the exact numbers, but it’s something like 20 cents a kilowatt? It’s got to get down
to 8 cents before it makes sense.
ENERGYBIZ What is GE doing to reduce the cost of
energy storage?
BOLSINGER
We have a battery business. We are
investing in it. We have hopes that we will get down
that learning curve and that cost curve. It fits very
nicely with our wind business.
ENERGYBIZ
Among your customers you have both
energybiz.com E N E RGYB I Z 7
» BUSINESS EDGE
utilities and utility customers?
BOLSINGER
ENERGYBIZ
Yes.
Which is a bigger business, and which is
growing faster?
It depends on the year. About 40 percent
of our business is the oil and gas business, including
power generation on platforms, pipelines or drill rigs.
The remaining 60 percent is for power generation. I
would say about 60 percent is industrial and 40 percent would be utility.
BOLSINGER
ENERGYBIZ
How many employees do you have
in the United States and globally? What are your
revenues?
We have a total of 5,000 employees
and 2,000 of them are in the United States. Our
power and water revenues total $28 billion annually.
BOLSINGER
ENERGYBIZ
What innovations do you see that will
be transformative?
BOLSINGER
There are new ways of deploying technology. There are new demands because of the growth
of renewables, both wind and solar. These are all dynamic things in an ecosystem that hasn’t changed very
radically. Some of that can be handled with intelligence
— whether it’s thinking about how you turn on and off
loads or how you turn on and off generation. There
are new ways of using technology that maybe weren’t
thought of in the past. Years ago, I never saw gas reciprocating engines operating in utility-sized applications.
We never really thought about them as peaking units.
Now that’s become mainstream. Everyone has to keep
their minds open to new ways of deploying technology
and having a broader portfolio of options as we think
about how the demand and the generation scheme is
going to change over time.
Smart Meters’ Operational Gains
DON’T FORGET THE DATA // BY HOWARD A. SCOTT
SINCE GOOGLE AND NEST
announced the creation of the
Thread Group in early August, many
observers have been asking whether
this latest technology for home
automation will undermine electric
utilities’ efforts to manage communications with devices in the home.
Many utilities got behind Zigbee and
other protocols to serve that role, to
access thermostats and for other
functions within the home. Tens of millions of smart
meters have been installed with Zigbee technology.
The Thread Group announcement clearly competes
with those efforts.
Quite honestly, though I have worked with electric
utilities for 32 years, I never expected them to win
the home automation fight. They have several major
limitations. Utilities don’t have much experience being nimble in the marketplace. Instead, their historical
8 E N E RGYB I Z November/December 2014
focus has been on deploying equipment and services that are solid and reliable and will last for many years. They
then back that up with maintenance
and operational procedures that ensure
high performance. Utilities do that very
well, but doing so does not teach them
to take risks or to deploy cutting-edge
technology, which will be key to kick
starting the home automation industry.
Technologies will change rapidly as
the home automation industry grows. For example,
consider the Internet of Things (IoT), a new network
that will enable connections to small devices and
sensors in homes and within communities. Countless
numbers of devices in businesses and homes, on
the street and possibly even in the air will be communicating over the IoT. In the future, meters and
sensors and other utility equipment will also likely
communicate over that network. They will securely
coexist with hundreds of millions of other devices in
every major city. There are no standards yet for the
Internet of Things, but Zigbee and several other similar technologies are not candidates for that standard
because they don’t support the throughput needed
by IoT. Though utilities will likely make use of this
network, they are minimally involved with IoT efforts
and will probably have little effect on how the IoT
marketplace develops.
Utilities have to justify whether they can include
technology costs in their rate base. Because such
decisions are made in public, they can’t surprise
the marketplace like Google and Nest did. Instead,
they have to go through public meetings to even get
permission to spend ratepayers’ money on a technology. Yes, they can spend non-ratepayer funds on
such ventures, but that money is very dear to utility
management and they are not likely to risk stock dividends and other returns to fund a speculative new
network like the IoT.
The utilities do not have
a good track record when
it comes to entering new
marketplaces. For example, in the 1990s many
utilities thought they could
enter the security alarm
business. At another time
utilities thought they could
become communications
providers and dreamed
of reselling use of the
fiber-optic strands in their
power cables. In almost
every such instance,
these ventures were market disasters.
So what should utilities do about all these smart
meters and about their efforts to engage customers? The obvious answer is not glamorous, but it
makes a lot of sense – smart meters should be used
to improve utility operations: detecting problems,
minimizing repair times, managing work orders, optimizing the work of staff, improving communication
with customers, enabling distributed generation and
controlling net-metering.
Before the next major storm, earthquake, financial
meltdown cyberattack or terrorist attack, we need
all our utilities to operate smart networks. They
The utilities
do not have
a good track
record when
it comes to
entering new
market­places.
need smart meters everywhere feeding a smart
electric grid or smart gas
STORAGE SPLURGE
or water system.
Consumers will spend
more than $625 billion on
And let’s not forget
distributed generation
about all of that data. To
between 2014 and 2024,
according to a report by
enable all those smart apNavigant Research.
plications, the utilities and
Residential customers
their suppliers will need
will be buying solar
panels and other
to hire large numbers of
technologies, causing
data scientists. Very few
a huge upheaval in the
electric power business,
of these people now work
the report said.
for utilities or their suppliers. The utility industry
will have to compete with
investment banks, IT companies and Internet providers for such staff. This won’t be easy because those
industries are highly competitive and know how to
attract the best candidates with big bonuses, an
alternative not readily available to regulated utilities.
Utilities have more than enough work to do to
get ready for the smart grid and to become smart
utilities. Instead of wasting time and money trying to
not be utilities, they should refocus their efforts on
enhancing what they already do so well.
It’s about time that we accept the simple fact that
some other industry will be driving the growth of
home automation. We have a role to play in that process, but we will mostly be followers, whereas highly
inventive firms such as Google will be the leaders.
I am not being negative. Let’s be honest with
ourselves. The move to smart metering and the smart
grid and all that effort to manage data has taught us
how to better deal with new technology, and every
utility that made those changes has clearly improved
its customer service. That’s the real benefit of upgrading our technologies.
Howard A. Scott is managing director of Cognyst Advisors.
Gatherings//
Business Edge
Jan. 25-27
MBA in Floating LNG
London
Jan. 27-28
Nuclear Power Asia
Kuala
Lumpur,
Malaysia
For more information about these and other events, please visit
www.energycentral.com/events.
energybiz.com E N E RGYB I Z 9
» BUSINESS EDGE
Next in Connectivity
THE USER AND THE INTERNET OF THINGS // BY CHRIS BOROSS
THE THREAD NETWORKING protocol was
designed by Nest Labs, Samsung, Silicon Labs,
ARM, Big Ass Fans, Freescale Semiconductor, and
Yale Security to create the best way to connect and
control products in the home.
It’s hard to get multiple devices to talk to one another.
Most of today’s technologies rely on a single device to
communicate with products around the home; thus, if
that device fails, the entire network goes down. Today’s
technologies can also be difficult and confusing to set
up. And because many devices around the home need
to stay connected constantly, they end up draining batteries quickly.
Thread seeks to build a technology that uses and
combines the best of what’s out there and create a
networking protocol that can help the Internet of Things
realize its potential for years to come.
Unlike many existing technologies or IoT approaches,
10 E N E RGYB I Z November/December 2014
Thread uses the latest version
of the Internet protocol built on
open standards and designed
for low-power personal-area
mesh networks. Existing popular
application protocols and IoT
platforms can run over Thread
networks. Thread is not an application protocol or a connectivity platform for many types of
disparate networks.
Thread offers product developers numerous technological advantages over existing wireless standards.
For reliability, Thread offers robust, self-healing mesh
networks that scale to hundreds of devices with no
single point of failure. Devices are ready when people
need them. For security, Thread networks feature secure, banking-class encryption. Thread closes identified
security holes found in other wireless protocols and
provides worry-free operation.
Offering simple connectivity, Thread devices install
with a smartphone, tablet or computer. Consumers
can securely connect Thread devices in the home
to each other and to the cloud for easy control and
access from anywhere. Using low power, Thread
supports battery-operated devices as part of a home
network. This allows the devices that people use every
day, including thermostats, lighting
controls, safety and security products, to be a part of the network
without requiring constant charging
or frequent battery changes.
Millions of existing low-power
personal-area network wireless
devices already on the market
can run Thread with a software
enhancement and no additional
hardware. Thread is designed for
quick implementation and deployment of devices throughout
the home. Because of this, it’s
possible for Thread to be downloaded to smart meters that have
been installed but that have not
yet used their low-power personal-area network radios for any
home-area networking functions
— which is most of them. Once
upgraded, the smart meters can run on the same
Thread network as other connected home products,
including appliances, lighting, HVAC, thermostats,
photovoltaic systems and electric vehicle chargers.
All of these devices will be able to communicate
with each other about your home and its surrounding environmental factors to keep you comfortable
and help you save energy without sacrificing convenience, security or privacy.
The smart meter can also inform devices on the
Thread network about factors related to energy
usage, delivery or production. including demand
response events, export tariffs, load conditions and
time-of-usage pricing.
Consumers who are able to take advantage of all
these benefits will be vastly more likely to opt in and
stay on demand response programs. Thread can play
an important role in making this a reality. Because
Thread focuses solely on the networking layer, one
or two applications layers are required to run over
Thread to make this happen. Fortunately, multiple
available popular application layers can run over the
latest IP networks such as Thread. Some examples
include ZigBee Smart Energy 2.0 and EchoNet Lite.
By virtue of being based on IP, Thread bridges
cleanly over to the home’s Wi-Fi and Internet connection, which means it will be possible to allow
devices on the Thread network a secure connection to cloud services, allowing
better communications between
these connected products and the
outside world. Many of the functions mentioned can be achieved
with equipment and products that
are either available now or already
in people’s homes.
Consumers will be able to simply and securely add and remove
products to the network via a
smartphone, tablet or computer.
Thread’s mesh network technology
provides improved reliability and
coverage anywhere in the home,
and Thread products will be tested
to ensure that they work together
effortlessly and securely right out
of the box. Thread products will
also bear the Thread logo, indicating they have been certified for
quality, security and interoperability, and to help
consumers identify them on the market.
Thread membership will open this fall for prospective members, with the Thread technical
documentation becoming available to members in
late 2014.
The Thread Group will offer multiple tiers of
membership.
Designed for consumers and devices in and
around the home, Thread connects hundreds of
devices to others and to the cloud using real Internet
Protocols in a low-power, wireless mesh network.
The nonprofit Thread Group is focused on making Thread the foundation for the Internet of Things
in the home, educating product developers and
consumers on the unique features and benefits of
Thread and ensuring a great user experience through
rigorous, meaningful product certification.
The nonprofit
Thread Group
is focused on
making Thread
the foundation
for the Internet
of Things in the
home.
Chris Boross is president of the Thread Group.
energybiz.com E N E RGYB I Z 11
Inform
yourself
for the job you
want, not the
job you have.
Whether you’re actively
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NEXT
10th
ANNIVERSARY
energybiz.com E N E RGYB I Z 13
NEXT
The Next
Business Model
UTILITIES ARE NOT OSSIFIED // BY LARRY KELLERMAN
EVER SINCE Pearl Street Station first energized its
central station service to 85 customers deploying 400
lamps in New York City in 1882, the electric utility industry
has survived and thrived by leveraging its competitive
advantages in order to adapt to ongoing technological and
structural change. At its core, those competitive advantages
can be boiled down to three dominant strengths: a significant
economies of scale advantage in an industry
where minimizing capital costs is mission
critical, a significant cost of money advantage
in a highly capital intensive industry, and
possession of an existing integrated, robust
system where reliability is essential.
The combination of these three powerful
factors has enabled incumbent electric
utilities to weather the storms of change in
the past and bring the benefits of electric
power to their customer base both more
economically and more reliably than any realistic massdeployable alternatives. And the preservation of the three
dominant electric utility competitive advantages mentioned
rests on the ability of the traditional regulatory compact to
evolve in thoughtful consideration of the challenges and
opportunities presenting themselves to the industry.
In short, the electric utility’s regulatory compact is based
on the granting of effective monopoly status to jurisdictional
electric utilities to serve specified geographies via an integrated,
grid-based system in return for the utilities being subjected to
regulatory oversight of their operations and, most importantly,
the rates they are able to charge to these jurisdictional
customers. This regulatory compact acknowledges both the
cost-effectiveness and the logic of assigning clear responsibility
for the critical societal infrastructure of electric service.
14 E N E RGYB I Z November/December 2014
On a recent trip to Arizona, I was somewhat surprised to
have passed more SolarCity vans on the streets and highways
of Phoenix than work vehicles bearing utility logos. Clearly,
solar entrepreneurs, leveraging off of rate structures and in
some cases regulatory encouragement, are making headway in
certain markets and challenging historic relationships between
utilities and certain elements of their historic customer bases.
In an interview conducted several days prior
to this writing, Elon Musk predicted “a future
where 65 percent of energy consumption
comes from solar, and the rest from
utilities.” But at the heart of this prediction
is a presumption, one that has proven wrong
over the past century and one that will prove
wrong in the future, that utilities are ossified
institutions, unable and unwilling to embrace
change and adopt new or, more appropriately,
evolved business models and technological
platforms in order to serve their customers.
The regulatory compact upon which the utility industry
has been premised continues to make sense, even as
technology enables a vastly enhanced array of technical
and commercial options. A regulated platform enables the
ability to comprehensively and cost-effectively plan for and
universally deploy advanced-generation, grid-optimized
and customer-facing energy management investments in an
organized fashion across integral geographies. The supply,
delivery and optimization of a system as capital-intensive, as
societally critical and as technologically complex as serving the
electric needs of a society that relies on always-on electricity as
much as our modern civilization does needs to be planned and
managed intelligently.
Musk may or may not be correct that a large fraction of
NEXT
the nation’s power will one day be sourced from the sun.
Where he is more likely off-target is in the underlying logic
that utilities will not be responsive and adaptive enough
to be the parties owning, controlling and supplying a large
fraction of this solar-generated power. The story of the electric
utility industry over its entire history is one in which new or
enhanced technologies requiring huge increments of capital
investments can be deployed quickly and cost-effectively as a
result of the utilities’ ability to do the three things previously
mentioned: implement at scale to reduce capital expenditures,
bring large volumes of cheap capital to the table to reduce the
cost of capital, and integrate these investments effectively into
a robust, integrated system.
If a retail, commercial or industrial customer contracts to
acquire some solar panels, an inverter and a rooftop racking
system, it will cost, on a per-kilowatt installed basis, something
on the order of 2.5 to 3 times what it costs a utility to develop
an economy-of-scale 100-megawatt solar photovoltaic
installation. And that utility-grade solar photovoltaic park will
be developed and installed in a location with a higher, and often
a much higher, solar insolation level than would be the case for
photovoltaics on a customer’s roof. California is classic example
of that. Why should someone nail a small-scale, expensive
photovoltaic system on a rooftop in California, where most
people live near the coast, when the same photovoltaic cell
located in California’s high desert 75 miles inland would
generate twice the kilowatt-hours per year? And when it comes
to operations and maintenance cost, there is no comparison
— the per-unit operating and maintenance cost of a rooftop
installation approaches an order of magnitude higher than the
same type of cost for a utility-owned, grid-scale product.
The next utility business model will be more likely to
incorporate not only new and innovative sources of supply,
but will increasingly involve the utilities’ expanding reach
behind the customers’ meters to further the development of
smart homes, smart offices and the utility-facilitated customer
control of energy use, energy-consuming device functionality
and energy costs. One hundred years ago, utilities were
handing out light bulbs to customers. Tomorrow, they
could — and should — be handing out or charging for
products and services including energy management software,
integrated building management communications and
control systems, vehicle-charging hardware, home and office
battery storage systems and neighborhood-based micro-grid
infrastructure. All of these customer-facing investments, along
with the current crop of renewable supply-side investments,
can be delivered to the nation’s electric power customer base
in a better, lower-cost, more integrated and reliable manner by
utilities as a result of the advantages they possess. By building
off of these advantages, utilities may not need to organically
innovate, but instead can adopt, embrace and invest in the
most customer-friendly, cost-effective technological and
commercial innovations for the benefit of their consumer base
and their owners.
Larry Kellerman is chief executive officer of Quantum Utility
Generation.
energybiz.com E N E RGYB I Z 15
NEXT
The Utility of the Future
PREPARING FOR A CHANGING ENERGY SECTOR
BY ROBERT ARMSTRONG AND IGNACIO PEREZ-ARRIAGA
THE ELECTRIC POWER SECTOR is at a pivotal
crossroads that may lead to revolutionary changes.
With the drive to decarbonize our energy sources continuing
to gain support, the deployment of renewable energy
generation such as solar and wind
may grow significantly. Improvements
in the cost and performance of
distributed energy technologies and
potential breakthroughs in energy
storage are creating new opportunities
for on-site generation and storage. At
the same time, changing patterns of
electricity use — such as from plug-in
electric vehicles — are altering
demands and broadening what it
Armstrong
means to be an electricity consumer;
and new information and communications technologies are
enabling the collection of massive amounts of data and
16 E N E RGYB I Z November/December 2014
unprecedented visibility and control over the power system.
What does this mean for the future of the electricity sector?
Will a new wave of distributed energy systems — comprised
of distributed generation, responsive demand, storage,
electric vehicles, and communication
and control technologies — take
shape? What new business models and
regulations will emerge, and how will
they transform the sector?
The electricity sector will surely
change in the coming years and decades,
but the details of these changes are
largely uncertain, which is a cause for
concern in the electricity industry. With
this in mind, the MIT Energy Initiative
Perez-Arriaga
is setting out to determine how the electric
power sector may evolve and how electricity services will be
provided in the coming decades.
NEXT
We have launched a comprehensive study of the reshape the sector. Incumbent utilities must find innovative
technology, policy and business models shaping the ways to evolve their value proposition, as they capture the
evolution of the delivery of electricity services. We aim to opportunities presented by new distributed systems and
examine several possible scenarios for the
their component technologies.
future of the electricity sector in order to
The utility business models of the
Learn more
inform utilities, regulators, policymakers
future will need to find ways to use
and new market actors attempting to
distributed energy resources such as
about the Utility of the Future
navigate a rapidly changing industry.
rooftop solar, fuel cells and batteries
at mitei.mit.edu
To guide our work, we are building a
to improve the operational efficiency
consortium of stakeholders who can help
and reliability of the grid. This calls for
provide insight into the challenges they are confronting.
utilities to be aware of and responsive to the growing needs
Over the course of a multi-year study, we will seek to and demands of system users.
answer key questions such as:
To explore this evolving electricity landscape, we will
employ quantitative models to analyze the effect of distributed
• What key distributed energy technologies can disrupt
energy systems at three levels. First, we will examine business
the power sector?
model design and management. We will study the internal
• How might distributed energy resources, such as solar optimization of investment in and operation of distributed
panels or plug-in vehicles in garages, affect power system energy systems (DESs) as providers of services with economic
value. Second, we will assess the market price corresponding
operations, markets and regulations?
to electricity services when DES penetration is modest. DESs
• What business models may develop, and how will they can impact and add value to a wide range of energy services
successfully serve both upstream electricity market and markets, including real-time and day-ahead energy
actors and energy consumers?
markets, regulation and reserves, congestion management,
voltage control, ramps, peak shaving or capacity markets.
• What effect could these new business models have on
Third, we will study the effects of greater DES penetration on
incumbent utilities, and what opportunities may exist
the power system, including changes to the generation mix,
for other industry sectors to capitalize on these changes?
wholesale market prices, transmission and distribution grids,
• How will regulation need to evolve to create a level playing and the retail electricity market.
To allow new business models to be successful, regulations
field for both distributed and traditional energy resources?
must enable utilities and other market actors to meet changing
• What are plausible visions of the future of the power needs and demands. For instance, regulations should ensure
sector, including changes for incumbent utilities, new that utilities are adequately compensated for and incentivized
electricity service providers, regulators, policymakers to make investments to accommodate distributed generation
and consumers?
where it is beneficial for system users. Likewise, regulators
must provide efficient and fair price signals for distributed
In preparation for this multi-year study, we completed
energy resources and ensure that energy market rules create
an initial assessment of the drivers of change in the electric
a level playing field that allows distributed and centralized
power sector that underscored several key observations.
energy sources to compete. If regulatory innovation does
Technological improvements in performance and cost,
not keep pace with the changing nature of the electric power
as well as in sensing and control, are transforming the
system, large inefficiencies will result.
electricity distribution sector into one that is more adaptive
The integration of distributed energy resources may
and responsive. New technologies such as microgrids, virtual
well reshape the provision of electricity services. How the
power plants and smart charging systems may drive or
sector adapts to changes over the next decade will define
emerge from a more distributed paradigm.
the landscape for incumbent utilities, create roles and
People have compared the nascent changes in the power
opportunities for new entrants, and transform the way each
sector to the replacement of landlines by cell phones.
one of us receives and uses electricity in our daily lives.
Although this analogy is certainly imperfect, it is fair to say
that the development of distributed energy technologies Robert Armstrong is director of the MIT Energy Initiative, and
Ignacio Perez-Arriaga is a visiting professor at MIT and chairman
may likewise give rise to new business models that could of its Utility of the Future project.
energybiz.com E N E RGYB I Z 17
regions, the United States once again
became the world’s No. 1 oil producer.
It was the Marcellus/Utica play, however, that redrew the energy map in the
last decade.
Natural gas is now so plentiful and
inexpensive that:
• The United States is regaining manufacturing jobs — particularly in the
chemical and fertilizer industries —
for the first time in decades thanks
to our energy advantage.
“A Decade of Change:
One Gas Well Quietly
Started It All”
I
t goes with the neighborhood. In
1821, engineers drilled the first commercial gas out of Devonian shale
near Fredonia, New York and made history. About 190 years later and roughly
a hundred miles south, drilling at a
Pennsylvania site began and would be
cited later as another historic moment in
the development of global energy.
Although located in the same geographical area, the more recent drilling
went far below the upper Devonian layers and into the Marcellus shale deposits.
It also employed the vastly improved
drilling techniques of horizontal drilling
and hydraulic fracturing — “fracking” —
which unleashes oil and gas trapped in
the impermeable rock underground.
As world events go, it was a muted
18 E N E RGYB I Z November/December 2014
affair. No bands. No parades. Still, the
Marcellus and related Utica shale natural
gas formations — now the largest such
fields in the nation — would undo decades’ worth of energy assumptions and
the geopolitical calculations that went
with them.
Yes, there have been other important
developments in energy over the last
decade. Renewable and distributed generation experienced significant growth.
Hybrid and plug-in electric vehicles
rolled off the assembly lines. The grid
became “smart.” Practically every device
we now touch is either plugged in 24/7
or rechargeable.
Other gas-producing basins have
proved important as well. And, when gas
drilling yielded to oil drilling in many
• Instead of being dependent upon
overseas nations to supplement our
natural gas supplies, we are ready
to export a limited amount. The
exports will create thousands of jobs,
reduce our trade deficit, help the
environment, and strengthen our
hand in international affairs.
• Coal’s role as a backbone fuel for
power generation has declined
somewhat, resulting in fewer greenhouse gas emissions and improved
environmental performance.
All of this comes with responsibilities.
Russell Gold, a journalist and author
who recently published “The Boom,”
nailed it on one major concern: We have
to be as smart about what we do above
ground, he said, as we have been below it.
That means we must adopt strict industry-wide standards on fuel extraction
and transportation. It applies equally
to safety, reliability and environmental
stewardship.
On balance, however, it has been a
good decade for America when it comes
to energy. We can thank a natural gas
well in a quiet part of southwestern
Pennsylvania, drilled into a shale formation that virtually no one had heard of
10 years ago.
Thomas F. Farrell II is chairman, president and CEO of Dominion, one of the
nation’s largest producers and transporters
of energy.
10TH AN N IVE RSARY THOUG HT LE AD E RSH I P • S P ON SOR E D BY DOM I N ION
MILITARY VETERANS LIKE DOMINION LINEMAN DEVON MCFADDEN
ARE REMOVING ONE PROUDLY WORN UNIFORM FOR ANOTHER.
Supporting our military—when they’re abroad and when they come home—is an important part of who we are. That’s one of the reasons we’ve helped pilot
the national Troops to Energy Jobs program, which links military veterans to jobs in the energy sector. We’re proud that our company’s commitment to
service members and their families was recognized when we received the Secretary of Defense Employer Support Freedom Award—the highest honor given
to companies employing military veterans. It’s also led to Dominion being named a “Top 100 Military Friendly Employer” five years in a row. But what we’re
most proud of are the dedicated men and women who’ve served our country so bravely. We’re honored to stand behind them—and work beside them.
dom.com
NEXT
The Water Energy
Dependency
UNLOCKING SMART CITIES // BY SUSAN N. STORY
WE ALL CONSUME a great deal of water and electricity
every day. And while most of us know the importance
of saving both energy and water, we rarely consider how much
our personal lives and our economy are affected by them or
how much they are affected by each other.
Water and energy are intimately
interrelated — water is required for
producing energy and generating electricity,
and electricity is required to treat and move
water. For example, it takes 13 gallons of
water to produce every gallon of gasoline
we put into our vehicles. The hydraulic
fracturing of a shale gas horizontal well
requires around 5 million gallons of water,
varying with depth. U.S. thermal power
plants withdraw 200 billion gallons of water a day, with the
majority of it efficiently returned to waterways after being
used for cooling. Drought conditions, however, can affect
water supply as well as discharge volumes.
In addition to the 4 percent of electricity in the United
States used for collecting, treating and moving water and
wastewater, the Energy Star program estimates that about
$4 billion is spent annually for energy costs to run drinking
water and wastewater utilities.
The Department of Energy’s Water-Energy Tech Team
recently issued a new report called “The Water-Energy
Nexus: Challenges and Opportunities.” The report frames
an integrated challenge and opportunity space around the
water-energy nexus for the DOE and its partners, laying the
20 E N E RGYB I Z November/December 2014
foundation for future efforts. As the first U.S. water utility to
join the Environmental Protection Agency’s Climate Leaders
program, American Water already has several efforts underway
that address the DOE’s six pillars — from investing in smart
water management to pioneering a smart
water grid, from improving pump efficiencies
to developing new patented technologies to
reduce electricity and added chemicals in
wastewater treatment, and from investing in
renewable energy to developing new solutions
for water reuse and recycling.
A few years ago, American Water formed our
innovation development process to specifically
look for new technologies and accelerate their
validation and acceptance within the water
industry. We have deployed various technologies and practices
to help customers use water with greater efficiency, prevent
leaks and main breaks, save energy and, ultimately, ensure that
customers have clean, safe, affordable and reliable water and
water services.
From a technology perspective, we are working on a smart
water grid — not just pipes and valves, but integrating flow
monitors, pressure monitors, smart meters and SCADA
devices so that we can both monitor our water to ensure it’s of
the highest quality and reliably delivered and enable predictive
maintenance to stop leaks and water losses before they occur.
Reducing water pressure reduces leakage. American Water
is a partner in a two-year award from the Israel-U.S. Binational
Industrial Research and Development Foundation along with
NEXT
Stream Control, an Israeli startup company, for developing an
advanced pressure-management system. International efforts
to reduce leakage have confirmed that reducing excessive
pressure not only reduces the volume of leaks through pipes
but also reduces the frequency of pipe failures.
Additionally, we signed an agreement with a company
that developed a standardized communications platform
that creates interoperability among meter manufacturers. In
addition to seamlessly integrating different types of meters, the
platform is able to receive many kinds of data from the water
distribution network, including pressure, water quality, leak
detection and flow, not just meter data.
Reducing energy use also plays a role in saving water.
American Water is partnering with Enbala Power Networks
to use demand-response practices at our water pumping
stations. This way, we can work with local electric utilities
to slow down or speed up pumping as part of smart grid
programs, returning power to the grid during peak periods.
A successful pilot program at Pennsylvania American Water’s
Shire Oaks Pumping Station offset the site’s total energy bill
by 2 to 3 percent.
Another example of how we are optimizing the energy
efficiency of water involves a process called NPXpress,
patented in September 2011, which dramatically
reduces the amount of energy needed for aeration
activities at wastewater treatment plants. American
Water has been awarded three patents for NPXpress
to reduce aeration energy consumption by up to
50 percent and supplemental carbon source by 100 percent.
When it comes to water supply, water providers across
the country need to plan for their systems to be sustainable
in times of threatened supply. Over 90 percent of the treated
wastewater in the United States is not recycled. American
Water sees this water as a valued resource and has been at
the forefront of research to study and promote reuse. Since
2006, American Water has conducted 11 research projects
sponsored by the WateReuse Research Foundation. These
projects have examined issues dealing with water quality,
public health, best management practices, treatment
processes and energy efficiency.
American Water also operates reuse systems in five high-rise
buildings in Battery Park City, Manhattan. It employs segregated
piping systems to collect, treat and recycle wastewater and
storm water for a variety of purposes. By reusing wastewater for
non-potable applications, these buildings’ potable water needs
are reduced by nearly half. Together, these five buildings save
approximately 56 million gallons of water per year.
In addition, American Water operates the water reuse
system at Gillette Stadium, home of the New England
Patriots. The facility’s double-piping system treats recycled
wastewater from the stadium, as well as from adjacent office
complexes and stores, saving 250,000 gallons of water for
every major event.
Reclaimed water need not only be confined to wastewater
or stormwater; highly saline sources such as ocean or deep
groundwater can also be treated. The process of water reuse
can involve desalination, whereby the salt content is removed,
and membrane filtration, whereby contaminants are removed
via a membrane process. Furthermore, these technologies are
continually being streamlined, becoming more cost effective
and energy efficient.
It is our job in the water industry to remember that what
we do changes lives. It provides for health. It enables energy
production and electricity generation. And we must provide
clean, safe, affordable and reliable water to our customers today,
tomorrow and into the future. Finding ways to use water and
energy more efficiently is an opportunity to do just that.
Susan N. Story is president and chief executive officer of
American Water.
energybiz.com E N E RGYB I Z 21
NEXT
Pursuit of
Integration
RE-ENVISIONING THE GRID // BY CLARK W. GELLINGS
IF SOCIETY HAD THE LUXURY of starting from
scratch to design the grid, the best option would be to
use architecture that applies an integrated approach. An
integrated grid enables the optimal combination of local
generation, energy storage, energy efficiency and new uses of
electricity integrated with central generation and storage to
provide society with reliable, affordable, and sustainable
electricity. This approach enables resources
and technologies to be deployed
operationally to realize all potential benefits.
It requires a modern grid characterized by
connectivity, rules enabling interconnection,
and innovative rate structures that enhance
the value of the power system to all
consumers. The integrated grid approach
allows society to adopt the most valuable
generation, storage, power delivery and
end-use technologies, tailored to meet local
circumstances.
Today’s grid is interconnected electrically from central
generation through transmission to the distribution system
where power is fed to consumers. In today’s grid, installations
of distributed energy resources are simply connected and not
actually integrated. Optimization of generation resources is
primarily done at the bulk power system level. Integration
22 E N E RGYB I Z November/December 2014
enables distributed energy resources to be used in concert
with central station resources. This maximizes the value of
the installed distributed resources and allows for them to be
operated in a way that supports the power system overall.
In the integrated-grid approach, the distribution grid is
strengthened to enable a higher penetration of local generation
sources, but integrated with central generation resources for
the purpose of providing high reliability and
high-quality power to all consumers. The use
of an integrated grid would lower overall costs
to consumers.
Connectivity is critical for achieving
the lower costs while meeting consumer
needs for electricity. To embrace wide-scale
connectivity, the re-envisioned grid would
need energy storage, sensors, communication,
computational ability and enhanced controls.
This combination will require additional
technologies over and above today’s
requirement, whereby the system responds to interconnection
needs on a case-by-case basis. The power delivery system
provides benefits beyond simply delivering energy, and
those benefits become more pronounced for consumers who
generate or store some of their own electricity.
At a minimum, the re-envisioned grid differs from today’s
NRG
energybiz.com E N E RGYB I Z 23
NEXT
system by including larger conductors and more capable
transformers on the distribution system. It has sensors
and communication and computational devices that will
need to be installed along with an enhanced distribution
management system to give utilities situational awareness
of a more dynamic electrical environment than is the case
with the current grid. And the re-envisioned grid needs a
substantial amount of distributed energy resources together
with a means to control the output, frequency response,
voltage and reactive support from local generation and
storage. Without this control, the power system would not
be able to operate reliably.
To enable the re-envisioned grid’s functionality, the use of
several key technologies would be required.
Wind and photovoltaic power generation systems need
smart inverters, voltage ride-through, frequency ride-through
and volt-ampere reactive power support.
The re-envisioned grid needs enhanced distribution
management systems that allow real-time adaptive protection
and control of distribution systems and all connected local
resources. These systems have information and communication
technology, including a robust telecommunications network
with high-speed data processing to enforce interconnection
rules overlaid with enhanced cybersecurity. They have a
24 E N E RGYB I Z November/December 2014
distributed control architecture that uses the information and
communication technologies for monitoring and control and
to communicate instructions to devices.
Appropriate energy storage and distributed generation
enable stand-alone installations and microgrids. Other systems
used with the re-envisioned grid enable utilities to integrate
local generation, storage and end-use devices, including energy
management systems and distribution management systems.
Additional key technologies that enable the re-envisioned
grid include topologies that encourage electrification based on
their societal benefits, an expanded infrastructure that includes
sensors, data analytics and communications together with the
means to manage the future infrastructure, and technologies
that integrate the consumer into the power delivery system
through services, social media and apps.
The integrated-grid approach could ensure the best use
of scarce societal resources when deployed in combination
with the functionally essential technologies, such as local
generation and smart distribution, and when supported by
enabling rate structures and interconnection guidelines. In
addition, integrating local and central resources provides
greater opportunities to enhance the value of all resources.
Clark W. Gellings is a fellow with the Electric Power Research
Institute and past winner of the EnergyBiz KITE Lifetime Achievement Award.
A Patch Is Not
the Answer:
U.S. Needs Permanent, Long-term Export-Import Bank Authorization
to Create, Sustain Jobs
T
he global marketplace is not a
level playing field. That’s why the
Export-Import Bank is essential
for American business.
While Westinghouse is pleased that
Congress acted responsibly by not allowing the U.S. Export-Import Bank to
expire at the end of September, the U.S.
needs a permanent solution with longerterm authorization.
Thousands of American manufacturing jobs hang in the balance when U.S.
companies — large and small — seek
to do business internationally against
competitors who are subsidized by their
governments.
The Export-Import Bank is the export
credit agency of the United States. Since
it was established in 1934, the Ex-Im has
helped American companies compete
with government-supported competitors
overseas on the basis of price, performance and service.
Throughout its history, the Ex-Im
has financed global projects that have
created hundreds of thousands of U.S.
jobs. Beyond that, Ex-Im returned over
$1 billion to the U.S. Treasury in 2013
alone, a return on investment unsurpassed in any federal financing program.
At Westinghouse, the need for longterm authorization of the Ex-Im Bank is
real to thousands of American workers.
Four Westinghouse AP1000 nuclear
power plants now under construction
outside of the United States are creating more than 20,000 American jobs
in no less than 20 states, a number that
will surely increase as we pursue other
nuclear plant projects in Brazil, the
United Kingdom, Bulgaria, Poland and
Asia. This global market is valued in excess of $740 billion over the next decade,
according to the U.S. Department of
Commerce.
Like other U.S.-based companies,
Westinghouse is the world leader in
its technology. Nonetheless, without
Ex-Im financing in emerging economies
around the world, we would be at a
severe competitive disadvantage.
Why? Because Westinghouse and the
U.S. nuclear power industry compete
in the world of multi-billion-dollar
infrastructure projects and in an industry where most of our competitors are
owned or subsidized by their governments. Nations such as Russia, the
Republic of Korea and France provide
their national nuclear energy suppliers
with multiple forms of support, including strong trade finance.
The loss of Ex-Im Bank for companies like Westinghouse that compete
against government-owned companies
would be unilateral U.S. trade disarmament. Without Ex-Im, companies like
Westinghouse would not be able to
compete against government-subsidized
competitors for multi-billion-dollar
projects that create hundreds of thousands of well-paying U.S. jobs. The
impact to small businesses and manufacturers that work with the likes of
Westinghouse would be devastating.
The Ex-Im bank fills the financing
gaps, offering loans, loan guarantees and
insurance that leverage private finance
in pursuit of U.S. commercial and
strategic interests. When the financing
gaps are filled, what’s left on the table are
technology and commercial terms—and
that’s where the likes of Westinghouse
outshine government-run companies.
In a few short weeks, our country
will again face the decision of whether
to be a leading technology exporter, or
instead, choose to lose thousands of
jobs and economic benefit. Losing the
Ex-Im bank would cost thousands of
U.S. jobs in the short term. Long-term,
the economic consequences would be
far greater.
David Howell, senior vice president,
Automation and Field Services for
Westinghouse Electric Co., headquartered in
Cranberry Township, Pa. (USA).
energybiz.com E N E RGYB I Z 25
10TH AN N IVE RSARY THOUG HT LE AD E RSH I P • S P ON SOR E D BY WE S TI N G HOUSE
NEXT
Ramping Up
Renewable
Electricity
EVER MORE RELIABLE POWER
BY AMORY B. LOVINS
MANY PEOPLE IN THE electricity industry long
thought that the two renewable sources of electricity
that vary widely over time — wind power and solar
photovoltaics — could provide only a few percent of total
generation without endangering reliability. Those who still
believe this now face increasingly severe reality tests.
Germany, for example, has installed 37 gigawatts of
photovoltaics, and its streamlined installation at high volumes
cut system costs to about half the U.S. average—spurring U.S.
installers to match or beat those savings.
Germany and other countries power their grids with
astonishingly high fractions of renewable generation by
combining five techniques: leveraging
diverse
generation
sources
across
interconnected regional and national grids,
improving renewables’ forecasting and
predictability, integrating dispatchable
renewables, adding distributed storage, and
leveraging demand response.
In the first half of 2014, German
renewables produced 28.5 percent of gross
and 31 percent of net domestic electricity
consumption. In Denmark, renewables
produced an even more impressive
47 percent of 2013 domestic electricity consumption. Wind
power alone produced 33 percent of Danish electricity use
for all of 2013 and 54.8 percent for December. These two
countries had Europe’s most reliable electricity, about 10 times
more reliable than America’s. Spain generated 45 percent
renewable electricity in 2013, and Portugal, an astonishing
58 percent. Scotland generated electricity 46 percent
renewably. These latter countries did so without the benefit of
26 E N E RGYB I Z November/December 2014
Denmark’s and Germany’s more extensive interconnections
to the larger European grid.
Meanwhile, Xcel Energy in Colorado has briefly surpassed
60 percent from wind power, more than five times wind’s
average share in the state in 2012.
Grid operators adapted familiar techniques
refined over the past century for managing the
intermittence of big thermal power plants,
which are typically unavailable about 10 to
12 percent of the time. Grids routinely back
up failed or temporarily non-operating plants
with working plants from a reserve margin of
extra capacity, some of it spinning ready for
instant use. The grid can similarly manage the
less abrupt and more predictable variations
in output from diversified portfolios of wind
and solar. Thus integrating either fueled or
renewable generators into the grid incurs integration costs;
there’s no reason to suppose renewables’ integration costs are
bigger, though they’re usually the only ones mentioned.
Modern photovoltaics and wind power are reliable
generating technologies, and with all generators working
together to serve the grid, it is possible to synthesize steady
output from a diverse portfolio of varying renewables.
Moreover, forecasting is so good that photovoltaic and wind
NEXT
No instrument
plays all the
time, but the
ensemble
continuously
produces
beautiful
music.
power are often more predictable than electricity demand. For
example, throughout a stormy winter month, the French grid
operator reported actual national wind power generation very
close to its forecast one day ahead. The small remaining errors
disappeared in the hours before actual dispatch.
Modern grid operators start with geographically diverse
wind and photovoltaic power and add dispatchable renewables
such as big and small hydropower, marine energy, solarthermal-electric plants, geothermal, and burning biomass,
biogas or wastes, including natural gas in fuel cells.
Another key flexibility resource is distributed electricity
storage. With smarter grids, car charging can be bidirectional,
drawing some peak power back from the car. Tesla, the world’s
largest battery manufacturer, offers efficient, reliable and
economical distributed storage modules for buildings and
factories. And firms like SolarCity and Solar Grid Storage
offer distributed storage to complement solar photovoltaics.
Operators can also integrate with demand response,
which controls or influences when customers use electricity
for particular tasks. Many building services and industrial
processes can use smart controls unobtrusively to make
demand surprisingly flexible, artfully combining flexible
demand with diverse supply to make the grid agile.
If other places or situations require still more resources
to ensure reliability, the next and costlier options would
include bulk electricity storage via compressed air in
underground caverns, or pumped hydroelectric storage,
or hydrogen, or conventional or flow batteries. However,
a largely or wholly renewable power system, well designed
and run, may need less storage and backup than utilities
have already bought to manage the intermittence of their
big coal and nuclear plants.
The National Renewable Energy Laboratory’s 2011 REFS
study showed how to run an 80 to 90 percent renewable
U.S. grid in 2050 “in combination with a portfolio of
flexible electric system supply- and demand-side options”
while meeting demand on an hourly basis in every region
of the United States, using bulk storage equivalent to only
11 percent of renewable capacity. A cost-neutral but riskreducing 80-percent-renewable, 50-percent distributed
power scenario could do the same on an hourly basis with
total storage equivalent to 13 percent of renewable capacity,
including 69 gigawatts of ice storage and 44 gigawatts of
batteries. Bulk electrical storage, including existing pumped
hydro, totaled only 5 percent.
The more we let all options compete, the more we can
discover how far customer-centric, distributed supply- and
demand-side resources can deliver reliable and resilient
electrical services at the least cost. The long-claimed low limits
to renewable power supply were imaginary. As my colleague
Clay Stranger says, operating a largely or wholly renewable
electric grid reliably is akin to the way a conductor with a score
leads a symphony orchestra: No instrument plays all the time,
but the ensemble continuously produces beautiful music.
We’re a long way globally from the average renewable
fractions achieved in five European countries and two U.S.
states. But in each of the past three years, these sources have
obtained a quarter-trillion dollars of private investment
worldwide and added more than 80 gigawatts, both promising
trends. Global clean-energy investment fell 11 percent in
nominal terms during 2013, but in 2012, capacity additions
rose 6 percent because costs fell even faster. In 2013, fourfifths of the investment drop reflected lower cost, not lower
capacity additions.
Bloomberg New Energy Finance expects solar power
to compete with retail grid power in three-fourths of world
markets in another year or two. The first part of the renewable
power revolution — scaling production — is already well
underway. Next comes the interesting part: ensuring that
all the moving parts mesh properly, and that incumbent
operators’ obsolete business, revenue and regulatory models
adapt to new and profoundly different market realities.
Amory B. Lovins is the cofounder, chief scientist and chairman
emeritus of the Rocky Mountain Institute.
energybiz.com E N E RGYB I Z 27
Unlocking the
Full Potential
of the Utility Fleet
P
ortfolio optimization is a key
to sustainable, affordable and
reliable power systems. This
has never been more relevant than it is
for utility systems tasked with meeting
aggressive renewable targets through
a renewable portfolio standard (RPS)
or by other means. Renewable energy
has tremendous potential to improve system efficiencies and reduce
greenhouse gas emissions, but it is
no simple task for utility systems to
absorb large amounts of wind and
solar energy for a number of reasons.
Wind and solar are variable energy
resources. The energy they provide is
intermittent, not entirely predictable,
and rarely in phase with demand.
They have low variable cost and are
often assured priority dispatch, which
means load is first served by renewables. The remaining load, called net
load, must be balanced in real time by
the remainder of the utility fleet. The
term renewable integration largely involves harmonizing energy provision
from renewable and thermal assets in
a reliable fashion.
The Challenge of a Variable
Net Load
Balancing a fleet to meet a variable and
somewhat unpredictable net load is not
so straightforward but can be vastly
improved with greater flexibility than
traditionally found in utility portfolios.
For example, in California (as in other
places) solar generation typically falls
prior to the evening peak. This becomes
most problematic in shoulder months
when peak loads are at their lowest,
necessitating a relatively large net load
ramp at this critical time (e.g., the infamous “California Duck Chart”).
The greater variability of net load causes
problems because many utility systems
have a thermal fleet dominated by
steam boilers and gas turbine combined
cycles (GTCCs). Often these units were
installed years before RPS standards were
implemented, and were not designed
with highly cyclic operation in mind.
When these units are expected to balance
renewable energy, grid operators must
weigh the significant start costs (tens
of thousands of $$ per start), long start
times (30-180 minutes), long minimum
Joseph Ferrari
Market Development
Analyst
Mikael Backman
Market Development
Director
up and down times (4-8 hours), and
limited ramp capacity in addition to the
increased wear and tear of these plants
against the need for sufficient ability to
balance renewables in real time. Simply
put, the systems are not optimized for
renewable integration. This results in
increased operational costs and excessive
capacity deployment relative to the type
of fleet that would emerge if resource
planners were tasked with designing the
ideal, optimized system in the first place.
While utilities cannot re-design their
entire portfolio, there is room for
improvement moving forward with the
help of better resource planning and
improved generation technology performance. Many utilities conduct long term
28 E N E RGYB I Z November/December 2014
THOUG HT LE AD E RSH I P - S P ON SOR E D BY WÄR TS I L Ä
integrated resource planning (IRP) that
includes load growth, asset retirements
and compliance with RPS and other
legislation such as CO2 targets. Due to the
prevalence of low cost shale gas in North
America, the majority of new thermal
assets considered are gas-fired. Flexibility
of the gas fleet is a key element of renewable integration, but the types of gas-fired
capacity additions are dependent on the
options considered and how they are
analyzed in the IRP process.
Filling the Need for New Capacity
Utility IRP planning efforts may be compromised due to legacy use of capacity
expansion models (CEMs) that rely on
what is known as the load duration curve
(LDC). The LDC basically takes the raw
net load profile over time and sorts it
from highest to lowest, providing insight
into the traditional bins of baseload,
intermediate and peaking requirements.
The LDC simplification is used by the
majority of commercially available CEM
software packages to choose the type and
amount of additional capacity to meet
demand into the future. But it does not
address the capabilities these assets need
to optimize delivery of net energy, as the
LDC discards all information on ramping,
cycling, starts/stops and part load operation. Capacity suggested by the LDC
approach is quite capable of meeting en-
Figure 1. Load and net load for a shoulder month day for a utility in compliance with 33% RPS; the evening load ramp is 1.5 GW/hour, but the thermal fleet must provide for the larger, 6-7 GW/h net load ramp.
ergy needs, but is not assured to reliably
balance net load. As a consequence, utilities, grid operators and market regulators engage in a number of after the fact
fixes, where lack of dynamic capability is
addressed by the installation of peaking
capacity, chosen through mechanisms
outside of the Capacity Expansion plan.
These can be considered capability-driven capacity additions.
Chronological Modeling versus
the Traditional Approach
One approach advocated for providing
a systematic framework that includes
the dynamic requirements upfront is
called Chronological capacity expan-
sion modeling (Chrono). The Chrono
method holds promise in terms of being
able to eliminate the need for multiple
steps in the capacity analysis, bringing
all capacity expansion under a broader,
integrated optimization paradigm.
Chrono uses net load data directly
within the optimization algorithms for
new build decisions over the planning
horizon of the IRP process. New power
plant assets suggested by Chrono thus
have the required capacity to meet energy needs as well as the dynamic capabilities to meet the challenges of a variable
net load, both of which are needed for
reliable renewable integration.
Figure 2. Data used by LDC and Chronological modeling frameworks for the same day.
energybiz.com E N E RGYB I Z 29
THOUG HT LE AD E RSH I P - S P ON SOR E D BY WÄR TS I L Ä
Two Types of Gas Fired Assets:
Gas Turbines and Internal
Combustion Engines
Gas fired simple cycle assets typically considered for flexibility include aeroderivative gas turbines (GTs) and industrial GTs.
Another option gaining traction in the
industry is medium speed utility scale (50
to 500 MW) gas fired internal combustion engine (ICE) plants. These plants are
based on parallel arrangement of multiple
10 or 20 MW units. Capital costs for ICE
plants are equivalent to aeroderivative GTs
while they have substantially higher efficiencies, faster start times and have no cost
or maintenance impacts from frequent
starting and stopping. Ramp rates are on
the order of 100%/minute (Pmin to full
load in less than one minute). The benefit
of the modular approach is twofold; first,
capacity needs can be met exactly, thus
avoiding overbuild; second, a multi-engine plant can maintain its high efficiency
even at part load. In load following mode,
all engines back down simultaneously.
This allows for quick response spinning
capacity for contingency and operational
reserves. In efficiency mode the plant
modulates output while cascading engines
on and off as needed and maintaining
close to full load efficiency. Full plant
output can be reached within minutes by
starting the remaining engines.
Utility-scale ICE plants provide flexibility
in plant sizing and in operations. They
are also a well-established technology, designed to meet the most stringent environmental guidelines while using no process
water. Wärtsilä, the leading supplier of medium speed ICE engines, has over 56 GW
of installed capacity for power generation,
with over 2.5 GW installed in the USA.
Figure 3. Plant efficiency as a function of load, assuming sea level, 77F.
Chronological Simulations
Show the value of Modular,
Flexible ICE plants.
To assess the benefits highly flexible
ICE plants can bring to a utility fleet,
we performed a comparative, long
term study using Chronological
capacity expansion modeling. The
PLEXOS™ software package was used
for the analysis. The portfolio chosen
was a representative west coast US
utility with 27 GW installed capacity,
modest load growth, more than 6GW
of retirements and expected to comply
with a 33% RPS standard several
years into the planning horizon. Net
load challenges were evident for this
portfolio, with net load ramps in excess
of 6 GW/h in shoulder months when
full RPS compliance is achieved.
Two scenarios were analyzed, a base
and a flex. For the base scenario new
build options consisted of 50 and 100
MW class aero GTs, 200 MW class
industrial GTs, and 300 and 600 MW
class GTCCs. The flex scenario included
all of the GT-based options in the base
scenario, as well as two ICE options us-
ing plants with 10 or 20 MW units. All
other factors across the simulations were
kept equal for both scenarios.
The flex scenario yielded 870 MUSD
savings NPV over the base, with the majority of savings coming from operational costs. The savings and improvements
can be separated into a few broad areas;
1. Portfolio optimization: By injecting more flexible capability with zero
(maintenance-based) start costs and
high operational ramp rates, combined cycle assets can generate at a
more stable dispatch that optimizes
the fleet generation cost.
2. Efficiency improvements: In addition to the overall portfolio improvements, ICE plants are more efficient
than any GT.
3. Improved import/export net balance: The lower marginal cost of
the portfolio reduced imports from
neighboring providers and increased
exports which had a positive portfolio effect.
30 E N E RGYB I Z November/December 2014
THOUG HT LE AD E RSH I P - S P ON SOR E D BY WÄR TS I L Ä
4. More capital efficient build out:
The smaller increments of the ICE
based assets reduced overbuild situations as they can be tailored to the
exact requirements while maintaining economies of scale, e.g. plants
can be built for 160MW or 180MW
with the same cost per kW installed.
5. Less capacity needed: Generally
the greater the portfolio flexibility,
the less capacity needed to meet
net load fluctuations. In addition,
modularity allows for exact matching of capacity needs.
6. CO2 reduction: Dispatch results
show that the flex fleet generates
more GWh, but consumes less fuel
than the base fleet, reflected by a
1.5% reduction in CO2 emissions.
So the portfolio optimization and
efficiency improvements show that
increased flexibility also reduces the
carbon footprint.
In the flex scenario 630 MW (9%) less
new capacity was needed as the ICE options allowed for optimal capacity instal-
lation by avoiding overbuild situations,
and capitalizing on the fact that a portfolio with greater flexibility needs less
capacity as it can provide more capability
per installed MW. ICE plants played a
larger role in the flex scenario in absorbing net load fluctuations and freeing
GTCC capacity to provide energy. This
is particularly important because GTCCs
represented half of the non-renewable
capacity in the portfolio in both scenarios. In the flex case the capacity factor of
combined cycles increased (68% to 71%),
and the number of GTCC starts was cut
by 50%. This is the core of the portfolio
optimization; the enhanced flexibility of
ICE capacity (modular capacity, excellent
part load efficiency, zero cost fast starts
and fast-ramp capabilities) allows these
power plants to provide greater amounts
of balancing services with less capacity
than alternatives and at a lower cost. This
allows for increases in system efficiency
as assets more suitable for base load are
now able to provide greater amounts of
energy, as opposed to balancing services
which require part load operations and
costly starts and stops. These system efficiency gains resulted in a lower marginal
cost of energy and also yielded a net
reduction of greenhouse gas emissions
(CO2) as well.
Summary
These findings highlight the importance in using the right modeling
approaches (Chronological vs. LDC),
as the Chrono approach holds promise in bringing the flexibility needs
required for renewable integration
into the fold of a single integrated
approach as opposed to a multi-step,
non-optimal process. They also shed
light on the importance of including a full suite of commercially
available generation technologies
in the integrated resource planning
effort. Inclusion of modern internal
combustion engine plants in the suite
of new build options can yield future
fleets that are more flexible and
reliable, optimize renewable integration, and deliver both emissions and
ratepayer savings.
The modular and flexible approach of
Wärtsilä ICE capacity is an example
of Smart Power Generation; cost
competitive, flexible, efficient and
clean capacity, ultimately designed
to unlock the full potential of the
sustainable, affordable and reliable
Smart Power System.
Learn more about the capacity expansion analysis described here, additional
system optimization studies and in
general how Wärtsilä can assist utilities
at www.smartpowergeneration.com.
Figure 4. New build capacity for the Flex scenario 628 MW (9%) less than in Base scenario.
energybiz.com E N E RGYB I Z 31
THOUG HT LE AD E RSH I P - S P ON SOR E D BY WÄR TS I L Ä
» TECHNOLOGY FRONTIER
Solar-powered Microgrid
GRID RESILIENCY // BY JOSH CASTONGUAY
AT GREEN MOUNTAIN POWER, we recognize the
traditional role of a utility is changing, and we are
focused on a new way of doing business to empower
customers, while increasing resiliency and improving
safety during storms.
Part of transforming the energy future includes a new
innovative solar project in Rutland, Vermont. At our Stafford Hill Project, Green Mountain is taking brownfield site
not suitable for development and using it for an innovative solution for grid resiliency and renewable energy integration. The Department of Energy believes this project is
the first solar battery storage project on a landfill.
The Stafford Hill project combines 2 megawatts of
solar with 4 megawatts of energy storage, all utilizing
common inverter equipment, further improving efficiency. The energy storage component is comprised
of two different battery technologies: 2 megawatts of
lithium ion and 2 megawatts of advanced lead acid.
The lithium-ion system provides a fast resource for the
New England ISO to use in order to help support the
grid through frequency regulation whereby it sends
signals directly to the equipment
to charge and discharge on a
fast-response basis, potentially
calling on the equipment every
few seconds when needed. The
lead-acid battery is designed for a
much deeper discharge whereby
it can be used to help shave
peak system loads and to provide
smoothing for the solar integration,
along with other system benefits.
One important component of this project is that in
the event of a grid emergency, such as a major storm
that takes out the transmission system, Stafford Hill will
be used to power a portion of the Rutland High School
that acts as an emergency shelter. Based on initial
studies, the solar-storage combination can carry the
load indefinitely, using both the lithium and lead-acid
batteries through the night and then utilizing the solar
during the day as the excess solar recharges the battery. The system is sized to allow for less than maximum
solar output during cloudier days as well. The goal is
to eventually expand the capabilities of the project and
look for additional sites, such as grocery stores, to
power during an emergency.
At a recent groundbreaking, the Department of
Energy called the Stafford Hill solar farm the “perfect
project,” bringing together solar energy, an emergency
shelter and energy storage to transform how the grid
operates. The grid right now is a centralized, heavily
transmission-dependent system requiring large central
power plants, along with big transmission systems to
move power from plant to customer.
The grid of the future will look different, with de-centralized or distributed systems in place to automatically
control and balance load and generation. In the clean,
distributed energy world, there will be more smart
electrification of home heating and transportation.
Green Mountain Power begins construction of a solar battery
storage project in Rutland, Vermont.
Photo courtesy of Green Mountain Power
32 E N E RGYB I Z November/December 2014
Green Mountain will start this transformation to smaller
microgrids in Rutland, before expanding it statewide
throughout Vermont.
The Stafford Hill Solar Farm is important because it
is helping create more resilient and strong communities
and demonstrates the future of energy. GMP will use
what we learn in Rutland to improve how we serve all
customers. With the frequency of major storms growing, the Stafford Hill project is critical and demonstrates
how Green Mountain and key partners in Vermont are
Richard Yemm inspects Pelamis Wave Power equipment.
Photo courtesy of Pelamis Wave Power
Ocean-powered
Pelamis
SCOTS RIDE THE WAVES // BY RICHARD YEMM
THE POWER CONTAINED in ocean waves is
enormous and inexhaustible. As a company
based in Edinburgh, Scotland, the sea’s force is
something we are reminded of regularly. Pelamis
Wave Power is working to capture that power to
generate clean and renewable electricity.
continuing to lead the way with innovative energy solutions to meet everyday challenges.
Dynapower of South Burlington designed special
equipment for the project, and the Clean Energy States
Alliance helped secure funding from the U.S. Department of Energy.
The $10 million project is expected to be complete
in mid-December.
Josh Castonguay is Green Mountain Power’s director of strategic
products and services.
Scotland has become the
global hub of activity for developing both wave and tidal power technologies. In addition to
having a strong wave resource,
marine expertise, infrastructure
and market support, Scotland
is home to a world-leading test
center for real sea demonstration of wave and tidal technologies: the European Marine
Energy Center.
At the EMEC wave test site
off the west coast of the Orkney
mainland two second-generation Pelamis machines, one of
which is owned by Iberdrola
subsidiary ScottishPower Renewables, are currently being tested and optimized.
These machines have demonstrated the safe and
efficient operation of the system over more than 90
percent of wave conditions and recently celebrated
hitting an industry-leading, cumulative 10,000 gridconnected operating hours.
This extensive test program has delivered a range of
valuable operational experience and performance data.
The team at Pelamis is now working to apply the experience from the P2 machines in the ongoing development and optimization of the Pelamis design, in parallel
with the development of commercial-scale wave farm
sites around Scotland. These pilot-scale arrays help
to pave the way for large deployments in the future.
The marine power sector has now progressed beyond
proof of concept to focus on the economics of delivering the first wave and tidal power arrays.
energybiz.com E N E RGYB I Z 33
» TECHNOLOGY FRONTIER
But we must not rest on our laurels; the progress and momentum generated by the sector in this
country must be maintained. We’re keen to avoid
repeating the mistakes made during the early stages
of wind power development, when there was a
failure to capitalize on and commercialize the UK’s
early technological lead. The marine power sector
continues to attract sufficient investment to maintain
progress, but the support from the UK and Scottish
governments will remain crucial over the next five to
10 years if we are to see wave energy successfully
make the commercial transition.
Developing any new technology is going to have
high initial costs. Marine energy is commercializing in
world conditions different from those experienced by
preceding technologies. Yes, the world is now awake
to climate change and the need to decarbonize
energy supply, but we are also in a world of deregulated electricity supply with huge cost pressure from
consumers and governments. Gone are the days of
amortizing development and commercialization costs
across a broad portfolio. We must make rapid progress down the cost curve if we are to survive and
deliver a significant contribution to energy supply.
The good news is that the opening cost of
wave energy is favorable in comparison with other
now mature technologies like nuclear or wind,
and we have a clear trajectory for costs to rapidly
decrease to the level of offshore wind. Central to
this cost reduction is to continue to push innovation and to develop and progressively improve the
Pelamis design.
The next machine is on the drawing board and will
commence manufacture next year. It builds on the
success and solid technical platform of our secondgeneration P2 machines and incorporates the key
enhancements required to make the first commercial
Gatherings//
Technology Frontier
Dec. 2-3
AWEA Wind Resource &
Project Energy Assessment
Orlando,
Florida
Dec. 7-9
Eilat Green Energy
Eilat, Israel
For more information about these and other events, please visit
www.energycentral.com/events.
34 E N E RGYB I Z November/December 2014
deployment viable.
It has been almost 10 years since
we generated our first kilowattCOSTLY CARBON
CAPTURE
hour from the waves off Billia Croo
Carbon capture
in Orkney. In that time we have
technologies would
increase the cost of
amassed 250,000 kilowatt-hours
building and running
of electricity generated, a wealth
natural-gas fired
generation by 30 to 70
of real operational experience and
percent, according to the
learning, and a mountain of parallel
Seattle Times.
fundamental research and developCarbon capture
equipment on a gas
ment data. We now have a deep
plant would cut carbon
understanding of the resource, our
emissions to 5 percent
of the carbon output of
environment and our technology, of
a coal-fired generating
how to make it work, how to make
unit, the report said.
it work better, and how to make
HYDROGEN
TRANSPORT
it cheaper. Of course, we are not
The Japanese
alone in making progress. A numgovernment is exploring
ber of the leading wave and tidal
whether to use
renewables to produce
technologies have delivered similar
hydrogen that would
advances and success stories.
power fuel cells in
vehicles, according to
The future of wave energy in
the Associated Press.
the next decade goes beyond the
The vehicles, powered
by hydrogen and oxygen,
UK waters, and the potential is
would emit water but no
there for wave energy to supply a
carbon dioxide.
significant proportion of the world’s
global energy consumption. The
World Energy Council has conservatively estimated
the market potential for wave energy to be in excess
of 2,000 terawatt-hours a year. That’s four times the
contribution from the current wind energy sector.
Along with the western seaboard of Europe,
southern Africa, Australia and New Zealand, the
Pacific coastlines of North and South America hold
great potential for wave power conversion. Within
the United States, Oregon in particular has already
made headway in establishing the right marketplace
for deploying wave power in the future.
Undoubtedly, there is still a long way to go and the
right backing and investment will be crucial to overcome the remaining barriers, but the industry as a
whole has come a long way from its beginnings. We
are now in a position where we know what needs to
be done and how to go about doing it. Our challenge
for the next decade is to take the sector from successful demonstration to large-scale generation.
Richard Yemm is chief executive officer of Pelamis Wave Power.
Speech analytics is enabling utilities
to HEAR customers and ACT.
R
eal-time speech analytics offers
utilities better insight into customer interactions and expectations. Seattle Public Utilities (SPU) and
Seattle City Light (SCL) will implement
speech analytics later this month according to Debra Russell, director, joint utility
contact center whom I had the pleasure
of chatting with at the INTERACTIONS
2014 customer conference hosted by
Interactive Intelligence.
Business drivers
Russell shared that recent events have
caused the utility to take a fresh look at
customer service. For example, some negative customer feedback accompanied the
utility’s handling of a major snowstorm
and its inability to absorb the spike in call
volumes and respond in a timely fashion.
Seattle’s Mayor launched a customer service improvement initiative and from that
sprung a desire to hear the “Voice of the
Customer” and report on the customer
experience in a more meaningful way.
The situation
The utility implemented Interactive
Intelligence’s Customer Interaction
Center (CIC), in 2011 and later added
Interaction Recorder and Interaction
Feedback. “While the sampling of calls
from Recorder and Feedback provided
beneficial results, we wanted more data,
more granular data, and more comprehensive and actionable insight. We
quickly settled on speech analytics as the
ideal solution,” Russell said.
Business objectives
• Measure how much effort is required
for a customer to do business with
SPU and SCL
• Identify when a customer is told that
something cannot be done and analyze the reason why (e.g. regulatory
reasons, policy reasons, agent error)
• Use data to demonstrate and advocate
needed change
• Provide tools that will make it easier
for agents to excel in their jobs
• Improve customer service and customer satisfaction
The solution
Beyond a speech analytics solution, the
utility required improved workforce
management functionality and learned
that Interactive Intelligence could fulfill
both needs with its Interaction Optimizer
and Interaction Analyzer add-on applications. The business case was developed
and approved and implementation of the
new applications are nearing completion.
Benefits anticipated
Russell anticipates that the investment in
speech analytics will:
• Uncover new actionable insights
• Support improved agent feedback
and training
• Enable agents to more effectively
handle the increasingly complex
customer calls
• Support more proactive and beneficial conversations with customers
• Improve first contact resolution results
• Provide a better understanding of
SCL’s JD Power customer satisfaction survey results and identify
improvement opportunities
• Deliver a better overall customer
experience
Future possibilities
Looking ahead, Russell envisions using
key words to trigger certain actions or
automate processes. For example:
• If a customer repeatedly calls about
high consumption, identify more
proactive ways of addressing the
customer’s concerns
• Determine if other channels should
be used to notify customers of high
bill situations in addition to current
paper notifications
• Drive the display of energy efficiency
tips for the agent to share when a
customer references a high bill
• Display information about payment plans and the Utility Discount
Program to the agent when a customer states that they are having difficulty
paying their bill in order to:
• Support customer education
about payment options
• Ensure that consistent and
accurate information is communicated
• Ensure that agents ask customers
the questions required to discern
Utility Discount Program eligibility
• Reduce call handle times, and
increase customer satisfaction
“Speech analytics could enable us to anticipate the reason for the customer’s next
call or to inform the development of new
customer programs,” Russell said.
Conclusion
There’s a growing realization that invaluable information resides in the utility’s
data. Russell asked: “How do we turn
that data into meaningful and valuable
information for our employees, stakeholders and customers?” She is excited to
see how speech analytics will help answer
that question.
To learn how Ambit Energy is using analytics
to achieve its strategic business goals, download a complimentary white paper sponsored
by Interactive Intelligence entitled “Advanced
Analytics and Actionable Intelligence: How
Ambit Energy is using data analytics to deliver
business value” at http://www.energycentral.
com/marketing/pdf/WP_AdvancedAnalytics_
whitepaper_laser.pdf.
energybiz.com E N E RGYB I Z 35
THOUGHT
HTLE
LEAD
ADEERSH
RSHI P
I P- -SSPPON
ONSOR
SOREEDDBY
BYI NTE
S I LVE
R S
PR I N
G NE
T WOR
KE
S
THOUG
R AC
TIVE
I NTE
LLIG
E NC
» TECHNOLOGY FRONTIER
Building Efficiency
UNLOCKING THE VALUE OF BENCHMARKING // BY CLIFF MAJERSIK
UTILITIES KNOW ALL ABOUT the energy flowing
through their meters, but how much do they know
about how that energy is used by the consumer or
whether the buildings they serve are using that energy
efficiently? Building energy use benchmarking data is a
powerful tool to shed light on this information.
Across the country, a number of cities and states,
and one county, are unlocking a wealth of data through
building energy use benchmarking and transparency
ordinances and programs. By requiring large building
owners to report the energy use of their properties on a
consistent basis, benchmarking allows a building’s performance to be compared over time with itself, with an
industry norm or with local and national peers — all with
the goal of improving energy use. It also is creating a
dataset that utility executives, regulators and policymakers can mine for intelligence to help drive cost-effective
business decisions.
Utilities play a crucial role in enabling benchmarking,
which requires whole-building energy consumption data.
This is something that large commercial and multifamily
building owners and operators are often challenged in
accessing because of the use of separate tenant meters
within a building, the time and labor required to consistently collect data from individual tenants, and utility policies that restrict third-party access to customer energy
data. Utilities, regulators and policymakers can address
all of these accessibility issues by providing better access to whole-building consumption data.
Many utilities now provide automated uploads of
whole-building energy usage data to the U.S. Environmental Protection Agency’s Portfolio Manager, the
most widely used benchmarking tool. Since offering this
service, Commonwealth Edison’s requests for data have
jumped 5,381 percent in six years. Data access is compatible with confidentiality protections on customer data,
as data can be provided as a monthly aggregated lump
sum for all accounts in a building. Recognizing this, the
National Association of Regulatory Utility Commissioners and its sister consumer advocate group, the National
Association of State Utility Consumer Advocates, have
both passed resolutions supporting wider access to
whole-building energy consumption data.
Customers aren’t the only ones benefitting from
36 E N E RGYB I Z November/December 2014
benchmarking. Engaging customers creates new business opportunities for utilities because educating owners on energy
efficiency has been shown to spur these
owners to pursue other energy efficiency
improvements, which creates a pipeline of
customers for a utility’s energy efficiency
programs. In surveying facility managers who benchmark, Building Operating
Management magazine found that more
than 60 percent said that they use benchmarks to prioritize energy efficiency investments and to
make the business case internally for those investments.
Plus, studies have shown that customers who are aware
of energy efficiency programs are more likely to give their
utility top marks on customer service surveys.
Benchmarking programs help utilities make smarter
decisions by providing data on energy use intensity, carbon emissions, and buildings’ physical and operational
characteristics — information few utilities already have.
Seattle City Light recently combined its dataset with the
city’s dataset to create a near-complete census of large
buildings in Seattle.
Utilities can analyze benchmarking data to drive
cost-effective infrastructure planning. Such analysis may
reveal undocumented patterns, as New York City found
in 2012 when analysis showed that energy use varies by
a factor of up to 8 times among properties with similar
uses. And, it may allow program administrators to hone
in on the worst-performing buildings to decrease the
cost of engaging customers at scale and avoid having to
make costly upgrades to surrounding infrastructure. The
Low-income Energy Affordability Network, Massachusetts utilities and WegoWise did just this in the multifamily sector in Massachusetts. By targeting low-performing
buildings via benchmarking, rather than costly audits, the
utilities saved $2.2 million in program costs.
This is just some of the value benchmarking offers to
utility executives. Unlocking benchmarking’s full potential,
however, requires these executives and regulators to
embrace energy performance policies that provide transparent, accurate, and easily accessed data. The tool is
there. Are you ready to use it?
Cliff Majersik is executive director of the Institute for Market
DEMONSTRATING EFFECTIVE
INTERNAL CONTROLS TO REDUCE
YOUR RISK AT AUDIT TIME
“NERC has indicated that an entity demonstrating
effective internal controls will lower its risk factor
when it comes time for the Regional Entity to
determine what requirements are audited.”
The utility industry has worked diligently over the years to
improve their Compliance Programs based on guidance from
NERC and the Regional Entities, as well as lessons learned
through audits. NERC has likewise been on a learning curve,
and is in the final stages of implementing its latest initiative,
Reliability Assurance Initiative (RAI). Internal controls, a key
element of the RAI, are about to change the way companies
monitor for compliance.
Many believe internal controls have been successfully
incorporated into their programs. They look great in electronic
folders or on paper, and everyone has a copy. But at
self-certification and audit time, things never seem to go
as smoothly as hoped. As the formal announcement date
approaches, many find themselves desperately searching for
evidence that will prepare them for the audit.
NERC has recently made some suggestions for internal controls
that place less emphasis on audits and more focus on reliability.
Audits will continue to be scheduled, but Regional Entities
are no longer required to publish the date until it makes an
announcement 90 days prior to the actual audit date. That’s
not the only change. Audits have been traditionally scheduled
at a prescribed periodicity. Under RAI, the six-year audit cycles
will be removed (three-year cycles remain for BA, RC and
TOP) and Regional Entities will be required to use a risk-based
approach to determine who will be audited each year and on
which requirements. This could result in a high-risk entity being
audited as frequently as once a year. The uncertainty of audit
frequency further bolsters the argument that entities will need
to be compliant all of the time, for all of the requirements.
To have reliability assurance under RAI, the compliance
department must continuously monitor the collection of
evidence and verify that activities are occurring according to
schedule. Depending on registration, continuous monitoring
tasks may include:
1. Listening to operator communication wav files
2. Verifying inspection and testing schedules have been met
3. Proving that evidence of compliance associated with
activities and events has been retained
4. Confirming that training schedules have been followed
and evidence of training exists
5. Substantiating that reports have been transmitted and
evidence of such retained
The bottom line is that the utility of the future must have a
compliance program that assures reliability standards are
being met on a continuous basis. NERC has indicated that an
entity demonstrating effective internal controls will lower its risk
factor when it comes time for the Regional Entity to determine
what requirements will be audited.
DNV GL has more than seven years of NERC compliance
experience. We assist generation and T&D entities with:
■ Operations, planning and cyber security processes and
procedures for NERC compliance
■ Development and implementation of NERC compliance
programs
■ Compliance staff augmentation for the short- or long-term
■ Startup NERC Compliance Manager to bridge a
resource gap
■ Performance of initial, annual and mock/practice
compliance assessments
■ Conversion to CIP Version 5
Reduce your risk of non-compliance by contacting us today at
[email protected] or +1 215-997-4500 x0.
Visit www.dnvgl.com/compliance to learn more.
SAFER, SMARTER, GREENER
energybiz.com E N E RGYB I Z 37
THOUGHT LEADERSHIP • SPONSORED BY DNV GL
Smart Utilities:
Flipping the “On Switch”
for Smart Cities
V
irtually every major city projects
itself as an innovation hub, a “smart
city.” The definition of exactly what
that is may sound a bit vague, but the
consensus among stakeholders is that it
involves disruptive technology, disruptive
in a positive sense, and that utilities are
essential in implementing that technology.
But this type of change is usually anathema to tradition-bound industries and
particularly awkward in highly regulated
ones. Utility executives don’t wake up
each morning wondering how they can
further their cities’ innovation agendas.
They do, however, wonder how to meet
the significant challenges of transitioning to a new, technological, business and
social environment largely defined by
advanced information technology.
The evolution of a smart grid, right
down to the device level, and the consequent ability to transform what had been
a static structure into a dynamic, information-based interactive system means
38 E N E RGYB I Z November/December 2014
the infrastructure is in place to perform
functions in real-time, and in a systemic
way to achieve significant cost and energy
efficiencies. It also means that utilities
are now in a position to partner with — if
not lead — cities to perform functions
together that were not possible before the
smart grid became a reality.
For Scott Lang, chairman, president
and CEO of Silver Spring Networks, one
of the leading providers of networking to
connect critical infrastructure, redefining a utility’s role in partnership with the
community it serves is much more than
an opportunity to realize new efficiencies
and define new revenue streams; it’s an
existential necessity. Lang believes that
“utilities are moving away from thinking
of themselves as simply providing reliable, ubiquitous electricity to consumers,
but are also looking at how they can be
increasingly relevant in the future. As
customers — retail, commercial, industrial
and municipal — evolve from passive con-
sumers to active participants in managing
how and when they use power, it becomes
incumbent on the utility to radically redefine its role and focus more on the critical
infrastrutcre that powers its community.”
In a sense, utilities and cities are changing in much the same way. They are
both moving from a centralized, topdown model to a distributed, horizontal
structure. In both cases, their relationships with customers and constituents
are becoming much more collaborative,
and massive amounts of information in
real-time are at the core of their transformation. Municipalities and utilities are
fast becoming aware that their continued
success and even relevance is best served
by working together toward the common goal of providing innovative, highly
reliable, safe, and responsive services that
allow populations to grow and thrive.
Utilities are in a good position to partner with cities in realizing their overlapping goals. That’s largely because most
utilities are already ahead of the curve in
deploying multi-application networks for
critical infrastructure – they are one
of the few types of
organizations in
the world with the
expertise and ability to deliver such
large-scale projects.
Utilities are, in
Scott Lang
effect, bringing
Chairman, President
and CEO
next-generation
Spring
technology to bear Silver
Networks
for the communities they serve.
Smart grid technology has driven operational efficiency, dramatically improving
outage response and restoration time,
and managing distributed and intermittent generation. That same technology
platform, particularly its advanced communication and control capabilities, can
be harnessed by municipalities to create
a platform upon which they can deploy
additional smart city services over time.
THOUG HT LE AD E RSH I P - S P ON SOR E D BY S I LVE R S PR I N G N E T WOR K S
“The technologies that utilities have been
out there deploying and whose reliability
and security they’ve been proving are the
same kind of technologies that cities need
in order to take the next step in becoming
smarter, more responsive and more cost
effective,” commented Lang.
A good example of the benefits that can
swiftly accrue from a city-utility partnership is in managing street lighting, which
can easily account for up to 40 percent of
a city’s energy budget, according to Lang.
That’s a very large chunk of a municipal
budget at a time of increasing demand for
city services in a climate of serious budget
constraints. Most utilities have some role
in supporting street lights in the municipalities where they operate, and a number of
utilities actually own at least a portion of a
city’s lights. When there’s a problem with a
particular light it can be difficult and timeconsuming to determine who’s responsible.
If both parties show up, it can be wastefully
costly. Furthermore, the technology involved in street lighting is not something a
municipality is likely to have any expertise
in. It’s a natural fit for utilities.
Silver Spring is working closely with
Florida Power and Light (FPL) in South
Florida, including in Miami, on a program to connect and manage street lighting. Since announcing the start of the
project in March, the utility is working
to network 75,000 street lights, creating the largest smart Internet Protocol
(IP) networked street light deployment
under contract in the United States,
while also leveraging the same network
that FPL was already using for its smart
grid program. In the past, almost all the
lights in the network had to be manually
inspected to see if they were functioning
properly, so the new network will save
literally thousands of wasted man-hours,
and outages and voltage problems will be
much more quickly addressed, improving reliability and quality of service for
customers. From the smart grid side,
adding more communication nodes on
the network means that FPL customers
will gain better grid reliabity too.
But to get there, utilities need to understand the importance of networking,
where replacing aging lights with LEDs is
not enough. When networked, Lang notes
that LED lights can save approximately 65
percent in energy costs and reduce maintenance by as much as 90 percent.
The IPv6 network that Silver Spring
deploys can also provide a community
with additional benefits. In Glasgow, U.K.,
for instance, Silver Spring’s technology will
allow street lights to dynamically shine
brighter when they detect bicyclists or pedestrians in the vicinity. In Copenhagen,
Denmark, Silver Spring is networking
the street lights to enable automatic
dimming or illumination at dangerous
road junctions or in inclement weather.
These make smart city assets immediately
attractive to residents and a source of
cost-savings for the city, because the lights
can be adjusted to deliver exactly what’s
needed for citizen safety, and for commuter flow and congestion in real-time,
without wasting power when lower levels
of illumination are perfectly adequate.
It also establishes a city-wide network
canopy upon which additional smart city
services can quickly and cost-effectively
be deployed in the future, allowing cities
to recoup their investment and speedily
deliver additional value to citizens.
Significantly, these networks can extend
to connecting other smart-city assets
including smart water networks, pollution
and environmental sensors, EV chargers,
parking meters, and traffic lights, among
many others. Intelligent traffic systems
can detect vehicle volume in all directions and immediately adjust themselves
to allow the most efficient flow. Some
estimates say 70 percent of all wasted
fuel results from sitting at traffic lights in
a city, so using this intelligent, interconnected system could significantly cut
pollution and waste. Even more important, it allows the lights to play a vital role
in emergencies by routing traffic away
from a blockage and providing a free path
THOUG HT LE AD E RSH I P - S P ON SOR E D BY S I LVE R S PR I N G N E T WOR K S
for response vehicles, varying the color
and intensity of its lights. Lang notes that
Paris, the “City of Lights,” is one city that
is working with Silver Spring to leverage
this type of technology.
With the amount of activity occurring
in Europe, it appears cities in other parts
of the world are ahead of those in the
U.S. in developing smart cities, but “this
is like comparing apples and oranges,”
explained Lang. Although Europe appears
to be moving along faster than the U.S. in
implementing intelligent assets, continued
Lang, it is solely because of their different models and regulatory environments.
Regulatory authorities in the U.S. are
beginning to understand that regulations
must evolve to encourage new business
models, if utilities are to embrace both
the costs and the risks involved in moving beyond their traditional generation
and distribution responsibilities, and the
guaranteed return on their investments.
But the governing regulatory structure in
the U.S. is often defined by a late 19th century model. Even where regulators have
allowed for some provider competition,
it has so far mostly failed to address the
larger issues of a quickly evolving industry.
It’s essential to get beyond the proprietary
issues that often discourage sharing infrastructure, software and the information
that they generate.
As utilities continue to rapidly install
the infrastructure and software essential
to manage a smart grid, and as cities
compete with one another regionally
and with the rest of the world to attract
new, technology-dependent industries,
it becomes clear that a partnership
between utilities and the municipalities in which they operate is more than
mutually beneficial; it’s critical. Many
utilities don’t realize that the infrastructure to support that partnership are
either already in place or quickly being
deployed for other assets that they own
and operate. What’s needed now is the
imagination to take full advantage of a
new, highly cooperative environment.
energybiz.com E N E RGYB I Z 39
» INTRODUCING
Gale Klappa, center, talks with attendees at Wisconsin Energy’s annual meeting.
Photo courtesy of Wisconsin Energy
Wisconsin Energy’s Symphony
COMING CHALLENGES TO UTILITY SECTOR RELIABILITY // BY MARTIN ROSENBERG
WISCONSIN ENERGY IS INTENTLY FOCUSED
on reliability and customers, says Gale Klappa, the
company chairman and chief executive officer. It is also
ready to act boldly, as it did recently when it announced
plans to acquire the Integrys Energy Group for
$9.1 billion. EnergyBiz met with Klappa at a recent
industry event to discuss his company and the utility sector. His comments, edited for style and length, follow.
ENERGYBIZ There’s a lot of talk about the business
model changing for utilities. What does that mean
for you?
KLAPPA
Probably, for the immediate future, not a
lot of change. But, longer term, I suspect there will be
more distributed generation as a percentage of the
base of generation in the United States. As distributed
generation gets a greater toehold, the utility’s role
becomes a little different than it is today. I see us, over
time, becoming much more of a symphony conductor.
One of the things that has not been discussed as
much as it will need to be is that the digital age is
40 E N E RGYB I Z November/December 2014
redefining reliability. It will be much more difficult to
maintain a very high level of reliability when you have
a significant number of distributed sources that have
to interconnect and synchronize.
ENERGYBIZ
How will utilities serve in this new
environment?
KLAPPA
There is no one answer to that question.
The United States is a patchwork quilt of regulations
governing what distributed generators can and can’t
do. The real key to staying ahead of the curve on distributed generation is strong, supportive relationships
with our customers.
ENERGYBIZ
How do you plan for that?
It starts with really strong relationships
with every one of the large industrial and commercial customers. I’m proud of our key account team.
We actually get very significant input from our
120 largest customers every year as we plan. In
those conversations we unearth important informaKLAPPA
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» INTRODUCING
tion about their energy needs and how we can best
serve them.
ENERGYBIZ
Have you seen an acceleration of inter-
est in microgrids?
In Wisconsin, there is a strong research
effort on microgrids. We are a part of it. Johnson
Controls is a part of it. The University of Wisconsin is
a part of it. Among our large industrial and commercial
customers, to be candid with you, there is very little
interest at this point.
In part, it’s because we have a strong track record of
reliability. And, right now our prices are reasonably competitive. They are slightly above the national average.
KLAPPA
ENERGYBIZ
What percentage of your generation is
from coal-powered units?
KLAPPA
ENERGYBIZ
About 55 percent.
How will you be affected by new federal
carbon emissions policies?
Under the initial target for carbon intensity
that was set by the proposed rule, Wisconsin would
have to cut its carbon emission intensity by 34 percent. The national average is 30 percent. It’s a 645page rule. When you add the appendices, it’s 1,200
pages. There is still a lot we all need to understand.
KLAPPA
ENERGYBIZ
Are you going to have to accelerate the
closing of coal units? Does that worry you?
KLAPPA
Each state will need to seek approval
of its own implementation plan from the U.S. Environmental Protection Agency. We will work with our state
EPA and the Public Service Commission. All of the
utilities in Wisconsin will be involved.
The major units in our coal-fired fleet are so efficient
that I would think we would be less affected. We
built two new, supercritical coal-fired units that were
completed in 2010 and 2011. They are in the top
7 percent in efficiency among baseload power
plants in the United States.
ENERGYBIZ
Are you planning to build any nuclear units?
If carbon emissions limits become the
law, we probably won’t see another coal-fired power
plant built in our lifetime. Nuclear has to be part of the mix.
We tend to muddle through in this country. When we see
a real crisis, then we take action. Right now, the economics do not favor building a new nuclear power plant.
KLAPPA
ENERGYBIZ
So how do you position your company
when it comes to generation?
42 E N E RGYB I Z November/December 2014
Because of all the modern generation
we’ve built in the last decade, our reserve margins
are ample through the early 2020s. We will face
the question on nuclear in about 2020. About 20
to 25 percent of our fuel mix is nuclear.
KLAPPA
ENERGYBIZ
Will small modular nuclear reactors
make sense?
Whether the modular units will be cost
effective is a question to be answered. But if you can
add capacity in increments, it would be quite helpful.
Right now, if we had to build generation, it would be
natural gas fired.
KLAPPA
ENERGYBIZ
There have been some notable mergers
lately, including your recent announcement that you
will acquire Integrys Energy Group. Tell me about
the transaction?
For starters, it’s clear that we are in a
consolidating industry. Approximately half of the standalone, investor-owned utilities that existed in the late
'80s and early '90s are now part of larger systems. This
year alone, you’ve seen three or four acquisitions in a
short period of time. The combination of Wisconsin
Energy and Integrys brings together two strong and
well-regarded utility operators with complementary
geographic footprints in the Midwest. We’re creating
a larger, more diverse electric and natural gas delivery
company with the operational expertise, scale and financial resources to meet the region’s future energy needs.
We believe this combination provides a unique opportunity to create the premier regulated utility system in
the region, with superior service and competitive pricing
for years to come. We believe that the operational and
financial benefits to all of our stakeholders — from the
customers and communities we serve, to the people we
employ, to the shareholders who count on us to create
value — are clear, achievable and compelling.
KLAPPA
ENERGYBIZ
Does this transaction meet Wisconsin
Energy’s previously stated criteria for acquisitions?
KLAPPA
Yes, it does. We have used three criteria
to evaluate any potential acquisition opportunity over
the years. First, we would have to believe that an
acquisition would be accretive to earnings-per-share
in the first full calendar year after closing.
Second, it would need to be largely credit neutral.
And finally, we would have to be convinced that the
long-term growth rate of any acquisition would be at
least equal to our stand-alone growth rate. We believe
this combination meets or exceeds all three criteria.
Also, in November of last year, we completed our first
biomass-fueled power plant. It’s a 50-megawatt plant
on the edge of the northern Wisconsin forests. I’m
sure we will do some solar over time. Wisconsin is
just not the ideal state for solar.
ENERGYBIZ
What is your corporate culture?
We have a strong focus on customers.
We measure customer satisfaction religiously. Every
day, no matter where I am in the world, I see the
results of our customer satisfaction calls from the prior
day. We call at least 3,000 customers every week,
and every senior person in our company sees the roll
up of those calls each day.
Recently, we were honored to be named the most
reliable utility in the United States. We continue to
invest a lot of money in upgrading our distribution
networks.
KLAPPA
We measure
customer
satisfaction
religiously.
Every day.
ENERGYBIZ
What do utilities need to do better?
I’m not sure that our industry has ever
been as good as other industries at communication
and branding and positioning our value with customers. People’s perception of reliability is driven by the
evolution of the digital age. There is an increasing
reliance on email, texting and social media. People
have become much more sensitized to, and much less
patient with, service interruption.
KLAPPA
ENERGYBIZ
You have new digital tools.
No question about that. We are using
data analytics to anticipate meter problems before
they crop up. In fact, we’ve been one of the industry
leaders in using data analytics to really sense when
there may be a problem with a customer and the customer hasn’t even recognized it yet.
KLAPPA
ENERGYBIZ
What is the future of renewables?
For renewables to have a stronger growth
rate in Wisconsin than they’ve had over the last five
years, a stringent carbon-intensity rule would have to
be passed. I don’t think you are going to see anybody’s strategy changing until several years from now
when the EPA rule is very clear.
KLAPPA
ENERGYBIZ
What is the story in Wisconsin?
KLAPPA
Wisconsin has a renewable portfolio
standard that calls for statewide 10 percent of all
the electricity sold to retail customers coming from
renewables by the year 2015. We have built the two
largest wind farms in the state. Wisconsin is in the
middle of the pack in terms of wind velocity and wind
consistency. It’s not like Iowa. But we are getting 27,
28, 29 percent capacity factors out of the wind farms.
ENERGYBIZ
How are you doing on workforce recruit-
ment? Are you getting new kinds of employees
coming into your business?
KLAPPA
We need all kinds of talent like any corporation does. But, at our core, we are an infrastructure
company. So we need really strong engineering talent.
Luckily, we have some terrific engineering schools in the
Milwaukee area and in Wisconsin. So we’ve had good
luck recruiting engineering talent. I see a continuing and
growing need for engineering talent that just simply will
not go away. We’ve moved from Power the Future to
Deliver the Future. About two-thirds of our capital investment over the next 10 years will be in upgrading our
distribution networks. That takes tremendous engineering work to plan, design and then execute.
energybiz.com E N E RGYB I Z 43
Mapping Out the Best Uses
for Energy Networks
GEOSPATIAL SYSTEMS MOVE FROM THE BACK OFFICE TO THE FRONT OFFICE AS UTILITIES STRIVE
TO MAXIMIZE THE RETURN ON THEIR NETWORK ASSETS // BY BRYAN FRIEHAUF
INTRODUCTION: THE INTEGRATION
CHALLENGE AND OPPORTUNITY
Through the years, utilities have
amassed an array of network assets that
are supported by a series of autonomous systems run by various business
units. The end result is a great deal of
duplication and inefficiency. In an effort
to optimize business operations in a
more cohesive and productive manner,
utilities have been trying to bring the
network assets together.
To make this transition, energy providers need to designate one solution as the
central information hub. An application
that acts as the central coordinator for all
department tasks is required. A geospatial system best meets this need because it
is used in some capacity by every department in the organization. Consequently,
geospatial solutions have been moving
from the back office to the front office
as well as into the field. Once geospatial
44 E N E RGYB I Z November/December 2014
THOUGHT LEADERSHIP • SPONSORED BY GENERAL ELECTRIC
systems become the Corporate System of
Record, utilities will be able to streamline
business processes, boost productivity,
and provide better service to customers.
DATA SILOS RULE THE DAY
The smart grid has evolved, resulting in
utilities collecting more data than ever before, with the volume promising to increase
dramatically in the coming years. Often,
this data is generated by applications run by
business units, so data collection occurs in
an ad hoc manner. The installation group
generates network configuration data, the
maintenance department monitors service
areas, and the finance department manages
the cost of network assets.
As departments capture critical business
process information, only a limited group is
able to access it. Managers can see fragments of the operation but are challenged
to access all necessary information in order
to improve efficiency and effectiveness.
Dealing with Data Dispersion
Right now, data is housed in a scattered
manner. Departments develop their own
iterations of the information. Network
information is used largely by the
engineering and maintenance departments, which rely on the information on
a daily basis. Other business units deploy
applications that manipulate small pieces
of network information. Furthermore,
utilities rely on public data sources for
network information. The end result —
network data is scattered throughout the
organization and managers have pieces
of data rather than a complete picture of
business operations.
A Lack of Integration
Energy providers generate many datasets in large complex systems. Since
these applications were not designed
to interoperate, these solutions act
as information silos. Information is
quarantined locally rather than being
available throughout the enterprise.
Breaking down these barriers is often a
complex, expensive process.
THE DAWNING OF A NEW AGE
Business Inefficiencies
Energy has become an informationbased industry. Business processes
revolve around data accessibility. Since
information does not freely move
throughout the company, workflows
are designed in small groups. The
result is duplication and a reliance
on manual procedures. Employees
spend a lot of time inputting information, work often entails consolidating
redundant information, few business
processes are automated, decision
making is delayed, and enterprise
productivity is drained.
Geospatial systems were once understood
only by engineering and maintenance
teams, but this has recently changed. Led
by various technology companies, the
consumerization of mapping systems has
significantly expanded its reach. As the
geospatial system interface has improved,
data input and manipulation has become
simpler. More employees use the systems
and understand its capabilities.
An Elusive ROI
As utilities have rolled out their smart
grid projects, spending on network
infrastructure increased significantly.
Many building blocks are now in place,
so energy providers want to enhance
network manageability and reap a
greater return on their investment.
Reaching this goal is cumbersome
because utilities cannot easily draw
a comprehensive picture of network
performance. To do so, utilities need
a cohesive, consistent view of their
network.
Now, companies stand at the edge of
change. New central geospatial systems
are emerging that consolidate information, enhance communications, and
streamline business processes. These
solutions break down traditional barriers
and enable energy providers to work with
common information in a simple and
consistent manner.
Management also realizes the power of
geospatial systems, which provide a common visual language that all departments
speak. Employees now have a tool to take
network financial data from the financial
team and couple it with installation data
from the maintenance crew.
As a result, geospatial solutions now act
as data hubs, marshalling and homogenizing information from disparate
sources. Consequently, data is no longer
siloed in various departments. Instead
geospatial visualization tools tie different
data sources together, allowing managers and employees to gain fuller, richer
pictures of network assets. Employees
see connections that were not previously
evident. As a result, energy providers are
energybiz.com E N E RGYB I Z 45
THOUGHT LEADERSHIP • SPONSORED BY GENERAL ELECTRIC
much better positioned to deliver strong
ROI on network assets.
Leading utilities are building on this
foundation. Rather than one autonomous
system, their core systems consist of a
comprehensive portfolio of solutions that
support many critical processes for either
electric or gas companies. These solutions are used in the planning, design,
building, operating, and maintenance
departments and support numerous
functions, including:
Strategic Planning
Networks are ever changing. Geospatial
information helps planners map out
network expansion and forecast current
and future demand. Armed with connections to other department applications, managers are able not only to
understand where additional investments are required, but also find ways
to justify those purchases. This capability is especially important when a utility
is considering large, complex, expensive
network upgrades.
Network Planning
Networks have been expanding. First,
planners must understand the workings of their underground and overhead network assets. Then they must
be able to determine how these systems
will interact with any new construction. Finally, employees must account
for other networks and public facilities.
Network Design
Today, utilities have many options for
building out their networks. Geospatial
data is essential for designers to understand the lay of the land. By combining
Rather than one autonomous system,
their core systems consist of a
comprehensive portfolio of solutions
that support many critical processes
for either electric or gas companies.
geospatial information with current
network configurations, designers
quickly lay out possible solutions for
any new service request. In addition,
they can examine current configuration and identify ways to reduce capital
or maintenance costs.
Network Build
Many departments play a role in adding to a network. Construction crews
need accurate engineering maps of the
planned assets. Supervisors need to
provide information in job packs issued to work crews, who take that data
and turn the plan into action.
Network Service Extensibility
The whole is greater than the
sum of its parts. Geospatial solutions make network models available to other operational systems:
Energy Management System (EMS),
Distribution Management System
(DMS), Outage Management System
(OMS), and Demand Response
Management System (DRMS).The
geospatial model is the foundation
for the processes of network design,
as it helps construction and maintenance teams, energizes Advanced
Distribution Management System
(ADMS) teams, and becomes the
starting point for managing outages.
Rather than work with small pieces of
the picture, utilities access all systems
and operate efficiently and effectively.
EXPERIENCE: THE BEST TEACHER
Utilities would benefit from working
with a supplier with extensive experience as well as a broad robust product
line. The products must have a sound
technical foundation, one that is scalable and easy to use. More importantly,
their supplier needs to take the geospatial
system and tailor it to the utility industry.
The supplier’s solutions do not touch
upon select departments, such as the
maintenance office or financial services;
but rather, the portfolio extends to every
area of the enterprise. So no matter what
view of the network data the user needs,
the solution provides it.
Experience is also key. Deploying and
maintaining an energy network is a complex process, one that requires decades
of experience to understand fully. The
supplier needs to have deployed solutions
among the world’s large and small energy providers. By working closely with
energy firms, the supplier identifies their
pain points and develops solutions that
address them. Some suppliers have the
strong technical foundation; others have
developed utility-specific applications; a
few have been in the market for a several
46 E N E RGYB I Z November/December 2014
THOUGHT LEADERSHIP • SPONSORED BY GENERAL ELECTRIC
years; but only the leading suppliers possess
all of these capabilities.
REAPING THE POTENTIAL BENEFITS
New geospatial solutions deliver many benefits. Today, geospatial systems assist utilities
in realizing greater reliability, improved productivity, and greater efficiency. Geospatial
solutions streamline business processes,
enhance customer service, and maximize
investors’ return. Customers have realized
many tangible benefits:
• 30% reduction in integration costs
between GIS, DMS and OMS
• 50% reduction in data synchronization
errors
What GE’s Digital Energy
Business Delivers
GE’s Digital Energy business is a major solutions provider
and thought leader in the effort to modernize and optimize
how utilities generate, move and consume energy. The
company’s global team of more than 4,000 employees
are inventing, improving and integrating communications,
automation, and power delivery technologies to give the
century-old electric infrastructure new capabilities, unheard
of just a generation ago.
• 10% reduction in customer outage time
From deploying solutions that enable consumers to underCONCLUSION: THE TIME AND MEANS
stand and manage energy usage, to championing leading-
HAVE COME TO CONSOLIDATE NET-
edge technologies that make clean, renewable energy an
WORK INFORMATION
everyday reality, GE’s Digital Energy business is deliver-
In today’s increasingly complex world, utilities face many challenges. Deregulation is
taking hold; renewable energy sources play
an increasingly important role in energy delivery; customer demands steadily increase;
and technology advances at a rapid pace. To
meet their mission statements, energy providers need to maximize investments in their
network, the core of their business. Utilities
must view it as an integrated whole, not a
series of autonomous pieces. In response,
geospatial systems are becoming the foundation for a new generation of operations, one
where managers access updated information,
business processes run smoothly, customers
are well served, and the business flourishes.
ing the breakthroughs that will power our planet for the
next hundred years. Its executives are leading the charge,
serving on standards boards, industry task forces and
government advisory committees, sharing their unmatched
experience and expertise to help overcome the capacity
and environmental challenges of an increasingly electrified
world. They are building intelligent devices that protect,
monitor, control and automate the grid, and visualization
software that optimizes the grid. They provide products and
services from the power plant to the end power consumer
(commercial, industrial and residential). When evaluating
geospatial systems for your business, the industry focused
solution set provided by GE’s Digital Energy business is
the best place to start.
Bryan Friehauf is the Asset Management Product
Line Executive at GE’s Digital Energy business.
energybiz.com E N E RGYB I Z 47
THOUGHT LEADERSHIP • SPONSORED BY GENERAL ELECTRIC
» LEGAL ARENA
Regulators Tackle
Emissions and
the Death Spiral
FOCUSING ON FEDERAL POLICIES, BUSINESS CHANGE // BY MARTIN ROSENBERG
STATE REGULATORS and the utilities they
oversee are challenged like never before. The
future of coal generation, long a mainstay of our
energy system, is challenged as new federal emission
standards are crafted. On the business front, utilities
have had flat sales and many are wondering where
future growth will come from. We sat down with a
group of state regulators from around the country as
they gathered recently in Dallas to discuss these
matters. Their edited comments follow.
Many utilities operate in several states.
What kind of problems will that create in implementing new federal emission rules?
ENERGYBIZ
FOX
Gina McCarthy, the administrator of the
Environmental Protection Agency, completely understands where the states are coming from. It’s pretty
clear from all the meetings that we’ve had over the last
couple of years on this that they want a lot of flexibility.
They gave as much as they could.
ENERGYBIZ
What is your main worry?
My main worry is it will become a partisan
issue more than it already is and that states will not do
what they should be doing in the best interest of their
state, of the country and of the world.
FOX
48 E N E RGYB I Z November/December 2014
My major concern actually is all the work
that it would take to get our
regional states together. We
have many multistate utilities,
some with coal generation,
some without. Oregon’s only
coal plant is scheduled to
shut down in 2020, but three
of our utilities get coal from
other states. If we’re getting
power from those coal plants,
we share in the cost. That’s
just the way it works in the
regulatory world.
ACKERMAN
PARTICIPANTS
Commissioner Jeanne Fox
State of New Jersey
Board of Public Utilities
Commissioner Paul Roberti
State of Rhode Island
Public Utilities Commission
Chair Colette Honorable
Arkansas Public Service Commission
Chair Susan Ackerman
Oregon Public Utilities Commission
Chair Robert Kenney
Missouri Public Service Commission
Commissioner Philip Jones
Washington Utilities &
Our first step in
Transportation Commission
Missouri is to work with our
air regulators and analyze
Commissioner Lisa Polak-Edgar
Florida Public Service Commission
the underlying assumptions
for each of the four building
blocks to ensure that the target the EPA has set for us
is achievable. There’s some analysis that needs to be
done before I start panicking and determining whether
there’s something to fear. We want to be able to
comment to the EPA by the 120-day deadline that we
either can or cannot achieve the target that they’ve set
KENNEY
Photos by Stephen Powell
for us. That’s my primary concern from the state where
80 percent of our generation is derived from coal-fired
power plants.
As a regulator I want to understanding how
EPA came up with its conclusions on what Rhode
Island should do. New England as a region is one of
the lowest emitting regions. We have made aggressive
efforts to reduce our CO2 footprint. The EPA’s adoption
of a 2012 baseline may become a greater economic
burden to the region, which is already strained by high
energy prices. We’re facing the same percentage reduction as West Virginia. That doesn’t seem equitable. I
don’t have enough data to figure out whether or not we
deserve a lower assessment. I appreciate the flexibility
that’s being granted to the states, but what it requires
is something I haven’t seen in my 20 years, which is a
marriage between regulators that are the implementers
of the Clean Air Act in our state. Who in the state is
brokering these arrangements? You really need this coordination between independent regulators and various
agencies to make sure we get the best plan in place to
achieve cost-effective reductions from our baseline.
ROBERTI
The Florida Public Service Commission is working closely with the staff at our state
Division of Air Resource Management, which is a
POLAK-EDGAR
good thing. We’re still trying to
figure out what the impact will be
for Florida. The emphasis in the
proposal on possible regional
solutions is a wonderful initiative, but it’s not really an option
in my state, given its size and
geographic uniqueness. Florida
has made a very significant
financial investment in modernizing our generation portfolio in
the past 10 years. The way that
the numbers are structured right
now, that really isn’t taken into
account. That could then add
additional financial burden to our
ratepayers.
JONES
Our state is very supportive of the president’s effort in
the Climate Action Plan, reducing
greenhouse gases, adapting and
sending a message to our international partners, who may not
be moving as quickly as we like.
It complements what our gover-
BPA HIRING
Two military veterans
recently filed suit against
the Bonneville Power
Administration claiming
the federal agency
violated veteran hiring
preferences, according
to a report in the
Oregonian.
BPA said it has been
attempting to address
alleged violations of
federal hiring practices.
TRANSMISSION
FIGHT
CenterPoint Energy
wants to build a
$590 million transmission line to Houston
but that move is being
opposed by Calpine and
NRG Energy, who argue
the investment is not
needed, according to the
Houston Chronicle.
The Texas Public Utility
Commission is expected
to rule on the dispute.
energybiz.com E N E RGYB I Z 49
» LEGAL ARENA
nors have done in our legislature. We’ve been doing
this in the energy efficiency area. We have a state
mandate to reduce greenhouse gases. However, the
carbon-intensity number for the 2030 target for us is
probably too tight. We face an 83 percent reduction
over 2005 emission levels, one of the biggest in the
country. We don’t know how they calculated that.
We think it’s because of the retirement of two coal
plants. How is the EPA going to come in and try to
enforce a 1.5 percent accumulative 2030 target, and
where’s this going to come from?
HONORABLE
The work is just now beginning. We
are working very closely with our air regulator. Our
framework can serve as a model for other states.
We have stakeholder workshops with more than 20
stakeholders including industry, the environment sector, public policy advocates and others who are very
concerned about these issues as are needed to form
solutions and achieve rapid results. The collaborative
piece is so important. It’s getting us out of our comfort
zones and silos.
ENERGYBIZ
FOX
My main worry is it will
become a partisan issue
more than it already is.
Is emissions policy going to become par-
tisan and controversial — like universal health care?
KENNEY Our general assembly in Missouri passed
a bill that gives the freedom to our state air regulators to draft a compliance plan that’s less stringent
than what the EPA is proposing. How do we minimize political concerns as we move forward in trying
to draft a state compliance plan? It’s important that
we understand exactly what the EPA proposal does
so that we can communicate effectively. We’re going
to need to figure out how to articulate it to our general assemblies and our air regulators. We don’t speak
the same language. I’m learning their language, and
they’re having to learn mine. It’s going to require a lot
of creative thinking.
ROBERTI The political backlash on the Affordable
Care Act really happened at the point of implementation when the websites and the enrollment process
failed for those consumers who had to sign up. The
pain point of the EPA emission rules will occur when
the rates go up or the reliability is jeopardized. That
may or may not occur in the future. As a former consumer advocate for 17 years, I don’t think you’ll find
any consumers who will give you the time to really truly
appreciate what EPA’s endeavoring to do right now.
HONORABLE
Now there’s a process in place. To
answer your question, how do we keep this from
50 E N E RGYB I Z November/December 2014
HONORABLE
The work is just now beginning.
We are working very closely
with our air regulator.
going off the rails, I don’t know that it’s my job to
keep it from going off the rails. It’s my job to stay
focused, to keep my eye on the ball. The process
begins with offering comments. Our message in Arkansas is time is of the essence. It would behoove
anyone with a stake in the outcome to participate in
the process and tell the EPA what’s wrong. Participate in the development of a statewide implementation plan. To participate throughout this process
doesn’t mean you lay aside any legal concerns you
might have.
ROBERTI
I don’t think you’ll find any
consumers who will give
you the time to really truly
appreciate what EPA’s
endeavoring to do.
JONES
There’s no question there’s going to be
litigation. There’s a joke going around our community about how energy and environmental lawyers
will have an endowment now for the next five or 10
years. I think there’s an affirmative obligation for a
state to step up and submit a plan. But some states
may not submit a plan. If that happens, that puts the
EPA in a very untenable situation because then EPA
officials have to draft a plan for a state that doesn’t
like the regulations.
ENERGYBIZ
What can Congress possibly do?
Congress has demonstrated they’re not moving ahead on anything. That is what forced the hand
of the government based on a Supreme Court decision. It’s been politicized, unfortunately. Congress is
not going to do their job. They haven’t done it for the
last five, six years.
FOX
JONES
I favor a carbon tax, and I’m a Republican.
I’m trying to work with my Republican counterparts but
it’s tough. If a governor, legislature and commission
can show that a carbon tax would lead to significant
reductions of emissions, you could justify it.
FOX
A state could do a cap and trade. It could
do a carbon tax. Maybe a bigger state could do it. It’s
technically and legally possible. Whether you can get
the reductions in the carbon emissions is a little bit iffy.
ACKERMAN
I wouldn’t say it’s dominated
but it’s on everyone’s mind.
KENNEY The phrase “cap and trade” is so politically
fraught. Economic efficiency is what should be driving
the decision-making process. But politics sometimes
will prevent a good economically efficient solution
from being implemented.
ENERGYBIZ
Has the question of federal carbon emis-
sions rules dominated your work lately?
I wouldn’t say it’s dominated but it’s on
everyone’s mind. We’ve asked our best analysts to dig
into it and to start cooperating with the Department of
ACKERMAN
energybiz.com E N E RGYB I Z 51
» LEGAL ARENA
Energy and with our state air regulators to make sure
we understand what the tactical requirements are.
JONES
We have some other big issues, like distributed generation and the supposed death spiral of the
utility. We have pipeline safety. We have cybersecurity
and physical security of the grid and substations.
The majority of our utilities are coming
in this year for a rate case. But there is rarely a day
that goes by that I’m not working on EPA carbon rules.
HONORABLE
ENERGYBIZ
Some say utilities face a death spiral.
What is your thinking about the existential threats
KENNEY
confronting utilities?
KENNEY The death spiral presumes that they will
go out of business because of disruptive competition. The reports of the traditional utilities’ demise
have been greatly exaggerated. That has caused us
to pay more attention to an important issue. Regulators are out in front of this. They recognize that utilities are operating in a different financial climate. They
recognize that there are technological drivers to this.
There are consumer expectation drivers to this. There
are other economic drivers such as low gas prices.
That is causing utilities to examine their business
models, and it’s causing regulators to examine our
regulatory models. I always ask the question: Has the
basic regulatory compact blown up and changed? I
don’t think so.
ACKERMAN
Regulation was never intended to
prevent competition or forestall competition. So
to a certain extent the utilities are going to have
to look at their futures and decide for themselves
how they’re going to adapt to new technology and
regulation. We have to be willing to go with them
and work with them to find solutions to it. There’s
no death spiral, although it might depend on where
you are. Germany’s got its issues right now, and
Australia has clear issues.
Customers are driving a lot of this process. They have decided in New York and New
Jersey that based on extreme weather events and
concerns about cyberterrorism, they’ve got to do
something different. People, communities and businesses are starting to form microgrids. The utilities
that are smart will follow the customers, because
they’re going to have to. I’m very concerned about
stranded costs. If utilities continue to build generation that lasts 40 years, a lot of those costs are
The reports of the traditional
utilities’ demise have been
greatly exaggerated.
JONES
FOX
52 E N E RGYB I Z November/December 2014
I favor a carbon tax, and I’m
a Republican. I’m trying to
work with my Republican
counterparts but it’s tough.
microgrids. Storms still come through but you may not
have the resilience you expected.
ENERGYBIZ
Are utility assets as secure as they can be?
JONES
We made a lot of progress. We did 35
workshops around the country educating commissioners and their staffs. But we still have a lot of work to
do. The threats are evolving; they’re dynamic. Some of
the commissions need to do more. They have to develop a plan, and coordinate with state agencies, and
then update that plan and work with federal agencies.
This is a massive effort of coordination.
POLAK-EDGAR
It’s very important that we
support our 250 plus members
and their work.
going to be stranded. Commissioners need to look
at that, and utilities need to look at that. If they want
to build something and the commission approves it,
you’ve got to make sure that if there are stranded
costs, maybe the utilities and shareholders should
bear that, not the customers. It’s something that
needs to be looked at. It’s not really being looked at
nowadays.
JONES
The utility has the burden to come up with
a strategic plan for the future. Transmission and distribution in 10 years are going to look quite different
than they do now. They’re going to be more nimble.
You’re going to have more two-way transactive energy flows. You’re going to have more intelligence in
the grid. You’re going to have more competition in
terms of competitive suppliers. You’re going to have
more storage. So how that all works and is reliable
and cybersecure we don’t know yet. You’re going to
see more mergers and consolidation. That presents a threat and an opportunity to commissioners,
because we can impose conditions on proposed
mergers and we can reject mergers.
Microgrids are expensive. The capital
costs need to be focused on when you talk about
ROBERTI
Colette, as you complete your one-year
presidency of the National Association of Regulatory
Utility Commissioners, what are the top issues facing
regulators today?
ENERGYBIZ
HONORABLE
One is pipeline safety, because we
continue to have incidents where when we don’t get
it right somebody dies or there are serious injuries.
As we’ve worked on cybersecurity we’ve learned that
we need to focus on resilience. We need to focus on
reliability and gas and electric service coordination.
What are we doing in the severe weather events to
ensure that people get electricity and gas service?
We need to focus on diversity. I’ve often said that
diversity is our strength in two respects. One is with
regard to our fuel mix. The other concerns our workforce. What are we doing to train the next group of
workers that we need to carry out this very important
work that fuels our economies, our homes, our hospitals, our schools?
ENERGYBIZ Lisa, as incoming NARUC president,
what are you most concerned about?
POLAK-EDGAR It’s very important that we support our
250 plus members and their work for effective and
efficient regulation in the public interest.
Gatherings//
Legal Arena
Dec. 18-19
Offshore Investment
Congress
Yangon,
Myanmar
Jan. 28-29
Nuclear Decommissioning
Summit
Berlin
For more information about these and other events, please visit
www.energycentral.com/events.
energybiz.com E N E RGYB I Z 53
» FINAL TAKE
Bismarck
Training
TALENT PIPELINE // BY BRUCE EMMIL
BISMARCK STATE COLLEGE, home of the
National Energy Center of Excellence, focuses
on supplying the energy industry with a pipeline of
well-qualified individuals to fill jobs that open
because of industry
growth and the
aging of the workforce, keeping in
mind the knowledge
required with new
technology. As
estimated by the
Center for Energy
Workforce Development, electric and
natural gas utilities
are looking at the
prospect of 55
percent of jobs
being replaced in
Editor’s Note
the next decade.
The very first issue of EnergyBiz
With continued
one decade ago addressed
advancements
“Brain Drain - Our Graying
being made via
Utilities.” We thought it relevant
to conclude this issue by
technology across
checking in with an innovative,
the industry, many
cutting edge program today
dealing with the ongoing aging
employers have
workforce problem.
embraced the need
for a highly educated, well-trained workforce. NECE makes
available 12 energy-specific college credit programs and noncredit, energy-specific offerings.
In addition to traditional classroom, lab and field
instruction methods, NECE focuses on the use of
technology, much the way industry does, to educate
54 E N E RGYB I Z November/December 2014
and train the present and future energy workforce.
Through the method and pedagogy of online education and training, BSC has trained and educated
thousands of incumbent employees and individuals seeking energy industry employment. Providing
online students with practical hands-on exercises
through the use of interactive learning tools such as
animations, minisimulations, full-fidelity simulations
and Web-based labs has proven to be highly effective and favorable among our students and industry
partners. BSC internally created and continues to
develop an extensive number of online interactive
learning tools and has also worked closely with
industry and vendor partners on designing, developing and purchasing additional online full-fidelity
simulations. Industry employees have never before
had so much information at their fingertips as they
do today. This ranges from the use of hand-held
field devices equipped with sophisticated software to the technology, communication and data
exchange that comes with smart grid technology. BSC’s interactive learning tools mimic what
employees work with now on a daily basis. The
younger-generation students and future industry
employees appreciate learning by manipulating and
operating these technically advanced learning tools.
To some degree, they almost expect to learn in this
manner, having been exposed to exponential growth
rates of change via technology throughout their
entire lives.
Continuous training of the current workforce in
an efficient and effective manner that saves costs
is an ongoing focus of the energy industry. Through
NECE, BSC offers North American Electric Reliability Corporation continuing education hours
training and seven U.S. Department of Labor
registered apprenticeship training programs where,
upon completion, apprentices receive a journeyman
license. These training programs can be offered
face-to-face, on a computer, via correspondence or
online. Because the energy business calls for work
at all hours, providing coverage for employees to be
released from their jobs to attend training is always
challenging. The availability provided through various offerings gives employers the option of assigning employee completion of some training requirements between job tasks and during odd hours
associated with shift work, all the while saving the
company from scheduling conflicts and lowering
their overall costs. This also offers employees better
use of their time when they are temporarily on hold
from completing future job tasks.
In addition to the NERC-CEH training and apprenticeship programs, BSC provides hands-on
industry training in the NECE state-of-the-art labs.
The employer may customize the training, and past
BSC offerings have varied from two-day refresher
training sessions to 10-week training events.
The energy industry continues to grow and is
comprised of many sectors. BSC and the NECE
cannot provide all of the education and training
required on their own. The key to success for us
has come through our partnerships with industry,
vendors, coalitions and other educational institutions. By working together with others, we can
limit the time and effort spent on reinventing the
wheel and spend it smarter and more efficiently
on improving what is already available. The energy
industry offers tremendous career opportunities to
our future workforce, but we need to ensure that
the younger generation is made aware of these
careers and how they can become qualified to be
part of the pipeline that replenishes our workforce
in this exciting industry.
Bruce Emmil is associate vice president of the National Energy
Center of Excellence at Bismarck State College.
» ADVERTISER INDEX
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A DECADE OF CHANGE:
ONE GAS WELL QUIETLY STARTED IT ALL
Natural gas and the shale revolution have capped a decade of change in
energy.
Dominionwww.dom.com
28UNLOCKING THE FULL POTENTIAL OF THE UTILITY FLEET
Generation diversity is crucial and poses a challenge that can be met.
Wärtsiläwww.wärtsilä.com
35
SPEECH ANALYTICS IS ENABLING UTILITIES TO HEAR
CUSTOMERS AND ACT.
Speech analytics provides a path to greater customer service.
Interactive Intelligence
www.inin.com
37INTERNAL CONTROLS TO REDUCE YOUR RISK AT AUDIT TIME
Internal Controls are central to RAI and audit compliance.
DNV GL
www.dnvgl.com
37
S MART UTILITIES: FLIPPING THE “ON SWITCH” FOR
SMART CITIES
Utilities will play a crucial role in the smart cities revolution now underway.
Silver Spring
www.silverspringnet.com
44
MAPPING OUT THE BEST USES FOR ENERGY NETWORKS
New tools help extract value from network assets.
General Electric
www.GE.com
CV3SPEECH ANALYTICS IS ENABLING UTILITIES TO HEAR
CUSTOMERS AND ACT.
Getting Back to Fundamentals: Improving the Customer Experience
in the Collections Process.
Interactive Intelligence
www.inin.com
Company
Page
URL
Dominion
19
www.dom.com
EnergyCentralJobs.com
12
www.energycentraljobs.com
Interactive Intelligence
1
www.inin.com
Leidos
3
www.leidos.com/utility-security
Quanta Services
CV4
www.quantaservices.com
Westinghouse
CV2
www.westinghousenuclear.com
energybiz.com E N E RGYB I Z 55
» FINAL TAKE
10
Congratulations to EnergyBiz magazine
on its 10th anniversary. Over the past
decade, I’ve appreciated the numerous
points of view that appear in its pages;
government officials, industry leaders and
other stakeholders are all given a forum
to discuss the pressing energy issues of
the day.
th ANNIVERSARY
CONGRATULATIONS
The hardworking team at EnergyBiz has
built a publication respected across the
electric utility industry. Congratulations on
10 outstanding years.
Thomas A. Fanning
Southern Company
Chairman, President and CEO
Tony Clark
Federal Energy Regulatory Commission
Commissioner
Colette D. Honorable
National Association of Regulatory
Utility Commissioners President
Arkansas Public Service
Commission Chair
In EPRI’s collaborative R&D world, we
value the sharing of information and
insights. One indication of EnergyBiz’s
value is that I often send along or
receive articles, interviews and columns
from this publication, and find that what
we read there is useful in a variety of
ways. Congratulations and thanks for
a decade of solid contributions to the
electricity sector.
For 10 years, EnergyBiz has been an
insightful, reliable source of information
about global energy markets and trends.
ComEd and Exelon value its role as a
forward-looking forum for industry experts
and leaders to share ideas and debate
issues critical to the energy business.
Our industry benefits greatly from the
meaningful perspectives reflected in
EnergyBiz magazine.
Michael W. Howard
Electric Power Research Institute
President and CEO
Anne Pramaggiore
ComEd
President and CEO
56 E N E RGYB I Z November/December 2014
EnergyBiz provides a venue for diverse
thought leaders to discuss the challenges
facing the evolving electric utility business.
EnergyBiz keeps a fast pace and focuses
on the latest trends, innovations, and
developments shaping the energy world.
I applaud Marty Rosenberg’s leadership
and congratulate EnergyBiz on this
milestone, 10-year anniversary!
Congratulations to EnergyBiz on
10 years, and for extensive coverage of
the distributed energy revolution. As more
Americans are empowered to choose
their energy, they will also want to become
more informed, and over the next 10 years
EnergyBiz will be a key resource for them.
Lyndon Rive
SolarCity
Co-founder and CEO
Photos courtesy of Arkansas PSC, ComEd,
EPRI, FERC, SolarCity and Southern Company.
Getting Back to Fundamentals:
Improving the Customer Experience
in the Collections Process
T
here is a renewed focus on the
customer experience across the
utility industry. Every customer
touch point matters, including customer interactions that are part of the
collections process. Delivering the best
possible customer experience is not easy.
Processes don’t always work as intended,
and resources are scarce.
Customer attitudes and expectations
are also evolving according to Tom
Russell, manager of credit and collections at Integrys. Russell said “Our
customer demographics are definitely
changing. Our long standing customer
base typically wants to pay their bill
and will work with us. The younger
generation seems to have an entitlement
attitude — especially when it comes to
things like electricity. Our society has
more wants than needs. Customers want
that new big screen TV. When it comes
time to pay for necessities like their utility bill, there is often nothing left. Some
customers do not think we should have
the right to shut-off their power because
it is a necessity.”
The answer to an improved customer
experience starts with helping customers remain in good standing. This may
include educating customers about budget billing programs, energy efficiency
programs, recurring payment options,
or low-income assistance programs.
Analytics can identify the customers
most likely to benefit from a particular
program and guide the development of
new programs. “Advanced analytics can
help you understand why customers are
delinquent, guide new program development, produce huge efficiency gains,
and enhance customer service if done
well,” said Ric Kosiba, vice president of
the Interactive Intelligence Bay Bridge
Decisions Group.
Business process automation also
supports delivery of the optimal customer experience by ensuring that the
process operates as desired. “If you can
sketch how a process is intended to
behave, then our Interactions Process
Automation solution can act as your
vigilant traffic cop to ensure that you do
not breach service levels or fail to handle
customer interactions in the correct
manner. One of the areas where we shine
is our ability to handle a process from
the customer interaction through all of
the various steps so that the process is
cohesive and efficient and delivers the
best possible customer service within the
budget available” said Rachel Wentink,
senior director, business automation
group at Interactive Intelligence.
When a customer does become past
due, it is important to consider past
payment behavior and to recognize that
each customer faces varying circumstances. Many utilities like Integrys are
moving to enhanced behavioral scoring
to guide steps taken in the collections
process. “Behavioral scoring will enable
a more proactive approach to collections
and ensure that we apply the proper
treatment to each customer. When you
manage credit and collections solely
based upon arrears analysis, the actions
taken may be too adverse for customers
likely to self-correct. On the flip side,
there are some customers where more
aggressive treatment and severe prompting is warranted sooner,” said Russell.
One bad customer experience in
the collections process, even if due to
process breakdown or an inadequately
trained agent, can do permanent damage to the utility-customer relationship.
A proactive and efficient collections
process that operates as intended may
pleasantly surprise customers and positively impact customer satisfaction.
To hear more for Kosiba and Wentink on
the topic of collections risk management
best practices, listen to a complimentary
on-demand webcast entitled “How Utilities
Can Mitigate Collections Risk” at http://
www.energycentral.com/events/30070.
energybiz.com E N E RGYB I Z 57
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