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Smarter Energy and Utilities

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0 IBM Energy & Utilities Global Smart Grid: Projects and Best Practice Matt Futch, Global Policy Director, IBM Energy & Utilities

1 Smarter Energy and Utilities
Transforming the Business Model 1

2 The transformation provides tremendous opportunities
Reduction in peak loads Changing generation mix Increasing demand 15% 53% 50% when consumers were offered the opportunity to save an average of 10% on their electric bills projected growth in worldwide energy demand by 2035 of new capacity is expected to be from renewable energy sources; by 2035, subsidies for renewables reach almost $250 billion Substantial investment Greater efficiency Conversation Objective: Highlight the positive side of the market forces so client sees opportunities Key ideas: These are some very large numbers. While of course some of them vary in different countries and markets, they are relevant to almost every utility – especially for things like global growth in energy demand or CO2 emissions. But I’m sure you recognize that each number on this slide – while it may be a challenge -- also presents a huge opportunity. The scale of the potential savings that can be achieved is very large. In addition to the numbers listed on the slide, here is another example: while obviously we have high quality electric service in the U.S., we still lose about $150 billion a year due to lost productivity from outages and service interruptions. So even in places where the quality of service already is very high, there is still the potential to have a very significant impact. Source: Galvin Electricity Initiative; U.S. Department of Energy, “The Smart Grid: An Introduction” Considering these various challenges and opportunities, I hope you’ll agree that the time has come to transform energy and utilities to meet the needs of the current century. (We can talk more specifically about how to do that as we move through some of the next few pages.) Sources for statistics on this page: 15% reduction in peak loads: Pacific NW National Lab Olympic Peninsula Project (cited by the U.S. Department of Energy on page 38 of this report)] 36.8% increased demand: International Energy Outlook 2011 50% of new capacity: World Energy Outlook -- $38 trillion investment: World Energy Outlook -- $70 billion greater efficiency: PNNL pilot Question: Are any of the areas shown here ones that you are particularly focused on in your organization? Essential thought to set up the next slide: How are energy and utilities organizations to address the challenges and take advantage of the opportunities? $38 trillion $70 billion global investment in energy supply infrastructure is expected between to 2035 (U.S.$) in infrastructure spending could be saved over the next 20 years through better management of existing assets (in the U.S. alone)

3 45% 49% ca. 400% Cost and pricing pressures
In a connected world, pressures on utilities continue to increase, underscoring the need for a smarter approach Data explosion Cost and pricing pressures Increasing consumer expectations In the utilities industry, the number of connected devices – participants in the “Internet of things” – is growing exponentially: By 2050, the Electric Power Research Institute estimates that the average electric bill will probably go up by about 50 percent if the smart grid is deployed. >50% of surveyed consumers with an opinion expect smart grid technologies will lower total household costs for energy use. But . . . 45% 49% ca. 400% Conversation Objective: Build the case for investing in a more intelligent utility network Key ideas: The facts on this slide speak for themselves . . . Utilities are dealing with an explosion of devices (smart meters, network sensors, electric vehicles, solar panels, etc.), which is leading to huge amounts of new data, which need to be managed, and stored in a way that maintains privacy and security. And the data needs to be analyzed to be turned into something you can use to improve your business operations. [Source for statistic: McKinsey Global Institute: “Big data: The next frontier for innovation, competition, and productivity”] While the economic benefits of investing in “smart grid” capabilities can seem hard to pin down, there is growing consensus that doing nothing or continuing to do what we’ve always done as an industry will not work to meet the demands of the future. [Statistic source: Adapted from Clark Gelling, EPRI Fellow, quoted in Reuters: “U.S. smart grid to cost billions, save trillions” 25 May, 2011] Consumers have a sense that more can be done to help them manage their energy use, and when they do know about smart grids, they have high expectations. But there is much more to do to engage consumers and gain their trust for new technologies and capabilities. [Source for statistic: IBM Institute for Business Value study, “Knowledge is power: Driving smarter energy usage through consumer education”] Essential thought to set up the next slide: Are you seeing evidence of these kinds of trends in the markets you serve? Compound annual growth rate, of consumers were concerned that erroneous smart meter readings would result in overcharges is the expected increase in the average electric bill if the smart grid is not deployed

4 DONG Energy, based in Denmark, reduces outage time and saves on capital investment
25-50% potential reduction in outage minutes. Fault search times reduced by one-third 90% estimated capital savings on planned grid reinforcements, when fully implemented Business problem: Develop the capacity to better manage and utilize its electrical distribution network in order to respond to outages faster and more efficiently. Solution: Implement an intelligent utility network by installing remote monitoring and control devices that provide information about the current state of the grid, reengineering business processes, and analyzing the resulting data to improve operations. “It turns out that the real key isn't the fact that we’ve got visibility into the grid, though that was our initial goal. It’s that we now have information available on grid performance that we didn't have before. We can do a lot with that information.” —Peter Vinter, Power Grid Specialist, DONG Energy Conversation Objective: Demonstrate to the client the kinds of benefits that can be achieved Key supporting facts: DONG Energy's ability to find problems in the grid and repair them quickly had to be improved. A key limitation of existing grids is a lack of information about what's going on in the field. DONG worked with IBM to install remote-monitoring and -control devices that give the company an unprecedented amount of information about the current state of the grid. The solution also involves extensive analysis of the high volumes of new data provided by the remote devices, as well as reengineering of DONG Energy's business processes. To achieve long-term planning benefits, new analytic tools are applied, and the information is integrated with the company's existing IT systems and applications. The new system allows DONG Energy to identify problems quickly, so power can be rerouted and repair crews can be dispatched more effectively. With the new systems, they expect to reduce the minutes of power lost by up to 50 percent, and cut the time it takes to locate faults by one third. DONG expects to be able to drive up the utilization rates on its existing equipment, avoiding costly upgrades. The company believes it can forego as much as 90 percent of the system upgrades it now has on the drawing boards. [IBM internal link to client reference database: Question: What kinds of grid monitoring and control capabilities do you have today, and what plans – if any – do you have to invest in extending those capabilities? Essential thought to set up the next slide: Let’s consider one more example that integrates several different capabilities . . .

5 Enemalta and Water Services Corporations
Building the world’s first smart grid island IBM is partnering with Enemalta, the national utility for the first national smart grid network on Malta complete with 250,000 smart meters that will enable the national utilities and their customers to better manage energy and water use. Solution Components Real-time monitoring and smart meters can deliver pricing based on time of day, enabling the utility to better manage energy consumption and customers to cut their electrical bills. Malta residents will also be able to track their energy use online and see how to curb consumption habits. Enemalta and Water Services Corporations Building a smarter energy and water system BUSINESS CHALLENGE: On the Mediterranean island of Malta, power and water are intricately linked. The nation’s electricity is generated entirely by imported fossil fuel, while the country depends on electrically powered desalination plants for over half of its water supply. In fact, about 75% of the cost of water from these plants on Malta is directly related to energy production. Meanwhile, rising sea levels threaten Malta’s underground freshwater source. This presents a complex, interconnected series of challenges that require immediate attention to ensure that the country delivers affordable, secure energy while protecting the environment. In addition, to meet this challenge, both Enemalta and Water Services Corporations are undergoing an internal transformation process geared towards increased efficiency. SOLUTION: Maltese national power and water utilities — Enemalta and Water Services Corporation — are partnering with IBM to help their country become the first in the world to build a nationwide smart grid and a fully integrated electricity and water system. This system will be able to identify water leaks and electricity losses in the grid, allowing the utilities to more intelligently plan their investments in the network and reduce inefficiency. 250,000 interactive meters will monitor electricity usage in real time, set variable rates, and reward customers who consume less energy and water. Thousands of intelligent sensors will be deployed along transmission lines, substations, and other existing infrastructure to manage electricity distribution more efficiently and to anticipate problems. The project is the first step in establishing an end-to-end electricity and water smart utility system. When complete, the multi-phased engagement is expected to completely transform the relationship between Maltese consumers and utilities suppliers, while enabling more efficient consumption of energy and water. In assisting in the transformation of both utilities, IBM is entrusted to implement a customer relationship management (CRM) & Billing solution, as well as Enterprise Resource Planning (ERP) core modules, while a new web portal will be instilled for both utilities to better interact with their end customers. To fund the needed projects, IBM Research partnered with GBS and the government of Malta and applied their expertise in securing European Union funding and committed to a two-year agreement to assist the government and people of Malta. The Research/GBS team conducted workshops, provided software and helped to develop internships that help Malta citizens learn project fundamentals and then move on to other projects in other countries. IBM Research is providing data analytics and other research expertise for energy and utilities, education, “smart city” initiatives and telecommunications projects. BENEFITS - All of the data from the intelligent meters can be collected and analyzed to help lower costs, adopt efficient and sustainable consumption patterns and cut greenhouse gas emissions. - By addressing the issues of water and power as a system, the Maltese government can provide citizens with better information to make smarter decisions about how and when they use power — and the country can begin the task of replacing carbonintensive fuel oil with renewable energy for the future. Other Benefits include: Actual use: Estimated accounts will be eliminated, and customers will pay only for what they actually use. Flexible tariffs: Utility companies will be able to manage different prices to sustain new policies on energy consumption. Pre-payment: The solution allows customers to switch to a pre-pay service, similar to mobile phone pre-payment. Reduction of losses: Commercial losses will be reduced and technical losses will be more easily identified through monitoring of electricity and water grids. Remote management of electricity supply: No local intervention will be needed to activate, reduce, increase or terminate supply, thereby reducing connection time. Energy efficiency: The system will enable sophisticated analysis of consumption patterns, enabling a real-time view of energy use to identify opportunities for reduction. Customer portal: Customers will have an Internet window to their technical and commercial data, to track current consumption and choose the most appropriate agreements. Usage level: Win/Ongoing project/Completed project: External Ongoing project Industry : Energy & Utilities

6 A Canadian energy company optimizes the operation of its power grid to avoid outages and power surges Up to 100% more distributed generation allowed into the grid When fully implemented, sensors will report outages automatically, and crews can be dispatched earlier and more accurately Business problem: Accommodate the rapid expansion of external sources of distributed, renewable generation and modernize the distribution system to improve reliability, responsiveness, planning, and overall customer satisfaction. Solution: Develop an advanced distribution grid management system, and implement real-time analytics capabilities to enable better prediction of demand, help ensure the right amount of power is generated, improve monitoring and control of distribution resources, and optimize outage restoration. Conversation Objective: Demonstrate to the client the kinds of benefits that can be achieved Key supporting facts: Responding to local regulatory mandates that require companies to adopt smart grid technologies and transform the region’s electricity distribution network a Canadian energy company: Must accommodate the expansion of distributed generation (DG), both large – Feed-in-Tariff (FIT) and small - MicroFIT (less than 10kW), which are expanding rapidly Must leverage new smart grid technologies for modernizing its distribution system to improve reliability, responsiveness, planning, and overall customer satisfaction. Must modernize the electrical infrastructure - a system designed over 50+ years ago Using historical, demographic and any other data that may affect electricity demand, the client creates more efficient forecasting models, which will improve predictions and help the company better align customer demand with distributed generation. IBM is the overall systems integrator and Program Management Office, along with its partner, Telvent, to supply and deploy a Distribution Management System (DMS), and with GE as the Power Systems Engineering design and integrator. IBM also is providing key business strategy consulting to assist in the overall business case. Benefits of the solution: Analytics help the operator allow for significantly more distributed generation (upwards of a 100% increase) into the grid, while improved monitoring, control, and protection of distributed energy resources ensures safe levels and maintains reliability in the grid By taming the unpredictability of the distributed generation forecasting model data, the client can now automate its demand forecasting and gain a competitive edge The Telvent distribution management system will help optimize outage restoration by quickly and automatically identifying where outages occur and providiving operators with restoration options [IBM Internal link to client reference database: Question: Were there capabilities described here that your organization would like to have? Essential thought to set up the next slide: With anything complex like this, it’s useful to have some kind of a roadmap or plan . . .

7 Pacific Northwest National Laboratory uses innovative ways of managing demand to keep the electric grid healthy in times of stress 50% reduction in short-term peak electricity loads, helping to avoid power restrictions and cascading blackouts 10% Business problem: Wanted to manage electricity demand through a combination of intelligent technology and financial incentives. Solution: After two years of preparation, the PNWSG Demo went live and the Transactive Energy Management went into full effect. Attendees at a launch event at the University of Washington witnessed how the new signal will allow project managers to accumulate energy usage information from all 60,000 households and monitor the energy grid in real time – a capability that was once impossible. average savings on electricity bills $70 billion projected reduction in infrastructure spending over 20 years

8 A group of utilities provide consumers with direct access to their consumption metrics
Standard platform across 7.1 million energy meters and 2.5 million consumers, provides visibility into their personal energy use Business problem: Seeking to improve the quality of service they could offer, a group of energy providers wanted to increase transparency within the energy industry and provide consumers with direct access to their consumption metrics. Solution: A public energy tracking solution that allows consumers to closely monitor their personal energy use.

9 VESTAS wind energy optimizes the siting and production value of their wind farms through forecasting and data analytics 97% Reduction in response time for wind forecasting information 40% IT footprint and costs and decreases energy consumption by "We can now show our customers how the wind behaves and provide a solid business case that is on par with any other investment that they may have.” —Lars Christian Christensen, Vice President, Vestas Wind Systems A/S

10 Irish Utility ESB - EV platform for nationwide EV infrastructure
Irish utility is deploying 1,000 EV charging stations and is partnering with IBM to develop a transaction management system SERVICES INCLUDE DNO - Distribution Network Operator REP - Retail Electric Provider TSO - Transmission System Operator IBM EV Platform DNO REP TSO User management services including enrollment and issuance of RFID card Charge Calculation based on the identified user’s appropriate rate Prepay and Post-pay services Transaction clearing and settlement services between DNO and REP Management of interruptible tariffs for spinning reserves Integration with TSO / DSO for usage forecasting Charge health monitoring and reporting of status Web and mobile interfaces for charge post location and viewing of relevant data

11 Public Private Partnerships
Developing an eco-system of knowledge 11

12 As a global integrator weverages three foundational capabilities to deliver end-to-end solutions.
SOLUTION DEVELOPMENT AND DELIVERY POLICY AND REGULATION INDUSTRY THOUGHT LEADERHSIP Solution Development IBM Research Global IUN Coalition Nuclear Power Advisory Council Solution Delivery Solution Development: IBM Solution Framework, SAFE, Global IUN Coalition, Nuclear Power Advisory Council Solution Delivery: IUN Method, Component Business Model, Smart Grid Maturity Model Partner Ecosystem @IBMSmartrEnergy

Smart Grid Australia Smart Grid Canada Smart Grid Great Britain India Smart Grid Forum Smart Grid Ireland Japan Smart Community Alliance European Distribution System Operators Korea Smart Grid Association NEW ADMISSIONS Denmark Israel South Africa Taiwan Turkey IBM established and manages the Global Intelligent Utility Network Coalition – advancing smart grid for over 150 million consumers around the world 13 13

14 Solving the Puzzle – Partnerships
UNITED STATES TURKEY IBM is working with GRIDWISE Alliance and other members on Federal energy and regulatory policies that enable the next transformational step for smart grid in the US market. IBM working with national smart grid association and regulator on best practices for market structure, system operations, and technology platforms for smart meter data management. EUROPEAN UNION MALAYSIA IBM partnering with European utility association to develop market structure, regulatory reform and investment recommendations enabling energy infrastructure innovation and network reliability IBM working with Malaysian Energy Commission to provide best practices on regulatory reforms enabling smart grid. National smart grid road mapping also part of activity. Multiple utilities and vendors part of the work effort. 14

15 Coalition Overview – Current Membership
Global Intelligent Utility Network Coalition Coalition Overview – Current Membership Raleigh, NC USA Optimized energy value chain minimizing need for new fossil generation units, AMR-to-AMI strategic transition, advanced feeder modeling Paris, France Sensing & control, asset optimization for fault prevention, smart grid for Co2 reduction, AMM & communications network Arnhem, The Netherlands Organization-wide smart grid vision and strategy, smart grid PMO, fraud detection Dallas, TX USA Advanced metering system implementation, integration and PMO, MDM, Business Analytics, Security, Smart Meter Texas Washington, DC USA IUN blueprint, outage management, notification, AMI Copenhagen, Denmark VPP, EDISON, DMS integration, CBM Düsseldorf, Germany Efficiency, Renewables Integration, Grid Quality, Intelligent Substation San Diego, CA USA Smart grid system implementation, condition based maintenance, OMS/DMS, smart grid communication strategy Tokyo, Japan Low carbon generation, EVs, Rooftop PV, Efficient buildings, AMI, Storage, Grid Reliability Seoul, South Korea Nuclear generation, Jeju test bed, Renewable integration, EVs, Grid automation Houston, TX USA Advanced metering system implementation, integration and PMO, MDM and HAN, Smart Meter Texas Queanbeyan, Australia IN strategy and customized IN blueprint, organizational impact of smart grid, IN Research & Demonstration Center New Delhi, India Smart grid governance structure, smart grid roadmap (in planning) Campinas, Brazil Smart Metering Center, loss reduction, communications

16 Universal policy foundation for Smart Grid
Create a Long Term Roadmap with Milestones Develop a Robust Consumer Education Plan Adopt or Establish Interoperability Standards Create Regulatory Incentive for Utility Investments Establish Clear Data Privacy and Security rules 16

17 Matt Futch, Global Policy Director
ありがとう * شكرا * 謝謝 * Merci * Danke * शुक्रिया * תודה * terima kasih * با تشکر از شما * gracias * tack * آپ کا شکریہ * σας ευχαριστώ * * شكر спасибо * gratias agimus tibi * Thank you! Matt Futch, Global Policy Director IBM Energy & Utilities

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