"We're seeing signs in the utility and power generation industry that suggest regulator and customer interactions and technology and business alliances will rapidly evolve as these massive infrastructure projects are executed. These factors could, in some ways, redefine the way utilities will do business going forward," says David Etheridge, utilities and power generation industry leader at PricewaterhouseCoopers. "Rate cases are on the increase as utilities try to find ways to manage investments and project costs. Utilities are forming alliances with the auto and tech industries, adding several layers of operational complexity. And the biggest question of all is whether customers will embrace or reject Smart Grid technology."
According to the report, six key areas that highlight the growing pains associated with Smart Infrastructure technology and its deployment:
- Additional expense: Some 62 percent of utilities surveyed globally cited smart grid initiatives (advanced metering infrastructure, protection and control relays and substation automation) as the reason for rising capital budgets in 2010. Nearly two-thirds forecasted boosting capital budgets for 2011. That’s a double whammy for the energy industry, which increased capital spending from $36 billion in 2004 to an estimated $75 billion in 2010. – adding smart grid costs to already-expanding capital expenditure budgets are being raised, in areas such as communications systems and smart meter installation and maintenance. These concerns come as overall capital investment by the utilities industry is estimated to reach $75 billion in 2010, more double that in 2004 ($36 billion).
- Utilities, Regulators & Customers: At the core of a fully optimized smart grid are customer adoption and satisfaction. In a recent study, sixty eight percent of Americans have never heard of a smart grid.
Sixty three percent have never heard of a smart meter. Additionally, in another survey, U.S. utilities executives said rate cases would be their no. 1 one focus during the next year. The number of rate cases filed by shareholder-owned electric utilities rose to 66 - the highest in two decades. Base rate increases among US electric utilities in all were $4.2 billion, with 58 cases in 2009, up from $2.9 billion with 42 cases in 2008. As of February 2010, 83 major U.S. electricity or gas retail rates cases were under consideration. - Costs vs. Benefits: Estimating future costs and the benefits of AMI and smart grid technologies has proven to be a prickly. To date, there is no shortage of estimates of the savings that a fully integrated smart grid could bring. But as smart grids move from theoretical projections into the nuts and bolts of deployment, real effectiveness and attendant savings will come to bear.
- Hacking the system: As smart infrastructures expand, so too will the urgency to safeguard against cyber-attacks -be they accidental and petty, or malicious and devastating. The number of successful cyber-attacks against supervisory control and data acquisition systems at power generation, petroleum and nuclear plants and at water treatment facilities has grown tenfold since 2000.
- Data overload: Data management and optimization will present significant challenges to utilities in the short term. As data from millions of smart meters streams in--and streams back out to customers—utilities could have a wealth of useful data available to optimize the grid. Or, they could end up with an underutilized and unleveraged data overload. Inevitably, more and more energy-use data will need to be managed as smart meter-enabled home appliances and devices equipped to send data go mainstream.
- Managing new partners: Utilities may be thrust increasingly into the role of "clean energy systems integrator," charged with integrating legacy and emerging operations that have traditionally operated independently. In many cases, utility companies are learning how to work with new partners and are adjusting vendor-management behavior. Five years ago, some technology vendors in the smart infrastructure world were willing to develop solutions for utilities at lo-cost or no-cost , generally on a "proof-of-concept" basis. More and more, these same vendors are expecting to be paid.
"Utilities will be challenged on many different fronts to get the equation right - from regulators, customers and technology partners to name a few," says Etheridge. "But the potential benefits and savings for both utilities and their customers are significant. Billions are being invested, and there is the possibility of billions in savings - not just in dollars, but also in emissions reductions. The utility industry is at an inflection point in its 100+ year history - the smart infrastructure is the driving force behind an industry transformation."
