Alvarez

Smart Grid Deployment Evaluations
Wired Group
Findings and Implications for

Regulators and Utilities
MADRI Meeting April 20, 2012

Wired Group
Preview Wire Group
Wired Group Introduction

Deployment Evaluations and Methodologies
Findings: Benefits, Costs, Drivers, Impacts
Implications for Regulators and Utilities
Regulatory Trends
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Wired Group
Wired Group Introduction Wire Group

Visioning
History
Goals Metrics
Background
Distribution
Strategies
Modernization
Optimize Best Practice Business
Perspective Adoption Case
Bang for
Buck
Evaluate Implement
Benefits Quantification Change Management
Effectiveness Review Project Management

Wired Group
Deployments and Evaluations

Xcel Energy Methodology/Framework Development
46,000 customers Emerging frameworks
Full deployment (Customer to Power Utility business cases
Plant) on selected circuits
Regulatory orders, initiatives
Evaluation encouraged by Colorado PUC
Supplier white papers/studies
Complete and free rein
Specific Examinations
Duke Energy Ohio
Existing Research
800,000 customers (400,000 gas)
Guidelines (NIST)
Partial deployment on all circuits
Standards (IEEE; UL; AICPA, etc.)
Mid-deployment review ordered by Ohio
PUC upon initial approval in 08
www.wiredgroup.net
Copyright 2012 Wired Group. All Rights Reserved
Wired Group
Benefit Quantification Wire Group

Economic Benefits, Reliability Benefits, Costs
Establish Value Propositions (hypotheses)
Gather data
Examine existing research
Interviews (internal/external SMEs, suppliers, etc.)
Pre-/post-deployment operational data queries; meter tests
Translate data to $ (Fuel/O&M/Capital/Rev) or Cust. Minutes Out
Associate Hypotheses to Systems, Costs
HAN AMI DM DA IVVC SM
*Strong resource: EPRIs
Methodological Approach
to Measuring Cost and
Benefits of Smart Grid
VP VP VP VP
VP VP VP VP Demonstration Projects
VP VP VP VP
VP VP VP VP
Wired Group
Effectiveness Review Wire Group

Customer Service*, Operational^, IT Risk~, Intangibles
Establish Value Propositions (Hypothesis)
Gather Data
Market Research (Qualitative, Quantitative)
Interviews/Process Documentation pre- and post-deployment
Data Utilization/Systems Integration reviews
Identify gaps from emerging best practices
Provide options for consideration
*Strong Resource: The ^Strong Resource: The ~Strong Resource: NISTs

Environmental Defense Funds Smart Grid Maturity Model Guidelines for Smart
Evaluation Framework for from the US DOE and Grid Cyber Security
Smart Grid Deployment Plans Carnegie Mellon University
Wired Group
Findings: Economic Benefits (Drivers)

Wire Group
All Other
Meter Reading:
Mostly
Manual reads
distribution
prior to
capital
deployment?
Insufficient on its
Distribution
own for strong
Efficiency (IVVC):
business case
Circuit Load
Circuit Voltage
Circuit Power
Factor
TOU Rates:
Participation Rate
Findings seem to indicate that the size Degree of behavior change
of anticipated benefits are consistently Recruiting & retention costs
being over-estimated in available IOU Benefit split between participants
business cases and non-participants
Wired Group
Findings: Reliability BenefitsWire

(Drivers)
Group
How Prepared Should the Grid Be?
CMO reduced ~ 20%
(60% from DA, 40%
from DM)
Drivers: baseline
performance;
granularity; data
frequency
At 99.98% reliability,
20% = 20 minutes
annually(!)
Greater DA/DM value is
more likely in the future
(EVs, PV Solar)
Findings seem to indicate that reliability benefits will be noteworthy

but insufficiently large to be recognized by most customers
Wired Group
Findings: Costs (Drivers) Wire Group
AMI: Relative Capital and Technology Risk by Capability
Features
Communications
All Other:
Extent of
Deployment
Employ 20/80
Rule!
See notes for this chart in the Appendix
Findings seem to indicate that the initial capital and ongoing O&M costs of smart grid
capabilities are consistently being under-estimated when compared to business cases
Wired Group
Findings: Organizational/Operational
Wire Group
Formal change management is critical to maximizing Organizational
value of smart grid capabilities! Structures and
Capabilities
Adjusting budgets between departments to ensure
resources are available to maximize new capabilities Operational
Processes and
Building personnel capabilities and new skill sets Governance
Establishing new processes to take advantage of new
Data Utilization,
capabilities and data
Systems, and
Modifying incentives to encourage use of new capabilities Tools
Integrating systems and data to facilitate their use Customer

Programs and
Translating new capabilities into program and service Services
enhancements for customers
Failure to conduct formal change management is directly correlated with failure to
maximize the value of new capabilities
Wired Group
Findings: Customer Services (Quantitative)

Wire Group

Wired Group
Findings: Customer Services (Qualitative)

Wire Group
TOU Rates
Customers dont want the additional responsibility
Customers dont like being placed at risk
Customers anticipate much greater savings for
behavior change than is generally available
When presented with multiple TOU options,
customers most often choose those that fit
existing behaviors (Free Riders in DSM terms)
The Texas experience

Wired Group
Implications for Regulators, Wire

Utilities
Group
Smart Grid investments are different!
IODU* (business) performance is subjective as
well as objective
New regulatory models may be called for
If the value of smart grid investments is to be
maximized:
IODUs need greater motivation than simply the
absence of disincentives
Some rules/constructs need to change
*Investor-Owned Distribution Utility

Wired Group
Smart Grid Investments Are Wire

Different!
Group
Traditional Investments in G, T, & D (Value is Black and White)

Customer
Fairly
Needed + + Commissioned = Value
Procured
Assured
Smart Grid Investments (Value is Highly Dependent on Choices)
Customer
Bang for Change Best Practice
+ + = Value
the Buck Mgmt. Adoption
Assured
Wired Group
Performance is More Subjective than Ever . . .

Wire Group
Biggest Bang for Change Best Practice

Buck Management Adoption
(Strategy) (Implementation) (Optimization)
Structure and
Communications Data Access
Capabilities
Processes and
Volt/VAr Control TOU Pricing
Governance
Data Utilization and

Sectionalization Outage Information
Systems Integration
Customer Programs
Remote Disconnect DSM Designs
and Services
( . . .making the absence of disincentives insufficient to drive performance)

Wired Group
Examples of Needed Rule Changes

Wire Group
Disconnect for non-payment rules

DSM program rules (IVVC satisfies DSM definition
but utility efficiency generally excluded)
Net metering rules that compensate generation
owners at retail rates
How to encourage customer service innovation?

Wired Group
Regulatory Trends Wire Group

Distribution Trend State Regulator
Smart Grid benefit Oklahoma First smart grid authorization to
measurement Corporations include cost reduction performance
Commission rewards and penalties for IOU
Increased activism California PUC Required smart grid business plans
and set aggressive rules for data
access (including 3rd party access)
Smart Grid benefit Ohio PUC Above plus mandated IOU to complete
maximization and annual change mgmt. & program
transparency optimization plans (in deliberation)
Increased legislative Illinois Commerce Legislature approved law encouraging
oversight Commission IOUs to deploy smart grids with no
significant economic benefit measures
Increased judicial Michigan PSC Appeals Court overturned PSCs
oversight approval of DTE Energys smart grid
cost recovery and ordered benefit
measurement (April 12)
Wired Group
Regulatory Trends Wire Group
Regulators Motivated
Increasing Customer Risk
to Measure Benefits
Increasing Utility Risk

Rider Rider w/Limits Rate Case
(Illinois, Texas) (Ohio, Oklahoma) (California, Nevada)
Utilities Motivated to
Measure Benefits
Are regulators/legislators moving to the middle?

Wired Group
Best Practices in Value Maximization

Wire Group
Establish goals and relevant performance metrics

Get the rules and motivations right
Make extensive efforts to maximize the use of new
data and capabilities
In organizational capabilities, operating processes,
and systems (formal Change Management)
In customer programs (DSM, Pricing), customer care
Measure and report on progress!

Wired Group
Wired Group Smart Grid Services

Wire Group
Visioning (goals, metrics)

Strategy (business case development)
Implementation (Project Mgmt., Change Mgmt.)
Performance Measurement
Benefits Quantification
Effectiveness Review (capabilities, processes,
data/systems, customer programs/services)
Optimization Action Planning & Execution Support
(best practice adoption)

Wired Group
Overall Observations Wire Group

Utilities smart grid business cases are overly optimistic
Reasonable payback periods are available, but
Extensive efforts are required to realize anticipated benefits,
maximize the value of available capabilities, and minimize
payback periods for customers
Wired Group
Paul Alvarez, President
palvarez@wiredgroup.net
www.wiredgroup.net
720-362-3522 Office
720-308-2407 Mobile

Wired Group
Notes to Costs Shown on Slide 9

Wire Group
Amounts indicated do not include fixed infrastructure capital costs.
*Distribution Monitoring capital cost estimate assumes transformer-based
sensing; the portion above the break indicates capabilities and costs that
might be duplicated with the installation of smart meters with certain sensing
capabilities. (Note that the use of meters as sensing devices is contingent
upon readily- and cost effectively-available data, which is in turn based on
communications infrastructure design choices.)
~Smart Metering capital cost estimates include communications-enabled meter
and premise-variable communications costs per premise.
^Demand Response capital cost estimates assume that customers purchase
home energy management equipment; amounts indicated consist of
equipment rebates likely paid by utility.

Alvarez

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Smart Grid Deployment Evaluations

Findings and Implications for

MADRI Meeting April 20, 2012

Preview Wire Group

Wired Group Introduction

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 2

Wired Group Introduction Wire Group

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 3

Deployments and Evaluations

Benefit Quantification Wire Group

Effectiveness Review Wire Group

*Strong Resource: The ^Strong Resource: The ~Strong Resource: NISTs

Findings: Economic Benefits (Drivers)

Findings: Reliability BenefitsWire

Findings seem to indicate that reliability benefits will be noteworthy

Findings: Costs (Drivers) Wire Group

AMI: Relative Capital and Technology Risk by Capability

Integrating systems and data to facilitate their use Customer

Findings: Customer Services (Quantitative)

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Findings: Customer Services (Qualitative)

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 12

Implications for Regulators, Wire

*Investor-Owned Distribution Utility

Smart Grid Investments Are Wire

Traditional Investments in G, T, & D (Value is Black and White)

Performance is More Subjective than Ever . . .

Biggest Bang for Change Best Practice

Data Utilization and

( . . .making the absence of disincentives insufficient to drive performance)

Examples of Needed Rule Changes

Disconnect for non-payment rules

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 16

Regulatory Trends Wire Group

Regulatory Trends Wire Group

Increasing Utility Risk

Are regulators/legislators moving to the middle?

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 18

Best Practices in Value Maximization

Establish goals and relevant performance metrics

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 19

Wired Group Smart Grid Services

Visioning (goals, metrics)

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 20

Overall Observations Wire Group

www.wiredgroup.net Copyright 2012 Wired Group. All Rights Reserved 21

Notes to Costs Shown on Slide 9

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