MODERN GRID

S T R AT E G Y

Smart Grid Basics

Joe Miller, Modern Grid Strategy Team Lead
Grid Econ – The Economics of a Smarter Electric Grid
March 16, 2009

Funded by the U.S. Department of Energy,

Office of Electricity Delivery and Energy Reliability

Conducted by the National Energy

Technology Laboratory
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 MODERN GRID
S T R A T E G Y

This material is based upon work supported by the

Department of Energy under Award Number DE-AC26-
04NT41817

This presentation was prepared as an account of work sponsored

by an agency of the United States Government. Neither the United
States Government nor any agency thereof, nor any of their
employees, makes any warranty, express or implied, or assumes
any legal liability or responsibility for the accuracy, completeness,
or usefulness of any information, apparatus, product, or process
disclosed, or represents that its use would not infringe privately
owned rights. Reference herein to any specific commercial product,
process, or service by trade name, trademark, manufacturer, or
otherwise does not necessarily constitute or imply its endorsement,
recommendation, or favoring by the United States Government or
any agency thereof. The views and opinions of authors expressed
herein do not necessarily state or reflect those of the United States
Government or any agency thereof.

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Agenda MODERN GRID
S T R A T E G Y

ƒ Why modernize the grid?

ƒ What is the Smart Grid?
ƒ How do we get there?
ƒ Is it a “good deal”?
ƒ What are some of the challenges?
ƒ Q&A

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What is the role of the MGS? MODERN GRID
S T R A T E G Y

ƒ Define a vision for the Modern Grid

ƒ Reach out to stakeholders for input
ƒ Assist in the identification of benefits and barriers
ƒ Facilitate resolution of issues
ƒ Promote testing of integrated suites of technologies
ƒ Communicate and educate stakeholders

MGS is an “Independent Broker” for the Smart Grid Office of Electricity

Delivery and Energy
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 MODERN GRID
S T R AT E G Y

Is there a “Case for Action”?

Why Modernize the Grid? MODERN GRID
S T R A T E G Y

ƒ Today’s grid is aging and outmoded

ƒ Unreliability is costing consumers billions of dollars
ƒ Today’s grid is vulnerable to attack and natural disaster
ƒ An extended loss of today’s grid could be catastrophic to
our security, economy, and quality of life
ƒ Today’s grid does not address the 21st century power supply
challenges
ƒ The benefits of a modernized grid are substantial

Running today's digital society through yesterday's grid is like running the Internet Office of Electricity
Delivery and Energy

through an old telephone switchboard. Reliability

Reid Detchon, Energy Future Coalition 6

 Demand for Electricity MODERN GRID
Will Increase 30% by 2030 S T R A T E G Y

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 Retail prices are increasing MODERN GRID
S T R A T E G Y

Average Retail Price (cents/kwh)

10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

30% increase over last decade

Office of Electricity
DOE EIA Energy Outlook 2007 Delivery and Energy
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Today’s grid is: MODERN GRID
S T R A T E G Y

ƒ Aging
ƒ 70% of transmission lines are 25 years or older
ƒ 70% of transformers are 25 years or older
ƒ 60% of circuit breakers are 30 years or older

ƒ Outmoded
ƒ Designed in the 50s and installed in the 60s and
70s, before the era of the microprocessor.
ƒ Stressed
ƒ Never designed for bulk power shipments
ƒ Wholesale power transactions jumped 300% from
2000 to 2005. Insight Magazine, Oct. 2005

Much of the equipment that makes up the North American grid is reaching the end
Office of Electricity

of its design life. Delivery and Energy

Reliability

EnergyBiz Magazine, Sept. 2005 9

Businesses losing billions MODERN GRID
S T R A T E G Y

Primen Study: Up to $135B annually for power interruptions

$0.2B - $2B
$2B - $4B
$4B - $6B
$6B - $11B Office of Electricity
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$17B Reliability

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Other considerations MODERN GRID
S T R A T E G Y

ƒ Jobs and the economic downturn

ƒ US dependence on foreign energy sources
ƒ Climate change
ƒ National security
ƒ 50 coal plants canceled / delayed since
January 2007
ƒ Impact of electric vehicles

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 MODERN GRID
S T R AT E G Y

What is the Smart Grid?

The Big Picture MODERN GRID
S T R A T E G Y

Smart Grid Vision includes:

ƒ Key Success Factors
ƒ Principal Characteristics
ƒ Key Technology Areas
ƒ Value Proposition
ƒ Implementation Plan
ƒ Metrics

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Smart Grid Key Success Factors MODERN GRID
S T R A T E G Y

The Smart Grid is MORE:

ƒ Reliable
ƒ Secure
ƒ Economic
ƒ Efficient
ƒ Environmentally friendly
ƒ Safe

These values define the goals for grid modernization and suggest Office of Electricity

where benefits will be realized

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Principal Characteristics MODERN GRID
S T R A T E G Y

The Smart Grid is “trans-active” and will:

ƒ Enable active participation by consumers
ƒ Accommodate all generation and storage options
ƒ Enable new products, services, and markets
ƒ Provide power quality for the digital economy
ƒ Optimize asset utilization and operate efficiently
ƒ Anticipate & respond to system disturbances (self-heal)
ƒ Operate resiliently against attack and natural disaster

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It will “Enable active participation by consumers” MODERN GRID
S T R A T E G Y

ƒ Consumers have access to new information, control

and options to engage in electricity markets
ƒ See what they use, when they use it, and what it costs
ƒ Manage energy costs
ƒ Investment in new devices
ƒ Sell resources for revenue or environmental
stewardship
ƒ Grid operators have new resource options
ƒ Reduce peak load and prices
ƒ Improve grid reliability

Today Tomorrow
Little price visibility, time-of-use Full price info, choose from many
pricing rare, few choices plans, prices and options, buy and sell, Office of Electricity
Delivery and Energy

“E-Bay” Reliability

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It will “Accommodate all generation and storage options” MODERN GRID
S T R A T E G Y

ƒ Seamlessly integrate all types and sizes of

electrical generation and storage systems
ƒ “Plug-and-play” convenience
ƒ Simplified interconnection processes
ƒ Universal interoperability standards
ƒ Number of smaller, distributed sources will
increase – shift to a more decentralized model
ƒ Large central power plants will continue to play a
major role.
Today Tomorrow
Dominated by central generation. Little Many “plug and play” distributed
DG, DR, storage or renewables energy resources complement central Office of Electricity

generation Delivery and Energy

Reliability

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It will “Enable new products, services and markets” MODERN GRID
S T R A T E G Y

ƒ Links buyers and sellers – consumer to RTO

ƒ Supports the creation of new electricity markets
ƒ PHEV and vehicle to grid
ƒ Brokers, integrators, aggregators, etc.
ƒ New commercial goods and services
ƒ Provides for consistent market operation across
regions

Today Tomorrow
Mature, well-integrated wholesale
Limited wholesale markets, not well
markets, growth of new electricity Office of Electricity
integrated Delivery and Energy

markets Reliability

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It will “Provide power quality for the digital economy” MODERN GRID
S T R A T E G Y

ƒ Monitors, diagnoses, and responds to PQ issues

ƒ Supplies various grades of power quality at
different pricing levels
ƒ Greatly reduces consumer losses due to PQ
(~$25B/year)
ƒ Quality Control for the grid

Today Tomorrow
Office of Electricity
PQ a priority with variety of Delivery and Energy

Focus on outages not power quality Reliability

price/quality options based on needs 19

It will “Optimize asset utilization and operate efficiently” MODERN GRID
S T R A T E G Y

ƒ Operational improvements
ƒ Improved load factors and lower system losses
ƒ Integrated outage management
ƒ Risk assessment
ƒ Asset Management improvements
ƒ Knowledge to build only what we need
ƒ Improved maintenance processes
ƒ Improved resource management processes
ƒ More power through existing assets
ƒ Reduction in utility costs (O&M and Capital)

Today Tomorrow
Office of Electricity
Limited grid information & minimal Deep integration of grid intelligence Delivery and Energy
Reliability

integration with asset management with asset management applications 20

It will “Anticipate & respond to system disturbances” MODERN GRID
S T R A T E G Y

ƒ Performs continuous self-assessments

ƒ Detects, analyzes, responds to, and restores grid
components or network sections
ƒ Handles problems too large or too fast-moving
for human intervention
ƒ Self heals - acts as the grid’s “immune system”
ƒ Supports grid reliability, security, and power
quality

Today Tomorrow
Office of Electricity
Protects assets following disruption Prevents disruptions, minimizes Delivery and Energy
Reliability

(e.g. trip relay) impact, restores rapidly 21

It will “Operate resiliently against attack and natural disaster” MODERN GRID
S T R A T E G Y

ƒ System-wide solution to physical and cyber

security
ƒ Reduces threats, vulnerability, consequences
ƒ Deters, detects, mitigates, responds, and
restores
ƒ “Fort Knox” image
ƒ Decentralization and self-healing enabled

Today Tomorrow
Office of Electricity
Vulnerable to terrorists and natural Deters, detects, mitigates, and restores Delivery and Energy
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disasters rapidly and efficiently 22

Smart Grid Key Technology Areas MODERN GRID
S T R A T E G Y

Advanced
Sensing and Decision
Control Support
Measurement IC Methods IC

IC

Advanced
Components

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Sensing and Measurement MODERN GRID
S T R A T E G Y

Smart meters
SmartAdvanced
sensors
Sensing and • Operating Decision
Control parameters Support
Measurement Asset Condition
• Methods
Wide area monitoring systems (WAMS)
Dynamic rating of transmission lines

Advanced
Components

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Delivery and Energy
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Advanced Control Methods MODERN GRID
S T R A T E G Y

Advanced
Sensing and Decision
Control Support
Measurement
Methods

Applications that:

Monitor and collect data from sensors

Analyze data to diagnose and provide solutions
Advanced
Real time and predictive
Components
Determine and take action autonomously or via operators
Provide information and solutions to operators
Integrate with enterprise-wide processes and
technologies

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Advanced Components MODERN GRID
S T R A T E G Y

Next generation FACTS/PQ devices

Advanced distributed generation and energy storage
PHEV - V2G mode
Fault current limiters
Superconducting transmission cable & rotating machines
Microgrids
Advanced switches and conductors

Advanced
Components

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Decision Support MODERN GRID
S T R A T E G Y

Data reduction
Data to information to action
Advanced
Sensing and Decision
Measurement Visualization Control Support
Methods
Speed of comprehension
System operator training

Advanced
Components

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Integrated Communications MODERN GRID
S T R A T E G Y

Advanced
Sensing and Decision
Control Support
Measurement
Methods

Smart meters
Smart sensors
Demand Response Advanced
DG dispatch Components
Distribution automation
Micro-grids
Markets
Work force management
Mobile premises (PHEV’s)
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 MODERN GRID
S T R AT E G Y

How do we get there?

Break it down MODERN GRID
S T R A T E G Y

ƒ Understand the vision

ƒ Create the roadmap (milestones)
ƒ Define the value proposition
ƒ Identify and resolve barriers
ƒ Apply resources
ƒ Create metrics to monitor progress

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Smart Grid Milestones MODERN GRID
S T R A T E G Y

ƒ Consumer Enablement
ƒ Advanced Distribution
ƒ Advanced Transmission
ƒ Advanced Asset Management

Each Milestone requires the deployment and integration of various Office of Electricity
Delivery and Energy

technologies and applications Reliability

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Steps to the Smart Grid MODERN GRID
S T R A T E G Y

CE empowers the customer and enables

Consumer Enablement
grid interaction

AD improves reliability and

Advanced Distribution
enables self healing

AT addresses congestion
Advanced Transmission
and integrates with RTO’s

Advanced Asset Management

AAM helps utilities reduce costs and operate

more efficiently
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Consumer Enablement Solutions MODERN GRID
S T R A T E G Y

ƒ Smart Meters & 2–way communications

ƒ Consumer Portal / Home area network
ƒ Meter Data Management
ƒ Time of Use Rates
ƒ Customer Information System
ƒ IT upgrades
ƒ Customer Education
ƒ Demand Response

CE empowers the customer and supports grid operations Office of Electricity

Delivery and Energy
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Advanced Distribution Solutions MODERN GRID
S T R A T E G Y

ƒ Smart sensors and control devices

ƒ Distribution Management System
ƒ Advanced Outage Management
ƒ Distribution Automation
ƒ Geographic Information System (GIS)
ƒ Micro-grid operations
ƒ Advanced protection and control

Advanced Distribution enables “Self Healing” Office of Electricity

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Advanced Transmission Solutions MODERN GRID
S T R A T E G Y

ƒ Substation Automation
ƒ Advanced regional operating applications (RTO)
ƒ Wide Area Measurement System (WAMS)
ƒ Advance materials and power electronics
ƒ Hi-speed information processing
ƒ Modeling, simulation and visualization tools
ƒ Advanced digital protection

Deeply integrated with CE, AD and AAM – AT optimizes transmission Office of Electricity
Delivery and Energy

operations Reliability

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Advanced Asset Management Solutions MODERN GRID
S T R A T E G Y

ƒ Advanced sensors
ƒ System Parameters
ƒ Asset “health”
ƒ Integration of grid intelligence with other
processes:
ƒ Operations to optimize asset utilization
ƒ T&D planning
ƒ Condition based maintenance
ƒ Engineering, design and construction
ƒ Work and resource management

Integration of CD, AD, and AT with asset management processes will Office of Electricity
Delivery and Energy
dramatically improve grid operations and efficiency Reliability

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Characteristic – Milestone Map MODERN GRID
S T R A T E G Y

Characteristic CE AD AT AAM
Enables Active Consumer
9 9
Participation
Accommodates All Generation &
9 9 9
Storage Options
Enables New Products, Services and
9 9 9
Markets

Provides PQ for Digital Economy 9 9 9 9

Optimizes Assets & Operates

9 9 9 9
Efficiently
Anticipates and Responds to System
9 9 9 9
Disturbances
Operates Resiliently Against Attack
9 9 9
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and Natural Disaster Reliability

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The “Big Picture” MODERN GRID
S T R A T E G Y

ISO/
Time-based SA RTO EMS
Rates Consumer
HAN

CE AD AT
Transmission
S&M, Comm
MDMS DA

DR AMI Transmission
Distribution Distribution Transmission SCADA
S&M, Comm AAM AAM

Distribution Transmission
GIS Planning GIS

OMS
Design/ Build Congestion
DMS Management

Maintenance

Micro-grid
Operation
Asset
Utilization

Data
Mart

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 MODERN GRID
S T R AT E G Y

Is it a good deal?
Smart Grid Value Drivers MODERN GRID
S T R A T E G Y

Key Success Factors

Reliability
Consumer National
Expectations Economy
Security

Economics Renewable
National
Portfolio
Security
Efficiency Standards

Environmental
Climate Global
Change Competition
Public/worker
safety Office of Electricity
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Value Proposition MODERN GRID
S T R A T E G Y

Cost to Modernize Benefit of Modernization

ƒ $165B over 20 years
ƒ $638B - $802B over 20
ƒ $127B for Distribution
ƒ $38B for Transmission
years
ƒ ~$8.3B per year ƒ Overall benefit to cost
(incremental to business-as- ratio is 4:1 to 5:1
usual)
ƒ Current annual
investment - $18B

(Source: EPRI, 2004)

Thus, based on the underlying assumptions, this comparison shows that the
benefits of the envisioned Future Power Delivery System significantly outweigh the Office of Electricity
Delivery and Energy

costs. (EPRI, 2004) Reliability

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Many stakeholders MODERN GRID
S T R A T E G Y

Policy &
Regulation Government
• FERC • Federal
• PUC’s • State
• NERC • Local
• NARUC
Others Utilities
• EPRI • IOU’s
• Financial • Publics
Firms • RTO / ISO
• R&D • Power
Organizations marketers

Advocacy
• EEI
Vendors
• Rate Payer
• Technology
Groups
• Services
• Environmental
Consumers Groups
• Industrial
• Commercial
• Residential Office of Electricity
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Many Beneficiaries MODERN GRID
S T R A T E G Y

ƒ Utilities
ƒ Consumers
ƒ Society
ƒ Stakeholders

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Business Case Framework MODERN GRID
S T R A T E G Y

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Value Metrics – Work to date MODERN GRID
S T R A T E G Y

Reliability
ƒ Outage duration and frequency
ƒ Momentary outages
ƒ Power Quality
Security
ƒ Ratio of distributed generation to total generation
ƒ Consumers participating in energy markets
Economics
ƒ Peak and average energy prices by region
ƒ Transmission congestion costs
ƒ Cost of interruptions and power quality disturbances
ƒ Total cost of delivered energy
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Value Metrics – Work to date MODERN GRID
S T R A T E G Y

Efficient
ƒ System electrical losses
ƒ Peak-to-average load ratio
ƒ Duration congested transmission lines loaded >90%
Environmentally Friendly
ƒ Ratio of renewable generation to total generation
ƒ Emissions per kilowatt-hour delivered
Safety
ƒ Injuries and deaths to workers and public

Smart Grid Workshop in June – Developed “build metrics” for achieving Office of Electricity
Delivery and Energy
the principal characteristics Reliability

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Utility Benefits MODERN GRID
S T R A T E G Y

Operational improvements
ƒ Metering and billing
ƒ Outage management
ƒ Process improvement
ƒ Work force management
ƒ Reduced losses (energy)
ƒ Asset utilization
Asset Management improvements
ƒ System planning
ƒ Maintenance practices
ƒ Engineering

These benefits are expected to improve customer satisfaction and

reduce O&M and capital costs. Office of Electricity
Delivery and Energy
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Consumer Benefits MODERN GRID
S T R A T E G Y

ƒ Improved reliability
ƒ Improved overall level of service
ƒ Access to information
ƒ Ability to manage energy consumption
ƒ Option to participate in demand response
ƒ Convenient interconnection of distributed
generation
ƒ Option to bid (sell) into electricity markets
ƒ Potential to dramatically reduce transportation
costs (PHEV)

Consumers have access to information, control and options Office of Electricity

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Societal Benefits MODERN GRID
S T R A T E G Y

ƒ Downward pressure on electricity prices through

improved operating and market efficiencies,
consumer involvement
ƒ Improved reliability leading to reduction in
consumer losses (~$135B)
ƒ Increased grid robustness improving grid security
ƒ Reduced emissions through integration of
renewable generation and reduced losses
ƒ New jobs and growth in GDP
ƒ Opportunity to revolutionize the transportation
sector through integration of electric vehicles as
generation and storage devices

Societal benefits must be included in the value proposition Office of Electricity

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 MODERN GRID
S T R AT E G Y

What are some of the Challenges?

 Change Management MODERN GRID
S T R A T E G Y

A significant change management effort is needed:

ƒ Why do we need to change?
ƒ What is the vision?
ƒ What is the value proposition?
ƒ 300 Million consumers affected
ƒ Consumer education, alignment and motivation is critical
ƒ Metrics needed for accountability and to monitor progress
ƒ Active leadership by stakeholder groups needed

Our challenge is to align under a common long term vision and make our Office of Electricity
Delivery and Energy
short term investment decisions consistent with the “end in mind”. Reliability

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Regulatory MODERN GRID
S T R A T E G Y

ƒ Time based rates - incentives for consumers to become

actively involved
ƒ Favorable depreciation rules – recovery of book value
for assets that are retired early for “smart grid” reasons
ƒ Policy changes that provide incentives and remove
disincentives to utilities – investment in a Smart Grid
should make business sense
ƒ Clear cost recovery policies - uncertain cost recovery
increases investment risk
ƒ Societal benefits – quantified and included in business
cases
ƒ New regulatory models
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Technical MODERN GRID
S T R A T E G Y

ƒ Incorporating 2-way power flow into operations

ƒ Simplifying interconnection standards while
maintaining safety
ƒ Getting the communications system right
ƒ Integration of disruptive technologies
ƒ Sharing successes and “lessons learned”
ƒ Need a “real” electricity market
ƒ Lack of resources to “change” and also “keep the
lights on”
ƒ Shortage of skilled human resources
ƒ More focus on R&D – breakthrough technologies
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Contact Information MODERN GRID
S T R A T E G Y

Additional information on the Smart Grid is

available:
http://www.netl.doe.gov/moderngrid/

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 MODERN GRID
S T R AT E G Y

Questions?
 MODERN GRID
S T R AT E G Y

Back-up Slides
 Smart Grid and the Environment MODERN GRID
S T R A T E G Y

ƒ Smart Grid is a key enabler to help reduce

CO2 and other emissions through
ƒ Reduced consumption from demand response
ƒ Reduce losses and increased grid efficiency
ƒ Integration of renewables and CHP DG
ƒ Enabling energy system diagnostics
ƒ Enabling PHEV adoption

ƒ Will provide a “window” for concerned

consumers to assess and react to their
personal environmental desires (Prius effect)

Smart Grid could reduce global power system emissions of CO2 Office of Electricity
Delivery and Energy

14% by 2020 Climate Group, 2008 Reliability

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 Cost of new generation is increasing MODERN GRID
S T R A T E G Y

NETL 2007 baseline

NETL 2008 estimate

with capture

Office of Electricity
Delivery and Energy
Reliability
FERC, “Increasing Costs in Electric
Markets,” June 19, 2008
The Smart Grid and Reliability MODERN GRID
S T R A T E G Y

ƒ Rapid detection of degraded conditions

ƒ Distributed generation and micro-grids
ƒ Automatic isolation and reconfiguration
ƒ Rapid damage assessment and diagnosis
ƒ Rapid dispatch of repair crews
ƒ Overall self-healing capability

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