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A report by The Climate Group on behalf of the Global e-Sustainability Initiative (GeSI), with independent analysis by McKinsey & Company

The Climate Group

Smart Grid: Electric Distribution Grid System Optimization

Key Facts

  • CURRENT Group LLC has developed a System Optimization solution provides electric utilities the visibility and control necessary to dynamically optimize power delivery.  The solution which optimizes the distribution grid is estimated to reduce electric generation requirements and related carbon by 3 to 5% without impacting upon, or requiring any change in customer behaviour, while also enabling the integration of intermittent renewables.

  • The electric power system was designed to handle a one-way power flow from central generation plant to the end user. The focus was on achieving reliable power delivery with limited visibility into the system power flow. However, electric power produces approximately 40% of energy related CO2 worldwide. Global warming and the two-way power flow resulting from the use of distributed renewables require new methods of optimizing the electric system. 

    The CURRENT® System Optimization solution combines advanced sensing technology, two-way high-speed communications and 24/7 monitoring and analysis software to dynamically adjust the distribution system to reduce the power required to operate the system while enabling the use of renewables. The CURRENT’s System Optimization solution leverages extensive Smart Grid experience to reach the highest level of Smart Grid maturity, the self optimizing electric grid. Adopting user configurable settings and high speed communications, the system automatically adjusts existing utility devices to achieve the desired level of optimization. Such optimization can be minimizing carbon, maximizing the use of renewables, reducing line losses or a combination of goals depending on a particularly utilities requirements.

    An example where CURRENT has implemented its System Optimization solution is in Boulder Colorado where CURRENT is a member of Xcel Energy’s SmartGridCity Consortium that has made Boulder, Colorado, the United States’s first fully integrated Smart Grid City.  The advanced smart grid system provides the city of Boulder Colorado (population of approximately 100,000 people) with the largest and densest concentration of smart grid technologies in the world designed to provide environmental, financial and operational benefits. 

    Xcel Energy’s vision of a Smart Grid includes a fully network-connected system that identifies all aspects of the power grid and communicates its status and the impact of consumption decisions (including economic, environmental and reliability impacts) to automated decision-making systems on that network. Xcel Energy believes the results will be a greatly improved delivery system that optimizes the impact on the environment, ensures the most efficient delivery, and maximizes reliability.

    SmartGridCity™ took approximately 18 months from initial consortium until the system was live. The CURRENT System Optimization solution is one part of the SmartGridCity project and can be easily deployed on a modular basis and expanded to a system wide basis.

  • The project took 18 months to implement
  • For the overall solution, the likely ROI is 36 months: The CURRENT System Optimization solution can be installed on a modular basis and can produce a payback in less than 36 months depending on the cost of power in a particular market.
  • In addition to improving the efficiency of the electrical grid, CURRENT’s OpenGrid™ software also enables utilities to improve the reliability. It is estimated that the cost of outages to the U.S. economy are as high as $0.50 for every $1.00 spent on electricity. CURRENT has developed a series of analytical software programs that detect problems with grid equipment, often before they result in an outage. As opposed to the traditional “run to failure”, Xcel Energy in its SmartGridCity™ project with CURRENT, reported it was able to move to a preventive maintenance program, voltage problems have been reduced by over 90%, there have been no customer voltage complaints this year and unpredicted transformer failures have been significantly reduced. Outage cause, location and restoration have also been significantly reduced.

  • The primary sponsor for the project was Tom Casey, CEO of CURRENT

What was the impact?

  • Did you use a specific methodology or third party to calculate CO2e or KWh savings?

    CURRENT is developing a Measurement and Verification solution to calculate CO2e and KWh savings on an ongoing basis as an enhancement to the solution.
  • Comments on energy savings

    The System Optimization solution is projected to shown reductions in overall power requirements in excess of the 3 to 5% and the Iinitial results of the system optimization implementation at Xcel have been favourable.
  • Notes about Carbon savings/calculations

    The potential for system optimization on a national or global scale is significant. For example, a 3% reduction in U.S. baseline generation would mean 123 million metric tons of carbon that won't be released into the atmosphere - every year, the equivalent to eliminating the need for approximately 22 coal plants or taking 15% of cars off the road.
  • The project has internal verification for results

Making it Happen

  • The following regulations or incentives allowed the business case to be more attractive

    This project was made possible because of the leadership of Xcel Energy and the consortium members. Xcel Energy wanted to test the potential of a Smart Grid. Unfortunately, traditional rate based utility regulation does not offer an incentive but a disincentive to invest in Smart Grid technology
  • Barriers experienced during the initiation of the project

  • Comments regarding barriers

    Electric Utilities need to be regulatory assurance and incentives to invest in a more advance Smart Grid, especially where it impacts on demand.
  • Other comments regarding barriers preventing the successful completion of the project

    Unfortunately, traditional rate based utility regulation does not offer an incentive but a disincentive to invest in Smart Grid technology.  The technologies exist for full smart grid implementation. The challenge is giving utilities regulatory incentives instead of disincentives. Regulatory disincentives still need to be overcome on a global basis.
  • How were they overcome?

    (How can they be overcome):

    The electric utility industry, and in particular the distribution grid, must be a central element of every nation’s program to reduce carbon emissions.  This requires upgrades to the distribution grid in addition to meters, transmission and renewables.   There are several potential regulatory alternatives to speed adoption of a Smart Grid:

    Regulatory Requirement of Smart Grid - The fastest way to achieve a Smart Grid is to mandate it in a similar way Renewable Portfolio Standards and metering have been mandated in various parts of the world. Without a Smart Grid, it is likely, as has been recognized in Canada, that the benefits of distributed renewables and metering will not be realized and thus, many years and trillions of dollars will be wasted without achieving the core goal of carbon reduction.

    Utility Efficiency Targets or Rewards - Set targets and/or rewards to utilities for energy efficiency, including through the use of a Smart Grid.  In the U.S., the recent action by several states and the proposed Energy Bill, which requires a certain percentage reduction in baseline energy consumption on an ongoing basis or at peak - or both - an be an effective mechanism to achieve energy efficiency and encourage a Smart Grid.  This is especially true if a utility can include in its saving targets any efficiency gains it receives from the use of a distribution Smart Grid. Another effective alternative is to reward utilities through incentives for being more efficient and for making its customers more efficient through concepts such as decoupling, efficiency gain sharing or the ability to recover energy efficiency related capital investments with a rate of return.

    Smart Grid as part of Efficiency Targets - Provide equal incentives or requirements for the use of a Smart Grid to achieve energy efficiency goals. Governments and regulators should recognize that the Smart Grid can provide the most direct and certain form of energy efficiency and demand response by enabling the electric utility to operate its distribution system more efficiently and thus reduce the amount of generation required to serve the ultimate customers. It is estimated such optimization of the distribution grid can reduce electric generation requirements and related carbon by 3 to 5% without impacting on, or requiring any change in, customer behavior. These benefits can be realized as on-going energy efficiency, at peak load or a combination thereof.  

    This trend is starting to emerge in the U.S. where both the Legislature’s proposed energy legislation allows utilities to count the benefits of a Smart Grid towards achieving energy efficiency targets. In addition, the National Association of Regulatory Commissioners for the States now recommends that regulators and utilities focus initially on these “direct value” investments.

    Provide incentives for utilities to invest in new technology:  - Utilities typically received no higher rate of return or incentives for the effort of implementing new technologies and thus tend to focus on a business as usual approach. In addition, in many places, utilities are traditionally subject to after-the-fact regulatory review of their investment decisions. A utility faces the realistic prospect that cost recovery for an investment could be denied in a rate-making proceeding that occurs several years after the utility has completed its investment. This is another reason that regulated utilities are often averse to adopting new and innovative technology (for example, in the U.S. utilities rank near the bottom of all industries in research and development spending as a percentage of sales).

    Provide Direct Stimulus Funding - The U.S. economic stimulus package funded $4.5 billion towards implementing the Smart Grid provisions of the U.S. Energy Independence and Security Act of 2007 which made the Smart Grid a policy of the United States. The European Commission also has a number of projects underway to encourage the Smart Grid. Programs such as these should encourage widespread trials of technologies and encourage standards and knowledge sharing to increase Smart Grid knowledge and adoption.

    The lack of incentives and regulatory certainty will act to delay investment in Smart Grid technology. Policy makers and regulators need to address this to assure that utilities are incentivised to invest, especially in cases where the overall societal business case is positive but the regulatory return for the entity investing in the Smart Grid is negative.

    There is a need to reduce incentives for utilities to sell more electricity. Under traditional rate base regulatory models, prices are determined by forecasting how much revenue is necessary to cover a utility’s operating expenses and to produce an adequate return on the capital such utility has invested in the regulated business. Usually, revenue is the product of the number of kilowatt hours sold multiplied by the price per kilowatt hour. Decreases in the amount of power delivered to customers (and therefore the amount of carbon emitted in generating that power) can be achieved through increases in efficiency in the transmission, distribution and use of electric power or by reductions in demand. Both of these results are essential to the climate goals; both require a utility to monitor and manage its grid (through a Smart Grid) and, under a traditional rate base regulatory model, both would result in the utility losing money because a utility must pass operating efficiency gains on to the customer. Thus, unless the incentives created by traditional rate base regulation are changed, there is no reason to believe that a for-profit entity will (or should) spend money in order to earn less. Additionally, because a utility can earn a much higher rate of return on new generation plants or on new transmission lines than on conservation, a utility is incentivised to spend more capital on such traditional assets.
  • What were the key lessons learnt?

    One of the key lessons CURRENT learnt is that it is a lot easier, quicker and more efficient to focus initially on improving the operation of the distribution grid itself as opposed to counting on individual customers to change their behaviour.

Highlights

Project Type
Pilot
Solution Type
Smart Grid

“Xcel Energy looks forward to continuing to work with CURRENT Group to meet our goals of more efficient power delivery and grid reliability. In today’s environment, having visibility and control of grid volatility is a key requirement for the integration of intermittent renewables and distributed generation.”

Randy Huston, Xcel Energy Program Delivery Executive, SmartGridCity

Who

Company Name
CURRENT Group LLC

A provider of clean technologies or services

    Where