Five Lessons for Smart Grid Business Success
By Peter Poggi
What will be the “killer app” of Smart Grid?
Recently, President Obama announced grants of $3.4 billion for Smart Grid development. However, studies make it clear that given the mammoth size of the existing transmission and distribution (T&D) system, the new system will be built on the shoulders of the old. The existing T&D infrastructure will dictate the winners and losers in the Smart Grid space. The past is prologue.
The grid is in the early stages of a sea change. EPRI (Electric Power Research Institute) points out that up to 4% of the total electricity generated is lost in the T&D system. This equates to as much as $20.4 billion worth of energy.
Can’t we have both efficiency and reliability? Yes we can…if we learn these five lessons.
5 Lessons for Winning in the Smart Grid Space…
1. The existing T&D system is balkanized. The US has fifteen transmission voltages running from 23kV to 765kV, all sorts of equipment manufactured over the past forty years, and a myriad of conductors. Interconnections can be overwhelming in their diversity. More importantly, company information systems are almost as fragmented. A product needs more variations, sizes and flavors than ice cream to conquer T&D territory.
2. The T&D system is old, as are its people. The heydays of rural electrification in the 1930’s and the post WWII boom drew engineers into the industry. That cycle reversed over the past decades as new graduates went elsewhere and early retirements downsized the industry. Walk into a T&D department nowadays and you will likely see only gray hair. Key insight: These employees were indoctrinated not to take risks. As we all know, change is risk. Technologies such as advanced metering infrastructure (AMI) and supervisory control & data acquisition (SCADA) have been around for decades. Silicon Valley did not invent them. A new mouse-trap will not necessarily attract more interest from the mice, and certainly not quickly. Investors will find that patient money wins the race.
3. To succeed in a “flat world”, companies need to transform their business models to optimize innovation globally. Thomas Friedman coined the term “flat world” to underscore how innovation travels and appears so quickly now in different parts of the world. For example, Smart Grid successes already occurred overseas. Look to the successes achieved in Germany, Sweden and Italy, ironically sometimes with US technology. However, the reasons for their successes are diverse. Germany doesn’t have armies of meter readers who would be unemployed by AMI. Consumers already read their own meters. Italy’s utilities use AMI to assure customer payment in the face of regulations which prevent termination of service. Now electric companies can turn down the amperage so that the late-payer has a choice. He can pay up or limit his enjoyment of modern accoutrements to three light bulbs.
4. The most difficult part of going global with Smart Grid is not international. It’s internal. An organization must have a willingness to develop a global mindset, adopt new procedures and modify their products. South Korea has reduced their T&D losses by 40% in thirty years by standardizing voltages and reducing conductor and transformer losses. Their T&D system now has the lowest losses in the world. Transmission lines are known to be major energy leakers, but quantifying hard savings can be difficult. That’s one reason why lower energy losing trapezoidal wire (TW) conductors, available in the US for years, have generally been ignored. Smart Grid successes will be those that impact the utilities’ revenues directly.
5. Undertaking a global journey means changes and a global mindset. Talent with a global vision and experience needs to be brought in to navigate change. This is the only way your organization will “cross the chasm” internally as well as internationally. A peek at the near-future of Smart Grid is what is happening in Cartagena, Colombia. AMI is being used to offer prepayment plans and to combat energy theft. Again, an application that impacts revenues directly. The testing ground of many Smart Grid applications will be in other countries first. The successful Smart Grid businesses will be there too.
What will be the “killer app” of Smart Grid? It will not be technological. It will be organizational. The ability to leverage international innovation locally and launch global businesses will determine who wins in the Smart Grid space. Those businesses with experienced global leadership who can transform their business model to a global engine are the ones to watch in the Smart Grid space.