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Innovating for the Future
Another year has passed, and the drive for utility innovation is
accelerating, with a particular focus on increasing the interactions
among all points in the utility network – from generation
to transmission and distribution systems and on to customers.
In fact, we expect customers to increasingly drive innovation
in utilities, just as they have done in telecommunications,
media and entertainment, and other technology-driven industries.
With rising energy prices, increased environmental concerns
and the trend toward greater customer interaction and
control that other industries have pioneered, the stage is set
for utility customers to demand better service in three areas:
- Increased communication with their utility through a
greater variety of media;
- Improved understanding of and control over their energy
use; and
- More accurate and timely information on outage events and
service restoration.
Utilities may find the best inspiration for innovation in their
youngest and newest customers. This segment has grown up
with the freedom to customize the nature of their communications
with all service providers, largely through the digital
devices that have become so deeply integrated into their daily
lives. We believe they will expect this same freedom from
their utility services providers as well. Utilities that provide
those capabilities will unlock new sources of revenue and cost
savings and strengthen the business case for a wide range of
innovations, many enabled by the smart grid or the intelligent
utility network.
Why is so much attention focused on the smart grid? Utilities
and regulators are continuing to seek the substantial
operational transformation that is enabled by it so that they
can realize the associated service quality improvements and
cost reductions. Beyond those important primary goals, we
see three additional factors that make the smart grid a prime
focal point:
- Climate change. Focus on climate change continues to
increase, and utilities, regulators and governmental bodies
are all realizing the major role the smart grid will play in
efforts to reduce the industry’s carbon footprint by reshaping
load, safely integrating new and cleaner distributed
generation resources, and optimizing existing fossil-fueled
generation use.
- Customer involvement. As the balance of power shifts
from utilities to customers, utilities will need to move
toward smart grid-enabled levels of customer experience
and control.
- Technology evolution. Consistent with other digital technologies,
the sophistication of the equipment enabling
the smart grid continues to advance while costs are
declining, helping to strengthen the business case for
this new technology.
A clear indicator of how innovative smart grid technologies
combined with market-based pricing can help address both
climate change and energy cost concerns is the recently completed
Olympic Peninsula project. This pilot project inserted
intelligence at every point in the grid – from generation to
customers – resulting in significant improvements in both
the energy and economic efficiency of the test system. The
project included development of a real-time energy market
system that could control demand response automation and
distributed generation dispatch. Residential customers
provided with options for their space heating and water heating
set points, and this resulted in rational decisions on trade-offs
between comfort and cost reduction. The project demonstrates
that market-based control enabled by smart grid technologies is
effective in reshaping the energy use of residential customers.
In some cases, governments and regulators are taking the lead
in driving and enabling utility innovation. Among many examples,
the Ontario Energy Board has ordered the completion of smart
meter installation by 2010. To help drive utilities to start making
the required smart grid investments, the Texas PUC has been
working on legislation authorizing surcharges to recover the
costs of advanced meter deployment, and the Massachusetts
Senate recently passed legislation that covers the smart grid
and time-of-use pricing with plans for a six month pilot program.
Looking beyond the smart grid, this book continues our effort
to provide the utilities industry with a broad range of perspectives,
with sections covering innovation in Technology, Operations,
Customers and Markets, and Strategy and Finance. We’re
excited by the developments in the industry that this book
highlights, and we think that in the next few years utilities will
continue to innovate to help address climate change, assist customers
in controlling their energy costs, improve the quality of
service, adapt to changes in the generation technologies and
drive profitable growth.
Cary Harmon
Associate Partner – Energy and Utilities Strategy
IBM Global Business Services
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