In focus: Smart grids

A new legacy

Energy Source & Distribution talks to Victoria’s smart grid technology integrators about transforming the state’s legacy systems.

Since the deployment of Victoria’s smart meters from October 2009, utilities have been implementing new systems for energy meter management, outage, billing and business functions. The underlying technology for smart meters – Advanced Metering Infrastructure (AMI) – will provide two-way communication between the electricity meter and the power distributor company, making more immediate information about electricity use available to consumers and utility companies.

Large volumes of data will be captured and processed in 30 minutes rather than three-month intervals, forcing a transformation in both technology and business practices for the energy chain. A flexible IT infrastructure will be vital to allow utilities to rapidly respond to changes in business and regulatory requirements and achieve operational agility and transparency of business processes. To achieve a smooth transition to a smart grid, systems integration and architect companies have been working alongside utilities, retailers and distributors as part of the rollout.

Global IT company Software AG works with 17 Australian companies on a range of projects, including smart grid integration with Jemena and UED. According to Software AG senior vice-president, global consulting services, Asia-Pacific and Japan, Steve Keys smart grid success will depend on the successful handling of two major IT issues, integration and data management.

“The utilities market is evolving due to multiple factors including liberalisation of the market, regulatory compliance, a greater focus on energy efficiency, a need to reduce carbon emissions, and a drive to use renewable sources of energy,” Mr Keys said.

“Many legacy applications simply cannot scale to handle the smart grid’s required levels of data volume and complexity. Utilities need a complete set of smart grid systems to transform the exponential growth of data into information that drives utility performance. IT will thus become an integral and critical part of the value chain – a major cultural change for utilities,” he said.

Programs such as Software AG’s webMethods encompass integration, business process management and business activity monitoring technologies – providing utilities with visibility across all the IT systems that drive their core functions/operations, so they can monitor, measure and improve their business processes.

“We also enable utilities to manage the huge volume of data generated by smart metering and turn this data into actionable information to improve business performance,” Mr Keys said.

IT services provider, CSC is assisting a number of power and water utilities globally in the deployment of Advance Metering Infrastructure and smart meter initiatives. Most recently, CSC assisted Victorian power distributor, Powercor and CitiPower Australia (PCP) with their AMI deployment, specifically addressing systems and data architecture, security, financial planning, business continuity and program management.

PCP manages the supply of power to 1.1 million households and business across Western Victoria and Melbourne CBD. CSC assisted PCP with the network design of PCP mesh network to meet performance, metering and regulatory requirements. CSC will develop the system architecture, establish and manage the technology integration layer, provide security assurance and contribute to the overall planning and management of its AMI program. Having established the architecture and systems for deployment of meters, the next steps will be to deploy systems to collate and analyse consumption data and downstream technology to optimise power distribution and share information with consumers and retailers. PCP’s aim will be to empower and motivate consumers to tailor power consumption.

As well as working on the overall IT solution coordination during the first wave of Victoria’s AMI roll out, CSC systems architect, David Campbell established an AMI architecture office and assisted in the set up the CSC Integration Competency Centre for PCP.

“The technology side of things is progressing, but that’s the comparatively easy bit,” Mr Campbell explains.

“Even though its cutting-edge technology, the far greater challenges are going to be organisational and getting people to work differently and think differently.

“Some of the challenges facing the utilities include the infancy of AMI industry solutions, the absence of any benchmarks upon which to base business cases, financial analysis or funding submissions, increase in the number and complexity of application integration points as data capture is automated, data correlation is enhanced and meters are managed remotely and an increase in the volume (and type) of consumption data, creating new requirements for data storage/recovery, system performance and data management.”

Mr Campbell believes the most significant challenges are yet to come, with meters to be connected to interval billing system in the middle of the year. At present the rollout has been focused on simply the installation of meters into Victorian households and businesses.

“That’s when the major issues for data volume are going to increase dramatically. That’s one of the major concerns and issues at the moment, what to do with all that data,” he said.

“There’s all sorts of possibilities of analysis so you can analyse usage and predict usage, but you have to have the tools to do it and you have to understand what the data means that’s coming back at you and be able to process it at the quantities it’s coming back at you.

“It comes back to the business understanding what it wants to do with the information.”

CSC assisted PCP in modifying its strategy and plans as cycle times for processing and exchanging information with third parties increased. This activity typically requires management and co-ordination of change across the majority of the enterprise’s infrastructure, applications, business sponsors and system vendors.

In identifying these challenges, CSC managed the technical integration layer, developing architecture design, ensuring security and business continuity standards were met and contributing to the program management and planning functions.

“Despite all this change, it was vital we maintained the existing high standards of reliability, performance and security that are expected every day from systems involved in the distribution and management of power for utility companies we service,” Mr Campbell said.

According to PCP, the success of the rollout will depend on the introduction and deployment of not only the metering infrastructure and communication technologies to capture and monitor power consumption data, but also the integration with existing operational and enterprise systems.

“AMI is a major initiative and it was clear from the outset that the smart metering roll out would significantly alter the utility business and technology environment at PCP,” PCP smart meter services division general manager, Peter Bryant said.

Like other major industry transformations, such as ATMs within the banking industry, PCP had to consider wide spread business and technology challenges. This included the infancy of AMI industry solutions, the absence of any benchmarks upon which to base business cases, financial analysis or funding submissions, increased in the number and complexity of application integration points as data capture is automated, data correlation is enhanced and meters are managed remotely and an increase in the volume (and type) of consumption data, creating new requirements for data storage/recovery, system performance and data management.

PCP was also concerned about the need for security and privacy requirements as consumer data is collected by IP enabled devices within households and transmitted across wireless networks to the utility company. Revisions were made for business continuity requirements (as cycle times for processing and exchanging information with third parties increased), management and co-ordination of change across the majority of the enterprise’s infrastructure, applications, business sponsors and system vendors.


Securing the smart grid

Energy Source & Distribution talks to CSC senior security consultant and National Smart Metering consultant, Gabriel d’Eustachio about AMI’s lagging security standards.

The implications of Victoria’s advanced metering infrastructure are both exciting and challenging for Gabriel d’Eustachio. Working from Sydney as senior consultant for global IT services provider CSC and recently appointed as a consultant to the National Smart Metering group, Mr d’Eustachio’s job is to find security solutions for AMI’s data management.

“We have all these ideas of what (the smart grid) is going to drive in the future. What’s interesting to me is what we don’t know it’s going to drive. No one has ever built a system of this scale where users can control their energy. Victoria has the most complex system in the world, we are on the cutting edge,” Mr d’Eustachio told Energy Source & Distribution.

Having covered a broad spectrum of industries in his career, Mr d’Eustachio is now focused on helping electricity utilities implement new technologies and manage their distribution networks in new ways. Powercor and CitiPower Australia (PCP) engaged CSC and Mr d’Eustachio at an early stage to help assess security risks, develop an ongoing information security management system and validate the effectiveness of existing security controls. While the security expert believes the US will be the ultimate driver of future smart grid processes, he believes Australia has the advantage of being smaller and more agile.

“Our entire global AMI security is being constructed right here in Sydney. The US is slower to get into motion because they are so much larger. This gives Australia a chance to get ahead of the curve and determine the optimal solution for itself, rather than implementing an American solution.”

By leading the world in smart grid deployment, Australia will learn the hard way the issues that come with new technologies. The implementation of smart meters introduces numerous threats that previously did not exist with mechanical meters on legacy distribution grids.

“When you look at electricity, the utilities are a very conservative business and they like it that way. They need to be online all the time. If their off time was 1 per cent of the time, that would mean three days of blackout. So they are very, very conservative. If you look at the technology out there, the meter on the side of your house is using technology patented in the 1880s. But we understand it, it works really well and is really simple.

“With AMI you are introducing a huge number of variables they’ve never had to deal with before. All of a sudden, we are gathering a whole load of data people have never had, let alone protected. You’re changing the entire model of the way electricity is measured, how the meters are then read and what is contained in that meter data, so a lot of thought has to go into how we are managing this and how we are both protecting the critical infrastructure and also how we are protecting the customer’s privacy.”

According to Mr d’Eustachio, customers have legitimate concerns and questions about their privacy as a considerable amount of information can be ascertained by monitoring energy usage.

“A power company can gather a range of data about their customers using smart metering and, as a customer myself, I would have some concerns about how that information is used. Will the data be shared or sold? Is there at least an opt-out option?

“These are legitimate concerns and as we implement the new technology, we must address these issues. With a lot of technology you hear a lot about smoke and mirrors and it turns out there’s nothing behind it. Here we have a valid concern and we need to be sure, as it is being implemented, that we think about it.”

Misuse of information stored on the smart grid is more likely to occur through inappropriate internal governance rather than external attacks.

“For example, I read a case study about an employee working for a company which installed SCADA-controlled equipment for a council’s sewage system. He left the company in less than optimal conditions, but his access was not revoked properly. He then remotely issued radio commands to the sewage system through the equipment he installed and dumped hundreds of thousands of litres of sewage into the local area.”

Mr d’Eustachio believes the best way to prepare against such attacks is by by focusing on appropriate internal governance for those building the smart grid’s foundation.

“Specific attacks aren’t usually relevant to a technology except for the public perception aspect of it. The thing that really drives security, and I think is critical here, is the proper development, implementation and then governance of that system when it’s being created and built. We need to be asking ourselves now, is this solution able to provide the security we need and the privacy controls we need? If it is, are we building it in such a way that these controls are being taken advantage of? Are we building them in such a way it utilises and benefits from its security controls?”

With utilities facing orchestrated, intelligent threats, security must be handled by an integrated and fully co-ordinated security approach, extending throughout the business through appropriate governance.
“The internal governance drives your external risk profile. Building a system that is resilient to a specific attack (for example viruses, terrorism, natural diasters) is not an efficient approach. Implementing a standards-based set of security controls to address risk across the corporate architecture will by its nature address multiple threat vectors and will position your architecture to mitiage new and future threats.”

With so much valuable information up for grabs and potential threats coming from multiple and sophisticated sources, having a clear set of standards in place to guide the security process would seem vital. However, the slow pace of Australian legislation could mean the smart grid is implemented and transmitting information before appropriate standards are in place.

“In the world of security standards, there aren’t many for smart metering. There are security standards on electricity grids and on the substations down the street near your house, but for this technology there isn’t,” Mr d’Eustachio explains.

“This is a common condition for emerging technologies. Market pressure encourages rapid implementation before the standards and regulatory bodies have caught up with the current state of the market. PCP has taken very proactive steps to address security issues and anticipate the threats posed by smart metering and AMI technology, and will be well positioned to comply with whatever regulatory requirements are eventually adapted.”

The American National Institute of Standards and Technology has released drafts of some security standards, but, according to Mr d’Eustachio, they have yet to be finalised. The Australian Energy Market Operator (AEMO) is currently considering various security guidelines and standards. AEMO formed the National Smart Metering Panel, which did not have a position for a security SME until June 2009. The panel hired a number of experts from external SMEs, including Mr d’Eustachio, as consultants on various subjects to develop the security standards.

“They gathered the stakeholders which are going to be hit by this smart metering technology and said, ‘Lets get together and figure out some business requirements, liability standards, security standards and let’s think about the privacy issues the technology will present’.

“While there are limited standards for AMI, there are standards for information risk management that we have used to develop our security programs in Australia and around the world. We have taken existing standards and customised them to address the security risks associated with power distribution. One such standard is the ISO 27001. The great thing about this security standard is that it addresses a whole range of security issues and is industry agnostic. I have used them successfully when working with banks and manufacturing companies and I am confident if we follow a well known security standard as the foundation, PCP is heading the right way. At the end of the day, it is all about good security governance.

“You can take that generic set of risks and implement it, so (even though) we don’t have a lot of standards and legal guidance, we can make it work in an effective manner.”

Because e-commerce has had a decade to mature its operations, security standards and mind set,  Mr d’Eustachio believes the necessary standards can implemented without making mistakes that would “really cause us trouble”.

With a secure and functional smart grid in place with households and devices communicating to retailers, Mr d’Eustachio is excited by the technological possibilities.

“What I think is going to be really fascinating is what technology will this drive, once you’ve created this market environment where you have smart meters and smart management and all this information. What is some guy in his shed going to invent which is just a game changer to the way we use electricity?

“There might be different ways of using power, different ways of managing what’s happening, different ways of retailing electricity, the possibilities are endless.”


Living the smart grid dream 

The worldwide rush to implement smart grid projects is underway, powered by unparalleled government spending. It now seems impossible to imagine a future without self-healing green power systems, electric cars, home-based generation and a multitude of smart devices, with new technologies yet to be conceived.

It will be at least 20 years before this vision is built into a reality, over multiple regulatory cycles, as key infrastructure is replaced, critical mass of supply side secured and consumer side capabilities put in place to achieve this dream. There’s no predicting the future, but it’s worth exploring the fundamental challenges the industry will face, the pragmatic technologies and opportunities that will drive acceleration of our electrical future.

The electrical system topology in Australia is driven by a mix of factors, which result in a unique set of challenges:

• More people live closer to city centres in Australia (2005 – 92.7 per cent) compared to counties such as the United Kingdom (2005 – 89.2 per cent). The capacity of the interconnectors between urban cities here is tiny in comparison, although it has some of the largest networks in the world.

• Australia’s older brown coal power stations are among the dirtiest in the world for GHG emissions on a per kw basis and we are accustomed  to using cheap electricity.

• Residential penetration of air-conditioning is one of the highest globally, presenting challenges in providing sufficient capacity on those few 40°+ days.

These are the challenges, but on the opportunity side, Australia has vast reserves of natural gas and coal, significant land areas and bio resources ready to be exploited as renewable energy sources.

Unlike the National Smart Meter Programme (NSMP) there’s currently no clear national policy agenda or firm timeline committed to by state governments, which has left industry-led smart grid work in its early stages. There is a funded national trial and groundswell of Distribution Network Service Providers (DNSPs) that have committed to and allocated funds for smart grid trials. But its definition, identification of regulatory changes and establishing frameworks is still very much in its infancy, an issue peak body Smart Grid Australia is now lobbying to address.

That’s where we are today, but how will Australia reach its smart grid dreamland?  Around 30-50 per cent of the benefits that will drive Australia’s own smart grid will come from load control, time of use (TOU) tariffs, electric vehicles and embedded generation. All of these directly impact the end user meaning the key to this vision is consumer engagement, but at this stage that key is very much in the hands of retailers.

Retailers will need to lead or face the backlash of consumers not accepting smart grids. The way in which retailers innovate and use these new platforms will fundamentally affect their business longevity. Getting it wrong will lead to stranded investments and disenfranchised customers. Smart meter rollouts, coupled with TOU tariffs in Victoria, will create the initial compelling event for either consumers or retailers to take the initiative. Apathetic retailers will experience high churn as customers fail to grasp the fundamentals of why they are paying more and vote with their feet. Proactive retailers will recognise the opportunity to create new segmentation models to offer new products and services, alongside the inevitable new tariffs. It will be a two-way approach that will empower an effective consumer response.

The vastly increased store of customer data allows a much more sophisticated approach to segmentation with the ability to identify and profile new segments in relation to their energy use. Smart grids offer retailers an opportunity for creating customer intimacy from which to take market share through innovative offerings, not just energy centric propositions.

The risk they face is leaving it to consumers to work through the initial impact of TOU. Reactive retailers will see significant churn increases. Therefore expect to see more retail consolidation, but also expect to see some creative new entrants seeking to grow and then sell a customer base leveraging this in their business model. It is up to the energy industry to pull together to support customer engagement in the rollout of smart grids, focusing on developing and delivering the tools needed to support retailers in converting the customers.

The key energy related go-to-market propositions that will drive the move towards Australia’s smart grid are:

• Home Area Network (HAN)  – how can the industry use this to reduce costs of service, retain customers and mitigate customer dissatisfaction impact of TOU?;

• air-conditioning – How will the industry integrate and get value from these peakier customers?; and

• embedded generation – can the industry use and extract more value via gas supply and peak hedging?

Home Area Network smart devices and air-conditioning

In-home displays are the much touted device which will link consumers to their meter, which on face value seems entirely logical. Examining what it will do in the context of billing and utility communications portals seems a relatively weaker argument when compared to other approaches that could leverage existing home computers and other devices, such as the iPhone. One has only got to look at the US’s Trilliant Networks’ website to see that companies are already porting iPhone applications that can handle billing, load scheduling and communication associated with peak times. If a retailer offered me an iPhone or an in-home display unit as an incentive to make me switch, it wouldn’t be a tough choice! Then there’s the irony of needing to install an additional electrical device to lower your electricity consumption.

Air-conditioning remains the villain of the piece as it drives Australia’s peak demand growth. The influx of very cheap systems from Asia has accelerated the take up with second and third units appearing in homes. Tackling this demand side challenge is at the core of any effective Australian smart grid strategy and where the in-home display and home area network are likely to be the enabler.

Linking control of air-conditioning into the HAN is an area which has huge potential, but is still very much in the exploration phase. Much of the specific functionality required will be a retrofit for the Victorian program, but the good news is the NSMP appears to have the necessary functionality from day one. The HAN allows a practical strategy which will allow us to tackle our rising air-conditioning load. It should be possible not only to control new split systems, which will have embedded Zigbee capability, but also could use the existing Infra Red ports on the already installed systems. Will consumers accept this and drive air-conditioning load control approaches from a home automation perspective? Or will it be the electricity industry that leads the way by providing innovative services, packed up with air-conditioning load control to reduce TOU tariff relief.

To date, networks have largely been driven by air conditioning load control trials, in which ETSA is currently leading the field. More than just being a side benefit, it is increasing critical for the success of smart grids that retailers drive a green/low price air-conditioning proposition. But this is probably still sometime away given that the system functionality required to support this, even in Victoria, is still a few years out.

Embedded generation – electricity by gas pipe

The idea of home generation is certainly not new. Microcogen is already broadly adopted across Europe and Japan. This has particular merit in Australia as our electrical demand peaks in summer and our gas load peaks in winter. Our gas networks are at very low load through summer and using these to enable high efficiency home-based generation looks highly attractive when taken at face value. There is also the regulatory case to set low tariffs as any extra gas used by embedded generation would be extra and therefore might be structured to attract a much lower transportation charge. Unlike Europe however, we tend to have separate heating and hot water systems which increases the cost of consolidating this functionality on a single device that provides heat, hot water and electricity.

For microcogen to run at its most efficient it needs heat usage. The hot water tank is of limited size, only allowing the unit to run for short time periods in Australia’s hot summers when air-conditioning load is high, but there’s less hot water usage. Coupling these devices to swimming pools, etc changes the game but there is a relatively small population of heater pools in Australia.

My prediction here is new sub divisions will be where we see most residential activity, but this will require devices that are better than 50:50 electrical heat load output. Today ceramic fuel cells look closest to market with their large trialling and commercialisation programme centred around UK retailer E.on.

From a retailer perspective embedded generation presents new growth opportunities in home installation business and increased gas sales. It will also allow the creation of a virtual peaking station should the HAN be used to leverage a load control type response to reduce the required peak hedge cover. This will not happen in Australia until a mass roll out in Europe has lowered the costs for local retailers, who have significantly smaller customer bases.

The common theme across these technologies and services is ‘active consumer participation,’ which will be the key for real smart grid success. The term ‘active’ should not be about consumers spending hours scheduling electricity supply for their domestic appliances or managing electricity loads via an internet portal. It is about retailers taking an active role in integrating pricing, new technologies and even appliance purchases in a way that is simplistic and motivating for consumers. First, the entire energy industry needs to pull together in support of consumer engagement through education and technology rollouts to make the vision a positive reality. Otherwise, it will be the retailer that ultimately wears the risks of consumer satisfaction or otherwise.


Consortiums submit Smart City bids

State-based consortiums submitted their bid for the Federal Government’s $100 million Smart Grid, Smart City initiative in February.

The Smart City, Smart Grid initiative aims to test and demonstrate how energy networks can change to address the challenges of climate change and rising energy demand. The $100 million grant will be used by the winning consortium to implement an exclusive program of trials.

Consortiums from Victoria, Queensland and New South Wales provided details about their bids to Energy Source & Distribution. A Victorian coalition hopes to redevelop the Frankston city area, a Queensland distributor has partnered with a Korean power company, while New South Wales will develop western Sydney and other satellite cities.

In Victoria, United Energy has formed with Jemena, AGL Energy and consultancy firm Accenture for a Frankston city-based bid, trialling new energy technologies in United Energy’s electricity network, homes and businesses. This initiative will see new energy technologies being piloted in the United Energy electricity network, homes and businesses to encourage a smarter and more energy efficient network.

Jemena group manager strategic investments, Phil Keogan told Energy Source & Distribution the Frankston-based bid was an “excellent choice” due to its demographics, existing network and changing climate.

With the Smart City guidelines asking for summer and winter periods, Jemena expects Victoria’s range of climate to push the network to its limits.

The Victorian bid will have a consumer-centric angle and look to sell the concept of public control over energy usage through tangible products such as electric vehicles.

By investing in an electric vehicle trial, Victoria will be able to monitor the interaction between generation, storage and charging of electric cars.

Having a range of charging points throughout Frankston will prove an interesting technical challenge.

“We believe the success of smart grids lies in the delivery of innovative technology combined with a pragmatic approach to sustained consumer behaviour around energy consumption and efficiency,” United Energy CEO, Hugh Gleeson said.

“Our bid sets out an integrated program for 10,000 households and businesses to use advanced technologies to understand their power usage, control their appliances and harness solar power, all aimed at reshaping the way power is delivered and used,” Mr Gleeson said.

In New South Wales, EnergyAustralia’s bid  focuses on its pilot smart village project currently underway in western Sydney, part of a larger proposed program.

Centred in Newington and Silverwater, it will also include the old Olympic Village and its heavy concentration of solar photovoltaics. The utility is also promoting an area-grade communications network which spans the entire network.

“We are the only utility in the country to have done that. That makes it much easier to connect some 50,000 households to this kind of smart grid,” EnergyAustralia managing director, George Maltabarow said.

Their bid also includes satellite cities such as Newcastle and Blacktown. According to Mr Maltabarow, Newcastle represents an ideal location for deployment as it is often used as a “marketing development representative in a demographic sense”.

“(Newcastle) is an identifiable community of 300,000 people and yet it has a sense of place, a sense of community and yet it’s within the city of Newcastle and Hunter (region),” Mr Maltabarow said.

EnergyAustralia will also partner with General Electric, IBM, AGL and Origin as well as local councils with strong community links.

“Put all that together, I think it’s the most comprehensive consortium,” he said.

“Given what we’ve already done in terms of having a carrier grade communications network across the whole of our system, I think in a technological sense what we are doing is on the cutting edge of any utility in the world.”

A consortium led by Queensland regional electricity distributor Ergon Energy launched a bid under the title Queensland Smart Communities.

Consortium partners to the bid include south-east Queensland electricity distributor ENERGEX and the Queensland Government Office of Clean Energy.

The Korean Government-owned Korea Electric Power Corporation (KEPCO) signed an implementation agreement for the bid and project with the Queensland Smart Communities consortium in Brisbane on 25 January, 2010. The agreement will allow for the exchange of knowledge on smart grid technologies. A key element of the Queensland bid is the opportunities for knowledge transfer to developing Asian economies and the possible business opportunities this will create.

The Queensland Smart Communities bid proposes to build a large-scale demonstration Smart Grid, Smart City project in Townsville, with several integrated smart grid projects at Zillmere (in Brisbane’s north) and Toowoomba.

The KEPCO delegation, headed by COO and executive vice president, Moon Duk Kim, visited Ergon Energy and ENERGEX facilities in both Brisbane and Townsville on their visit to Australia in January.

The bid aims to provide best practice demonstration and gather information and data to inform broader industry rollout.

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