FSO Smart Grid Overview July 23, 2009 Smart Grid Overview Steve Bossart Director, Integrated Electric Power Systems Foreign Service Officers Coal and Power.

FSO Smart Grid Overview July 23, 2009

Smart Grid OverviewSteve Bossart

Director, Integrated Electric Power Systems

Foreign Service Officers Coal and Power Training Course

July 23, 2009

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Agenda

• Case for Grid Modernization• Smart Grid Vision, Technologies, & Metrics • What’s the Value Proposition?• Some Challenges and Risks• Questions

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Case for Grid Modernization Action

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Why Modernize the Grid?

• Today’s grid is aging and outmoded• Unreliability is costing consumers billions of dollars• Today’s grid is vulnerable to attack and natural disaster• An extended loss of today’s grid could be catastrophic to

our security, economy and quality of life• Today’s grid does not address the 21st century power supply

challenges• The benefits of a modernized grid are substantial

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Demand for Electricity Is Projected to Increase 30% by 2030

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FERC, “Increasing Costs in Electric Markets,” June 19, 2008

Cost of new generation is increasing

NETL 2007 baseline

NETL 2008 estimates, with capture

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Retail prices are increasing

30% increase over last decade

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DOE EIA Energy Outlook 2007

Average Retail Price (cents/kwh)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

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10.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

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Today’s grid - status quo is not an option

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

• Outmoded – Designed in the 50s and installed in the 60s and 70s,

before the era of the microprocessor.

• Stressed– Never designed for bulk power shipments– Wholesale power transactions jumped 300% from

2000 to 2005. Insight Magazine, Oct. 2005

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WV Military Affairs / Public Safety , November 20, 2008

Role of the NETL Modern Grid Strategy

• Accelerate modernization of the national grid• Define the vision for the Smart Grid• Reach out to stakeholders to gain consensus• Assist in identification and resolution of barriers &

issues• Communicate success stories to stimulate deployment• Act as an “independent broker” consistent with

Modern Grid concepts

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Smart Grid Vision

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Smart Grid Key Success Factors

The Smart Grid is MORE:

• Reliable

• Secure

• Resilient

• Economic

• Efficient

• Environmentally friendly

• Safe

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WV Military Affairs / Public Safety , November 20, 2008 1212

Smart Grid Principal Characteristics

The Smart Grid will:

• Enable active participation by consumers• Accommodate all generation and storage options• Enable new products, services and markets• Provide power quality for the digital economy• Optimize asset utilization and operate efficiently• Anticipate & respond to system disturbances

(self-heal)• Operate resiliently against attack and natural disaster

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Smart Grid Technologies

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What is the right sequence?

Consumer Enablement

AT addresses congestion and integrates with RTO’s

AAM helps utilities reduce costs and operate more efficiently

CE empowers the customer and enables grid interaction

AD improves reliability and enables self healing

Advanced Distribution

Advanced Transmission

Advanced Asset Management

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Metrics

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Smart Grid Metrics – Work in Progress

Reliability• Outage duration and frequency, momentary disruption, power qualitySecurity• Ratio of distributed generation to total generationEconomics• Electricity prices, transmission congestion costs, cost of outagesEfficient• T&D electrical losses, peak-to-average load ratioEnvironmentally Friendly• Ratio of renewable generation to total generation, emissions per kwhSafety• Injuries and deaths to workers and public

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What’s the Value Proposition?

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Value Proposition

Cost to Modernize• $165B over 20 years

– $127B for Distribution– $38B for Transmission

• ~$8.3B per year (incremental to business-as-usual)

• Current annual investment - $18B

Benefit of Modernization• $638B - $802B over 20

years • Overall benefit to cost ratio

is 4:1 to 5:1

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Thus, based on the underlying assumptions, this comparison shows that the benefits of the envisioned Future Power Delivery System significantly outweigh the costs. (EPRI, 2004)

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Who are the Beneficiaries?

• Utilities (What’s in it for my shareholders?)• Consumers (What’s in it for me?)• Society (What’s in it for us?)

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We get what we reward!

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Utility Value Proposition

Opportunities• Rate of return• Operational Benefits

– Outage restoration, billing, reduce T&D losses, optimize asset utilization, maintenance, planning

• Improved Customer Satisfaction

Cost• Risk of cost recovery

Utilities are the engine for investment in Smart Grid

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Consumer Value Proposition

Opportunities• More reliable service• Reduce business loss• Energy bill savings• Transportation cost savings• Information, control, options• Sell resources into the market

Cost• “Consumer always pays”

Is this compelling?

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Is it compelling?

Potential bill savings• Average residential bill ~$100 / month• Expected reduction from EE/DR 10% – 15%• Potential savings $10 - $15 / month• Bill increase to pay for SG $5 - $10 / month

Potential fuel cost savings• Assumed miles driven 10,000 mi/year• Fuel cost (gas) 10 -15 cents/mile• Fuel cost (KWh) @ 3 - 5 cents/mile 3 – 5 cents/mile• Potential fuel cost savings $500 - $1,200/year• Premium to purchase EV over gas $10,000

Consumer benefits alone may not drive Smart Grid implementation

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Societal Value Proposition

Opportunities• Downward pressure on electricity prices• Improved reliability reducing consumer losses• Increased grid robustness improving grid security• Reduced emissions• New jobs and growth in GDP • Revolutionize the transportation sector• Reduce import of foreign oil

Cost• No incremental cost?

Does the societal value proposition make it compelling?

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Some Challenges and Risks

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Change Management

A significant change management effort is needed:• Why do we need to change?

• What is the vision?

• Who’s in charge?

• What is the value proposition?

• Consumer education, alignment, and motivation is critical• Metrics needed for accountability and to monitor progress• Active leadership by stakeholder groups needed

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Move at the “Speed of Value”

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Technical Challenges

• Interoperability and scalability• Large number of consumers actively involved• Decentralized operations with 2-way power flow• Getting the communications right• “Future proofing” the technologies• Cyber Security• Conversion of data to information to action• Market driven

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Where will we find the skilled resources to solve these?

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Regulatory Challenges

• Time based rates – incentives for consumers to become actively involved

• Clear cost recovery policies – uncertain cost recovery increases investment risk

• Policy changes that provide incentives and remove disincentives to utilities – investment in a Smart Grid should make business sense

• Societal benefits – quantified and included in business cases

• Increased PUC workload – impact on Smart Grid implementation

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….and the list is growing!

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Regulatory

• Consistency among state PUC’s• Potential cost of “Cap and Trade”• Future proofing vs. stranded assets• Consumer privacy concerns• Integrated Resource Plans• Least cost • Used and useful• New operating and market models

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Regulatory Challenges

Are we limited by the “speed of regulation”?

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References

The Modern Grid StrategyCollaborative, public/private effort

open to all

Independent “broker”

www.netl.doe.gov/moderngrid/

Downloadable documents

www.smartgridnews.com

Grid modernization columns,

articles and case studies

[email protected]

(304) 599-4273 x101

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

http://www.smartgridnews.com/

mailto:[email protected]

FSO Smart Grid Overview July 23, 2009 Smart Grid Overview Steve Bossart Director, Integrated Electric Power Systems Foreign Service Officers Coal and Power.

Documents

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