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HomeMy WebLinkAboutF-3 2015 Strategic Directions: Smart Utility Report Information Item Presented 10\1)4\16 F-3 LIGHT t WATU INFORMATION ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: OCTOBER 26,2015 SUBJECT: 2015 STRATEGIC DIRECTIONS: SMART UTILITY REPORT The attached Black & Veatch's 2015 Strategic Directions: Smart Utility Report captures thoughts and planning concepts from utilities that are upgrading their infrastructure to help manage traditional operational concerns and respond to new challenges. Topics addressed include devices, telecommunications networks and automation technologies used to meet new service requirements and provide greater integration with smart city programs. The report is based on a survey of utility, municipal, commercial and other customers who are planning to implement a smart grid system. Prepared by:Liza Cawte, Senior Administrative Technician Attachment: Black& Veatch's 2015 Strategic Directions: Smart Utility Report UB-70 t/ BLAnCKw &yEATCH 2015 STRATEGIC DIRECTIONS : SMART UTILITY REPORT Black & Veatch Insights Group ANOTE The annual Strategic Directions report series captures Black&Veatch's ABOUT global engineering and thought leadership expertise across key elements of the critical human infrastructure market. Just as advising DESIGNour clients requires mastery of design,strategy development and project construction and execution, so too does selecting a report theme that reflects the dynamics of change across industries. For 2015,the idea of the universe,which encompasses distinct yet overlapping galaxies, stood out as analogous to the continuous evolution of utility services.Interdependence and convergence,as illustrated by ongoing conversations about the energy/water nexus and consumer and utility technologies,are tangible examples. From a design perspective,what you see reflected in the report's cover and in the graphic elements found throughout its pages,is purposeful art.Our aim is that this creative approach produces reports that are informative and engaging resources for Its readers. 1 -72 TABLE OF CONTENTS Table of Contents Introduction 04 The Black&Veatch Analysis Team 06 2015 Report Background Executive Summary 4 'r Building the Foundation 14 Planning to Manage Telecommunications Change 22 Staying on the Sidelines Carries Risk Perspective:Workforce 28 Challenges and Opportunities on the Path to Automation . ye Smart Communities 32 Opportunities Abound Thrcugh Data Analytics 38 Customer Education is Key to Smart Utility Initiatives 46 Private Industry and Smart Cities Perspective: Policy 53 Smart Collaboration Perspective:Global 56 India's 100 Smart Cities Closing Commentary List of Figures/Tables UB-74 2 I 2015 Strategic Directions:Smart Utility Report UB-75 5 INTRODUCTION Welcome to Black &Veatch's 2015 Strategic Directions:Smart Utility report.This report represents the evolution of Black&Veatch's inaugural Strategic Directions:Utility Automation & Integration report, with an expanded focus on automation and integration and utilities' efforts to harness data to make operations and service delivery more efficient. This iteration of the report moves from primer to prescription, providing insights and solutions based on a survey of utility, municipal, commercial and community stakeholders who are planning the next steps in their connected journey. The Black&Veatch 2015 Strategic Directions:Smart Utility report captures thoughts and planning concepts from utilities that are upgrading legacy infrastructure to help manage traditional operational concerns and respond to new challenges from reshaped markets and rising customer expectations.Topics addressed include devices,telecommunications networks and automation technologies used to meet new service requirements and provide greater integration with smart city programs. As utilities strive to upgrade their systems,municipalities,in turn,are tasked with ensuring that their business community and citizenry thrive.As this report shows,achieving balance between opportunity and cost will require cooperation and compromise.This report addresses the role utilities and non-utility stakeholders play in the advancement and adoption of the smart/connected city ideal and the challenges and opportunities they will face along the way. We welcome your questions and comments regarding this report and/or Black&Veatch services.You can reach us at Medlalnfo@bv.com. Sincerely, MARTIN TRAVERS I PRESIDENT Black&Veatch's telecommunicatians business JOHN CHEVRETTE I PRESIDENT Black&Veatch's management consulting business Black&UBr76 EXECUTIVE SUMMARY Fred Ellermeier is a Vice President and the Managing Director of Black&Veatch's The Black &Veatch Smart Integrated Infrastructure(SII)service line.This service line leverages distributed Analysis Team infrastructure development capabilities with a high-end analytics platform to address the areas of asset management,operational efficiency,reliability and sustainabitity for a wide variety of clients.With more than 20 years of experience, Ellermeier is an expert in energy management,energy optimization and sustainable design practices. UTILITY TELECOMMUNICATIONS Dean Siegrist is the Director of Black&Veatch's utility telecommunications business line. With more than 20 years of experience,Siegrist leads the development and execution of utility telecommunications projects,including a continued focus on the impact of smart grid programs on utility telecommunications Infrastructure. Craig Watson is the Network Services Manager of Black&Veatch's telecommunications business and oversees all group functional activities,from project execution to resource management. With more than 17 years of experience in the information technology(IT) and engineering industry,Watson has in-depth experience working on improving all phases of data and cybersecurity life cycles and providing network design architecture expertise and on-site field project support. UTILITY AUTOMATION Curtis Johnson is the Utility Automation Director for Black&Veatch's telecommunications business.He is responsible for client satisfaction,quality,cost and schedule for all utility automation projects and services.Among Johnson's areas of expertise is a thorough knowledge of the management of complex infrastructure projects,from siting through testing and commissioning,to achieve desired project objectives.Johnson spent nearly 25 years working at multiservice utilities before joining Black&Veatch. William Biehl is an Automation and Telecommunications Project Manager in Black&Veatch's telecommunications business.With more than 20 years of experience, Biehl manages projects for electric,water and gas utilities across North America.Biehl has ted projects for water utilities in the areas of treatment,distribution and collection specifically focused on automation and supervisory control and data acquisition(SCADA) to improve reliability and efficiency. Biehl leads electric utility projects in distribution, substation automation and telecommunications,improving reliability and security with a planning focus on future requirements. 4 I 2015 Strategic Directions:Smart Utility Report UB-77 DATA ANALYTICS Clint Robinson is Associate Vice President of G.Scott Stallard is a Vice President and oversees asset Black&Veatch's Government Affairs team and works management services within Black&Veatch's energy collaboratively with professionals within Black&Veatch's business.He focuses on developing processes,tools businesses,industry stakeholders,association partners and solutions that help power generators better address and consultants to build relationships with government the technical and financial challenges in today's market, officials to achieve Black&Veatch's overall global growth With more than 35 years of total experience,Stallard strategies.Robinson has over 30 years of experience as a specializes in plant performance,information technology registered professional engineer.He is currently engaged solutions and competitive generation practices. wit h the US Conference of Mayors,the National Leagues of Cities and the American Council of Engineering Ccmpanies as a business partner participating in the SMART COMMUNITIES discussions on sustainable,resilient and smart city Richard Azer is the Director of Development within concepts. Black&Veatch's SII service line and is involved in developing smart city initiatives,such as microgrids, distributed renewable energy and intelligent utility G."Satya"Sathiamoorthy is the Country Manager networks.Azer has more than 20 years of experience in and Managing Director of Black&Veatch India.He is developing and implementing emerging technologies. responsible for overseeing the company's operations and He is currently involved in a program to deliver the first spearheading the implementation of the India growth plan nationwide network of high power,fast electric vehicle for the company in energy,water and telecommunications. charging stations. Sathiamoorthy is a functional specialist with a vast knowledge of engineering and a career that has spanned nearly 30 years.He is responsible for the successful Kevin Cornish is an Executive Consultant in execution of manyturnkey y projects in India and around Black&Veatch's management consulting business. the world. With more than 25 years of direct experience in the electric industry,Cornish specializes in the integration of intelligent infrastructure systems into the utility CONCLUSION enterprise,such as geographic Information systems Martin Travers is President of Black&Veatch's (GISs),advanced metering infrastructure(AMI),meter telecommunications business and Executive Sponsor data management systems(MDMSs)and outage of the company's SII service line.Travers has led the management systems(OMSs),among other areas. strategic growth of Black&Veatch's telecommunications business for more than 10 years.The company's telecommunications business provides vertically PERSPECTIVES integrated solutions to both public and private network Robert F.Welch is the Vice President,Operational clients around the world.In addition,Travers is a member Technologies and Analytics in Black&Veatch's of Black&Veatch's Board of Directors. management consulting business.His team advises clients in deployment of new processes,architectures and technologies in next generation electric,gas and John Chevrette Is President of Black&Veatch's water distribution environments.Over the last 4 years, management consulting business and works closely with Black&Veatch has helped more than 15 clients in the clients to address key challenges affecting today's electric, planning and execution of full-scale automated metering water and gas utilities.Chevrette has more than 20 years initiatives and worked with many of those clients to of industry consulting experience and has worked with help them take advantage of advanced planning and domestic and international clients in the electric utility, operations,including data analytics and business energy technology.gas pipeline,telecommunications and intelligence. water industries. Black&UBr78 The Black&Veatch 2015 Strategic Directions:Smart Utility report is a 2015 Report compilation of data and analysis from an industry-wide survey.This Background year's survey was conducted from 15 October through 14 November 2014.The results of the online questionnaire reflect the input of 721 qualified utility, municipal,commercial, and community stakeholders. Statistical significance testing was completed on the final survey results.Represented data within this report have a 95 percent confidence level.The following figures provide additional detail on the participants in this year's survey. Industry Type 32.0% Electric utility 40.5' ■ Water utility 0.6% 1 Natural gas utility 7.9% 1111 Combined utility : 2.2% # Local government/municipality 3,9% University/college 2.9% Manufacturing establishment Source:Black&Veatch 6 I 2015 Strategic Directions:Smart Utility Report UB-79 9 Primary Business Region 6.8% Rocky Mountain 27.8% 10.5% /Midwest 4'1% o o / /New England Northwest\ _ `I [ J r \7.3% .tom Mid-Atlantic 0 22.3x/ 20.1% o Southwest Southeast 5.5%Canada 4.2%U.S.-Nationwide 3.4%Other Countries 2.0%Other U.S. 1.3%Mexico Source:Black&Veatch Utility Type 63.1% x Public or government-owned utility 23.6% Investor-owned utility 4.8% I Cooperative 3.6% Independent/industrial power producer 3.6% Privately held corporation 0,7% Other Source:Black&Veatch Black.U/31-80/31-80 EXECUTIVECommunities and utility service providers are moving dramatically toward a smart city ideal.The proliferation of smart devices and utility SUMMARY automation efforts coupled with the expanded use of data analytics is transforming the development and delivery of key infrastructure services.These advances are reshaping the customer-utility relationship Making Connections and making service providers more responsive, efficient and resilient. By Fred Ettermeier 8 I 2015 Strategic Directions:Smart Utility Report ■ K-81 Developing a framework for the smart utilities that provide Th.ase differing outlooks are reflected in the goals set critical infrastructure services is key to defining the smart by companies initiating smart city projects.Improving city.Data in this 2015 Strategic Directions:Smart Utility efficiency and reducing costs are paramount for report indicates consistency in the goal of the smart city, some respondents(Figure 1).Others seek to satisfy even as a common definition of a smart city remains environmental sustainability goals or improve elusive.For water utilities,smart city meant"smart water" relationships with customers to resist competitive threats. and resiliency planning.For municipalities,sustainability of operations and resources took the lead. Figure 1 What do you see as the primary driver of smart city initiatives in your region? " i .: K � ��� � f, �$ � Improving efficiency of operations/ 42.5 , reducing operating costs .E�:.: . ... tea;_ 5.6'x' - Environmental/resource sustainability 8.7% ■ Better olerall management of community systems 7.9% ■ Increasing critical infrastructure resilience 6.6% III Attracting business investment 5.7% 4,,i'';',:, Increasing customer satisfaction Source:Black&Veatch ADVANCING THE IP FRONT What began as a few connected devices placed on utility networks is now widely recognized as an essential element of the Internet of Things(loT).Empowered by investments in telecommunications infrastructure, smart utility and smart city efforts provide evidence that we are on the cusp of a new,data-driven future.Legacy equipment continues to cycle out as Internet Protocol (IP)-based technology creates new opportunities to improve system efficiency.As networks converge, comprehensive planning becomes key to ensuring the capability and security of utility networks. Black 8,1.1131-82 ESSENTIAL AUTOMATION Understanding the role of automation is especially Regardless of type,automation-and the infrastructure on Important as nearly over one-third of respondents predict which it is based-delivers value to utilities and end users that the United States will see the implementation of a alike.Supervisory control and data acquisition(SCADA) smart city model within 6-10 years(Figure 2).The systems are widely automated;however,despite the proliferation of smart city deployments wilt multiply. significant attention given to greater netwotk connectivity, Hurdles to reaching smart city status are diverse,but this report identifies a surprisingly large number of overcoming the return-on-investment challenge is organizations that have yet to move forward with smart essential to improving performance and strengthening infrastructure plans. relationships with customers. Figure 2 When do you believe there will be widespread adoption and implementation of the smart city model across the United States? 31.6' In the next 6-10 years • 25.0% In the next 11-15 years 17.6' Don't know • 10.0% 10.9% In the next 1-5 years In the next 20+years 4.l x In the next 16-19 years • 0.7% Never Source:Black&Veatch 10 I 201S Strategic Directions:Smart Utility Report UB-83 DATA ANALYTICS Despite a fluid definition of"smart,'institutions face common,age-old struggles:how to pay for these technologies,harness their benefits and quickly recover their costs.Utility leaders see the value of analytics, particularly as it relates to managing their infrastructure assets and planning capital investments,as well as improving customer service,engagement and customer operations(Figure 3). Figure 3 What are the top three business/administrative areas in your organization that would be best served by increased data management and analytics capabilities? 67.1% 111111111111111111.1111111 Asset management 44,5% �■ Capital investment prioritization 27,1% Customer service/engagement 27,0% Customer billing,collections and/or revenue protection 26,8% Evaluating strategic options/scenarios 24.6% Risk management 19.7' Business case development 146% Rate making or dynamic pricing 1.3 Other Source.Block&Veatch Black&VIJkl3-84 SMART UTILITY/SMART INDUSTRY Such agility is especially important in urban areas,where This report includes an overview of what a smart utility service demands are placing significant stress on aging might look like as well as the policy implications of data infrastructure.Some of the most aggressive moves sharing and data security and the financial considerations toward automation are coming from utilities serving large involved with collaboration.A similar exploration of populations.For instance,this report finds that nearly 40 manufacturing and other commercial stakeholders was percent of organizations serving populations of 2 million carried out by outlining the concerns and opportunities for have announced a smart city initiative,a significantly industry in a smart city scheme, higher percentage than institutions serving smaller areas. Recognizing the global implications and need for smart AU of these advances will propel utilities and,in turn, utility and smart city planning,this report also provides help to create smart cities.This 2015 Strategic Directions: insights from India as the country focuses on supporting Smart Utility report captures a time of exciting change the needs of a growing urban population, and great challenge as major service providers become more intelligent about their operations and explore opportunities to improve resiliency,costs,safety and SMART UTILITIES,SMARTER CITIES resource efficiency.Yet,this report also finds many service Now more than ever,the increasing use of technology providers moving warily,challenged by market shifts, offers utility operators greater understanding of their regulatory action and the effects of years of run-to-fail networks and how customers consume power,water, management.While some providers are moving faster natural gas and data.Forecasting historically required than others,it is increasingly clear that technology will large teams to examine past operations and create have a foundational role in evolving all utilities into smart an operations snapshot,often long in the past.Now, utilities and creating the foundation for future smart cities. predictive analytics,or Adaptive Planning,is redefining how complex systems can be managed through rapid analysis of real-time information. Nearly 40 percent of organizations serving populations of 2 million or more have announced a smart city initiative. BUILDINGChange is sweeping through utility telecommunications at a furious THEpace.This change is challenging utilities to adapt to transformative technologies, place a heightened focus on security and regulation, FOUNDATIONand manage an aging workforce that is being asked to adjust to,and find efficiencies in, a disruptive environment.Those challenges are not stopping utilities from moving ahead: Black&Veatch's 2015 Strategic Planning to Manage Directions:Smart Utility report finds that nearly 60 percent of providers Telecommunications are planning for replacement, upgrades or new communications Change infrastructure in the next five years (Figure 4). By Craig Watson and Dean Siegrist Electric utilities are leading the way,with 63 percent of those reporting moving ahead with new systems(Table 1).A key driver is the need to support capacity demands for future smart grid/smart utility projects.This is a clear sign that providers are developing systems designed to meet today's communication and asset management expectations while keeping an eye on how these systems will integrate with future expansion. 14 I 2015 Strategic Directions:Smart Utility Report UB-87 From the surge in Internet Protocol(IP)deployment to the sunsetting of legacy connections(e.g.frame relay,POTS), this exciting transformation brings the promise of cost savings and agile,speedier networks. But the changes also carry big implications for utilities,even for those that are already moving aggressively.For example:Does a utility have a master plan?Do security concerns occupy an important space in planning?Is the workforce ready?How these questions are answered will go far in determining how change is managed. Table 1 Are you planning on replacing,upgrading or building communications infrastructure in the next 5 years? Plans to Replace,Upgrade or Build Communications Electric Water Combined Local Infrastructure in the Utility Utility Utility Government/ Next 5 Years Municipality Yes 63.2% 59.0` 59.6" 47.1% No 18.2% 17.2" 14.0% 24.1% Don't know 18.6' 23.8' 26.3% 28.7'* Source:Black&Veatch Figure 4 What are the top three reasons why you are planning on upgrading or building communications infrastructure in the next 5 years? 1 • 2 Support smart grid/ SUPPORT K ... smart utility MOBILE WORKFORCE initiatives 3 Upgrade obsolete infrastructure Source:Black&Veatch ](�� Black&v R-88 • IP LEADS THE WAY At the forefront of these changes is the move to IP,a network protocol standard at the heart of communications networks that provides the basic building blocks that allow seamless integration and compatibility among all devices. iPs are being adopted from multiple angles.One key migration comes with supervisory cont rol and data acquisition (SCADA)programs.Before,remote terminal units monitored and controlled information flows through hardwired serial connections that retied on fixed endpoints. IPs deliver more flexibility and the bandwidth necessary Other advanced technologies, such as multiprotocol for handling corporate data and other traffic(Figure 5). label switching(MPLS),offer similar speed and network The value proposition is high:IP delivers a common, reliability gains.They offer utility customers the ability standardized approach to efficiently enable devices and to converge networks or systems in a segregated traffic applications to directly communicate with one another model across a shared infrastructure.Under MPLS,tags through an assigned address.Those benefits,however, are added to packets that speed them along predefined can only be realized after a utility considers several key routes according to a network's quality of service factors: requirements.Black&Veatch recently migrated a large utility to an MPLS scheme,underscoring how providers • Equipment costs and the resources to support the are willing to retire traditional data management systems. upgrades.Do utilities have the trained workforce required to support and maintain the new technology? •The need for thorough testing to ensure"proof of 1� concept:' •Witt equipment and systems scale to accommodate future upgrades and equipment changes? IPs deliver more flexibility and the Momentum for wide IP deployments is building,driven by the promise of reduced capital and operational bandwidth necessary expenses that a single,shared network infrastructure for handling can provide.Some utilities are completely embracing a converged mentality and running everything over a shared corporate data infrastructure,while others are moving more cautiously and other traffic. by keeping protective relaying and other mission-critical applications separate from the converged network (Figure 6). IS I 2015 Strategic Directions:Smart Utility Report UB-89 Figure 5 Select the top two reasons you are considering,planning or currently deploying IP network convergence. e Wt:" ', Increased amount of data and 73.4% 7d i�j bandwidth capabilities to support 44::.�"<> t4��� �i�°� .+�.��„�- ”�'e*%;,�c3��'� `,ate*- `:�"�a operations 62.2% Demand for operational efficiency and lower operational expense 33.9% Security concerns 14.0% - Operational expense savings 34% Environmental initiatives 2.2% Other Source:Black&Veatch Figure 6 What do you see as the two biggest challenges to deploying an IP network convergence solution? 46.3% Need to keep protective relaying and other mission critical applications separate from converged network 44.0% Ensuring ongoing service and support 36.6% Organizational responsibility of the future network 35.6% - Ensuring low financial risk and achieving high return on investment 22.5% Sourcing qualified network architects/installers 2.5% Other Source:Black&Veatch Black&V1J3 90 SECURITY Seventy percent of electric utilities said they now operate The change to IP and other automating technologies a private communications network for transmission comes with a renewed-and federally required-focus and distribution,with water utilities not far behind in on network security.The new systems bring speed and similar adoption.Public network solutions are still a latency improvements but open utilities to new risks that significant connectivity option for utilities,with 37 percent need to be understood and mitigated.Providers that once of respondents saying they use public-carrier cellular piggybacked on public-carrier networks to handle network networks to help with advanced metering infrastructure traffic are increasingly initiating,or considering,privately (AMI),SCADA and other devices.Utilities increasingly operated networks(Table 2). prefer the private option,however,because it gives them control over reliability and access. That control also lowers the data-leak risks Inherent The change to IP and other to a network that must accommodate sensitive utility monitoring and control traffic as well as general,user- autornating technologies generated voice and data.It is also notable that more than comes a renewed — half(56 percent)of utilities and municipalities serving with7 populations of 2 million or greater say they are installing and federally required — new or updating communications infrastructure because J of cybersecurity initiatives(Table 3). focus on network security. Utilities must also factor tighter government regulations, such as Version 5 of the Critical Infrastructure Protection (CIP)requirements set out by the North American Electric Reliability Corporation(NERC).Version 5 of the CIP requirements also emphasizes the need for more stringent security controls,awareness and documentation practices of physical and remote cyber access to highly critical operational areas and devices that comprise a utility's bulk electric system.One such technology that will continue to be adopted and its implementation increased across a utility's network is video surveillance. Although widely recognized as a crucial component of physical security,this requirement will significantly impact a utility's available bandwidth.It may also force the creation of new workflows to address who monitors the video and how and where it is stored.Many utilities reported not knowing the impacts of the NERC/CIP Version 5 on their businesses. 18 I 2015 Strategic Directions;Smart Utility Report UB-91 Table 2 Do you operate a private communications network to support transmission and distribution operations? Operate a Private Local Electric Water Combined Government/ University/ Manufacturing Communications Network? Utility Utility Utility Municipality College Establishments Yes 69.7` 59.6' 72.7' 48.1" 53.8` 41.2`" No 19.9` 29.5% 14.5' 38.0% 38.5% 47.1" Don't know 10.4' 10.9' 12.7% 13.9% 7.7' 11.8% Source:Black&Veatch Table 3 What are the top three reasons you are planning on upgrading or building communications infrastructure in the next 5 years? By Population Served Reasons For Replacing, Upgrading or Building Under 50,000- 100,000- 500,000- 1.000,000- 2,000,000 Communications Infrastructure 50,000 99.999 499,999 999.999 1,999,999 or more Our communications infrastructure is obsolete or near 40.6' 34.2% 451% 49.0% 25.0% 47.7% obsolete New or updated communications infrastructure is needed to support capacity demands for 46.9% 63.2' 51.3% 51.0` 60.7% 69.3% future smart grid/smart utility initiatives New or updated communications infrastructure is needed to 15.6% 34.2% 33.6% 43.1% 33.9' 40.9"' support future renewable integration projects New or updated communications infrastructure is needed to 59.4% 44.7% 59.3% 35.3% 46.4` 43.2` support mobile workforce New or updated communications infrastructure is needed because 34.4" 211% 31.9" 41.2% 48.2% 55.7% of cyber security initiatives To support IP network 21.9% 26.3% 31.9% 27.5% 28.6% 20.5% convergence Other 12.5% 7.9' 7.1' 5.9' 8.9% 1.1% Source:Black&Veatch Black&Ve d 7il' 2 WHAT'S THE PLAN? • Complex systems featuring IP MPLS and other technologies require thoughtful advanced planning. Above all else,Black&Veatch recommends a master telecommunications plan that acts as a road map for adopting and exploiting these advances.Thorough planning,design and proof-of-concept regimens will ensure that a new system aligns with the utility's larger goals and is adaptable to change(Figure 7). Developing conceptual network architecture,identifying system requirements and identifying mission-and non mission-critical assets are just a few of the factors utilities must evaluate during the planning,assessment and architecture stages.From there comes a smart strategy: developing and documenting operational standards, creating detailed network designs and specifications. and establishing a solid testing phase to help utilities understand these changes and exploit their potential. Figure 7 Do you currently have a long-range plan for development of your telecommunications networks? 16.0% - Yes, but it will need updating within three years 26.4% Yes,and it extends out beyond three years 14.7% No,but we are currently developing a plan 12.3% 11111 No,and we have no plans to develop one 30.5% Don't know Source.Block&Veatch 20 I 2015 Strategic Directions:Smart Utility Report Thorough planning, design and proof-of-concept regimens will ensure that a new system aligns with the utility's larger goals and is adaptable to change. Advances in smart grid and automation technologies are prompting Staying on operators to upgrade their networks for efficiencies and cost savings. the Sidelines Real-time information, sped to central locations by millions of smart Carries Risk sensors and meters, helps utilities manage abnormalities, reduce By Curtis Johnson outage times and maintain customer satisfaction with Little to no human and William Biehl intervention. But Black&Veatch's 2015 Strategic Directions:Smart Utility report finds a landscape of smart utilities with a high number of cities, privately owned utilities and other providers on the sidelines of the automation movement (Figure 8). Figure 8 When did or will you start to roll out major changes in the following automation programs? • Will Start l Will Start Will Start No Plans Next 2 Yrs Next 3-5 Yrs Next 6+Yrs 7% 3%2% 13% Water or natural gas production, transmission,or treatment 8% 2%3% 17% Water or natural gas unmanned facilities 9% 5% 4% 20% Water or natural gas distribution main Source:Black&Veatch 22 I 2015 Strategic Directions:Smart Utility Report UB-95 Figure 9 What does your utility include in its definition of distribution automation? •• Automated • • metering • infrastructure :• Distributed energy resources integration • • •. Fault location, isolation, •• DEMAND • and service • RESPONSE • restoration Volt/VAR Smart optimization/ sensors conservation voltage reduction Source:Black&Veatch Some utilities,understandably focused on the costs of maintaining and replacing outdated equipment,are unconvinced that smart grid technologies and automation are critical.Others are kept away by investment-return pressures.Those concerns,while significant,carry risk. Utilities moving aggressively into automation indicate that advanced metering infrastructure(AMI),fault location and restoration,volt/VAR control,demand response and sensors are key factors toward optimizing their networks (Figure 9).Supervisory control and data acquisition (SCADA)systems have seen the most automation changes,with 80 percent of utilities indicating that they have already made substantial changes to the centralized systems used to control remote equipment and monitor its use. Black&Ve3Cc}r—'I_Y3 AMI devices,in particular,have moved providers closer to advances are not applicable to their business model the concept of a smart grid by delivering highly specific (Figure 10).Many such providers are deploying key metrics on customer use of energy,water and gas.That first steps,such as SCADA,but are stopping short of information,sent to centralized locations where the data fully developed automation systems at a time when are analyzed and acted on, has produced efficiencies overwhelming trends suggest industries as far ranging and led to significant gains in measuring consumption as banking,retail,health care and others are using and using that data to change behaviors.For example, information more completely. Still others may recognize Black&Veatch joined four other technology companies the benefits of automation but believe customers in late 2014 In providing sensors,analytics software and would resist paying for both the replacement of aging other technologies to help the Port of San Diego collect infrastructure and an automation layer on top of it. energy consumption data.Port operators are acting on the data by adjusting behaviors in ways that are aimed at reducing both energy costs and greenhouse gas Yet many utilities are making the business case,believing the cost savings and efficiencies exceed automation's emissions. investment.This report finds that more than four in five providers that have developed automation initiatives said Customer-side benefits are Just as important.End users operational efficiencies were the top driver,followed by see more accurate billing,faster service hookups and improved service reliability(Figure 11,Table 4).Tellingly, disconnects,and the perception of a utility on top of its large organizations(5,000 or more employees)said systems.For example,AMI data routinely report outages profitability and shareholder value were the primary even before the customer calls the utility to report them. considerations fueling their automation initiatives, compared to smaller organizations.Regardless of size, distribution automation must be profitable by getting rate Black&Veatch finds that a surprising number of utilities, recovery in excess of costs or by realizing operational city governments and other service providers have no savings in excess of the investment. plans to implement smart grid projects,believing the Figure 10 Which of the following statements best reflects your approach to the implementation of smart grid and automation programs? Not applicable,we are not implementing 34.1 � `` !:` smart grid and automation projects 16.4% - Each project is performed separately by a focused team Each project is performed separately 32 4% but coordinated with other projects 17.1% All projects are performed as an integrated program Source:Black&Veatch 24 I 2015 Strategic Directions:Smart Utility Report 153-/ Figure 11 What are the three primary business drivers for your automation programs? 83.1 �� � $ � t . } O p erational efficiencies 6 7 y,y� % ,u Improve service reliability • 55.4% 111.111111111.1111111 Replacement of outdated/obsolete systems 25.6% Strategic initiative 25.4% Federal,state,or local government mandates Source.Black&Veatch Table 4 What are the three primary business drivers for your automation programs? Primary Business Drivers Electric Water Combined Local for Automation Programs Utility Utility Utility Government/ Municipality Federal,state,or local government 31.2% 201° 321% 281 mandates Customer or other non- governmental(NGO)pressure 7.5'' 3.8 7.1% 12.5% Operational efficiencies 75.9% 89.8' 78.6% 82.8` Improve service reliability 68.3" 72.7" 55.4% 65.6'° Profitability or other shareholder 18.6% 3.8% 14,3% 10,9 benefits Company-initiated conservation/ 8.5% 8.0% 12.5% 7.8" green goats Replacement of outdated/obsolete 44.2% 65.9" 50.0' 54.7 systems strategic initiative 30.2.. 20.8% 26.8% 21.9% Source.Black&Veatch Black& OVERCOMING THE RETURN ON INVESTMENT HURDLE Black&Veatch expects providers to continue setting high bars that automation plans must meet before they are adopted.Investor-owned utilities(IOUs) and municipalities should craft education strategies for skeptical investors and citizen constituents.The investment pressures raised by both groups are genuine;Stockholders expect profitability,customers and regulators demand cost-containment,and both generally resist short-term sacrifices even if system upgrades deliver profits and increased reliability in the future.Simply put,utilities wilt be challenged to show stakeholders the dangers of not automating,which could be higher both in the long and short term. Customers have come to expect briefer outages,and utilities that have successfully implemented automation drive these expectations with smart sensors that can detect outages and route power around them.In the long term,automation deployed across the enterprise results in an efficient,balanced delivery system that reduces costs and emissions.Recent environmental mandates could ultimately force these efficiency steps;this is an issue that remains especially acute for electric utilities,which will face pressure to balance resources to support using less energy. 26 I 2015 Strategic Directions:Smart Utility Report UB-99 FOR PROVIDERS,THINKING AHEAD WITH AUTOMATION IN MIND ht', 13_1tl -(tAt['- -r ii ttit..C1,n. 5,1 ni.:JE:[vt-. 1,-...-,117,11'i r nuri,LL•r r-1,-kvit Jr 2 rd. cLi stiLittl 71,1 -.11:1 r c-JIL_•r,-_ ar:d egnipn SH-t;pt-?!L 'Intuit t ()--T,1[1-•Ut ml 'n th 01, tc:a:-,1ti mel ..u,Icestlflii It n-cv Inoft 'lit,or t. dLtkcirr-Rnt, ti iii ic2L. th-, • - ' I ,crn j -H-11 it i p. r , t r epHt t I ' hUh :IT tS•.' ' H FigL,ro 12 Whet does your organization see as the two most significant gaps ut its current automation state? Old and obsolete equipment Lack of integration of automation into overall enterprise PERSPECTIVE: WORKFORCE Challenges and Opportunities on the Path to Automation By Robert E.Welch 28 I 2015 Strategic Directions:Smart Utility Report LTB-101 Rapid advances and convergence in technologies are arriving on the utility landscape just as regulatory changes, new financial pressures and opportunities, and the impacts of an aging workforce are being felt. These forces are combining to reshape how utilities deliver key infrastructure services. Ultrafast networks speed actionable data about customer usage, nimbly anticipate user needs and resolve abnormalities to reduce outages or other service interruptions. They also are becoming essential to managing a workforce that is getting older and increasingly pondering retirement in an improving economy. < reat�r i.,tcm�t r(.f k;L.t,�_� nl��.�i„t ons fc, rrn rpt, I ./1 t ' 11 -- perr r t, -.tt 11 a 3 1 t..t[ F 7 Ilan 1 _ fCt t �,r rL ri, ',,,r ti i r� It �f� Ef ficle,�Iey and cjuahhty to t1 1 1 1-1-1_C COi_. it 1111 I of operations 11 f ,.0' -ruo ,rtt ' 1 !L.r -ori are f ec. LCrItly I T.'11411-11I 111I1 key asul—es that .•. . _,�,t'. . � �,-rt ��1 li 1paet f ate t�al�i�1�. r-r.nuo ti rCO rcir,tirou'at '>rt Jr 3 ..�•I i 10' _.fit.. ;l 'I ck - of n_lr�i�li , ,3 r�t�rra-r.r;t'y 4tt a[-r n3. For rnot .t i L1 : tir ;r rt-ir r r)r ,o;a.ik rr nr=t THE PROBLEM OF AN IMPROVING ECONOMY MOBILE COMMUNICATIONS Lt CL,-- I ,t r ,tt,111.t, r d'Hd P;11 , Jr,(: fprT. r ' mt, trrriaI:nJHa[ ah, t; „PI t!-,Ci,=JII I Prrl lPlt t -ILL ti)om HI' 1 ,11 C'OPS ; I - Litt -, ; t 111,11 Eut ut Iles i riP :t a rwri storms prid the eirrj r-,vr cirr; ! I: ')rr t.' -htt ' ,lict 1,?-1 icit baci .satee flip qL. Ct LIPId Ye PIP 11-1' er_cconl"PilL 111.-3,1r, rite 1.4.1,:r:tur,-, t ,..,-.I - : :. 1ThrialL;h!, kJ-3LSIP'e pt Ltrri 01,ttflOLU of ittilities' t r InStitlit10/10:1 k-tlowledge to tIe1 IS becoifnivio di) ,i)cti-t becatlse the rifla/s tat or.rmar-r1 it, 'Ida , _P__t TPL OUll ig CCOYIODly 11.(f.S lip 1-21 Htd:it:f 1 1.ii p1 mis oHmpm, rriode J-eti 1-(]i7-1 eylts III!! ILLi CililnItli ':ti*1 „- 1110ic oxcessible. Utilities now have the ability to not wait until a transformer fails. Table 5 What are the top three reasons you are planning on upgrading or building communications infrastructure in the next 5 years? Reasons For Replacing,Upgrading or Building Electric Water Combined Local Communications Infrastructure Utility Utility Utility Government/ Municipality Our communications infrastructure is obsolete or near 34.9 49.1* 35.3% 42.5` obsolete New or updated communications infrastructure is needed to support capacity demands for future smart 74.04 42:1% 70.6` 50.0' grid/smart utility initiatives New or updated communications infrastructure is :38 4` 33.996 29.4` 30.0` needed to support future renewable integration projects New or updated communications infrastructure is 60.2" 29.4' 47.5` needed to support mobile workforce New or updated communications infrastructure is 70.796 35.7% 32.44 32.5` needed because of cybersecurity initiatives To support IP network convergence 19.97 281' 41.2" 32.5' Source:Block&Veatch THE OPPORTUNITY OF REGULATION Utilities across the United States are dealing with state and federal regulations on everything from security and mandated uptime to environmental efficiency aimed at meeting greenhouse gas reduction goals. Data gathered by Black&Veatch find that many of those regulations play a significant part in moving the industry toward the smart utility ideal.Previously,utilities rarely worried about efficiencies,but a new model of regulation in the states has put performance benchmarks on providers.Utilities are paid based,in part,on how efficient they are in keeping the lights on and outage times down.Automation,as the data show,is seen as a key solution to the manifold problems of efficiency and government regulation. This is spurring massive change,particularly in asset management.Utilities are committing billions of dollars to replacing grid infrastructure,and they are placing smart technology layers on top of the new equipment to expedite cost recovery.Utilities now have the ability to not wait until a transformer falls.Advanced sensors and networks monitor the transformer's age,giving the utility the chance to replace it proactively before an event forces its hand.The scenario should sound familiar to an industry that is increasingly compelled to act on its trouble spots before the storm of change arrives. Black IL-i104 SMARTPrevious Black&Veatch Strategic Directions reports covering the electric utility,water utility and natural gas industries highlighted the need to COMMUNITIES improve energy management and operational efficiency was a recurring theme.As utility operators seek to stretch limited capital budgets, maximize return on investment(ROI), and improve the customer Opportunities experience, any discussion of how to achieve these goals and build Abound Through smart utilities or smart cities will eventually focus on data. Specifically, Data Analytics the spotlight is on the use of data analytics to extract actionable system By Scott Stallard knowledge that will reduce costs and better position leadership to improve their organizations' performance. 32 2015 Strategic Directions:Smart Utility Report UB-105 It is important,however,to avoid grouping all data analysis into the same bucket.In many cases,data analytics remains an aspirational resource for utility business and operational leaders.Despite widespread advertising campaigns targeting the business-to-business(B2B)and business-to-consumer(B2C)markets and a high profile role in the 2014 political cycle,talk of data analytics should not be confused with broad utility adoption. According to Black&Veatch's research,overall utility adoption of analytics programs remains within the margin of error when compared to 2014 survey results.Approximately one-third of respondents still do not know what types of analytics are in use in their organization(Figure 13).On the plus side,executive awareness of analytics programs ranked higher than It did with other respondents,which supports Black&Veatch's position that analytics programs are being driven by senior leadership.It Is also interesting to note that water and combined utilities appear to have more aggressively adopted descriptive analytics programs,while electric utilities are applying more advanced predictive or prescriptive analytics programs in greater numbers(Table 6). Figure 13 What types of data analytics does your organization currently use to improve its operational performance? II 2014 $ 2015 37.2% 35.4% 35.5% 32.1% 34'3% 28.0% 27.3% 24.8% II II II 18.6% 15.8% Descriptive Closed-loop Predictive Prescriptive Don't analytics optimization analytics analytics know Source:Black&Veatch Table 6 Types of Data Analytics Currently Used to Electric Water Combined Improve Operational Performance Utility Utility Utility Closed-loop optimization 21.9% 35,1% 17.5% Descriptive analytics 32.0% 36.4% 45.6% Predictive analytics 31.6% 2 5.4% 24.6% Prescriptive analytics 21.5% 18.6% 12.3% Don't know 40.4% 28.9% 40.4% Source:Black&Veatch Black LIB-106 OBSTACLES TO IMPLEMENTATION Barriers to deploying analytics programs typically fall into two categories:technology and benefit identification obstacles.Despite a growing body of evidence that analytics are critical to making the transition'to a smart As the cost of utility,budget constraints(64 percent)and justifying the ROI(42.2 percent)were identified by respondents as the technology drops, 7,, top barriers to more fully capitalizing on data analytics budgetary obstacles opportunities(Figure 14,Table 7), fall as well. In many Instances,it is easy to identify a faulty piece of equipment or the need to replace a leaking pipe,but less clear to ratepayers and regulators are the investments that,for example,provide Incremental efficiency gains. This disconnect will remain a hurdle for organizations seeking to move forward with their plans. Addressing these challenges successfully requires internal and external education campaigns to allow for the prioritization of investments.Fortunately,ongoing progress in understanding portends the breakdown of these barriers in the years ahead.From the technology perspective,cost-effective,scalable cloud-based technology continues to make it easier to address security support and data management issues,As the cost of technology drops,budgetary obstacles fall as welt. The second major development is the realization that foundational analytics programs are demonstrating value throughout organizations versus simply one group or department within an organization.Attempts to purchase technology that wilt be siloed within an organization,are increasingly hard to justify,but those that can impact the effectiveness of multiple departments shift from the "nice-to-have"to the"have-to-have"category. Other challenges from aging utility workforces to a lack of in-house resources are discussed in the Perspective: Workforce section of this report. 34 I 2015 Strategic Directions:Smart Utility Report UB-107 Figure 14 What are your organization's three biggest obstacles to more fully capitalizing on data analytics opportunities? 64.7% ��� ���� �� _ �' •';:t.;4 Budget constraints 42.2% .'■ Justifying the ireturn on investment 33.4% IT/data management infrastructure 1111111111.1 31.6% Lack of in-house understanding or support 27.3% Data availability/accuracy 27.0% « ' � :) Security concerns 13.4% Knowing where to start Source:Black&Veatch Table 7 Biggest Obstacles to More Fully Capitalizing on Electric Water Combined Local Government/ Data Analytics Opportunities Utility Utility Utility Municipality Budget constraints 59.4% 67.6% 57.9% 68.7% Data availability/accuracy 24.0' 26.6" 40.4' 28.4% 1T/data management infrastructure not in place 34.1% 33.4% 281' 35.8% Justifying the return on investment 45.4% 42.4'' 40.4% 38.8' Knowing where to start 12.7% 14.5`' 14.0% 14.9" Lack of in-house understanding or support 25.8' 34.8° 36.8' 37.3% Security concerns 30.1" 27.2' 21.1* 17.9% Source:Black&Veatch Black LIB 1108 THE ANALYTICS CONVERSATION SHIFTS While analytics adoption rates appear similar to a year ago,the conversation about the rote of analytics has evolved.Like the initial deployments of advanced metering infrastructure(AMI)programs,many of the early data analytics efforts focused on the customer.Programs centered on the customer experience,theft detection and improved customer billing/usage information,These programs gave utility leaders a snapshot of what is currently happening in the organization,a trend particularly prevalent in the electric utility industry. Over the course of 2014,the discussion shifted to the role of analytics in asset management and capital investment planning functions that fall more into the predictive/prescriptive realm(Table 8).These latter examples reflect where leaders are trying to use data to better make future decisions versus gaining a snapshot of what is currently happening in the organization. Table 8 What top three operational areas in your organization would be best served by expanded data management and analytics capabilities? Operational Areas that Will Benefit Most from Increased Electric Water Combined Local Data Management and Analytics Utility Utility Utility Government/ Capabilities Municipality Evaluating operational or 41.9" 57.7' 45.6* 38,86 maintenance options/scenarios Identifying issues and losses 23.6" 34.7' 24.6" 26.9" Improving/maintaining service 49.3" 45.4% 61.4" 49,3 reliability Infrastructure resiliency and 24.9% 22.3' 31.6 29.96 recovery Monitoring performance 38.9" 46.4' 29.8" 53.7" Outage management 34,T 3.8' 36.8" 9.0* Regulatory compliance/reporting 131% 20.3" 15.8" 19.4" Resource conservation/operating 8 3` 26.5" 5.3" 20.9" efficiency Streamlining projects 9.2°' 4.V 5.3" 11.9" Source:Black&Veatch 36 I 2015 Strategic Directions: Smart Utility Report UB-109 In 2015,Black&Veatch believes that analytics programs — willcontinuetheirevolutionfromthoseprogramsfocused Evaluating strategic on customers and individual assets within an organization to programs informing the comprehensive needs of the options and business case enterprise.Evaluating strategic options and business !' case development functions requires more complex development functions analytics systems,or combinations of systems,to help requires more complex utility leaders plan for an increasingly challenging business environment. analytics systems, or combinations of systems, It has been well documented that many electric utilities are facing challenges from increasingly complex to help utility leaders regulatory environments and the fundamental threat plan for an increasingly to their business model from distributed generation, particularly rooftop solar installations.For the first time challenging business since the industry's founding,electricity providers do not control the entire flow of electricity,or the relationship environment. with the customer.For water utilities,the Black&Veatch — previous Strategic Directions:U.S.Water Industry report shows that only one-third of water service providers believe their revenue is sufficient to cover all of their operational and debt service needs.Lost revenue from aging,leaking infrastructure compounds their financial crisis. To more effectively address these challenges,utilities need analytics capabilities that will provide visibility that allows for improved interaction with the customer and understanding of the organization.Armed with a range of options,and likely outcomes,operators can work to avoid collisions with customer needs and build synergies to strengthen their networks while ensuring the viability and service that communities expect. Black LIB Ill 0 Moves by utilities to adopt smart grid capabilities are built on the idea Customer Education that complex technologies can speed information across networks to is Key to Smart nimbly anticipate customer needs and lower costs.Technology fulfills Utility Initiatives its own promise when systems "just work";the lights come on at the By Fred Ellermeier flip of a switch,the water flows at the tap,the furnace or air conditioner and Kevin Cornish springs to life when the temperature hits a certain point. Ironically,these all too often,taken-for-granted occurrences belie the complex networks behind them.As a result,improving the efficiency of these systems to achieve key operational and environmental goats has become a challenge for utilities in their bid to convince customers of the need for smart utility Investments.With service providers increasingly joining the smart systems movement(Figure 15), it becomes clear that Utility 2.0 depends greatly on customer buy-in,either through rate cases or their own installation of smart devices at the home.Deeper understanding of the systems that make next-generation devices a more efficient option is critical.Creative education efforts can place customers in a partnership role with utilities and can help users understand the smart grid's complexity while placing value on Its implementation. 38 I 2015 Strategic Directions:Smart Utility Report k L-111 "Smart " has become a buzz phrase that means different things to different utility sectors. Just as important as developing agile network technologies is the education of a customer base still wrestling with,and skeptically questioning,what it means to live In a smart city or draw power from a smart grid. Mass media imagery of perfectly timed traffic lights, advanced interactive video surveillance and other technological advances have tried to sculpt a shared understanding of how a fully connected grid efficiently moves utilities,traffic and data along their way. However,customer confusion persists,and some utilities are reluctant to push ahead with investments.Multiple utility respondents suggest the term"smart"in a utility context is less than definitive.As referenced earlier in this report,"smart "has become a buzz phrase that means different things to different utility sectors. slack U 3-112 Most utilities have an accepted understanding of smart systems even if their eventual deployments take different paths(Figure 16),Water utilities,for instance,are deploying advanced metering infrastructure(AMI)and distribution sensors to reduce meter-reading costs,identify leaks and increase resiliency.Power providers employ centralized locations to remotely control and adjust devices,along with two-way communication that sends information between a customer's meter and the utility. Intelligent devices,deployed along the utility's systems or inside a customer's home,gather consumption information in real time and give operators actionable data that can lead to behavioral change. Figure 15 What systems are you currently implementing? Smart electric grid 43.6% ,.-■ Renewable/distributed generation 40.7% ■ High-speed data network 39.5% Energy management systems 30.8% Smart water systems 23.3% Smart buildings 22.1% - Smart transportation 19.8x° Smart street lighting 16 Microgrids or nanogrids 11.6% Smart water systems Source:Black&Veatch 40 i 2015 Strategic Directions:Smart Utility Report UB Figure 16 Which of the following automation initiatives are you currently implementing? 51.2% Enterprise-wide 48.7% Asset management 36.2% Cyber or physical security 29.9% Electric substation 25.0% Water or natural gas production,transmission,treatment facilities 17.77. i . Water or natural gas unmanned facilities 17 Water or natural gas distribution main monitoring and/or control 16.4% Water or natural gas customers 14.4% Electric distribution 1.8% No,we are not currently implementing automation initiatives Source:Black&Veatch Black u13-114 SKEPTICAL CUSTOMERS MUST BE EDUCATED,CONVINCED Smart utility rollouts have been plagued by skepticism at the customer level,largely because they are misunderstood.The past year has seen utilities struggle to convince residents of the required cost of smart grid updates and the steps customers can take at home-often with the help of utility-provided devices-to enable their own smarter choices. Black&Veatch's research found nearly 58 percent of utilities,cities and organizations had not announced a smart utility or smart city initiative.Perceptions that smart initiatives were not applicable to organizational missions and a lack of education and information about"smart" improvements were among the top contributors to the utilities'holding patterns(Figure 17). 42 I 201S Strategic Directions:Smart Utility Report UB-115 Why have you not considered a smart initiative? `,. Lack of , Currently education/ i t . information Inuestujotincy Perceived as .. considermo ii not applicable , ---- I-- ,•-'' .f Budget constraints ----,— Lack of support r._____ -----, or 7--- --\ perceived "value" NOT A PRIORITY Lack of resources, including leadership I'\ ------------\r \,. i 1 , c. V . . Timing is _ not right Organization is not oped -, COO)dirtCli1017 \ __.. i to change ' b el Le eldffeient entities , .. . INFRASTRUCTURE V , 1 Many utilities,however,may understand the benefits of smart grid investments but are struggling with how to communicate their vision or simply prefer to let larger institutions make the first moves and demonstrate their effectiveness. But with mounting evidence that automation and other smart device deployments are reaping significant cost savings and efficiencies;Black&Veatch believes utilities have a unique opportunity to revisit their strategic missions.They can recommit to new,efficient ways of delivering services driven by improved understanding of real-time and historical data (Table 9),At the same time,they can reinforce their bond with customers by educating them about how the changes can save money and potentially reduce greenhouse gas emissions through smarter consumption.A plan that communicates how the utility and Its customer base are invested in each other will go far toward incentivizing residents to act as partners. Table 9 What are the reasons your organization is currently collecting and transmitting field data to a central location? Reasons for Collecting Electric Water Combined Local and Transmitting Field Data Utility Utility Utility Government/ to a Central Location Municipality Historical archiving 44.7`° 64.7` 40.7' 484" Business analytics 46.7% 38.6% 37.0% 32.3% Operational analytics(asset management,outage restoration, 89.3' 871" 92.6% 79.0% system performance) Distributed resource integration 25.9% 19.1% 20.4% 19.4' Support of advanced applications 22.8% 4.4% 20.4% 3.2% such as DMS,VVO,etc. Source:Black&Veatch • 44 I 2015 Strategic Directions:Smart Utility Report IJ13-117 A STUDY IN CUSTOMER ENGAGEMENT Such strategies could be especially valuable for at-risk Recently,a Midwestern utility made customer education demographics that may not easily understand the benefits a major plank in its effort to recover the costs of a smart or may fear that a high technology solution could expose systems upgrade,which was expected to add a small their private data. amount to the average customer's monthly bill in exchange for savings that were projected to eventually be double the cost of the upgrade.Focus groups revealed to Black&Veatch believes it will be crucial for utilities the utility that customers knew little about how smart grid Pondering an investment in"smart"solutions to develop technologies would affect them or how their own changes a comprehensive plan that is tailored to a community's needs.In addition,that plan must include an aggressive at home could help lower costs. customer education component to instill trust and pre- empt suspicions about the utility's motives. The utility crafted an education platform that included, among other actions,sending teams of smart grid advocates into the community to educate customers. A plan that communicates how the utility and its customer base are invested in each other will go far toward incentivizing residents to act as partners. Black Las-111 8 mummimi Increased urbanization has put pressure on municipalities around the Private Industry world to provide robust infrastructure to support growing demand for and Smart Cities housing, municipal services and efficient transportation.The objective By Richard Azer is to make cities more livable, sustainable and resilient. In addition, communities seek solutions to quality of life concerns such as reliable access to water and power,goods and services, and increasingly, broadband access. It is no surprise that many are hoping the promise of utility interconnectivity, data sharing and analysis will be the solution to their challenges. One of those fundamental questions facing municipal and utility leaders is how does a networked city help private industry thrive?The answer most cited is that it creates environments where investments in intelligent infrastructure,transportation,and public safety serve as incentives for job creation and growth.Supporting that premise,of the systems related to initiatives currently being implemented,65 percent are smart electric grid(Figure 18).The smart utility,aided by the civic objectives of renewable integration and ubiquitous communication networks,is serving as an entry point to smart cities. Industry,seeing the potential for new revenue streams and aiming to capitalize on consumer's interest in all things digital,are eyeing opportunities to engage and collaborate with city decision-makers.Universities and technology companies,such as Amazon,Google and Tesla,are building entire businesses leveraging and extending infrastructure built and maintained by utilities and regulated by local and federal entities. These entities thrive by layering innovative technology advancements onto existing services and continue to push the boundaries of a smart integrated infrastructure. 46 I 2015 Strategic Directions:Smart Utility Report U13-119 These entities thrive by layering innovative technology advancements onto existing services and continue to push the boundaries of a smart integrated infrastructure. Figure 18 What systems are you currently implementing? =aw g v 64.5' Smart electric grid t 3 43.6' Renewable/distributed generation 40.7% High-speed data network 39.5' Energy management systems 30.8% Smart water systems 23.3% Smart buildings 22.1% ° ,* ;x t Smart transportation 19.8% Smart street lighting Source:Black&Veatch Black N B-120 But increasingly,there is perceived competition regarding opportunities to stakeholders isa key step in mitigating who is best served by these initiatives.Survey respondents perception and cost issues.For retail or manufacturing overwhelmingly believe that commercial entities benefit businesses,an attractive return on investment(ROI) most from municipal-wide smart city initiatives(Figure 19). includes energy efficiency gains,because a tower electric When asked which city agencies would benefit most from bill reduces operations costs. For an electric vehicle smart city Initiatives,respondents cited electric utilities manufacturer,traffic pattern insights may inform the (Figure 20).Clearly,there is work to do to increase the charging station siting process and bring additional • value proposition these services can bring to commercial customers to retail in proximity.Universities and shopping enterprises. centers prioritize WI-Fl access.While improved services may be a selling point for the public,their concerns about privacy will also have to be addressed. With commercial Interests already assumed to be in conflict with agency priorities,ascertaining who foots the bill becomes an additional concern.Determining the value proposition and effectively communicating those Figure 19 Please rank the following organizations in terms of which organizations benefit most from a municipal-wide smart city initiative. 4.62 Commercial 4.57 Schools/colleges/ universities 3,70 Hospitals 3.53 Manufacturers 2.3211111111111111.1 Hospitality 2,26 � � � ,. Homeowners associations 1 = Benefit least 6=Benefit most Source:Black&Veatch 48 I 2015 Strategic Directions:Smart Utility Report UB-121 Determining the value proposition and effectively communicating those opportunities to stakeholders is a key step in mitigating perception and cost issues. Figure 20 Please rank the following city agencies in terms of which agencies benefit most from a municipal-wide smart city initiative. 4.66 Electric utility 4.09 I Transportation 3.69 ■ Water/sewer 3.261111111111111111111111111 I Law enforcement 2.94 Public works 44 2.31 ,F � City administration 1 =Benefit least 6= Benefit most Source:Black&Veatch Black U13-1422 Lid