smart grid bulletin

8/2/2019 Smart Grid Bulletin

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The Smart Grid Reliability Bulletin


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Table o Contents

A Smart Grid is an Optimized GridThis white paper discusses the tremendous efciency

gains that are possible using existing technologies ....................... 3

Security in the Smart GridThis paper gauges the challenges utilities ace and

explores how new technologies and operating

practices can improve security ..................................................... 5

Toward a Smarter GridABB starts with a look at todays grid, then shares a vision

or the grid o the uture. In this white paper, ABB discusses

how the uture should and will merge the business realitieso the utilities industry, the increasing energy demands

o modern society, and the sustainability requirements o

our environment into something more reliable, efcient

and secure .......................................................................................8

ABB white paper | The Smart Grid Reliability Bulletin 2


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A Smart Grid is an Optimized Grid

The term smart grid has been used to describe a broad range o technologies, design concepts and

operating practices that collectively paint an exciting picture o what our electric power inrastructure might

look like in ten or twenty years. But what about the grid we have today? Certainly one o the most important

attributes o a smart grid is the ability to wring more out o the assets currently deployed throughout our

electricity delivery system. That is the essence o optimization.

The benefts o grid optimization are airly straightorward:

To get more out o the existing inrastructure and thus deer investments in new generation, transmission

and distribution acilities

To reduce the overall cost o delivering power to end users

improve reliable delivery o power to end users

To reduce resource usage and by extension, emissions o CO2 and other pollutants

Running through all o these is the concept o efciency, whether in an economic or physical sense. So, how

do we go about improving the efciency o our power grid, short o wholesale replacements o aging equipment

and massive investments in the latest technologies? In short, what can be done now to make the grid

operate better?

What does efciency mean or a power grid?

Efciency at the utility level is oten overlooked outside o industry circles, in particular the substantial gains that

could be made in the efciency o power transmission and distribution systems. Grid efciency comes down

largely to line losses, the amount o power leaving a generation plant that is lost on the way to our homes and

businesses. Losses in the transmission and distribution system o 6 to 8 percent are typical even in the worlds

most advanced countries, and they can run even higher.

In 2006, a total o 1,638 billion kWh o energy was lost on the US power grid, with 655 billion kWh lost in the

distribution system alone. To put this in perspective, consider that a 10 percent improvement in grid efciency

at the distribution level alone would have produced $5.7 billion in savings based on the 2006 national average

price o electricity. It would also have saved over 42 million tons o CO2 emissions.

But achieving that ten percent is not as difcult as one might think. As well see in a moment, there are

technologies available today that can have a tremendous impact without bank-breaking investments. Whats

also important to note, though, is that ar rom convincing millions o consumers to try something new, applying

these technologies involve only utilities. O those, the 210 investor-owned utilities operating in the US today

serve over 70 percent o all end users, so the universe o customers or improved grid efciency is remarkably

small. Compare that to the millions o consumers who would have to change their energy usage under demand

response programs, or example, in order or those initiatives to realize their ull potential.

Reducing losses

Improving the efciency o power transmission and distribution comes down to two choices: you can reduce

the resistance o the wires by making them larger or using better materials (not a practical solution), or youcan improve the eectiveness o the ow o electricity. To address the latter, its important to understand one

technical concept and that is the dierence between active and reactive power.

ABB white paper | A smart grid is an optimized grid 3


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Real power is what we use to run our lights, computers and production lines. Its the power the does the

work. Reactive power does not contribute anything to doing work, but it does cause conductors to heat up

and it takes up a certain amount o space in the wires. The more reactive power owing on a line, the less

room there is or real power, and the less efcient the transmission and/or distribution system will be.

So, to optimize the movement o electric energy, we would ideally like to eliminate reactive power ows, or at

least minimize them. Utilities do this today on their local distribution systems using devices such as capacitor

banks or special transormers, typically located at substations or on eeder. These devices work to keep

reactive power ows down, making the ull capacity o the conductor available or the real power that will be

used by our lights, TVs and rerigerators. This process is known as volt/VAr control.

Historically, volt/VAr control devices have operated autonomously, independent o one another and with-out

centralized coordination. This approach worked, but it let a good deal o efciency on the table since actions

taken by one device might have less-than-optimal results or another location on the grid or or the system

as a whole.

Enter VVO: volt/VAr optimization

Advances in automation and communications have laid the oundation to make centralized, coordinated voltage

control possible and in act applications to take advantage o it have been in the works or years. The problem

lies in the act that the computing requirements or such applications to generate useul solutions in near real

time are staggering. However, new methodologies and todays aster computers have converged to make volt/

VAr optimization viable.

VVO, as it is known, is an advanced application that runs periodically or in response to operator demand

at the utility control center or in substation automation systems. Combined with two-way communication

inrastructure and remote control capability or capacitor banks and voltage regulating transormers, VVO

makes it possible to optimize the energy delivery efciency on distribution systems using real-time inormation.

The real breakthrough here is in the speed and quality o the computation. VVO uses advanced algorithms to

identiy the optimal operation strategy rom millions, or even billions o possibilities. Arriving at that result ast

enough to apply it in practice, in a day-to-day utility working environment, is a tall order.

The result is improved efciency that reduces the amount o power that must be generated and with it the

emissions o CO2 and other pollutants associated with power generation. VVO also allows utilities to control

costs better by getting the most out o their networks.

Whats next

More applications are being developed now that address not only the efciency o grid operations but also

reliability. For example, ault detection, isolation and restoration (FDIR) will require more components (devices

on the grid and sotware applications) than VVO, and dierent utilities are likely to take dierent approaches to

implementing this type o unctionality. Similarly, managing large volumes o distributed generation resources

like rootop solar panels will take even more sensors, aster computers and more robust algorithms to manage

the interrelated eects o so many devices on the utilitys system.

For all o these applications, however, one component is vital: communications. The ability to move large

amounts o data rom disparate points on the grid is the key to enabling the applications that will in turn

acilitate the widespread adoption o distributed generation and maintain (or even improve) the level o servicecustomers expect. O course, challenges remain. There are issues surrounding standards and interoperability,

security, and o course cost to name a ew. The long-term benefts, though, are compelling. VVO is only

the beginning o a new stage in the evolution o our power systems that will make them simultaneously more

reliable, more efcient and more economical.

ABB white paper | A smart grid is an optimized grid 4


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Security in the Smart Grid

Its hard to avoid news reports about the smart grid, and one o the medias avorite topics is security, cyber

security in particular. Its understandablethe grid as we know it today already relies on a wide variety o digita

devices and computerized controls to keep the lights on. The grid o the uture will only be more wired (or

wireless, as the case may be), and the combination o those systems with public communications inrastructure

creates the potential or unauthorized access.

The question then becomes, how do we protect such a vast system rom hackers, criminals, disgruntled

employees and others who would do harm to the grid?

Security is primarily about people, processes and technologies working together to prevent an attack. It is not

just technology, or a set o procedures, and it is not a one-time investment. There is no single solution that is

eective or all organizations or applications, but eective solutions can be realized through the cooperation o

vendors, systems integrators and end users.

Gauging the threat

Ultimately, security is about managing risk, but the task o defning security threats to power utility systems is

a difcult one, in part because there is relatively little statistical data on security breaches. These have been

(thankully) rare as compared, or example, to natural disasters like hurricanes, ice storms and the like. Natureis also undamentally random, and as such lends itsel to statistical analysis. Cyber threats, on the other hand,

are posed by human beings who are able to learn and change their methods over time. Security in this context

is by nature a dynamic and ever-changing process. It is never done.

Security threats also do not know technical limits (i.e., there are many potential vectors o attack that might be

used to circumvent security measures). This is why security experts oten reer to the need to have deense

in depth, a combination o policies, procedures and technologies that are mutually reinorcing.

Another distinction that should be made with regard to security in utility systems is the relationship between

security and reliability. These two objectives are not always aligned, given the priorities behind each o them.

For example, the increasing amount o data owing out o substations back to utility control centers is highly

useul or managing reliability but it presents additional challenges rom a security perspective. Modernroutable communication protocols are seen as vulnerable, and with the prolieration o intelligent electronic

devices (IEDs), the utilitys exposure to cyber attack seems to grow by the day.

However, a return to older serial protocols would not allow the bandwidth required to run advanced

applications like wide-area monitoring, and would also not oer nearly as much as IP-based protocols in the

way o security tools to harden utility systems. Ultimately, though, reliability and security are on the same team.

I a security breach allows an intruder to disrupt the utilitys operations and cause a blackout, then clearly

reliability has also been compromised.

Today o course, utility systems have not only grown more extensive and more numerous, they have also

orged connections between one another and with remote acilities like substations. In addition, interoperability

o utility systems has emerged as a priority, as demonstrated or example by the rapid adoption o opencommunication standards like IEC 61850. Vendors must thereore ensure their security measures do not come

at the expense o interoperability.

Meeting utility security requirements in the current environment is a multi-aceted and ever-changing challenge.

From the system vendors perspective, one o the frst hurdles in addressing security lies in meeting the dierent

and sometimes contradictory requirements o utility users, regulators and various industry working groups and

standards. Requirements rom these sources were developed within a certain context and with specifc objectives,

and are not likely to account or concerns outside o that scope. For example, NERCs CIP requirements address

operators, not vendors, but system users will likely still expect vendors to support their compliance eorts.

ABB white paper | Security in the smart grid 5


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This presents a moving target or systems vendors as they develop new product and service oerings.

Defning product requirements, then, takes on an even more vital role. Similarly, security issues must constantly

be revisited throughout the development process with a heavy emphasis placed on security assessments

and testing.

Challenges or utilities

While system vendors are vital in their role o developing undamentally secure products, ater the sale it is

primarily the job o the user, the utility, to ensure ongoing security. Ultimately, it is the utility that is accountable.

For that reason, security within the modern utility organization is by necessity a complex and

high-visibility unction.

Utilities must assess the security o their existing systems, evaluate and plan or new costs associated with

security, crat security policies and procedures, train their employees on those policies and procedures, and

establish a management mechanism that ensures all o these things get done in a thorough and timely ashion.

From an organizational perspective, security is an interesting unction in that power engineers are not

security experts by training. Their ocus is on operating the network to maximize reliability. Likewise, security

proessionals typically are not operations people, and their ocus is on preserving the integrity and unctionality

o the system rather than actually using it on a day-to-day basis.

Managing security as a corporate unction requires balance in order to draw on the skill sets o the user and

the security proessional alike. It also takes a good deal o basic vigilance in terms o monitoring the security

inrastructure (e.g., regularly analyzing system log fles, reevaluating threat models, updating security policies

and processes), a concept we will return to later.

Improving security

For the utility, security begins with policies that address human behavior, which is the basis or all security

whether technical, procedural or organizational. Relatively ew security breaches can be attributed solely to

a technological ailure. What is ar more likely is that a technological weakness will be exploited through the

application o social engineering on the part o the intruder, or through a seemingly innocuous oversight on

the part o the system operator.

Monitoring log fles is an important, i unglamorous, way or utilities to keep track o the nature and requency

o attempted security breaches their systems are acing. I all goes well, the policies, systems and procedures

in place will deter the garden-variety threat, but log fles provide valuable inormation on unsuccessul attacksthat may be applied to preventing more sophisticated ones.

There are many simple things that utilities already do to maintain IT system security. They may seem obvious,

but the key to their successul application lies in the organizations ability to stick with them. Some examples

o such basic but vital practices include:

Using and listening to alarms

Removing unused sotware rom servers and workstations

Disabling unused services

Removing unused accounts

Changing deault passwords regularly

system setup on a redundant or test system, not the production server Using host-based frewalls

Regularly updating antivirus sotware

Using a vendors patch management process

This last item points to the importance o cooperation between vendors and utilities over the entire system

liecycle. It also highlights maintenance o security systems, which are as vital as the control systems they

protect. The maintenance phase is by ar the longest in the liecycle o any security regimen. The vendor

addresses security during product development and an integrator will handle it during installation and major

upgrades, but over most o the systems lie, the care and eeding o security alls to the utility.



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This brings us back to the organizational character o the security unction. To be successul, security must

be ormally established within the utility and that can sometimes present a problem in terms o who owns

security within the company. Cross-unctional teams are vital because security spans the entire organization

(and because similar challenges are aced in dierent departments), but the lines o responsibility should be well

defned and a security czar or stand-alone department should coordinate the various activities.

Legacy systems also present a particular security challenge. In most cases, it simply is not practical to replace

systems that are otherwise perectly unctional simply to apply the latest in security technology. However,

depending on the age o the system in question, its also conceivable that the security inherent to it is not at all

adequate or current requirements. Fortunately, there are several approaches that can secure legacy systemswithout replacing them.

One option is to encapsulate the given system within a secure zone o cyber protection so that it is isolated

rom direct contact with other systems, both within the utility frewall and outside it. Communication

channels can also be secured by upgrading to modern protocols that support encryption, authentication and

authorization mechanisms. Access to the legacy system can also be controlled by bolting on a new user

interace layer along with the application o appropriate procedures or authorization.

Finally, i remote access to the legacy system is required, that can be achieved using a secure virtual private

network to connect to a terminal server rather than the operation system itsel. As with any system, new or old

non-essential applications should be hosted rom hardware that is physically separate rom the main system.

Security best practices or the vendor

While suppliers o critical utility IT systems take security seriously, its almost impossible to overstate the

importance o having a pervasive security culture across the development process. Developers themselves

should be trained in security strategies and development tools, and system vendors should build development

methodologies to model the ever-changing array o potential threats. Security requirements also need to be

addressed as early as possible in the development process as they may have ar-reaching implications or the

product.

Testing, as mentioned earlier, is also vitally important. At the device level, a ormal testing methodology should

be created that leverages current state-o-the-art commercial and open source testing tools in the development

lie cycle. Multiple approaches should be employed. Profling tools can help to determine vulnerable services;

known aw testing can check or the latest identifed threats; resource starvation testing (which looks at denial-o-service attacks) and negative testing can be used to examine departures rom a protocols specifcations and

operating parameters.

At the system level, thorough preparation, strict ollow-up and clarity in who will receive test results can

streamline the testing process. However, this is one area where time and money will be required, and wise

investments o both are likely to produce a superior end product.

The complete system delivered to a utility user should address security rom several vantage points. It should

be secure by design (secure architecture and code, robust threat analysis, reduction o vulnerabilities), secure

by deault (reduced attack surace area, minimum privileges used, unused eatures turned o by deault), and

secure in deployment (training and documentation or users; management o detection, deense and recovery).

Finally, the vendor should strive to maintain an open communication process with users regarding security. Nosystem is perect, and the ease with which fxes can be applied will directly impact the overall security o the

system.

Conclusion

When we look at the organizations involved in maintaining utility system securityvendors, integrators, end

usersits air to say that security is everybodys business. To the extent these groups cooperate with

one another throughout the system liecycle, security will be enhanced. At the same time, perhaps the most

important aspect o security or the various players to keep in mind is that it is a journey and not a destination.

There will always be new threats. Likewise, there will be new methods and technologies or meeting those

threats. Vigilance, cooperation and technical expertise, when applied in unison, oer the best deense.



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Toward a Smarter Grid

There is a convergence occurring between the business realities o the utility industry, the energy

demands o modern society, and the sustainability requirements o the environment in which we live.

The combination o these actors is driving the development and implementation o a new power delivery

system. This network will utilize the same basic inrastructure we know today, but will also draw on

advanced monitoring, control and communications technology that is presently only beginning to

be applied.

The result will be a grid that is largely automated, applying greater intelligence to operate, monitor and even heal

itsel. This smart grid will be more exible, more reliable and better able to serve the needs o a digital economy.

Whats wrong with the grid today?

Given the level o reliability we are accustomed to in North America, its easy to overlook the unattractive truth

that our investments in our power system have long been outpaced by the demands we place upon it. While

transmission spending, or example, has increased in recent years, it still lags the pace o increasing energy

consumption. According to a Morgan Stanley analysis, power outages cost the U.S. economy between $25

billion and $180 billion every year.

The grid is also not perorming at the same level it was decades ago. Energy losses in the transmission anddistribution system rose rom around 5 percent in 1970 to as high as 7 percent in recent years. There is also a

considerable security risk in the design o the grid with centralized generation plants serving distant loads over

long transmission lines. However, adding more distributed generation, in particular variable sources like wind

and solar, present new operational challenges.

Meanwhile, changes in the way electricity is bought and sold at the wholesale level have drastically increased

the amount o power being traded between regions. Even the way we use electricity has changed. In our digital

society, power quality is o much greater importance than it was just 15 years ago, both or end consumers and

businesses like chip manuacturing, where even small disturbances in the power supply can have detrimental

eects to production.

Taking all o these actors into consideration, it becomes apparent that the grid we know today is insufcient toserve us in the uture.

What makes a grid smart?

There is a great deal o variation both within the power industry and outside it as to what exactly should be

included under the idea o a smart grid. Ask a room ull o utility proessionals to defne the term and youre

likely to get a wide range o answers. Similarly, most consumers would likely associate smart meters or home

automation with the concept o a smart grid, but there is much more to the picture.

ABB takes an expansive view o the smart grid, defning it by its capabilities and operational characteristics

rather than by the use o any particular technology. Deployment o smart grid technologies will occur over

a long period o time, adding successive layers o unctionality and capability onto existing equipment and

systems. Technology is the key, but it is only a means to an endthe smart grid can and should be defned bybroader characteristics.

ABB white paper | Toward a smarter grid


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In June o 2008, the U.S. Department o Energy held a meeting o industry leaders who identifed seven defning

traits o what a smart grid will do:

1 Optimize asset utilization and operating efciency.

2 Accommodate all generation and storage options.

3 Provide power quality or the range o needs in a digital economy.

4 Anticipate and respond to system disturbances in a sel-healing manner.

5 Operate resiliently against physical and cyber attacks and natural disasters.

6 Enable active participation by consumers.

7 Enable new products, services, and markets.

What is not explicitly stated here, but is equally important, is that a ully developed smart grid concept goes

ar beyond smart meters. It includes technologies at both the transmission and distribution level and extends

to both IT hardware and sotware, such as monitoring and control systems, as well as primary equipment like

transormers and relays.

ABBs list o smart grid criteria covers much o the same ground as DOEs, but ocuses on broad characteristics

rather than specifc unctions. Under this model, the smart grid is:

Adaptive, with less reliance on operators, particularly in responding rapidly to changing conditions.

Predictive, in terms o applying operational data to equipment maintenance practices and even identiying

potential outages beore they occur.

Integrated, in terms o real-time communications and control unctions.

Interactive between customers and markets.

Optimized to maximize reliability, availability, efciency and economic perormance.

Secure rom attack and naturally occurring disruptions.

So how does the smart grid dier rom the one we know today?

The table below provides a concise summary o some o the dierences:

Current Grid Smart Grid

CommunicationsNone or one-way; typically not

real-timeTwo-way, real-time

Customer interaction Limited Extensive

Operation and ElectromechanicalDigital (enabling real-time pricing

and net metering)

Generation Centralized Centralized and distributed

Power ow control Limited Comprehensive, automated

ReliabilityProne to ailures and cascading

outages; essentially reactive

Automated, pro-active protection;

prevents outages beore they start

Restoration ollowing disturbance Manual Sel-healing

System topologyRadial; generally one-way

power ow

Network; multiple power

ow pathways

Adapted rom Research Reports International

ABB white paper | Toward a smarter grid


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From hierarchy to network

The last item in the table, topology, hints at what is perhaps the most undamental shit that a ully realized smart

grid will require. Todays power systems are designed to support large generation plants that serve araway

consumers via a transmission and distribution system that is essentially one-way. But the grid o the uture will

necessarily be a two-way system where power generated by a multitude o small, distributed sourcesin addition

to large plantsows across a grid based on a network rather than a hierarchical structure.

Just as the internet has driven media rom a one-to-many paradigm to a many-to-many arrangement, so too

will the smart grid enable a similar shit in the ow o electricity.

Todays hierarchial power system Fully realized smart grid

The diagrams above illustrate this shit. In the frst, we see todays hierarchical power system, which looks

much like an organizational chart with the large generator at the top and consumers at the bottom. The second

diagram shows a network structure characteristic o a ully implemented smart grid.

Standards: the key to interoperability

Interoperabilitythe capacity or devices rom various manuacturers to work togetheris vital to the realization

o a network-based smart grid, and the key to interoperability is standards. Indeed, the entire smart grid

proposition is predicated on open communications between the smart devices using common protocols.

DNP3, or example, is a widely used communications protocol in substation applications and is the de acto

standard in North America.

IEC 61850 is an open source alternative to DNP3 and other proprietary protocols that has been adopted

rapidly since its introduction. However, or various reasons it has not penetrated the North American market to

the same degree as in other parts o the world. Other standards will be integral to smart grid deployments o

various kinds.

For example, there is broad agreement that the grid o the uture will eature ar more distributed generation

resources than todays largely centralized system. One standard, IEEE 1547, addresses grid interconnection or

distributed resources and the broader adoption o this standard will ease the development o more distributed

generation resources.

The U.S. National Institute o Standards and Technology (NIST) is leading a process to identiy and propagate

key smart grid-related standards within the power industry. These include the standards mentioned above, as

well as some that are specifc to other portions o grid operations. In the near term, however, it will be especially

important or equipment vendors across the electricity value chain to supply multi-lingual devices that can

communicate using standardized protocols, preerably more than one. Proprietary systems simply do not

provide the exibility required to achieve widespread adoption.

ABB white paper | Toward a smarter grid 1


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Benefts: what good is a smart grid?

The transition to a ully implemented smart grid brings a host o benefts to a wide range o constituencies.

Grid operators will enjoy a quantum improvement in monitoring and control capabilities that will, in turn,

enable them to deliver a higher level o system reliability, even in the ace o ever-growing demand.

Utilities will experience lower distribution losses, deerred capital expenditures and reduced maintenance

costs.

Consumers will gain greater control over their energy costs, including generating their own power, while

realizing the benefts o a more reliable energy supply.

The environment will beneft rom reductions in peak demand, the prolieration o renewable power sources,

and a corresponding reduction in emissions o CO2, as well as pollutants such as mercury.

To put a number to these benefts, EPRI has estimated that an investment o $165 billion in smart grid

technology, integration and development will produce benefts valued between $638 billion and $802 billion.

That implies a cost-beneft ratio o between 4:1 and 5:1.

Its important to understand that, in many cases, these benefts have a symbiotic relationship to one another.

Reliability and efciency, or example, are two important objectives o any power system. With a smart grid,

though, technologies applied primarily to improve one will oten improve the other at the same time.

Power electronics devices known in the industry as FACTS (exible AC transmission systems) enhance reliability

by making transmission lines more resilient and less vulnerable to system disturbances. FACTS also greatly

increase the capacity o transmission lines, making them ar more efcient. This is just one example o how

smart grid technologies can achieve multiple objectives simultaneously.

Smart grid technologies in use today

Utility companies are already implementing smart devices in various ways. Some examples o how smart

technologiesand the practices they enablecan impact the operation and overall health o the grid include

the ollowing:

Real-time situational awareness and analysis o the distribution system can drive improved system operationa

practices that will, in turn, improve reliability.

Fault location and isolation can speed recovery when outages do occur by allowing work crews to drastically

narrow the search or a downed line.

Substation automation (SA) enables utilities to plan, monitor, and control equipment in a decentralized way,

which makes better use o maintenance budgets and boosts reliability.

Smart meters allow utility customers to participate in time-o-use pricing programs and have greater control

over their energy usage and costs.

SCADA/DMS (distribution management systems) put more analysis and control unctions in the hands o

grid operators.

Voltage control, through reactive power compensation and the broader application o power electronics,increases tranwon capacity o existing lines and improves the resiliency o the power system as a whole.

O course, this is not an exhaustive list. Smart grid technologies similar to those used or voltage control, or

example, are already being applied to bring power rom wind arms to the local grid. In this way, the smart grid

acts as an enabler or all orms o renewable generation.



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Smart grid drivers

The orces driving the development o the smart grid are as varied as they are inuential. Environmental

concerns are increasing around the globe, and that is driving the expansion o renewable energy on a larger

scale than ever beore. The widespread addition o wind, solar and other renewables presents operational

challenges due to those sources intermittent nature. A grid that can handle a generation mix with a high

percentage o renewables, thereore, will become a necessity or those technologies to realize their ull potential

The efciency o the power grid itsel has also come under examination, as even in the most modern systems,

up to 8 percent o the electricity leaving a power plant is lost in the transmission and distribution network.

Reliability, or years the chie concern o utilities and grid operators, is now only one o a wide range oconsiderations in power system planning, operation and management. Energy efciency has now come to

the ore as another key issue that, in many cases (notably in areas suering rom transmission congestion),

is closely linked with reliability.

On the demand side, energy consumers are seeking ever greater control over their energy usage and the

application o technology is already meeting this need. Residential smart meters, or example, allow utility

customers to take advantage o time-o-use pricing that was ormerly available only to large commercial/

industrial users. Sel-generation (e.g., using rootop solar) is also on the rise and is driving a need or net

metering to manage power sales rom many small-scale generators.

Regulators have taken note o all these trends. There are now many examples o regulatory support or

expanding renewable generation, increasing grid efciency and enhancing system reliability. These eortsrange rom local government actions to ease the installation o rootop solar panels, to state/provincial

requirements or renewable generation, national reliability standards and cross-border agreements or

improved interconnection between power systems.

Status o smart grid development in the U.S. and beyond

All o these elements, rom the economic to the environmental, are ampliying the need or the grid to evolve.

We need our power delivery inrastructure to do more, much more than it does today. To meet the many

challenges acing it, the grid needs an inusion o intelligence, most o all at the distribution level.

The frst steps toward a ully realized smart grid are being taken now, and the potential investment is

substantial. EPRI estimates the market or smart grid-related projects in the U.S. will be around $13 billion per

year over the next 20 years. That comes in addition to an estimated $20 billion per year spent on transmissionand distribution projects generally. More recently, a Morgan Stanley report analyzing the smart grid market put

current investment at $20 billion per year, increasing to over $100 billion per year by 2030.

Despite these remarkable orecasts, however, smart grid deployments still represent a major departure rom

current utility practices. For an industry with a time honored ocus on reliability and certainty in the application

o new technologies, the shit to smart grid presents a daunting challenge. However, some exciting projects are

already underway.

ABB is working as part o a consortium in Germany to develop a minimum emissions region. The MEREGIO

project, as it is known, will integrate renewable, distributed generation and provide the grid operator with real-

time inormation on conditions across the network. This will enable the operator to predict power ow, adapt

rapidly to changing situations, send price signals to the consumer to encourage demand or restrain it i there isrisk o a bottleneck, and create a regional energy market that incorporates end customers.

Consumers will be able to monitor their energy consumption and CO2 ootprint, respond to price signals and

adapt consumption according to price and availability. They will also be able to sell surplus power rom their

own generators to the grid when price conditions are most avorable. Similar demonstration projects are being

undertaken around the world.



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The role o government

The U.S. is home to several consortia working on smart grid issues. EPRIs IntelliGrid program and DoEs

GridWise Alliance are just two examples. Likewise, the nations utilities are actively involved with approximately

80 percent o investor-owned utilities developing some orm o smart grid, or example by participating in pilot

studies o wide area monitoring systems (WAMS).

However, while programs like MEREGIO and Excel Energys Smart Grid City in Boulder, Colorado are important

to advance smart grid technologies in real-world applications, the widespread adoption o these technologies

will likely depend to a great extent on governmental support o various kinds.

In the U.S., the Energy Policy Act o 2005 (EPAct) introduced mandatory reliability standards and required state

regulators to investigate advanced metering, time-based pricing, and demand response programs, all o which

will rely on smart grid advances. The Energy Independence and Security Act o 2007 (EISA) included an entire

title devoted to smart grid that provided unding or R&D eorts, created a Smart Grid Advisory Committee,

and requires state regulators to consider smart grid alternatives beore approving investments in traditional

technologies.

More recently, the American Recovery and Reinvestment Act o 2009 (ARRA) made provisions or $11 billion in

unding or grid improvements with a heavy emphasis on the application o smart grid technologies. Specifcally,

ARRA provides $4.5 billion in grants, $2.3 billion in tax credits and another $6 billion in ederal loan guarantees,

all aimed at upgrading the nations power systems. These unds are directed toward a number o specifc

activities, ranging rom grants or R&D in energy storage to matching unds or new T&D construction.

O the total, $3.4 billion will go to smart grid-related projects with utilities investing an additional $4.7 billion

according to a December 2009 study by Pike Research. Notably, one provision in ARRA sets aside $10 million

or the creation o a smart grid interoperability ramework. Its a comparatively tiny drop in a large bucket, but,

as noted earlier, standards are vital to accelerate the adoption o smart grid technologies across the utility

industry. The National Institute o Standards and Technology (NIST) is leading the standards eort and, in May

2009, published an initial list o standards that will be used in smart grid development.

The government will also play a major role in the development o the smart grid through its many regulatory

agencies, both state and ederal. EPAct (2005), or example, established a mechanism or creating so called

National Interest Electric Transmission Corridors to speed up the approval process or new transmission lines in

heavily congested areas.

The Federal Energy Regulatory Commission (FERC) recently issued an interim rate policy, whereby smart grid

investments would be included as recoverable costs in a utilitys regulated rates. FERC has also joined with

the National Association o Regulatory Utility Commissioners to create a Smart Grid Collaborative o regulators

at the state and ederal level. Among other things, the Collaborative has made recommendations to the

Department o Energy on the criteria to be used in unding projects through ARRA.

These examples are only the beginning. Whether in the role o advisor, regulator, policymaker or even banker,

the government holds tremendous inuence over the course o smart grid development.

Conclusion

The smart grid is more than any one technology, and the benefts o making it a reality extend ar beyond the

power system itsel. The transition rom the grid we know today to the grid o tomorrow will be as proound as

all o the advances in power systems over the last hundred years, but it will take place in a raction o that time.

That said, this transition will not be easy. The integration o smart technologies o many dierent kinds will be

essential to a unctioning smart grid, and the path to integration is lined with interoperability standards. Realizing

smart grids potential will require a new level o cooperation between industry players, advocacy groups, the

public and especially the regulatory bodies that have such immediate inuence over the direction the process

will take. In the end, though, a ully realized smart grid will beneft all stakeholders.



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