smart€grid€benefits michele€marzola grid benefi… ·...

Smart Grid Benefits

Michele Marzola

Chief Executive Officer

Digital Networks [email protected]

Sharm el SheikNovember 21, 2006

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2

Executive Summary

§Smart Grids will transform the Utilities business

§Utilities will be able to cut their costs by more than30% whilst increasing revenues

§Smart Grids create more than € 1,000 of value forevery meter

§Smart Grids can be implemented quickly, usingexisting meters

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3

Smart Grids integrate AMM and BPL

Automated Meter Management(AMM)

Broadband Technologies(BPL)

Asset Monitoring and SCADA Systems(Solutions for the High and Medium Voltage networks)

Takes the intelligence of IT to any meterEnables any meter to be an IP node

Applies Advanced AnalyticsCuts costs by at least 33%

Can be selffinanced

Enables broadband InternetServices and VOIP

using existing electrical wiresdelivering the benefits of

3 investments with the cost of 1

DIGITAL NETWORKS PLC scope of work

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4

Smart Grids enable three parallel innovation streams

IntelligentAppliances

IntelligentBuildings

IntelligentNetworks

SMART GRID COMPONENTSReal Time control of Low Voltage NetworkInteractive Load and Service management

TELECOMMUNICATION COMPONENTS200 MBps data connection

VoIP

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5

Most economies need to address three priorities

Broadband universal access to sustain economicgrowth

Access to Voice over Internet Protocol for everyone

Electrical grid improvement

1

2

3Three benefits with just one investment:

Smart Grids

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6

Governments and Regulators are favouring theintroduction of Smart Grids to achieve multiple benefits

Disposable Income

Elimination ofCommercial Losses

Distribution Efficiency,Customer Choice

Smart GridSupply

ReliabilityGDP

Growth

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7

Investments in Smart Grids are driven by four inevitableforces

Overall demand isincreasing

with the economy.Peaks are already

exceedingCapacity

Smart Grids are the only sensiblereplacement alternative

Generation Capacity is limited by environmental

andpolitical factors

Most Assets should have beenreplaced already a decade ago

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8

In 5 years no Utility will dare managing the Networkwith tools of the ’50s

§ Staying blind on Low Voltage operations?§ Relying on annual manual readings that tell you nothing of users

dynamics?§ Ignoring where your assets are and which is their operating

condition?§ Fixing your assets only after they broke with unmanageable

customer damages?§ Investing according to historical patterns instead of real critical

usage?§ Having a fragmented, inconsistent and scarce data base of customer

events and network events?§ Growing the top line selling the same services with rates continuosly

reduced by the Regulator?

Would you envisage… ..

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9

The key issue for many utilities is which is the best pathto arrive to the Smart Grid vision

§ Invest in metering? In communication? In application? Which is theright sequence?

§ Scale the investment from pilots to universal rollouts? Which is theminimal size of economic investment in Smart Grids?

§ Invest now or invest later?

§ Which is the correct timeframe for the investment?

§ Which generation of technology should I invest in? Can I move from3G to 4G? Is there a 5G around the corner?

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10

Smart Grids are the fourth generation technology inDistribution networks management

1° Generation:Standalone meters

2° Generation:Remote Reading

3° Generation:AMM

Narrow Band

4° Generation:Smart Grids

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11

The first generation is structurally limited



3° Generation:AMM

Narrow Band


Manual Reading

1 data per read(from once a month to

once a year)

As reliable as the meterreader

No customerintelligence

No Network Monitoring

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12

The second generation is a mere substitution of labourcosts with capital costs



3° Generation:AMM

Narrow Band


Manual Reading


once a year)




Oneway remote reading


once a year)

Up to 24 hrs to read ameter with proprietary

protocols



No Integration withLegacy systems

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13

The third generation has already proven its Value



3° Generation:AMM

Narrow Band


Manual Reading


once a year)






once a year)


protocols




Twoways remotemanagement

At least 8 data every 15min

2.4 Kbps band,Asyncronous mgnt with

proprietary protocols

AsymcronousCustomer intelligenece

Asyncronous NetworkMonitoring

Legacy Integration

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14

But only Smart Grids can maximise performance withflexible realtime Network management



3° Generation:AMM

Narrow Band


Manual Reading


once a year)






once a year)


protocols




Twoways remotemanagement

At least 8 data every 15min

2.4 Kbps band,Asyncronous mgnt with

proprietary protocols

AsymcronousCustomer intelligenece

Asyncronous NetworkMonitoring

Legacy Integration

Full grid management

Any data with anyfrequency

200 Mbps band with openInternet protocol andopen IT architecture

Alwayson customermanagement

Alwayson NetworkManagement

Legacy Integration

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15

Only Smart Grids enable major functionalities



3° Generation:AMM

Narrow Band


Peak LoadManagement

FlexibleTariffs

FraudDetection

OutageManagement

NetworkPlanning

BB Services

X

X

X

X

X

X

X

X

X

X

X

X

X

Y

Y

X

X

X

Y

Y

Y

Y

Y

Y

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16

Two business models are sustainable

CURRENTPOSITION

Unstainable for theRegulator

Unstainable for theCustomers

Smart GridsBroadband Services

Real Time MgmtEnergy Mgmt

Continuous Evolution

AMMBasic servicesNarrow BandAsyncronous

Static services

Level of ServiceLOW HIGH

Investment

LOW

HIGH

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17

Smart Grids generate a much higher Net Present Valuethan previous technologies

Solution Completeness

Valu

e to

Util

ity

€ 10

€ 100

€ 1,000

Present ValuePer Metering Point

Investment

Value



3° Generation:AMM

Narrow Band


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18

Savings from Energy Management can already justify theinvestment in Smart Grids

Savings per meter per annum (€)

0

20

40

60

80

100

Savings Hi Savings Low SavingsReasonable

CommercialLossesCustomerOperationsDisasterAvoidanceNetworkOperationsField Operations

3 yearspayback

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19

Smart Grids create more than € 1,500 of benefits permeter just out of pure electricity management

0

100

200

300

400

500

600

700

800

SystemicBenefits

End UserBenefits

Utility Benefits

Regulatory benefits

Provision of BB VAS

Savings on Telephony andVASNetwork management

Field Operations

Commercial losses

GDP growth

Home gateway

Peak Power Reduction

Critical Outage

Flexible rates

€ per Metering Point(for the 15 yrs. Lifecycle)

Illustrative example for EmergingMarkets

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20

Smart Grids may enable to double the revenue per userand increase the average margin

Revenue evolution

010203040506070

Electrictyuser

Networkcustomer

SmartGrid pal

€/m

onth

Other ValueAdded ServicesInternet access

Base revenue

Net Margins are wellabove average

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21

Broadband PLC services are sustainable and competitive

Competitive Map Italy

0

10

20

30

40

50

0 5 10 15Download bandwidth (Mb)

€/m

onth

TIMTele2WindTiscaliASM BresciaFastweb

PLC Price performance

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22

Broadband PLC services are sustainable and competitive

Competitive Map Switzerland

0

20

40

60

80

0 1 2 3Download bandwidth (Mb)

€/m

onth

BluewinEasynetInit7AMB Bellinzona

PLC Price performance

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23

When the benefits of Value Added Services are added toEnergy Management, the investment is repaid 20x

0

200

400

600

800

1000

1200

1400

1600

SystemicBenefits

End UserBenefits

Utility Benefits

Regulatory benefits

Provision of BB VAS


Field Operations

Commercial losses

GDP growth

Home gateway


Critical Outage

Flexible rates



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24

The investment in Smart Grids requires some upfrontstrategic decisions

§ Smart Grid, AMM or just AMR?

§ Universal coverage or selected customers?

§ Single technology or multiple technologies?

§ Single supplier or multiple suppliers?

§ Intense deployment or diluted deployment?

§ Compliance or Transformation?

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25

The Leadership Team of Digital Networks PLC hasalready implemented a Smart Grid at ASM Brescia

220K customers fully managed for theirelectricity, gas, hot water andBroadband internet services

BroadbandInternet servicesare sold at € 17per month per

customer…

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26

Digital Networks PLC can implement a Smart Grid usingexisting meters and sensors

13 DIGITAL NETWORKS PLC

EVOLUTION OF THE COMMUNICATION CHANNELSTHANKS TO BROADBAND COMMUNICATION

COMMUNIC.GATEWAYAMRPLUS

RADIO ORSERIAL LINKS

CONCENTRATORCUPLUS

Electric grid

CENTRAL APPLICATIONSERVER

Ethernet/IP

GASMETER

WATERMETER

BPL

BPL

CUSTOMER SITE TRANSFORMER SITE CENTRAL SITE

GPRSWMAXFIBER

MBUS

Domoticappliances

Sensors

Videosurveillance

PLCNB

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27

Size matters and risks can be reduced in various steps,without sacrificing scale economies

§ Technology test 1 – 5 K meters 2 months

§ Benefit Assessment 30 – 50 K users 1 year

§ Training 200 – 300 K users as above

§ Transformation Universal 3 – 5 years

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28

To size the possible Value Creation, a thorough businesscase should be prepared

§ Analyses of current cost base

§ Saving model adapted to the specific utility situation

§ Broadband services strategy

§ Investment strategy

§ Technology and Partners selection

§ Financial model

§ Investment approval management

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29

The most important part is the quantification of themajor sources of value

0

200

400

600

800

1000

1200

1400

1600

SystemicBenefits

End UserBenefits

Utility Benefits

Regulatory benefits

Provision of BB VAS


Field Operations

Commercial losses

GDP growth

Home gateway


Critical Outage

Flexible rates



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30

Digital Networks PLC can provide a full lifecycle,modular Smart Grid services offering

2 M 6 M 12 M 18 M 2 to 4 Years

FinancialCommitment

Business Case

Investment Detailed Design

Technical Verifications

Project Financing

Contract Negotiation

Deployement

Possible way outs

Time

Regulatory Management

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