the utility of the future – and changes to infrastructure ......facilitate der grid services ....

Missouri Energy Initiative

October 2017

The Utility of the Future – And Changes to Infrastructure Needs

2 Copyright © 2016 Accenture All rights reserved. Copyright © 2017 Accenture. All rights reserved.

Market forces continue to put pressure on the current utility business model

Choice-conscious and sophisticated customers

Energy efficiency and cost-competitive distributed energy resources

Increased focus on resiliency and reliability

Shifting energy policy and new regulatory models

Asymmetric competition

Drivers of Business Model Change

61%

56%

66%

45% of utility executives believe today’s cost of service model is inadequate to meet technical challenges and financial goals

expect an increase in grid faults due to DER by 2020

expect their company’s role to evolve to integrate distributed energy resources (DER) and facilitate DER grid services

expect the distribution network to evolve as an active monitoring and optimization of network assets

2017 Digitally Enabled Grid

Sources: Accenture New Energy Consumer 2017, Accenture Digitally Enabled Grid 2017, Accenture Capital Theft POV 2017


Trial Users

Everybody Else

Innovators (2.5%)

Early Adopters (13.5%)

Early Majority (34%)

Late Majority (34%)

Laggards (14%)

THE SHARK FIN

The old curve of innovation adoption has been replaced by “big bang” disruption that has ambushed entire industry models

Film Rentals

Taxi Services

Mapping / GPS

Hotels

Source: P. Nunes, Accenture Institute for High Performance, Big Bang Disruption


….and dramatic disruptive technologies are coming at utilities at an unprecedented pace

DISTRIBUTED GRID RESOURCES

DIGITAL CUSTOMER LIFESTYLE

TRANSFORMATION OF TRANSPORTATION

THE DIGITAL ENTERPRISE

REVOLUTION IN ENERGY EFFICIENCY

Today 2020 2025 2030 Drivers Technologies

13m EVs globally

Installed solar >50% of US peak load

80b connected things installed worldwide

40m smart thermostats in US

60% LED installed penetration

PV LCOE Grid Parity

Fuel Cell LCOE Grid Parity

ECMs in >50% of new appliances installed

• Li Ion installed cost per MWh

• Rate of PV growth (40% per year since 1970’s)

30k commercial drones in US

EVs parity with ICE vehicles

• LCOE of Li ion • EV range • Charging infrastructure

deployment • Reduction in vehicle

ownership from ride-sharing

$20b US grid mod cost

>50% of US population ridden in autonomous vehicle

<1% US load growth Avg. home load down 50% vs 2016

• LED cost decline (90% since 2008)

• ECM efficiency (50% vs 20% for induction motor)

• Demand response participation rate

• Connected device penetration

• Mobile app adoption

2b virtual assistances

• Workforce automation • Shift from hosting to cloud

38% of US jobs replaced by robots

300GW Solar Installed Globally

Published references (i.e, Intl. Energy Agency, US Energy Info. Admin., Greentech Media, Goldman Sachs, Forbes, Bloomberg)

Accenture perspective


The utility model of today must be transformed to adapt to disruptive technologies


• Substantial risk of capital spend degradation • Increased pressure to capture earnings

through operational efficiency measures to mitigate revenue contraction

• Opportunity driven by the combination of new capital spend opportunities, earning on alternatives to infrastructure, and increases in allowed ROR

• Diverse earnings opportunities shift focus from capital spend

With the right regulatory incentives in place, there is a path to growth from the utility optimizing its asset base


ENERGY MARKET REQUIREMENTS

DISTRIBUTION OPTIMIZATION

DEMAND INTEGRATION

Ramping needs

Trading/ hedging

Energy arbitrage

Voltage optimization

Reliability/ resiliency

Power quality

Energy efficiency adoption

Energy service

enablement

Fuel optimization

Conserv. voltage

reduction

T&D capital deferral

DER integration/ optimization

Frequency regulation

Heat rate optimization

Spinning reserve

reduction

Loss reduction

Demand response

Power optimization

System utilization

Location-based

incentives

Price/tariff optimization

Growth Platform 2: NEW CUSTOMER

USE MODELS

Optimization can be achieved by tightly integrating with customers’ assets and behaviors

Transparency, convenience and control

HVAC/ appliances

Storage

e-Vehicles

Demand response

CHP Connected home

Energy Management

Distributed generation

Growth Platform 1: OPTIMIZING

ENERGY VALUE CHAIN

Residential and SMB

Commercial & Industrial Distribution Transmission Market Operations Generation


So what might be the impact to utility infrastructure?

• Bottoms-up and scenario-based asset investment planning

• Use of DERs as alternative to traditional asset infrastructure

• Asset analytics

• New operational technologies like blockchain, artificial intelligence, drones

Key Capabilities Asset Types

• Communications and control devices to monitor, analyze, and control the grid

• Electric vehicle infrastructure

• “Non-wires alternatives” (i.e, energy storage)

• Use of “customer” and third-party assets

• Smart city infrastructure


There are MANY new capabilities needed across the utility of the future


For instance, traditional grid investment planning will be replaced with scenario-based “Investment Optimization”

Traditional grid reinforcement regime...

.. grid flexibility is enabled by integrated resource planning.

Current grid’s acceptable risk level

Reinforced grid’s acceptable risk level

Reinforcing the grid

Enabling EE & Demand

Response

Reinforcing the grid

DER Solutions

New solutions lower reinforcement costs while maintaining acceptable risk level

Baseload projected asset risk

Projected (energy transition driven) additional asset risk

$ $

Asset Management Planning

Network Planning

Adoption Scenarios and Resource Plans

Asset Performance / Optimization

• Traditional and alternative assets • Integrate with network planning

• Localized DER adoption scenarios • Power supply forecasting across

spectrum sources/loads

• Assess delivered performance to inform asset and integrated resource planning

• Needs defined and communicated to customers

• Integrate with resource planning

DER Procurement

DER Integration

• Seamless interconnect • Procure contracted

resources

Time of Day

Time of Day

Load

Lo

ad

Scenario-based Investment Planning


MARKET HUB PLATFORM

“Platform for the smart home”

3 EV SHARING ECONOMY Network management, peer-to-peer traction & data monetization

Non-regulated

5 BEYOND THE METER Integration of EV battery as a DER & creation of solutions for the platform

4 DEVELOPERS & STARTUPS Creating apps for the platform to help customers leverage their EV in new ways

Non-regulated

Regulated

1 EV CHARGERS FOR VEHICLES Locations compliant to commission guidelines, commercial charging stations

6 DIGITAL ASSETS Communicates or self optimized for assets management and maintenance

Regulated

2 VEHICLE TO GRID EVs reduce or stop charging, act as available capacity, communicate and optimize the grid

For example, an electric vehicle ecosystem provides numerous opportunities for value and growth

Regulated Non-regulated


MARKET MECHANISMS AND SIGNALS Products, tariffs, and price signals to monetize stacked value

from deployed storage infrastructure

TECHNOLOGY PLATFORMS Foundational technology investments to provide energy storage

access to new revenue including DERMS, analytics, etc.

GENERATION & WHOLESALE SOLUTIONS Power plant optimization, wholesale markets and ancillary services, solar & wind “firming”, and long-duration storage

T&D OPTIMIZATION Upgrade deferral, renewables integration, congestion relief, voltage / reactive power support, line-loss reduction, asset life extension, reliability / outage mitigation

CUSTOMER ENERGY MANAGEMENT Demand charge avoidance, energy price arbitrage, and solar self-consumption

STORAGE R&D AND INNOVATION Pre-empting disruptive storage technologies by partnering with researchers, innovators & venture capitalists

BEYOND THE METER STORAGE Peer-to-peer transactions, digital trading platforms, battery data monetization – uses beyond the grid and customer meter

STORAGE NETWORK

“NETWORKING STORAGE TO OPTIMIZE THE

ELECTRIC SYSTEM”

CUSTOMER PEACE OF MIND On-premise reliability, resiliency, power quality and microgrid management

Likewise, energy storage provides new opportunities to optimize the grid and customer assets

FOUNDATIONAL UTILITY INVESTMENTS


Smart cities is another key growth area for utility infrastructure Smart Cities Definiton


Utility Assets

• Wireless communications network • One-way paging communications

system • SCADA / operational technology • Owned T&D poles and right-of-way • Owned real estate • Operations Centers • Fleet of vehicles (overhead and

underground equipment) • Business information systems

(GIS, EAM, etc.)

Utility Capabilities

• Energy Expertise • Storm/Emergency Response • Asset Management • Work Management • Customer Operations • Fleet management • Facilities management • Network management • Security / Cyber-security

Utilities have a lot to bring to the Smart Cities game


Smart cities use cases can be organized across these key verticals


Multi-stakeholder Smart City value network

Public-private partnerships are key to bringing together the right inputs into the Smart Cities proposition


There is an evolutionary path to the business model of the future

• Enhanced customer education and outreach

• Streamlined interconnection of DER

• Aggregated DER participation in wholesale markets and targeted microgrid opportunities

• Modernized grid infrastructure to support increased of data and analytics

Enhance Customer Access

• Further improved customer experience through interconnection ‘fast-tracking’

• Utilization of DERs for capital deferral and grid services focused on improving utilization and efficiency

• Optimally targeted grid investments

• Rapid piloting and regulatory approvals of new programs and technologies

Optimize Grid Performance

• Flexibility to integrate customer DERs via distributed control capabilities

• Optimizing the grid with active control of loads

• Services to enable intelligent consumption and supply in a market via open exchange

Maximize Customer Value

The vision for a new business model can be supported by foundational “no regrets” investments in the near term, unlocking grid performance benefits and enabling new customer interactions over time

~1-2 Years ~2-5+ Years ~6-10+ Years

Distribution of the Future

the utility of the future – and changes to infrastructure ......facilitate der grid services ....

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