Energy Biz - September/October 2008 - (Page 38) smart grid initiative; federal and state regulators are pushing this policy imperative; the energy act of 2005 encourages the adoption of time-of-use rates; operational costs are skyrocketing; fuel costs are increasing even more rapidly; and the presumed adoption of a cap-and-trade system for carbon emissions has utilities seeking every possible way to reduce their carbon footprints. Perhaps complicating the issue are the product specifications that will be required. There are simple ones that everyone most likely will want — remote connect or disconnect capabilities, to name one. Power quality may be a requirement. Will there be outage notification? But what if your state does or does not yet have a demand response program? Will there be time-of-use rates, and if so, at what intervals, 15 minutes or hourly? The primary motivations appear to be money and reli- There are a number of drivers and The firsT one is operaTional savings. ability — saving the former by cutting operational costs and preserving the latter by reducing peak demand during the most critical hours when electricity usage threatens to exceed available supply Joel Westvold, director of AMI projects for Oregon utility Portland General Electric, says that company’s primary motivation was the operational savings it would gain from smart metering. “In the long term, we’re committed to an $18 million savings that will be credited in future rate cases,” he says. PGE started a pilot project in June that will last the rest of the year, with meters divided between river valley areas, neighborhoods with concentrations of towers or rental units. Following that, there will be a full rollout in 2009 and 2010 for its 850,000 units. Based on these data points, thousands of utility managers, executives and regulators will be making decisions that will ultimately be worth billions of dollars. These decisions will not only impact the vendors and equipment manufacturers they choose, but also will help set a dollar value on the operational benefits they’ll accrue, the time-of-use rates they may eventually charge, or even cost-recovery mechanisms employed, and the rate base or billing surcharges. It will even influence the brave new world of carbon management, if either a tax or capand-trade plan is passed in the coming years. The New York Public Service Commission ordered utilities to investigate the costs of deploying AMI and the operational benefits. But the initial results were problematic for 38 E n E rgyB i z one major utility, Con Edison, which serves New York City and some surrounding counties. The construction of an AMI system had a net present value of $712 million while operational benefits were estimated at $500 million. That gap has to be bridged, says Larry Nardo, a section manager for strategic applications for ConEd. If carbon caps are adopted, there will be benefits that accrue not just to the utility, but to society as a whole. “If we consider the highest use of our 40 to 50 hours, something that substantially reduces the cost of our carbon footprint, then that makes the business case a net positive of $60 million over 15 years,” he says. To provide evidence for those assumptions as well as the operational benefits, the company is just starting its own pilot project in diverse areas of its service territory. After a few months of data, ConEd will refile with the Public Service Commission and, if its business case flies, will proceed with its rollout. With only one other utility in New York nearly as far in its planning process, ConEd’s direction will have significant influence on the AMI implementation in the rest of the state. “There are a number of drivers and the first one is operational savings,” says Wayne Harbaugh, Baltimore Gas & Electric vice president of pricing and regulatory service. Those concerns include recent legislation, reliability concerns and high prices on the spot market on the highest-demand days. “With a 20 percent churn in Baltimore city, that’s a tremendous amount of unscheduled reads for turn-ons and turn-offs,” he says. BG&E has its own pilot program for operations and reliability benefits of AMI in different ZIP codes to test it under various operating conditions. AMI has also been wedded to a smart grid/demand response initiative, When spot prices reach a certain baseline, say $1 a kilowatt-hour, an AMI-enabled system would cut power to a residence, qualifying the property owner for a rebate. Vendors regularly announce major contracts with utilities across the country. Recently, Landis+Gyr Holdings, an international utility-meter company, announced a $360-million deal to furnish 3 million smart meters to Oncor Electric Delivery of Dallas. Southern Company and Sensus Metering Systems have a deal for 4.3 million meters over the next five years. “Primarily, the meters will send readings wirelessly, giving consumers and suppliers very detailed information on electricity use,” says Stephen Johnston, CEO of SmartSynch. The company’s products use public wireless networks in the commercial and industrial markets, and sees burgeoning opportunities with retail electricity customers. The company partners with meter vendors such as GE, Itron and Elster to integrate its wireless solution to the smart grid. “A single device is not always a plug-in type of solution,” Johnston says, especially with different requirements created by population density or the landscape. September/October 2008
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