Grid Modernization – Justified

Many business cases for Grid Modernization (formerly known as Smart Grid) have focused on the technology and the direct and indirect benefits, generally a long bullet point list which sounds good, but is not usually presented as a compelling argument focused on outcomes.

The following contains a storyboard to use to develop a compelling Grid Modernization business case.

Context

The Distribution System Operator (DSO) is traditionally a monopoly with only one way for customers to access a reliable supply – the electricity network. Both customer behaviour and the regulated revenue stream were dependable and predictable.

However, the industry is experiencing increasing:

• total energy consumption
• regulatory scrutiny and WACC pressure
• customer price sensitivity
• accessibility of technological disruption and change (distributed energy generation, storage and vehicles) and;
• changing customer behaviour (participation in energy markets)

Disruptive technology

1. Distributed generation
   1. reduced total demand
   2. maintain investment for peak demand
   3. increase investment for power quality management and protection
2. Energy storage
   1. potential reduced customers
   2. reduced total demand as generating customers will store and consume rather than export
   3. increase investment for power quality management and protection
3. Electric vehicles
   1. transient load / demand (peakier peak)
   2. maintain investment for peak demand
   3. increase investment for power quality management and protection

Enterprise Risk

For the DSO, adoption and proliferation of these disruptive technologies will lead to:

• an under-utilised or orphaned asset
  • ongoing interest repayments for sunk capital investment
  • potentially operating costs > regulated revenue
• reduced regulated revenue
• perceived barriers to changing customer behaviour and risk to current and projected regulated asset base

Objective

The objective is to:

• maintain a safe and reliable energy transport service at the lowest price (and increase shareholder Return on Investment).

AND/OR

• provide new services at the lowest price (and increase shareholder Return on Investment) such as distribution system operations (frequency control, load balancing), telecommunications or services

Asset Management Strategy

To meet the objective by investing in the minimum required asset to meet forecast demand, safety and service standards and increase existing asset utilisation (i.e. balance supply / load, smooth profile).

1. Maintain network assets risk to ‘as low as reasonably practicable’
   1. Operational asset management
   2. Digital transformation / operational technology
2. Influence customer behaviour
   1. Time of use tariff
   2. Demand management
   3. Seek alternative arrangements with customers (encourage distributed generation and energy storage)
3. Improve network flexibility
   1. Increase application of advanced monitoring, interconnection, protection, automation and control systems
   2. Increase access to dispatchable energy storage
4. Actively pursue alternative unregulated revenue streams i.e. telecomms, EPCM services, gas/water merger/acquisition

This is to be supported by ongoing corporate and asset strategies for continuous improvement (improve productivity / efficiency).