Moving Boldly into the Future

Transcription

1 JANUARY/FEBRUARY 2016 S NICK AKINS: Moving Boldly into the Future INNOVATIVE PARTNERSHIPS AND RENEWABLE ENERGY CROSSING THE ENERGY MANAGEMENT THRESHOLD

2 INTO THE By Nick Akins Chairman, President, and CEO of American Electric Power Chairman of the Edison Electric Institute A new business model Utility 2.0 capitalizes on our reputation as energy experts and fosters innovations to adapt the legacy electric system to the changing world. There s no doubt about it our companies, customers, and society are moving to a cleaner energy future. With low-cost and abundant natural gas, new technologies, and environmental regulations as catalysts, the electric utility industry is leading this transition and creating a much smarter, resource-diverse energy system. As part of the process, we re redefining our 100-year-old business model and developing the solutions and technologies our customers want, while continuing our core mission of providing the safe, reliable, and affordable power that fuels our nation s economy. JANUARY FEBRUARY

3 is involved in about 2,000 transmission projects at any time, including regional projects to address generation retirements and integrate renewables, as well as projects to replace aging infrastructure, strengthen local and regional reliability, and meet the needs of the oil and gas industry. The dynamics of the grid will continue to change as we integrate new baseload generation, distributed generation, and largescale renewables, along with technological advancements that drive further efficiency and use of electricity. It s an exciting time to work at an electric utility. We re forging new partnerships to speed innovation and building on established relationships with our customers to help them take full advantage of opportunities to save money and improve the environment. We re being continually challenged as technology advancements and changes to consumer behaviors and demands converge with policy and regulatory reforms. With these challenges come great opportunities to engage in discussions with policymakers, regulators, stakeholders, customers, and investors about how our industry is evolving to deliver the clean energy future that we all want and expect. I m continuously impressed, though not surprised, by the innovation that is happening throughout our industry and with our technology partners. We re creating a new business model Utility 2.0 by capitalizing on our reputation as the energy experts and innovating to adapt the legacy electric system to the changing world. A national energy plan that leverages our country s vast resources and lays out a reasonable pace for this transition would provide critical support for our efforts. In many ways, the changing face of American Electric Power () reflects the transformation of the industry. For nearly 110 years, we thought about our business in terms of generation, transmission, and distribution with a one-directional flow of power and information to customers. Today, we re focused on infrastructure investments and improving the customer experience, supported by an evolving two-way data and power flow that can enhance the operation of the grid and our connectivity with customers. We re also unleashing the power of our employees to create an engaged, creative, and collaborative culture one that will be agile in responding to the challenges we face and that will allow us to develop and take advantage of new opportunities. Modernizing the Grid Modernizing the electric grid is critical to support a cleaner energy future. The evolution of the grid is already underway, with significant investments being made to accommodate changing generation resources and further optimize power flows. The dynamics of the grid will continue to change as we integrate new baseload generation, distributed generation, and large-scale renewables, along with technological advancements that drive further efficiency and use of 28 ELECTRIC PERSPECTIVES

4 electricity. As the industry s transmission pioneer and the nation s largest transmission owner, is committed to creating the grid for the future a grid that is much more flexible and resilient to support generation changes and these new technologies. Technology advancement is occurring in all areas of the electric system. As an example, s Breakthrough Overhead Line Design (BOLD ) line is our most recent transmission development. Faced with resistance to building new 765-kilovolt (kv) extra-high voltage lines, our engineers focused on making 345-kV transmission much more efficient, and developed the innovative BOLD design to achieve higher capacity, less impedance and line loss, and improved reliability in a compact, visually appealing form. The 345-kV BOLD design delivers up to 60 percent more power more than a 500-kV line in a smaller right-of-way than conventional designs. BOLD s smaller footprint is ideal for updating the more than 125,000 miles of 230-kV and 345-kV lines in the United States, especially in congested urban areas. BOLD is one of many advanced transmission technologies we are deploying at. Other examples include: Variable frequency transformer a bi-directional power flow control device first deployed in the United States by to address reliability challenges in a load pocket near Laredo, TX. Phase-shifting transformer a special type of transformer that balances power flows to avoid thermal overloads on transmission lines and more efficiently and effectively utilizes the capacity of the grid. Drop-in control module a flexible and expandable prefabricated control room that can be placed into service in half the time needed to build a traditional control room, allowing us to meet rising customer demand, particularly from the oil and gas industry. Focusing on Security Improving the resiliency of the grid complements our industry s focus on physical and cyber security. While there is no single solution that can make the grid completely immune to threats, and the industry have taken proactive steps to evaluate our systems, reduce the impact of threats, and improve our response if an attack does occur. We work with federal agencies and private-sector security experts to identify vulnerabilities, enhance preparation and information sharing, and secure our systems. Industry and government partnerships such as the Electricity Subsector Coordinating Council are instrumental in deploying tools, processes, and drills to further improve our prevention, detection, and resiliency. Additionally, and seven other utilities recently created Grid Assurance to provide subscribing companies with quicker, cost-effective access to critical transmission equipment in cases of prolonged transmission outages stemming from events CEO Nick Akins, center, recognizes transmission engineers Dr. Meihuan (Nancy) Fulk and Richard Gutman with awards for their development of the patented BOLD transmission line. 29

5 Industry and government partnerships such as the Electricity Subsector Coordinating Council are instrumental in deploying tools, processes, and drills to further improve our prevention, detection, and resiliency. such as natural disasters, terrorist or criminal attacks, cyberattacks, or geomagnetic and solar storms. Other companies involved in Grid Assurance include affiliates of Berkshire Hathaway Energy, Duke Energy, Edison International, Exelon, Eversource Energy, Great Plains Energy, and Southern Company. Grid Assurance is part of our industry s strategy to meet grid-resiliency mandates, and it will complement EEI s Spare Transformer Equipment Program (STEP), which provides utilities with transformers of certain voltages after a presidential declaration of a national emergency caused by terrorism. Developing a Smarter System Technology is changing how customers want to interact with their utilities and with the energy in their homes. Smart grid technologies are an important part of the industry s efforts to improve service quality and reliability and to empower customers to use energy more efficiently. At, we re focused on bringing efficiencies to the distribution system and new technologies to customers homes through efforts including: Smart meters has installed 1.2 million smart meters, with an additional 1.4 million planned, giving customers more ability than ever to monitor and control their own energy use. Distribution automation This monitoring and control equipment uses data about the operation of the grid to adjust the system, identifies outages or failing equipment more precisely, and allows us to remotely manage the distribution system. Volt/VAR optimization We like to think of volt/var as energy efficiency for everyone. This technology allows us to actively manage voltage levels, reducing energy and demand by 2 3 percent and lowering customer bills without changes in a customer s equipment or behavior. Delivering Value The grid of the future will be the foundation to enable customer choice, but I see our role as much more than providing just a plug and play platform. That s why we are focused on being the trusted energy advisor for our customers and making sure we deliver the experience they want and expect. Developing a more resilient and intelligent grid will enable all customers to take advantage of new technologies in the least-cost way. As an industry, we re just beginning to use the data being generated by a smarter grid to improve the interface with our customers and maximize the value of our infrastructure investments. is one of seven central Ohio companies from different industries that have joined together to tackle common challenges in big data analytics and cybersecurity. This collaboration is helping us create new technology solutions to improve operational efficiency and the quality of customer service. Like many utilities, is working to improve our online tools and enhance communications with our customers, who conduct about 18 million online transactions with us each year. In 2015, we redesigned our websites to be responsive and adapt to the devices desktop, tablet, and phone that a customer uses to interact with us. We also launched mobile billing and payment alerts, as well as outage alerts, to provide our nearly 5.4 million customers with proactive information about their accounts and service. And we continue to build our social media presence to engage in meaningful conversations with customers and other stakeholders about outages, safety, energy efficiency, career opportunities, crises, and other topics. Improving and expanding the ways our customers can interact with us will continue to be a priority and will allow us to provide more value, flexibility, and transparency. Investing in Energy Storage Cost-effective energy storage will be a game changer for our industry. Although the cost currently exceeds what the market will support for broad-based adoption, energy storage technology continues to advance. Under the right circumstances, batteries can be deployed cost-effectively today. pioneered utility-scale energy storage in the United States, installing 11 megawatts of sodium sulfur (NaS) batteries at six sites across our service territory from 2006 to These systems successfully allowed us to defer investments in transmission and distribution infrastructure and to demonstrate load shifting and islanding for reliability. More recently, we made a strategic investment in Greensmith, a company focused on grid-scale energy storage deployment, and we are actively evaluating storage technology options including lithiumion and aqueous flow batteries for market opportunities and grid support services. We know that storage will play a key role in the future of 30 ELECTRIC PERSPECTIVES

6 The 2.5-MW Deer Creek Solar Facility in Indiana is one of four solar projects is building in Indiana and Michigan, with a total capacity of 17 MW. the industry, and we want to be at the forefront of advancing these technologies and implementing solutions that will benefit the grid and our customers. Harnessing Renewable Resources The rapid growth of solar energy, which accounted for more than 30 percent of our nation s new generating capacity in 2014, illustrates the huge opportunity for our industry to continue investing in renewables. Even if tax subsidies are phased out, renewable energy will still expand, driven by customers growing desire for clean energy, the decreasing cost of renewables, emissions limits, and the importance of maintaining fuel diversity for electricity generation. Electric utilities are responsible for more than 60 percent of new solar capacity and almost 100 percent of wind capacity as part of the industry s efforts to rebalance the nation s generation mix. While the adoption rates of distributed generation in s service territory have not yet reached the levels in other areas, we are focused on providing our customers with more choices and are working with regulators and policymakers in our has a renewable portfolio of more than 3,100 MW today, and we ve included 2,800 MW of new large-scale solar generation and 5,600 MW of new wind power in our integrated resource plans between now and states to expand renewable energy offerings in the most cost-effective and beneficial way for all customers. In addition to wind, large-scale solar will be a focus for as our generation system evolves because it allows us to make clean energy available to all customers at half the cost of smaller, rooftop solar systems. Since rooftop solar is unavailable to nearly half of U.S. homes and businesses due to lack of rooftop access, space, or other factors, our industry s ability to make solar more universally available is critical. has a renewable portfolio of more than 3,100 megawatts (MW) today, and we ve included 2,800 MW of new large-scale solar generation and 5,600 MW of new wind power in our integrated resource plans between now and We re also investing at least $5.7 billion in transmission infrastructure in the next three years, in part to support the integration of large-scale renewables and distributed generation. Unleashing the Power of Employees Ensuring we have a diverse, entrepreneurial team is critical for and the industry, especially as many of our seasoned employees prepare to retire. Three years ago, began a culture initiative to engage our employees and find out how we can tap each employee s unique contributions. Through a baseline culture survey, we found that we could build on our legacy of innovation and our commitment to customers, safety, and operational excellence by targeting the following areas: JANUARY FEBRUARY

7 We ve established employee resource groups focused on building awareness and fostering interaction and support among military veterans, and Asian-American, African-American, Hispanic, Native American, disabled, and LGBT employees and allies. Strategic alignment We developed a learning map to help all employees understand what s changing in our industry from regulatory and policy changes to technology advances that are driving customer desires and behaviors. More than 10,000 of our 18,500 employees already have participated in a learning map session to explore why and how our company and our industry are transforming to meet these challenges. We intend to share the learning map with all employees. Employee engagement Culture action planning is now the norm at as each work team identifies areas for improvement every year, and develops and implements plans to help make our company the open, collaborative, engaging environment that we want and need it to be. Our lean process improvement efforts, which began three years ago at the Gavin Plant in Ohio, have been implemented throughout the company and have become the new way of operating for. The lean initiative taps into the knowledge and ingenuity of our employees to make operations run more efficiently and eliminate waste, and it strengthens our culture of engagement. Through this focus on continuous improvement, we are on target to achieve $205 million in savings for this year. Leadership To date, 6,000 employees have participated in s Power Up & Lead program developed by Senn Delaney (the culture-shaping firm), and our goal is to share it with every employee. The program has given us new tools and skills to manage change, coach others, be accountable, and achieve better results. We have culture champions who help keep the concepts from Power Up & Lead top-of-mind for employees in their work groups. We re also actively developing the next generation of leadership at through targeted development and mentoring programs. Performance recognition and accountability In our culture surveys, employees clearly said that recognition is important to motivate them in their jobs and reinforce their value to the organization. A team of employees put together a program called The Power of Thank You, along with a set of resources, including badge cards, hard hat stickers, certificates, and an online toolkit, to help all of us provide timely and genuine appreciation for one another s efforts. We also believe that programs to actively support inclusion are critical for ensuring that a diverse and innovative work force thrives at. We ve established employee resource groups focused on building awareness and fostering interaction and support among military veterans, and Asian-American, African- American, Hispanic, Native American, disabled, and LGBT employees and allies. Each group has executive sponsors who advocate and support their efforts and help address any challenges they are facing in the workplace. Improving our culture is a constant journey that goes hand-inhand with our business strategy. We still have many opportunities for growth, but we ve seen considerable improvement in our culture survey results since we began this intentional effort. Developing the Next Generation We all have a memory of at least one teacher who made a profound impact in our lives and on our future. I was sure that I d be a rockand-roll drummer when I grew up (which I actually still do on the side), but luckily I also had an electronics teacher who sparked my interest in electricity and energy issues, leading me down the career path of electrical engineering. I also was blessed to have parents who emphasized the importance of education and its ability to transform our lives. As I look around our communities, it is clear that many children do not have the proper support, guidance, and opportunities they need to succeed. As an industry that must have skilled, innovative employees, it s important for us to help make sure students have access to the type of The business challenges we face require our employees to be agile, think creatively, make smart decisions, take advantage of new tools and technologies, and use resources in the most effective and efficient ways. 32 ELECTRIC PERSPECTIVES

8 These students at West High School in Columbus, OH, are among more than 6,000 students in fi ve communities who are benefi tting from the Foundation s Credits Count program. education that will cultivate the reasoning and problem-solving skills they will need to be successful. The business challenges we face require our employees to be agile, think creatively, make smart decisions, take advantage of new tools and technologies, and use resources in the most effective and efficient ways. is one of many businesses that have stepped up to invest in the next generation of employees. In 2013, the American Electric Power Foundation launched Credits Count SM, a dualenrollment program that is helping to build career pathways for economically disadvantaged students in the fields of science, technology, engineering, and mathematics (STEM). To date, we ve worked with community colleges to roll out the program to school districts in Columbus, OH; Shreveport, LA; Tulsa, OK; Ashland, KY; and Marion, IN, with a total investment of more than $11 million over five years. Our goal is to create at least one Credits Count program in each of our seven utility company service areas. Credits Count is centered on five major components that include: middle school experiences to create awareness and interest in STEM careers; college readiness testing; a summer bridge program to prepare students for dual enrollment; dual enrollment at community colleges to earn at least 12 college credit hours; and scholarships for select students pursuing a degree after graduating from high school. We hope that by exposing students to the connection between college and careers at an earlier age and helping them overcome barriers such as college readiness and the rising cost of tuition, we can help create a new generation of highly skilled talent to meet our country s future needs. Looking Ahead Ultimately, Utility 2.0 will be defined at the intersection of customer choice, the emergence of new technologies, and our industry s expertise in operating the world s largest machine our electric system. We have a lot to be proud of and much more opportunity ahead as we take an active role in shaping the future of our business. A commitment to creating a smarter, more robust and resilient grid; developing new products and solutions that enhance the customer experience; and leveraging the ingenuity of our employees will allow us to reinvent what electric utilities look like and how we operate while still continuing our legacy of providing the safe, reliable, and affordable electricity that is the backbone of our nation s economy and powers our customers daily lives. Nick Akins is chairman, president, and CEO of American Electric Power and chairman of the Edison Electric Institute. JANUARY FEBRUARY