Maximizing The Value Of Your Smart Grid Investment

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1 Maximizing The Value Of Your Smart Grid Investment Publication Date: August 25, 2015 Author: Kody M. Salem and Kara Truschel

2 EXECUTIVE SUMMARY With thorough planning and a rigorous approach to updating utility infrastructure and systems, the introduction of Smart Grid technologies can provide tremendous operational benefits, reduce cost, and facilitate efficiencies across your utility organization. However, many utilities never realize the full value of their Smart Grid investment. Since we started in 2005, UtiliWorks has worked with more than 50 utilities across the U.S. as they assess, procure, and deploy new technologies. Time and again, we have found that there are four (4) guiding principles to follow in order to maximize the potential of your investment. 1. Follow a rigorous technology selection process 2. Research back office systems and integration 3. Apply a phased deployment approach 4. Invest in people and business process improvements These are fundamental elements of the end-to-end procurement to deployment process. Following these simple guidelines can ensure your utility stays on track to achieve maximum value. The organizational benefits that will be realized include: An organization aligned and optimized to take full advantage of the new technology Full understanding of value-add processes across the whole organization Organizational buy-in from across the organization and customer base Risk mitigation with structured approach to requirements definition and phased implementation Appropriate technology systems that facilitate achieving your defined business goals and objectives Strong foundation for a continuous improvement culture While there are many common technological elements from one utility to another, there are often many operational differences. How you approach and incorporate these differences will help you realize the full benefits listed above. Use the detailed best practices that follow as a starting point in thinking about your own tailored approach to Smart Grid investment and implementation. UtiliWorks.com UtiliWorks Consulting, LLC PAGE 2

3 1. FOLLOW A RIGOROUS TECHNOLOGY SELECTION PROCESS It is important to begin any technology investment conversation with business goals and objectives. This may sound simple, but its importance cannot be overstated. Too often, utilities do not properly evaluate and refine their goals and objectives before beginning a Smart Grid deployment. Keeping this refined list front and center with all stakeholders will help gain universal awareness and acceptance as your organization considers a new Smart Grid initiative. Every procured and deployed technology must directly or indirectly address one or more goals or objectives. If not, you risk the high likelihood of wasting valuable time and capital. Ask yourself the question, Exactly which goal or objective does this technology address? If members of your team cannot answer this question without hesitation, you need to pause and reevaluate. Continue to foster a culture of questioning to stay on track throughout your project. After clearly defining business goals and objectives, begin developing Use Cases to determine how the technology will support those goals. Use Case diagrams and current state process maps serve as tools to conceptualize how users interact with technology and provide context on how existing processes may change. Use Cases will also provide additional insight for building out business and system requirements. Outlining these requirements at this level of detail will further inform the procurement process. SMART GRID CHALLENGES (Common mistakes that are made when utilities undertake these projects) Trying to do it all at once Going too fast for the organization to adapt Choosing the wrong vendor partners Failing to change with the technology (users and processes alike) During the procurement process, the organization should leverage its goals and objectives, Use Cases and industry knowledge to develop a detailed set of system and operational requirements for the future technology. These requirements can then be added to a RFP to solicit vendors who can meet those requirements. Upon receipt of vendor proposals, carefully compare responses to all requirements included in the RFP to understand which limitations may exist for each vendor. While many vendors will meet most requirements, there will be variation between vendors regarding capabilities and strengths. Identify the variations and discuss them with proposing vendors to understand how any capability gaps might impact the project goals and objectives. When evaluating proposed technologies, carefully determine which technologies are leading-edge and which are bleeding-edge. We re often drawn to the latest technology because there is hope that it s a silver bullet that will solve everything. However, a greater number of features and limited experience in deployment will typically result in a more costly, complex project that has a greater chance of cost overrun. UtiliWorks.com UtiliWorks Consulting, LLC PAGE 3

4 Looking to past performance for vendors will be a critical final step in making technology selections. Verify which systems are performing as anticipated by contacting other utilities with functioning systems to understand their implementation processes and the current system performance. Looking at qualifications and understanding the pros and cons of each vendor will provide insight into how your Smart Grid implementation may be impacted. Finally, take an opportunity to match the technology with the organization s budget for the short-, mid- and long-term. Consider the full cost of capital investments and ongoing costs, and be sure that your utility is not acquiring an overly-expansive system. Employ a cost benefit ratio to ultimately determine which technology systems provide the desired scope, with the greatest benefit to the utility. 2. FOLLOW A RIGOROUS TECHNOLOGY SELECTION PROCESS Leverage the requirements and Use Cases developed from the procurement process to understand which interfaces will be required between new and legacy systems. It helps to compile documentation on which types of communication exist between systems currently. Are there nightly data syncs to get meter usage data into your billing system? Or perhaps manual uploads to update your Customer Information System? Gathering detailed requirements on all interfaces between technology systems now will help ease the integration efforts down the road. Work closely with the selected vendors to evaluate all interfaces in detail, understand how they relate to the requirements, Use Cases and over-arching business goals of the organization to confirm that the integration efforts will achieve the desired benefits of the technology. Defining the purpose for each interface in terms of business objectives will help determine which areas to prioritize during implementation and may also identify unnecessary process steps or outdated technology. Utilities should integrate the full system as early as possible, before making large expenditures to replace field hardware. Smart Grid projects are heavily data-centric compared to past technologies. Therefore, proving the system can be integrated must supersede hardware changes in order to ensure continued operations. Utilities should prioritize system integration to support all interface requirements and system functionality prior to making large investments in field hardware, which kicks off hardware warranties. UtiliWorks.com UtiliWorks Consulting, LLC PAGE 4

5 3. APPLY A PHASED DEPLOYMENT APPROACH Phase 1 - Smart Grid Assessment & Plan Design Hold Point Phase 2 - Procurement & Contract Management Phase 3 - Construction, Deployment & Integration Phase 4 - Project Acceptance & Contract Closure In addition to phasing system integration prior to full-field hardware deployment, utilities should consider a phased approach to all Smart Grid system implementations. Consider Smart Grid systems as layers of technology, with each layer of technology providing additional benefits. From the initial understanding of the business goals and objectives, utilities should craft a long-term technology strategy for the Smart Grid, built around a chosen foundational technology. The technology strategy can inform which technologies will serve as foundational to the long-term plan of the utility. Once implemented, the foundational technology should be honed operationally, with periodical evaluations. It is important to build a solid foundation before moving onto other components of the proposed Smart Grid system. After the foundational system is in place, other systems can leverage the data and functionality plus provide additional benefits. Work your plan while periodically evaluating the success of each step before proceeding to the next. Remember that all complex projects will require fine-tuning as you go, because circumstances, technology, and business needs are prone to change. Utilize the principles of project management to ensure there is proper change management, risk mitigation, and ultimately, that the project is delivered with high quality, on-time and on-budget. The phased approach is important for complex systems because it keeps the focus on a manageable amount of work at any given time. 4. INVEST IN PEOPLE AND BUSINESS PROCESS IMPROVEMENTS Smart Grid technology is intended to be disruptive to utility business practices by providing greater granularity of holistic operations and greater automation. Ultimately the goal is to realize this disruption as a cost saving opportunity. Yet, installing and integrating capital assets alone will not gain the desired benefits of a Smart Grid system. In order to achieve them, it is critical to re-engineer business processes to support industry best practices and the new technology. Utilities should leverage the Use Case documentation to understand how business processes can be re-developed to work within the context of the new systems. Retire outdated and unnecessary processes if they do not continue to support operations and the new technology. UtiliWorks.com UtiliWorks Consulting, LLC PAGE 5

6 There must be a concurrent focus on human capital when re-developing internal business processes. Taking time initially to ensure coordination with users from the various departments will pay back during the implementation, training and testing phases. By requesting input from users and incorporating them into the business process development cycle, users have ownership in the processes being created, which increases buy-in and yields higher adoption rates of the new processes and technology. Input from users and Use Cases should inform how automation is pursued to increase efficiencies and ultimately achieve the desired business goals. After obtaining an idea of how the future state processes will work, perform a gap analysis of which skill sets will be required, and which skill sets already exist within the organization. Any skills gaps will require further development of a resource allocation plan to meet the needs of the new Smart Grid system. Upon completion of business process design, training and documentation should be provided for all users of each business process. Familiarizing them with every facet will provide one last opportunity for input and ensure users are educated on their processes. Training should act as a transition for when the users go-live with the processes. Assuming the systems are fully integrated and tested, users will get hands-on experience with the new systems and processes they will be using from this point forward. There is a subsequent phase that involves an audit of the processes to verify user adoption and identify any further efficiencies that can be integrated into the process. A third party can sit next to users and verify the step-by-step process and procedures for verification. Results from the training and audit sessions may reveal if additional training is required, or if new aspects of the process will need alteration to gain greater efficiency. Furthermore, regularly performing audits will assist the organization in maintaining process efficiency while adjusting to the ever-changing needs of the organization. Regular audits may identify new opportunities to improve, and will verify the technology and processes are achieving the business goals of the organization. Seize opportunities to make further alterations to continuously re-define the business processes moving forward. It is important to foster a culture of collaboration and continuous improvement to ensure that the highest level value is being added at each step of the business process. Always remember that no process is set in stone. If an improvement is identified, take the necessary actions to communicate the change to others and document it. The ways your customers interact with the utility and customer-facing applications will be new to them, just as your business processes will change internally. The final component in this area that is often overlooked is engaging your customer base in the project. Understanding their needs, frustrations and concerns with the utility and new technology will help inform public awareness campaigns and marketing materials that can accompany a deployment. UtiliWorks.com UtiliWorks Consulting, LLC PAGE 6

7 SUMMARY Many utilities realize the technological benefits of implementing a Smart Grid system, yet fail to comprehend the greater business value of the system. It is important to fully commit to these areas in order to personalize an approach that works for your utility. To recap: 1. Follow a rigorous technology selection process a. Use business goals and objectives to drive technology decisions b. Develop Use Cases based on business goals to inform requirements development c. Compile detailed system and operational requirements prior to procurement d. Devise a detailed Request for Proposal (RFP) and evaluation process e. Stick to leading-edge not bleeding-edge technology f. Evaluate past performance of the vendor community g. Match the technology to the budget 2. Research back office systems and integration a. Gather detailed requirements on all interfaces between technology systems b. Define the purpose for each interface in terms of business objectives c. Focus on system integration as a priority over wide-scale hardware deployment 3. Apply a phased deployment approach a. Consider Smart Grid systems as layers of technology, each providing additional benefits b. Get the foundation done first and well-honed within your organization before continuing c. Pick the next Smart Grid technology and repeat, while adhering to project management principles 4. Invest in people and business process improvements a. Leverage Use Cases to develop how business processes will change with new technology b. Include end-users during business process re-engineering c. Assess your organizational chart and skillset d. Set users up for success with proper training, testing, and audits e. Build a culture of continuous improvement f. Engage your customer base While there are many common technological elements and strategic visions from one utility to another, there are often many operational differences. How you approach and incorporate these differences in your technology selection process, research and integration steps, phased deployments, and investments in people and business processes will make a dramatic difference in the outcome of the project. A methodical approach coupled with determination, will help guide you through a successful Smart Grid system implementation and ensure you maximize the return on your investment. UtiliWorks.com UtiliWorks Consulting, LLC PAGE 7

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