Unlocking the Value of Metrics

Transcription

1 Accenture Utilities Podcast Series Unlocking the Value of Metrics An interview with Wade Malcolm, managing director of North America grid operations for Accenture, and recommendations on how utilities can position themselves to drive more value from performance metrics.

2 Welcome to the latest installment of the Utilities Podcast Series. Today, Wade Malcolm, managing director of North America grid operations for Accenture, will discuss insights from Accenture s research, Unlocking the value of metrics: Maximizing smart grid technologies for high performance. In North America and Europe, government funding for smart grid initiatives has ushered in a new wave of reporting requirements. Around the world, utilities and government agencies are working on quantifying and defining the most meaningful smart grid measures. Today, let s explore what utilities are doing in the smart grid metric space: the challenges, benefits and some of the recommendations for utilities to position themselves to drive more value from performance metrics. Why is the issue of performance metrics important to utilities today? What we re seeing as utilities continue their transition from what we ll call today s traditional grids to more of the smart grid the technology-enabled systems of the future is that they re under a lot more pressure from stakeholders, such as regulatory authorities, to be able to demonstrate the value of the grid modernization investments they re making so far. To assess the return on their smart grid investments, utilities need to be able to very effectively and very efficiently monitor and measure their smart grid performance over time, to show that its value exceeds what was there in the traditional system. In that way, it requires that they apply the right metrics at the right time to understand the benefits and improvements that are being achieved. Now, we ve performed some research, and while we didn t conduct what I d call a comprehensive global survey sample, our data does provide a good perspective on the trends and the relative differences between North America and European utilities, and how they have chosen and met their particular goals. It also demonstrates differences and challenges both regions face with respect to modernizing their electrical grids. One thing we noticed that really does not vary by region is the consensus that it s important for utilities to have and use metrics that help them accurately measure and manage the performance of their chosen smart grid technologies the ones they planned and are actually investing in today. What we did hear from our research, though, is that while doing so is critical and important to the success of their initiatives, utilities in all geographies indicated that objectives such as demonstrating compliance with regulations and standards (which is not a big surprise), as well as monitoring reliability, were their most critical metrics to follow. Other leading objectives that utilities rated as critical or important in our work were the ability to monitor operational efficiency, analyze demand consumption and indicate potential risks. What are some of the challenges utilities are facing in measuring performance? The results from our research suggest there are several challenges and then results and opportunities that utilities could pursue, not only to more accurately assess the effectiveness of their smart grid performance to date, but also to capture and articulate the return on their investments going forward. Utilities are continuing to expand their smart grid efforts, and what we re seeing is that the realization of expected benefits is lagging behind investment. This is somewhat typical for large, complex capital projects that utilities undertake, but we think this lag is likely being extended due to the industry s still-early stage of smart grid implementation. However, our research suggests that it may also have to do with utilities simply not adequately or accurately measuring the right outcomes and indicators of success. So the first opportunity, we think, involves developing better metrics, and that would address some of the challenges faced today. About 10 percent of our survey respondents in the research we conducted felt they had all the information they needed to effectively assess their grid performance that was it. The majority see significant room for improvement. Two specific challenges that stood out in this regard were that they had difficulty associated with accessing and collecting information, and the 1

3 other was a general lack of best practices and benchmark data to which they could compare their grid performance. Another challenge that affects the value of the performance metrics they have today is really the quality of the metrics inventory that they re employing. We found that utilities typically look at measures of performance in several areas that together make up the operational benefits that can save utilities money. These include transmission system effectiveness, power quality and distribution reliability metrics. They are measured in large part by tracking the extent of distribution automation, or penetration of intelligence centers and processors on the system. We also see utilities track the number and nature of incurred disturbances, generally in response to a regulatory requirement. End-use customer metrics are also important, and they cover a spectrum of very traditional measures that are being employed to include things like customer satisfaction. But the potential customer benefits for smart grid capabilities in many ways have yet to be tracked in a meaningful manner. Only about half of the utilities involved in our research currently monitor energy savings, and about one-third track customers who change their participation in various smart grid programs that are offered up. Similarly, we re seeing that utilities are finding it difficult to measure their nonoperational benefits or, more broadly stated, the impact of their programs on society. There are probably several reasons for this. First, smart metering enables some societal benefits and the impacts of those benefits, but it doesn t necessarily ensure that those benefits would be realized on their own. Other societal benefits are independent of the end-user s behavior, and sometimes they only relate to what the utility does in terms of things like, for example, reducing carbon emissions. So things get complex quickly. In some cases, the line between operational and societal benefits isn t clear, especially based on certain regulatory environments. So it makes it hard for some utilities to understand which metrics to actually employ. What are utilities currently measuring? It s interesting because, in the past, different energy providers and regulating bodies established metrics that determined how well the grid operated in terms of reliability and grid availability, predominantly. These types of metrics help form a variety of leading operational practices that providers use to run their systems, and they deal with reliability and enhancing customer satisfaction. Today, we re seeing some added measurements, especially in North America and Europe, with government funding for smart grid initiatives. Along with that funding has come a new wave of reporting requirements. What we tried to do in our research is capture the metrics inventory, to explore not only what utilities are measuring, but how they measure it and who specifically measures things. Some of the current measurements if we look at, for example, the transmission area seem to be predominantly buildout and equipment-oriented. Key components, such as advanced technology phase or measurement units that are being deployed and planned, are being tracked. The percentage of transmission assets with real-time condition monitoring and diagnostics is another example of what is being measured today. In terms of the distribution system, there are a lot of reliability-driven metrics, again regulatory-based, so improvements in reliability and the related power indices are key. Then we see a lot of build-out metrics associated with distribution automation: the percentage of smart grid-enabled switches, reclosers and capacitor banks; and the percentage of distributed generation that s actually connected to the system, including the percentage of distribution circuits that have volt/ VAR controls. So those types of technologies are being tracked and reported as well. In the customer-related area, it s still very traditional. We are seeing folks track and measure the percentage of customers with smart meters, the percentage of customer energy savings, customer satisfaction indexes and the percentage of loads that can be managed. In terms of societal measures, there s some operational impact metrics that deal with lower operational and maintenance costs, and fewer and lower costs for interruptions that have societal benefits. The pure societal-impact metrics we ve heard about, and that the research reflects, have been the percentage of renewable 2

4 generation versus the percentage of standard generation, and the percentage or tons of greenhouse gas emission reduction. Those are the more frequent metrics mentioned in the research that we conducted. You ve mentioned a lot about the research that was involved in this process. Can you tell us a bit more about what type of research was performed? Sure. To better understand how these metrics are being used to track grid modernization and performance, we ended up surveying executives from utility companies around the world. The survey comprised telephonebased interviews with 32 utilities executives located in North America, Europe, Asia-Pacific and Latin America. All survey participants qualified themselves as being involved in the decisionmaking process, or being an influencer regarding the decisions of their company related to smart grid performance, and more than three-quarters of the respondents were based either in North America or Europe, so that s clearly the emphasis for the study. More than half of the participating executives were from utilities with more than US$10 billion in revenues, with cross-segment capabilities across generation, transmission and distribution, and retail. We had the research fieldwork conducted by Market One International. They asked the utilities executives several questions about metrics in the areas of transmission and distribution, end-use customers, and systems and societal impacts. They asked questions about what types of metrics the utilities use to measure performance in a given segment or area, when they measure performance of each segment or area and with what frequency, how they applied metrics and measures and performance levels, what level of granularity did they apply to them, who was in charge of analyzing performance in a given area or segment and how was it done. What are some of the improvements that are needed in how measurements are performed? Utilities have an opportunity to improve their ability to use metrics from what we ve seen, and those metrics become markers, or ways to continually drive performance improvements. Today, what we hear is a lot of utilities saying they lack the analytical tools and expertise to draw conclusions from the increasing number of data points that are available to them, from things such as smart metering, distribution automation systems and other massively data-intensive systems. They also indicate that when they have the tools and man power to analyze the information, they sometimes still struggle to understand the proper granularity in the measure, the frequency of measurement and how detailed they should go. So building a more appropriate analytics capability is a great start to improving how the measurements are performed. Starting with a real understanding of the various data sources that exist within the company, beyond the operational areas that individuals currently manage with that type of an understanding, we think utilities can apply tools to build relevant metrics from multiple sources of data, with multiple levels of granularity. In response to a lot of the recent stimulus-funded projects, we see interest in metrics typically falling into two distinct categories. The first is an opportunity to enhance the build metrics, to get a better feel for the measure of basis conditions and progress during a smart grid implementation. Build metrics are tailored to a utility s unique circumstances, and they can include the number of smart meters that are installed, substations they ve automated and the types of pricing programs they re offering to customers. Those metrics are typically augmented, and that gives utilities a better sense of how they re doing with their build-outs and their progress. There are also impact metrics that can represent an improvement. Impact metrics measure how and to what extent an investment in grid modernization or smart grid is affecting grid operations and performance. Is it enabling customer programs and behavior changes that couldn t be implemented previously? Some examples of impact metrics would be reduction in peak demand, reduction in greenhouse gas emissions, avoidance of maintenance costs and a decline in the number of outage minutes reported per year in a given area. 3

5 We think there are opportunities for improvement when you link the identified data sources across these areas. Let s consider, for example, equipment status data, which is typically stored in some sort of an asset management system, or a maintenance system database. The equipment we re storing that data on, that utilization level in real time, might reside in SCADA, a supervisory control and data acquisition system. But by linking that asset data with the utilization data, there s a potential to get more significant value from that asset. Doing so could yield a source of performance comparison across other assets and potentially show you new ways of operating the assets to improve the overall performance of the grid, based on the metrics you define. You ve just mentioned reaping more value, so how can utilities achieve more value from their grid-related investments through performance metrics? Our research suggests there are several opportunities utilities could pursue to not only more accurately assess the effectiveness of their grid performance to date, but to capture and convey the return on their investments going forward with a fairly accurate forecast. We have touched on how to improve those measurements and carry those out, but there are a lot of other ways to do it as well. One is to simply improve what s measured. As utilities continue to expand their smart grid and their grid modernization efforts, they are seeing a lag in investments the realization of those investments. We found that utilities can overcome some of these issues in a variety of ways. We think dedicating resources to develop a fair, consistent set of metrics and measures provides distinct value. Moving beyond what has been traditionally purely historical measures for utilities and starting to focus on consistent measures can enable a more accurate forecast of future grid performance. We think utilities could also improve on their examination of customerrelated metrics, for example, by more detailed analysis of customer benefits as they do technical improvements to the system, and looking more closely at the influence of customer choice on, for example, smart grid development. We think utilities can gain a better understanding of the value of their past and future investments, and we think developing an inventory of meaningful metrics that they put together for their particular strategy allows them to improve their insights not only on how their grid is performing, but on how that performance aligns with the business case and the desired outcomes their strategy originally intended. The other point I d add to that is that there s an opportunity to improve how measurement programs and metrics programs are governed. Our research confirms that the ownership of activities related to tracking and managing smart grid performance metrics differs from one utility to another. A lot of the respondents to the survey noted that responsibility for distribution-related metrics, for example, fell to their operating planning, outage center, maintenance or customer service departments. However, societalimpact metrics tended to belong to operations, planning or marketing. More than half of the respondents claimed their customer service departments owned the enduse customer metrics, but other departments such as operations and marketing had nearly as much responsibility in other companies. So we saw a lack of consistency around ownership of performance measures related to the customer, and that makes it potentially more difficult to drive an integrated approach to engaging customers and providing the next generation of customer choice that our research had indicated most people felt was on the horizon. We worry less about who actually owns the analyses, but we think it is critical that the metrics and measures are effectively disseminated and used by all the relevant departments associated with a particular performance. As we mentioned previously, there was a lack of established leading practices in many areas of performance especially in performance metrics governance, the establishment and oversight of the development and use of metrics. We think utilities have an opportunity to take the lead and establish some of this on their own. At a bare minimum, utilities should consider establishing teams that comprise representatives from all departments dedicated to metrics and performance measures, and we think that type of team could serve a variety of purposes. They could help utilities prevent and overcome what I ll call the 4

6 compartmentalized thinking that is talked about today, where people focus on their own department and their own operations. When you do that, it causes metrics and measure programs to fall short of their desired goals because they don t necessarily have the benefit of the impact of the entire enterprise. Utilities can also develop and adopt frameworks and new roadmaps to ensure that performance measurement programs are fully aligned to the business case. As we mentioned earlier, a lot of the early metrics the industry uses were tied to regulatory guidelines. With more and more pressure from shareholders on investor-owned utilities, we think there is an opportunity to better align the dayto-day performance with desired business cases and provide the insights needed to deal with both stakeholder expectations and the regulatory environments. Utilities could also achieve more value by ensuring that there s the proper frequency in customerrelated performance measurements. Right now, very few utilities measure their end-use customer metrics more often than once per year. We found that more than half of the survey respondents indicated they measure less often than once a year. Also in the research, though, they all indicated the increasing importance of customer choice and customer focus. So we think as the emphasis on the customer experience rises, the frequency with which utilities will make these critical measures will certainly increase, and so we think there s an opportunity to deal with that sooner rather than later. Thank you, Wade, for sharing this information with us, and I d like to thank our listeners for joining us for this installment of the Utilities podcast series. We invite you to visit to read Unlocking the value of metrics: Maximizing smart grid technologies for high performance, to view the full research report and to read the survey findings. We also encourage you to learn more about our utilities industry capabilities. Thank you for joining us. Copyright 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. 5