3 rd October 2013 The Benefits of Smart Grids for Irish Renewables IBM Perspective Presentation to the IWEA Autumn Conference David Lee Executive Partner IBM Global Business Services 2011 IBM Corporation
IBM Agenda Proposal Template Value Driven Proposals 1 2 3 Redefining the Energy Value Chain So What is a Smart Grid? Delivering Benefits for Ireland 2
IBM Agenda Proposal Template Value Driven Proposals 1 2 3 Redefining the Energy Value Chain So What is a Smart Grid? Delivering Benefits for Ireland 3
IBM Grow-and-build Proposal Template Value Driven strategy Proposals was the dominant industry model driver from the start of the 20th century until the 1960s The Grow and Build years Today Low cost of inputs Infrastructure growth relatively unconstrained Technology improvements bring generation costs down End use prices dropping Assumed inexhaustible and benign resources Imperatives Growth and Consumption Volatile cost of inputs Infrastructure growth constrained by environment and public policy Technology improvements have little impact on generation costs End use costs rising Assumed finite and harmful resources Imperatives Sustainable Growth and Efficiency..but today, the industry is inverting the messages it sends to customers from keep using more to conserve and be efficient Source: IBM Institute for Business Value (IBV) analysis 4
IBM Imperatives Proposal Template today Value Driven are Proposals substantially different from those of the grow-and-build era... Policy Shifts: Encouragement of conservation and renewable or self-generation driving decreases in overall consumption of utility-generated power, Customer Involvement: Consumers are demanding more from their relationships with their energy providers as they seek options for conserving energy, saving money, and reducing their impact on the environment Technology Evolution: New smart grid technologies that drive better system efficiency are being rapidly deployed around the world, 5 Source: IBM Institute for Business Value (IBV) analysis
IBM Proposal Template Value Driven Proposals As a result Industry Value Chain for Energy is undergoing a fundamental transformation from centralised model to Traditional electricity value chain generation and trading transmission distribution Energy service (retail) Electric devices and appliances End-use customers flow Information flow Source: IBM Institute for Business Value (IBV) analysis 6
IBM Proposal Template Value Driven Proposals more distributed bi-directional model for both power generation and information exchange Traditional electricity value chain generation and trading transmission distribution Energy service (retail) Electric devices and appliances End-use customers Emerging electricity value chain Distributed resources (generation, storage, electric vehicles) generation and trading transmission distribution Energy service (retail) Electric devices and appliances End-use customers flow Information flow Information and services platform owner Information services Information devices and appliances While the traditional value chain stopped at the meter to the premises, the new value chain will integrate devices beyond the meter and the actions of customers themselves. Source: IBM Institute for Business Value (IBV) analysis 7
Centralized and One-Way Technology Evolution Distributed and Dynamic IBM We Proposal envision Template a Value future Driven Proposals for energy providers driven by technology evolution & increasing consumer control Participatory Network Operations Transformation Some combination of grid and network technology evolves to enable shared responsibility, but consumers either cannot exert much control (or elect not to) and the balance of benefits favors the utility Utility Industry Models Participatory Network A wide variety of grid and network technology evolve to enable shared responsibility, and consumers strong interest in specific goals creates new markets (virtual and physical) and new product demands, which balances benefits more equally between the consumers and utilities Passive Persistence Traditional utility market structures dominate, and consumers either accept or prefer the traditional supplier-user relationship Constrained Choice Consumers take firm steps to move toward more control, but are limited to certain levers (technologies, behaviors, or choices in providers) by regulatory and/or technological constraints Low Degree of Consumer Control High 8 Source: Valocchi, M, A. Schurr, J. Juliano, and E. Nelson, Plugging in the consumer: Innovating utility business models for the future, IBM Institute for Business Value, 2007; Valocchi, M, J. Juliano, and A. Schurr, Lighting the way: Understanding the smart energy consumer, IBM Institute for Business Value, 2009.
IBM Proposal Template Value Driven Proposals In the expanded value chain, the New Energy Consumer has more to offer than just payment for energy Traditional industry value model: Emerging industry value model: Value to customers (continuous) Reliability Universal service Revenue Reciprocal value from customers (intermittent) Value to customers (continuous) Reliability Universal service Environmental impact reduction Cost saving Personalization Information Services Revenue Information Services Environmental impact reduction Revenue Third- party product/ service providers At the same time, customers are becoming more demanding; they actually have much more to offer in reciprocal value to energy and other product/service providers. Source: IBM Institute for Business Value (IBV) analysis Information Personalization Services Cost savings Environmental impact reduction Revenue Information Connections/ personal networks Demand response Reciprocal value from customers (intermittent) 9
IBM Ireland Proposal Template is well Value advanced Driven Proposals on this journey Source : ESB Networks Connecting the wind turbine to the electric vehicle 10
IBM Agenda Proposal Template Value Driven Proposals 1 2 3 Redefining the Energy Value Chain So What is a Smart Grid? Delivering Benefits for Ireland 11
IBM So Proposal what Template is Smart Value Driven Proposals? Instrumented + Interconnected + Intelligent everything is becoming instrumented with sensors and computational power The world produced about 10 quintillion transistors in 2009, which is 250 times more than all the grains of rice consumed in same year - CNN the world is becoming interconnected via vast, ubiquitous networks many things are becoming intelligent by applying analytics to the mountains of data they can collect = Smart 12
IBM Proposal Template Driven Proposals New Energy Value Chain driven by technology evolution & increasing consumer control presents an opportunity to think and act in new smarter ways. INSTRUMENTED INTERCONNECTED INTELLIGENT + + = Incorporate renewable energy and electric vehicles into the power grid and meet stringent greenhouse gas emissions targets while maintaining a reliable, costeffective power supply. Empower consumers and improve satisfaction by providing them with near real-time, detailed information about their energy usage. Transform electric grid and gas and water infrastructures from rigid, one-way systems to dynamic, automated and reliable information networks. We see the successful exploitation of data across the value chain driving operational efficiency and customer insight - as the key to achieving competitive advantage 13
IBM Smart Proposal Grids Template Value key Driven enabler Proposals in transition to new industry models Smart Grid hundreds of different definitions many focused on the technology A smart grid employs innovative products and services together with intelligent monitoring, control, communication, and self-healing technologies in order to: Better facilitate the connection and operation of generators of all sizes and technologies. Allow consumers to play a part in optimising the operation of the system. Provide consumers with greater information and options for how they use their supply. Significantly reduce the environmental impact of the whole electricity supply system. Maintain or even improve the existing high levels of system reliability, quality and security of supply. Maintain and improve the existing services efficiently. Foster market integration towards European integrated market electricity networks that can efficiently integrate the behaviour and actions of all users connected to it generators, consumers and those that do both in order to ensure an economically efficient, sustainable power system with low losses and high quality and security of supply European Smart Grid Task Force (2010) 14
IBM Proposal Template Value Driven Proposals We are working with clients in Ireland and abroad as they mover to the emerging electricity value chain Emerging electricity value chain Distributed resources (generation, storage, electric vehicles) generation and trading transmission distribution Energy service (retail) Electric devices and appliances End-use customers flow Information flow Information and services platform owner Information services Information devices and appliances 15
IBM Proposal Template Value Driven Proposals Sample Smart Grid related Project Experience Emerging electricity value chain Battery 500 Distributed resources (generation, storage, electric vehicles) generation and trading transmission distribution Energy service (retail) Electric devices and appliances Deep Thunder End-use customers flow Information flow Information and services platform owner Information services Information devices and appliances 16
IBM Agenda Proposal Template Value Driven Proposals 1 Redefining the Energy Value Chain 2 So What is a Smart Grid? 3 Delivering Benefits for Ireland 17
IBM Proposal Template Value Driven Proposals From our global experience in Smart Grid projects American Electric BC Hydro BELCO CenterPoint Energy Consumers Energy Entergy EPCOR Hydro One Hydro Ottawa Hydro-Québec IESO London Hydro NB NYC-based utility Oncor Ontario Energy Board Pacific Gas & Electric Pacific Northwest National Laboratory PECO Pepco Holdings Inc Progress Energy Sempra Energy Southern California Edison Toronto Hydro EnergiMidt AEM Torino ESB Networks ASM Brescia Göteborg Energi DONG Energy 30 Italian distributors EDF Oxxio E.on Scottish & Southern Energy EDP npower EnBW Malta Water & Electric Country Energy Energy Australia NDPL We have distilled some key lessons 18
IBM Proposal Template Value Driven Proposals 1. Put the Customer at the Centre Impact Smart Metering CIS change Network upgrade Energy Conservation Program Rate change New rate structure Billing cycle disruptions New bill format Service disruption Individual customer notification / scheduling New in-home devices Remote disconnect ability Changes to meter reading service Success of smart grid initiatives such as smart metering, distributed generation and electric vehicles dependent on individual consumers making changes in both buying and consumption behaviours. 19
IBM Proposal Not Template everybody Value Driven Proposals thinks they are a good idea 20
IBM 2. Proposal Think Template across Value Driven traditional Proposals boundaries Smart Grid straddles the traditional domains of Operational (OT) & Information Technology (IT). Realisation of vision for Ireland requires continues and increased co-operation across Energy, telecommunications and transportation industries 21
IBM 3. Proposal Importance Template Value of Driven a Proposals Supportive Regulatory Environment Industry cannot succeed in the adoption of new technologies required to enable smart grid without a supportive regulatory regime Need to continue to be supportive of innovation that benefits the consumer 22
IBM 4. Proposal Smart Template Grid Value Technology Driven Proposals - One Sized Approach does not fit all Many of the technologies are at different stages of the evolution and maturity with differing levels of impact on the existing industry models These differences needs to be reflected in both policy setting and implementation 23
IBM 5. Proposal Collaborate Template Value Driven Extensively Proposals Evolving industry model places an increased focus on value being co-created by players in the network. Highlights need to collaborate with a wide range of partners including electricity sector players, academic bodies and partners from the ICT and transportation industries. Provides access to new knowledge Mitigate new technology related risks 24
IBM Conclusion Proposal Template Value Driven Proposals Opportunity to build on work done to date for Ireland to continue to be at the forefront of smart grid related initiatives that are driving industry change cycle Ireland has many inherent advantages Attractive location for inward investment Favourable geographical and climate considerations Market structure and scale enables agility Engaged regulator However Need for integrated policy and regulatory framework covering previously separate silos of energy, telecommunications and transportation Continued focus on encouraging energy related research and innovation is required While focusing on the technological and engineering challenges not to lose sight of the customer - their participation and support is key
IBM Proposal Template Value Driven Proposals Thank You david.lee@ie.ibm.com