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Choices, Choices, Choices: Resolving Smart Grid Choice Overload With Business Case Models

Municipal Smart Grid Summit June 6, 2012. Choices, Choices, Choices: Resolving Smart Grid Choice Overload With Business Case Models. Jerry Jackson, Ph.D. Leader and Research Director Smart Grid Research Consortium, LLC 37 N. Orange Avenue, Suite 500 Orlando, FL 32801

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Choices, Choices, Choices: Resolving Smart Grid Choice Overload With Business Case Models

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  1. Municipal Smart Grid Summit June 6, 2012 Choices, Choices, Choices: Resolving Smart Grid Choice Overload With Business Case Models Jerry Jackson, Ph.D. Leader and Research Director Smart Grid Research Consortium, LLC 37 N. Orange Avenue, Suite 500 Orlando, FL 32801 www.smartgridresearchconsortium.org 407-926-4048 979-204-7821 (cell)

  2. Choice Overload is All Around Us http://www.nytimes.com/2010/02/27/your-money/27shortcuts.html Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  3. Source: NIST Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  4. Marketing and Psychology Research Provides Interesting Insights on Choice Overload • Jam problem • Decision-making process • Decision-maker satisfaction • Marketing applications Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  5. Implications for: • Utilities • Vendors Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  6. Topics • Consortium’s approach to SG choice overload • Smart Grid Investment Model • Example application • Recommendations Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  7. The SGRC Was Developed to Address Choice Overload and Other SG Evaluation Issues Unbundled model software and support services Completed Smart Grid Investment Model development Transitioned to an independent research organization Formed at Texas A&M University to investigate quantitative business case issues Dec 2011 Feb 2012 Jan 2010 Jan 2011 Available to All utilities Vendors Consulting firms Others Coops, Munis, Public Utilities Vetted with 15 utility applications Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  8. The Scope of Today’s Attractive SG Investments Makes Smart Grid Business Case Extremely Complex Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  9. SGIM Applies Choice Overload Principles toTransform This Complexity Into Manageable Investment Choices • Simplified hierarchical selections • Structured knowledge base • Information discovery • Expertise development • Relevancy: utility-specific detail/implementation Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  10. SGIM Hierarchical Schematic Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  11. Hierarchical User Interface Discounted Net Benefit Chart Four Summary Investment Stats 1 2b Three Program Areas 2a 3 Two General C/B Areas Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  12. Programs Are Turned On and Off Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  13. Investment Summaries Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  14. Chart Representations Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  15. Drill-Down Dashboard Visualizations and C/B Tables Support Information Discovery Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  16. Drill Down to System load Impacts

  17. Structured Knowledge Base Supports Information Discovery and Expertise Development Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  18. Technologies and Programs Can be Evaluated Individually or in Combination ALL CVR AMI /SM + CE (DLC + PCT) AMI /Smart Meters Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  19. Assumptions Behind Results Can Be Evaluated;Stand-Alone PCTs Outcomes Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  20. Focus and Timing Can Be Evaluated Accelerated customer engagement, and accelerated, expanded CVR Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  21. Five Steps Are Applied to Transform Analysis Results into a Comprehensive Investment Strategy Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  22. “Composite Utility” Case Study Analysis Provides An Example • Current AMR, no CVR or customer engagement • Utility executives’ questions • Which SG investment areas and specific investments are most attractive? • What is the business case for the best investments • How do uncertainties impact results (e.g., increases in wholesale power costs) • Utility priorities • Keep up with industry (not the first and not the last) • Provide customer benefits relative to surrounding utilities • Keep costs as low as possible Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  23. The SGIM Implementation Process • Utility provides data • Monthly customer class billing data • 8760 system load data • Any available utility customer information • General info on distribution system • Consortium Staff Implement the Smart Grid Investment Model • Customers by customer class, kWh sales, peak demand • Monthly customer class, end-use hourly load impact model • Utility costs • Model delivered for utility application, or • Online training session • Model applied by Consortium staff in turnkey analysis • Model delivered with training Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  24. First Select Individual Options: Discounted Net Benefit Chart Four Summary Investment Stats 1 2b Three Program Areas 2a 3 Two General C/B Areas Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  25. AMI/Smart Meters Unattractive investment Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  26. Why ? Benefits are Limited Drill Down Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  27. Add Customer Engagement: AMI + Direct Load Control (WHDLC)+ ProgCommunicating Thermostat (PCT) Better, but not a great investment Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  28. Stand-Alone WHDLC + PCT Greater per unit cost but still an attractive investment option Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  29. DA Category: Conservation Voltage Reduction (CVR) 20% of highest value substations Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  30. CVR + Stand Alone WHDLC + PCT 20% Customers with elecWh on DLC Wh and PCT plus 20% of highest value substations on CVR Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  31. What If: AMI + Customer Engagement With Increased Wholesale Prices AMI plus WH DLC and PCT along with 40% increase in wholesale prices 2015-2016 still provide modest returns Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  32. What If: Increased Wholesale Prices Also Improve CVR + Stand Alone WHDLC +PCT Investment Stand-Alone WH DLC and PCT along with 20 & 40% increase in wholesale prices 2015-2016 provides substantial returns Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  33. Consider CVR Risk: -20%, -30% of Load Impact - 20% - 30% Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  34. Consider WHDLC, PCT Risk: -30%, -50% of Load Impacts - 30% - 50% Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  35. Conclusions at This Point • Reject AMI/Smart meter investments at this time • Identified CVR and stand-alone WH DLC and PCT as potentially attractive individual options • Relatively little risk with CVR initiative • Potential risk with WH DLC and PCT programs Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  36. Preliminary Strategy • Develop preliminary plan for CVR applications • Target highest value first • Refine cost/benefit data with early results • Continue financial analysis on a substation/feeder level basis • Conduct pilot program with stand-alone WH DLC + PCTs Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  37. Next Steps • Begin compiling substation/feeder level information to support CVR implementation strategy • Develop additional internal information on relevant technology/program areas • Form utility task force/management plan and action items • Identify project management model • Vendor RFQs, RFIs, RFPs • …. Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  38. Actual Applications Include Additional Items and Analysis • Water, natural gas, emergency, etc systems • Distribution automation (auto reconfiguration, FDIR Show) • Customer valuations of reliability • Various levels of deployment • CVR • DA • Various levels of deployment and incentives • WH DLC • PCTs • Pricing • WH DLC, PCTs, pricing, etc with C&I customers • Program timing • Optional additional technology detail (DER, storage, HEV, etc.) • Feeder-level investment strategy development Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  39. Extended Distribution System Information Supports Detailed Substation/Feeder Level Analysis Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  40. Business Case Analysis Recommendations • Recognize importance of: • Utility-specific detail • Utility-specific load impact modeling and analysis • System-wide evaluation • Apply a quantitative framework • Explicit representation of important costs and benefits over time • Support what-if questions for all important analysis parameters • Provide replication and documentation • Develop clear, simple financial and other evaluation criteria • Include sufficient detail to integrate detailed engineering, operations and management inputs • Evaluate many scenarios to address all important what-if questions Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

  41. Take-Away: Smart Grid Choice Overload Can Be Resolved With a Quantitative Business Case Model For additional information: Jerry Jackson, Ph.D. Leader and Research Director Smart Grid Research Consortium, LLC 37 N. Orange Avenue, Suite 500 Orlando, FL 32801 www.smartgridresearchconsortium.org 407-926-4048 979-204-7821 (cell)

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