Smart Grid Utility Challenges and Telecomm Opportunities

1. Smart Grid Utility Challenges and Telecomm Opportunities Rick GeigerExecutive Director, Utilities & Smart Grid

3. Service Providers and Electric Utilities • Business Model: CAPEX vs OPEX • Not an issue for Munis & Co-ops • Business Drivers – Voice & Data vs 120VAC • SLAs • Disaster Recovery • My customers - Who’s your retailer? • Not an issue for Munis & Co-ops • Technology Horizons

4. Coverage – Always a Challenge

5. Cooperatives

6. Cooperatives • Are located in 80% of the nation’s counties • Are the largest electric utility network in the nation • Total more than 930 local systems in 47 states • Have 40 million member-owners • Distribute power over 2.4 million miles of line • Own $112 billion in generation, transmission, and distribution assets Source: NRECA

7. Public Power • Located in 49 of 50 States • 2010 Community Owned Electric Utilities • Serving 45 million people • 14% of US Electric Power Source: APPA

8. US Electricity Industry Statistics Number of Electricity Providers % of Total Publicly Owned Utilities 2,010 61.5% Investor Owned Utilities 212 6.5% Cooperatives 883 27.0% Federal Power Agencies 9 0.3% Power Marketers 153 4.7% Source: Energy Information Administration

9. Innovation and regulation drive change in the utility industry Change Drivers Changing Supply: Renewable Generation ChangingDemand Patterns Regulation/Compliance NewOpportunities • Unpredictable renewable supply sources • Distributed generation sources feeding into unmonitored grid areas • Flexible tariffs cause changing demand patterns • More complex to predict • Climate change and energy efficiency goals • Standards and interoperability • Network security and reliability • Stimulus packages • Additional sales volume by electric plug-in vehicles • Economically store electricity

10. Industrial Customer Commercial Customer Residential Customer Smart Grid:Transformation of an Industry Distributed Generation Sources Power Generation Federated Data Centers Transmission (Utility) Distribution (Local Utility) Network Control Center Network Control Center Energy Information

11. Utilities are challenged with a more complex operating environment Smart Grid Challenges Distributed Generation EV & Storage Energy Management Change Challenges Capacity • Intransparent build-up (geography & scale) • Significant increase in offtake • Integration of new applications Commu-nication • Timing of feedin • Moving load • Increased information requirements Capabi-lities • Management of increased stochastic generation • Potential for storage & feedin • Technical specs defined outside utility industry • Competition for ownership of innovative efficiency solutions

12. Utilities will respond along three dimensions in building the Smart Grid Smart Grid Building Blocks Dimensions Requirements Rationale Readiness SG Building Blocks ( ) Capacity • Adequate capacity • Transition from distribution focused to contribution capable • Today’s consumption supplied though no demand shifts included • Physical infrastruc-ture to accommodate complex load flows Infrastructure Layer ( ) Commu-nication • Basic systemstatus • Creation of an information rich and potentially real time operating environment • Current system highly reliable in “look and see” mode • Increased levels of uncertainty around system behavior ICT Layer Capabilities • Electricity delivery • Integration of new infrastructure elements • Substitution of phy-sical with virtual capacity • Stable environment with limited need for short term action • Increased system stress through erratic offtake / feed-in Applications Layer Available today Not available today

13. Business and regulatory requirements open new business opportuntities Smart Grid Opportunities Network of substations Residential smart meters Supply Side Grid Operation Demand Side SG Building Blocks Comms for Vehiclesby 2020 Infrastructure Layer V2G Substation Automation Advanced Grid Sens. & Contr. Smart Meter Top Utilities: We can do it better than SPs Plan, design, operate ICT Layer Narrow- / Broadband Enablement Data Integrity Management Energy Management Applications Layer DG Integration Energy Storage Visualization & Prediction Work Force Mgt. Demand Response “Near-Time” Pricing Load Mgt. & Balancing Micro Grids Building/Home Energy Mgmt Web Services Comms for new installations Application hosting Business Energy Mgt. Self-Healing Grid SystemEngineering Comms C&I smart meters Smart Grid business opportunties for SPs Source: Booz & Company, Newton Energy Research, ABS Energy Research

14. Strategic and architectural challenges: Will Utility/SP infrastructures converge? Market Expectation • Utilities rolling-out Smart Metering • Strong regulatory and public pressue to deliver energy efficiency solutions • SP / Challenger under pressure to enable mass market broadband connectivity Competition • Utility and SP under pressure by declining retail margins • Renaissance of home automation services fueled by energy efficiency solutions (and renewable integration) • Utility and SP independently fighting for retail customer ownership Smart Grid as a hosted service How to develop a communication infrastructure meeting the requirements of an integrated though unbundled utility value chain? Could convergence of utility and SP networks enhance a joint value proposition? What are the regulatory and legal implications?

15. Way Forward: Developing the Vision for the converged infrastructure network • Develop a converged network position • Outline an end-to-end Smart Grid solution • Win-win value proposition and business models • Explore utility industry readiness • Consider a cross-industry Smart Grid initiative