[Smart Grid Market Research] The Optimized Grid - Zpryme Smart Grid Insights

Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved www.zpryme.com

Smart Grid Insights [PREMIUM] Intelligence by Zpryme

July 2012

The

Optimized Grid A 10-Page Special Report

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1 www.zpryme.com | www.smartgridresearch.org Zpryme Smart Grid Insights. The Optimized Grid | July 2012

Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved.

Table of Contents

The Optimized Grid .................................................................... 2

Transmission & Distribution Losses ............................................. 3

Distribution Automation............................................................. 3

Evolution of Distribution Automation ....................................... 3

Substation Automation ............................................................. 4

Feeder Automation ................................................................... 4

Volt/VAR Optimization .............................................................. 4

FLISR .............................................................................................. 5

The Business Case for Distribution Automation ...................... 5

Opportunities by Geography ................................................... 7

Distribution Automation (DA) Forecasts by Region .............. 7

Key Player Spotlight ................................................................... 8

Short-Term Outlook .................................................................. 10



The Optimized Grid

Optimizing utilization and operating efficiency in electricity

delivery system is one of smart grid’s characteristics.

Transmission and distribution infrastructure includes

transmission lines, substations, and distribution feeders. One

estimate has put the potential in reducing distribution

losses through smart grid deployment at 30%.1

In this report Zpryme looks at the distribution system portion

of the smart grid and the portfolio of technologies that are

being deployed to optimize the distribution infrastructure.

The global distribution automation (DA) market will be

driven by smart grid investments in emerging countries

such as China, Brazil, and India, and by European policies

that aim to have 80% smart meter deployments by 2020.

However, the current market for DA is driven by

progressive utilities in North America.

The global DA market is projected to reach $5.7

billion in 2012. North America (44%) and Asia Pacific

(25%) will account for about 70% of the global

market in 2012.

By 2020, the global DA market is projected to reach

$33.9 billion. The DA market is projected to grow at a

compound annual growth rate of 25% from 2012 to

2020. By 2020, Asia Pacific will account for 37% of

the global market.

1 www.members.weforum.org/pdf/SlimCity/SmartGrid2009.pdf

$5.7 $7.4

$9.0 $11.3

$13.5

$16.4

$20.6

$26.2

$33.9

$0

$5

$10

$15

$20

$25

$30

$35

$40

2012 2013 2014 2015 2016 2017 2018 2019 2020

Global Distribution Automation Market Value Forecast

CAGR = 25%

2012 to 2020 (in US billions)

(figure 1, source: Zpryme)

44% 39% 37% 34% 32% 31% 30% 29% 28%

7% 7% 7%

7% 7% 7% 8% 9% 10%

15%

14% 14% 14% 14% 14% 15% 15% 16%

25%

24% 26% 26% 28% 29% 32% 34% 37%

9% 16% 17% 20% 19% 18% 15% 12% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019 2020

Global Distibution Automation Market Segmentation

2012 to 2020 - Region % of Global Market

(figure 2, source: Zpryme)

ROW

Asia

Pacific

Europe

Latin &

South

America

North

America



Transmission & Distribution Losses

Worldwide electricity losses through transmission and

distribution (T&D) account for almost 9% of total electricity

supplied. According to the U.S. Energy Information

Administration statistics, electricity distribution losses in the

U.S. in 2010 alone were about 261 billion kWh. Reducing

distribution losses in the U.S. by just 1% would save about

2.6 billion kWh of electricity, more than the total electricity

the country of Uganda generated.

Losses within T&D infrastructure are characterized by two

components: technical and non-technical losses.

Technical losses such as line losses consist mainly within the

electricity components and system. Non-technical losses

are attributed primarily to electricity theft, customer non-

payment, and inefficient or erroneous accounting.

Distribution Automation

Distribution automation (DA) is the backbone of the future

intelligent distribution network. Historically, distribution

systems do not have much automation. System

equipment, once installed, was expected to perform

autonomously with only occasional manual interventions.

In response to demands for higher reliability and power

quality, improved efficiency through reducing technical

losses, lower operating costs, demand response

capabilities, and increasing the use of distributed energy

resources (DER), distribution operations are becoming

more and more automated.

The strategic drivers for advanced distribution automation

are fundamentally the characteristics of the smart grid.

These include improve reliability and power quality,

reduce operating costs, improve outage restoration time,

increase customer service options, integration of DER, and

integration of customer facing energy applications.

Evolution of Distribution Automation

Distribution automation has been around for decades. In

its initial stages, efficiency improvement was the main

driver of distribution automation. However, the definition

and scope of DA is evolving with a set of new

technologies and utility needs. In 1998, the IEEE broadly

defined DA as “a set of technologies that enable an

electric utility to remotely monitor, coordinate, and

operate distribution components in a real time mode from

remote locations.” In a recent white paper for NIST, the

IEEE updates its definition of DA to “any automation which

is used in the planning, engineering, construction,

operation, and maintenance of the distribution power

system, including interactions with the transmission system,

interconnected distributed energy resources (DER), and

automated interfaces with end-users.”2

In this later definition, the scope of DA has grown from

mainly remote monitoring and automatic reconfiguration

to encompass several key characteristics of the smart grid.

More specifically: operating efficiency, optimizing asset

utilization, accommodating renewable and distributed

generation, and market forces.

Traditional distribution automation capacities include

automation of switching functions with limited

2www.grouper.ieee.org/groups/td/dist/da/doc/IEEE%20Distribution%20Automation%20W

orking%20Group%20White%20Paper%20v3.pdf



reconfiguration capabilities and other individual functions

such as Volt/VAR control. The new vision for DA now

includes automation of all controllable equipment and

advanced reconfiguration for optimizing performance

capabilities. In a sense, the new generation of DA

technologies will allow distribution system to be fully

automatic relying on minimal manual intervention.

Substation Automation

Distribution substation automation represents the first level

of EPRI’s advanced distribution automation

implementation plan. In 2005, it estimated the cost for

integrating distribution substation automation to the grid

infrastructure at about $10 billion. The same study

estimated the integration cost for feeder automation at

around $70 billion.3

Markets for substation and feeder automation are

relatively segregated with substation automation having a

much higher market penetration. According to a DOE

report, as of 2005 84% of U.S. electricity companies had

implemented or plan to implement substation automation

compared with only 20% for feeder automation.4,5

However, the majority of substation automation

applications are in monitoring and control of breakers and

equipments; hence, there are significant opportunities to

improve substation automation applications and integrate

them with the distribution system. For example, substation

3 EPRI Research Plan for Advanced Distribution Automation. Slide 18.

www.grouper.ieee.org/groups/td/dist/da/doc/IEEE%20GM%202005%20ADA%20Panel%2

0-%20Goodman%20-%20EPRI%20Research%20Plan.pdf 4 DOE (2010) Smart Grid System Report 5 CEC 500-2007-028, VALUE OF DISTRIBUTION AUTOMATION APPLICATIONS reports 80%

penetration

automation can be used in conjunction with an outage

management system to automatically identify possible

fault locations on the distribution system resulting in

improved response and restoration time.

Feeder Automation

Two key applications that are driving feeder automation

are: Volt/VAR optimization and Fault Location, Isolation,

and Service Restoration (FLISR). Each application offers

different value propositions to utilities. Broadly speaking,

Volt/VAR optimization technology helps improve

efficiency by reducing electricity losses and the demands

made on distribution systems while FILSR technology offers

economic reliability by improving system restoration time.

Volt/VAR Optimization

Volt/VAR control is a fundamental part of optimizing the

electrical distribution system. Its primary purpose is to

manage the flow of electricity to maintain acceptable

voltage at all loading conditions along the distribution

system. In a nonintegrated system, Volt/VAR management

is achieved by autonomously operated devices such as

capacitor banks. New Volt/VAR control technology

improves optimization at the system level through the use

of real-time information and system modeling to

continuously optimize power delivery efficiency and peak

demand. In a smart grid environment, Volt/VAR’s

management objective will go beyond keeping voltage

within allowable limits and reducing technical losses. As

distributed energy resources grow, real-time Volt/VAR

optimization will play a significant role in maintaining

voltage stability and power quality on the distribution



feeders. When outages and faults occur, Volt/VAR control

will also help to restore the system after feeder

reconfiguration.

FLISR

An FLISR system can detect feeder faults, determine the

fault location, isolate the faulted section of the feeder,

and restore service to the unaffected portions of the

feeder. In simpler terms, FLISR provides the means for utility

to restore service to some customers before field crews

arrive on the scene thereby reducing the number of

customers affected by power outage. Other benefits

include minimizing lost revenues due to the ability to get

unaffected customer back online sooner and operational

efficiency in cost savings due to a fewer number of fault

investigations, and lower patrol time because fault

location is narrowed down.

The level of control offered by an FLISR system depends on

the back-end software architecture. With current

technology offering, identifying and isolating faults are

now relatively easy but automatically restoring power still

remains a challenge. A fully automatic system is the most

complex approach to DA and is currently deployed in

pilot stages. A semi-automatic approach lets the system

automatically perform relatively “easy” actions such as

identifying faults and restoring upstream services while

system operators remain in control of more complicated

actions.

The Business Case for Distribution Automation

While distribution automation technologies are

commercially available for wide scale utility deployment;

implementation of DA is a complex process that involves

multiple departments within a utility, long-term decision

making in term of system architecture, and potentially high

investment costs. Making the business case for DA is

complicated by the fact that its benefits include values

that are not easily quantifiable such as improved customer

satisfaction and safety. Some benefits are more difficult to

calculate; for example, savings from reduced labor costs

due to automatic fault detections depend on how many

outages are expected, the number, which at best is

probabilistic.

Like any smart grid investment, values derived from DA

deployment vary according to utilities context. The key in

making a business case is identifying applications that

provide the best return on investment in ways that can be

measured by utilities. In the U.S., uncertainties due to

deregulation and restructuring of the power industry have

been blamed for the slow implementation of distribution

automation.

Utilities that have performance-based rates may consider

FLISR for its ability to improve certain reliability metrics

measured by regulators. While utilities that are able to pass

the cost of line losses to the customers or distributor of

power without retail licenses, the benefit of line loses

reduction add little value without changes from the

regulator.



Global Distribution Automation Market Value by Region, 2012 – 2020

(table 1, source: Zpryme, in US billions)

Market Value 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR

World Region

North America $2.5 $2.9 $3.3 $3.8 $4.4 $5.0 $6.2 $7.6 $9.4 18%

Latin & South America $0.4 $0.5 $0.6 $0.8 $1.0 $1.2 $1.7 $2.4 $3.3 30%

Europe $0.9 $1.0 $1.3 $1.5 $1.9 $2.3 $3.0 $4.0 $5.3 26%

Asia Pacific $1.4 $1.8 $2.3 $2.9 $3.8 $4.8 $6.6 $9.0 $12.4 31%

ROW $0.5 $1.2 $1.5 $2.2 $2.5 $3.0 $3.1 $3.2 $3.5 27%

Total $5.7 $7.4 $9.0 $11.3 $13.5 $16.4 $20.6 $26.2 $33.9 25%

Percent of Total Market

North America 44% 39% 37% 34% 32% 31% 30% 29% 28%

Latin & South America 7% 7% 7% 7% 7% 7% 8% 9% 10%

Europe 15% 14% 14% 14% 14% 14% 15% 15% 16%

Asia Pacific 25% 24% 26% 26% 28% 29% 32% 34% 37%

ROW 9% 16% 17% 20% 19% 18% 15% 12% 10%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

North

America

44%

Latin &

South

America

7%

Europe

15% Asia Pacific

25%

ROW

9%

Global Distribution Automation Market Value %, 2012

figure 3, source: Zpryme

North

America

28% Latin &

South

America

10%

Europe

16%

Asia Pacific

36%

ROW

10%

Global Distribution Automation Market Value %, 2020

figure 4, source: Zpryme



Opportunities by Geography

It seems natural to talk about global infrastructure

investments in terms of developed and emerging

economies. While it’s generally true that the U.S. and

Europe need to focus more on modernizing aging

infrastructure and to accommodate DER and EV

penetrations. And while infrastructure in emerging markets

may be newer, the existing systems could benefit from

distribution system automation. Renewable energy and

DER will also be key drivers of smart grids for many

emerging economies due to energy security concerns

and government policies.

For markets that are deregulated benefits from DA

investments are constrained by regulatory rules and

market forces. Hence, some state-owned utilities may

adopt DA technologies at a faster pace due to the lack of

regulatory and business uncertainties as well as

government support. For example, in 2007 the Korean

Electric Power Corporation (KEPCO) reported having 90%

integration of automated feeders in its distribution

automation system. With its successes at home, KEPCO has

launched projects to supply new DA technologies in

Indonesia, Vietnam and China.6

Size also matters. Large emerging markets such as Brazil,

China, and India still provide great opportunity for growth.

Infrastructure investments in these markets are driven by

grid expansion, demographic growth, and rapid

urbanization.

6 www.grouper.ieee.org/groups/td/dist/da/doc/2008-07Kepco.pdf Slide 8

One of India’s leading suppliers in network

automation, Siemens recently announced a turnkey

supervisory control and data acquisition technology

order with India’s Maharashtra’s State Electricity

Distribution Company. As part of the $24.5 million

deal, the company will install distribution substation

automation systems with integrated IT systems as

well as provide maintenance and other services for

five years after the systems are commissioned.7

China for its part has developed and implemented

an aggressive plan for the national smart grid.

Implementation for distribution automation system is

underway in 27 cities across the country. By 2020,

the State Grid Corporation of China plans to

comprehensively deploy distribution automation

and controls in all prefecture-level cities within its

territories.

Distribution Automation (DA) Forecasts by Region

North America: From 2012 to 2020, the North American

market is projected to grow from $2.5 billion to $9.4 billion

with a compound annual growth rate of 18%. In 2012, the

region will account for 44% of the global market, but this

figure is projected to drop to 28% by 2020.

Latin & South America: From 2012 to 2020, the Latin &

South American market is projected to grow from $0.4

billion to $3.3 billion with a compound annual growth rate

of 30%. In 2012, this region will account for 7% of the

market, but this figure is projected to reach 10% by 2020.

7 www.smartgridnews.com/artman/publish/Business_Global/Siemens-picks-up-24-5-

million-SCADA-DMS-order-from-India-4553.html



Europe: From 2012 to 2020, the European market is

projected to grow from $0.9 billion to $5.3 billion with a

compound annual growth rate of 26%. In 2012, this region

will account for 15% of the global market, but this figure is

projected to grow to 16% by 2020.

Asia Pacific: From 2012 to 2020, the Asia Pacific market is


compound annual growth rate of 31%. In 2012, this region

will account for 25% of the global market, but this figure is

projected to increase to 37% by 2020.

Rest of World (ROW): From 2012 to 2020, the ROW market is


compound annual growth rate of 27%. In 2012, the ROW

will account for 9% of the market and increase to 10% of

the market by 2020.

Key Player Spotlight

Utility infrastructure is a long-cycle business. As such,

companies with extensive product range and expansive

supply chain distribution are oftentimes the key players.

We look at four leaders in global electric power market

place who are providing utilities with physical components

as well as the back-end network to support distributed

automation. All of these companies are rapidly expanding

their smart grid presence by acquiring, establishing

alliances and partnerships that bring end-to-end solutions,

including whole products and services, to utility customers.

ABB

As the world’s largest maker of power distribution

equipment, ABB has a wide customer base. It operates in

about 100 countries with manufacturing and R&D base in

many developing countries. In recent years it has made

several strategic moves to expand offerings in the

distributed automation and smart grid portfolio through

acquisitions of several software firms and low-voltage

components makers. One such acquisition, Ventyx, has

helped the company become one of the leaders in

energy industry enterprise and asset management in North

America.

In March 2012, ABB was awarded a contract from the

Iraq’s Ministry of Electricity to upgrade and rehabilitate

power distribution network in Baghdad. The company will

install integrated software solution from its Ventyx portfolio

as well as supply the communications equipments and

remote terminal units to monitor and control power

supplies. As part of several infrastructure improvement

initiatives currently underway in Iraq, the project will

improve the availability and quality of electricity for

customers in densely populated areas of the country’s

capital.8

Siemens

Siemens has positioned itself as a one-stop supplier of

energy automation technology. With extensive equipment

portfolios, the focus for smart grid is on a tight integration

of IT, operation technology, communication, and

automation to power components. The company has

8 www.abb.com/cawp/seitp202/ca3424817ffc3cf2c12579cd00338a85.aspx



Company Distribution Automation Solutions (select list – not an exhaustive list of solutions) Key Utility Customers

ABB

Substation automation & protection

Distribution protection and control

Feeder automation

Distribution communication and networking solutions

Network Manager

Distribution management system (via Ventyx solutions)

CenterPoint Energy

Duke Energy

Long Island Power Authority

Progress Energy

CDEC-SIC, Chile

UTE, Uruguay

Siemens

Medium voltage automation (Efficient Network and Energy Automation Systems)

Feeder automation (Efficient Network and Energy Automation Systems)

Applications (Efficient Network and Energy Automation Systems)

Distribution automation communication networks (via purchase of RuggedCom)

Kansas City Power & Light

Oncor Electric

A & N Electric

Maharashtra's State Electricity

Distribution Company Ltd, India

GE

Distribution automation controllers

Outage management Systems

Distribution management systems

Feeder protection systems

GIS

Substation automation systems and solutions

Substation gateways and RTUs

Solutions as a Service

PacifiCorp

Electrica de Guayaquil, Ecuador

Norcross Electric Cities of

Georgia

Schneider

Electric

Medium voltage monitoring, control, and fault detection

Substation automation systems

Power and energy monitoring systems

L500 network management

Advanced Distribution Management System (Telvent)

Dazhou Power Group, China

Basra, Iraq

Rivers State Government, Nigeria

Summary of Key Player Distribution Automation Solutions

(table 2, source: Zpryme)



taken a software-centric approach in order to provide an

end-to-end network infrastructure that enhance its

business lines in power generation, transmission, and

distribution.

Siemens and A&N Electric Cooperative recently

completed an ultra-high-speed distribution feeder

automation system for Riverside Shore Memorial Hospital.

The system enables A&N Electric to detect faults, isolate

problems, and transfer to alternative power sources almost

instantly improving the service reliability of the only hospital

serving the eastern shore of Virginia. System

communication equipments are handled by RuggedCom,

a Canadian based company specialized in

communication equipments for harsh electrical and

climatic environment. Siemens Canada Limited later

acquired RuggedCom in March 2012.

GE

Like Siemens, GE has extensive interests in the power

industry. The company has been promoting smart grid

solutions to utilities by offering comprehensive services and

turnkey contracts. In one of the latest announcements, GE

offers up FLISR systems that can be deployed in

incremental stages and scalable across the system. The

company also ventured into providing cloud-based data

services as part of their smart grid solutions. GE is also

pioneering the concept of smart grid as a service.

In 2011, GE announced a fee-for-service for smart grid

project with the city of Norcross Electric Cities of Georgia.

The company will provide an integrated system

specifically tailored to mid-market and community-owned

utilities. Under this new business model, the company’s

Grid IQ Solution will be implementing smart grid system for

the utility for a monthly fee. GE hopes to sign up more

utilities to take advantage of the economy-of-scale.9

Schneider Electric

Schneider Electric has fast become one of the major

players in serving utility customers. In the past two years, it

has made two major acquisitions that greatly expanded its

distribution system management offerings both in software

and actual devices. Like others, the company has been

providing more energy software solutions, consultancy,

and project management capabilities.

Telvent, a subsidiary of Schneider Electric, in a partnership

with IBM were selected for a smart grid project for the

largest distributor of electricity in Ontario, Hydro One. IBM

and Telvent will run tests and simulations to determine the

smart grid technologies that best fit Hydro One’s electricity

distribution system needs, including enabling increased

amount of distributed generation feed to the grid.10

Schneider Electric acquired Telvent, a Spain-based

analytical software maker, for $2 billion in 2011.

Short-Term Outlook

In the near-term utilities will continue to invest in

technologies that enable them to more effectively

manage the grid. In more mature markets the growth will

be driven by needs to modernize aging infrastructure and

the need for increasing reliability. The global trends in

9www.genewscenter.com/Content/detail.aspx?NewsAreaId=2&ReleaseID=13492 10 www.www-03.ibm.com/press/us/en/pressrelease/37308.wss



urbanization and energy efficiency are more prominent in

emerging markets where many countries are encouraging

investment in energy grids, in these markets intelligent

hardware will make up a larger share of the investment in

the short term.

As with any investment, the availability of financing will be

a barrier for mid and small utilities. Companies offering

solutions that are scalable will be more attractive to utilities

with limited access to capital who may choose to deploy

smart grid systems targeted at critical needs or those yet

unwilling to take the plunge into a full-scale smart grid

system.



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Zpryme Credits:

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Managing Editor

Robert Langston

Research Lead

Stefan Trifonov

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