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Smart Grids 360 Degree Analysis: Current Status and Future Directions

in Asia Pacific

Ravi KrishnaswamyVice PresidentEnergy PracticeFrost & SullivanAsia Pacific

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Agenda

Smart Grids Architecture

Evolution and Transformation

Industry Convergence

Utility Business Model – The Paradigm Shift

Changing Functions

Customer Service

Utility Pain points and Implications

State of Asia Pacific Smart Grids Market

Key Drivers & Restraints

Business Case Evaluation

Country Attractiveness

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Smart Grids Architecture

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Smart Grids - An Answer to Next Generation Infrastructure

Pressure on grids from renewable energy generation

Demand for security of supply and high quality of power

Greater demand for energy efficiency

Harmonisation of electricity markets needs flexible grids

Electric vehicles drive need for sophisticated infrastructure

Electricity Supply-Side Drivers Electricity Demand-Side Drivers

Growth in on-site microgeneration

Global growth and spread of distributed generation

Looming ‘gap’ in power gen capacity in mature regions

Source: Frost & Sullivan.Source: Frost & Sullivan.

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Smart House with EV car generator

Smart Grid Control Centre

Wind Power

Solar Power

Energy Storage

Hospital

Pre

20

10

Time Frame

Utility Power Generation InfrastructureTopics

Pos

t 2

01

0

Implications on Energy Management

Conventional Grid and Infrastructure

Houses

Power Station

Office Building

Factory

Transformation of Conventional Grid Energy Internet (Smart Grid)

• Centralised power generation resulting in substantial power and transmission losses

• Ageing infrastructure in most regions

• One-way metering of consumption

• Several small generating facilities (including micro-generation) – wind, solar etc.

• Advanced metering infrastructure (AMI) facilitates 2-way communication

• Offices, hospitals selling excess energy back to grid

• Electric vehicles as generators when not in use

• Increased efficiencies and reduced OPEX and environmental effects

Distributed Generation

Timeframe Analysis - Shift towards Smarter Grids

Source: Frost & Sullivan

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Smart Grid Components

Smart Grid Web

Frost & Sullivan definition“Smart Grid consist of a web oftechnologies aimed at automating,improving efficiency, and increasingavailability of the electric grid rangingfrom generation, transmission, anddistribution levels.Automation also includes tools toconduct predictive, preventative andsupply analysis based on datacollection that is conducted at thetransmission and distribution level.”

Smart Grid

Meter Manufacturers

Energy Storage & Distributed Generation

HAN Appliances

Consulting and System Integration

Demand & Response

Software

Network & Connectivity

Power Transmission & Distribution

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InternetInternet

Smart metersSmart meters

Data & ProcessData & Process

ModellingModelling

Analytics toolsAnalytics tools

AutomationAutomation

Information & Information & Control Control systemssystems

IntegrationIntegration

EquipmentEquipment

Smart sensors Smart sensors

ICT networksICT networks MaterialsMaterials

Utilities are investing in many technologies….process automation, real-time monitoring & control systems etc to achieve greater reliability and efficiency…

Distributed GenerationDistributed Generation

Energy StorageEnergy Storage

EV & HybridsEV & Hybrids

Key Technological Elements of a Digital Smart Grid

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Overall Smart Grid Architecture

Smart House with EV car generator

Smart Grid Control Centre

Wind Power

Solar Power

Energy Storage

Hospital

Customer SideGrid Side AMI

In- home displays with real time usage/pricing statistics

Home Energy Management Systems (HEMS)

Automation of the grid Fault identification Outage Management Demand Management Remote Monitoring

Smart Meters Wide Area Network (WAN) Local Area Network (LAN) Home Area Network (HAN) Meter Data Management

Systems (MDMS)

Advanced Applications

Control & Data Management

Broadband Communications

Back office

Integration of front end systems to decision making tools

Software systems

Future Applications

Electric Vehicles Advanced Storage Smart Appliances

Source: Frost & Sullivan

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Smart Grids - Convergence of Inter-Related Markets

IT Automation & Control

Energy & Infrastructure

Electric Vehicles RenewablesU

tiliti

esC

omm

unic

atio

n P

roto

cols

Ene

rgy Stora

geP

ower E

lectronics

Source: Frost & Sullivan.Source: Frost & Sullivan.

Software Building Technology

September 201010

Software & Search Engines

Key Variables and Converging Elements

Customer Participation

Energy Consumption

Carbon

Footprint

Mobile Access

Wireless Technology

Remote Control & Monitoring

Billing

Utilities

Source: Frost & Sullivan.Source: Frost & Sullivan.

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Convergence of Technology Leads to Convergence of Competition

IT PlayersAutomation/Building Control Players

Energy/Infrastructure Players

Source: Frost & SullivanSource: Frost & Sullivan

• IP Networks• Digital Technology• Analysis Software• Wireless Communication• Technology Integration• Network Security• Etc.

• T&D Technology• Power Electronics• Renewable Energy• Integrated Distribution Management• Substation Automation• AMI-Enabled Metering• Etc.

• Building Automation• Demand-Side Management• Connectivity of devices• Monitoring and Sensing• Smart Grid Integration• Etc.

Outlook for the Energy & Power Industry: Smart Energy Players (World), 2010

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Emergence of Integrated Solution providers

IT Players Automation/Building Control Players

Energy/InfrastructurePlayers

Tier 1 Integrated Solution Providers.

Source: Frost & SullivanSource: Frost & Sullivan

Outlook for the Energy & Power Industry: Smart Energy Players (World), 2010

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Utility Business Model – The Paradigm Shift

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New Business Models for Utilities

Current flow

Information flow

Distribution

Future Business Model

Electric

appliances/

devices

Customer

service

Power

generation

Power

transmission

Monitoring

Power distribution

Power from utility

Power

generation

End User/

Grid

Power from Distributed Generation units

Monitoring

Metering and energy portal

Third-party energy

management services

Energy Information Services

Current Business Model

Power

generation

Power

transmission

Electric

appliances/

devices

Customer

serviceMeteringPower

distribution

Distribution

Electricity usage bill

Retail

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Utility Functions – Now and Future

Supply Energy

Energy Buyers & Sellers

System Integrators

Leasing of

Hardware

Information Service

Providers

Application Developers

Information Aggregators

Device/ Appliance

Supermarket

Energy Managers

Guarantee Reliability

Build Capacity

Collect Revenue

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Customer Loyalty

Low HighLow

High

Loyalt

y M

ark

et

Op

port

un

ity

Loyalty Market Maturity

Hotels & Airlines

Credit & Debit Cards

Retail StoresRetail Banking Insurance

Private Pensions

Telecoms

Utilities

Other Transportation

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Countries Financial Regulatory Technological Organizational Operational

USA

EU (Early

Adopters)

EU

(Mandated)

Japan

Korea

Australia

New Zealand

China

Strongest

Utility Pain Points and its Impact on Smart Grids

EU (Early Adopters) includes Italy and Nordic countriesEU (Mandated) includes UK, France and Spain Weakest

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Key Implications for Utilities

New revenues sources for utilities will be by leveraging “information” and not “commodity”

Even though utilities create infrastructure, it is most likely that third parties will create additional value through out the value chain and hence make more profits

Ability of the utility to create an ubiqutous connectivity between its current data sources and decision making points is critical to success of smart grids

For utilities to adapt to the future would mean they have to focus on “human and intellectual capital” than just on physical assets and processes

“Marketing” as a function becomes more important than ever before for utilities

Customer education and involvement is key to success of smart grid projects

Do not under estimate the investment and over estimate the benefit

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State of Asia Pacific Smart Grids Market

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Asia Pacific – Key Drivers for Smart Grid

Integrate Renewable Energy and Electric VehiclesGovernment

Mandates and Support

Operational Efficiency

Enhancing Network Efficiency and Resilience

Shaping Consumer Behavior and providing better features to consumers

Deferring Capital Investments

Reducing Energy Wastage and Emissions

Need for Infrastructure upgrade

Evaluation of Smart Grid Technology and Business Case

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Asia Pacific – Key Restraining factors for Smart Grid

Massive Organizational Change requirements

Ambiguity around the business case

Lack of adequate support from Regulators Financing of Smart

Grid Investment

Technological Challenges

Public Reaction

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Value Proposition for Utilities

Higher

Revenues

Cost

Savings

Government

mandates and

funding

• The governments across Asia Pacific have been pushing the idea of Smart Grid through regulatory mandate as well as funding for Smart Grid implementation

• Australia, South Korea and Japan have already committed a total of US$ 258 million for Smart grid development

• Government push is the most important reason driving the Utilities towards Smart Grid

• Peak Load Power Requirement, Manpower cost and Line Losses are the major cost components to the utilities

• In several countries the power requirement ‘peaks ‘ at certain times of the year. To provide for this excess power Utilities have to build special power plants. By implementing a sound Demand Response system, the Utilities can save Billions of dollars by removing the need for these plants

• Manpower cost for Meter Reading, Meter Disconnection is huge for most Utilities. Also countries like Japan and South Korea are fighting with problems of an aging workforce. Hence, Smart Grid can help such Utilities save cost of workforce as well as solve the problems of ageing work force

• Outage Recovery can help Utilities sell more power• US Economy currently loses $150 billion every year

due to power outages• In certain countries like New Zealand Distribution

companies can even expand their consumer base by providing better service

1

2

3

3 key reasons why the Utilities would move towards Smart Grids

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Asia Pacific on a typical Smart Grid development Roadmap

AMR for CNI consumers

AMI infrastructure

Regional Demonstration/

Pilot projects Transmission and Distribution

network improvement

Renewable Energy

connectivity and Energy

storage

Enabling of Electric Vehicles connectivity to

the gridComplete Smart

Grid system deployment

MalaysiaIndonesiaThailand

Philippines

Japan

AustraliaNew Zealand

Singapore

South Korea

High Medium Low

Degree of focus on activityTime

A snapshot of the current focus of

activities for different countries

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Asia Pacific - Utilities Business Case Evaluation Meter

Higher Revenue Potential

Government Mandates and Funding

Cost Savings Potential

Low HighKey :

South Korea Low High1 52 3 4

Low High

1 52 3 4

Low High 9

New Zealand Low High

1 52 3 4

Low High

1 52 3 4

Low High 9

Australia Low High

1 52 3 4

Low High

1 52 3 4

Low High 11

Japan Low High

1 52 3 4

Low High

1 52 3 4

Low High 8

Singapore Low High

1 52 3 4

Low High

1 52 3 4

Low High 8

Rest of Asia Pacific Low High

1 52 3 4

Low High

1 52 3 4

Low High 7

Overall Score

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

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Asia Pacific - Utilities Business Case Evaluation Meter

New Zealand

Australia

China

Singapore

South Korea

Japan

Actual Roll Out

Low High

Low High

Low High

Low High

Low High

Low High

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

Pilot Projects and

Future Outlook

Low High

Low High

Low High

Low High

Low High

Low High

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

State of Utility

Low High

Low High

Low High

Low High

Low High

Low High

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

1 52 3 4

Low HighKey :

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Country attractiveness in Asia Pacific

Australia

Singapore

South Korea

Japan

New Zealand

Malaysia

Indonesia

Philippines

Propensity towards Smart Grid Investments

Deg

ree o

f Im

ple

men

tati

on

HighLow

Low

High

The shift would happen as the utilities having realized the necessity of Smart Grid or mandated by the governments, manage to raise capital from governments or the external agencies like UN or WB. A lot of them would also like to learn from others experience

Despite no government mandate New Zealand remains attractive due to continued investment by the Utilities in Smart Meters

CHINA

Thailand

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Asia Pacific Summary

Leading countries in Asia Pacific

In terms of evolution and opportunity being offered the major APAC countries rank in the following order:1.Australia2.New Zealand and South Korea3.Singapore, China and Japan

Route to market

Typically a Utility chooses a consortium of players offering a complete AMI package to them, which could mean a metering company tying up with a Network provider to provide Smart Meters to the Utility. Such an arrangement ensures a single window communication between the Utility and vendors. An integrator or a Consultant may play a role in integrating the services offered by different vendors and ensure a seamless integration of all products into the grid.

Key Factors to promote Smart Grids

While the drivers promoting Smart Grid may be different in different countries, on a broad level the three key reasons in that order why countries would move towards Smart Grid are : 1.Government Mandates and Funding2.Significant cost benefits due to peak power plant and manpower cost reduction3.Higher Revenues due to outage recovery

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Asia Pacific Summary

Way Forward

Governments across APAC have shown inclination to support the move twards a smarter grid infrastructure, even though at varied pace. Exactly what features a country needs shall vary as per a country’s energy policy, existing infrastructure and eventual objectives of investment. However, broadly speaking, Smart Grid in some form is increasingly inevitable for any country to meet its Green objectives

The Utilities across APAC region would need to keep a track of three major factors: The government mandates/ funding making Smart Gris implementation necessary and/or profitableTechnological advancements in Smart Grid area and they effect the business case for implementing a Smart GridDifferent vendors/firms involved in Smart Grid space including Metering Companies, Network Solution providers, Software firms, Integrators, Consulting firms etc and understand what product/service offerings they would need from them to help implement their own Smart Gris in the best possible manner

The Vendors and firms involved in Smart Grid area see a very dynamic market currently. The opportunity surely exists for them and to make the most of this opportunity they would need to stay ahead of the competition by keeping a track of how regulatory, technological and business environment changes in different countries. Matching an utility’s requirements would involve understanding its long term plans and coming up with suitable solutions to fulfill those plans. Given the fact that common standards are not necessarily expected in the near future, significant focus would be how well a firm can customize its products to meet the requirements of different Utilities.

Gov

ernm

ents

Util

ities

Vend

ors

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+603 6204 5832djeremiah@frost.com

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 5910carrie.low@frost.com

Ravi KrishnaswamyVice PresidentEnergy & Power Systems+65 6890 0245kravi@frost.com

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