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2014 STRATEGIC DIRECTIONS: UTILITY AUTOMATION & INTEGRATION A Black & Veatch Report
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Page 1: 2014 STRATEGIC DIRECTIONS: UTILITY AUTOMATION & …assets.fiercemarkets.net/public/sites/energy/reports/blackandveatch.… · Operating Officer of Black & Veatch’s Smart Integrated

2 0 1 4 S T R A T E G I C D I R E C T I O N S :U T I L I T Y A U T O M AT I O N & I N T E G R A T I O NA Black & Veatch Report

Page 2: 2014 STRATEGIC DIRECTIONS: UTILITY AUTOMATION & …assets.fiercemarkets.net/public/sites/energy/reports/blackandveatch.… · Operating Officer of Black & Veatch’s Smart Integrated
Page 3: 2014 STRATEGIC DIRECTIONS: UTILITY AUTOMATION & …assets.fiercemarkets.net/public/sites/energy/reports/blackandveatch.… · Operating Officer of Black & Veatch’s Smart Integrated

TABLE OF CONTENTS INTRODUCTION 2The Black & Veatch Analysis Team 4About This Report 6

EXECUTIVE SUMMARY 8

TELECOMMUNICATIONS 12 The Evolution of the Utility Network 12Outlook: Generating Value From Network Convergence 17

UTILITY AUTOMATION 18 Pushing the Boundaries of Smart Grid 18Hong Kong: Real-Time Data Monitoring Helps Keep Tabs on Stormwater 23

DATA ANALYTICS 24Bridging the Gap Between Data and Knowledge 24Outlook: A Growing Relationship Between Data Centers and Utilities 28

TECHNOLOGY 30Utilities and the Cloud 30Outlook: Tech Advantages Moving to Small Utilities 33

CONCLUSION 34The Road Ahead: Smart Integrated Infrastructure™ 34

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2 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

Welcome to the inaugural Black & Veatch Strategic Directions

report on Utility Automation and Integration. The purpose

of this report is to provide insight on common challenges

and opportunities that utilities of all sizes and types face

with regard to adding greater levels of intelligence into

their network operations.

Electric, water and gas utilities must all manage common challenges associated with the availability of natural resources,

costs, regulation and customer requirements. These challenges are driving factors for increasing automation and

communications across utility functions and implementing real-time monitoring and diagnostics to enable proactive

decision making for enhanced asset management.

Unprecedented access to information continues to break down once-siloed functions, altering traditional utility

paradigms and, in some cases, business models. This creates new opportunities for utilities to leverage automation and

communications technologies for reliability improvements, operational efficiency and enhanced security.

As utility leaders work to maintain regulatory compliance and manage budgets, it is important to align investments with

the organization’s long-term strategic vision. Telecommunications, automation and analytics programs offer utilities the

ability to accelerate the return on past, present and future capital investments.

On behalf of Black & Veatch, we are grateful to all who participated in this industrywide survey. We also acknowledge the

Black & Veatch professionals who provided their time, talent and insight in the creation of this report.

This report and all Black & Veatch industry insights are available at www.bv.com. In order to continuously improve our

reports and thought leadership materials, we welcome your questions and comments.

Please send your feedback or requests for information to [email protected].

Sincerely,

MARTIN TRAVERS | PRESIDENT

Black & Veatch’s telecommunications division

JOHN CHEVRETTE | PRESIDENT

Black & Veatch’s management consulting division

INTRODUCTION

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BL ACK & VEATCH | 3

BLACK & VEATCH IS WORKING WITH PUBLIC SERVICE ELECTRIC AND GAS COMPANY TO ACHIEVE MEASURABLE NETWORK IMPROVEMENTS USING TECHNOLOGY.

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4 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

BLACK & VEATCH ANALYSIS TEAM

EXECUTIVE SUMMARY

Fred Ellermeier is a Vice President and the Chief

Operating Officer of Black & Veatch’s Smart Integrated

Infrastructure service line. This service line leverages

distributed infrastructure development capabilities with

a high-end analytics platform to address the areas of

asset management, operational efficiency, reliability,

and sustainability to a wide variety of clients. With more

than 20 years of experience, Ellermeier is an expert in

energy management, energy optimization and sustainable

design practices.

UTILITY TELECOMMUNICATIONS

Paul Miller is a Vice President in Black & Veatch’s

telecommunications division where he leads the

company’s Private Networks business line. With

nearly 25 years of experience, Miller provides

executive leadership over all utility automation and

telecommunications projects involving electrical

substation and distribution automation, SCADA systems,

and wireless and fiber telecommunications networks.

Charles Hill is a Regional General Manager in

Black & Veatch’s telecommunications division. With more

than 35 years of experience, Hill’s technical expertise

includes telecommunications strategic and business

planning, along with design and construction of the full

range of telecommunications technologies for utilities.

Dean Siegrist is the Director of Black & Veatch’s Utility

Telecommunications business line. With more than

20 years of experience, Siegrist leads the development

and execution of utility telecommunications projects,

including a continued focus on the impact of smart grid

programs on utility telecommunications infrastructure.

UTILITY AUTOMATION

Curtis Johnson is the Utility Automation Director for

Black & Veatch’s telecommunications division. He is

responsible for client satisfaction, quality, cost and

schedule for all utility automation projects and services.

Johnson’s areas of expertise include a thorough

knowledge of the management of complex infrastructure

projects, from planning and engineering through testing

and commissioning, in order to achieve desired project

objectives. Johnson spent nearly 25 years working at

multiservice utilities before joining Black & Veatch.

Dave Roberts is an Associate Vice President in

Black & Veatch’s water business and the National Practice

Leader for instrumentation and controls services in the

Americas region. He has more than 25 years of experience

in the application of automation for energy monitoring,

control and optimization of water and wastewater facilities.

William Biehl is an Automation and Telecommunications

Project Manager in Black & Veatch’s telecommunications

division. With more than 20 years of experience, Biehl

manages projects for electric, water and gas utilities

across North America. Biehl has led projects for water

utilities in the areas of treatment, distribution and

collection specifically focused on automation and SCADA

to improve reliability and efficiency. Biehl leads electric

utility projects in distribution, substation automation and

telecommunications, improving reliability and security

with a planning focus on future requirements.

INTRODUCTION

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BL ACK & VEATCH | 5

DATA ANALYTICS

Mark Moskovitz is a Senior Executive Consultant in Black

& Veatch’s management consulting division, where

he is responsible for growing the company’s business

intelligence and data analytics services for gas, electric

and water utilities. He also has lead responsibility for

customer engagement projects and initiatives. Moskovitz

is a regular thought leadership contributor, industry

speaker and author. He co-authored the 2012 white paper

Customer Transformation – A Challenge from Competitive

Markets, among numerous other publications.

Kevin Cornish is an Executive Consultant in

Black & Veatch’s management consulting division.

With more than 25 years of direct experience in the

electric industry, Cornish specializes in the integration

of intelligent infrastructure systems, such as GIS, AMI,

MDMS and OMS, into the utility enterprise.

TECHNOLOGY

G. Scott Stallard is a Vice President and oversees asset

management services within Black & Veatch’s energy

business, where he focuses on developing processes,

tools and solutions that help power generators better

address the technical and financial challenges in

today’s market. With more than 35 years of total

experience, Stallard specializes in plant performance,

information technology solutions and competitive

generation practices.

Richard Azer is the Director of Development for

Black & Veatch’s SII service line and is involved in

developing smart city initiatives, such as microgrids,

distributed renewable energy and intelligent utility

networks. Azer has over 20 years of experience in

developing and implementing emerging technologies.

He is currently involved in a program to deliver the first

nationwide network of high-power, fast electric vehicle

charging stations.

CONCLUSION

Martin Travers is the President of Black & Veatch’s

telecommunications division and Executive Sponsor

of the company’s SII service line. Travers has led the

strategic growth of Black & Veatch’s telecommunications

business for more than 10 years. The company’s

telecommunications division provides vertically integrated

solutions to both public and private network clients

around the world. In addition, Travers is a member of

Black & Veatch’s Board of Directors.

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6 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

ABOUT THIS REPORTThis Black & Veatch Strategic Directions report focuses on Utility Automation

and Integration and is a compilation of data and analysis from an industrywide

survey. The industrywide survey was conducted from October 16 – November 8,

2013. A total of 235 qualified industry participants completed the 20-minute

questionnaire. Statistical significance testing was conducted on final survey

results. Represented data have a 95 percent confidence level.

Among these participants, 65.1 percent represent electric

utilities, 10.2 percent represent water utilities and

23 percent represent a combined utility organization

(Figure 1). Nearly half of the respondents represented

publicly owned organizations, and nearly 42 percent

represented investor-owned utilities (IOUs) (Figure 2).

The Black & Veatch survey specifically targeted executives

and technology leaders within utility organizations.

More than half of the respondents stated that operational

technologies is their area of technology responsibility

(Figure 3).

INTRODUCTION

FIGURE 1 RESPONDENTS BY UTILITY TYPE

Source: Black & Veatch NOTE: Because of the small sample size of respondents who identified their organizations as natural gas utilities, this report provides comparisons only between electric, water and combined utility providers.

Figure 3.

0

10

20

30

40

50

60

13.1%

32.6%

52.5%

24.9%

Corporate IT networks

Field device automation

Operational technologies

Operations IT networks

22.2%

Smart metering

28.5%

Other

Figure 1.

0

10

20

30

40

50

60

70

80

65.1%

10.2%1.7%

23.0%

Electric Utility Water Utility Natural Gas Utility Combined Utility

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BL ACK & VEATCH | 7

FIGURE 2 RESPONDENTS BY TYPE OF ORGANIZATION

Source: Black & Veatch NOTE: Because of the small sample size of respondents who identified their organizations as independent power producers, private or other, this report provides comparisons only between public utilities and IOUs.

FIGURE 3 RESPONDENTS BY AREAS OF TECHNOLOGY RESPONSIBILITY

Source: Black & Veatch

Figure 2.

0

10

20

30

40

50 46.8%

4.7%

41.7%

5.5%

Public IPPs IOUs Private

1.3%

Other

Figure 3.

0

10

20

30

40

50

60

13.1%

32.6%

52.5%

24.9%

Corporate IT networks

Field device automation

Operational technologies

Operations IT networks

22.2%

Smart metering

28.5%

Other

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8 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

EXECUTIVE SUMMARYBY FRED ELLERMEIER

When the term “smart grid” first entered the common lexicon, it was used to

describe a future state of electric utility distribution networks. This future

state promised a grid that would have lower operational costs and be more

reliable, more informative, better integrated and more efficient, among a long

list of additional benefits.

Since the rollout of the first smart grid programs,

there has been a realization that automation and

“smart” programs benefit all types of utilities and

infrastructure systems. Gas and water smart grids, for

example, will result in more efficient storage, improved

distribution, reductions in system losses and expanded

customer engagement.

However, as noted in Black & Veatch’s 2011 Strategic

Directions in the U.S. Electric Industry report, “divergent

perspectives make the commitment to achieving smart

grid opportunities more difficult to define, quantify and

justify. Without common alignment of program objectives,

approval from regulators, utility boards and consumer

advocates becomes difficult.”

These concerns continue to resonate in 2014.

Black & Veatch believes that the objectives and

priorities of all utility stakeholders can ultimately be

achieved through a series of progressive improvements.

These improvements go beyond a smart grid or utility

distribution network. A Smart Utility™ integrates multiple

systems, such as generation, distribution and demand-

side management, to reduce resource requirements and

costs while enhancing reliability and performance.

Additionally, by not just making a smart grid, but a “smart

utility,” currently siloed infrastructure systems, such as

electric, water, gas and transportation, can work together

seamlessly to create even greater value for a community

and each other. In a real and tangible way, we can create

Smart Integrated Infrastructure™ (Figure 4).

BUILDING ON DATA

The first step in creating Smart Integrated Infrastructure

is creating a smart network. This network is generally

referred to as a utility’s “smart grid” program and involves

the deployment of a foundational communications

infrastructure. This foundation provides the connectivity

that enables smart meters, sensors and other devices

across the utility enterprise. These devices can collect

and transmit data to utility operators. As utilities deploy

their foundational networks and advanced metering

infrastructure (AMI) systems, they also seek additional

applications to leverage the communications network and

meter as a sensor.

The benefits realized by utilities that have fully

implemented AMI programs have been compelling.

NV Energy’s NVEnergize smart metering program, for

example, has resulted in annualized operational savings

of $35 million. Smart meters for water utilities eliminate

the need to estimate customer usage, making billing more

efficient and accurate. Further, smart meters can facilitate

better management of water resources, particularly during

periods of drought. But regardless of utility type, all AMI

programs generate data – and lots of it.

Utilities are also looking to expand data collection to

include distribution and other assets, such as water

treatment plants, pumps and transmission lines. More

than 70 percent of all utilities plan to expand the use of

sensors and other instrumentation to gather field data

within the next three years (Figure 5).

EXECUTIVE SUMMARY

Figure 4.

low Integration Progression

Str

ateg

ic Im

pac

th

igh

WisdomInformation KnowledgeData

high

I. Smart Network■ Device Connectivity■ Smart Grid

II. Smart Information■ Data Aggragation and Analysis ■ Smart Single-Use Infrastructure

III. Smart Utility■ Multisystem - Multi-Facility Aggregation

IV. Smart Integrated Infrastructure■ Multiutility Integration ■ Physical-Cyber Integration

Figure 5.

0

5

10

15

20

25

30

35

40

10.6%

26.4%

39.1%

5.5%

No plans Yes, but in very limited

applications

Yes, for some important technical

and/or business applications only

Yes, for all technical and business applications

18.3%

I don’t know

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BL ACK & VEATCH | 9

FIGURE 4 THE STEPS TO SMART INTEGRATED INFRASTRUCTURE™

Source: Black & Veatch

Figure 4.

low Integration Progression

Str

ateg

ic Im

pac

th

igh

WisdomInformation KnowledgeData

high

I. Smart Network■ Device Connectivity■ Smart Grid

II. Smart Information■ Data Aggragation and Analysis ■ Smart Single-Use Infrastructure

III. Smart Utility■ Multisystem - Multi-Facility Aggregation

IV. Smart Integrated Infrastructure■ Multiutility Integration ■ Physical-Cyber Integration

FIGURE 5 PLANS TO EXPAND SENSOR USAGE FOR FIELD DATA ANALYSIS DURING NEXT THREE YEARS

Source: Black & Veatch

Figure 5.

0

5

10

15

20

25

30

35

40

10.6%

26.4%

39.1%

5.5%

No plans Yes, but in very limited

applications

Yes, for some important technical

and/or business applications only

Yes, for all technical and business applications

18.3%

I don’t know

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10 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

EXECUTIVE SUMMARY

Regardless of utility size or type, AMI and other smart

grid programs involve the creation and collection of large

volumes of data. Many utilities will be challenged to

develop the in-house infrastructure or expertise necessary

to manage, store and secure the data generated across

their operations. As detailed in the Technology section,

cloud services, whether privately owned or outsourced, are

envisioned to emerge as an essential component of future

utility operations.

Today, less than 30 percent of survey participants stated

their organization currently uses some form of public

or private cloud-based solutions. Of the organizations

that are using some form of cloud services, most activity

is limited to hosting software applications, data backup

and data storage solutions. Cloud-based services

represent an area of opportunity for many utilities to

enhance operations.

Transferring data generated from smart meters and

sensors across a utility’s enterprise to a central control

location requires a robust telecommunications backbone.

Yet, the lack of available wireless spectrum and

ongoing financial pressures are limiting utilities’ ability

to incorporate smart grid programs into their private

communications network. As a result, many utilities

are increasing reliance upon public carriers for non-

mission critical applications. The Telecommunications

section addresses common problems and solutions for

maximizing utility telecom networks.

Distribution automation is another area with substantial

value for utilities. This is particularly important for electric

utilities that are preparing for greater levels of control

and monitoring in their network, while also supporting

distributed generation and renewable energy use.

Distribution automation programs allow for improved

efficiency of the network through optimization of the

system and overall better asset management (refer to the

Utility Automation section for additional information).

ANALYTICS

Managing data can be a challenge. However, converting

data into actionable information and institutional

knowledge is an opportunity. Just as the nervous system

provides critical information to the brain, sensor data

can tell a utility operator that a pump bearing is running

2 degrees warmer than usual. Analytics can tell the

operator that, without proactive repair, the pump will

likely fail.

When considering the goals and objectives that many

conceived when smart grid first came into being,

analytics is fundamental to making these goals a reality.

However, implementation of analytic programs has been

relatively slow.

When asked what they considered their organization’s

obstacles to capitalizing on data analytics, utilities listed

budget constraints, justifying the return on investment

(ROI) and insufficient in-house experience, respectively,

as the top three reasons they have not moved forward

(Figure 6).

As Black & Veatch noted its 2011 Strategic Directions in

the U.S. Electric Industry report, regulatory review and

approval and business case development were the

primary obstacles to the initial smart grid deployments.

A primary challenge with smart grid initiatives is that

“the business cases are reviewed by regulators and

other stakeholders with a level of critical analysis not

seen in most other utility projects. Additionally, internal

competition for capital and organizational focus results

in increasingly critical attention in the management

review cycle.”

The primary challenge for smart grid in 2011, and analytics

programs today, is the need to make assumptions about

the desired future state of the utility as a result of the

smart grid/analytics programs. These assumptions can

be the focal point of internal deliberations because

they often have significant impact on the project

financials. Black & Veatch continues to recommend that

clients perform consistent and rigorous business case

assessments for all smart grid investments.

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BL ACK & VEATCH | 11

Proving the value of analytics may be the last great

obstacle to creating utilities of the future and Smart

Integrated Infrastructure. Just as the first advanced

metering and “smart grid” programs provided valuable

lessons learned and benchmarks for others to follow, the

application of data analytics and management programs

will create new ways for data-driven enterprises to

integrate real-time knowledge. This will allow managers

to make smarter operating decisions and efficiently deliver

on the business goals of the utility enterprise.

FIGURE 6 TOP OBSTACLES TO IMPLEMENTING DATA ANALYTICS SOLUTIONS

Source: Black & Veatch Participants were asked to select the three greatest obstacles to implementing data analytics at their organizations. This chart highlights the top five items as ranked by industry respondents.

Figure 6.

0

10

20

30

40

50

60

70

80

63.7%

30.3%

Budget constraints

40.6%

24.8%

10.3%

Insufficient in-house expertise

Justifying the ROI

Lack of in-house understanding

or support

Security concerns

26.9%

PROVING THE VALUE OF ANALYTICS MAY BE THE LAST GREAT OBSTACLE TO CREATING UTILITIES OF THE FUTURE AND SMART INTEGRATED INFRASTRUCTURE.

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12 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

THE EVOLUTION OF THE UTILITY NETWORKBY PAUL MILLER , CHARLES HILL AND DEAN SIEGRIST

Increased connectivity is creating new types of data and control functions for

utilities. Smart grid investments are increasing utilities’ telecommunications

network requirements from both a geographic and capacity perspective.

As noted in the Technology section, growth in the use and deployment of

automation technologies, devices, and systems that use utility telecom

infrastructure is ongoing. However, without adequate improvements to a utility’s

telecommunications network, the full value of ongoing and future smart grid

investments cannot be realized.

For example, among the ongoing technology expansions,

advanced distribution automation is seen as having the

greatest impact on utility operations within the next five

years. Distribution automation is driving new telecom

requirements into areas of the utility’s operations that

have not had this type of connectivity. In turn, new

levels of connectivity create a need for greater network

performance, reliability and security.

MEETING FUTURE NEEDS

Today’s utilities typically use a combination of both

public networks provided by telecom carriers and private

networks built to address their own internal requirements.

The use of this hybrid model is expected to continue

for the foreseeable future. The majority of survey

respondents stated they expect their utility to continue

to use both public and private networks.

Public networks are widely used by utilities for advanced

metering infrastructure (AMI) and traditional business

needs, such as voice and Internet connectivity. But

public networks are viewed less favorably for mission-

critical applications. Direct control and operation of

the infrastructure is vital for utilities, particularly during

extreme circumstances such as severe weather events.

Utilities need to be able to efficiently manage and control

their infrastructure for service restoration even when

commercial communications are not available.

Emphasis on the continued rollout of smart grid initiatives

perhaps explains the diversity in responses to the

question of how utilities will meet their telecom network

needs in the future. If a utility is actively deploying AMI,

it could mean that it is increasing its reliance on public

networks. If the utility is advancing to more automation

activities, then it is likely building out or expanding its

existing private networks to support these operations

(Figure 7).

Most utilities continue to see private networks as an

indispensable component of their operations. As a

result, substantial investments are planned across both

traditional and new telecom technologies to replace

outdated systems and meet future requirements as well.

However, a number of factors challenge utilities when it

comes to addressing their network needs.

Utility staffing, for example, is generally focused on

meeting operational requirements. Aging workforces,

challenges with recruiting technical talent to work in utility

operations and costs associated with necessary personnel

TELECOMMUNICATIONS

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BL ACK & VEATCH | 13

FIGURE 7 MEETING FUTURE TELECOM NETWORK NEEDS – BY UTILITY TYPE

Source: Black & Veatch Utilities were asked how their organizations will meet operational telecommunications network needs in the future.

0

10

20

30

40

50

13%

Maintain utility owned or

other private network

Maintain use of public carrier

network

Maintain combined use of

private and public networks

Increased dependence on private network

to support utility operations

Increased dependence on

public carrier network to

support utility operations

I don’t know

28%30%

33%

7% 6%

42%

31%

26%

4%

10%

19%

4%5% 4% 4%

18% 17%

Electric Utility Water Utility Combined Utility

make it difficult for utilities to engineer and deploy new

technologies and networks in a manner that can keep pace

with evolving requirements. Several Black & Veatch clients

are investigating options to outsource the engineering

and operations and maintenance (O&M) of their private

telecom networks. This emerging trend was confirmed

by survey respondents, where 18.4 percent stated

outsourcing was likely or very likely (Figure 8).

WIRELESS SPECTRUM

Utilities rely on wireless telecommunications networks,

such as microwave and mobile radio, to meet specific

operational needs and support the reliable delivery of

services. In addition, wireless networks represent the most

efficient means for meeting growing smart grid network

requirements. However, wireless networks need spectrum,

and utilities typically do not have access to adequate

amounts of spectrum to meet existing and future needs.

The Utilities Telecom Council (UTC) has estimated that 30

megahertz (MHz) of spectrum in a frequency range below

2 gigahertz (GHz) is necessary in order to meet future

utility communications requirements. Unfortunately,

utilities do not have reliable, available alternatives for

dedicated spectrum to support these needs.

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14 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

FIGURE 9 LIKELIHOOD OF IMPLEMENTING A PRIVATE NETWORK

Source: Black & Veatch All participants were asked the likelihood of their organization developing a private network telecom solution to support utility operations or resiliency if additional radio spectrum were allocated by the FCC. This chart excludes “I don’t know” responses (23.4 percent of respondents).

0

5

10

15

20

25

30

35

10.2%

19.6%

34.9%

11.9%

Not likely, utilize public carrier

network

Not likely, already have

private network solution

Moderately likely, would

consider for future smart

grid needs

Very likely, would consider building network utilizing

this spectrum

TELECOMMUNICATIONS

FIGURE 8 LIKELIHOOD OF OUTSOURCING ENGINEERING AND O&M OF PRIVATE TELECOM NETWORK

Source: Black & Veatch Participants were asked how likely it will be for their organization to outsource the engineering and O&M of their private telecom network. This chart excludes “I don’t know” responses (21.8 percent of respondents).

0

5

10

15

20

25

15.0%

23.5%21.4%

12.8%

Very unlikely Unlikely Neutral Likely

5.6%

Very likely

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BL ACK & VEATCH | 15

A key advantage of public carrier networks is that they

control large bands of radio spectrum. This spectrum,

allocated by the Federal Communications Commission

(FCC), could help utilities connect the thousands,

if not millions, of smart devices across wide service

territories. However, these carrier networks do not provide

immediate access and availability under all circumstances

because utilities are only one among a large number of

customers and connections. This circumstance drives

many utilities to the conclusion that they should build

their own private wireless networks to meet specific

operational requirements. Nearly half (46.8 percent) of

all respondents stated it was moderately or very likely

that their utility would develop its own a private wireless

network if additional radio spectrum were allocated by the

FCC (Figure 9). This is particularly true for small utilities

(serving populations less than 50,000) where nearly

60 percent indicated their organizations would consider

building private networks (Figure 10).

Based on available information, it appears unlikely that

the FCC will allocate additional radio spectrum dedicated

for utility use in the near term. As a result, utilities are

challenged to leverage all available spectrum choices,

including public and private carriers and unlicensed

spectrum, in order to maximize their wireless capabilities.

There is also potential for utilities to access spectrum

recently allocated on a nationwide basis for the First

Responder Network Authority (FirstNet). The Middle Class

Tax Relief and Job Creation Act of 2012 created FirstNet

in order to develop the first nationwide high-speed,

broadband network dedicated to public safety. FirstNet is

to be built on the Long-Term Evolution (LTE) technology

standard in order to deliver a cost-effective, reliable public

network across the United States.

The authorizing legislation encourages FirstNet to seek

additional participants such as utilities on a secondary

FIGURE 10 LIKELIHOOD OF IMPLEMENTING A PRIVATE NETWORK – BY SIZE OF POPULATION SERVED

Source: Black & Veatch All participants were asked the likelihood of their organization developing a private network telecom solution to support utility operations or resiliency if additional radio spectrum were allocated by the FCC. Nearly 60 percent of small utilities said such activity was moderately or very likely.

Figure 10.

0

10

20

30

40

50

17.6%

6%

18%

9.1%

35.3%

47%

18.9%

11.8%

35.7%

12%

15.4%

0%

35.3%

18%21.0%

<49,999 50,000-99,999 100,000+

Not likely, utilize public carrier

network

Not likely, already have

own private network solution

Moderately likely, would

consider for future smart

grid needs

Very likely, would consider building

own network utilizing this

spectrum

I don’t know

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16 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

TELECOMMUNICATIONS

use basis or possibly as public-private partners in the

network. Individual states are currently reaching out to

potential stakeholders within their state to establish

requirements and explore assets that might support

the FirstNet initiative. Black & Veatch recommends that

utilities actively engage in discussions at the state level

to explore the value, synergy and benefits for them that

might be achieved.

NETWORK CONVERGENCE

As utilities have evolved over the past several decades,

separate networks were built for specific operational

functions (e.g., mobile radio, SCADA). Reducing the

number of separate networks a utility owns and maintains

is one way to potentially reduce operational costs. One

advancing solution is an Internet Protocol (IP)-based on a

Multi-Protocol Label Switching (MPLS) network (refer to

Outlook: Generating Value from Network Convergence).

Another area of opportunity to gain cost efficiencies

is for electric, water and/or gas utilities to share

communications infrastructure. Wireless infrastructure

needed for remote meter reading is just one example

of where utilities could collaborate to leverage the

investment costs between utilities implementing

similar functions.

Multiutility collaboration could be particularly beneficial

for water utilities where extending wireless infrastructure

may be cost prohibitive. By extending network access

and reach, water utility leaders could improve watershed

monitoring and scheduling of resources, reduce energy

consumption and implement asset management

programs in a cost-effective manner. However, joint

use agreements and regulatory hurdles will need

to be addressed in order for utilities to implement

collaborative plans.

Optimizing a utility network requires thorough

planning. Black & Veatch recommends developing a

telecommunications master plan. A telecom master

plan outlines the strategies and business requirements

that a utility has in place today, as well as its vision and

anticipated future needs.

Using the current state as a starting point, the master

plan is created to provide a blueprint of what the future

network will look like. The plan will also provide utilities

with a phased roadmap for efficient migration to the

desired future state. The phases of the roadmap are

often implemented over multiple years, with potential

midcourse updates along the way.

WITHOUT ADEQUATE IMPROVEMENTS TO A UTILITY’S TELECOM NETWORK, THE FULL VALUE OF ONGOING AND FUTURE SMART GRID INVESTMENTS CANNOT BE REALIZED.

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BL ACK & VEATCH | 17

Outlook: Generating Value From Network Convergence

BY CHARLES HILL

Reducing the number of networks a utility owns and

maintains helps reduce the overall complexity of the

utility network. This also makes it easier to manage and

secure the network, while reducing operational costs.

Multi-Protocol Label Switching (MPLS) is one technology

solution that many utilities have chosen to converge their

disparate networks.

MPLS is a globally leveraged, standards-based Internet

Protocol (IP) network virtualization technology used by

large network owner/operators to scale and connect

thousands of devices, sensors and users across a single

cost-effective communications network platform.

One of the main advantages that utility companies are

finding with MPLS is the ability to segregate and “tag”

mission-critical data applications apart from noncritical

applications. This separation of data allows a utility

to maximize its investments in a shared, physical

infrastructure while ensuring high performance and

reliability for its operational goals and objectives.

Network convergence lowers the operational expense

and maintenance costs utilities need to support mission-

critical infrastructure, while providing scalability. The

convergence of data network infrastructures using

virtual, standards-based IP solutions is one of the best

paths forward for a utility considering modernizing its

network infrastructure.

A key element in network convergence is interoperability.

As utilities continue adding new technology applications

and services to their communications network, a

standardized transmission and packetization protocol,

such as Transmission Control Protocol (TCP)/IP, will allow

these different technology applications to communicate

over a single, integrated network architecture.

Moving forward with a network convergence program

requires comprehensive planning and execution. Steps

must be taken from start to finish to ensure that the

implementation of connected technologies is approached

with great care. And, as the new network is developed

and put in place, utilities still must maintain and operate

legacy network technologies, such as Time-Division

Multiplexing (TDM) or Synchronous Optical Networking

(SONET), until a full migration can take place. Black &

Veatch offers proven program and project methodologies

to assist utilities every step of the way and to help utility

leaders ensure that they are maximizing both their capital

and staffing resources in a manner that reduces overall

operational and capital costs.

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18 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

PUSHING THE BOUNDARIES OF SMART GRIDBY CURTIS JOHNSON, DAVE ROBERTS AND WILLIAM BIEHL

The past several years have brought an unprecedented level of automation

technology deployments. Spurred by U.S. government funding, millions of

“smart” advanced metering infrastructure (AMI) devices were placed throughout

electric utility networks to improve operational efficiency. For operators weighing

the decision to invest in greater utility automation, validation of expected

benefits from installed systems and alignment of advancing technology for a

demonstrable impact on operations appear to be key decision factors.

Significant progress has been made by utilities adopting

AMI technology, as demonstrated on Figure 11. AMI

provides information about customer energy, water

and/or gas usage at a level of granularity never before

experienced. The application of this information is proven

to streamline a host of cost drivers, such as the number of

“truck rolls” and reductions in manual meter reads, as well

as potential loss detection or prevention.

Customer benefits from these deployments have included

more accurate billing information and, for electric

customers, faster service hook-ups/disconnects. Most

importantly, AMI provides the foundation for the two-

way networks that can identify customer outages before

individual customers call the utility to report them.

Federal support accelerated AMI programs, but with

strong mandates for reliability and safety, utilities

were unlikely to make large-scale investments without

supporting data. However, increasing environmental

and security regulations are creating new cost pressures

that require managing the effectiveness of distribution

infrastructure at a more granular level. For electric

utilities, this includes using less energy, balancing energy

resources and automating processes that enable the utility

to stabilize and recover services faster. In essence, the

concept of a “self-healing” grid is coming closer to fruition

through automation efforts built on the AMI foundation.

UTILIT Y AUTOMATION

Figure 11.

0

10

20

30

40

50 44.7% 43.8%39.1%

26.8%

Facility operational data

AMI data Distribution metering

data

Major facility status and

alarming data

17.9%

Distribution pressure

data

20.4%

I don’t know

AMI PROVIDES THE FOUNDATION FOR THE TWO-WAY NETWORKS THAT CAN IDENTIFY CUSTOMER OUTAGES BEFORE INDIVIDUAL CUSTOMERS CALL THE UTILITY TO REPORT THEM.

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BL ACK & VEATCH | 19

FIGURE 11 INFORMATION CURRENTLY COLLECTED FOR REMOTE MONITORING

Source: Black & VeatchAll participants were asked to select all areas where their utility is currently collecting and transmitting facility operations information to a central location for remote monitoring and/or historical data collection.

Figure 11.

0

10

20

30

40

50 44.7% 43.8%39.1%

26.8%

Facility operational data

AMI data Distribution metering

data

Major facility status and

alarming data

17.9%

Distribution pressure

data

20.4%

I don’t know

FIGURE 12 AREAS REMOTELY MEASURED OR MONITORED – BY UTILITY TYPE

Source: Black & VeatchAll participants were asked to select the areas where their utility remotely measures and monitors equipment performance and/or conditions.

Figure 12.

0

10

20

30

40

50

60

70

33%

Consumer devices or

meters

52%48%

Electric Utility Water Utility Combined Utility

31%

17%

8%

46%

62%

54%

25%

42%44%

4%

28% 26%

46%48%

57%

17%

54%

44%

4%4%9%

Distributed energy

production

Distribution systems

Facility operations communi-

cations

Fleet vehicles

Plant/facility

performance

Transmission networks

I don’t know

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20 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

UTILIT Y AUTOMATION

The next step in the automation progression involves

the testing of automated distribution, with many utilities

already using remote measuring to monitor equipment

performance and conditions (Figure 12). Because

all utilities, whether they are electric, water, gas or a

combined utility, are increasingly focused on enhancing

operations, reducing costs and conserving resources,

Black & Veatch expects remote monitoring and measuring

efforts to continue to grow across the entirety of every

utility’s enterprise.

Automation technologies and solutions, such as Fault

Location, Isolation and Service Restoration (FLISR), volt/

VAR optimization, intelligent electronic devices (IEDs) and

distributed energy resource integration, are being tested

by many utilities (Figure 13). Additionally, SCADA systems

are one area of continuous focus for utilities. Nearly three-

fourths of survey participants are currently implementing

or planning to implement upgrades to their distribution

SCADA system in the next five years.

FIGURE 13 PLANS FOR UTILITY AUTOMATION TECHNOLOGY INVESTMENTS

Source: Black & VeatchParticipants were asked what plans their organization had for investing in the listed utility automation technologies.

Figure 13.

0

20

40

60

80

100

Distribution SCADA

FLISRIEDsSubstation automation

Volt/VAR optimization

Within the next 5 years In more than 5 years No plans/I don’t know

64.7%72.4% 62.7% 52.8% 49.6%

1.3%4.3% 5.2%

6.4% 5.6%

26.3% 31.0% 32.1% 40.8% 44.8%

Figure 14.

0

5

10

15

20

25

30

12.4%

29.1%

15.8%

10.7%

Less than3 years

3 to less than7 years

7 to less than10 years

10 yearsor more

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BL ACK & VEATCH | 21

FIGURE 14 YEARS LEFT TO UPGRADE/REPLACE CENTRALIZED CONTROL SYSTEM

Source: Black & VeatchAll participants were asked how many useful years of service life remain before their utility will need to upgrade/replace its SCADA, distributed control system (DCS) or other centralized control system. This chart excludes “I don’t know/does not apply” responses (32.1 percent of respondents).

Figure 14.

0

5

10

15

20

25

30

12.4%

29.1%

15.8%

10.7%

Less than3 years

3 to less than7 years

7 to less than10 years

10 yearsor more

BLACK & VEATCH EXPECTS REMOTE MONITORING AND MEASURING EFFORTS TO CONTINUE TO GROW ACROSS THE ENTIRETY OF EVERY UTILITY’S ENTERPRISE.

SCADA systems, like any technology, become obsolete

with age. For SCADA systems, continued vendor support

to its product line and ongoing improvement of the

SCADA offering are obsolescence issues that should be

considered separate from hardware obsolescence. More

than half of utility respondents expect their organization

to replace critical operating control systems in the next

10 years (Figure 14). This upcoming replacement cycle

provides the opportunity for utilities to incorporate some

of the latest software and hardware advances. These

technology advances can help utilities more effectively

leverage their AMI and communications investments.

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22 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

UTILIT Y AUTOMATION

BENEFITS OF AUTOMATION

FOR ELECTRIC UTILITIES

Distribution automation for electric utilities is becoming

increasingly more important as organizations prepare for

greater levels of distributed generation and renewable

energy use. Automation must be able to account for

not only optimizing and increasing the efficiency of an

operation, it also means considering alternative energy

sources, the cost of those sources and how to best

schedule each energy source to optimize the total value.

The integration of renewable energy into the California

market, for example, has not been without some

challenges. Driven by low-cost natural gas prices and

aggressive mandates to incorporate renewable supplies,

operators will require a complex integration model

to coordinate the inflow of renewable supplies from

their source locations into the existing grid network.

Automation must facilitate the interplay between

baseload generation stations and distributed resources to

ensure system reliability.

Perhaps the most successful example of the benefits of

pushing smart technology deeper into the network comes

not from the United States, but from a program in Rio de

Janeiro to deploy meters to improve billing accuracy. The

multiyear effort to deploy AMI infrastructure resulted in

a significant decrease in power theft: from approximately

80 percent to near zero.

The Rio de Janeiro program provides a clear example of

how greater data regarding end-user consumption can

reshape a power distribution market. In the U.S. market,

continued improvement of metering tools, operational

automation and actionable intelligence driven by data

analysis will continue to push the boundaries of efficiency.

BENEFITS OF AUTOMATION

FOR WATER UTILITIES

Similarly, water utilities are increasingly looking for savings

from investments in operational automation and control

systems as they face continued pressure to “do more with

less.” To maximize performance, new automated systems

can interpret data from factors such as water source,

pump efficiency and others.

Faster responses, reducing human error and

24/7 monitoring can help enhance the performance of

existing assets and enable utilities to allocate capital

based on risk using data collected from systems and

assets. AMI systems, for example, provide more granular

data that can be used to detect and prevent leaks as well

as reduce other forms of nonrevenue water.

SUCCESSFUL IMPLEMENTATION

Realistically speaking, distribution automation for

electric utilities has been around for many years. Electro-

mechanical substation relays, hydraulic reclosers, and

time and temperature controlled capacitor banks are but a

few examples of mature analog automation of the electric

power distribution system.

Digital communications and microprocessor technologies

have tremendously expanded the ability to further

automate the electric distribution system much in the

same way they have transformed the rest of the world. As

these technologies continue to develop and become less

expensive, utilities of all types and sizes will increasingly

deploy these new assets to improve the reliability, safety

and efficiency of their distribution infrastructure.

As utilities continue the migration towards automation,

it will be critical to incorporate technology investments

and systems into the their long-term plans. Automation

requires careful planning and implementation to ensure

that capital investments are used efficiently and are

aligned with business goals.

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BL ACK & VEATCH | 23

Hong Kong: Real-Time Data Monitoring Helps

Keep Tabs on Stormwater

BY KELVIN L AU

Smarter use of data is taking center stage in Hong Kong’s

stormwater management strategies. The award-winning

Happy Valley project is one example of the Drainage

Services Department (DSD) of the Government of the

Hong Kong Special Administrative Region’s (SAR) long-

term commitment to finding new ways of integrating data

to modernize its efforts in fighting the age-old problem

of flooding.

An advanced approach is being taken to flood alleviation

in low-lying Happy Valley. An underground storage tank is

being built beneath the area’s famous horse racing venue.

The system, with supervisory control and data acquisition

(SCADA) monitoring as its backbone, is designed to

work with nature, not against it. It serves as an emerging

example of how cities around the world are rethinking

the way they plan and manage intense rainfall in crowded

urban spaces.

During tropical downpours in Hong Kong, real-time

monitoring of data will help manage the flow of

stormwater in the drainage system. In many ways, the

Happy Valley storage tank will be brought online to

alleviate stress within the local network. Stormwater will

be intercepted and peak flow attenuated by diverting

water to be temporarily stored in the 60,000 cubic meter

storage tank. When the intensity of the rainfall subsides,

the water stored will be diverted back into the system

when it can manage the flows more effectively.

A movable crest weir system adds another layer of

innovation that allows the water to return to the network

via a gravity flow. Its operation will also be hooked up

and plugged into the SCADA real-time monitoring.

Water levels and, crucially, tidal levels will be monitored

by a command center tasked to respond and manage

the flows.

Kelvin Lau is an Associate Vice President and Senior Project Director in Black & Veatch’s water business based in Hong Kong.

Having worked in the civil engineering field for over 30 years in both the private and public sector, Lau brings a wealth of

knowledge in areas such as water, drainage and sewage infrastructure, underground facilities installation and information

technology solutions.

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24 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

BRIDGING THE GAP BETWEEN DATA AND KNOWLEDGE BY MARK MOSKOVITZ, G. SCOTT STALL ARD AND KEVIN CORNISH

Now more than ever, data are informing the way utilities manage their

operations and business needs. Investments in intelligent infrastructure

technology have created an unprecedented ability to measure conditions,

asset status, performance and activity of the grid or utility networks. However,

based on Black & Veatch industry survey results, notable gaps, uncertainty

and barriers still exist for utilities attempting to develop and deploy a smarter

analytics capability.

Capturing and converting the right data at the right time

into actionable intelligence is the essence of analytics.

Taken together, much of the value from intelligent

infrastructure investments will depend on how utilities

implement analytics in order to leverage the data capture

in the following ways:

■■ Measuring activity within their systems (rather than estimating it) in order to react more quickly to emerging conditions.

■■ Moving from a reactive to proactive operating/business approach.

■■ Developing new opportunities for revenue/cost control.

■■ Improving risk management and mitigation.

ANALYTICS IN ACTION

Much of the data analytics used by utilities today appear

to be focused on tracking current or past activities

(i.e., measuring and validation) as shown on Figure 15.

However, evolving a program toward the use of predictive

and prescriptive analytics will provide utility leaders

with better information to support future action. The

value of such analytics programs is the ability to

identify and address maintenance and/or operational

issues in a manner that could prevent catastrophic

equipment failures. In essence, fixing the “small things”

and cost avoidance can have a big impact on budgets

and performance.

For example, Black & Veatch’s Asset 360 platform

provides monitoring and diagnostic services for utility

clients. The following are examples of issues identified for

a Midwestern municipal utility within the first year of using

Asset 360 services for its 194 megawatt (MW) power plant.

■■ Turbine inner casing leak: A 2.5 to 3 percent drop in low-pressure turbine efficiency was detected. Further inspection identified a failing port gasket as the cause of the problem. Left undetected, the failing gasket would result in approximately $36,000 per month in additional fuel costs and a 2.6 MW reduction in capacity margin.

■■ Internal extraction line failure: A deviation in one of the unit’s low-pressure turbine stage pressure ratios was detected. Further inspection identified an extraction line expansion joint failure as the cause. Black & Veatch estimated that this failure was costing the client approximately $25,500 per month in fuel costs plus a 4.5 MW derate.

■■ Turbine deposits: Six months after upgrading its turbine, the unit’s capacity dropped 17 MW. In addition, there was an 8 percent loss in steam flow, among other efficiency losses. Deposits on the turbine were determined to be the cause of the loss in efficiency. Left undeterred, the deposits would have cost the client approximately $37,500 per month in added fuel costs and a 17 MW derate.

Utility leaders recognize the value analytics can provide

their organization, rating “Evaluating operational or

maintenance options/scenarios” and “Improving/

maintaining service reliability” as the top two areas of their

organization that would benefit from expanded analytics

capabilities (Figure 16).

DATA ANALYTICS

Figure 15.

0

5

10

15

20

25

30

35

40 37.6% 37.2% 35.5%

24.8%

Measurement and validation

Descriptive analytics

Closed-loop optimization

Predictive analytics

15.8%

Prescriptive analytics

32.1%

I don’t know

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BL ACK & VEATCH | 25

FIGURE 15 DATA ANALYTICS CURRENTLY IN USE

Source: Black & VeatchAll respondents were asked what types of data analytics their utility currently uses to improve operational performance.

Figure 15.

0

5

10

15

20

25

30

35

40 37.6% 37.2% 35.5%

24.8%

Measurement and validation

Descriptive analytics

Closed-loop optimization

Predictive analytics

15.8%

Prescriptive analytics

32.1%

I don’t know

FIGURE 16 TOP OPERATIONAL AREAS FOR EXPANDED DATA MANAGEMENT AND ANALYTICS

Source: Black & VeatchAll respondents were asked to select the top three operational areas they believe their utility would be best served by expanded data management and analytics capabilities.

Figure 16.

51.5%

38.2%

32.6%

48.9%

27.5%Monitoring performance

Identifying issues and losses

Outage management

Improving/maintaining service reliability

Evaluating operational or maintenance options/scenarios

0 10 20 30 40 50

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26 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

DATA ANALYTICS

From a business function perspective, respondents

selected asset management programs, or components

of asset management, as the top three areas that would

benefit from expanded data management and analytics

capability (Figure 17).

The disconnect between the forward-looking

optimism toward the application of analytics in asset

management and its current usage was also highlighted

in Black & Veatch’s 2013 Strategic Directions in the

U.S. Water Industry report. In the report, more than

70 percent of respondents stated their utility has condition

assessment and inspection programs in place. However,

only 27.5 percent stated their utility has or is planning to

implement deterioration modeling to proactively manage

assets. The lack of deterioration modeling represents

a missed opportunity to improve rehabilitation and

replacement planning for their buried infrastructure.

Analytics and asset management programs go hand

in glove. Data, and the analytics derived from the data,

enable utilities to develop risk-based plans to proactively

manage utility assets. Because such programs break down

functional silos that exist within many utility organizations,

it is positive to see that more than 35 percent of

respondents (Figure 18) stated their utility is using cross-

functional teams to determine which data and analytics

investments to pursue.

IMPROVING SERVICES AND OPERATIONS

Improving customer service is also an important area

of focus for many utilities. Outage management is one

area where analytics can help electric utilities better

serve their customers. Analytics, data management and

communications capabilities allow utilities to respond

to outages in real time. These capabilities also help

the utility keep customers informed on the status of an

outage, the repair timeline and when service was restored.

Additionally, analytics helps utilities study the cause of

outages and develop preventive measures for the future.

For water utilities, analytics can be an essential part of

an integrated effort to improve efficiency across entire

infrastructure systems. Real-time information enables

operators to make informed operating decisions.

For example, in a storm situation, real-time data on

wastewater levels and flows enable an operator to make

decisions about what to treat and what to divert. Sensor-

based data can also aid in the understanding of water

utilization and distribution. Sound data and analytics can

help utilities provide customers with more accurate bills

and minimize nonrevenue water, a key industry issue.

Reliability factors are also particularly important for

utilities in regions with aggressive renewable portfolio

standards and incentives. The influx of distributed

generation, such as rooftop solar, can have a profound

impact on the traditional daily demand curves for a service

territory. While historical load ranges can help inform

decisions, each day offers opportunities for variations.

Analytics will be critical for utilities in scheduling

traditional baseload power and optimizing transmission

and distribution assets for rapid ramp ups and ramp downs

to continuously meet fluctuating power demands.

DEVELOPING ANALYTICS PROGRAMS

Many grid, utility and network operators have focused, and

continue to focus, on how best to use the volumes of new

data generated from across their service regions. Because

of this focus, data analytics and management represent

the next opportunity for utilities to reduce costs and

improve services.

However, more data for the sake of having more data is

not necessarily better. Developing data flows and analytics

programs requires merging together once siloed functions

to create a whole greater than the sum of its parts. Amid

the flood of new information, utility leaders must use

their organization’s business issues, questions, risks and

priorities as the guiding influences for their analytics

programs. Black & Veatch recommends that utilities use

their data analysts to respond to specific business and/

or operational questions by examining the appropriate

data sources.

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BL ACK & VEATCH | 27

FIGURE 17 TOP BUSINESS AREAS FOR EXPANDED DATA MANAGEMENT AND ANALYTICS

Source: Black & VeatchAll respondents were asked to select the top three business areas they believe their utility would be best served by expanded data management and analytics capabilities.

Figure 17.

56.6%

29.8%

28.1%

42.6%

27.2%Customer billing, collections and/or revenue protection

Customer service/engagement

Risk management

Capital investment prioritization

Asset management

0 10 20 30 40 50 60

FIGURE 18 TEAM(S) RESPONSIBLE FOR DETERMINING ANALYTICS INVESTMENTS

Source: Black & VeatchAll participants were asked who in their utility has the lead in determining what operational data management and analytics investments to make.

Figure 18.

0

5

10

15

20

25

30

35

4035.3%

7.7% 8.1% 8.5%

Cross-functional

team

IT Operations Plant/facility management

26.4%

Senior/corporate

management

11.5%

Other

2.6%

I don’t know

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28 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

Outlook: A Growing Relationship Between

Data Centers and Utilities

BY JOHN VOELLER

In the United States alone, more than 600 independent

data center projects of varying sizes and scope

commenced or were completed between January 2011

and November 2013. Business and consumer trends are

expected to propel data center construction spending

for the foreseeable future. The volume and pace of

constructing new data centers, or expanding or renovating

existing facilities, reflects the growing need to manage

data for virtually all types of businesses, including utilities.

These figures do not include the hundreds, if not

thousands, of private facilities that corporations and firms

are building to serve their internal needs. Independent

data centers represent a unique challenge and

opportunity for electric utilities. Large facilities represent

a lucrative power customer or resource. Independent data

centers also represent a potential service provider for

storing and managing the steadily increasing amount of

information generated from across a utility’s enterprise –

regardless of utility type or size.

DATA CENTERS AS A CUSTOMER OR RESOURCE

As client demand increases the load on a data center,

the infrastructure supporting the facility must become

more robust as well. Meeting the unique and growing

needs of data centers will require a thorough assessment

of an electric utility’s business capabilities and plans,

its customer needs and the economics of developing

alternative power solutions.

One area to watch will be whether increases in data center

revenue per minute justify the continuation of traditional

power provider relationships. Should power prices

impact data center returns, or if client needs and service

levels impact the cost and capital structure, data

center operators may choose to adopt an island or

“off-grid” structure.

In North America, low-cost natural gas has prompted

commercial and industrial users of all types to consider

on-site, natural gas-fueled generation. Such decisions

may have strategic benefits for facility owners and electric

service providers. For example, adding new, traditional

baseload power generation can be challenging for

utilities in many regions. The elimination of a large power

consumer from the local grid could delay or prevent

the need for new capacity additions. This scenario could

benefit customers by providing lower rates over the long-

term as a result of reduced or avoided utility

capital spends.

“Off-grid” data centers can also benefit utility operations.

The dynamics of an evolving power portfolio, in addition

to potential financial, environmental, security and other

issues, could result in some utilities encouraging off-grid

data center operations, or providing independent systems.

For example, the increasing penetration of distributed

generation, particularly intermittent renewable resources

such as rooftop solar, requires grid operators to have

DATA ANALYTICS

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BL ACK & VEATCH | 29

reserves available for rapid start up. Data centers could be

a resource by selling excess capacity back to utilities that

need to constantly balance fluctuating loads.

DATA CENTERS AS A SERVICE PROVIDER

The growing wave of data generated by utility investments

in intelligent metering and automation devices helps

to create a trove of information at the operational and

enterprise level. But for some utilities and telecom

services providers, the data wave creates a logistical

challenge as well. Specifically, each bit of data must

be both stored and accessible to facilitate its use in the

development of data-driven, analytics-based decision

making. While storage prices continue to come down,

the sheer volume of utility “smart” data could pose a

capital challenge requiring innovative solutions and

management approaches.

Further, as utility system technology evolves, demands

for greater productivity and improved customer service

will push utilities to generate more and extract value from

as much data as possible. For smaller utility operators,

off-site data storage and cloud technology can offer

benefits in terms of security and resiliency at a price point

that in-house management cannot.

In the future a greater role can be expected for

independent data centers as a consumer and as a

resource for many utilities. But it remains to be seen

whether the independent data center marketplace will

take on a uniform structure or whether different client

needs will result in different approaches. One certainty is

that the wave of new information managed and stored in

data centers is nowhere near cresting.

John Voeller is a Senior Vice President in Black & Veatch’s federal services division. Among his numerous career

accomplishments, Voeller served as a White House Fellow from 2003-2008 and a consultant from 2008-2010 in the Office

of Science and Technology Policy. His primary effort was to be the White House representative and editor of the National

Critical Infrastructure Protection R&D Plan to address the vast array of issues related to protecting the nation’s critical assets

as required by Homeland Security Presidential Directive 7.

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30 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

UTILITIES AND THE CLOUD BY G. SCOTT STALL ARD AND RICHARD A ZER

Most technology transitions are initially viewed with immense skepticism and,

occasionally, fear. However, once the value of any technology is fully understood,

rapid acceptance generally occurs. Considering the historical precedent and the

tremendous value such services provide, Black & Veatch anticipates utilities will

begin to rapidly embrace cloud technologies within the next three to five years.

Black & Veatch survey responses indicate that utility

leaders are buying into the concept of enhanced

automation in the distribution of their product/service

and the operational benefits of mobile technologies

(Figure 19). However, only 5.1 percent of respondents

selected cloud computing as the emerging technology

that will have the greatest impact on how utilities operate

in the next five years. This relatively low percentage for

cloud computing likely indicates a disconnect between

what technologies drive functionality and what is

perceived as a value point.

Cloud computing can mean two things: the ability to

access data securely from any connected device anywhere

in the world and/or the environment to manage massive

data stores and data complexity. For example, most

utilities have begun or have finished implementing

advanced metering infrastructure (AMI) programs.

To manage the huge volumes of data generated by AMI,

cloud services offer a level of flexibility and efficiency

previously unavailable through hard-wired connections or

in-house storage.

With most utilities still planning or finalizing AMI

implementations, the use and need for cloud services

is limited. Nearly 27 percent of utility respondents

stated their organization is currently using some form of

cloud-based solutions (Figure 20). The majority of these

respondents stated they are using these solutions for data

storage, a valuable, but limited, application.

While AMI does generate significant amounts of data, it

is only one system. As utilities move into more advanced

distribution automation programs, they will deploy

additional sensors across their network that generate

exponentially more data than the current AMI network.

This will create a pressing need to manage the volume of

data and variety of data types to make elements across the

enterprise work concurrently. This is where the need for

cloud and advanced data analytics becomes particularly

important (refer to the Data Analytics section).

Cloud technology also offers resiliency benefits, including

the ability to quickly restore servers and work capability

after system disruptions. For example, when a server

supporting multiple systems goes offline, a range

of operations can be affected or interrupted. Adding

resiliency through the deployment of a virtualized

server allows operators to quickly restore and replace

its functionality.

Perhaps even more appealing is the ability of virtualized

cloud-based servers to interact with multiple end-user

software systems. This greater flexibility eliminates the

need for same system replacements and can speed

restoration from a complete outage from days to hours.

TECHNOLOGY

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BL ACK & VEATCH | 31

FIGURE 19 EMERGING TECHNOLOGIES THAT WILL HAVE THE GREATEST IMPACT ON UTILITY OPERATIONS

Source: Black & VeatchParticipants were asked which of the listed emerging technologies they see as having the greatest impact on how utilities operate their businesses in the next five years.

0

5

10

15

20

25

30

25.1%

20.4%

15.7% 15.3%

Advanced distribution automation

5.1%

13.2%

5.1%

Advanced metering

infrastructure

Mobile devices

Operational technologies

Advanced data

analytics

Cloud computing

Other/I don’t know

FIGURE 20 CURRENT USE OF CLOUD-BASED SOLUTIONS

Source: Black & VeatchRespondents were asked if their utility currently uses any form of public or private cloud-based solutions.

0

10

20

30

40

50

9.8%

0.4%

12.8%

3.8%

Yes, light/limited use of public

cloud infrastructure

Yes, heavy reliance on

public cloud infrastructure

Yes, light/limited use of private

cloud infrastructure

Yes, heavy reliance on

private cloud infrastructure

43.4%

No

29.8%

I don’t know

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32 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

TECHNOLOGY

CLOUD BENEFITS ALL

An interesting statistic within the survey data is the

significantly higher percentage of water utility use of third-

party (public) cloud services compared to use by electric

and/or combined utility providers. Nearly 30 percent of

water utilities use public cloud infrastructure to some

capacity, compared with 7 percent of electric utilities and

13 percent of combined utilities (Figure 21).

When compared by ownership structure, 16 percent of

publicly owned, or municipal, utilities use third-party

cloud infrastructure. Comparatively, 20 percent of

investor-owned utilities (IOUs) use privately owned cloud

infrastructure. Moving forward, the industry will likely see

small and/or publicly owned utilities adopt cloud-based

services on a wider scale than will the larger IOUs (refer

to Outlook: Tech Advantages Moving to Small Utilities).

In the past, small utilities and/or municipalities were

generally limited in the types of technologies they could

procure, be it computers, software or advanced utility

operating systems. Previous Strategic Directions reports

have indicated a sharp difference between the IT and

cybersecurity capabilities of mid- to large-scale utilities

when compared to smaller providers.

Fortunately, third-party, multi-tenant systems are now

providing the scale and security necessary to make big

IT systems, such as customer information systems (CIS),

cost effective for smaller organizations. This not only

enables smaller utilities to use the advanced technologies

but also provides the necessary security programs many

of these organizations currently lack.

Regardless of utility size or types, organizations should

spend time developing their cloud strategies. It is

important to consider the entirety of the organization’s

data and analytic migration. It will also be important

to consider what information is going to be required,

consumed, manufactured and used in terms of utility

operations and business continuity.

Metaphorically, if system and customer data represent

individual jigsaw puzzle pieces, the cloud is the table

upon which utilities will be able to see how each piece fits

together. Paired with advanced analytics, cloud technology

enables utilities to gain the maximum value from their

IT investments.

FIGURE 21 USE OF CLOUD-BASED SOLUTIONS - BY UTILITY TYPE

Source: Black & Veatch

Figure 21.

0

10

20

30

40

50

60

25%

Yes, light/limited use of public

cloud infrastructure

Yes, heavy reliance on

public cloud infrastructure

Yes, light/limited use of private

cloud infrastructure

Yes, heavy reliance on

private cloud infrastructure

No

7%

13%

4%

0% 0%

4%

16%

7%

0%

5%

0%

54%

38%

52%

Electric Utility Water Utility Combined Utility

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BL ACK & VEATCH | 33

Outlook: Tech Advantages Moving

to Small Utilities

BY G. SCOTT STALL ARD AND RICHARD A ZER

The benefits of advanced automation and metering have

not been distributed evenly among service providers

to this point. Lacking the requisite economies of scale

to support large-scale capital investments in IT and

advanced metering infrastructure (AMI), many small

utilities have lagged their larger peers across the water,

electric and combined utility markets. Black & Veatch

forecasts that the small utility technology gap will narrow

as a result of the availability of cloud-based solutions.

Small businesses of all kinds are now enjoying access to

the latest software and technology advances as a result of

scalable, cloud-based subscription services. Despite their

relatively recent introduction, cloud-based administrative,

finance, customer relationship management and other

tools have helped businesses succeed at the retail level.

These services offer users the ability to harness a level

of software functionality that was previously not feasible

because of cost barriers.

Traditional IT infrastructure follows a cost curve similar

to most capital investments. Regardless of its capacity,

the first unit includes all of the startup costs and is,

therefore, the most expensive. Each subsequent capacity

addition then drives average unit costs lower. For small

utilities, these startup costs have precluded investments

in advanced data analytics, cybersecurity, mobile

technologies and system automation. However, the

adoption of this technology could be pushed forward

by a combination of new economic realities and

regulatory pressures.

In February 2013, President Barack Obama issued

the Executive Order Improving Critical Infrastructure

Cybersecurity, requiring all critical infrastructure systems

to become more hardened against cyber threats. While

electric utilities have previously fallen under the auspices

of the North American Electric Reliability Corporation

Critical Infrastructure Protection (NERC CIP) standards,

the executive order will force each of the covered vertical

markets, including water, gas and telecommunications

providers, to address potential areas of cyber vulnerability.

Black & Veatch anticipates that the executive order, like

any regulatory mandate, will result in a wave of IT-focused

capital spending among utilities. Additional guidance

from the administration will likely shape the financial

repercussions of the order.

While larger utilities have begun to take steps to address

their vulnerabilities, cybersecurity needs are significant

among smaller utilities. The Black & Veatch 2013 Strategic

Directions in the North American Natural Gas Industry

report showed that less than 40 percent of small gas

utilities, or utilities serving less than 50,000 customers,

had formal cybersecurity programs in place. This is

in marked contrast to utilities serving more than

100,000 customers, in which 76 percent of respondents

had plans in place. The pressure is building for smaller

utilities to modernize or implement cyber protocols

to protect customer information and enhance

operational resiliency.

Interestingly, cloud-based services, particularly third-

party services, provide the equalizing effect for small

utilities. Multi-tenant systems have the scale and security

needed to safeguard critical operational data and sensitive

client information. Most importantly, they give even the

smallest organizations cost-effective access to big system

capabilities. Previously inaccessible computing power and

data analytics and management tools can be deployed

to increase efficiency and help facilitate data-driven

management approaches.

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34 | 2014 STRATEGIC DIRECTIONS: UTILIT Y AUTOMATION & INTEGRATION

THE ROAD AHEAD: SMART INTEGRATED INFRASTRUCTURE™ BY MARTIN TR AVERS

Aging infrastructure, aging workforces and limited budgets continue to increase

the pressure on utility service providers to do more with less. This Strategic

Directions report shows that many utility service providers have made progress

in using their telecom networks to deploy advanced metering infrastructure

(AMI) and automation capabilities. However, significant opportunities remain

to expand “smart” programs to other parts of the utility network and to use

analytics to improve performance.

INFRASTRUCTURE IS BECOMING MORE

INTELLIGENT, DISTRIBUTED AND COMPLEX

Black & Veatch is frequently asked by our clients about

the steps they need to take in order to become a “Utility

of the Future.” We believe that greater use of network

connectivity, automation and data analytics provides

the foundation for Smart Integrated Infrastructure (SII).

SII combines integrated infrastructure and smart analytics

solutions to improve a utility’s efficiency, reduce the cost

of operation, increase reliability and enhance the overall

quality of service.

However, SII is not simply the proliferation of intelligent

devices. The concept of SII is based on many large

infrastructure groups interacting with each other across

platforms. For example, smarter electric grids represent

a major step in making intelligent infrastructure. By

providing a wealth of new data about usage, loads

and power quality, smart grid systems provide critical

information that can help improve utility business

systems. Deploying additional sensors and using

available telecom networks to stream data from across

a distribution network, operators can begin to develop a

much more complete picture of their overall integrated

energy network.

Water and wastewater utilities that make operating

decisions based on supply source information, regional

power needs and other factors are helping to propel this

transition. Greater communication between water, energy,

telecom and transportation infrastructure will make

communities more adaptive, resilient and sustainable.

The use of analytics can help operators make data-driven

decisions so that less focus is spent on gathering system

data and more time is spent analyzing and acting on it.

This focus is particularly important because the adoption

of asset management programs is a key goal for utilities

worldwide. Analytics can also be applied to help address

these more complex issues.

Over the next few years, renewable energy resources pose

a particularly interesting situation for electric utilities as

they grapple with its promise and challenges. A report

released by the California Independent System Operator

(CAISO) in December 2012 detailed the growing need for

flexible power generation resources to offset the growing

use of intermittent renewable resources. These resources

are needed to meet the state’s 33 percent renewable

portfolio standard by 2020. At the same time, the influx

of renewable resources is projected to create a roller

coaster-like dip and then rapid increase in daily demand

for thermal plant generation (Figure 22).

CONCLUSION

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BL ACK & VEATCH | 35

The dip in the CAISO chart shows how the influx of solar

power reduces the overall demand for conventional power

when these assets are delivering at their peak power

capabilities – between the hours of 10 a.m. and 4 p.m.

local time. The steep decrease in demand is followed by

a rapid spike to daily peak demand levels. This pattern

reflects the growing complexity of providing reliable

power flows that operators will have to plan for and

adapt to. Most notably, the CAISO chart reflects a typical

day. Many other factors, ranging from daily temperature

changes, wind speed, sunrise and sunset times, and

scores of other issues, create an inherent need for

automation and analytics. A fully integrated data analytics

program can help manage the complex system changes

in order to optimize efficiency, maintain reliability and

minimize network damage.

As renewables become a greater part of the energy mix

and utility systems get more complex, it will be essential

for operators to better understand their assets, so they

can plan, operate and adapt to extract the maximum value

from their renewable energy and energy storage assets.

Black & Veatch anticipates that the industry will see a

wide array of creative solutions to address this integration

problem and a wide variety of systems and tools to

manage the complexity.

Building on the capabilities created by smart grid

investments, the Utility of the Future will not be viewed as

a single operating entity. Rather, the Utility of the Future

will integrate and coordinate its infrastructure system with

other service providers (i.e., electric, gas, water, telecom

and transportation) in order to provide performance

improvements. As utilities large and small prepare for

greater systems integration, Black & Veatch will provide

the knowledge and solutions necessary to speed these

transitions.

FIGURE 22 CAISO NET LOAD 2012-2020

Source: California ISO “Flexible Resource Adequacy Criteria and Must-Offer Obligation Market and Infrastructure Policy Straw proposal.” December 13, 2012.

Figure 22.

0

27,000

25,000

23,000

21,000

19,000

17,000

15,000

13,000

11,000

201220132014201520162017201820192020

Potential Over-Generation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Typical March Day — Significant Change Starting in 2015

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LEGAL NOTICE Please be advised, this report was compiled primarily based on information Black & Veatch received from third parties, and Black & Veatch was not requested to independently verify any of this information. Thus, Black & Veatch’s reports’ accuracy solely depends upon the accuracy of the information provided to us and is subject to change at any time. As such, it is merely provided as an additional reference tool, in combination with other due diligence inquiries and resources of user. Black & Veatch assumes no legal liability or responsibility for the accuracy, completeness, or usefulness of any information, or process disclosed, nor does Black & Veatch represent that its use would not infringe on any privately owned rights. This Survey may include facts, views, opinions and recommendations of individuals and organizations deemed of interest and assumes the reader is sophisticated in this industry. User waives any rights it might have in respect of this Survey under any doctrine of third-party beneficiary, including the Contracts (Rights of Third Parties) Act 1999. Use of this Survey is at users sole risk, and no reliance should be placed upon any other oral or written agreement, representation or warranty relating to the information herein.

THIS REPORT IS PROVIDED ON AN “AS-IS” BASIS. BLACK & VEATCH DISCLAIMS ALL WARRANTIES OF ANY KIND, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. BLACK & VEATCH, NOR ITS PARENT COMPANY, MEMBERS, SUBSIDIARIES, AFFILIATES, SERVICE PROVIDERS, LICENSORS, OFFICERS, DIRECTORS OR EMPLOYEES SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THIS REPORT OR RESULTING FROM THE USE OF THIS REPORT, INCLUDING BUT NOT LIMITED TO DAMAGES FOR LOSS OF PROFITS, USE, DATA OR OTHER INTANGIBLE DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

In addition, user should place no reliance on the summaries contained in the Surveys, which are not intended to be exhaustive of the material provisions of any document or circumstances. If any point is of particular significance, reference should be made to the underlying documentation and not to this Survey. This Survey (and the content and information included therein) is copyrighted and is owned or licensed by Black & Veatch. Black & Veatch may restrict your access to this Survey, or any portion thereof, at any time without cause. User shall abide by all copyright notices, information, or restrictions contained in any content or information accessed through this Survey. User shall not reproduce, retransmit, disseminate, sell, distribute, perform, display, publish, broadcast, circulate, create new works from, or commercially exploit this Survey (including the content and information made available through this Survey), in whole or in part, in any manner, without the written consent of Black & Veatch, nor use the content or information made available through this Survey for any unlawful or unintended purpose.

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© Black & Veatch Corporation, 2014.

All Rights Reserved. The Black & Veatch name and logo are

registered trademarks of Black & Veatch Holding Company.

REV 2014-01

BUILDING A WORLD OF DIFFERENCE® Black & Veatch is an employee-owned, global leader in building Critical Human Infrastructure™ in Energy, Water, Telecommunications and Government Services. Since 1915, we have helped our clients improve the lives of people in over 100 countries through consulting, engineering, construction, operations and program management. Our revenues in 2012 were US $3.3 billion. Follow us on www.bv.com and in social media.

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