In an interview, Richey, who started his career with ESCO in 1985, talks about smart grid technology, and why utilities are so keen on the new systems.
In your opinion, what is driving the growing interest in Advanced Metering Infrastructure (AMI)?
Several factors have combined to raise utility and regulatory interest in these topics. The consensus is now stronger than ever for industry wide deployment of AMI as the electric industry leaders announced at the recent EEI annual meeting. The Energy Policy Act of 2005 required each State regulatory authority to look at AMI. Legislation and regulatory rulings favorable to AMI at both the federal and state levels, and in Europe and Australia are announced daily.
A key driver for this consensus is public policy interest in improving the cost-responsiveness of consumer behavior. Meter systems are needed to provide the hourly cash registers for time-based pricing, which conservatively delivers $25 to $100 resource benefit per meter per year. Compared to other resource options, this is the clear winner: cheaper, cleaner, quicker, and safer.
We are seeing growing evidence that customers can, and will, respond to time varying pricing and that once they experience these prices many customers will prefer them to standard pricing options.
There has also been a near universal acceptance that demand response is essential to mitigating market power and price volatility in competitive wholesale markets. This can reduce the need for new generation capacity, improve reliability, and address climate concerns.
With the decreasing costs associated with AMI deployment and the growing recognition of the operational benefits that utilities can achieve when AMI is effectively integrated into utility operations, the utility marketplace is beginning to recognize the advantages that AMI technologies have to offer.
Improved outage detection, restoration, and management also represent a potentially large benefit stream. AMI systems with two-way communications can be used to “ping” a meter when the system detects an outage or when a customer calls regarding an outage to determine whether or not the outage is on the customer's side of the meter, thereby avoiding a field crew dispatch. In the case of storm related outages, crews can be dispatched to the outage location or site of the problem as opposed to searching for the problem.
The combination of efficiency and demand response, operational benefits, improved outage detection and management, improvements in transmission and distribution planning, and cost savings and improvements in customer service and billing are all tangible benefits that ESCO Technologies is bringing to the industry.
The above speaks to activity in North America. What, if any, insight can ESCO provide with relation to the global market space?
Well, much like the North American market, European (in general) and Australian utilities are seeing legislation and regulatory rulings that support deployment of AMI systems.
In developing markets there is more of a push towards AMR to account for non-technical losses and to improve cash collections. Features such as prepayment, tamper detection and remote disconnect are driving forces. As utilities consider the value that an AMR system offers, it is a natural extension to consider the added benefits that a more advanced AMI system will provide with two-way communication capabilities.
The term Advanced Metering Infrastructure is commonly used in the industry, but is often described in different fashions. How does ESCO define AMI?
Automated Meter Reading (AMR) is primarily focused on replacing manually read meter operations. AMI includes not only automated meter reading at a frequency of hourly or less, but also promises a communications network between advanced meters and utility business systems that allows collection and distribution of information to customers, the utility itself, and other parties. It brings together elements of a meter network where data is accessible for direct customer use, as a data source for home or business displays, or “smart” thermostats, controls, and appliances.
As a supplier of AMI products, ESCO offers meter-to-head-end system components, displays and control devices, and meter data management software with analytics to make data meaningful. Meaningful data is required to support utility business processes and to help a utility's customers manage their energy usage and costs. All of this, together, is an AMI solution that achieves the targeted results.
While the term AMI is widely accepted to include the provision of operational benefits and customer information, there are nuances to the term that various regulatory and industry trade organizations have applied in an attempt to provide better definition. For example, concepts on AMI have been articulated through the Federal Energy Regulatory Commissions (FERC), the Demand Response and Advanced Metering Coalition (DRAM), and the California Public Utilities Commission (CPUC).
Through these collective interpretations, we have noted that the term AMI typically involves utilities having the ability to record at least hourly customer consumption and other usage measures, to have that data communicated to a central collection point, and to support two-way communication. In addition to meter data, this type of configuration should be able to offer outage detection, remote connect-disconnect, and power quality or grid monitoring capabilities. It is important that an AMI system support implementation of rate options, critical peak pricing, and hourly pricing for all customers. Customers should have access to personal energy usage data, be provided with education and energy management information, customized billing, and receive improved complaint resolution.
Most recently, the concept of AMI has been expanded to specifically focus on the degree of "openness" of the system architecture. Open architecture, while not yet a released standard, is now recognized as a critical trait in truly advanced metering infrastructure architecture.
Why are utilities and policy makers interested in open connectivity for applications beyond the meter?
Utilities today are very interested in the openness of the system beyond the meter, inside the home or business, to ensure that their investment in advanced metering will allow communications to the consumers, and to provide consumers the ability to choose devices, such as in-home displays, that are competitively priced and are interoperable.
There are many ways to provide better information ranging from improvements in bill content and design, provision of previous day usage data via the internet, and direct connectivity between meters and IHDs (In-Home Displays) or personal computers that can provide real-time usage and cost information. For example, utilities want to ensure that it will be possible for consumers to walk into an electronics store and purchase a plug-and-play In-Home Display, a programmable communicating thermostat (PCT), or a USB device. These devices are simply plugged into an outlet or detected by the home computer network and effortlessly connect to and communicate with the AMI system. Recent pricing experiments have indicated that enabling technologies, such as PCTs, can boost demand response by 50 percent or more for residential customers. These findings have led policymakers to examine new approaches to fostering rapid penetration of enabling technologies and to push utilities to deploy AMI systems that work together with these technologies.
For example, the California Energy Commission is expected to approve a new building standard requiring that thermostats in all new residential and commercial buildings, as well as those installed whenever an HVAC system is replaced, with PCTs. The PCTs should have a port in which a ZigBee (or other protocol) enabled communication chip can be installed. Such a policy would create a situation where, in roughly a decade, a very large share of the total building stock in California will have PCTs that can be used to provide a significant reduction in electricity demand in response to economic signals or when needed for grid system reliability.
ESCO has been a supplier in the demand response marketplace for years. The market is heating up. Technology, utility requirements, driving motives and consumer expectations are all changing. What are the key necessities to maintaining and growing ESCOs prevalence in the DR market space?
Clearly, ESCO needs to simply, and effectively, communicate our existing capabilities to our customers. You may, or may not, be aware that our power line communication business, DCSI, has provided the single largest direct load control system in North America, which is capable of shedding approximately two gigawatts of power in about 60 seconds. That system controls over 900,000 endpoints.
The success of the system lies not only in its ability to shed so much load so quickly, but — and this is critical — in its ability to bring load back on line so that the system remains in "balance." Imagine the demand surge that could occur if, after a critical peak event has ended, 400,000 air conditioners kick on at the same time. The ability to gradually bring load back on line is vital in such instances.
That system has been in place for over 10 years now. Naturally, times have changed and newer technologies are being assessed, such as home area networks that promote consumer participation in demand response. It is important for ESCO, in order to maintain our leadership position in the marketplace, to provide systems that will meet the requirements of these evolving demand response programs. In that regard, we introduced our new home area network, the HANfx, that utilizes a ZigBee protocol, at the most recent AMRA show, along with our new demand response unit that works in conjunction with the HAN. This system enables consumer choice in selecting the level of participation in demand response programs, but also provides direct control to utilities to shed non-essential load, such as water heaters, should emergency load shed be required.
While our current offering uses the ZigBee protocol, we are also prepared to support other protocols, such as Z-Wave. The flexibility of the HAN to communicate with a variety of protocols is an essential element in maintaining and growing our position in the marketplace.
How does ESCO's Nexus Energy unit plan to support the role of the meter data management (MDM) system in managing communications with the home area networks, such as ZigBee under-the-glass, that may be deployed in California?
Nexus offers a unique approach to leveraging HANs. Its MDM suite offers end-to-end support for managing demand-response programs, providing education and enrollment capabilities, alerts for managing events, and analysis of the overall system operations. The MDM's "business process management" capability enables the creation of work flows to manage a demand-response event, including messaging the head-end system — be it an ESCO system or third party — to initiate an action on the HAN. In addition, the Nexus application enables end-users to access the HAN through a remote Internet connection. ESCO is involved with the OpenHAN group, and is participating in relevant IEC committees, to be in a position to rapidly leverage all resulting standards.
How does ESCO plan on integrating its AMI products with the smart grid as it evolves?
ESCO intends to offer a complete and seamless system of communications, to include sensing and monitoring of grid assets. ESCO's acquisition of Doble uniquely positions us to deliver real time analyses on the performance of critical high voltage assets through its Intelligent Diagnostic Devices (IDD). With the IDDs, utility customers can remotely monitor the health of a transformer's insulating oil, detect abnormalities in bushings or current transformers, and sense the presence of moisture or dissolved gases in that equipment. That information is often crucial in maintaining the welfare of the transmission system, and it is our intention to provide the communications infrastructure to deliver that data so that timely operational and maintenance decisions are possible.
Also, we recently introduced our new capacitor bank controller, which has the flexibility of communicating over either of our AMI infrastructures — whether it be powerline or RF. This is our first step towards participating in the broader distribution automation space, which is an area that we expect to further support, to include interactions or exchanges with a utility's existing SCADA (Supervisory Control And Data Acquisition) systems.
Of course, software is a very important part of pulling all of this together and to providing interfaces for the end users. We are fortunate that we have a very talented group of software engineers at Nexus that understand the industry, the needs of the customers, and have the skill to present the information required by the end user in a format that enables them to efficiently assess the large amount of data being provided by the communications infrastructure.
What are your observations regarding the needs driving the gas and water markets versus the electric market with relation to AMI? How is ESCO positioned to address the various market segments?
There's no doubt that one of the driving factors behind water AMI deployments involves the recent droughts, which are driving utilities to monitor water consumption using increased intervals. Drive-by AMR systems are now being replaced with fixed-network AMI systems capable of monitoring water consumption on an hourly basis allowing utilities or municipalities to monitor for leak detection or excessive water usage during times of conversation. Gas AMI, on the other hand, is catching up and as with any energy the need to monitor consumption has increased as operational costs have continued to rise.
Obviously there are different factors that drive the fundamental need for gas and water AMI but, interestingly enough, there are some common factors playing a role as well. Electric, gas, and water utilities are seeking to improve customer service, obtain operational benefits, and address regulatory requirements.
ESCO is uniquely positioned with Hexagram and DCSI to answer the needs of the growing utility market segments with our AMI systems. The ability of ESCO to work with a utility partner to derive a "best-fit" solution is unique and, when coupling this with the value-added solutions of Nexus, leads to an unparalleled multi-utility AMI solution. ESCO has installed millions of meter end points, has demonstrated that our system architectures are scaleable to any size of deployment, and that we offer a mature and proven set of solutions. These time proven multi-utility solutions allow ESCO to provide excellent long and short term benefits to the utility and, ultimately, to the utilities' customers.
How does ESCO Technologies see the adoption of wireless personal area networks (WPANs) functioning with its technologies?
We envision the use of either DCSI's or Hexagram's proprietary backhaul communications as the network backbone, augmented by a WPAN gateway to enable in-home mesh networks and demand response capabilities. In the very near future, a PC-enabled gateway approach should allow in-home energy management, detailed consumption monitoring, in-home messaging, verified account information, and access to third party home network solutions such as our Nexus personalized dashboards.
Using such a dashboard will allow utility customers access to real-time usage and appliance data, immediate energy management feedback, prepay communications, and participation that is more effective during critical peak pricing events.
Our vision of demand response provides utilities with the ability to offer more pricing and service options, tailored to their customers' needs. Demand response reduces price volatility, allows for deferral of capital investments by utilities, increases supply reliability by allowing dispatchers to call demand resources on short notice and finally has the ability to aid environmental impact. California conducted a statewide pilot program from 2003 to 2004 that showed that residential consumers, on average, would reduce energy use during peak periods in response to dynamic price signals. So demand response is real, and we are providing the utility industry with technologies that will allow participants to take full advantage of its potential.
Interviewer Jon Brock is president and COO of Albuquerque, N.M.-based UtiliPoint International, an energy industry research, analysis and consulting firm.
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