Change Leader Full Interview: Electrical Utilities Face Many Challenges and Opportunities in 2019
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Mark Burke is a technical and business development advisor for Black & Veatch, an employee-owned engineering, procurement, consulting and construction company.
V1 Media: Please provide a brief background of your career and role with Black & Veatch.
Burke: I serve as a technical and business development advisor for Black & Veatch. I get involved in large program solutions and also market growth for large, multi-year programs. I have an engineering background. I’ve been engaged with industrial communications development for well over 25 years or so. I have an engineering degree and a graduate certificate in business management. Formerly, I was vice president of energy and utilities at Ericsson, the large wireless vendor. Prior to that, I was the head of intelligent networks and communications at a global organization called DNV KEMA.
V1 Media: Tell me a about this annual 2019 Strategic Directions: Smart Utilities Report and why you think it’s important.
Burke: It’s good to track trends and actual activities by sector. The report does an excellent job of serving utilities and other participants in the sector. It found that billions of dollars are being invested in distribution systems, particularly distribution, automation and communication systems. The investment is large, but it’s also in an area that includes integration of what are not generally utility assets such as distributed energy resources, renewable generation facilities, even consumer-owned facilities, electric vehicle charging and all that sort of thing.
It’s a very interesting trend to see, because typically generation and transmission are the largest forms of investment in the sector, but the survey indicates that the distribution side is where the bulk of investment is going now. That also includes some innovative automation, Big Data analytics, machine-learning and the necessary communications infrastructure needed to enable that.
One of the terms we use is “grid modernization” or “smart grid.” These things are happening throughout the country, but it’s a trend globally as well in the developing economies.
V1 Media: Have you been involved in previous reports, and how do you think this one is different from reports in previous years?
Burke: I didn’t author any sections on previous reports. I think one of the big differences in this year’s report is the focus on distribution, distributed energy resources, automation and communications including 5G, and network management. I think that’s new this year. The number of managed devices that are populating the utilities sector is growing exponentially. Typically, utilities had a few thousand managed devices through their distribution system. Now it’s going into the millions in a relatively short time, so that presents a number of challenges that utilities are having to address. That’s really the major difference: the focus in grid modernization to the distribution level.
V1 Media: Is the methodology of creating the report basically the same through the years as far as who’s surveyed and how?
Burke: There have been some adaptations, but basically they go out and survey customers and partners and other sector participants directly. They tabulate the results. They try to focus on those issues that are relevant. So there’s a discussion, both internally on what are the issues that are relevant to the customers, and then there’s an independent survey among customers and partners and other industry participants to determine the results. The actual results of individual customers for the report are–except when there’s a case study–anonymized. It’s protected. Everybody’s proprietary information is protected, but the survey does indicate industry trends and issues. I think this year’s report was particularly clear in that, with statistics of what the industry is facing, the investments and the challenges.
V1 Media: What are some of your favorite observations from the 2019 report, both the most important, and perhaps some of your favorites that you find most interesting?
Burke: I mentioned the large growth in distribution investment. That’s very interesting. The other area is the increasing cybersecurity burdens. The constraints and requirements are growing quite rapidly. It’s moving from protecting assets that had a high or medium impact on the bulk power system, moving down to the NERC CIP requirements, moving to low-impact assets as well.
Also, the cybersecurity of the communication and automation systems is important, particularly at a time when utilities are moving from synchronous networks to packet-based networks. They’re having to make sure their communications infrastructure is secure from “man in the middle” and other cyber-attacks while also having to maintain their synchronous services like tele-protection and SCADA and moving to packet-based networks.
The other interesting thing is the growth in investments in what are called field area networks: the wireless networks throughout utilities’ service territory. Typically, utilities had rather lean investments in telecom. They had fiber for their transmissions facilities for tele-protection, and maybe fiber going to major facilities. Their wireless was typically just for land mobile radio–very limited capacity. Now we see the move to LTE and broadband wireless throughout their service territory, so that’s a big deal. The search for spectrum and acquiring facilities, and putting more services into a single multipurpose network, and moving away from small, limited capacity and capability special-purpose networks to more a holistic network that offers the greatest economies of scale and scope.
The other thing that’s interesting is renewables: the increase in developing renewables and also integrating third-party renewables into the system, and including electric vehicle charging stations and energy storage. These are both opportunities and challenges for utilities. The utilities aren’t really in full control of their development, since they involve third-party investment, particularly fast-moving third parties like Tesla and community energy storage, community energy delivery programs, which are really happening not at utility pace but a more commercial pace. The utilities are having to accommodate that.
V1 Media: Could you summarize the utilities that were polled in this report?
Burke: Our report was primarily focused on the electric utility business. They were the large investor-owned utilities (IOUs), also the municipal utilities. They’re doing a lot in smart cities and including the smaller electric co-ops and independent power producers and things like that. It was a broad industry survey of the major investor-owned utilities, the municipal utilities as well as co-ops and public power organizations.
V1 Media: In terms of these different electric utilities, did you find that some of them were further ahead or behind in terms of being “smart”? If so, why?
Burke: I can’t say I know all the utilities and the pace of their development, but one large entity that I think is particularly “smart” and is taking a leadership role is Southern Company, which owns Georgia Power, Alabama Power, Mississippi Power and Gulf Power. They have been extremely innovative, particularly in the telecom and automation side. They acquired wireless spectrum some years ago. They’re building out a private LTE network. From that network, they’re doing distribution automation as well as other plans to do automated meter infrastructure, and field-force automation and field-force communications. Many utilities look to them with envy of how they’ve been able to build a robust, private broadband network throughout their service territory and enable a lot of automation with standards based technology. So that has a broad ecosystem of support. They’re immune from the bankruptcy of small entities. I think they’re one of the leaders in this smart intelligent network development.
V1 Media: What are some of the major difficulties that utilities will face in the next five years, and what might be some longer-term challenges beyond five years?
Burke: In the next five years, utilities have several challenges they’re facing; some of which are not of their own making and are out of their control. One of the challenges they’re facing is the increasing requirement for cybersecurity throughout their service territory–not only cybersecurity, but also physical security. That involves things such as video surveillance of transmission substations or principal facilities and then also involves the implementation of automated metering infrastructure and distribution automation. Just huge amounts of data. Then how do you store the data, and then how do you leverage machine-to-machine learning and artificial intelligence and Big Data analytics to benefit from all that data?
I think several utilities have shown some leadership in that, but it’s certainly a challenge that’s prescient right now and in the next five years. They’re getting all this data, and engineers love data, but now they have to not only make sure they can leverage it for the benefit of their customers and investors, but also keep it secure and private. That’s a challenge.
Another challenge is the transition from synchronous networks or what’s called time division multiplexing telecommunications network to a packet-based network and internet protocol. The telecom industry is moving away from traditional telecommunications technologies to packet, which has much lower costs and higher flexibility. The challenge is it’s also more vulnerable as far as latency, reliability and cybersecurity. Although the utilities have been using IT technology and packet-based technology for their corporate communications, on their operational side–those networks dealing with energy delivery–have been in extremely secure, synchronous networks, closed-loop networks for the most part. Now the challenge is that the traditional technologies that supported those networks are increasingly no longer supported and no longer available from the vendor community.
So utilities need to perform “IT/OT” convergence. In other words, how do they maintain things that have high reliability and resilience, very low latency and latency asymmetry or high technical requirements such tele-protection in their transmission system, while, at the same time, they have to use packet-based systems. So they’re using solutions such as MPLS/TP, which is a multi-protocol label switching transport protocol to essentially simulate pseudo wires similar to the old technology. That’s a prescient problem currently faced by utilities on the automation side, because most vendors are no longer supporting the old TDM networks. They’re forced to change, even though the old networks served them very well for a long time and would continue to, but they can’t get the support. DACs networks are being abandoned by the vendor community, so they have to do other things. That’s also a particular challenge utilities must face.
The other challenge they have is a more-sophisticated and demanding consumer used to getting just about everything on their cell phone with an easy-to-use app. These consumers are going to want to be able to manage their energy consumption, make sure they can participate in green energy–all from a handset they carry around with them. They want to have near-real-time information. Traditionally, when looking at meters once a month, utilities couldn’t support that type of real-time or near-real-time data requirements, and that’s changing.
Another challenge is a change in the supply mix, with more renewables and more distributed renewables. There is increasing data generation and consumption, increasing security requirements, and also a migration of technology from a traditional technology for communications to packet. All these drivers are hitting utilities at the same time.
Also at the same time, they still have regulatory limitations of headcount if they’re an investor-owned utility, so they can’t go out and hire lots of new experts. They have to do it in a very lean way and do more with essentially the same resources or less in many cases.
The other challenge they also face is – with a few exceptions – energy consumption is down. In some markets, they have negative load growth, so their revenues are declining. They’re looking for new ways of generating value. Perhaps the Big Data analytics, the automation, the communications may offer that value, but utility executives are facing some tough choices. Top lines are declining because energy consumption is down. In traditionally regulated markets, the demand is up for information by their customers. They have to integrate with third-parties for renewables, and they’re forced to change technology because the industry doesn’t support it. So it’s a very tough market in the United States in the eclectic utility industry.
In some pockets, they’re moving toward what they called performance-based regulatory structures. They can generate rates on performance rather than just straight consumption. That might help the situation, but that’s not widely deployed at all. So the utilities have to do more with less money and less people.
V1 Media: Is moving toward green energy driven more by the economics involved or is it consumer demand or political will?
Burke: It varies state to state, but the fundamental we see consistently is that customers want more green energy, given a choice. Now it’s still relatively nascent. The first thing they want is reliability. Second thing, they want to grow in renewable or green energy. As millennials age and displace some of the older generations, I think they’re going to want more of that. Also, they’re going to want more evidence that they’re getting green energy. Things such as “community solar,” which allows apartment dwellers to participate, are growing in many parts of the market.
The underlying economics are improving. The cost of solar is declining rapidly. The cost of storage is declining – maybe not as fast as solar generation, but it is declining. The storage mix is changing and improving technically. Super-capacitor battery banks are being developed. Tesla’s investing heavily in that technology. As the cost of renewables drops and the cost of storage goes down, the economic viability of green energy improves.
The other challenge, however, that utilities face is the intermittency of wind and solar, if you don’t have equivalent storage capacities. So managing that intermittency is still a strong challenge, both positive and negative. In California, they have what’s called a duck curve. In other words, they have a fair amount of renewable penetration, so their demand for energy is quite low during the daytime. Then around sunset, the demand ramps up rather quickly while solar energy supply drops. How you accommodate that effectively is a real challenge. We’re finding that “duck curve” occurring in other markets as well. One methodology may include keeping 100 percent of the renewable energy backed up by traditional sources, but that doesn’t help the environmental impact at all. Using automation and perhaps distributed energy storage and some other techniques may mitigate that, but that’s a real challenge.
I would say the underlying driver for renewable energy is customer demand supported by improving economics and followed up by political or regulatory supports. The regulatory supports allow the investments to go in to accommodate the demand and improving economics. All of them together, it’s sort of three legs of a stool. If you have high demand, but you don’t have appropriate regulatory structures, the stool doesn’t stand up. If you have good regulatory structures and good demand, but poor economics, well then it doesn’t stand up, either. All three play a key role.
V1 Media: If you were speaking directly to a utility, what would you say might be the most important lessons from this 2019 report?
Burke: Distribution is going to consume a lot of near-term and long-term investment. The investments will be integrating third-party devices as well as utility devices, and cybersecurity is going to be a continuing, evolving and more-demanding concern. I think the NERC CIP rules are evolving, but, in addition to that, real security, security of operations and privacy will drive a continuous effort. This will not go away. Larger proportions of utility investments will include telecommunications and automation going forward.
The other important thing to capture the benefit of all this investment will be changes in the way utilities work. Typical siloed operations and IT are breaking down, so they can take advantage of the holistic approach of total system management and leveraging all the customer and system data. This will require new ways of working and new organizational structures.
V1 Media: Now let’s say you’re talking to individual engineers or field workers in the utility industry. What can they do to help bring about the changes this report seems to think we need?
Burke: I think they need to keep an open mind to new technology and new ways of working. The new systems will enable the leverage of lots of data and lots of near-real-time data. The engineers won’t have any difficulty doing that, but it will be a new way of operating particularly on the distribution side, because there’s more rapid change in that side of the sector.
V1 Media: When the next report comes out, are there any changes you expect will be highlighted in that report?
Burke: It’s difficult to say because it’s survey-driven, so it will be driven by what the customers and other industry participants indicate. I imagine we will have even more growth in distributed energy resources, possibly more on electric vehicle integration and community energy storage. With battery technology getting cheaper and more reliable, I think that will continue to grow. The other thing is the adoption of private networks or private field-area networks. I know several utilities are investing heavily in that now. Once that trend shows greater participation growth, it’ll become more conventional wisdom. I expect that to grow.
Then I think some of the changes on the regulatory side being demonstrated in New York and other jurisdictions may offer new opportunities and challenges for the sector, both for new participants to offer new value at the distribution level and also for utilities to accommodate those opportunities and challenges. I expect this to continue a trend for distribution systems, and perhaps more trends for large-scale private telecommunications systems and also a regulatory trend to enable new innovations at the distribution layer.
In the report, we highlighted the move toward integrated network management. This is a way of having an end-to-end view of their managed devices throughout their service territory. They’re moving from a few thousand to millions of end devices. To take advantage and ensure they have appropriate availability, reliability, resilience and security, utilities need an integrated network management system and the work processes to ensure that works. That network management system will enable them to take advantage of the new automation systems without increasing headcounts significantly. I think that will be a growing area that may be highlighted in the report next year. I know several utilities are investing heavily in this now, and it does accommodate both the structural challenges of limited head count and regulated rates with an increasing number of devices to manage and integrate into a cohesive network view. I think that will continue during the next 10 years.