Assessment of Smart Grid Applications for Palo Alto and Customer

218 Pages·2011·6.42 MB·English

by  Utilities Information Systems

MEMORANDUM

TO: UTILITIES ADVISORY COMMISSION 2

FROM: UTILITIES DEPARTMENT

DATE: APRIL 27, 2011

SUBJECT: Assessment of Smart Grid Applications for Palo Alto and Customer Survey
Results

The attached report, Assessment of Smart Grid Applications for Palo Alto, is provided to elicit
feedback from the Utilities Advisory Commission (UAC) on the consultant’s findings and
recommendations. No action is requested at this time.

SUMMARY
In March 2010 the City of Palo Alto (City) engaged a consultant to assess smart grid applications to
determine which of these applications make sense in Palo Alto. The consultant identified three
applications relevant to Palo Alto, a) Advanced Metering Infrastructure (AMI), b) advanced
distribution systems, including Distribution Automation (DA), and c) enhanced customer
engagement for optimal use of energy and water supplies.

Because of uncertainties in the technology market place, relatively efficient utility meter reading
operations, and comparatively lower energy efficiency savings, the report recommends that the City
not expedite implementation of AMI, but instead undertake a number of steps in the next 2 to 3 years
to position the City to develop and implement a smart grid road map in the 2012-13 time period.

The executive summary of the report was reviewed by the UAC’s Ad Hoc Committee on Innovation,
Technology and Projects and Don Von Dollen of the Electric Power Research Institute (EPRI).
Input provided by these reviews was incorporated into the report. A telephone survey of commercial
and residential customers’ perception of the value of smart grid applications was also undertaken.

BACKGROUND
The electric utility industry in the U.S. is in the midst of a transformative process of integrating
modern electronic sensing and communication technologies into the traditional electric utility
infrastructure to deliver more efficient and responsive services to its customers. The technologies
and processes to implement these changes are commonly referred to as “smart grid.” In the interest
of providing advanced cost effective delivery of utility services, the City of Palo Alto Utilities
(CPAU) began an investigation into the applicability of smart grid in Palo Alto in 2009.

The City Council and UAC held a joint meeting in May 2009 to discuss smart grid and its
applicability to Palo Alto. Palo Alto resident and the Smart Grid Program Manager for the Electric
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Power Research Institute (EPRI), Don Von Dollen, made a presentation at the meeting and has since
advised staff on this subject. Based on the discussion at the meeting, staff sought to engage a
consultant to assess potential smart grid applications for the City.

In March 2010 the Council approved a consulting contract with EnerNex Corporation (EnerNex)
with the goal of reviewing the many smart grid applications and determining which of these
applications are applicable to CPAU’s electric, gas and water utility services, and to undertake a
benefit-cost assessment of implementing such a system.

The consultant arranged a series of workshops and discussion groups with staff to gather
information. As implementation consultants to other municipal utilities in California, including the
City of Santa Clara, EnerNex brought real life experiences to the assessment. The report provided is
the culmination of a nine-month effort.

DISCUSSION
The executive summary of the report (Attachment A) provides a high level overview of the
consultant assessment, findings, and recommendations. The assessment included: a) strategic utility
goals and objectives, b) defining smart grid elements, c) an outline of current and future architecture,
d) a cost-benefit assessment, and e) an evaluation of communication systems approaches. The
report’s appendices provide detailed smart grid use cases and assumptions used in the assessment.

The consultant found that three smart grid applications are relevant to CPAU.

1. Advanced Metering Infrastructure (AMI) would allow remote meter reading and provide
usage information for customers and for developing advanced rate offerings. Although the
primary benefits of installing an AMI System in Palo Alto is related to reducing meter
reading costs and efficient utilization of electricity, these benefits are not large enough to
justify implementation of AMI in the immediate future. The costs of implementing an AMI
system are $23-35 million with benefits estimated between $1.2 and $1.7 million per year for
meter reading savings. Customer efficiency savings could total $18.5 to 27.7 million over 20
years.

2. Advanced Distribution Systems including Distribution Automation (DA) would more
efficiently manage the distribution system. Although more efficient distribution system
operations could be enabled with these systems, the costs to implement such systems are
about $3 million while the benefit is estimated to be $2.7 million.

3. Enhanced customer engagement would lead to more efficient use of energy and water
resources, but would require customer investment in real-time usage displays or other
systems. Implementing AMI could lead to a higher degree of customer engagement through
enabling customers to receive information that could lead to changed customer energy usage
patterns and understanding of the value of installing resource efficient measures.

The consultant’s key recommendations are summarized below.
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1. Smart grid deployment around the country has occurred due to government spending or
regulation. However, the risks of being an early adopter appear to outweigh the benefits for the
City.

2. Costs of implementing an AMI system are expected to decline as technology matures over the
next two to three years. Thus waiting until 2012 or 2013 should improve the benefit-cost
assessment for the City.

3. Over the next two years, the City should benefit from lessons learned by others. During this
time, the City should:
a. Develop a robust gas and water meter maintenance and replacement plan, including the
potential to replace meters with AMI enabled meters;
b. Implement time-of-use rates to encourage charging of electric vehicles during off-peak
hours;
c. Implement a Demand Response pilot program for large commercial customers;
d. Provide incentives for large non-residential customers to upgrade their Building
Management Systems to better integrate with features of smart meters;
e. Develop a long term Distribution System Automation road map;
f. Further analyze potential volt/var energy conservation on the distribution grid; and
g. Further review cost estimates for AMI backend software.

4. CPAU should allocate sufficient resources over the next two years for this planning phase.
These plans include studying IT resources required to operate smart grid systems, assessing staff
resource requirements and organizational structure, and implement a communication effort to
engage relevant stakeholders.

The consultant also provided a spreadsheet based cost-benefit model that formed the basis of much
of the analysis. As more relevant information becomes available in the coming months, this model
could be updated and results analyzed.

California Energy Commission Distribution Monitoring Pilot Project
EnerNex also facilitated the City’s participation in a study funded by the California Energy
Commission (CEC) related to the development of analysis tools used to estimate operating
conditions (voltage & current) for distribution systems. These tools are a key enabling technology
for any number of smart grid applications. The City’s involvement consisted of installation of line
current sensors at key locations on one distribution circuit that wirelessly communicate load
information. This information provides insight on circuit loading and fault location for improved
outage management. Staff believes the findings and recommendations from this project could
provide a good basis to develop an action plan for the next 2-3 years. Such an interim action plan
will place the City in a better position to decide on the best course to implement a smart grid
strategic plan over the long term.

CEC California Municipal Utility Smart Grid Vision 2020
In February 2011 the CEC commenced a California Municipal Utility Smart Grid Vision 2020
exercise. This assessment will be completed by the end of the year. As part of the Steering
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Committee for this effort, City staff will highlight some of the barriers Palo Alto is facing in
implementing a smart grid system in a cost effective manner and will seek ways to maximize
community and societal value by collaboration across the industry.

Smart Grid Benchmark Survey and Results
The municipal utilities of the cities of Burbank, Glendale, and Santa Clara are ahead of CPAU in
planning and implementing smart grid related systems. These cities commissioned a customer
survey by RKS Research to assess customer perceptions of smart grid technologies and electric
vehicles. The City collaborated on this survey to assess Palo Alto residential and commercial
customer views on the topic. The phone survey was conducted in October and November of 2010
and covered 250 residential and 60 large/medium commercial customers. The summary of the RKS
Research survey results are provided in Attachment B. The high level findings are summarized
below:

1. CPAU enjoys a high level of credibility with its customers

2. Customer opinions about the strategic direction CPAU should take are divided:
a. Residential customers are equally supportive of three strategic options -- CPAU offering
“cost effective environmental programs”, CPAU providing “leadership in green energy
programs”, and “CPAU providing service at least cost.”
b. Business customers appeared a bit more cost conscious – showing divided opinions between
CPAU providing service at least cost and CPAU offering cost effective environmental
programs.

3. Customers approach smart grid cautiously. They are aware of customer concerns at PG&E, but
appear to trust that a local effort will be handled competently in Palo Alto. CPAU must address
customers’ expressed concerns about smart grid.

4. The survey research consultant concluded as follows:
a. Effective implementation by CPAU depends on smart grid being viewed internally as a
product launch rather than as a hardware installation.
b. Successful product launches rely on extensive effort being placed on:
• Employee education and training
• Competent marketing and selling the benefits to customers
• Widespread outreach and support
• Constant communication
• Repeated tracking of customer experiences
c. A successful implementation of smart grid application in the City will require allocation of
adequate resources.

The survey results complemented the smart grid assessment by EnerNex in many ways, and
provided staff greater insights into how to begin the project planning process to implement the
consultant recommendations.
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The survey results complemented the smart grid assessment by EnerNex in many ways, and provided
staff greater insight; into how to begin the project planning process to implement the consultant
recommendations.
NEXT STEPS
Upon receiving feedback from the UAC, staff expects to develop a plan and timeline to implement
the recommendations made by the consultant in the report and return to the UAC for
recommendation to the CounciL
RESOURCE IMPACT
The consultant effort and the survey research effort was undertaken at a cost of $27 ,600 and $21,000,
respectively, for a total cost of $48,600.
The cost of implementing the recommendations will be estimated after incorporation of UAC
feedback into a staff recommendation. '
ATTACHMENTS
A. Consultant Report: "Assessment of Smart Grid Applications for City of Palo Alto" Final Report
B. RKS Smart Grid Survey Results
PREPARED BY: SHIV A SWAMINATHAN, Senior Resource Pla~
TOM TING, Senior Electric ProjectEngineer~ .
Engineerin~~
REVIEWED BY: TOMM MARSHALL, Assistant Director,
JANE RATCHYE, Assistant Director, Resource Management .~.
APPROVED BY:
"
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ASSESSMENT OF SMART GRID APPLICATIONS

FOR CITY OF PALO ALTO
Final Report

February 2011

Prepared by:
EnerNex Corporation
Knoxville, TN
Table of Contents
EXECUTIVE SUMMARY..............................................................................................................................4 
1  OVERVIEW....................................................................................................................................19 
1.1  INTRODUCTION..............................................................................................................................19 
1.2  DRIVERS FOR CHANGE..................................................................................................................21 
1.2.1  Internal Drivers......................................................................................................................21 
1.2.2  External Drivers.....................................................................................................................22 
1.3  SMART GRID OVERVIEW................................................................................................................23 
1.4  APPROACH TO DEVELOPING THE ASSESSMENT OF SMART GRID APPLICATIONS FOR CITY OF PALO
ALTO............................................................................................................................................24 
1.5  CITY OF PALO ALTO UTILITIES VISION STATEMENT.........................................................................26 
2  STRATEGIC GOALS AND OBJECTIVES.....................................................................................27 
2.1.1  Strategic Goals......................................................................................................................27 
2.1.2  Strategic Objectives..............................................................................................................27 
3  DEFINE SMART GRID ELEMENTS..............................................................................................34 
3.1.1  Fundamental Applications.....................................................................................................36 
3.1.2  Enabled Applications.............................................................................................................37 
3.1.3  Strategic Alignment...............................................................................................................38 
3.2  SMART GRID FUNCTIONAL REQUIREMENTS....................................................................................39 
3.3  MAPPING TO SMART GRID ELEMENTS............................................................................................39 
3.3.1  Smart Grid Function..............................................................................................................40 
3.3.2  Scope of Smart Grid Systems...............................................................................................40 
3.3.3  Overview of Smart Grid Functional Components..................................................................41 
3.4  PROPOSED SMART GRID ELEMENTS..............................................................................................42 
4  CURRENT AND FUTURE ARCHITECTURES..............................................................................47 
4.1  CPAU AS-IS SYSTEM ARCHITECTURE............................................................................................47 
4.1.1  Current Information Management Systems Architecture......................................................47 
4.1.2  Current Utility Operations System Architecture.....................................................................49 
4.1.3  Current City of Palo Alto Municipal Network Architecture.....................................................51 
4.2  PROPOSED SMART GRID ARCHITECTURE.......................................................................................52 
4.2.1  Proposed Smart Grid Information Management System Architecture..................................53 
4.2.2  Proposed Smart Grid CPAU Operations System Architecture.............................................54 
4.2.3  Proposed Smart Grid Municipal Communications Architecture............................................55 
4.2.4  Field Force Management......................................................................................................57 
5  COST BENEFIT MODELING AND ANALYSIS.............................................................................59 
5.1  SMART GRID COST BENEFIT ANALYSIS...........................................................................................62 
5.2  COST BENEFIT MODELING AND ANALYSIS.......................................................................................63 
5.2.1  Smart Grid Cost Benefit Analysis Model...............................................................................64 
6  EVALUATION OF COMMUNICATION SYSTEMS APPROACHES..............................................75 
6.1  BASE COMMUNICATION.................................................................................................................76 
6.2  BASE COMMUNICATION PLUS PUBLIC SAFETY AND WORKS.............................................................77 
6.3  BASE COMMUNICATION MODEL PLUS PUBLIC SAFETY AND PUBLIC WORKS AND CITY-WIDE PUBLIC
ACCESS........................................................................................................................................79 
6.4  AMI USING THIRD PARTY CELLULAR CARRIER...............................................................................81 
City of Palo Alto Utilities
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March 4, 2011
Smart Grid Business Plan
6.5  DEMAND RESPONSE SYSTEM ARCHITECTURE................................................................................81 
7  SMART GRID CBA MODEL ANALYSIS, KEY FINDINGS AND RECOMMENDATIONS.............84 
7.1  ADVANCED METERING INFRASTRUCTURE SYSTEM..........................................................................85 
7.1.1  CBA Base Model – Electric Meters only...............................................................................87 
7.1.2  CBA Base Model – Electric, Water, Gas Meters...................................................................89 
7.2  CBA BASE MODEL ANALYSIS - COMMUNICATION OPTIONS..............................................................91 
7.3  CBA BASE MODEL ANALYSIS – PRIVATE CARRIER SUPPLIED AMI COMMUNICATIONS......................92 
7.4  ADVANCED DISTRIBUTION..............................................................................................................92 
7.5  DEMAND RESPONSE SYSTEM........................................................................................................94 
7.6  SOCIETAL BENEFITS......................................................................................................................94 
8  SUMMARY OF KEY FINDINGS AND RECOMMENDATIONS.....................................................95 
8.1  SUMMARY OF KEY FINDINGS..........................................................................................................95 
8.2  SMART GRID RECOMMENDATIONS.................................................................................................96 
8.3  PRELIMINARY SMART GRID TIMELINE.............................................................................................98 
8.4  OTHER FACTORS TO BE CONSIDERED............................................................................................99 
8.4.1  Smart Meter Accuracy...........................................................................................................99 
8.4.2  Customer Information Access and Privacy.........................................................................101 
8.4.3  RF Emissions Interference with Equipment and Human Exposure....................................102 
APPENDIX A  SMART GRID USE CASES............................................................................................104 
APPENDIX B  CPAU FACTS & MODELING ASSUMPTIONS..............................................................116 
APPENDIX C  CPAU STRATEGIC OBJECTIVES.................................................................................120 
APPENDIX D  SMART GRID FUNCTIONAL REQUIREMENTS...........................................................127 
APPENDIX E  SMART GRID ELEMENTS AND COMPONENTS.........................................................142 
Metering............................................................................................................................................142 
Revenue Protection..........................................................................................................................144 
Remote Connect / Disconnect..........................................................................................................145 
Meter Asset Management................................................................................................................147 
Advanced Distribution......................................................................................................................147 
Outage Detection and Restoration...................................................................................................151 
Demand Management......................................................................................................................153 
Power Quality Management.............................................................................................................155 
Distributed Energy Resource (DER) Management..........................................................................156 
Engineering......................................................................................................................................159 
Work Management...........................................................................................................................160 
Enhanced Customer Experience / Customer Services....................................................................162 
Dynamic Pricing and Demand Response........................................................................................165 
Water and Gas Functions.................................................................................................................168 
External Party Information................................................................................................................168 
Security.............................................................................................................................................169 

City of Palo Alto Utilities
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March 4, 2011
Smart Grid Business Plan
EXECUTIVE SUMMARY
The executive summary provides summary findings and recommendations for City of Palo Alto
Utilities (CPAU) staff, City Council and stakeholders. It also provides an overview of the
approach and assessment results to provide context. The detail report outlining modeling
approach, assumptions, and results is provided in Chapters 1 through 8.
Summary of Findings & Recommendations
Summary Findings
1. Among the full gamut of possible smart grid applications being developed in the market
place today, three applications are relevant to CPAU.
a. Advanced Metering Infrastructure (AMI) that enables remote meter reading and
more granular and actionable usage information for customers including Meter Data
Management System (MDMS) for providing billing flexibility and dynamic pricing.
b. Advanced Distribution Systems including Distribution Automation (DA),
distribution monitoring and advanced distribution applications to enhance
reliability and more efficient management of the distribution system.
c. Enhanced customer engagement for optimal use of energy and water suppliers. This
aspect would require additional investment by customers in devices like In-Home-
Displays for residential customers and Building Management Systems (BMS) for
commercial customers. The cost of such customer devices and systems were not
considered in the analysis.
2. The principle benefit of installing an AMI System in Palo Alto is related to reducing meter
reading costs and efficient utilization of electricity. However due to the relatively efficient
CPAU meter reading operations and comparatively lower energy efficiency savings
potential in the City, these benefits are not sufficiently large to warrant an expedited
implementation of AMI.
a. The capital cost of implementing an AMI System for electric, gas and water meters is
estimated at between $10.8 and 16.2 million, NPV. In addition, enhanced data
management functionality related to consumption, rates, billing; meter and
communication network maintenance; and software maintenance cost is projected to
be $1.0 to 1.5 million annually in additional operating cost. Total AMI System 20
year costs range from $23.4 to 35.2 million, NPV.
b. The commensurate AMI System benefits are estimated to be in the $1.2 to 1.7 million
range annually, with principle benefit related to meter reader savings. Customer
efficiency benefits directly related to AMI was difficult to quantify, but preliminarily
it was estimated that AMI related technologies could result in electricity
City of Palo Alto Utilities
Assessment of Smart Grid
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March 4, 2011
Smart Grid Business Plan
consumption reduction of 0.5% for commercial customers and 1% for residential
customers in the long term. No gas or water usage savings was assumed in this
assessment. The estimated 20 year benefits range from $18.5 to 27.7 million, NPV.
c. Since AMI is an enabling technology, it was difficult to foresee and quantify benefits
related to such technologies far into the future. Benefits related to enhanced
customer service and satisfaction was also difficult to quantify.
d. With a 20 year NPV cost of $23 to $35 million and benefit of $18 to $28 million, there
is no compelling quantifiable economic benefit related to replacing existing meters
with smart meters. In the best case scenario, an AMI System investment is estimated
at 17 years to breakeven cost recovery - this is a scenario where the costs are at the
bottom of the range and the benefit is at the top of the range.
3. The business case for Distribution System Automation was not positive. Implementing a
basic Outage Management System (OMS) and integration with Geographic Information
System (GIS) will facilitate a more effective and efficient operations on the field. The total 20
year actual costs of implementing such a system is estimated at $3 million and several
elements of such a system are already under development. The quantifiable economic
benefit is lower than the capital costs with a NPV of $2.7M versus a total projected utility
and customer benefit of adding up to $1.6M NPV.
4. CPAU at present has a program to provide in-home displays to residential customers and
assists with upgrading building management systems at commercial customer locations. If
CPAU decides to implement AMI, higher degree of customer engagement will have to occur
to maximize the value of the AMI system. This includes implementing a range of customer
oriented programs such as customer on-line energy usage and bill review web portal,
analysis of appliance efficiency and usage pattern, and other customer conservation and
energy efficiency outreach campaigns.
Summary Recommendations
1. The Smart Grid related systems are being rapidly deployed around the country. This
effort is largely driven by regulatory mandates or spurred by government stimulus
funds. While there are benefits associated to being an early adopter, the risk of early
adoption outweighs the benefits for Palo Alto at this time.
2. It is our assessment that as Smart Grid technology standards are finalized and
technology/product lines mature in the next 2-3 years, costs of implementing an AMI
system would decline and benefits to Palo Alto will become more apparent. Hence, it is
recommended that Palo Alto positions itself, without making any major investments at
this time, to take advantage of potential opportunities that may arise in the 2012-13
period.
3. It is recommended that the City devote its effort in the following areas in the next 2
years, to learn from experience and be in a position to make decisions based on an AMI
implementation road map in the 2012-13 period:
City of Palo Alto Utilities
Assessment of Smart Grid
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March 4, 2011
Smart Grid Business Plan