[Smart Grid Market Research] The Optimized Grid - Zpryme Smart Grid Insights

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July 2012 www.smartgridresearch.org

The
Optimized Grid
A 10-Page Special Report

Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved www.zpryme.com

Table of Contents
The Optimized Grid .................................................................... 2
Transmission & Distribution Losses ............................................. 3
Distribution Automation............................................................. 3
Evolution of Distribution Automation ....................................... 3
Substation Automation ............................................................. 4
Feeder Automation ................................................................... 4
Volt/VAR Optimization .............................................................. 4
FLISR .............................................................................................. 5
The Business Case for Distribution Automation ...................... 5
Opportunities by Geography ................................................... 7
Distribution Automation (DA) Forecasts by Region .............. 7
Key Player Spotlight ................................................................... 8
Short-Term Outlook .................................................................. 10

1 www.zpryme.com | www.smartgridresearch.org Zpryme Smart Grid Insights. The Optimized Grid | July 2012

Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved.

The Optimized Grid Global Distribution Automation Market Value Forecast
CAGR = 25%
Optimizing utilization and operating efficiency in electricity 2012 to 2020 (in US billions)
$40 (figure 1, source: Zpryme)
delivery system is one of smart grid’s characteristics.
Transmission and distribution infrastructure includes $35 $33.9
transmission lines, substations, and distribution feeders. One
$30
estimate has put the potential in reducing distribution $26.2
losses through smart grid deployment at 30%.1 $25
$20.6
$20
In this report Zpryme looks at the distribution system portion $16.4
of the smart grid and the portfolio of technologies that are $15 $13.5
$11.3
being deployed to optimize the distribution infrastructure. $9.0
$10
$7.4
$5.7
The global distribution automation (DA) market will be $5
driven by smart grid investments in emerging countries
$0
such as China, Brazil, and India, and by European policies 2012 2013 2014 2015 2016 2017 2018 2019 2020
that aim to have 80% smart meter deployments by 2020.
However, the current market for DA is driven by Global Distibution Automation Market Segmentation
progressive utilities in North America. 2012 to 2020 - Region % of Global Market
(figure 2, source: Zpryme)
 The global DA market is projected to reach $5.7 100%
9% ROW
billion in 2012. North America (44%) and Asia Pacific 90% 16% 17% 20% 19% 18% 15% 12% 10%

(25%) will account for about 70% of the global
80% 25%
market in 2012. Asia
70% 24% 26% 34% 37% Pacific
26% 28% 29% 32%

 By 2020, the global DA market is projected to reach 60% 15%
14% Europe
$33.9 billion. The DA market is projected to grow at a 50% 7%
14%
14% 14% 14% 15% 15% 16%
compound annual growth rate of 25% from 2012 to 40% 7% 7%
7% 7%
2020. By 2020, Asia Pacific will account for 37% of 30%
7% 8% 9% 10% Latin &
the global market. South
20% 44%
39% 37% America
34% 32% 31% 30% 29% 28%
10% North
America
0%
2012 2013 2014 2015 2016 2017 2018 2019 2020
1 www.members.weforum.org/pdf/SlimCity/SmartGrid2009.pdf



Transmission & Distribution Losses These include improve reliability and power quality,
reduce operating costs, improve outage restoration time,
Worldwide electricity losses through transmission and increase customer service options, integration of DER, and
distribution (T&D) account for almost 9% of total electricity integration of customer facing energy applications.
supplied. According to the U.S. Energy Information
Administration statistics, electricity distribution losses in the Evolution of Distribution Automation
U.S. in 2010 alone were about 261 billion kWh. Reducing
distribution losses in the U.S. by just 1% would save about Distribution automation has been around for decades. In
2.6 billion kWh of electricity, more than the total electricity its initial stages, efficiency improvement was the main
the country of Uganda generated. driver of distribution automation. However, the definition
and scope of DA is evolving with a set of new
Losses within T&D infrastructure are characterized by two technologies and utility needs. In 1998, the IEEE broadly
components: technical and non-technical losses. defined DA as “a set of technologies that enable an
Technical losses such as line losses consist mainly within the electric utility to remotely monitor, coordinate, and
electricity components and system. Non-technical losses operate distribution components in a real time mode from
are attributed primarily to electricity theft, customer non- remote locations.” In a recent white paper for NIST, the
payment, and inefficient or erroneous accounting. IEEE updates its definition of DA to “any automation which
is used in the planning, engineering, construction,
Distribution Automation operation, and maintenance of the distribution power
system, including interactions with the transmission system,
Distribution automation (DA) is the backbone of the future interconnected distributed energy resources (DER), and
intelligent distribution network. Historically, distribution automated interfaces with end-users.”2
systems do not have much automation. System
equipment, once installed, was expected to perform In this later definition, the scope of DA has grown from
autonomously with only occasional manual interventions. mainly remote monitoring and automatic reconfiguration
In response to demands for higher reliability and power to encompass several key characteristics of the smart grid.
quality, improved efficiency through reducing technical More specifically: operating efficiency, optimizing asset
losses, lower operating costs, demand response utilization, accommodating renewable and distributed
capabilities, and increasing the use of distributed energy generation, and market forces.
resources (DER), distribution operations are becoming
more and more automated. Traditional distribution automation capacities include
automation of switching functions with limited
The strategic drivers for advanced distribution automation
www.grouper.ieee.org/groups/td/dist/da/doc/IEEE%20Distribution%20Automation%20W
are fundamentally the characteristics of the smart grid.
2

orking%20Group%20White%20Paper%20v3.pdf



reconfiguration capabilities and other individual functions automation can be used in conjunction with an outage
such as Volt/VAR control. The new vision for DA now management system to automatically identify possible
includes automation of all controllable equipment and fault locations on the distribution system resulting in
advanced reconfiguration for optimizing performance improved response and restoration time.
capabilities. In a sense, the new generation of DA
technologies will allow distribution system to be fully Feeder Automation
automatic relying on minimal manual intervention.
Two key applications that are driving feeder automation
Substation Automation are: Volt/VAR optimization and Fault Location, Isolation,
and Service Restoration (FLISR). Each application offers
Distribution substation automation represents the first level different value propositions to utilities. Broadly speaking,
of EPRI’s advanced distribution automation Volt/VAR optimization technology helps improve
implementation plan. In 2005, it estimated the cost for efficiency by reducing electricity losses and the demands
integrating distribution substation automation to the grid made on distribution systems while FILSR technology offers
infrastructure at about $10 billion. The same study economic reliability by improving system restoration time.
estimated the integration cost for feeder automation at
around $70 billion.3 Volt/VAR Optimization
Markets for substation and feeder automation are Volt/VAR control is a fundamental part of optimizing the
relatively segregated with substation automation having a electrical distribution system. Its primary purpose is to
much higher market penetration. According to a DOE manage the flow of electricity to maintain acceptable
report, as of 2005 84% of U.S. electricity companies had voltage at all loading conditions along the distribution
implemented or plan to implement substation automation system. In a nonintegrated system, Volt/VAR management
compared with only 20% for feeder automation.4,5 is achieved by autonomously operated devices such as
However, the majority of substation automation capacitor banks. New Volt/VAR control technology
applications are in monitoring and control of breakers and improves optimization at the system level through the use
equipments; hence, there are significant opportunities to of real-time information and system modeling to
improve substation automation applications and integrate continuously optimize power delivery efficiency and peak
them with the distribution system. For example, substation demand. In a smart grid environment, Volt/VAR’s
management objective will go beyond keeping voltage
3 EPRI Research Plan for Advanced Distribution Automation. Slide 18. within allowable limits and reducing technical losses. As
www.grouper.ieee.org/groups/td/dist/da/doc/IEEE%20GM%202005%20ADA%20Panel%2
0-%20Goodman%20-%20EPRI%20Research%20Plan.pdf
distributed energy resources grow, real-time Volt/VAR
4 DOE (2010) Smart Grid System Report optimization will play a significant role in maintaining
5 CEC 500-2007-028, VALUE OF DISTRIBUTION AUTOMATION APPLICATIONS reports 80%

penetration
voltage stability and power quality on the distribution



feeders. When outages and faults occur, Volt/VAR control The Business Case for Distribution Automation
will also help to restore the system after feeder
reconfiguration. While distribution automation technologies are
commercially available for wide scale utility deployment;
FLISR implementation of DA is a complex process that involves
multiple departments within a utility, long-term decision
An FLISR system can detect feeder faults, determine the making in term of system architecture, and potentially high
fault location, isolate the faulted section of the feeder, investment costs. Making the business case for DA is
and restore service to the unaffected portions of the complicated by the fact that its benefits include values
feeder. In simpler terms, FLISR provides the means for utility that are not easily quantifiable such as improved customer
to restore service to some customers before field crews satisfaction and safety. Some benefits are more difficult to
arrive on the scene thereby reducing the number of calculate; for example, savings from reduced labor costs
customers affected by power outage. Other benefits due to automatic fault detections depend on how many
include minimizing lost revenues due to the ability to get outages are expected, the number, which at best is
unaffected customer back online sooner and operational probabilistic.
efficiency in cost savings due to a fewer number of fault
investigations, and lower patrol time because fault Like any smart grid investment, values derived from DA
location is narrowed down. deployment vary according to utilities context. The key in
making a business case is identifying applications that
The level of control offered by an FLISR system depends on provide the best return on investment in ways that can be
the back-end software architecture. With current measured by utilities. In the U.S., uncertainties due to
technology offering, identifying and isolating faults are deregulation and restructuring of the power industry have
now relatively easy but automatically restoring power still been blamed for the slow implementation of distribution
remains a challenge. A fully automatic system is the most automation.
complex approach to DA and is currently deployed in
pilot stages. A semi-automatic approach lets the system Utilities that have performance-based rates may consider
automatically perform relatively “easy” actions such as FLISR for its ability to improve certain reliability metrics
identifying faults and restoring upstream services while measured by regulators. While utilities that are able to pass
system operators remain in control of more complicated the cost of line losses to the customers or distributor of
actions. power without retail licenses, the benefit of line loses
reduction add little value without changes from the
regulator.



Global Distribution Automation Market Value by Region, 2012 – 2020
(table 1, source: Zpryme, in US billions)

Market Value 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR

World Region
North America $2.5 $2.9 $3.3 $3.8 $4.4 $5.0 $6.2 $7.6 $9.4 18%
Latin & South America $0.4 $0.5 $0.6 $0.8 $1.0 $1.2 $1.7 $2.4 $3.3 30%
Europe $0.9 $1.0 $1.3 $1.5 $1.9 $2.3 $3.0 $4.0 $5.3 26%
Asia Pacific $1.4 $1.8 $2.3 $2.9 $3.8 $4.8 $6.6 $9.0 $12.4 31%
ROW $0.5 $1.2 $1.5 $2.2 $2.5 $3.0 $3.1 $3.2 $3.5 27%
Total $5.7 $7.4 $9.0 $11.3 $13.5 $16.4 $20.6 $26.2 $33.9 25%

Percent of Total Market
North America 44% 39% 37% 34% 32% 31% 30% 29% 28%
Latin & South America 7% 7% 7% 7% 7% 7% 8% 9% 10%
Europe 15% 14% 14% 14% 14% 14% 15% 15% 16%
Asia Pacific 25% 24% 26% 26% 28% 29% 32% 34% 37%
ROW 9% 16% 17% 20% 19% 18% 15% 12% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100%

Global Distribution Automation Market Value %, 2012 Global Distribution Automation Market Value %, 2020
figure 3, source: Zpryme figure 4, source: Zpryme

North
America Asia Pacific
44% 36%

ROW Europe ROW
9% Latin & 16% 10%
South
Asia Pacific Europe North
America
25% 15% Latin & America
7%
South 28%
America
10%



Opportunities by Geography  One of India’s leading suppliers in network
automation, Siemens recently announced a turnkey
It seems natural to talk about global infrastructure supervisory control and data acquisition technology
investments in terms of developed and emerging order with India’s Maharashtra’s State Electricity
economies. While it’s generally true that the U.S. and Distribution Company. As part of the $24.5 million
Europe need to focus more on modernizing aging deal, the company will install distribution substation
infrastructure and to accommodate DER and EV automation systems with integrated IT systems as
penetrations. And while infrastructure in emerging markets well as provide maintenance and other services for
may be newer, the existing systems could benefit from five years after the systems are commissioned.7
distribution system automation. Renewable energy and
DER will also be key drivers of smart grids for many  China for its part has developed and implemented
emerging economies due to energy security concerns an aggressive plan for the national smart grid.
and government policies. Implementation for distribution automation system is
underway in 27 cities across the country. By 2020,
For markets that are deregulated benefits from DA the State Grid Corporation of China plans to
investments are constrained by regulatory rules and comprehensively deploy distribution automation
market forces. Hence, some state-owned utilities may and controls in all prefecture-level cities within its
adopt DA technologies at a faster pace due to the lack of territories.
regulatory and business uncertainties as well as
government support. For example, in 2007 the Korean Distribution Automation (DA) Forecasts by Region
Electric Power Corporation (KEPCO) reported having 90%
integration of automated feeders in its distribution North America: From 2012 to 2020, the North American
automation system. With its successes at home, KEPCO has market is projected to grow from $2.5 billion to $9.4 billion
launched projects to supply new DA technologies in with a compound annual growth rate of 18%. In 2012, the
Indonesia, Vietnam and China.6 region will account for 44% of the global market, but this
figure is projected to drop to 28% by 2020.
Size also matters. Large emerging markets such as Brazil,
China, and India still provide great opportunity for growth. Latin & South America: From 2012 to 2020, the Latin &
Infrastructure investments in these markets are driven by South American market is projected to grow from $0.4
grid expansion, demographic growth, and rapid billion to $3.3 billion with a compound annual growth rate
urbanization. of 30%. In 2012, this region will account for 7% of the
market, but this figure is projected to reach 10% by 2020.

7 www.smartgridnews.com/artman/publish/Business_Global/Siemens-picks-up-24-5-
6 www.grouper.ieee.org/groups/td/dist/da/doc/2008-07Kepco.pdf Slide 8 million-SCADA-DMS-order-from-India-4553.html



Europe: From 2012 to 2020, the European market is ABB
projected to grow from $0.9 billion to $5.3 billion with a
compound annual growth rate of 26%. In 2012, this region As the world’s largest maker of power distribution
will account for 15% of the global market, but this figure is equipment, ABB has a wide customer base. It operates in
projected to grow to 16% by 2020. about 100 countries with manufacturing and R&D base in
many developing countries. In recent years it has made
Asia Pacific: From 2012 to 2020, the Asia Pacific market is several strategic moves to expand offerings in the
projected to grow from $1.4 billion to $12.4 billion with a distributed automation and smart grid portfolio through
compound annual growth rate of 31%. In 2012, this region acquisitions of several software firms and low-voltage
will account for 25% of the global market, but this figure is components makers. One such acquisition, Ventyx, has
projected to increase to 37% by 2020. helped the company become one of the leaders in
energy industry enterprise and asset management in North
Rest of World (ROW): From 2012 to 2020, the ROW market is America.
projected to grow from $0.5 billion to $3.5 billion with a
compound annual growth rate of 27%. In 2012, the ROW In March 2012, ABB was awarded a contract from the
will account for 9% of the market and increase to 10% of Iraq’s Ministry of Electricity to upgrade and rehabilitate
the market by 2020. power distribution network in Baghdad. The company will
install integrated software solution from its Ventyx portfolio
Key Player Spotlight as well as supply the communications equipments and
remote terminal units to monitor and control power
supplies. As part of several infrastructure improvement
Utility infrastructure is a long-cycle business. As such,
initiatives currently underway in Iraq, the project will
companies with extensive product range and expansive
improve the availability and quality of electricity for
supply chain distribution are oftentimes the key players.
customers in densely populated areas of the country’s
We look at four leaders in global electric power market
capital.8
place who are providing utilities with physical components
as well as the back-end network to support distributed
Siemens
automation. All of these companies are rapidly expanding
their smart grid presence by acquiring, establishing
Siemens has positioned itself as a one-stop supplier of
alliances and partnerships that bring end-to-end solutions,
energy automation technology. With extensive equipment
including whole products and services, to utility customers.
portfolios, the focus for smart grid is on a tight integration
of IT, operation technology, communication, and
automation to power components. The company has

8 www.abb.com/cawp/seitp202/ca3424817ffc3cf2c12579cd00338a85.aspx



Summary of Key Player Distribution Automation Solutions
(table 2, source: Zpryme)

Company Distribution Automation Solutions (select list – not an exhaustive list of solutions) Key Utility Customers

 Substation automation & protection  CenterPoint Energy
 Distribution protection and control  Duke Energy
 Feeder automation  Long Island Power Authority
ABB
 Distribution communication and networking solutions  Progress Energy
 Network Manager  CDEC-SIC, Chile
 Distribution management system (via Ventyx solutions)  UTE, Uruguay

 Kansas City Power & Light
 Medium voltage automation (Efficient Network and Energy Automation Systems)
 Oncor Electric
 Feeder automation (Efficient Network and Energy Automation Systems)
Siemens  A & N Electric
 Applications (Efficient Network and Energy Automation Systems)
 Maharashtra's State Electricity
 Distribution automation communication networks (via purchase of RuggedCom)
Distribution Company Ltd, India

 Distribution automation controllers
 Outage management Systems
 Distribution management systems  PacifiCorp
 Feeder protection systems  Electrica de Guayaquil, Ecuador
GE
 GIS  Norcross Electric Cities of
 Substation automation systems and solutions Georgia
 Substation gateways and RTUs
 Solutions as a Service

 Medium voltage monitoring, control, and fault detection
 Substation automation systems  Dazhou Power Group, China
Schneider
 Power and energy monitoring systems  Basra, Iraq
Electric
 L500 network management  Rivers State Government, Nigeria
 Advanced Distribution Management System (Telvent)



taken a software-centric approach in order to provide an utilities. Under this new business model, the company’s
end-to-end network infrastructure that enhance its Grid IQ Solution will be implementing smart grid system for
business lines in power generation, transmission, and the utility for a monthly fee. GE hopes to sign up more
distribution. utilities to take advantage of the economy-of-scale.9

Siemens and A&N Electric Cooperative recently Schneider Electric
completed an ultra-high-speed distribution feeder
automation system for Riverside Shore Memorial Hospital. Schneider Electric has fast become one of the major
The system enables A&N Electric to detect faults, isolate players in serving utility customers. In the past two years, it
problems, and transfer to alternative power sources almost has made two major acquisitions that greatly expanded its
instantly improving the service reliability of the only hospital distribution system management offerings both in software
serving the eastern shore of Virginia. System and actual devices. Like others, the company has been
communication equipments are handled by RuggedCom, providing more energy software solutions, consultancy,
a Canadian based company specialized in and project management capabilities.
communication equipments for harsh electrical and
climatic environment. Siemens Canada Limited later Telvent, a subsidiary of Schneider Electric, in a partnership
acquired RuggedCom in March 2012. with IBM were selected for a smart grid project for the
largest distributor of electricity in Ontario, Hydro One. IBM
GE and Telvent will run tests and simulations to determine the
smart grid technologies that best fit Hydro One’s electricity
Like Siemens, GE has extensive interests in the power distribution system needs, including enabling increased
industry. The company has been promoting smart grid amount of distributed generation feed to the grid.10
solutions to utilities by offering comprehensive services and Schneider Electric acquired Telvent, a Spain-based
turnkey contracts. In one of the latest announcements, GE analytical software maker, for $2 billion in 2011.
offers up FLISR systems that can be deployed in
incremental stages and scalable across the system. The Short-Term Outlook
company also ventured into providing cloud-based data
services as part of their smart grid solutions. GE is also In the near-term utilities will continue to invest in
pioneering the concept of smart grid as a service. technologies that enable them to more effectively
manage the grid. In more mature markets the growth will
In 2011, GE announced a fee-for-service for smart grid be driven by needs to modernize aging infrastructure and
project with the city of Norcross Electric Cities of Georgia. the need for increasing reliability. The global trends in
The company will provide an integrated system
specifically tailored to mid-market and community-owned 9 www.genewscenter.com/Content/detail.aspx?NewsAreaId=2&ReleaseID=13492
10 www.www-03.ibm.com/press/us/en/pressrelease/37308.wss



urbanization and energy efficiency are more prominent in
emerging markets where many countries are encouraging
investment in energy grids, in these markets intelligent
hardware will make up a larger share of the investment in
the short term.

As with any investment, the availability of financing will be
a barrier for mid and small utilities. Companies offering
solutions that are scalable will be more attractive to utilities
with limited access to capital who may choose to deploy
smart grid systems targeted at critical needs or those yet
unwilling to take the plunge into a full-scale smart grid
system.



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Zpryme Smart Grid Insights Contact:

smart.grid@zpryme.com | +1 888.ZPRYME.1 (+1 888.977.9631)
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Zpryme Credits:
Editor Managing Editor Research Lead
Pimjai Hoontrakul Robert Langston Stefan Trifonov

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