ASSESSMENT OF SMART GRID APPLICATIONS FOR CITY OF PALO ALTO Final Report

223 Pages·2012·7.18 MB·English

City of Palo Alto (ID # 2443)
City Council Staff Report
Report Type: Informational Report Meeting Date: 2/13/2012
Summary Title: Assessment of Smart Grid Applications
Title: Assessment of Smart Grid Applications in Palo Alto and Two-Year Smart
Grid Related Work Plan for 2012 and 2013
From: City Manager
Lead Department: Utilities
Recommendation
This is an informational report and requires no Council action.
Executive Summary
The City of Palo Alto 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. However, because of uncertainties in the technology market place,
relatively efficient utility meter reading operations, and estimated low energy efficiency
savings, the consultant recommends that the City not expedite implementation of advanced
metering infrastructure (AMI), but instead undertake a number of steps in the next 2 to 3 years
to position the City to develop a smart grid road map at a future time.
In April 2011 the UAC reviewed the consultant findings and recommendation, and concurred
with the consultant recommendations. Based on the UAC’s input and consultant
recommendations, staff prepared a two-year work plan to undertake additional smart grid
related assessments and pilot projects and presented the plan to the UAC in November 2011.
This report outlines both the consultant findings and staff’s work plan for the next two years.
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 related
technology 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
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Electric 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.
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 identifiedthree smart grid applications that would be relevant to CPAU.
1. Advanced Metering Infrastructure (AMI), “smart meters”, 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 capital cost of implementing an AMI system was estimated at $16 million. The
present value (PV) of the costs of implementing and maintaining the system over 20
years was estimated at $29 million, and the corresponding PV of the benefit to the
community was estimated at $23 million over the same period.
2. Advanced Distribution Systems including Distribution Automation (DA) would allow for
more efficient management of the electric distribution system. The cost to implement
such systems is about $3 million while the benefit is estimated to be $2.7 million. Given
the relatively reliable service in Palo Alto, the improvement in service levels was found
not sufficient to justify such an investment at this time.
3. Over and above utility investment in AMI systems, enhanced customer engagement
could lead to more efficient use of energy and water resources, but would require
customer investment in real-time usage displays or other systems and behavioral
changes as related to energy and water use. 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 additional cost-benefit of customer
investment in such systems was not assessed by the consultant, but any future AMI
system implementation must take these costs, and related benefits, into consideration
to realize the full benefits of a utility AMI/smart grid system implementation.
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The consultant’skey findings are summarizedbelow.
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 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. A summary illustration of costs and benefits of implementing an AMI
program for the electric, gas and water utilities is provided below. As outlined before, the PV of
the costs over a 20-year period was estimated at $29 million versus a PV benefit of $23 million
over the same period. This assessment will be updated in the coming years as more
information becomes available.
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AMI System Implementation: Cost & Benefit
(millions of $, 20 Year Assessment, Present Value(PV))
30
Cost of $29M & Benefit of $23M
25
20 Year O&M, 15.8
20 Reduced EnergyPurch., 6.2
Demand Response, 2.3
15
Avoided Capital Exp., 1.3
Distribution Operations, 1.3
IT Integration & Software, 5.2
10
Installation, 2.1 Meter Reading Savings,
10.5
Network, 0.9
5
AMI Meters, 5.3
Customer Service, 1.4
0
Cost (PV) Benefit (PV)
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 from
the survey 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.
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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.
Smart Grid Related Work Plan for the Next Two Years
Based on the consultant’s input and UAC discussion at the April 2011 meeting, staff has
developed a 2-year work plan to undertake various assessments and pilot projects as discussed
below. These initiatives will position the City to re-evaluate the merits of implementing smart
grid systems by 2014.
1. Retail Meter Maintenance and Replacement Plan
CPAU has over 72,000 electric, gas and water meters, of which approximately 5,000 are
Automated Meter Reading (AMR) meters that were installed in 2005 to 2007. Steps will be
taken to ensure that when gas and water meters are replaced as part of routine maintenance
activities, the new meters are capable of being retrofitted with smart meter registers that may
be installed at a future date.
2. Time-of-Use Retail Rates for Residential Electric Vehicle Charging
Potentially rapid growth of electric vehicle (EV) charging is one of the drivers for implementing
various elements of smart grid. CPAU’s electric feeders have sufficient capacity to handle load
growth projections made through 2020, though staff is monitoring localized distribution
transformer loading in areas where there may be clusters of residential EVs. Providing
incentives for EV customers to charge at night through time-of-use (TOU) rates reduces the risk
of overloading local distribution transformers.
Staff is in the process of evaluating and testing various systems to offer TOU rates on a pilot
basis for a limited number of EV customers. The pilot is to be launched in the summer of 2012.
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3. Demand Response Pilot Program for Large Commercial Customers
The ability to provide incentives for customers to reduce their electric consumption during the
peak load period is another driver for smart grid system implementation. With a moderate
climate and a relatively flat load, the potential for Demand Response in Palo Alto was projected
to be relatively small. The consultant recommended further evaluation to determine possible
savings for large commercial customers.
During the summer of 2011, a pilot Demand Response program was launched for large
commercial customers who have interval meters with communication systems to remotely
monitor usage. In May 2011, three large commercial customers signed up for the program to
collectively reduce 150 kW when called upon during hot summer days. Due to mild weather, a
Demand Response event was not initiated. However, the program was tested once with one
volunteer customer participating. During the test event, the customer reduced capacity by 170
kW, well above the customer’s initial estimate of 50 kW. The pilot Demand Response program
will be continued during the summer of 2012 with program results available in the fall of 2012.
Staff will also explore incentives that will encourage large commercial building owners to install
state-of-the-art building management systems to optimize energy use and be better able to
participate in the Demand Response program. This will be an ongoing effort.
4. Smart Meters and In-home Displays –Residential Customer Pilot
The primary feature of a smart electric meter is the ability to store energy consumption data in
smaller time increments and transmit the information periodically to the utility and to the
customer so that customers can directly monitor their own usage in real-time.
Though CPAU is not yet planning to install smart meters to remotely read customer
consumption for billing purposes, a pilot project will be designed to enable customers to
receive a smart meter and read their own consumption patterns through an in-home display or
their mobile device. Staff will explore the feasibility of offering such a pilot for customers
interested in learning about the technology and the ability to adjust energy use based on
energy use information. CPAU will gather data regarding the potential for energy savings
associated with smart meters and in-home display installation. The timeline to launch such a
program is uncertain at this time.
5. Smart Meters and real time information and alerts –Commercial CustomerPilot
The primary feature of a smart electric meter is the ability to store energy consumption data in
smaller time increments and transmit the information periodically to the utility and to the
customer so that commercial customers can directly monitor their own usage in real-time.
Though CPAU is not yet planning to install smart meters to remotely read customer
consumption for billing purposes, a pilot project will be designed to enable commercial
customers to receive a smart meter and read their own energy and water consumption
patterns through a web based display or mobile device. Staff will explore the feasibility of
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offering such a pilot for customers interested in learning about the technology and the ability to
adjust energy use based on energy use information. CPAU will gather data regarding the
potential for energy savings associated with this technology. The timeline to launch such a
program is uncertain at this time.
6. Projects Received through CPAU’s Emerging Technology Demonstration Program
CPAU is in the process of obtaining approval to launch an Emerging Technology Demonstration
Program to promote the testing, evaluation, and deployment of new technologies or innovative
applications of existing technologies that could be used for the benefit of CPAU customers. This
will be an ongoing pursuit and smart grid objectives will be coordinated with the program.
7. Investigate Ways of Reducing AMI back-end Software and Integration Cost
The consultant report found that $6 million of the $16 million cost of implementing an AMI
system was associated with software and integration (“back-end”) costs. These systems include
AMI “head-end systems”: meter-data-management-systems, integration with SAP, and bill
production systems. Staff will explore the software-as-a-service model and other potential
collaborative ways to implement back-end systems at a lower cost such as through third party
service providers. This will be an ongoing exercise, with new market opportunities investigated
as appropriate.
8. Analyze Potential Volt/Volt-Ampere Reactive (VAR) Energy Conservation on the
Distribution Grid
“Volt/VAR energy conservation” is a distribution feeder optimization technique based on the
premise that operating the electric system at the lowest allowable voltage level and highest
power factor will reduce energy consumption and demand for customers and the utility.
Because of the design and configuration of many of the distribution circuits it is questionable as
to whether savings can be achieved.
The consultant report recommends this opportunity be further analyzed through testing on
selected distribution circuits. Staff will explore this opportunity using voltage monitoring
equipment that can replicate what would be available from an AMI system or incorporate this
testing as a part of another AMI pilot project. Preliminary results expected to be available by
the fall of 2012.
8. Develop a Long Term Distribution System Automation Road Map
Staff will refine the assumptions used in the consultant report to develop a better
understanding of the benefits of automating the operation of the distribution grid, quantifying
some of the intangible benefits, and identifying the level of automation (what equipment,
location, etc.) that would provide the most benefit for the least cost.
The new Outage Management System that is currently being procured has the capability to
gather data from smart meters to determine areas impacted by outages and facilitate
troubleshooting, thereby reducing the duration of outages. Such a system will be a key
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component in developing the distribution system automation road map, expected to be
accomplished by the fall of 2012.
Timeline
Staff will undertake the assessments and pilot programs outlined above over the next 2 years,
and re-evaluate the merits of implementing smart grid systems by 2014. Staff will be providing
updates on the progress of further assessment and pilot projects to the UAC periodically.
Resource Impacts
A smart grid Capital Improvement Project budget of $500,000 from the Electric fund was
approved by Council for FY 2012. This budget is sufficient to undertake the assessments and
pilot projects outlined in this report.
Policy Implications
Evaluating the merits of implementing smart grid applications and planning for its
implementation in the long term is consistent with Utilities Strategic Plan Strategic Objective to
investigate and adopt innovative technologies.
Environmental Review
The City’s study of smart grid related pilot projects and assessments do not meet the definition
of a “project” under the California Public Resource Code Section 21065, thus the California
Environmental Quality Act (CEQA) review is not required.
Attachments:
•
Attachment A: Smart Grid Assessment Consultant Report -EnerNex -Feb 2011 (PDF)
•
Attachment B: Smart Grid Benchmark Survey Results Jan 2011 (PDF)
•
Attachment C: UAC Minutes April 27 2011-Smart Grid Assessment (PDF)
Prepared By: Shiva Swaminathan, Sr. Resource Planner
Department Head: Valerie Fong, Director
City Manager Approval: ____________________________________
JamesKeene, City Manager
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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
Assessment of Smart Grid
Applications 2
March 4, 2011
Smart Grid Business Plan