Smart Grid Vision to India Essay Sample

Smart Grid Vision to India Pages
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1.Overview and Background
Today, the electricity supply industry is wrestling with an unprecedented array of challenges, ranging from a supply-demand gap to rising costs and global warming. These and other forces are driving the need to reinvent the business. That in turn, is driving the need for a smart grid. Unrelenting increases in electricity demand. Rising population, the growing affluence of emerging technologies, and escalating demand for goods and services that require ever more electricity, and the growing need for the unique properties of electricity in an increasingly digital world are all driving the demand for power to unprecedented levels. In India’s high-growth economy, for example, the demand for electricity is forecast to grow by an estimated 10% per year until the existing supply-demand gap is closed. In India with the proliferation of electronic end-use devices, particularly for computing and communications results in demand for more (and more reliable) electricity because of the sophistication and accuracy of the peripherals involved 1.1 Basic Reasons Influence the need for Smart Grid:

Global warming: There is broad consensus that global warming has already begun to cause serious and lasting damage to the world’s ecology. Because electricity production is a major source of carbon emissions, “early adapters” around the world — both governments and corporations — have begun exploring ways to create sustainable, low-carbon, high-growth economies. The smart grid offers the potential to conserve energy, both through reducing demand at peak times and by its ability to deploy renewable energy sources, thus lessening the industry’s contribution to climate change. An upturn in the trend in unit costs of electricity: It is becoming more apparent that the long-term trend of rising unit costs of electricity began as long ago as the late 1960s, after nearly a half century of declining unit costs. Many factors will continue to put upward pressure on costs, including increased commodity prices, especially for oil and gas, plus “dispatchability” and thus lower plant load factors for renewable energy sources, among others.

At the same time, a construction cycle of historic proportions is unfolding for utilities to replace and renew the aging transmission and distribution infrastructure in India. Reliability. The electric utility industry is facing a decline in quality at the same time unit costs are rising. For example, India has experienced recently a massive blackouts in the North-Eastern Region due to Grid failure that have left a deep scar on the industry and, perhaps more so, society, as well as government and regulators. These blackouts led to the codification of reliability standards and the imposition of regulations with stiff penalties to govern the reliability of bulk power supply networks. An important goal of the smart grid vision is a network that can improve outage management performance by responding faster to repair equipment before it fails unexpectedly. Efficiency: The smart grid can improve load factors and reduce system losses. According to the US Department of Energy’s (DOE) estimates, if the US electricity system were just 5% more efficient, the energy savings would be equivalent to eliminating the fuel and greenhouse gas emissions produced by 53 million cars. 1.2 What Exactly is a Smart Grid?

Simply a Smart Grid is the integration of information and communications technology into electric transmission and distribution networks. The smart grid delivers electricity to consumers using two-way digital technology to enable the more efficient management of consumers’ end uses of electricity as well as the more efficient use of the grid to identify and correct supply demand-imbalances instantaneously and detect faults in a “self-healing” process that improves service quality, enhances reliability, and reduces costs. Thus, the smart grid concept is not confined to utilities only; it involves every stage of the electricity cycle, from the utility through electricity markets to customers’ applications. The emerging vision of the smart grid encompasses a broad set of applications, including software, hardware, and technologies that enable utilities to integrate, interface with, and intelligently control innovations. Some of the enabling technologies that make smart grid deployments possible include:

Storage devices
Distributed generation
Renewable energy
Energy efficiency
Demand response
Integrated communications systems
Superconductive transmission lines.
Typical View of Smart Grid Technology

1.3 Key characteristics of the smart grid
Self-healing: The grid rapidly detects, analyzes, responds, and restores Empowers and incorporates the consumer: Ability to incorporate consumer equipment and behavior in grid design and operation Tolerant of attack: The grid mitigates and is resilient to physical/cyber-attacks Provides power quality needed by 21st century users: The grid provides quality power consistent with consumer and industry needs Accommodates a wide variety of supply and demand: The grid accommodates a variety of resources, including demand response, combined heat and power, wind, photo voltaic, and end-use efficiency Fully enables and is supported by competitive electricity markets.

1.4 Drivers in India
Six factors will drive the adoption of the smart grid in India: Supply shortfalls: Demand especially peak demand continues to outpace India’s power supply. The increasing affordability of household appliances is adding to the burden on the grid. Official estimates of India’s demand shortfall are 12% for total energy and 16% for peak demand. Managing growth and ensuring supply is a major driver for all programs of the Indian power sector. Loss reduction: India’s Aggregate Technical and Commercial (AT&C) losses are thought to be about 25-30%, but could be higher given the substantial fraction of the population that is not metered and the lack of transparency. While a smart grid is not the only means of reducing losses, it could make a substantial contribution. Managing the “human element” in system operations: Labor savings are not a prime driver for the smart grid in India, as contracts for outsourcing are inexpensive. However, automated meter reading would lower recording and other errors – including what are known elsewhere as “curbstone readings” or “shade tree” readings – or even deliberate errors, which are thought to be significant reasons for losses.

Peak load management: India’s supply shortfalls are expected to persist for many years. A smart grid would allow more “intelligent” load control, either through direct control or economic pricing incentives that are communicated to customers in a dynamic manner. Such measures would help mitigate the supply-demand gap. Renewable energy: India has supported the implementation of renewable energy. Historically, much of its support was for wind power, but the newly announced National Solar Mission and its goal to add 20,000 MW of solar energy by 2020 should be an accelerant. Spurred by environmental concerns and the desire to tap into all available sources of power, this move can also be a smart grid driver. Technological leapfrogging: Perhaps the most intriguing driver for India is the potential to “leapfrog” into a new future for electricity, as it did with telecommunications. Also, the “smart” an area of unique capability in India. 1.5 Potential Benefits of the Smart Grid

The smart grid presents a wide range of potential benefits, including: Optimizing the value of existing production and transmission capacity Incorporating more renewable energy
Enabling step-function improvements in energy efficiency Enabling broader penetration and use of energy storage options Reducing carbon emissions by increasing system, load and delivery efficiencies Improving power quality

Improving a utility’s power reliability, operational performance, asset management and overall productivity Enabling informed participation by consumers by empowering them to manage their energy usage Promoting energy independence.

1.6 Smart Grid and the Environment
There is a broad consensus that smart grid deployments will provide environmental benefits, including significant reductions in greenhouse gas emissions. EPRI has projected that by 2030, the implementation of a smart grid across the United States would reduce annual greenhouse gas emissions by 2.5 to 9% of the greenhouse gas emissions of the US in 2006. Smart grids can bring about environmental improvements by:

Managing peak load through demand response rather than spinning reserves.

Reducing transmission losses through better management of transmission and distribution networks. A recent study shows that a smart grid could reduce transmission and distribution losses by 30% from the business-as-usual case in 2020, the equivalent of $10.5 billion in energy savings and $2.9 billion in carbon costs. Monitoring equipment in real time, which will enable the redirection of power flows in response to early warnings of system problems, detect and remedy faults in a “self-healing” mode and keep important system components operating at high efficiency.

Increasing transparency in electricity prices to help consumers understand the true cost of electricity by time of day. Giving continuous feedback on electricity use could reduce annual CO2 emissions by 31-114 million metric tons of CO2 equivalent in 2030 as consumers adjust their usage in response to pricing and consumption information. Reducing new infrastructure construction by helping optimize the use of existing generation and transmission and distribution capacity. Together with energy efficiency and conservation savings, this will reduce the pace at which new supply and delivery infrastructure must be built to satisfy increasing demand. Integrating more renewable energy sources and energy storage to support system operators by providing more real-time information to make decisions on selecting generation from clean energy sources, thus substituting renewable energy Source: GE T&D Marketing, The smart grid, May 2009.

Mechanism | Reductions in Electricity Sector Energy and CO2 Emissions (%)* | | Direct| Indirect |
Conservation effect of consumer information and feedback systems | 3 | — | Joint marketing of energy efficiency and demand-response programs | — | 0 | Deployment of diagnostics in residential and small/medium commercial buildings | 3 | — | Measurement and verification for energy efficiency programs | 1 | 0.5 | Shifting load to more efficient generation | <0.1 | — | Support for additional electric vehicles and plug-in hybrid electric vehicles | 3 | — | Conservation voltage reduction and advanced voltage control | 2 | — | Support the penetration of renewable wind and solar generation (25% renewable portfolio standard) | <0.1 | 5 | Total reduction 12 6 | Assumes 100% penetration of smart grid technologies Source: R.G. Pratt et al., Smart Grid; An Estimation of the Energy and CO2 Benefits, Pacific Northwest National Laboratory, January 2010.|

Table 1: Smart grid mechanisms for reducing CO2
2. The Technology of Smart Grids
A variety of computing and telecommunications technologies can make many of the smart grid’s envisioned benefits a reality. A few of these include detecting and quickly responding to power outages, providing consumers with near real-time information on the amount and cost of the power they use, improving the security of the system, and linking all elements of the grid to enable better decision making on resource use. As these technologies advance, they will produce more and better-quality data, which will give utilities new opportunities to improve their analyses. For example, customer load patterns and tariffs, and thus offers better services to their customers. After a brief overview of the electricity value chain and a review of the evolving role of the smart grid technologies within the utility system’s architecture can easily understand. 2.1 The Electricity Value Chain

The process for generating electricity and transporting it through the bulk power supply network (the transmission grid) has been in place for many decades. A critical early step was the adoption of AC power to enable the cost-effective transportation of bulk power over long distances. This enabled the technical structure of the electric industry that was set almost 100 years ago, namely, large, central-station power plants connected to a transmission grid (the superhighway of the electric system) to move power to load centers where transformers reduce voltage levels to distribution levels for use by customers. The core process remained largely unchanged, except for technical advances that allowed for ever-larger plants producing power at ever-lower unit costs as well as the continuous enhancement of transmission technology. The following figure shows the major elements of the value chain.

2.2 Evolutionary Changes In Network Operations
The traditional system network operation model has evolved from the cost-based supply-side system dispatch paradigm when companies operated as vertically-Integrated utilities. Electric utilities operated large, remote power stations, long transmission lines, and a distribution system primarily designed to deliver power to a fairly static load.

This will change to a more sophisticated market driven system dispatch with multiple asset owners with a wide range of commercial interests. This
evolution has been underway for several decades and will continue; the pace of change may accelerate. The new approach will have to accommodate more demand-side resources, generation and storage resources on the distribution system, and considerably higher levels of wind, solar and other types of renewable generation. The Traditional or Classical system dispatch focused mainly on: * Unit Commitment Scheduling

* Economic Dispatch
* Automatic Generation Control
* Grid Security
* Local dispatch with some regional implications
The evolution into a smart grid system dispatch environment will add even more dimensions, which include the following: * Dynamic balancing of centralized and distributed resources. * Integration of distributed energy resources and demand response resources. * Integrating large-scale intermittent renewable generation. * Increased coordination of renewable generation and storage resources. Given the variability of some renewable generation (e.g., wind, solar), more real-time control will be needed to instantaneously balance supply and demand. New forms of storage resources, such as plug-in electric vehicles, could provide a critical buffer. * Shifting loads to more efficient generation using demand response and distributed generation and storage with the aim of saving energy and reducing carbon emissions, depending upon the mix of base, intermediate, and peak load generating resources in use at any given time. * Integrating technological advances in transmission to control power flows (FACTS, SVC, etc.). It Can be under stand from the following Figure

Source: Generation Dispatch, AREVA – IEEE Smart Grid Conference January 2010

Smart grid technologies will allow better management of network flows. Specific network operation solutions include: * More accurate monitoring of the network and analysis of the operational state of the network, including lower voltage levels * Increasingly efficient allocation of cross-border interconnection capacity * Power flow control (e.g., by phase shifting transformers, FACTS and HVDC devices) * Improved coordination of operations across countries

* Exploitation of real-time thermal monitoring for power cables and/or critical overhead lines * Increasingly intelligent post-contingency corrective actions and defense schemes * Activation of pre-contingency preventive actions after exceeding pre-defined stability limits and thresholds * Improved automation in distribution grids and optimal use of grid reconfiguration after faults. 2.3 How the smart grid can affect generation and transmission Primary Function| Description of Functions| How the smart grid affects these functions| How an intelligent communications infrastructure enables and amplifies the smart grid impact| Generation|

Load control and dispatch| Economical load dispatch scheduling and optimization help to select the right dispatch for the right load at the right time, reducing the cost of generation (startup, operations, and wind down)| The smart grid helps with the scheduling of committed generating units so as to meet the required load demand at minimum operating cost while satisfying all units and system equality and inequality constraints| Economic load dispatch during unforeseen events warrants robust real-time communication infrastructure between the demand and generation functions| Load shaping | Shaping the load during peak demand times reduces the idle and standby generating capacity| Demand-side management helps to manage and accurately estimate demand to as to meet demand without extra generation| Load shaping with DSM involves reliable communication between AMI and CIS (customer information systems) and generation functions| Distributed, renewable generation

 The integration of micro-grids as well as customer premises with the utility infrastructure| The smart grid enables distributed generation and automated adjustment of feed-in tariff regulation to receive premiums in the case of forced switch-off of distributed-generation asset for balancing| Infrastructure is needed to confirm, analyze, and dispatch available load to distribution generation sources| Generation Equipment maintenance| Diagnoses and maintenance of the generation equipment reduces faults and prevents their propagation| The smart grid helps asset management and conditioning in preventive maintenance. It also helps accessing newly sensed data| Data from utilities need to be transferred to the generation control center for better equipment conditioning and monitoring.| Distribution|

Transmission-grid monitoring and control | Energy management systems and transmission SCADA for data acquisition needed for the following functions:1.Outagemanagement,2.Volt/VAR management, 3.State estimation,4.Network sensitivity analysis, 5.Automatic generation control and 6.Phasor data analysis.| Automatic regulation of load tap changer and capacitor banks for voltage regulation.Wide-area phasor management and control for grid optimization and control. Volt/VAR management using capacitor switches and controls| Substation automation results in two-way communication between transmission SCADA equipment and the energy management system.Communication between transmission and generation units is necessary for automatic generation control.| Maintenance of transmission control center|

The transmission control center is the first line of defense for the transmission fault detection and prevention| Automated operations eliminate human interventions in fault prevention, detection, isolation and correction| Real-time communication between primary and backup transmission control center. Transmission, generation and distribution units is necessary for the control center operationsSecurity technology deployment provides for secure data sharing between transmission and oter utility functions| Equipment maintenance | Maintenance of transmission equipment, including breakers, relays, switchers, transformers, and regulators, prevention of faults| The smart grid helps asset management and conditioning for preventive maintenance| Data from transmission equipment need to be transferred to the generation control center for better equipment conditioning and monitoring| Source: Smart Grid – Leveraging Intelligent Communications to Transform the Power Infrastructure 2.4 Intelligent Electronic Devices

Utilities have used electromechanical devices such as land lines and power line carriers for many years. But today, many of these devices are taking on enhanced, and even new, features and functions in the form of intelligent electronic devices (IEDs). For example, the old single-function electromechanical meters have given way to multi-function electronic meters that can communicate with a central computer. Also, the addition of electronics to the control units of reclosers has enabled them to communicate with a utility’s central computers, which automatically store the outage data (e.g., number, duration) needed for reliability and availability indices (SAIDI, CAIFI, SAIFI, etc.). Remote terminal units (RTUs) for supervisory control and data acquisition systems (SCADA) are smaller and less expensive than before. For this reason, the use of SCADA RTUs is expanding out from the transmission system to the distribution system.

Some of the advances India is making in the area of intelligent electronic devices include: * The Restructured-Accelerated Power Development and Reforms Programme (R-APDRP) is stimulating progress toward 100% metering on distribution transformers and feeders. * The conversion from electromechanical to static (electronic) metering is progressing at the low-tension level (400/220 Volts) to residential and small commercial customers. * The Bureau of Indian Standards is scheduled to issue a standardized meter protocol in March 2010 to address meter interoperability. The Meter Inter-Operability Solution being promoted by the Indian Electrical and Electronics Manufacturers Association and Device Language Message Specification are also gaining ground. * Although meter data acquisition and management are still within the purview of meter vendors, which is hindering the interoperability of the products of different meter suppliers, R-APDRP is working on a holistic approach to meter data management. 2.5 Telecommunications

The core of the smart grid transformation is the use of intelligent communications networks and systems as the platform that enables grid instrumentation, analysis, and control of utility operations from power generation to trading, and from transmission and distribution to retail. Telecommunications channels can be divided into four categories: * Land line: this includes analog subscriber lines, digital subscriber lines, coaxial cable, and fiber optics . * Wireless: this includes cell phone communications systems (both the GSM/GPRS/ EDGE method and the CDMA method) and Wi-Fi . * Private radio: this includes trunk mobile dispatching channels and meshed meter networks . * Power Line Carrier: this encompasses traditional power line carriers between substations and the new technology of broadband-over-power line at the distribution voltage. A smart grid system could be constructed from just one of these telecommunications technologies, but a utility will often use two or three in order to add more reliability to its service territory coverage. Telecommunication technologies for the smart grid

Telecommunication in India
Land Line Wireless Telecom | Power Line Carrier | Private Radio | Infrastructure available in India | Remote area connectivity not available everywhere Available also in remote areas. Connectivity improving | Not widely used in India until now | Remote area connectivity may not be available and point-to-point networks would need to be established | Cost of transferring data | Low Low (based on transmission during off-peak time) | Low (different standards must be implemented first so initial cost may be high) | Free | Reliability | Low (due to risk of physical damage) High | Low (due to use of newer and untested technologies) | High | Risk involved | Physical damage High traffic during day-time | Newer, relatively untested technology | Onsite support | Scalability |

2.6 Information Technology
The head-end system is the apex node of the network; it consists of the telecommunication system and field devices. The role and function of the head-end system vary depending on the system’s application (for example, metering for billing, SCADA, automatic generation control with economic dispatch, metering for load research, demand-side and load management, load shedding, disconnection and reconnection as part of billing, energy accounting, and SAIDI, SAIFI, and CAIDI indices). Physical and cyber security

Smart grid communications will play a critical role in maintaining high levels of electric system reliability, performance and manageability. But at the same time, the grid is increasingly subject to attack, as many of the technologies being deployed to support smart grid projects (such as smart meters, sensors, and advanced communication networks) are interoperable and open. Meeting the critical need for an integrated security infrastructure will require the establishment and implementation of a security framework for managing both physical and cyber security, as well as an accompanying security policy. In addition to reducing the system’s vulnerability to physical or cyber attacks, a comprehensive approach to security will help utilities better manage their systems, keep costs lower, and improve the system’s resilience against security disruptions and data privacy invasions. This framework should cover:

* Physical safety and security
* Generation plant security
* Substation security
* Utility regulatory compliance
* Identity management
* Access control
* Threat defense
* Wide Area Network security
* Security management and monitoring.

2.7 Substation Automation for the Smart Grid
To achieve this vision of ubiquitous near–real time information, a transformation of the power grid communications infrastructure is needed, particularly in transmission and distribution substations. While modern data communication has evolved from telephony modems to IP networks, many power utilities are still deploying modem access and serial bus technology to communicate with their substations. The existing supervisory control and data acquisition (SCADA) remote terminal unit (RTU) systems located inside the substation cannot scale and evolve to support next generation intelligence. Since flexible IEC 61850–compliant intelligent electronic devices (IEDs) and utility-grade rugged IP routers and Ethernet switches have become more widely available, many utilities are now ready to transform their communications networks from serial to IP-based communications. Substation Automation Business Factors and Benefits

The transition from a legacy to future substation is taking place because of various substation automation factors: Reduce operations expense: The future substation reduces operational expenses by converging multiple control and monitoring systems onto a single IP network while helping ensure higher priority for grid operational and management traffic. This network convergence enables utility companies to reduce power outages and service interruptions as well as decrease response times by quickly identifying, isolating, diagnosing, and repairing faults. These improvements are achieved through automation and flexible access to operational control systems and, in the future, through better data correlation across multiple monitoring systems. In addition, many utilities are facing an aging workforce, which will be retiring in the next 5 to 10 years. Utilities need to fill their pipeline of talent with a younger workforce that is capable of operating today’s electric grid, but who can also help build the smart grid of the future. Utilities can benefit from substation automation by more efficiently using their existing workforce and reducing the amount of service calls through programs such as condition-based maintenance.

Further, substation automation allows utilities to extract further value from their corporate networks by providing a remote workforce secure access to applications and data that are located in the operations center. Reduce capital expense: As demand for energy continues to grow, utilities must find ways to generate power to meet peak loads. As a regulated industry, utilities must provide power regardless of the amount of power consumed. The cost of providing spinning reserves for peak load hours of the year is extremely high for society. Utilities are challenged to find new ways to shave peak load to help reduce costs and manage supply and demand of energy more efficiently. Substation automation can be the enabling technology for mass-scale peak load shaving and demand response, which will reduce the need to build as many power plants to meet peak demand. Additionally, substation automation can reduce the expense and complexity of dedicated control wiring between devices found in many transmission and distribution substations today by converging to an Ethernet based network.

Logical network segmentation and reconfiguration of IED connectivity are much simpler to achieve. Point-to-point wiring not only is expensive, but also increases the difficulty of fault isolation detection. Enable distributed intelligence: As network intelligence expands beyond the control center out into the substations, new applications can be developed that enable distributed protection, control, and automation functions. A distributed intelligent network also introduces opportunities for new service creation, such as business and home energy management. Meet regulatory compliance: For many governments, utilities are considered critical infrastructure and have economic and national security concerns. Because of this, various regulatory mandates exist or are emerging that require utilities to secure, monitor, and manage their critical data networks in accordance with regulatory requirements, such as NERC-CIP.

Improve grid security: Grid security is not just about securing the electronic security perimeter (ESP) in the substation; it is also about creating a secure end-to-end architecture that maximizes visibility into the entire network environment, devices, and events. Substation automation enables an important part of the end-to-end security architecture and allows network operators to control network users, device, and traffic. Physical security can be layered on top of this network security to create security zones of access control, IP cameras for surveillance monitoring, and video analytics to protect and alert network administrators of intruders. A secure IP network for transmission of grid communications, physical security, and remote workforce management applications can be achieved through substation automation. 3.Engineering,Economics and Financing

Since the early 2000s, the Government of India’s policy has been to balance the development of generation, transmission, and distribution. This policy has served as the touchstone for a number of financing innovations to deal with the power sector’s large capital investment deficit: unbundling the vertically-integrated power companies to improve their performance and accountability, attracting increasing private sector participation, expanding all sources of capital market financing (bonds, listings and privatizations), and continuing public and multilateral investments in strengthening and expanding transmission and distribution, in particular. These new capital sources are expected to play a role in smart grid roll-outs in India. A number of problems, however, will continue to hamper smart grid deployments and must be factored in during project design, including the determination of the financial feasibility of investing in projects. 3.1 Engineering Economic Issues

The smart grid is a system that enables two-way communication between consumers and electric power companies. In this system, electric power companies receive consumer’s information in order to provide the most efficient electric network operations. At the same time, consumers get better access to data to help them make intelligent decisions about their consumption. Thus, project economics will need to reflect the benefits to both consumers and utilities. 3.2 Traditional Cost-Benefit Analysis

Although many countries have been discussing the concept of a smart grid for several years, projects are only now beginning to move forward. Smart power meters featuring two-way communications between consumers and power providers to automate billing data collection, detect outages, and dispatch repair crews to the correct location faster. This one element — sensors and two-way communication and control equipment — is central to most definitions. Smart measurement and metering also often embrace smart substation and smart distribution (together known as distribution automation). Collectively, these elements represent the de facto core of most programs that are being proposed or implemented. Smart substations include the monitoring and control of critical and non-critical operational data such as power factor performance, security, and breaker, transformer and battery status. Smart distribution is self-healing, self-balancing and self-optimizing, including superconducting cables for long-distance transmission, and automated monitoring and analysis tools capable of detecting or even predicting cable and other failures based on real-time data on weather, outage history, etc.

Smart generation capable of “learning” the unique behavior of power generation resources to optimize energy production, and to automatically maintain voltage, frequency and power factor standards based on feedback from multiple points in the grid. Universal access to affordable, low-carbon electrical power generation (e.g., wind turbines, concentrating solar power systems, photovoltaic panels) and storage (e.g., in batteries, flywheels or super-capacitors or in plug-in hybrid electric vehicles). Intelligent appliances capable of deciding when to use power based on pre-set customer preferences. This can go a long way toward reducing peak loads, which has a major impact on electricity generation costs by alleviating the need for new power plants and cutting down on damaging greenhouse gas emissions. Early tests with smart grids show that consumers can save up to 25% on their energy usage by simply providing them with information on that usage and the tools to manage it. Cost analysis

The typical costs associated with the smart grid are categorized according to the elements and functions they provide. The major cost items are: * Cost of project design and feasibility studies

* Cost of program management
* Cost of setting up infrastructure to enable two-way communications between the consumer and the utility; this will include the costs of the communications medium (e.g., fiber optic, PLC), installing sensors, monitoring equipment, and software, and an online tracking mechanism * Cost of purchasing and installing the smart meters

* Costs for in-home devices and customer information systems
* Training and development of key staff

Benefits analysis
The move to a smarter grid promises to change the power industry’s entire business model and its relationship with all stakeholders, involving and affecting utilities, regulators, energy service providers, technology and automation vendors, and all consumers of electric power. Peak load reduction. Smart grids can use time-of-day price signals to reduce peak load – this benefit has particular importance for Indian utilities coping with urban loads. AT& C loss reduction. For Indian utilities, this is a major driver from a commercial and regulatory point of view. For distribution operations with high losses that are upgrading meters and other equipment, companies may consider smart grid components as a way to build in additional communication technology and upgrades. Self-healing. A smart grid automatically detects and responds to routine problems and quickly recovers if they occur, minimizing downtime and financial loss. Consumer motivation. A smart grid gives all consumers – industrial, commercial, and residential – visibility into real-time pricing, and affords them the opportunity to choose the volume of consumption and price that best suits their needs.

Attack resistance. A smart grid has security built-in from the ground up. Improved power quality. A smart grid provides power free of sags, spikes, disturbances and interruptions. It is suitable for use by the data center, computers, electronics and robotic manufacturing that power an economy. Accommodation of all generation and storage options. A smart grid enables “plug-and-play” interconnection to multiple and distributed sources of power and storage (e.g., wind, solar, battery storage). Enabled markets. By providing consistently dependable operation, a smart grid supports energy markets that encourage both investment and innovation. Optimized assets and operating efficiently. A smart grid enables the construction of less new infrastructure and the transmittal of more power through existing systems, thereby requiring less spending to operate and maintain the grid. These benefits can be combined under three broad categories: 3.3 Economic benefits.

Five types of economic benefits can be derived from the smart grid. Cost savings from peak load reduction. Smart grids bring about a reduction in per-unit production costs due to demand response / load management programs. Reductions in capacity costs. These can be attributed to residential customer reductions in demand during the 50 to 100 hours of highest system demand each year (critical peak periods) in response to some form of dynamic pricing, either peak time rebates or critical peak pricing. Deferred capital spending for generation, transmission, and distribution investments. By reducing peak demand, a smart grid can reduce the need for additional transmission lines and power plants that would otherwise be needed to meet that demand. Reduced operations and maintenance costs. Smart grid technologies allow for remote and automated disconnections and reconnections, which eliminate unneeded field trips, reduce consumer outage and high-bill calls, and ultimately reduce O&M costs.

Reduced costs can also result from near real-time remote asset monitoring, enabling utilities to move from time-based maintenance practices to equipment condition-based maintenance. Reduced industrial consumer costs. Industrial and commercial consumers could benefit significantly from a smart grid. Electric motors account for about 65% of industrial electricity usage because they power virtually every moving process necessary for process industries, including power generation, oil and mining extraction, and pharmaceuticals, as well as for the compression and pumping needed for heating and cooling buildings. Motors are also essential to India’s growing manufacturing sector for automobiles and other products. Small improvements in motor efficiency can generate significant savings in energy costs, but more sophisticated motors require higher-quality power. 3.4 Service benefits.

The smart grid will bring benefits to residential, commercial, and industrial consumers alike: Improved reliability. A smart grid enables significant improvements in power quality and reliability. Smart meters will allow utilities to confirm more easily that meters are working properly. Two-way communications all across the grid will let utilities remotely identify, locate, isolate, and restore power outages more quickly without having to send field crews on trouble calls. A smart grid could eliminate up to 50% of trouble calls in a mature power sector. Increased efficiency of power delivery. Up to a 30% reduction in distribution losses is possible from optimal power factor performance and system balancing. Today, this problem is managed to some extent by controlled or automated capacitor banks on distribution circuits and in substations. But the control of these devices can be greatly improved with better real-time information through a smart grid. Consumption management. Smart grid technologies offer consumers the knowledge and ability to manage their own consumption habits through in-home or building automation.

Advanced meters tell consumers how energy is used within their home or business, what that usage costs them, and what kind of impact that usage has on the environment. They can manage their usage interactively or set preferences that tell the utility to automatically make adjustments based on those choices. Improved system security. Utilities are increasingly employing digital devices in substations to improve protection, enable substation automation, and increase reliability and control. Enhanced business and residential consumer service. The smart grid will allow automatic monitoring and proactive maintenance of end-use equipment, which can be an avenue for energy savings and reduced carbon emissions. Equipment is sometimes not properly commissioned when it is first installed or replaced. With the two-way communications of a smart grid infrastructure in place, a utility could monitor the performance of major consumer equipment through advanced interval metering and on-premise energy management control systems. The utility would thus be able to advise the consumer on the condition of specific facilities. 3.5 Environmental benefits.

According to recent studies, the smart grid can reduce emissions at a lower cost than many of the newest clean energy technologies. The smart grid will reduce emissions in four ways: * Enabling the integration of clean, renewable generation sources * Reducing electrical losses

* Increasing the penetration of distributed energy resources * Increasing energy conservation through feedback to consumers. 3.6 Challenges for the Smart Grid Several challenges present themselves for smart grid development, and may affect the results of a cost-benefit analysis. Financial resources. The business case for a self-healing grid is good, particularly if it includes societal benefits. But regulators will require extensive proof before authorizing major investments based heavily on societal benefits. Government support. The industry may not have the financial capacity to fund new technologies without the aid of government programs to provide incentives for investment. The utility industry is capital-intensive, but has been sustaining exorbitant losses due to thefts and subsidization. Compatible equipment. Some older equipment must be replaced as it cannot be retrofitted to be compatible with smart grid technologies. This may present a problem for utilities and regulators since keeping equipment beyond its depreciated life minimizes the capital cost to consumers. The early retirement of equipment may become an issue. Speed of technology development.

The solar shingle, the basement fuel cell, and the chimney wind generator were predicted 50 years ago as an integral part of the home of the future. This modest historical progress will need to accelerate. Lack of policy and regulation. No defined standards and guidelines exist for the regulation of smart grid initiatives in India. Capacity to absorb advanced technology. Most Discoms have limited experience with even basic information and communications technology and, as a result, they have weak internal skills to manage this critical component of smart grids. R-APDRP aims to provide some redress, but it is relatively recent and has not yet had a major impact on the industry. Consumer education. “Customer response” is the phrase used to describe the reaction of customers to the new features and functionality enabled by the smart grid. If, for example, a company installs advanced metering and two-way communication along with time-of-use rates, the question is “Will customers use it?” If there aren’t enough customers who use the features, the benefits of a smart grid will not be achieved. Thus, two critical and often overlooked components of a smart grid implementations are 1) sufficient marketing analysis and product design to optimize the likelihood that customers will use the new technology, and 2) an education, communication and public relations program aimed at creating an understanding of smart grids, the associated benefits and the potential implementation issues.

The program should be aimed at customers but also policy makers, opinion leaders, regulators and financial institutions. Cooperation. The challenge for diverse State utilities will be the cooperation needed to install critical circuit ties and freely exchange information to implement smart grid concepts. Cost assessment. Costs could ultimately be higher than projected because the standards and protocols needed to design and operate an advanced metering infrastructure are still in a state of flux. Thus, investments made now, before the standards are settled, have a higher risk of obsolescence. Failure to include estimates of the costs for the control equipment customers will install to automate their response to time-differentiated pricing could put smart grid investments at risk. Other risks include 1) no demonstration that the proposed project is more cost-effective than alternative approaches that will achieve the same major energy cost reduction objectives at less cost and 2) exclusion of incremental costs of “stranded” existing meters (i.e., accelerated depreciation). Rate design. Many utilities are proposing to recover these costs via a customer surcharge.

This is not reasonable, based on the view of cost causation, and will have disproportionate adverse impacts on low-usage customers. Consumer protection. Privacy concerns about customer usage data and other personal data are real, but it is not clear how such data will be protected. Also, the installation of smart meters will open the door to remote involuntary disconnection and the use of service limiters, all of which limit customer access to and control over electricity service. Even unfounded concerns about a “spy in the house” may affect consumer attitudes. Thus, issues related to consumer privacy will likely be submitted to regulators and consumer protection agencies as soon as new technologies are planned. Lack of empirical evidence.

Utilities have done a number of pilot projects to test AMI and dynamic pricing on a limited basis, but it is only recently that several US utilities received regulatory approval to deploy AMI and dynamic pricing tariffs on a wide scale. In fact, most of those utilities are still in the process of completing deployment. The absence of robust empirical evidence regarding the performance and economics of AMI and dynamic pricing on a system-wide basis over time is a source of uncertainty over both long-term technical performance and the magnitude of peak load reductions that will actually be sustained in the long term in response to dynamic pricing. 3.7 Funding issues for India

Historically, building the grid through transmission and distribution lines has been undertaken by Power Grid Corp. and various state-regulated distribution companies. Central programs such as APDRP and R-APDRP provided some support in modernizing and rationalizing the billing and metering systems, but there have been relatively few such programs. While no one has estimated with any level of detail the costs required for India to upgrade to a smart grid, estimates range widely depending on the utilities involved and the timing. Given the large investment required to build out the current set of plans, Indian utilities will need to experiment with how best to fund such projects. Based on a survey by the authors, most utilities are proposing to recover all of these costs via a fully reconcilable surcharge. Many are proposing to allocate these costs among rate classes according to the number of customers in each class. Some utilities are also proposing to recover these costs via a monthly customer surcharge.

With the introduction of smart grid technology at the distribution level, consumers will have more incentive to switch to a new tariff. The existing tariff structure will have to be rationalized and time-of-day tariffs must be introduced to provide incentives to consumers. Similarly, for new renewable generation, more system integration will be required to ensure system security. Some possible alternatives for funding are presented below. However, these are only illustrative in nature. Detailed rounds of talks with government, banks and the private sector will need to be undertaken to rationalize and validate the plausibility of these alternatives. For central sector lending, develop a new appraisal process for smart grid projects. Grant and loan funding for the smart grid can come through traditional sources (e.g., PFC), but a revised project appraisal process that incorporates operational benefits will be needed to evaluate project submittals. Reach self-funding. Following the lead of on-going loss reduction projects, many smart grid projects will become self-funded by exceeding the stipulated payback periods. Attract new players and bring in vendor financing.

Information and communication technology companies such as IBM, Infosys, and Wipro have started smart grid programs and are developing commercial models. Some examples of pilot projects include those with real estate developers to implement small-scale smart grid projects for residential and commercial complexes. Expand bank understanding of the smart grid. Banks that are already lending to the power sector will see the business case for the smart grid quickly and can act to increase funding directly to projects, or indirectly to companies and utilities. The most prudent route is however, a combination of these sources through public-private partnerships. State utilities can take the lead on developing the business case for pilot implementations of smart grids and then invite private players to participate by providing both technical know-how and funding. Private players can further approach the banks to fund their investment. 4.Recommendations

The still-evolving concept of the smart grid is a vision of an industry transformed. The electric industry’s historic business model will be changed, perhaps as much as the long-successful business model of the telephone industry was. For the electric industry, technology is the key enabling factor, but the situation is more complicated. The smart grid concept results from the convergence of a number of trends that have been evolving for up to a half century, including: Information and communications technology (ICT) – Moore’s Law continues in effect and ever-cheaper computer chips, sensors and controllers, coupled with increasingly sophisticated mobile and WiFi capabilities, have already begun to radically transform the data-intensive electric business. Advances in metering technology – Likewise, digital meters are increasingly affordable and rugged, and they have begun to replace electro-mechanical meters on a wholesale basis, even in some developing countries. Costs – The trend in the unit cost of electricity turned upward several decades ago, although that wasn’t clear until more recently. The reality is that electric companies need to learn how to prosper during an era of increasing costs and declining service quality. That may well require a “next new thing.”

If the smart grid is not the answer, the industry’s future could be unpleasant as well as unprofitable. The dawning of the digital age – The automation of almost everything is occurring at a breathtaking pace. Likewise, the expansion of high-tech electronic manufacturing has spread in response to mushrooming demand. One side effect of the digital age is the increased demand for electricity as the premium form of energy (as the authors of Perfect Power put it, “Try running your laptop on a lump of coal”) and the need for higher-quality power to run everything from delicate precision machinery to advanced household appliances.35 Growing prosperity – It is difficult to acknowledge in the midst of the most serious recession in 75 years, but the world is becoming more affluent.

There are significant risks attached to recent economic developments but, with the exception of a worst-case scenario, the long-term trend is still up. And customer expectations are rising in tandem with individual affluence. Climate Change – Mounting evidence is reinforcing the consensus of leading scientists that global warming is real, that it is a function of historic amounts of carbon that have been released to the environment as the result of human behavior. The reality of global warming and the increasing public concern it has triggered — and the close link between electricity production and carbon emissions — add an accelerant to the technological, utility cost and behavioral economic influences that are converging.


1. A White Paper : “The Smart Grid Vision for India’s Power Sector” by PA Consulting Group, PA Government NJ,USA. 2. A Presentation on Smart Grid Technology by Saremi, Fatemeh; from Engineering at Illinois.
3. A White paper on Smart Substations by CISCO India Ltd. 4. In India, the state politician might be the “real” customer. 5. Judith Warrick, in a speech at a clean technology conference in Palm Springs, California, on January 10, 2010 and as published in Morgan Stanley’s Energy Insight, January 25, 2010 6. Banglaore Electricity Supply Company (BESCO) in Karnataka, MGVDCL in Gujarat, MSEDCL in Maharashtra, and North Delhi Power, Ltd. in New Delhi. 7. Robert Galvin and Kurt Yeager, Perfect Power: How the Microgrid Revolution Will Unleash Cleaner, Greener, More Abundant Energy, McGraw-Hill Companies, 2008. 8. The American Recovery and Reinvestment Act (ARRA), known as the Stimulus Plan, provided $4.5 billion in grant funding for smart grid investments for qualified applications that were approved by the US Department of Energy 9. Pacific Northwest National Laboratory, The Smart Grid: An Estimation of the Energy and CO2 Benefits, January 2010. 10. Smart Grid – Leveraging Intelligent Communications to Transform the Power Infrastructure 11. Position Paper on Smart Grids,” An ERGEG Public Consultation Paper, December 2009 12. EPRI, The Green Grid: Energy Savings and Carbon Emissions Reductions Enabled by a Smart Grid. 1016905. Palo Alto, CA: 2008. 13. 14. The Climate Group, Smart 2020: Enabling the Low Carbon Economy in the Information Age, 2009. 15.

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