Operating in the Dark

Message from the Editor

Welcome to GISWeekly! In this week's webcast hosted by GITA, The August 14th Blackout: A Perspective on the Future of Utility Automation and IT, the seriousness of the country's electric power dilemma was addressed and the role of GIS and IT technology challenged. According to Mike Marullo of InfoNetrix, a market research firm, the August 14 Blackout stunned the nation, yet those people directly involved in the day-to-day planning, design, and operation of the grid were not surprised. Read what Mike had to say in this week's Industry News.

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Susan Smith, Managing Editor

Industry News

Operating in the Dark
By Susan Smith

In this week's webcast hosted by GITA, The August 14th Blackout: A Perspective on the Future of Utility Automation and IT, the seriousness of the country's electric utility dilemma was addressed and the role of GIS and IT technology challenged. One presenter, Mike Marullo, Director, Strategic Market Research, InfoNetrix LLC spoke on the topic: “Blackout Impact on Utility Automation and IT: The Short and the Long of it.” According to Marullo, the August 14 Blackout stunned the nation, yet those people directly involved in the day-to-day planning, design, and operation of the grid were not surprised. Many industry practitioners surveyed by InfoNetrix just prior to the Blackout were already speculating that such an event would occur.

InfoNetrix developed a methodology for looking at market drivers, issues and trends over the past couple of years. “We look at the structure of the electric utility marketplace in the U.S. and Canada,” explained Marullo. “There are basically about 3500 utilities in the North American continent. About 3150 in U.S., another 375 in Canada and this amounts to roughly a ten to one ratio. The significance we find is this ratio is typically reflected in annual utility automation and IT spending as well. In any given year you can figure the Canadian portion of the market is going to be anywhere between 5 and 15% depending where the dollar is against Canada. It averages out to about 10%. There are about 250 large investor owned utilities and some of the large federal power agencies that collectively account for about 75% to 80% of all expenditures in these areas. Historically, this percentage has been pretty consistent but we do expect and we are seeing a slight shift of more projects going to smaller utilities going forward. This is really the result of municipals and some of the larger and even smaller electric coops advancing some of their automation and IT platforms progressively in the years ahead. That is being precipitated by deregulation and market restructuring.”

Key Utility Automation & IT Initiatives
The backbone of real time automation systems in this area is SCADA-“Supervisory control and data acquisition” - and external applications such as outage management, are increasingly moving up to the enterprise level where before they were sort of buried at a lot of utilities, said Marullo. Over time they have become more valuable and as they've become more visible throughout the enterprise. Specifically this means things like SCADA and asset management, etc., are becoming more core to utility business. And also they are beginning to achieve tangible benefits for the utility. They are moving up the scale in terms of utility consciousness, awareness and priority. “This is very consistent with utility managements' focus on return on investment and the shift to what we sometimes refer to as 'application execution mode.' The translation of application execution mode simply means that after many years and in the case of a lot utilities, decades, and after having spent million of dollars in investments in automation, projects like this will increasingly expect to have a measurable ROI now and in the future, and will ask the management to play a major role in that emphasis.”

“As a result these million critical automation components are moving up the priority list where they are becoming substantially more visible than ever before. And also for the first time , specifically due to the Blackout, at some utilities are now being used as a critical part of the core infrastructure upon which utilities will rely in the future for safe, reliable deregulation. Moving ahead, there's the new issue of cost effectiveness in their operation--whereas historically utility industries have been predominately focused on safety and reliability in a regulated environment.”

According to Marullo, two of the most pervasive impacts on the Blackout were transmission congestion and customer service.

“Transmission congestion was a problem that was talked about for many years extensively prior to this dramatic system outage that we experienced in August, but quite frankly, most of that discussion was in technology circles like the Power and Engineering Society, EEE, and some congressional subcommittees, etc. There was no public awareness of how bad this congestion had actually become and the amount of investment required to rectify it. Many of you have heard Spencer Abraham comment that anywhere from $50 to $100 billion would be required - I just saw recently in an article that they're talking about in the next ten years, it will cost into the trillions. But that kind of dialog and discourse was almost nonexistent prior to the Blackouts. We say the squeaky wheel gets the grease and I think we can all agree that 50 million people losing power is a pretty loud squeak.”

Customer service is another area where the Blackout helped to dramatically elevate the public mindset. “This was something that had already gained a lot of momentum in the utility mindset as deregulation began to move throughout the country, but the public really is become very tuned in to customer service issues, particularly when it comes to reliability and availability,” noted Marullo. “Performance based regulation, which we commonly refer to as PBR, makes utilities more accountable for their expenditures -- particularly those affecting rates, and is quite possibly the most positive outgrowth of the federal energy regulatory commission's market restructuring initiatives. The most immediate result of PBR is it's giving consumers a louder voice in how they are served, not only by whom. This is an interesting twist because in the early days of deregulation I think many, if not most, people thought that competition, right of choice, would be the primary purpose and focus of deregulation. That's changed somewhat.”

Important Markets and Trends

“InfoNetrix is in the process of compiling our annual market reports for principle areas that we define as comprising utility, automation and IT markets space. In order to help us track market changes and organize in a technically consistent manner, we developed something we call the Seven Signs of Market Evolution.

“Markets and trends we've identified as being the most important ones:
1) Politics and fear associated with economic, regulatory, security and other dimensions of the market are having a fundamental impact on the overall market direction and growth. Needless to say, the Blackout exacerbated an already unsettled set of conditions that began with the California power crisis and all the county scandals, collapse of Enron, etc. 2) Most of the research talked about in markets like this have historically been very technically driven and we look at the market drivers and things that are really determining the future of the market today and many of them are non technical; more business, political or regulatory related, so that's a pretty dramatic shift in the marketplace.

“3) Over the past decade utilities have been indoctrinated in the art of doing more with less. Sometimes this comes at the expense of mission critical applications and that's a growing problem. The advent of greater standardization will partially help to alleviate some of those issues, but regulatory mandates and some of the new rules, things like PBR, GASB34 which is a government accounting standards board, and NERC 1200 - the new security mandate -- will still play the starring role in the shaping of this marketplace.

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