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Five Emerging Focus Areas for the U.S. Utility Industry

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Przemek Tomczak's picture
SVP IoT and Utilities Kx

I am a CPA, CA with over 20 years business and technology experience in software, consulting, IT management, infrastructure with leaders such as Kx Systems, First Derivatives (FD), Ontario’s...

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This item is part of the Special Issue - 2021-10 - Advances in Utility Digitalization, click here for more

Seismic shifts like the adoption of more sustainable energy sources, decarbonization, the introduction of new technologies, and the electrification of transportation are drastically disrupting the traditional utility model.

These innovations, coupled with industry action such as the recent FERC Order 2222 -- which enables Distributed Energy Resources (or DERs) to compete on a fair and level playing field in the wholesale power markets -- will undoubtedly affect the broader market design and introduce a greater degree of complexity.

Transformation Begets Collaboration

Take a moment to consider the millions of transactions that take place across the energy market every day. While yes, some of the technology may appear the same (customers will continue to have one wire connected to their home), there are still a lot of industry unknowns. In the United States, for example, the utility industry is already incredibly fragmented and newer markets -- e.g., the California Independent System Operator’s Energy Imbalance Market (CA EIM) and the newly emerging Southeast Energy Exchange Market (SEEM) -- have established themselves in recent years; fractures also persist among federal, state, city and local levels.

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With the introduction of FERC 2222, this complex energy market (and the resources and grids which support it) will become much broader and will, as a result, demand a better view across the entire value chain. In turn, the secured sharing of data will become increasingly important, as will its quality. Both play a crucial role in enabling real-time situational awareness across the various power systems, as well as after the fact settling and allocating fees and costs across all the parties.

But data, especially big data of a certain volume and velocity, can manifest into a big challenge very fast -- particularly if you must reconcile and settle the market in a, say, 5-minute interval involving millions to tens of millions of connections spanning the distribution and bulk power system, and then make all this data available to authorized parties in a secure manner.

Consider the New York Independent System Operator (NYISO), which is undertaking a massive upgrade to its Energy Management System/Business Management System (e.g., its market software). It became clear to the NYISO and its technology vendors that evolving market designs (e.g., energy storage and DER aggregation participation models) and resources (e.g., larger numbers of DER and DER aggregations) created a degree of complexity that prevented market optimization for the day-ahead and real time markets within the existing time frames. As a result, NYISO issued a study and adopted data processing methods that resulted in shorter processing times.

An Industry Call to Action

The energy industry is undergoing a transformation, spurring the creation of the next generation digital ecosystem for the energy markets. In order to meet this moment -- transparently and efficiently -- the utility industry must work together to effectively capture and share information and better ensure:

  • Security: Security and privacy must be managed and demonstrated with adoption of best practices, policies, procedures, and tools; more than ever, external independent auditors may be needed to opine on the design and operating effectiveness of those controls, as well as their rules and penalties.
  • Clarity, Autonomy and Accountability: Governance models must be outlined with clear market stakeholders, rules, penalties -- as well as transparency and independence -- so that market parties are encouraged to not only participate, but to do so appropriately (i.e., no one player should be able to game the market); this will become even more important as the extent of FERC Order 2222 goes beyond wholesale markets into regions where a market does not exist.
  • Agility: Information must be made available to authorized parties quickly and efficiently to settle the market, cementing the need for data processing and management systems that can not only capture and validate data, but correct telemetry and AMI data and deal with anomalies.
  • Efficiency: Parties must commit to use the information to improve the efficiency and operation of the system; one Regional Transmission Organization (RTO), for example, reduced forecasting errors by over 200 MW based on information from the distribution system. 
  • Awareness: All participants must recognize their role in the ecosystem and securely share information, not only for broader situational awareness but to support critical market processes.

According to FERC, Order 2222 will “help usher in the electric grid of the future.” But to overcome the barriers to DERs and their wider adoption, the North American Energy Markets will need to adopt a more flexible, collaborative model while at the same time ensuring secure, efficient and reliable operation of the power system. The benefits above depend on it.

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