Solving The Challenge of Digital Transformation for Small and Medium Sized Utilities

The Challenge of the Energy Transition for Smaller Utilities

The energy sector digital transformation is rapidly reshaping the power and utility industry, introducing distributed energy resources, digital workforce-from-anywhere, and an infusion of data centric initiatives to allow for more analytics by more people, more often. Smaller, multi- faceted "combination" utilities like Chelan PUD, offering essential services like electricity, fiber, water, wastewater, face a unique and difficult challenge.

How can these complex, smaller utilities embrace innovation and address the evolving energy landscape while maintaining reliable and affordable services with fewer resources than larger investor-owned utilities (IOUs), while protecting against the growing risk of cyber-attacks?

Chelan PUD: Driving Innovation and Collaboration

Chelan PUD, a district utility in Chelan County, Washington State, serving 80,000 customer-owners with a diverse service portfolio and significant (2300MwH) hydropower generation, is redeveloping a new way of thinking: starting with the innovation of utilities digital architecture.

We recognize two fundamental principles:

Digital Transformation is Key: Integrating digitalization into our core business model is the only way to address the systemic challenges of the energy transition.
Open Ecosystems: Building digital capabilities centered on a foundation of open standards and collaboration is essential to meet the needs of a modern utility.

The Search for a Blueprint

Understanding the need for transformation, Chelan PUD recognized the importance of a clear digital blueprint before embarking on this mission-critical journey. However, we couldn't find a comprehensive guide specifically tailored to the needs of smaller utilities. While valuable resources existed from industry organizations and vendor-specific offerings, they lacked the holistic focus we sought.

Creating the Blueprint

Recognizing this gap, Chelan PUD, with the approval of senior management, gave CTO Ian Fitzgerald the mandate to develop an innovative and open-source digital blueprint. This blueprint would not only meet Chelan PUD's needs, but also empower other smaller utilities to collectively address the challenges of the energy transition.

A Shared Vision

Chelan PUD's investment in this innovative blueprint is driven by a core principle: to advance the industry as a whole. We are now 18 months into a 42-month transformation journey, and we're committed to sharing both the blueprint and our successful implementation. Our goal is to help smaller utilities not only survive the energy transition but become leaders in shaping its future.

Stronger Together

By working together on a foundation of best practices specifically designed for smaller, multi-service utilities, we can compete with larger IOUs and ensure the continued delivery of affordable and reliable essential services to our customers. Chelan PUD believes this collaborative approach is the key to success, strengthening our industry and furthering the goals of the energy transition.

From Innovation Motivation to Principles

So where do we start in building the innovative blueprint that utilities so desperately need? Before jumping to the answer Chelan spent the time to define the essential requirements and principles that would guide this ambitious and game Endeavor in the belief that clarity of requirements is the best predictor of success. The digital blueprint development was guided by core set of principles designed for the unique needs of small and medium-sized, combination utilities:

Value Focus: Prioritize projects aligned to the blueprint that directly benefit and align with customer needs. Focusing on business value is key to “putting points on the board early and often”, which is crucial for transformational initiatives.
Simplify: Reduce complexity and technical sprawl for streamlined operations across multiple service areas. This is especially important for resource constrained utilities.
Agility: Build in flexibility to rapidly adapt to the evolving energy landscape while meeting diverse service expectations. No one can exactly predict the road ahead. But by building the “hooks” that enable future flexibility is a key requirement.
Systems Thinking: Prioritize adoption by aligning technology with company culture and the needs of the utility as a whole. Because the blueprint must address the whole enterprise keep the “whole in mind” is essential.
Service Mindset: Focus on service quality across all domains, not just on technology ownership. This externally focused service mindset is probably the most important cultural and technological shift – essentially adopting an “outside in” versus the more typical utility “inside out” approaches. What this means in practice is shifting away from a mindset characterized by “needs of the utility” are often imposed on customers and partners to one where the default mindset is “we are here to always serve our stakeholders”.
Security and Compliance: Proactive cybersecurity is essential for the modern utility in complex, multi-service environments. There are growing geopolitical and criminal security risks to our essential services. Protecting our communities means that security and compliance can not be a burden but an opportunity to provide “best in class secure utility services that automatically meet and exceed compliance needs”
Data as an Asset: Treat data strategically to unlock insights and value across all utility functions. With the advent of AI data is now the new “currency”. Leveraging data across the enterprise can fuel the innovation so desperately needed to fuel the energy transition at the local level where small and medium sized utilities excel.
Reliability and Continuity: Ensure service dependability under all circumstances, regardless of which utility component is involved.

Taken as a whole these foundational principles encapsulate the major requirements for any digital blueprint for a utility. However these principles alone are not enough. We also need a set of technologically oriented guidelines that will be essential to us in developing the exact digital architecture.

From Innovation Principles to Building Codes

Building the Blueprint: The "What" of the Architecture. To translate the core principles into action, Chelan PUD's CTO, Ian Fitzgerald, and his team established a set of detailed "service building codes" that could be used as guidelines for the design, build and operation of the requisite digital services. These codes provided clear instructions on how to structure the architecture to navigate the complexities of the energy transition.

Defining the Architecture Segments

The first step involved breaking down the utility into distinct segments. Each segment aligned with a core group of utility functions, such as generation, transmission, customer service, and distribution. This approach mirrored the model used by TMforum in the Telco industry, defining simple building blocks. However, Chelan PUD leveraged the National Institute of Standards and Technology's (NIST) Smart Grid Architecture model with its domains and zones for a more tailored fit. This industry standard provided a well-defined foundation for organizing the "what" of the architecture.

From Segments to Systems

Following the segmentation and alignment to NIST’s smart grid architecture, the team defined the logical systems required by each segment to meet the business needs. Each system acts as a container for functionally related business applications. All business applications must reside within a designated system, which in turn aligns with specific locations, segments, and supports one or more business capabilities. These systems essentially group technology services that cater to a set of interconnected business functions. Notably, ownership of these services falls under program teams following a DevOps approach, ensuring a collaborative development and operations environment. Establishing a set of general systems was a significant amount of work, but once agin was facilitated by leveraging SEPA’s standardized architecture map, so Chelan could align with industry best practices

Standardized Deployment to “Floors”

One of the greatest challenges in utilities is that there is a need to segment the architecture based on the NIST smart grid architecture zones. It is not possible nor advisable for example to move all utility services to the cloud, nor does it make sense to put everything on premise. Rather the team had to consider everything from “critical infrastructure”, Operations, Enterprise, Cloud, Internet and even “Behind the Meter”. With the systems established in the prior step, the team had to ensure all technology systems and services resided within correct deployment locations and security zones. This classification once again leveraged the NIST smart grid model to organize Critical Infrastructure Protection (CIP), Operational Technology (OT), and business criticality. Services into deployment zones like operational technology, on-premise, cloud, SaaS or a hybrid approach.

Seamless Integration

With the segments and systems defined and the systems and services allocated to the appropriate “floor” of the architecture (OT, on premise, field and station, cloud etc..) it became clear that seamless integration of data and services across these different “floors” was arguably the biggest challenge to be overcome. Organizing the segments and systems had the benefits of simplifying the architecture however ensuring seamless integration across the floors appeared at first to be a daunting challenge. The architecture must prioritize seamless communication between systems irrespective of location while respecting the “zone based” drivers that required systems and services to be “tenanted” on the correct “floor” of the architecture. The conclusion of the team was that all inter-system integration must leverages a standardized "Integration as a Service" (IaaS) “data elevator” platform. This IaaS facilitates secure, real-time data exchange across all floors and security zones within the architecture. Additionally, all integration paths must follow designated "elevator" routes, promoting a structured flow of information. In addition the architecture must be able to provide support for zero trust to provide optimal security. For instance, an integration path might flow from CIP systems to the corporate network, then to the cloud, and finally to a SaaS application seamlessly.

Service Management and Security

The architects took the bold moving of assuming that everything was “outside in versus inside out” as far as Chelan goes. With the advent of “work from hope”, mobile devices, SaaS and IoT the utility had to adopt a “trust no one and no device” perspective. This view meant that “outside in was the default”. This lead to the conclusion that Zero Trust and Identity and Access Management which was unified across all floors was key. Literally the only exception to this would be the CIP and Hydro Dam control centers. The architecture therefore needs to promote a zero trust federated architecture. This allows for service aggregation for centralized monitoring, avoiding redundant service instances across locations. Security is paramount, with all services subject to appropriate distributed security measures based on location and zone. A "Zero Trust" security model forms the baseline, with additional safeguards implemented for critical zones. CIP and control-related applications reside exclusively within the OT layer but remain interoperable with the IT layer. Business-critical and business applications favor a SaaS/cloud deployment, while mission-critical and OT systems prioritize on-premise hosting.

Data as a Service

Data is recognized as a core service within the architecture. Every service inherently includes some form of data support. Buildings ana rchitecture with “data at the core” would enable innovation to flourish, improve operations and open the door to data science and AI that could radically transform the utility.

From Theory to Practice: From Building Codes to Strategic Building Block Selection

Armed with a clear vision, principles, and innovation building codes, Chelan PUD's next step was to identify the most suitable technology building blocks. A careful analysis of Gartner reports, both within and beyond the utility industry, provided invaluable insights. Our goal was twofold: minimize risk and maximize value by prioritizing mature, powerful, and open-source technology solutions wherever possible.

Key Building Block Categories

Software as a Service (SaaS) and Business Services as a Service (BaaS): We explored SaaS/BaaS options to streamline operations. This included metering, customer information systems, asset management, trading and scheduling, aggregator services, electric transportation management, GIS, field workforce management, IoT services, service management platforms, and behind-the-meter device management.
Cloud: We evaluated cloud building blocks for virtual data centers, data fabric, identity and access management, Zero Trust services, security, integration, IoT, AI, delivery services, and mobile device management.
On-Premise: We identified essential on-premise components for converged infrastructure, IT/OT convergence, software hosting, delivery services, security, backup, business continuity, and legacy systems requiring isolation.
OT: Vital OT building blocks included energy balancing, energy management (EMS/ADMS/DERMS), water management, fiber network management historian services, model management, planning and simulation, storage management, distribution control, and more.
Field and Station: We focused on integrated SCADA, standardized field communications, intelligent substations, device automation, drones, intelligent edge devices, and synchrophasors.
Frameworks: We assessed best practice technology frameworks such as TOGAF, Archimate, ITSM, SAFE, TBM, DevOps, DMM, AI, DAMA, CAF, etc.

Critical Building Blocks

We paid particular attention to several key areas:

"Data Elevator" Integration as a Service: We prioritized advanced integration services to facilitate seamless API and data flows across all architectural zones and floors.
Virtual Data Center: We drew insights from Azure and VMware to create mirrored on-premise/cloud data center architectures aligned with best practices.
Data Platform Services: We examined database management, data fabric, and data-as-a-service solutions to build a robust data foundation.
SaaS Applications: SaaS options for cloud-based metering, field workforce management, customer information systems, asset management, and financials received careful consideration.
Security and Identity: Zero Trust, device management, identity and access management (IAM), external identity handling, and two-factor authentication were evaluated for comprehensive protection.

Describing The Innovative Target Architecture

The "Data Elevator" Architecture: A Multi-Floor Approach

At the heart of Chelan PUD's innovation lies a unique target architecture. This architecture strategically blends our established motivation, principles, building codes, and chosen building blocks to create a secure and adaptable framework. Let's explore it floor-by-floor:

Floor 1: Field and Station (OT) This is the operational core, where IoT devices, data acquisition, substation services, and SCADA converge. It's where operations technology directly interacts with the physical grid assets.

Floor 2: Operations Technology (OT) This highly secure floor focuses on managing field and station devices. It adheres strictly to the identified high availability, reliability, business continuity, security, and compliance principles. As with most utilities, Chelan PUD maintains an on-premise OT floor isolated from IT to ensure maximum resilience.

Floor 3: On-Premise IT In our current state, this floor houses the majority of business applications. Our target architecture shifts non-critical OT services (such as planning, engineering, and outage management) to a dedicated landing zone on this floor, isolating them from less-critical applications. Most other business applications will transition to SaaS. Legacy systems will reside in a separate "isolate and protect" zone.

Floor 4: Cloud This layer is centered around a virtual data center, emphasizing integration and data services. A data lake and data fabric empower self-service analytics, data science, and AI initiatives. Crucially, the cloud layer will foster innovation by allowing Chelan PUD to explore cutting-edge cloud-native solutions.

Floor 5: SaaS and Internet External and mobile access are routed through this internet/SaaS floor, which also hosts SaaS and BaaS solutions. This model maximizes the value and agility of readily available best-of-breed services, while the cloud layer drives data-centric innovation, and the on-premise floors ensure seamless OT operations.

Floor 6: Behind the Meter This innovative floor targets interaction with behind-the-meter devices owned by customers and businesses. This enables unprecedented opportunities for customer-centric partnerships and new service models in the energy transition.

The "Elevator" Concept

The key to this architecture is the seamless integration between floors, acting as a 'data elevator.' Secure, real-time data flows across zones, enabling decision-making across generation, transmission, distribution, and customer-centric services. This multi-floor approach is designed to align with industry standards while providing the flexibility Chelan PUD needs to adapt to the rapidly evolving energy landscape.

The data elevator is realized using a leading edge integration as a service provider that allows Chelan to deploy integration components on every floor but allows management and configuration of those services from a SaaS based “management plain”. This means we can implement integration services in the station and field layer all the way up to the SaaS layer in a semless way. This provides a single management “pane of glass” to mange integrations across all floors. Integration components are deployed on each floor and are completely independent and are not dependent on each other enabling each floor to operate independently in case of failure. This the SaaS layer can operate without the cloud, the cloud can operate without SaaS or on premise and most importantly OT is not impacted by any failures on a “floor above.” The magic of the data elevator is that each of these individually deployed integrations on each floor “talks to each other” allowing services all layers to interoperate securely irrespective of where it is located. Strict paths are enforced with security rules defined on each floor. This is further enhanced with privileged access management, zero trust and sophisticated identity and access management. Most importantly data can now flow securely if necessary into the data fabric or data can be more easily accessed “in place”. The data elevator is integrated with the “hub central firewall”, virtual networking, landing zones, management zones and common services zones on every floor so each floor is fully self contained but interoperable with all other floors of the architecture. This remarkable approach integrates all of the best practices while providing the agility to add and move services from floor to floor almost at will.

Data in Motion and at Rest:

The data elevator facilitates secure data flow, allowing data to be directed to the data fabric when needed, or accessed readily "in place." Additionally, the data elevator integrates seamlessly with Chelan PUD's "hub central firewall," virtual networking, landing zones, management zones, and common service zones across all floors. This ensures complete self-containment within each floor while enabling seamless interoperability across the entire architecture.

A Winning Combination:

Chelan PUD's data elevator approach represents a remarkable achievement. It masterfully integrates industry best practices with the agility to adapt and move services between floors as needed. This flexibility empowers Chelan PUD to stay ahead of the curve in the rapidly evolving energy landscape.

Unlocking a World of Possibilities: Architecture-Enabled Capabilities

Chelan PUD's innovative architecture paves the way for transformative capabilities across a wide range of domains:

DERM (Distributed Energy Resource Management) Innovation: Create the foundation to seamlessly integrate SMART Home technology, enabling new revenue streams and customer-centric services.
Cloud SaaS Migration & Cloud Innovation: Reduce technical debt and accelerate innovation by migrating business-critical systems to the cloud.
Collaborate from Anywhere: Enhance collaboration capabilities with seamless chat, email, and file sharing, accessible without on-premises authentication.
Segment Mission Critical IT: Isolate mission-critical IT services (such as planning and energy portfolio management) in on-premise environments to ensure reliability and security.
Quality Customer Digital Experience: Provide secure authentication and empower seamless data and workflow sharing with customers and partners, enhancing the overall digital experience.
Work from Anywhere: Move initial IAM (Identity and Access Management) authentication to Azure Cloud, with an on-premise fallback, to enable secure remote work from any location (field, home, conferences, etc.).
Data & Analytics as a Service: Create the capability to consume and analyze data from both on-premise and cloud sources. Establish the ability to securely share data with external partners.
Vertical Data Elevator: Facilitate secure, Zero Trust data flows between OT, IT, and cloud systems, breaking down silos and enabling real-time, data-driven decision-making.
Hyperconverged Data Center: Upgrade and expand the capabilities of a high-performing virtual desktop infrastructure (VDI), providing a robust foundation for flexible and efficient IT operations.

Transforming Customer Service with the Data Elevator

The energy transition demands a shift towards dynamic, real-time customer service experiences. Chelan PUD recognizes that automation is key to achieving this. However, accurate asset and inventory data, synchronized with the physical utility network, is a prerequisite for successful automation.

The Challenge of Accurate Asset Data:

Chelan PUD, like many utilities, faces several challenges in maintaining accurate network inventory. These challenges impact the ability to automate processes, limiting service innovation.

The Data Elevator Advantage:

This is where the data elevator delivers a crucial advantage. By ensuring accurate, consolidated asset and inventory data, Chelan PUD gains the foundation needed to automate the resource and service lifecycle. A single, secure, SaaS-based service management platform further strengthens this capability.

Benefits of Data-Driven Service Delivery:

Reinvented Customer Experience: Chelan PUD can offer new, innovative services powered by trusted asset data, redefining how customers interact with their utility.
Proactive Operations: The data elevator and integrated services platform allow Chelan PUD to deliver faster service and address issues proactively.
Optimized Planning and Engineering: Planners and engineers can accurately plan, design, build, and manage utility resources and services, ensuring optimal resource use and investment decisions.
Streamlined Operations: Improved resource tracking, procurement, and ESG (Environmental, Social, and Governance) compliance through data-powered automation.