Enabling the Pathway for the Digital Distribution Utility

The power industry is at a turning point. Motivated by increases in grid reliability, more efficient operations, and delivery of a superior customer experience, distribution utilities have embraced digitalization as the path to these improved capabilities. The industry’s accelerating digital maturity is also helping utilities meet evolving regulatory challenges and reduce complexity. However, while distribution utility leaders are seeing key technological advancements deliver significant digitalization to their businesses, a multitude of challenges remain if transformation is to take hold.

Megatrends fundamentally reshaping the power systems

The “3D” megatrends driving change to power systems are decarbonization, decentralization, and digitalization.

Decarbonization refers to the reduction in the total CO2 emissions of a system. Just five years ago, the energy sector (including electricity, heat and transport) represented 73.2% of global greenhouse gas emissions, making it the primary focus of decarbonization initiatives everywhere. Utilities can do their part by integrating low-carbon-generation technologies like wind and solar into the power mix.

Decentralization in the utility sector upends the traditional grid design based on unidirectional flow from generation source to consumer. Decentralization calls for the integration of many smaller, distributed renewable power generation facilities that are subject to the variability of weather and climate. Integrating these technologies vastly increases the complexity of grid operation and management and ushers in the need for digitalization.  

Digitalization is the trend of transforming business processes through end-to-end sharing of digital information across the enterprise. Digitalization is enabled by a host of technologies such as the Industrial Internet of Things (IIoT), artificial intelligence, and machine learning. For utilities, digitalization provides the tools to help manage the ramifications of decentralization while also delivering benefits to improve operational efficiency.

Digital opportunities for distribution utilities

The core responsibility of distribution utilities – ensuring the safe and reliable flow of electricity to homes and businesses – has always been straightforward and generally slow to change. That is no longer the case. Today, distribution utilities must contend with a variety of pressures that are both pushing and pulling the industry forward.

• Integrating distributed energy resources (DERs): Renewable generation capacity is expected to grow to a total of 387 gigawatts by 2025.
• Aging infrastructure: Simply keeping up with needs for maintaining a grid that is far past its prime has increased distribution spending over 50% since 1997 to total $51 billion annually in the United States.
• Challenges to resilience: Despite being relatively infrequent, outages cost at least $150 billion per year nationwide.
• Newfound cybersecurity concerns: The recent SolarWinds incident highlighted cyber vulnerability and was found to have impacted at least 25% of utilities in North America.

Of course, distribution utilities must address these challenges while maintaining sound financial performance. That is no easy feat. Fortunately, distribution utilities can draw on rapidly maturing digital tools to aid in decision making. The following are some examples:

• Consumption models. These models provide digital tracking of where renewable energy is being generated and where consumption patterns show the highest levels of demand. This information, especially when combined with real-time weather information impacting wind and solar assets, can help optimize renewable energy distribution and storage strategies.
• Outage response and mitigation. Sensors and IoT technology installed across distribution infrastructure can highlight in real time where outages occur from major events or gradual degradation. Prognostic capabilities take that one step further and help utilities make proactive O&M or event-related decisions.
• Cyber threat reduction. Automated digital monitoring technologies that enable cybersecurity teams to identify and assess threats 24/7 are critical for reliability and resiliency.

Leaders in the utility sector recognize the need to move toward a future where the electrical system is customer-centric, resilient, automated, and hyperconnected. Digital tools have demonstrated the ability to move utilities toward that future by delivering new levels of data gathering and communications capabilities. Examples of these capabilities include the following:

• Customer-centric: Advanced digital smart meters show customers their total energy use and disaggregate it out to provide detail on how systems consume energy, so they can take action to reduce demand in their homes and businesses.
• Resilient: A self-healing power distribution system is enabled by digital tools that identify issues via sensors, reroute power to prevent outages, and can directly resolve issues or alert field crews when repairs are required.
• Automated: Smart digital communications systems enable automated notification of utility and customer of outages and expected downtimes.
• Hyperconnected: With ubiquitous digital technology, grid operators can implement virtual power plants that allow smaller sources of energy generation, consumption, and storage (such as microgrids and DERs) to communicate and act in concert with the same overall net capacity as a traditional power plant.

Main drivers for grid modernization

In general, distribution utility modernization efforts tend to fall into at least one (but often several) of the following five categories:

• Reliability and resilience
• Efficiency
• Sustainability
• Operational effectiveness
• Customer engagement

1. Reliability and resiliency. Digital asset management capabilities improve reliability and resiliency by reducing in-service failures, pinpointing tree-trimming needs, identifying opportunities for grid hardening, and deploying automated systems for quick response to storms and other disturbances.

2. Efficiency. Digitalization can help utilities save on costs and embrace conservation by improving asset utilization, increasing worker productivity, and reducing transmission and distribution losses – particularly the loss from distribution feeders.

3. Sustainability. Mandates and pressure for utilities to increase sustainability efforts are coming from regulators, investors, and customers. Digitalization helps advance sustainability in many ways, including integration of DERs, increased grid health monitoring performance, and facilitation of downstream energy use – for example, by enabling the grid to support transportation electrification.

4. Operational effectiveness. Digitalized utilities can dramatically improve asset performance management and enable faster, more accurate decisions across their operations. Asset and workforce monitoring enables real-time decision making about equipment/infrastructure condition and performance, field team deployment, grid aggregation, and demand response functions.

5. Customer engagement. As utilities transition to new operating models that include integrating DERs and the rise of “prosumers,” customer interactions become more complex and time sensitive. Digital communications systems and tools help utilities engage their active customers in new ways that improve responsiveness and fulfill more demanding expectations.

The future of utilities is digital

As we’ve observed the abovementioned challenges and opportunities presented by the digital utility, Hitachi Energy has seen utilities pass through three stages in the evolution to digital. While leaders at the top of utilities may be eager to jump straight to all-out digitalization, the more moderate, step-wise approach allows for adaptation by employees and customers and identifies hiccups before they can develop into serious problems that undermine the whole process:

Step 1: Digitization – Simply put, this step encompasses the conversion of analog data to digital data, e.g., digitizing paper maps for graphic displays in the distribution control room and using those displays to improve outage management and storm response. 

Step 2: Digitalization – Not to be confused with the megatrend of the same name, a “digitalized” utility has taken the “digitization” step and started to put data to work. Digitalized utilities are ones that have made strides to capture data and to enable autonomous communication throughout a distributed network, while also providing insights for potential capital investments and long-term strategic decisions.

Step 3: Enterprise Integration – An integrated enterprise is a utility that has embraced optimized strategic, data-driven decision making and digital processes to solve enterprise-wide business challenges.

Navigating the digital transformation journey

Digital transformation can be a complex and daunting initiative with a lot of unknowns and dependencies that can inhibit program success. To help clarify and simplify the path to digitalization, Hitachi ABB Power Grids has developed a reference framework referred to as “From the Field to the Boardroom,” comprised of six primary areas for investment: 

1. Digital substation and smart field devices: By using these, utilities can improve efficiency and convert information from analog to digital format.
2. Multi-application communication networks: A layered digital multipurpose communication network coupled with edge computing capabilities helps to meet the requirements of different network applications.
3. Battery energy storage systems: These can provide backup power, renewable generation, capacity firming, peak demand shaving, regulation services, and also black start capability while simultaneously improving network connections and lowering consumer rates. 
4. Modern distribution control room: This enables distribution system operators (DSOs) to efficiently, reliably, and safely operate their grid, providing operational confidence and grid resilience.
5. Enhanced cybersecurity: Given that cyber threats have the potential to significantly disrupt corporations, thoughtful security investment is an imperative building block. 
6. Connected enterprise: Enabling better situational awareness, decision-making intelligence, and, ultimately, quicker action, collaboration across system silos creates a truly connected and digital utility operation.

Forward-looking distribution utilities must understand digitalization is a journey that doesn’t happen overnight, but that there is no better time than now to establish a pathway to accelerate digital transformation. Utilities that adopt an agile, thoughtfully designed digital approach will be better positioned to deliver an improved customer experience and thrive in this transformative age of digitalized energy. 

Learn more about how to accelerate digitalization in your organization:

• View the on-demand webinar “Establishing the pathway for the digital distribution utility”
• Download our free white paper “Digital transformation of the distribution grid”
• Visit our digitalization web page