Smart Grid: The Next Frontier of the Mobile/Wireless EcoSystem—2009 Conference Panel Discussion
Smart Grid programs require major capital investments in a fast-changing environment. Pillsbury understands the complexities of the technologies, the implications for utility operations, and the contracting models favored by global suppliers.
Around the world, governments are challenged to address concerns about public safety, energy dependence and global warming while meeting an ever-growing demand for electricity. Wind, solar, biomass, geothermal and other renewable and clean energy sources are being deployed to address energy dependence and carbon emissions, but they raise very significant operational challenges (notably, cost and reliability) compared to traditional base-load power sources. Against this background, moderating the rate of growth in demand for electricity and improving the efficiency of the electric distribution grid are also seen as important features of a modern grid structure.
Although these issues are being addressed on many fronts, the creation of a smart grid is seen as an essential component of an integrated strategy to:
- better manage diverse and potentially intermittent power supplies, including renewables (wind, solar, biomass, geothermal) and micro-grid generation with “net metering” capability
- improve the efficiency of electric distribution systems and respond faster to major outages by pinpointing problem areas, activating self-healing systems and focusing recovery efforts in the areas of greatest impact
- empower consumers to make smarter choices to conserve energy, particularly during periods of peak demand, both by delivering real-time (or near-real time) price signals, and supporting the deployment of smart appliances and control systems within the customer’s premises.
The leading smart grid technology suppliers offer products on a global basis. They have the benefit of global experience when negotiating with their utility customers, many of whom have no experience deploying this technology at scale. Pillsbury has negotiated major smart grid programs with many of these global suppliers.Contracting for Smart Metering Systems
Smart Metering systems are a particularly risky and expensive component of the smart grid:
- Field deployment requires millions of customer interactions and visits to customer premises. The work flow and costs associated with field deployment present significant operational and budget risk.
- Utilities must evaluate products that are evolving rapidly for use in markets that have not been fully defined. There is a significant risk that technologies may fail to interoperate effectively, or that they will become obsolete.
- Multiple technologies may be required to achieve full network coverage in service areas with diverse topology, demographics and technology constraints. This may require utilities to negotiate supply, installation and integration agreements with several product and service providers concurrently.
- Utility business processes and technology must integrate with the new technologies and must adapt to serve customers dynamically. Competing suppliers may be required to collaborate to achieve successful project outcomes.
- New pricing models and tariff structures may also be implemented to create incentives to mitigate peak demand and encourage consumers to use less.
- Intellectual property risks can be significant, as technology providers compete for substantial contract awards and technology trolls seek to capitalize on the value of their patent portfolios.
- Cybersecurity is a fundamental challenge to the safe deployment of intelligent metering technologies.
In the United States, the State of California has led the way in pursuing comprehensive smart grid deployment through the State’s investor-owned utilities – Pacific Gas and Electric Company (PG&E) serving Northern California including the San Francisco area, San Diego Gas and Electric Company, serving the San Diego area, Southern California Gas Company, serving Southern California including the Los Angeles and San Diego areas, and Southern California Edison serving the Los Angeles area.
Serving tens of millions of customers, those utilities are well advanced in their smart metering and smart grid deployments. The PG&E deployment is the largest in North America, with over 10 million meters deployed in PG&E’s electric and gas service territory.
Pillsbury has advised several of California’s investor owned utilities (IOUs) in the negotiation of technology supply agreements, installation service agreements and system integration agreements with the leading international suppliers. We structured and negotiated contracts on behalf of these utilities with suppliers of one-way and two-way radio frequency (RF) mesh systems, power line carrier (PLC) systems, integrated electronic meter suppliers, field installation service providers, system integrators and software system licensors. Our work covers both electric and gas systems.
We have also advised in the resolution of legal and operational issues arising in the course of the field deployments, including issues relating to technology performance, cost and schedule compliance.
Through this work we have developed a deep understanding of the leading technologies and the issues associated with their deployment. We understand how the various metering, networking, communications and software products must be combined to create an intelligent metering capability, and the kinds of problems that arise as these products are deployed in large scale. Our lawyers understand the critical business and IT dependencies that can derail these projects, and have designed contractual models to mitigate the risks.