Case Study: Optimizing a Power Utility’s Portfolio
3 Critical Issues Power Utilities Face
Today’s power utilities are balancing more than they ever have before. Power market and regulatory uncertainties abound. Then, there are pressures to improve environmental performance, while keeping consumers’ costs down and maintaining system reliability. Now more than ever, power utilities must rethink business models, make digital transformations, and establish new partnerships.
A municipal power utility that delivers electricity to a California city of over 200,000 people came to ION Allegro with a challenge: to see their net power position with complete clarity. ION FEA’s @Energy/PowerWorks advanced analytics solution helped this utility calculate their position in real time, take new positions, and reduce exposure. Read the case study below to learn more.
With everything there is to manage today, power utility companies like the one in the case study above must focus on the bigger picture. Here are three critical, recurrent issues power utilities face today and methods to take control.
Issue 1: Grid Infrastructure
A modernized grid means improved security, , the ability to integrate other energy sources (i.e. wind power) into system operations, and lower operational costs. Unfortunately though, aging grid infrastructure remains rampant. In the U.S., nearly 75% of transmission lines and transformers are more than twenty-five years old, the majority of which are built above ground and susceptible to extreme weather.
With the demand for power growing and aging grids stretched to capacity, it’s no wonder modernizing the U.S. power grid has become one of the largest undertakings in the utility industry’s history. The Grid Modernization Multi-Year Program Plan (MYPP), developed by the U.S. Department of Energy, has a strategy to increase the grid’s reliability and resilience.
In recent years, utilities have deployed smart grid technologies to improve grid infrastructure. After an outage, the data collected through these technologies can be used for further resilience improvements. Other established methods include grid hardening, distribution of sources, and “resilience on demand” technology.
Whichever of the methods you choose, start with a consistent planning process to identify, quantify, and prioritize risks and response options. The Department of Energy’s guide to risk assessment offers a solid process for approaching improvements to grid infrastructure:
Being fully aware of the hazard exposures and vulnerabilities that exist within grid infrastructure will lead to a more detailed outline of critical assets. In turn, a fuller picture of conditions and vulnerable assets allows for utility organizations to measure and prioritize benefits and costs the right way. Make no mistake about it: Data-driven power organizations will be the ones who reap the most from a changing grid infrastructure.
Issue 2: Resource Procurement
Since resource procurement requires massive coordination and data sharing across organizations, it is usually a difficult and flawed process. For a long time, many organizations believed there was never a compelling business case for prioritizing resource procurement. However, things have changed.
Now, innovators are moving away from a transactional procurement approach to one that better suits the organization’s overall goals. Those making these changes and moving away from transactional approaches are preventing huge losses, saving typically around 20% in material costs.
Despite this, a 2015 PwC study found that many power companies are lagging. The study made the case that the secret sauce for procurement professionals finding success is in aligning data across functions, simplifying and justifying supply specifications, and broadening their time and geographic demand forecasts. Advanced commodity analytics ultimately maximizes value throughout the procurement process, while enabling dynamic management and hedging of procurement assets.
Issue 3: Risk Mitigation Planning
It’s a given that organizations should proactively identify risks as early as possible. Yet for too many power utility businesses, unforeseen volatility paired with reactive responses remains constant. Those who have access to advanced commodity analytics will successfully mitigate risk while determining opportunities. Advanced analytics allows for comprehensive and accurate forecasting, which leads to increased organizational protection and fewer surprises.
When you gain buy-in to advanced analytics at the organizational level, it can transform your entire business. Continuous improvement, innovation, and optimization become the norm. It’s important that your executives understand that the digital transformation of risk mitigation through advanced analytics allows for early risk identification and portfolio transparency.
How will you proactively handle these critical issues?
A Toolset to Tackle It All
Are you facing similar challenges? The ION FEA @ENERGY Suite can help you optimize your assets across power markets.
Read the ION FEA @Energy/PowerWorks case study below to find out how ION FEA helped change a municipal power utility’s business for the better.