1. Choices, Choices, Choices: Resolving Smart Grid Choice Overload With Business Case Models Jerry Jackson, Ph.D. Leader and Research Director Smart Grid Research Consortium, LLC 37 N. Orange Avenue, Suite 500 Orlando, FL 32801 www.smartgridresearchconsortium.org 407-926-4048 979-204-7821 (cell) Municipal Smart Grid Summit June 6, 2012

2. 2 Choice Overload is All Around Us http://www.nytimes.com/2010/02/27/your-money/27shortcuts.html Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

3. 3 Source: NIST Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

4. 4 Marketing and Psychology Research Provides Interesting Insights on Choice Overload Jam problem Decision-making process Decision-maker satisfaction Marketing applications Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

5. 5 Implications for: Utilities Vendors Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

6. 6 Topics Consortium’s approach to SG choice overload Smart Grid Investment Model Example application Recommendations Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

7. 7 The SGRC Was Developed to Address Choice Overload and Other SG Evaluation Issues Formed at Texas A&M University to investigate quantitative business case issues Jan 2010Jan 2011 Dec 2011 Transitioned to an independent research organization Completed Smart Grid Investment Model development Feb 2012 Unbundled model software and support services Coops, Munis, Public Utilities Vetted with 15 utility applications Available to 1.All utilities 2.Vendors 3.Consulting firms 4.Others Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

8. 8 The Scope of Today’s Attractive SG Investments Makes Smart Grid Business Case Extremely Complex AMI/Smart Meters Customer Engagement Distribution Automation Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

9. 9 SGIM Applies Choice Overload Principles toTransform This Complexity Into Manageable Investment Choices Simplified hierarchical selections Structured knowledge base Information discovery Expertise development Relevancy: utility-specific detail/implementation Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

10. 10 SGIM Hierarchical Schematic Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

11. 11 Hierarchical User Interface Three Program Areas Two General C/B Areas Four Summary Investment Stats Discounted Net Benefit Chart 1 2a 3 2b Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

12. 12 Programs Are Turned On and Off Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

13. 13 Investment Summaries Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

14. 14 Chart Representations Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

15. 15 Drill-Down Dashboard Visualizations and C/B Tables Support Information Discovery Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

16. 16 Drill Down to System load Impacts

17. 17 Structured Knowledge Base Supports Information Discovery and Expertise Development Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

18. 18 Technologies and Programs Can be Evaluated Individually or in Combination AMI /Smart Meters AMI /SM + CE (DLC + PCT) CVR ALL Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

19. 19 Assumptions Behind Results Can Be Evaluated; Stand-Alone PCTs Outcomes Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

20. 20 Focus and Timing Can Be Evaluated Accelerated customer engagement, and accelerated, expanded CVR Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

21. 21 Five Steps Are Applied to Transform Analysis Results into a Comprehensive Investment Strategy 1. Prioritize General Investment Areas 2. Assess Specific Technologies & Programs 3. Evaluate and Refine Parameters 4. Consider Alternative Scenarios 5. Update Parameters and Initiate Next Analysis Cycle Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

22. 22 “Composite Utility” Case Study Analysis Provides An Example Current AMR, no CVR or customer engagement Utility executives’ questions oWhich SG investment areas and specific investments are most attractive? oWhat is the business case for the best investments oHow do uncertainties impact results (e.g., increases in wholesale power costs) Utility priorities oKeep up with industry (not the first and not the last) oProvide customer benefits relative to surrounding utilities oKeep costs as low as possible Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

23. 23 The SGIM Implementation Process Utility provides data oMonthly customer class billing data o8760 system load data oAny available utility customer information oGeneral info on distribution system Consortium Staff Implement the Smart Grid Investment Model oCustomers by customer class, kWh sales, peak demand oMonthly customer class, end-use hourly load impact model oUtility costs Model delivered for utility application, or oOnline training session Model applied by Consortium staff in turnkey analysis oModel delivered with training Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

24. 24 First Select Individual Options: Three Program Areas Two General C/B Areas Four Summary Investment Stats Discounted Net Benefit Chart 1 2a 3 2b Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

25. 25 AMI/Smart Meters Unattractive investment Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

26. 26 Why ? Benefits are Limited Drill Down Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

27. 27 Add Customer Engagement: AMI + Direct Load Control (WHDLC)+ Prog Communicating Thermostat (PCT) Better, but not a great investment Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

28. 28 Stand-Alone WHDLC + PCT Greater per unit cost but still an attractive investment option Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

29. 29 DA Category: Conservation Voltage Reduction (CVR) 20% of highest value substations Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

30. 30 CVR + Stand Alone WHDLC + PCT 20% Customers with elec Wh on DLC Wh and PCT plus 20% of highest value substations on CVR Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

31. 31 What If: AMI + Customer Engagement With Increased Wholesale Prices AMI plus WH DLC and PCT along with 40% increase in wholesale prices 2015-2016 still provide modest returns Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

32. 32 What If: Increased Wholesale Prices Also Improve CVR + Stand Alone WHDLC +PCT Investment Stand-Alone WH DLC and PCT along with 20 & 40% increase in wholesale prices 2015-2016 provides substantial returns Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

33. 33 Consider CVR Risk: -20%, -30% of Load Impact - 30% - 20% Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

34. 34 Consider WHDLC, PCT Risk: -30%, -50% of Load Impacts - 30% - 50% Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

35. 35 Conclusions at This Point Reject AMI/Smart meter investments at this time Identified CVR and stand-alone WH DLC and PCT as potentially attractive individual options Relatively little risk with CVR initiative Potential risk with WH DLC and PCT programs Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

36. 36 Preliminary Strategy Develop preliminary plan for CVR applications oTarget highest value first oRefine cost/benefit data with early results oContinue financial analysis on a substation/feeder level basis Conduct pilot program with stand-alone WH DLC + PCTs Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

37. 37 Next Steps Begin compiling substation/feeder level information to support CVR implementation strategy Develop additional internal information on relevant technology/program areas Form utility task force/management plan and action items Identify project management model Vendor RFQs, RFIs, RFPs …. Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

38. 38 Actual Applications Include Additional Items and Analysis Water, natural gas, emergency, etc systems Distribution automation (auto reconfiguration, FDIR Show) Customer valuations of reliability Various levels of deployment oCVR oDA Various levels of deployment and incentives oWH DLC oPCTs oPricing WH DLC, PCTs, pricing, etc with C&I customers Program timing Optional additional technology detail (DER, storage, HEV, etc.) Feeder-level investment strategy development Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

39. 39 Extended Distribution System Information Supports Detailed Substation/Feeder Level Analysis Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

40. 40 Business Case Analysis Recommendations Recognize importance of: oUtility-specific detail oUtility-specific load impact modeling and analysis oSystem-wide evaluation Apply a quantitative framework oExplicit representation of important costs and benefits over time oSupport what-if questions for all important analysis parameters oProvide replication and documentation Develop clear, simple financial and other evaluation criteria Include sufficient detail to integrate detailed engineering, operations and management inputs Evaluate many scenarios to address all important what-if questions Smart Grid Research Consortium www.smartgridresearchconsortium.org June 6, 2012

41. 41 Take-Away: Smart Grid Choice Overload Can Be Resolved With a Quantitative Business Case Model For additional information: Jerry Jackson, Ph.D. Leader and Research Director Smart Grid Research Consortium, LLC 37 N. Orange Avenue, Suite 500 Orlando, FL 32801 www.smartgridresearchconsortium.org 407-926-4048 979-204-7821 (cell)