It has become a cliché to say it, but facts are facts: The energy industry is experiencing tremendous and fast-paced change. Distributed energy resources (DERs) are quickly changing the energy mix, the Internet of Things (IoT) and digitization are driving transformational change, utility markets are deregulating, new regulations are being promulgated, and customers are demanding more services and options to make their electricity consumption cleaner and more affordable.
Amid all this change, utilities have the continued critical obligation to provide safe and reliable service to their customers. To keep the existing infrastructure reliable and resilient as well as incorporate new technologies, DERs, and methods of operation, utilities need to make continuous investments to maintain and improve the aging infrastructure. While budgets are tight, significant capital deployment is nonetheless required. Many utilities are implementing a breadth of technologies as part of their strategy to create the utility of the future - this includes a much more sophisticated approach to asset investment planning (AIP).
AIP is defined as a facts-based methodical approach to deploy limited resources to achieve optimal outcomes aligned with an organization’s objectives (such as ISO 55000). Using an innovative solution such as AIP, utilities make their data from their asset health and other systems practically actionable. They can view their assets across their entire portfolio, understanding and optimize the associated risks of a project.
With the use of AIP, they’re moving forward by directing available funds to projects that generate the most benefit and value in an efficient and cost-effective manner -- while meeting corporate goals and objectives. All this is done within a long-term framework that allows those same corporate goals and objectives to be achieved in an optimized manner over a multi-year horizon. In short, AIP enables utilities to optimize where they spend their money, achieving maximum results.
It is key to understand that AIP is not competitive to nor a replacement for a utility’s asset management system. What AIP does is make the asset health systems actionable, and enables complex analyses of capital spends, including sensitivity to different parameters that are important (e.g., ROI, safety, sustainability). Here are three cases where utilities were using AIP technologies provided by the leading US-based software provider in this category, Cardano Networks (www.cardanosolutions.com)
(NOTE: Cardano did not want the names of these three utilities to be published, but I verified the story which each one: they did in fact, use AIP, and my summary below is accurate).
CASE 1 - OPTIMIZING CAPITAL ALLOCATION
A large investor-owned utility in the Western United States used AIP across multiple operating companies to view and assess assets and projects across their enterprise. In charting a course for the future, its initiative represented vastly different asset classes and project scopes. Included were multiple technology and process projects representing transmission and distribution for electric and gas operations, back-office field and work order management support, customer service for both field and contact center personnel, and IT infrastructure and networking projects.
To address this challenge and improve investment decisions, the company turned to AIP to provide focus on these vastly different asset classes and projects by optimizing the capital allocation to each while focusing on the achievement of corporate goals. Now, a transparent methodology that helps drive capital decisions based on corporate goals, priorities and risk tolerances is utilized on a continuous basis.
CASE 2 - TRACKING ASSET PERFORMANCE FOR ROI
One large North American transmission utility used AIP to optimize and track the asset performance and capital spend within a major asset class. AIP was also used to make their regulatory process much more efficient. Not only did the software enable faster, lower cost regulatory efforts, the utility received more from the regulator because of the fact-based, transparent presentation of their case to these regulators. This means that, at least in one case, AIP translate into better overall economics for the utility.
The utility looked at each asset type: what investments were considered to pursue, the timelines of each project, and the level of development with each project. By applying ‘what if’ scenarios, and identifying the ‘next best’ projects, the utility analyzed investments based on growth, performance, health and risk. Next, they identified whether to fund or defer, repair or replace, and/or acquire or retire given assets based on objective analysis. By linking this with historic performance, asset health and calculated risk, the utility could focus on the return on investment (ROI) and reliability of each set of assets. Additionally, they were able to turn some of their dialogues with their regulator into a more fact-based conversation.
CASE 3 - CAPITAL AND LIFECYCLE GOVERNANCE
A major, multi-state, U.S. investor-owned utility uses AIP to ensure proper capital budget submission to track projects through their full life cycle according to the project budget(s) and other important company metrics.
The utility was looking for a solution that would help level the playing field across projects, asset classes, and departments, directing a new approach to allocate the capital for each project investment required. The utility was accustomed to using blank undefined budgets. Since this was a largely discretionary approach viewed per department, no focus or matching of corporate goals by the departmental initiatives was made. Further, monies were typically spent on projects that won the ‘popularity contest’. AIP allowed the utility to allocate capital and resources across their entire organization in a disciplined manner. Objectively considering the projects critical to the organization allows capital funds to be reallocated to those projects based on project lifecycle, capital budget, and priority of meeting the stakeholder and regulatory requirements.
INTO THE FUTURE
Utilities worldwide use AIP to chart a course and create a clear vision for the future. As they move forward with
- myriad, diverse investment evaluations such as grid modernization programs,
- upgrades to existing transmission and distribution operations,
- better connecting asset management capability to AIP processes,
- addressing customer operations via contact center and field services, and
- evaluating legacy IT infrastructure and network services,
- prioritizing and allocating resources objectively to projects at the appropriate time is critical. As more data becomes available within a utility, at rapidly expanding rates, the depth and breadth of AIP (utilizing “Smart Data” solutions, as Cardano does with SAP’s HANA). These are being applied to large datasets. including real-time IoT sensor data, that aid in tracking and benchmarking against long-term capital and risk management goals. These include enabling ISO 55000 compliance and more efficient capital allocation and risk-optimized operation.
As demonstrated in three quite diverse case studies, utilizing AIP solutions is not rocket-science. Utilities now have available to them a transparent, repeatable methodology that drives both short- term and long-term capital decisions – all based on a utility’s key priorities, goals and risk tolerances, and on their own asset performance. Additionally, utilities can accomplish capital optimization, maximize efficiency of investments across an enterprise, and achieve the demands imposed by the company itself and by their regulators.
