McKinsey - Disruption
Transcript of McKinsey - Disruption
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Smart Grid as a disruption:thinking 10 years ahead
Humayun Tai
February 23, 2011
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
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McKinsey & Company 1|
Today’s Smart Grid paradigm: 5 non-uniform ecosystems
1234
1234
1234
PowerCo
Smart MeteringAllows: Outage info
Remote reading/ disconnect Home gateway
Grid applicationsEnables: Automation
Diagnostics Volt Var Syncrophrasors
A
A
Integration ofrenewables and
distributed storageFacilitates: Cogen, storage,
distributed solar (LV) EV Centralized
renewables (MV/HV)
D
D
Home Area NetworkSupports:
In-home display andTime of use pricing Smart appliances Home automation
C
C
SOURCE: McKinsey analysis
Systems IntegrationAllows:
Front-end operationalintegration
Data management
Back office integration
Business apps
E
E
B
B
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McKinsey & Company 2|SOURCE: McKinsey analysis
9
7
Total
Automatedmeter functions
2
Meter dataover network
Total 59
Avoided capacity 26
Energyconservation
17
Shift peak 16
Description of benefitsSmart Grid benefit by 2019$ Billions annually, 2009 dollars
Customerapps
Shift demand away from the peak
Overall reduction in energy consumed
Decrease in peak and energyconsumption
9
106-148
38-80
59
SmartMetering
Eliminate manual meter reading
Increased info on usage/outages
Remote disconnect/ connect
Grid apps
2
Total 38-80WAM
30-60
DER n/aM&D 1-8FDIR 5-10Volt-VAR
CUSTOMER VIEW
Total valueof benefits
~$1-1.4 trillion
Volt-VAR drives energy efficiency
Switching reduces outage time
M&D reduces inspection and maintenance
WAM increases throughput
Large societal value at stake: “size of value pools”
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McKinsey & Company 3|
Sequencing of functionality over next 10 years
Basic AMI Operations
improvement Customer
service
Facilitatedecentralizedgeneration(CHP, PV)
Wind stabilization Electric vehicles and
dispatchable storage
L e v e l
o f G r i d S o p h i s
t i c a t i o n
Horizon
Demandmanagement
Grid automation Volt / Var Remote asset
monitoring
Experienced
Emerging
Future
Typicalutility focus
SOURCE: McKinsey analysis
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McKinsey & Company 4|
Today’s Smart Grid faces significant challenges in delivering the value
123412341234
PowerCo
Smart Metering Significant evolution Commodization? Comm’s technology
of future unclear
Grid applications Slow innovation? Regulatory obstacles
Reliability has littledirect value
AA
Integration ofdecentralized resources Regulatory challenges Lack of standards
DD
Home Area Network B2C models not
working Hardware obselete in 5
years?
CC
SOURCE: McKinsey analysis
Systems Integration 3xERP spend
No clear solutions Spend with 0 return
EE
BB
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McKinsey & Company 5|
What is transformative--and disruptive--about the Smart Grid?
Highly centralized asset model Focused on delivery and supply of an aggregate demand profile
From “traditional utility” . . .
. . . to “utility of the future”
Shift towards distributedgeneration in low voltagegrid
Customers now connectedto supply curve
Storage (including EV)
moderates mismatch ofdemand/supply
‘Hard’ and ‘soft’ customerexperience enhancement
Advanced batterysystems
Conventional powerplants
Offices
Houses
PHEV
Industrial PlantsMicroturbines
Fuel cells
VirtualPower Plant
Storage
Renewables
CHP
SmartMeters
Customers
Distributed solar
Demandmanagement
SOURCE: McKinsey analysis
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McKinsey & Company 6|
BB
EE
JJ
CC
DD
Emergence of “Behind-the-meter” landscape
SOURCE: McKinsey & Company
PowerCo
PHEV/EV
Customerapplications
Smart metering
Data collection/analytics/management
IT integration and communications “backbone”
Grid ApplicationsDistributedgeneration
Energy efficiency
Storage1234
GG
AA Home electronicspenetration
FF
HH
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McKinsey & Company 7|
Some key implications as
Load shape changes fundamentally (and leads to demand destruction)
LV generation alters conventional dispatch
New capabilities needed for utilities—but currently lacking
New opportunities created for information and software (EV, demand response)
Energy efficiency and Smart Grid benefits merge
Finding a way to monetize energy/non-energy data is critical
Regulatory paradigms need to shift considerably
Distribution utilities need to decide on their roles
AA
BB
CC
DD
EE
FF
GG
HH
SOURCE: McKinsey analysis