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Transcript of WMAX-060 Realizing Smart Grid Revenues White Paper_bc3
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Realizing Smart Grid revenuesUsing WiMAX to fulfill
the M2M promise
White Paper
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2 Realizing Smart Grid Revenues
Contents
03 Executive summary
04 1. What is a Smart Gridnetwork?
05 2. The Smart Grid market
05 2.1 The Market Segments
05 2.2 The Potential for Growth
06 3. Access technology
choice is critical
06 3.1 Access network and device
pair options
07 3.2 Feature set considerations
07 3.3 The WiMAX ARPU
advantage09 4. Business model
build or lease
10 5. Nokia Siemens Networks
Smart Grid solution
WiMAX CSPs
10 5.1 Why
Nokia Siemens Networks
10 5.2 Summary
11 6. Appendix: Smart Grid
open standards andarchitecture
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3Realizing Smart Grid Revenues 3
Executive summary
Machine-to-machine (M2M)
communication is becoming a
potentially very attractive revenue
stream for telecom carriers. One of the
first and most promising M2M
applications is Smart Grid, a
comprehensive vision for improving the
reliability, efficiency and security of the
power system.
The grid becomes smart when the
conventional electric grid is augmentedwith telecommunications infrastructure,
data management, automation and
control technologies. Many of the
elements of a Smart Grid
implementation are already available,
including smart meters, automated
monitoring systems and power
management systems. What has
been needed is a communication
technology that can make the Smart
Grid not only possible, but profitable.
WiMAX is now emerging as that
technology. Factors that are
encouraging many leading utilities to
plan Smart Grid deployments include:
Increased focus on energyefciencyandzeroemissionpower
production
Stress on the electric grid due to
growing power demand and aging
infrastructure
Dramatically lower cost of Smart
Grid infrastructure using wireless
broadband
This paper provides a general
introduction to the Smart Grid market,
a description of the business
case, and a blueprint that WiMAX
carriers can use to capture their share
of the new ARPU that M2M will begin
to generate in the very near future.
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4 Realizing Smart Grid Revenues
1. What is a Smart Grid network?
More and more, the machines we use
every day are becoming automated
and intelligent. Smart systems such as
manufacturing robotics, automated
inventory controls and power
management systems have long been
among industrys tools, but they
are now entering our households, as
well. We have dishwashers that start
themselves when energy costs are
lowest, refrigerators that are aware of
the products stored on their shelves,
and entertainment systems that can be
programmed over the IP backbone
from anywhere.
In fact, potentially smart machines
already outnumber human
communicators. The European
Telecommunications Standards
Institute (ETSI) estimates there are50-70 billion connectable machines
in the world, compared to about 7
billion people and while the majority
of people are already connected to
one or more communication networks,
only about 1% of the machines are
connected. For telecom carriers,
that makes machine-to-machine
(M2M) communication a potentially
very attractive revenue stream.
Thanks to growing global energy
demand and a number of government-
backed initiatives, Smart Grid
is likely to be the first fully realized
M2M application. In its most basic
form, Smart Grid can be thought of
as a parallel power and
communications network, as
illustrated in Figure 1. The
communication network
provides a means for all major
elements of the electric grid to
communicate with one another in real
time, enabling many energy and cost-
saving features not possible with a
standard, non-smart electric grid.
An electric grid with smart capability
allows power producers, distributors
and users to maintain a near
real-time awareness of one anothersoperating needs and capabilities. With
this awareness, the Smart Grid
can produce, distribute and consume
power in the most intelligent and
efficient manner.
Smart Grid enablesmany energy andcost-saving featuresnot possible withtodays electric grid
4
Smart Grid = Utility + Communications
Electric Grid
Communications Network
Figure 1: Smart Grid Consists of Parallel Communications and Utility Networks
With a Smart Grid system,
everyone benefits:
Energy users can be provided real-
time information on energy rates
by time of day, permitting them the
opportunity to use power when it is
available at a lower cost.
Energy users and producers
can add automation to the grid,
optimizingtheefcienttransport
of power.
Utilities can have immediate
information about the exact scope
and nature of outages, enabling
them to respond more quickly
andefciently.
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5Realizing Smart Grid Revenues
2. The Smart Grid market
The market segments
Just as energy users break logically
into two primary segments, commercial
and residential, so too does the Smart
Grid market. Industrial and large
commercial power users typically
represent just 12% of a utilitys
customer base, but consume
about two-thirds of the power
produced. Massive power usage at a
discrete service location makes
an excellent business case for any
technology that can help monitor and
optimize that usage, so Smart
Grid technology has been in use in
commercial applications for decades.
Among residential users, however,
88% of the customer base consumes
about one-third of the power
generated. The incremental expense of
connecting so many energy users to a
common communication network has
been a serious hindrance to Smart
Grid deployment for this segment.
That situation has changed
dramatically of late, thanks to recent
advances in digital technology and
low-cost WiMAX wireless networks.
The business case for residential
Smart Grid is now strong, as willbe demonstrated as we explore further.
The potential for growth
Several Smart Grid global hot spots
are moving forward with deployments
at a rapid pace:
The Australian government has
committed up to $100 million to
develop a demonstration project
called Smart Grid, Smart City. This
initiative, which will commence in
July 2010 and continue until June
2013, demonstrates Australias
position at the forefront of global
efforts to use energy more
efciently,ensurenetworkreliability
and combat climate change.
SP AusNet recently announced a
comprehensive plan to deploy a
WiMAX Smart Grid network. All
of their customers will have smart
meters advanced meters that can
identify consumption in detail and
communicate back to the local utility
for monitoring and billing purposes
by 2013.
Europe is expected to deploy 145
million smart meters by 2020.
European deployments are being
driven by the EUs Smart Grid 2020
Directive. It calls for 20% carbon
emission reduction, 20% energy
efciencyuse,and20%renewable
by 2020.
The US Department of Energy
recently awarded $4.5 billion in
Smart Grid stimulus funds. The
State of California has published
aggressiveefciencyandCO2
reduction regulations and mandated
the deployment of smart meters.
As a result, California utilities have
projects underway to deploy millions
of smart meters. Various other
state mandates have motivated
US utilities to launch 31 projects
deploying a total of 81 million
smart meters.
China is also moving rapidly,
concentrating on distribution
automation to reduce grid loss. In
thecurrentve-yearplan,allmajor
generators will have Smart Grid
measurement sensors by 2013.
In all, utilities are expected to invest up
to $240 billion to upgrade over 2 billion
utility meters worldwide (see Figure 1).
Each of those 2 billion devices willneed to be paired with an access
network to enable Smart Grid
functionality. The question then
becomes, which network makes the
most sense?1400
1200
1000
800
600
400
200
0Electric Gas Water
NumberofMeters(millions)
Source: Robert W. Baird and C o., January 2010
10 30 30Automated 1
11 65 370 945Unautomated
Global Utility MetersOver 2 billion unautomated meters worldwide
Utilities will investup to $240 billion
on Smart Griddeployments
5
Figure 2 Global Utility Meters
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6 Realizing Smart Grid Revenues
3. Access technology choice is critical
The choice of access networks canmake or break a Smart Grid
deployment, since the consequences
of selecting an inappropriate access
network and device technology can be
staggering.
For example, consider a utility with
300,000 Smart Grid customers. The
network would consist of 300,000
residential devices, perhaps 200 to
1,000 access nodes and one or two
core networks. One can reasonablyreplace components in the core if the
first choice in design or products is
ultimately not selected. However,
replacement of equipment in the
access network or customer premises
is nearly unthinkable. The choice of
access network and associated smart
meters should be subject to intense
analysis in order to avoid Technology
Regret.
Access network and device
pair options
The access network and devices must
be analyzed as a mated pair. This is
essential because they must
speak a common language (e.g.,
protocol) and very few access
networks and devices are multi-lingual.
For example, WiMAX devices and
access networks speak to one another
over the 802.16e wireless protocol
using equipment in accordance withthe WiMAX specification. Likewise, a
proprietary 900 MHz access network
will only communicate with a 900 MHz
device manufactured by the same
manufacturer as the access network.
Core NetworkandApplications Access Network Residential Devices
CAPEX Cost:
OPEX Cost:
15%
20%
35%
50%
50%
50%
Source: Motorola Internal Study
e.g. WiMAX, 2G & 3G Cellular,Proprietary, Mesh, Others
e.g, BPL, PLC, DLC, DSL,ADSL, HFC, Others
Smart Grid CAPEX and OPEX
Choosing the rightaccess technologywill preventTechnology Regret
The utility faces the challenge ofdetermining which access network/
device pair (i.e., which technology)
is best suited to provide a cost-effective
and reliable communications network
for Smart Grid. There are three basic
forms of access network/device
technologies in the market.
1. Wireless Networks
WiMAX, cellular (2G and 3G) and
proprietary (e.g., 900 MHz)
Wireless networks have the lowestbuild-out costs. Typical installations
range from$120 - $2501 per
customer depending on density of
customers covered. Furthermore,
many regions already have several
networks in place and capacity can
be leased from a wireless carrier at
a low cost. Typical lease costs can
be as low as $0.50 3.00 per
subscriber for large volume, long
term deals.
2. Wired CommunicationNetworks Cable, Digital Subscriber
Line (DSL), Ethernet
Wired communication network build
costs vary from $500 - $2,000 per
customer depending on density of
customers covered. As such, they
are not typically economically viable
for Smart Grid. However, they can
still be considered because they can
often be leased from wireline
communications carriers where
they exist.
3. Wired Power LineCommunications Broadband
over Power Line (BPL), Data
Communications Link (DCL)
Wired power line communications
networks use a portion of the electric
network for data transport. They
have proved viable in a small
number of cases where the electric
grid design permits hundreds of
homes to be served by a single
transformer. This configuration is
uncommon and these deploymentshave typically proved to be cost
effective only in portions of Europe.
On the basis of cost and availability,
then, wireless networks provide a clear
benefit.
6
Figure 3: Smart Grid CAPEX and OPEX
1 All figures in this section are Nokia SiemensNetworks internal calculations based on actualcustomer deployments
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7Realizing Smart Grid Revenues
WiMAX is typicallythe optimaltechnology forSmart Grid
The WiMAX ARPU Advantage
For a wireless carrier, WiMAX offers onefinal advantage the rich revenueopportunity afforded by M2Mcommunication over a WiMAXinfrastructure.
A WiMAX base station not only provides alow cost last mile infrastructure, it is alsohighly scalable, able to support from 450to 3,000 subscribers. For high bandwidthusage, a typical load would likely averageabout 500 users, each generating anARPU of about $30/month. So one basestation could generate revenues averagingabout $15,000/month.
Now consider that same base station inuse in a Smart Grid. Because machine-to-machine communications, such as regularmonitoring of smart meters, are focused,predictable and can be managed withouthuman intervention, the communicationload can be optimized to take advantage ofWiMAXs tremendous capacity.
So a single base station can easily support25,000 smart meters. Even though M2MARPUs are much smaller ranging from$.50 to $3.00 the greater volume ofsubscribers served can yield monthlyrevenues between $12,500 to $75,000 ona single base station. The case for WiMAXas the Smart Grid access technology ofchoice is becoming very clear.
Feature set considerations
When building a Smart Grid, careful
consideration must also be given to thefeatures enabled by a given access
technology in order to assure that it
meets the minimum requirements for a
successful service. Figure 4 compares
the features for the access network
alternatives considered to be most
competitive.
As can be seen in Figure 4, WiMAX
offers a number of advantages over
other technologies for Smart Grid
support. It offers the best value to the
utility by providing the greatest feature/functionality at the lowest cost. The
advantages over Programmable
Logic Controllers (PLC), Data Link
Control (DLC) and Mesh networks are
significant and compelling.
Nokia Siemens Networks has outfitted
cellular wireless networks with features
to support Smart Gridlike applications
for several years and they work well for
a limited feature set. To support full
featured Smart Grid deployment and to
future-proof ones access networkinvestment, the speed, performance
and features inherent to 4G technology
are needed. Taken as a whole, WiMAX
is typically the optimal technology for
Smart Grid.
Critical Attribute PLC DLC Mesh WiMAX Cellular
High Bandwidth
Suitability for High
Customer Densities
Suitability for Low
Customer Densities
Security
Standards Based
Scalability
Large Supplier Ecosystem
Reliability
Option to Wholesale/Lease
System Availability
Cost
Source: Motorola Internal Study
Comparing Access TechnologiesWiMAX provides the greatest feature set and functionality at the lowest cost
Figure 4 Access Network Technology Comparison
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8 Realizing Smart Grid Revenues
There are morethan 500 WiMAXnetwork deploymentsworldwide
WiMAX Forum,March 2010
Best Feature Set
Full QoS regime assures utility
trafcisgivenproperpriority
Strong security features safeguard
grid and customer information
Licensed spectrum assures
interference will not affect networkperformance
Private or Virtual Private Network
supportisolatesutilitytrafcfrom
that of the public carrier
All-IP Architecture assures feature
transparency
Carrier-grade, high availability
network assures system availability
Scalable for very high and very lowdevice densities
New technology just beginning its
service life (i.e., will not be replaced
in the coming decade as is the case
for 2G/3G)
The strengths and weaknesses of the
three strongest alternatives in the
market 900 MHz proprietary
systems, 2G/3G cellular systems andWiMAX are summarized in Figure 5
below. Again, WiMAX clearly has an
impressive set of compelling
advantages that make it worth serious
consideration by any utility planning a
Smart Grid deployment:
IP-based technology
Much higher capacity and lower
latency than 2G and 3G
Genuine standards-basedtechnology
Full ecosystem of suppliers and
equipment assure competitive
pricing
Proven interoperability between
suppliers guarantees the supply
chain
Large installed base of carriers
future proofs the technology
Best Business Case
Cost effective, low OPEX,
end-to-end solution
Enables both build and lease
options
Several suppliers
Field proven
Widely deployed
Open standard
900 MHz Proprietary
2G/3G Cellular
WiMAXHighest capacity
Best feature set
Supplier ecosystem
Open standard
AdvantagesTechnology Disadvantages
Proprietary
Wed to a single supplier
Interference issues
Limited capacity
Limited service life
Deployments in process
Comparing Wireless Access TechnologiesWiMAX emerges a clear winner
Figure 5 WiMAX Advantages and Disadvantages
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9Realizing Smart Grid Revenues
4. Business model build or lease
When utilities first began to consider
Smart Grid as a business opportunity,
most simply presumed that they would
deploy and operate their own Smart
Grid access networks. As they have
gained experience, many have come
to understand that they have another
option lease capacity on an existing
Communication Service Providers
(CSPs) network. This alternative has
several tangible advantages, includingfaster time
to market, lower capital costs, and
better ROI.
This alternative has not been
overlooked by cellular network
providers. Verizon and AT&T have
recently established programs and
rates structures intended to capture the
utilities Smart Grid business. A typical
deal structure would be as follows (also
see Figure 6):
Carrier provides the network and
basic connectivity
Utility provides and deploys the
meters
Utility maintains the Smart Grid back
ofce
Carrier bills the utility based on
users per month and call model
Guaranteed minimums andincentives for volume
The cost of leasing network capacity
can vary based on several factors,
including: capacity requirements,
term of lease, services provided,
frequency of meter reads, outage
recovery requirement, etc. The
following carrier ARPU estimates are
considered typical for most cases and
can be used as a starting point for
business case analysis:
Large volume deals: $0.50 - $1.50/
subscriber, depending on the
service
Small volume deals: $1.50 - $3.00/
subscriber, depending on the
service
Low end: Automatic meter reading
(AMR) use case, periodic reads of
usage data and basic health checks
High end:Advanced meteringinfrastructure (AMI) use case, real
time metering
Leasing meansfaster time to market,lower capital costs,and better ROI
Smart Grid Business Structure
To realize all the benefits of Smart Grid, a utility needs to access network, not own it.
Leasing capacity from an existing wireless carrier is a win-win for both partners.
Figure 6 Smart Grid Business Structure
Wireless
Last Mile
Utility
Wireless Carrier
Utility Customer Management
Utility Applications
Network Management
Telecom Customer Management
Carrier Applications
Network Management
IP/MPLS Network Gateways,
Service Edge
and Firewalls
Base Stations Smart Meters
Wireless Devices
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10 Realizing Smart Grid Revenues
5. Nokia Siemens NetworksSmart Grid solutionWiMAX CSPs
Nokia Siemens Networks offers a
tightly integrated end-to-end Smart
Grid access network solution. The
major components as illustrated in
Figure 7 include:
Smart Grid core network
Wireless backhaul solutions
Smart Grid access network
Smart Grid meters
Design, deployment and
implementation services
Why Nokia Siemens
Networks
The optimal supplier for WiMAX Smart
Grid networks needs a unique
combination of WiMAX experience and
Smart Grid know-how, as well as a
product line that supports smooth
integration and deployment. Nokia
Siemens Networks has that
combination.
Experience: Nokia Siemens Networkshas demonstrated leadership in
WiMAX since its inception by being:
First to interoperate with other
suppliers
First to deploy a commercial
network
First to demonstrate mobility
FirsttobeWiMAXForumcertied
First to build a WiMAX Smart Grid
access network
Know How: Smart Grid is more than
just another wireless application.
Smart Grid applications place new and
strenuous requirements on a wireless
access network. Having deployed the
first WIMAX Smart Grid network, Nokia
Siemens Networks has developed
features, solutions and methods to
assure that the stringent performance
requirements of Smart Grid are met.
Right Product: Nokia Siemens
Networks is a full end-to-end supplier,
providing one-stop shopping. The
solution is fully compliant with open
standards and optimized for Smart
Grid applications, so we can work with
our partners or with the utility providers
preferred suppliers. Nokia Siemens
Networks offers a rich set of smart
meter features that will permit a utility
to get the most from their investment.
Leasing means
faster time to market,lower capital costs,and better ROI
Canopy
Wireless
Backhaul
IP Core
WiMAX
ASN Gatew ay
Consumer
Devices
MetersWiMAX Access
PolicyNet
NMS
MIMO Beamforming
Base Controller Unit
SERVICES
IP Services
Smart Grid
VoIP
Presence
Location
PrepaidGaming
Mobile TV
Push to X
Hosted PDX
IP
MPLSMetro
Figure 7 End-to-end WiMAX Smart Grid Solution
PSTN
Internet
WiMAXs End-to-end Smart Grid Solution
Summary
The Smart Grid is emerging as one of
the fastest growing new businesses ofthe decade. WiMAX carriers have the
ideal access network technology for
the Smart Grid and can leverage their
network to capture a new, large
revenue stream. As the first WiMAX
system supplier to deploy a WiMAX
Smart Grid Access network, Nokia
Siemens Networks is the sole WIMAX
supplier to optimize its system offering
for the demands of Smart Grid
technology. Nokia Siemens Networks
provides the products, services and
know-how that WiMAXCommunications Service Providers
(CSPs) will need to make the most of
Smart Grid revenue opportunities.
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Figure 8 - NIST Smart Grid Architecture
6. Appendix: Smart Gridopen standards and architecture
Early Smart Grid systems were
proprietary. However, the power
industry understood the benefits of
establishing open standards and has
been driving the completion of
standards in both the U.S. and Europe.
The U.S. National Institute of
Standards and Technology (NIST)
recently released its Smart Grid
Reference Architecture (Figure 8)
along with recommendations for the
adoption of 77 existing and developing
standards from organizations including
ANSI, DNP, IEC, IEEE, ISO, NERC,
NIST, OpenADR, OpenHAN and
Zigbee. Several European groups are
also working on Smart Grid standards,
including: the European Industrial
Initiative on electricity grids under the
SET European Technology Platform
(ETP) Smart Grids, Open Meter 7
Group, and European Utilities Telecom
Council (EUTC).
The architectures and underlying
standards being crafted for Smart Grid
are IP-based and have much in
common with 4th generation mobile
network architectures. This makes
WIMAX and other 4th generation
wireless networks particularly well
suited for Smart Grid.
Utilities are leading the standards effort
by making standards compliance a
minimum requirement in the selection
of venders for their Smart Grid
projects. Leading Smart Grid suppliers
are adapting their products to meet the
U.S. and European reference
architectures and emerging standards.
It is generally anticipated that true
interoperability will be achieved in the
coming years. Until then,
interoperability is being tested at each
individual utility deploying a system.
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www.nokiasiemensnetworks.com
Nokia Siemens Networks
P.O. Box 1
FI-02022 NOKIA SIEMENS NETWORKS
Finland
Visiting address:
Karaportti 3, ESPOO, Finland
Switchboard +358 71 400 4000 (Finland)Switchboard +49 89 5159 01 (Germany)
Copyright 2011 Nokia Siemens Networks.All rights reserved.
Nokia is a registered trademark of Nokia Corporation,Siemens is a registered trademark of Siemens AG.The wave logo is a trademark of Nokia Siemens Networks Oy.Other company and product names mentioned in this documentmay be trademarks of their respective owners, and they arementioned for identification purposes only.
This publication is issued to provide information only and is notto form part of any order or contract. The products and servicesdescribed herein are subject to availability and change withoutnotice.
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