The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Utilities Get "Defense"-ive
How cutting-edge military technologies can help solve some of the industry’s most critical issues.
Whether it’s an aging workforce, the impact of competitive markets, or an outdated transmission system, today’s energy and utility organizations are facing a whole new set of challenges. What many people in the industry don’t realize is that the utility sector is not the first to face these kinds of issues.
The U.S. military is dealing with, or has dealt with, a strikingly similar set of problems in recent years. During the 1990s, the military realized that the information technology it had developed during the 1960s, ’70s, and ’80s would not be sufficient to prepare for the distributed battles they would need to fight in the future. It was using monolithic legacy systems with dated technology, closed operating systems, and proprietary codes, making it difficult to share critical information among different branches of the military.
Although the defense sector still is working through some of these issues, the good news for utility organizations is that military advances offer many lessons. In some cases, direct applications for defense technologies can help solve key utility challenges. Some of those technologies already are being used in several forward-thinking utility organizations, and some are being adapted for potential future use in solving nagging utility-industry problems.
Old Systems, New Problems
The transmission and distribution systems that deliver energy today are, in many cases, more than 50 years old. These systems and the business practices used to support them were designed to handle lower loads and fewer customers with less stringent economic, reliability, and power-quality constraints. Because of the differences in intended and actual operating conditions, utilities are operating much closer to critical design limits and have less margin for error than ever before.
In addition to this issue of outdated technology, increased complexity poses a challenge. Utilities operate much more intricate distributed systems that must be monitored, analyzed, reconfigured, and repaired reliably, cost effectively, and safely. This requires massive amounts of real-time operating data; consistent, accurate and current financial data; and accessible historical data. It also requires very large and often elaborate applications. The systems required to collect, analyze, store, retrieve, and share this data and information are complex, costly, and extremely important. Operators must be able to extract useful information from megabytes of data from real-time two-way communications with distributed assets, resources, and customers.
Additionally, efficiency, cost cutting, and revenue enhancement continue to be top operations priorities as utilities look for ways to meet investors’ expectations. In this changing environment, the development of adaptive organizations with flexible business processes, systems, and technologies is becoming a necessity. Systems and processes must be enhanced to respond to evolving business conditions and regulatory positions without costly down-time or large investment.
Today, closed systems with protocols and code written by vendors in proprietary languages hamper the ability of organizations to collect, share, and analyze data and create useful information. Beyond that, there are countless challenges