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With recent market changes placing new pressures upon the traditional power utility business model, utilities' roles are likely to change in a number of significant ways, and adapting to these changes will be a key to success in coming years, according to a recent white paper by Navigant Research.

Ten trends to watch, as outlined in the white paper, include the following:

1. Advanced metering infrastructure (AMI) supports distribution automation (DA)
Navigant says North American utilities are taking a step back and reassessing their investments following smart meter deployments spurred by the American Recovery and Reinvestment Act. Many utilities now see the communications network installed alongside their AMI system as a platform to be leveraged for DA applications, particularly in the low-voltage distribution network. The research firm reports that the use of AMI smart meter endpoints for DA applications is expected to grow from just 2% of endpoints in 2012 to 4% in 2014 and more than 15% in 2020, driven primarily by North America, Europe and Asia Pacific.

2. Net metering brouhaha escalates, with possible solutions emerging
If nothing else, Navigant expects a flurry of proposed formulas over the course of the year that are designed to deal more intelligently with the net metering issue. In the U.S., the problem is compounded by the state-level regulatory environment under which utilities work - that is, there may be multiple compensation schemes per state. In addition, utilities that have argued for changes to existing policies are maligned as waging a "war on solar," the research firm notes.

3. Smart grid information technology (IT) spending rises

Navigant reports that the market for utility IT systems is large and growing rapidly. Challenges in interoperability and integration are substantial, but the economic and regulatory pressures utilities now face will result in increased investment in new systems and more rapid upgrade cycles for existing systems over the next decade. The research firm projects the market for utility IT systems to grow at a nearly 10% compound annual growth rate (CAGR) between 2013 and 2022, from more than $8.5 billion to nearly $20 billion by 2022.

4. Utilities' business models shift
Navigant predicts scenarios under which utilities could adapt to changing market conditions. In one scenario, utilities would act as highly localized private grid operators that manage grid conditions and stability and profit from delivery of electricity along the distribution grid. The research firm says that utilities could also become electric services providers. These entities would manage sales of electric power that are bundled with distribution and energy efficiency services.

5. Distributed energy and microgrids begin to affect utilities
According to Navigant, the growth of distributed generation (DG) and microgrids has disrupted utilities' remaining profit-generating grid management assets. With environmental and technological drivers, more residences have deployed isolated generation resources. Similarly, recent years have seen an increase in commercial buildings and small communities that are engineered to be energy independent. Individual market drivers, such as growing investment in the DG market and technological advances, are likely to force utilities to adopt models that improve distributed energy management and support increased DG resources on the grid. Navigant adds that the models that prevail will be ones that can leverage these resources to lower overall fixed costs associated with centralized generation while maintaining high reliability on the grid.

6. Conservation voltage reduction (CVR) becomes a secret weapon in energy efficiency
CVR optimizes voltage levels to the lower range of American National Standards Institute-acceptable levels in order to continuously reduce energy consumption and demand during peaks when electricity prices are inflated, the research firm notes. Even if the voltage is only reduced slightly, the total energy savings can be substantial when measured across an entire distribution network. Navigant says CVR can benefit a utility and their customers substantially at a relatively low cost of implementation, and energizing the grid at lower voltages will result in lower energy consumption by all customer classes.

7. Hybrid high-voltage direct current (HVDC) breakers bring innovation and efficiency
The research firm reports that a hybrid HVDC breaker marries the speed and high breaking capacity of a large solid-state circuit breaker (main breaker) with the efficiency of a mechanical switch (ultra-fast disconnector) in series with a smaller solid-state switch (load commutation switch). In practice, Navigant says hybrid HVDC circuit breakers can dramatically reduce the number of converters necessary for multi-terminal HVDC applications. Navigant adds that converter stations represent a major cost element in HVDC systems, and thus, any reduction in converter requirements translates to substantial savings in the capital needed for HVDC systems.

8. Demand response (DR) outside North America will begin to grow
The vast majority of DR takes place in North America today, but activity in Asia Pacific and Europe will grow at a faster rate over the next several years, according to Navigant. The adoption of automated demand response (ADR) looks especially promising in Asia Pacific, which will most likely leapfrog directly to the more advanced ADR technologies in initial DR deployments. In Europe, governments are realizing the importance of DR to meet the European Union's energy efficiency and carbon emissions mandates and address the need to balance the grid to manage the integration of intermittent renewables, such as wind and solar power.

9. Smart meter market expands globally
For the next 10 years, Navigant reports that the new focus for smart metering will shift to Europe, where Great Britain and France are just starting major deployments that, combined, will amount to some 65 million devices. Japan will also be a new focus of smart meter rollouts, with Tokyo Electric Power Co. making plans to install 27 million smart meters. Deployments of smart meters will lead to a smart meter penetration rate surpassing 80% in North America by 2020. Similarly, in Europe, smart meter penetration is forecast to match that level by the end of the forecast period. Driven primarily by China, the forecast penetration rate in Asia Pacific will reach nearly 70% by 2022. Latin America and the Middle East and Africa will show significantly lower smart meter penetration rates through the forecast period.

10. Home energy management (HEM) market will see a steady uptick
Navigant says that during the next 10 years, the HEM market is likely to expand at a steady pace as new industry participants introduce innovative products. Utilities are likely to mimic what Oklahoma Gas & Electric, NV Energy, and Baltimore Gas and Electric have begun by offering HEM products or services linked with DR programs. The research firm expects global annual revenue attributed to HEM shipments to grow from $300.7 million in 2012 to $1.8 billion in 2022, with a CAGR of 19.5%. Revenue will peak in 2020 when the mandate to have HEM equipment installed along with smart meters in Great Britain ends, Navigant adds.

This article was adapted from Navigant Research's white paper, "Smart Utilities: 10 Trends to Watch in 2014 and Beyond." The full version is available here.

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