🌏 The bits and bytes of grid tech

(Bonus edition) Part III:  The software “middleware” layer for grid operators / utilities

John Tan
This is an exclusive “Sector Guide” from the Sightline Climate platform, where we cover in-depth climate tech sector landscapes and data. Want to go further? Request a demo for Sightline Climate, or reach out directly to [email protected] to learn more.

Here’s a special bonus to share our gratitude. Last week, we unscrewed the nuts and bolts of grid tech hardware, so this week we’re decoding the bits and bytes of grid tech software. Read last week’s post? Skip to the Market Map section to jump right back in. 

The grid serves as the underlying infrastructure for the climate transition — tethering us all via overhead and underground wire and fiber. For a 2050 net-zero future, we’ll need an electricity grid large enough that its untangled cables would be long enough to stretch all the way to the sun. To get there, the grid requires constant attention to balance the flow of electrons. Ensuring grid reliability, resilience, and security is a balancing act between assets, systems, and participants. As electricity demand rises to meet population growth and the electrification transition, so does the need to expand and strengthen the grid.

To quantify that growth requirement, the International Energy Agency (IEA) pegged the gap at 80 million kilometers of new power lines that will have to be built or upgraded globally by 2040. And power lines are just the rails — not to mention all of the accompanying hardware, software, and services that create a reliable, resilient, clean, and accessible grid.

If reaching net zero means electrifying everything, investment in grid tech will be crucial. Accordingly, this year we’ve seen an uptick in public and private interest. In the US, for example, the Department of Energy (DOE) announced $3.5B for grid upgrades as part of the Grid Resilience and Innovation Program (GRIP).

A physical and digital matchmaker

While the grid serves as the underlying infrastructure, the power markets keep the entire operation humming by performing two key functions. First, they use price signals to influence market behavior, just like other commodity markets. Second, they act as a matchmaker between electricity buyers and sellers in order to balance the flow of electrons in real time. 

This balance is reflected as two layers: 

Physical layer: The underlying infrastructure that allows electricity to flow from generation to end use. This is the equipment, systems, and structures including transmission lines, distribution lines, transformers, and substation equipment.

Digital layer: The data, analytics, and digital processes that allow for the pricing, management, and operation of the grid. In most cases, the electrons sold to you from a residential solar roof won’t be the same ones that you’ll receive. It’s a transaction in the digital layer that represents this movement.

Here, we’ll focus on the digital layer — and more specifically, grid software and services. We’ll walk you through the Sector Compass, how the market works, the key technologies and players, and what to take away.

Market Framework

A quick tour of the power value chain 

Market Framework: A quick tour

Laying out the market framework for grid tech software (Source: Sightline Climate). Access the full Market Framework in the Sightline Climate platform.

The grid follows a four-step value chain. Whereas the power markets followed a fairly linear operation in the past, a more digital, distributed, and decarbonized grid creates a more complex and sometimes circular set of flows. As demonstrated by the bi-directional arrows, power doesn’t necessarily have to flow from generation straight to end use

As residential, commercial, and industrial customers install distributed energy resources (DERs), or build virtual power plants (VPPs) or microgrids, they transition from being continuous power consumers to more flexible sources of power demand and, in some cases, even power generators themselves. But how do grid operators know how to work with this additional flexibility and generation and pull these capabilities into the grid? On the market framework diagram, this is highlighted by a Data arrow that feeds back into the Interconnection stage. This data exchange allows end-users with on-site flexible demand, generation, and storage capabilities to offer ancillary and grid flexibility services [read more about grid services in our power markets explainer]

Grids face challenges specific to each step in the value chain. 

Generation: Utilities, independent power producers (IPPs), and others generate electrons from fossil, nuclear and renewable sources.

  • Interconnection queues: Grid connections have not kept up with renewable project investment and construction. The backlogged interconnection queue is more than the grid’s existing capacity at the end of 2021. Why the hold up? Connecting new generation assets to the grid is a delicate process. Grid operators need to ensure the new asset doesn’t cause disturbances or outages, and that it is tuned to match the frequency, voltage, and phase of the grid. This takes time and modeling, and is a key factor in lengthening interconnection wait times.
  • Inertia synthesis and management: Remember Newton’s First Law of Motion, an object in motion stays in motion? Inertia is created by rotating generators (such as those from fossil turbine generators), and provides stored energy to keep the grid stable and going, even if generators are offline. With more renewable generation sources coming online, stabilizing the grid becomes more difficult. Solar is connected to the grid without any rotating masses and wind is not connected directly to the grid, which therefore means they both provide little to no inertia. 

Transmission: Power is sent from power plants over long-distance, high-voltage lines to substations, where the voltage is stepped-down to go through the distribution network.

  • Congestion: Transmission lines can become overloaded, resulting in power that cannot be delivered to end users. Overloading happens when transmission lines cannot cope with power demand and line capacity is reached.  
  • Losses: As electricity travels through wires, not all power makes it from point A to B. ~5% of electricity transmitted in transmission & distribution (T&D) in the US is lost, often as heat, and especially in aging transmission lines which can be well over 50 years. 
  • Physical threats: Risks caused by physical hazards such as vegetation growth threaten power transmission. Overgrown vegetation, severe weather, or other events can cause damage to transmission lines leading to outages and create a feedback loop for further devastations, including wildfires. 
  • Long permitting timelines: Building new transmission (and distribution) infrastructure is challenging, further complicated by NIMBYism and the difficulty of securing Right-of-Way (ROW) agreements over long distances. Not only does this require working with numerous local, state, and federal agencies, but it also means getting buy-in from all the stakeholders involved—from the utilities, to the regulators and landowners.

Distribution: Utilities move power from substations to end users across shorter distances at lower voltages.

  • Faults and outages: Equipment failures, caused by aging equipment or physical damage, are increasingly common and can lead to outages for consumers. 
  • Increased demand: Population growth and the electrification transition are driving more demand on the grid. Utilities now face added pressure to manage increased line congestion while also reducing outage times and handling equipment upgrades and installations.
  • Pollution risk: Switchgears, which are devices that isolate faults, have traditionally been insulated with Sulfur Hexafluoride (SF6). This greenhouse gas is 23,500X more potent than CO2e.  

End use: Residential, commercial, and industrial consumers use power for various applications.

  • Increased participation: End users are shifting from being passive consumers to active participants in the grid. Power from DERs, VPPs, and vehicles-to-grid (V2G) has meant more electrons flowing from the end-user back into the grid. This bi-directional flow has put added pressure on the grid, both to accommodate this additional power and to effectively manage the increased flexibility and load.

Market Map

A bird’s-eye view of grid software 

The grid is becoming more complex than ever. This complexity is characterized by the proliferation of physical assets like power lines, transformers, and substation equipment, the need to leverage the build-out of renewable capacity, and the call for a flexible grid to cope with increased participation.

Operators / utilities have long employed software and associated services to ensure control and visibility over power flows on the grid. And the software employed worked great when power flowed only one-way.  But legacy solutions like Supervisory Control and Data Acquisition (SCADA) and Wide Area Monitoring Systems (WAMS) are one-dimensional and fail to manage the complexity of today’s grid.

This is where next generation grid software and services come in. They help operators / utilities achieve greater control and visibility over the grid, by building situational awareness across all assets and systems. Think of these technologies and services as offering an operating system or “middleware” layer for operators / utilities to manage power flows, operations, and planning.   

Here, we’ll walk through some of these key technologies and who is pushing the state-of-the-art forward.

Market Map: Who's doing what

The power players in grid tech (Source: Sightline Climate). Access the full, dynamic, and interactive Market Map in the Sightline Climate platform

Grid Expansion 

Building new capacity (i.e. power lines and generation interconnections) is onerous. Permitting times are long and difficulties arise from managing NIMBYism, securing Right-of-Way (ROW) agreements, and working with multiple stakeholders. Operators / utilities historically have had limited visibility or assurance on whether new installations would succeed. But what if they could maximize their chances of success from the get-go? 

Grid expansion software offers visualization, simulation, and digital modeling tools for new grid project planning. This suite of tools offers a predictive intelligence layer, allowing for the design and validation of new grid installations without laying a single line or pole. 

With this visibility, operators / utilities can actively reduce risk for potential grid projects and carry out initial evaluations on costs and potential bottlenecks. Such software offers multiple teams (across operators, utilities, and EPCs) and stakeholders a chance to collaborate on grid expansion plans, breaking silos between teams and providing a unified platform on which to plan.      

  • Key innovators: encoord offers an interface that assists with new infrastructure planning that uses model-ready datasets. Neara provides predictive visibility for new grid infrastructure in the form of a 3D visualization platform. Pearl Street Technologies offers a power flow simulation platform which cuts down time on generation interconnection model building. 
  • Putting it into practice: National Grid has implemented encoord’s grid planning software that helps quantify tradeoffs between different planning decisions. Neara has partnered with Ausgrid to deploy their 3D visualization platform for distribution-level grid planning. Pearl Street Technologies worked with MISO and Ulteig to demonstrate their interconnection queue scenario model building process, resulting in time reductions from three weeks to thirty minutes. 

Inspection and Risk Mitigation

In the US, inspecting grid transmission and distribution lines to identify anomalies has always been a process carried out to meet state guidelines. Inspection intervals are set by Public Utility Commissions across the US and tend to be every 1-2 years. As a result of these yearly time gaps, risks in the form of faults and outages can never be fully mitigated. Because of that, resolving anomalies in assets and systems typically only happens exactly at the same time as identification.         

Inspection and Risk Mitigation software and services aim to mitigate these risks, by detecting anomalies in grid assets and systems before they cause faults, outages, and further damages. Through the combination of AI/ML, analytics, and data from monitoring systems (such as UAV / drones), Inspection and Risk Mitigation solutions provide utilities with a predictive intelligence layer. 

This layer not only removes the need to deploy human field crews for inspection reducing operating costs, but increases utilities’ situational awareness of the grid. They are no longer reliant on inspection results that occur annually or bi-annually, but have real-time inspection assessments happening as often as every minute.   

  • Key innovators: Noteworthy AI provides a service which automatically detects and geolocates distribution line poles to assess their condition. Buzz Solutions offers an AI-based visual processing platform that assesses asset anomalies, and can predict asset failures.  
  • Putting it into practice: Noteworthy AI works with several utility customers, including FirstEnergy, Alabama Power, and Exelo, actively deploying their distribution line anomaly detection service. Buzz Solutions has partnered up with POWER Engineers to help utilities better prioritize inspection cases and cut human field crew deployment costs.

Grid Asset Management

Most power grid assets are 50 to 70 years old. These aging assets contribute to losses in power transfer and are increasingly susceptible to faults and outages. What’s worse is that most of these assets haven’t been digitized, providing no visibility into real-time asset health and lifecycle status. 

Assets are either 1) replaced only when faults and outages occur or 2) replaced without knowledge of the underlying health status of the asset. Replacement or maintenance services are often only initiated when the grid goes down (which by then is too late 😬).  Knowing which assets and when to replace them is poorly understood.  

Grid asset management software and services aim to equip operators / utilities with real-time data and insights over grid assets. This enables operators / utilities to better plan and optimize asset replacement cycles. Since not all assets can be replaced at the same time, such software improves planning and orchestration. Grid asset management software forms a real-time, “middleware” interface that determines the health status of assets relative to one another so operators / utilities can better plan replacement cycles.    

  • Key innovators: Cosmo Tech offers asset lifecycle simulation and management tools to allow operators and utilities better understand replacement cycles. GE’s Asset Lifecycle Management (ALM) services combine data and advisory services to assist substation owners with asset maintenance and upgrades strategy.  
  • Putting it into practice: Cosmo Tech has partnered with TenneT to optimize maintenance and replacement policies for their grid assets through scenario modeling and digital twin simulations. GE optimized maintenance strategy for a Qatar-based utility, helping to reduce asset failure rates as well as extending asset life. 

Physical Incident Detection

The Northeast Blackout of 2003 and other blackouts caused by outages can be traced back to poor vegetation management. To remove the chance of these outages happening again, regulatory frameworks such as FERC’s FAC-003-4 Transmission Vegetation Management provide standards and requirements for utilities.  

However, meeting standards for tree trimming and clearing transmission lines free from vegetation has been a costly and labor-intensive process. It involves deploying human field crews to assess vegetation levels on-the-ground. 

Incident detection software and systems allow utilities better visibility on vegetation growth and broader climate risks so they can comply with regulation, and more importantly, reduce risk of outages and wildfires. Through satellite imagery, predictive analytics, and physical risk assessment, incident detection solutions offer real-time power grid monitoring. 

These capabilities give utilities in the control room visibility over potential threats ahead of time at the ground-level, without needing to take a single step in the field. Mapping out physical threats that may put the grid at risk provides a singular digital interface that all utility team members can view. It means field crews are only deployed when necessary and to the most critical of events, removing the guesswork.  

  • Key innovators: Overstory applies machine learning to satellite imagery to identify potential risks caused by vegetation. Rhizome offers climate risk analytics for utilities to help better manage grid resilience and planning  
  • Putting it into practice: Overstory provided their vegetation screening solution to EDP through their first utility contract. Rhizome has partnered with Seattle City Light to help them better understand climate risks at the distribution-level and inform adaptation plans.    

Advanced Distribution Management Systems (ADMS)

The grid is under pressure to deliver reliable electricity to end users. And this pressure is piling up specifically at the distribution level where utilities are facing unprecedented demand. Electrification, population growth, and increased DER participation complicates power flows, increases outage likelihoods, and increases customer interaction. Historically, these problems have been solved with one-dimensional solutions built to remediate a single problem. For example, faults are monitored through Fault location, isolation, and service restoration (FLISR) and outages are managed through Outage Management Systems (OMS). 

But what if utilities could solve these problems through a single solution, instead of navigating multiple interfaces? Advanced Distribution Management Systems (ADMS) glues together fault detection, outage response, and customer interaction to provide utilities with one interface to manage distribution-level grid problems. Think of ADMS as a swiss army knife providing greater control for utilities to manage faults, outages, and end use demand through a fully integrated system. Utilities no longer have to deal with multiple isolated solutions on their own (like FLISR and OMS) but just have to interface with one integrative layer in the form of ADMS. 

  • Key innovators: Volue’s ADMS solution supports real-time distribution-level operations that can run 24/7 without downtime. Survalent’s ADMS solution combines SCADA, OMS, and DMS into an integrated solution that runs on a graphical interface. 
  • Putting it into practice: Volue assisted Agder Energi Nett, the grid operator serving Southern Norway, with the transition from legacy SCADA systems to their ADMS solution. Survalent worked with Holy Cross Energy and NREL to demonstrate interactions between their ADMS solution and DERMS software to navigate load management. 

Topology Optimization

Meeting power demand is a delicate process and often has hiccups, especially when transmission lines get overloaded. Congestion prevents electricity from being delivered as  forecasted. This materializes in congestion costs which are passed on to end users and have been on the rise, jumping 56% in the US in 2022. 

Currently, operators alleviate congestion through power flow controls and switches. However, reconfiguring power flows through these hardware technologies takes time and is often reliant on human knowledge and experience. These calculations are manual and time-consuming. Topology Optimization software streamlines this process, remediating congestion through automated responses to congestion incidents.

Think of it as the car SatNav that searches for the most optimal route when there’s traffic. Instead of operators having to come up with reconfigurations or rerouting pathways manually, Topology Optimization software automates this process, analyzing, and evaluating possible ways to alleviate congestion. And giving operators a complete bird’s-eye view over what’s happening, when it’s happening at the transmission-level. 

  • Key innovators: NewGrid offers a topology optimization software that enables operators to reduce transmission congestion.  
  • Putting it into practice: NewGrid worked with PJM to identify and produce topology re-configurations typically within a minute. Results show 5 - 10% transfer capacity increase during highly congested periods and ability to reduce costs by up to 50%.    

Key Takeaways

As a market participant, you should remember…

  • Uptake takes time. Operators / utilities are often slow to test or procure new technologies that might jeopardize grid reliability or performance. Co-developing solutions with operators / utilities will help minimize this risk, as will robust onboarding and upskilling programs for using new software. 
  • Capex vs Opex model. The rate-based capex model of utilities allows for capitalized investments such as grid hardware to be captured in rate case increases charged back to consumers. Since utilities’ revenues are determined by the size of their rate base, this disincentivizes them to invest in opex-based SaaS (software-as-a-service) solutions that they cannot add to their rate base.     
  • Solve immediate and acute problems. Entry points into the grid software and services market are larger in scope for companies looking to solve short-term problems that operators / utilities are currently facing day-to-day. Operators / utilities are looking for solutions already being deployed or in demonstration with other operators / utilities.  
  • Build a “middleware” layer. Physical assets and equipment are characterized by different protocols and standards such as different substation interfaces and varying sensing equipment devices. Embedding interoperability will reduce adoption risk by grid participants and open up opportunities for other developers to build off this “middleware” layer.   
  • Location, location, location. Different standards, regulations, and procedures produce uncertainty for technology providers in the grid sector. Lean on regulators like FERC for the US, Ofgem for the UK, and CRE for France.

As the market matures, be on the lookout for… 

  • Real-time in no time. Reliance on historical and static data has characterized the grid up till now. Leveraging real-time data to solve problems like congestion and to inform inspection services, is increasingly forming the basis of most grid software solutions.   
  • Visualization is key. The grid is becoming more complex with multiple problems to solve, often at the same time. Setting up a single interface that allows operators / utilities a single pane of glass to solve problems could likely lead to a winning solution.    
  • Innovator-operator development partnerships. For earlier-stage grid technologies such as Topology Optimization software, watch out for partnerships between technology providers and operators / utilities co-building and co-testing software technologies. Companies with such a partnership should have an advantage as co-developing with operators / utilities allows for more buy-in from the start and a greater chance of success.
  • Genuine AI/ML innovation. Like other industries, grid software solutions are not immune to the influx in AI/ML applications. Demonstrable and proven improvements will increase chances of operator / utility uptake. 
  • Cross-industry software providers chiming in. Providers such as Palantir and C3 AI are applying their data tools to the grid sector. Their software solutions which serve corollary industries such as oil & gas or other utilities (gas, water), are often proven and success can be replicated in the power grid sector. 
  • Jack of all trades. Some companies are creating one-stop shops, offering software and service solutions across multiple areas in the grid value chain. These suites of tools minimize the need for operators / utilities to go elsewhere for other solutions.   

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