The digital utility: where IT and OT meet

In June, GE announced the next step in its broad digitization endeavor in the power grid, with the goal of securely connecting generating assets to broader power markets. GE’s ‘Digital Utility Suite’ is intended to eliminate the silos that often exist between the plant operators – living in an operating technology (OT) environment – and the power traders who inhabit an IT environment, where they must optimize and coordinate fleet behavior with trading activity based upon external signals emanating from the grid and power markets.

Creation of a more integrated and data-rich approach facilitates more intelligent and economically rational behavior across the spectrum. Plant operators with digitized facilities essentially have a dynamic MRI-type view into their assets, which lets them know the health of the plant, how hard to push it, and when it needs to shut down for maintenance. Traders have a better view of what each generating asset can do and how to position themselves to sell various products – such as frequency regulation (immediate grid balancing services), spinning reserve (the ability to ramp up and down within a few minutes lead time), and day-ahead or real-time energy into the power markets.

A rapidly emerging new world

In the old days (just five to ten years ago!), the need for this precise level of information existed, but it was not as critical as it is today. Back then, we didn’t have over 82,000 megawatts of wind and close to 45,000 MW of solar in the United States, with over 50% of new capacity added in 2016 being renewables. Nor did we have a European Union that added 86% of its capacity last year in the form of intermittent renewables.

Shutterstock – you’ve gotta get smarter if you want to survive

This trend is not likely to slow down anytime soon, as renewables become increasingly more cost-effective (some of the cheapest power contracts in the world now are for utility-scale wind and solar). There are some projections that with a step function in technology, unsubsidized wind energy in the U.S. could come in as cheaply as 2-3 cents/kilowatt-hour within five years. Some states already produce well over 30% of their energy from wind turbines, and those numbers are only going to rise. Solar will continue to increase market share as well.

This trend, combined with declining demand growth in some areas and associated low wholesale electricity prices, creates new challenges for generating plants. Among other things, power plants are being asked to increase their capabilities to offer grid balancing services, meaning they have to ramp up and down far more frequently than they were originally intended to do. And it’s not just the gas-fired fleet that needs to transition: other assets – including coal plants – must rethink their positions and operating regimes if they intend to survive.

Transforming an existing asset so that it can assume this new and more flexible role is not easy, but it’s virtually impossible if you don’t have access to critical data at the right times. Only when you know what’s going on in the market and what’s happening inside the plant can you address the near-term opportunities while positioning yourself for the longer-term.

Following GE’s June press release, I spoke with Ganesh Bell, GE’s Chief Digital Officer and CEO of the GE Power Digital Business, to determine what had changed since our previous conversation concerning digitization in March of this year.

The major development, Bell commented, is that,

We are now seeing real use cases and proof points of the IT/OT coming together. Every market has different dynamics, but at the macro level we are seeing a set of reasons why utilities are looking at the transformation agenda.

The global macro picture

Bell noted that at the macro level, even as demand in developed countries is leveling off, as many as 2.5 billion people will migrate to cities by 2050 – “the equivalent of creating a new London every month.” At the same time those billions of people will require electrification. Meanwhile, the entire grid model is rapidly being transformed.

The 100-year-old model of one-way electrons is now turning into a network. Customers are starting to look at the interaction of IT/OT and the value of a networked approach to creating new business models…Utilities are now deploying digital solutions to manage across infrastructure, substations, plants, grids, and whole networks,…