Section 3: IBM Shared Value Model and Smart Grid in Developed Countries
Table 4-4. GIUNC Smart Grid Analytics and Value Creation Workshop Results
Low Medium High
Continued based asset management √
Power forecasting include renewable forecast
and dispatch opportunities for EV, PV and DG √ Responsive load optimization (supply &
demand optimization) √
Detect and minimize electricity fraud and theft √ Load capacity planning and forecasting
(including renewable) √
Use of social media (focused on east of
deployment √
Target new service offerings √
Customer segmentation/modeling for tariffs
proposals, consumer behavior and satisfaction √ System planning, modeling and simulation
Getting right engineering talent to support
smart grids √
Condition based maintenance using statistical
data (includes asset replacement) √ Power quality at end point (relation of macro to
micro) √
System to monitor a more complex distribution grid (centralized and decentralized
√monitoring, control and automation)
√
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Source: IBM GIUNC Analytics Value Creation Workshop (2011)
Storage value optimization √ Arbitrage and regulation √ Increase capacity with existing infrastructure √
Integrate maintainence history with real-time
data such as state information √
Predicting theft from AMI, consumption and
losses √
Prioritize outage management schedules √
Optimize crew to the right job √
Condition based asset management (risk
based prediction, asset effective lifecycles) √ Target customer service levels (profile for
internal efficiency and added services √ Power forecast to reduce excess purchase √
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Table 4-5. GIUNC Analytics and Value Creation in Comparison with Creating Shared Value Business Social Business Social Business Social Continued based asset
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Source: This research summarized information from IBM GIUNC Analytics Values Workshop (2011) and Michael E. Porter (2011)
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3-1. Redefine products and markets
From table 4-4, the GIUNC members have proposed a list of values which they have categorized by the likelihood of happening in the future. As we can see that the utilities within the coalition are confident about the development of the smart grid technologies would be able to lead them to better control the assets of their own. Once the smart grid is up the utilities would be able to act on the information gained to make clearer customer segmentation. By doing that, utilities would be able to target different segmentations with different electricity rates and tariffs. Energy saving programs could then be created to better enforce consumer participation through demand response. Renewable energy forecast would also contribute to where the energy will be coming in advance. This would also save the utilities money to over generate electricity.
These renewable energy sources would also try to share the load of transmission by sending electricity from households or business buildings to the local grid networks. As smart grid started to receive the attention of the world top key economies like U.S, China, Japan; the market could expect an increase in the investment on smart grid technologies and renewable energies.
The condition based management possible could also be applied in the future.
The condition of the physical assets would be able to gain through the transferred information from different points of the grid and then the information would then be analyzed by the asset experts to find out which of the current assets owned need to be either repair or replaced. This could save the utilities a great fortune as the assets are diagnosed on a frequent basis, potential risks that might contribute to business losses could be determined and fix before threatening events happen.
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It would be wise for business and political leaders to start using analytical tools to assist with their operational processes to see the next big leap in their financial performance. Much recent research recognized the perks companies and expectation to achieve higher financial performance by using analytical information systems is more than possible. Company that introduces information analytics can expect one-point- six times revenue growth, two times more EBIDTA growth and two-point-five times higher stock price appreciation. As for IBM, it has received awards for the recognition for its energy efficient data center from both European Union Code of Conduct for Data Centers and U.S Environmental Protection Agency (EPA) ENERGY STAR. IBM has become the benchmark company for the data centers. IBM’s achievements have helped to provide a good framework, criteria and standards for both EuCoC and EPA to put forward to encourage data centers operators and owners to become more energy efficient by reducing consumption in a cost-effective manner at the same time able to sustain their mission critical function. This is a good example of how the productivity is redefined. Most of the operations remained unaffected but it was able to reduce the overall energy consumption.
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Table 4-6. IBM’s Smart grid Solutions and Creating Shared Value Reconceiving Business Social Business Social Business Social INTELLIGENT UTILITY NETWORK SOLUTION
Source: This research summarized information from Michael E. Porter (2011) and IBM smart
grid solutions (n.d.)
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Generally, IBM’s solution relies on the developed smart grid infrastructure for their solutions to work. But that does not stop IBM from showing its great contribution to the smart grid. At the end of the day, IBM is a company that focuses on the information and communications. They have to rely on the hardware or infrastructure to operate. IBM is well aware of the complexity of development of smart grid. It has then enter into partnership with smart meter manufacturers like ITron and emeter, and other companies like General Electric and many more to form the strategic alliances to create complementary sources. Due to the fact that the solutions provided by IBM is to focus on the asset and process reengineering for the business, government and utilities. And the results have turned out to be positively. Pretty much just like what IBM has said about the benefits of their solutions. Users of these solutions have better control over the assets and the operations processes to eliminate wasteful practices and to make the energy more efficient by better identifying the flow and consumption. This would mean that the CSV model was reached by the IBM smart grid solutions from the business perspectives.
Like in the case of demonstration projects, consumers and office buildings have experienced reduction in the energy bill, more and more energy saving practices have emerged in the value chain and ultimately, it will save the carbon emission as a whole. This would also apply to other smart solutions to smart grid. By linking the renewable energy to supply electricity to the grid and also by connecting the grid to the EV cars will have improved the technologies in these aspects. Since IBM have also spend tremendous amount of investment on those areas mentioned and not just IBM but also many other companies. The industry is experiencing changes to how they view about electricity generation. Electricity generation can now be installed at various
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points if they have the right schemes to follow. Not only can they generate their own electricity to support the operations but they can also sell the electricity back to the grid. The energy management system like batteries have also seen improvement as IBM has worked with the best of the energy management providers and research institute to continue to improve the capacity of the batteries. As the capacity of the batteries increase they could be apply to the electrical vehicles as well as high electricity consumption industries to show them that it is possible for them to store energy for their own benefits with their own renewable energy generations to secure the supply of energy without having to worry much about the changing weather condition as well as the difference between night and day generation.
3-2.Redefine productivity in the Value Chain
The government must evaluate the importance of different technologies and their industry to make the best decision to overcome with all the technical problems that still yet to be solved. As for the industries, the issue would be how to better make their energy more efficient, they can always start with making the building greener. The business process reengineering sometimes might not pay off just to avoid the peak demand. This might be only possible for industries that can divide the process by modeling the process itself. But what they can do is to set operation targets with faster production speed and to decrease the lead time as well as increase the operation capacity of the existing machineries at the same time decreasing the energy consumption of the machineries. As for the utilities business process engineering would be focus on how they manage the call centers. As the grid is becoming more
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automated, more skilled workforce would have to be there to give more intellectual answers responding to the questions of the consumers. The billing process must also be audited with as little mistake as possible as everything is calculated electronically due to process automation. Sometimes the utilities might have forgotten the true cost reflected by a new system which they have not yet experienced and rushing too much about the idea without realizing what they are up against with. To truly understand whether smart grid will deliver CSV we have will have to be more thoughtful about the cost structure coming from different business processes at every single point of the value chain for every stakeholders involved.
3-3. Enable Cluster Development
Smart grid has to have the ability to link all the local grid networks together in order to complete the map. Most of the demonstration projects are initiated by the utilities and the selected households. This creates a situation that you have quite a large amount of dispersed demonstration project each acting independently if the grid is not able to be connected to one another. Studies have already shown that due to the specification of the hardware and software use, grids of different locations are facing difficulties to connect to one another.
Most of the utilities are limited to working with the households and business buildings that are regionally close to one another to save the cost of upgrade and to present business case that is often subjected to regional development.
Does allowing the development of different systems on the market a good way for national development of smart grid? It would depend on how much the technologies would be able to evolve for integration service. Cluster
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development is still hard to be reached as most of the market direction of smart grid is still mainly on the communications business that alone accounts for 70% of the market. And even if it does come, the situation becomes a very competitive market for companies to get that bid of the pie. Traditionally, the cluster would mean that different components are coming from manufacturers of the same area to save the cost. But in the cast of smart grid, you have so many technologies involved and some industries do not even exist in some countries so they are mainly using what is available on the market they are missing a player. Some markets like renewable energy would take a long time for the locals to reach consensus as it is high in cost and depends on the geographical condition of the country. Some markets are just yet at the beginning stage of development. So it’d be easier to look at the development of smart grid on a national level to define the cluster development. For those that are developing the renewable, cluster development could be found in the areas where renewable resources are richest. Cluster development would depend on the locations of the technology holders of the smart grid as they are not targeting markets of a single location but rather quite many and sometimes even across borders. Studies have also shown that most of the players in the communication market are multi-national enterprises. Clearly, we can see that there the market is controlled by those that are heavily equipped with matured technologies and abundant capitals. Despite the effort made from the government to provide more innovative policies for other smart grid markets to develop it will still take time and money for them to grow. Some markets have grown too big due to the fact that they have been in the business for years while other markets relatively in market value mainly composed of energy entrepreneurs. The question is whether these energy entrepreneurs would be
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able to get the contract to sustain their growth by government’s supervision as well as be interested by the utilities.
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