Intelligent networks-automated meters, remote sensors, mobile workforces, and internet-enabled SCADA-ca be a reality.

UNDER PRESSURE FROM four distinct sources-aging assets, growing peak demand, the emergence of new power generation technologies, and revenue constraints from regulation and theft-distribution companies around the world are seeking a new, smarter approach to operating their networks

This intelligent network is based on advanced network analytics, automated meter management, remote asset monitoring and control, mobile workforce management, and internet-enabled supervisory control and data acquisition (SCADA). Moreover, distribution companies operating intelligent networks will have a much stronger business case to present when they seek regulatory approval for asset investments. In each of these ways, the intelligent network is designed to enable electricity grids to deliver better service without sudden increases in price.

The Older Generation
In much of the electrified world, modern grids were built in the 1950s, 1960s and 1970s. Now, many of the assets critical to running these networks (such as power transformers and substations) are approaching the end of their expected life spans. Yet with regulators reluctant to approve capital-intensive infrastructure upgrades (due to the price rises they may trigger), distribution companies find themselves operating assets beyond those design limits.

The average accounting age of assets is declining, but this can be misleading: For accounting purposes, that age does not include the fully depreciated assets that remain in operation. While the average age of assets in the United States has declined from 24.1 years in 1999 to 15.8 years in 2003, many assets are fast approaching the end of their design life. A similar situation exists in the United Kingdom and Australia, where investment in distribution assets peaked in the late 1960s and early 1970s.

Keeping Up

Today, in almost every electricity market, peak demand is growing, creating a need to augment the capacity of aging networks. Peak demand for electricity generally grows as a function of gross domestic product. So unless GDP stagnation is a permanent fixture in a country's economy, that country's grid can be expected to face a near-continuous need to increase capacity.

Demand growth boosts the overall yearly capital costs of operating the network. In a regulatory climate where rate hikes are problematic at best, the options are clear: keep up with growth or risk letting service levels slide. If left unaddressed, growing demand can leave the electricity distribution company with significant problems.

Many Small Generators

The economics of the electricity industry show some signs of changing to favor smallscale power generation connected to the distribution system. Two trends push this shift. First, concern over emissions is sparking interest in new electricity generation technologies. Many governments are subsidizing environmentally friendly generation, including hydropower, solar, wind, fuel cell, tidal, and geothermal. Second, the quest for efficiency is driving onsite use of smallscale, gasfired generators. New technologies, such as fuel cells, will also be used in buildings to generate electricity and heat water.

When producing electricity with a greater number of smaller generators, it makes more economic sense to place the generator closer to the customer so that less power is lost over the network. As a result, myriad small power sources are being embedded in grids originally designed for large, centralized power production. This has important implications for the traditional distribution model. Distribution networks are designed to automatically adjust voltage control to meet requirements within a small tolerance. The presence of many small generators can wreak havoc with these controls. Moreover, while central transmission networks are designed to handle power flows with sufficient flexibility to prevent a failure, peripheral distribution networks-where distributed power generators are being added-can handle only the maximum flow required by customers. These networks are simply not built to handle the complex power-flow issues that come with distributed generation, such as sudden reverse flows when a generator is disconnected.

Consequently, distribution companies face a choice in how to handle the complexities: either passively, by upgrading wires and other components to handle the maximum flow from each generator, or actively, by building in sensors and switches to monitor and control the output of generators, avoid bottlenecks, keep fault currents within safe levels, and keep voltages within statutory limits. In addition, the growth of distributed generation will increasingly require changes to metering and commercial arrangements.

Revenue Pressures

Added to this, revenue pressures from regulation and theft are constraining distribution companies' ability to invest in new infrastructure.

Despite key differences in regulatory regimes globally, in most markets changes in network pricing and rates of return will continue to require regulatory clearance. Around the world, regulators and ratemakers often are reluctant to authorize investment in distribution assets. Regulators must protect the interests of customers by ensuring a continuous, high-quality supply of electricity; but they also seek to avoid the political ramifications of rate hikes. This combination of motives gives officials an acute cost/benefit sensitivity. In this climate, distribution companies must argue compellingly that the money they propose for renewing the network is money well invested.