A vertically integrated utility is really a collection of semi-autonomous organizations operating in completely different ways—almost different industries. Generationlooks like a factory, with its industrial site, hardhats and heavy equipment. Transmission runs like a highway, with remote tall metal towers carrying electricity over long-distances, requiring regular maintenance. Distribution, similarly, is all about the local wires, poles, and substations, and keeping the system operational in the face of storms, trees, squirrels, and cars crashing into poles. Retail operations more closely resemble a typical office environment, focused on billing and revenue collection, with rows of customer service reps connected to computer screens and headsets, and office workers managing accounts and moving information. Each of these divisions is an essential part of a whole, but their individual tasks are so distinct that we use the word “silo” to describe how these divisions operate independently of each other, stacked together in vertical columns to comprise a whole. But silos are found, as well, in the enterprise operations of utilities, whether or not they are vertically integrated, as different departments operate semi-autonomously (back office-IT, customer service, metering, distribution operations, energy efficiency, etc.).
When it comes to silos, electric utilities are not that different from many other large enterprises that separate their tasks by function. But many other enterprises are well-along on the journey to integrate more completely as a result of the changes brought on by technological advances, and so it must be with electric utilities, as well.
In The Advanced Smart Grid, from the outset my co-author Andres Carvallo and I raised the organizational challenge that utilities will face as they begin to implement Smart Grid projects. Transitioning from vertical to horizontal orientation is fundamental to the Smart Grid transformation. Whether it is at the planning stage, designing and architecting a Smart Grid, or later, after smart meters have been deployed and the river of data has started to flow, utilities are recognizing the fundamental changes wrought from organizing around a communications network and IT infrastructure that touch all aspects of operations. In fact, a Smart Grid transformation is a transition to an integrated energy ecosystem, away from the analog world of relatively independent silos that operate largely in autonomous fashion, towards a far more integrated operational norm.
The emerging challenge of Smart Grid and distributed energy resources (DER) may be seen as an opportunity to address the silo issue head on, with a goal of transforming the utility to an integrated energy ecosystem. Smart Grid is now requiring that such traditional silo functions as metering, back office (IT), energy efficiency, distributed generation, and customer service begin to work together in ways they never had to before. Also, there remains a huge disconnect in many utilities/regions between wholesale and retail markets, which makes it difficult to realize the financial benefits of new innovations like demand response and energy efficiency. In some ways, we could say that these are silo’d operations, as well.
To begin to address all these silos, two key organizational values are paramount: transparency and accountability. By operating in the open, honestly sharing data and plans for change, the organization engenders the necessary trust to lead employees to accept fundamental change. And by operating according to a committed schedule of deadlines and milestones, with assigned responsibility and consequences for organizational impacts, both positive and negative, the utility will move steadily towards its goals.
Breaking down silos to create a horizontal energy ecosystem can be expected to encounter significant cultural opposition—this is how utilities have been organized for over three generations, after all—but such realignment is necessary to operate in the data-rich environment of a Smart Grid. Beyond new organizational values, other tools are available to help the utility in its transition away from silos. In our previous IssueAlert article, we wrote about the vital nature of a service oriented architecture or SOA, to enable more flexible and efficient operations in an increasingly complex environment. Creating a technology governance council, comprised of senior staff from each of the silos, provides oversight of the integration of technology and ensures continuity of organizational goals, promoting organizational buy-in. As the Smart Grid project progresses, a series of business process improvement (BPI) projects is necessary to align the utility around its emerging needs and capabilities. These projects are vital to lead the organization to a common view of its new challenges and the potential of a new orientation. A Program Management Office (PMO) staffed with certified project managers will provide another element of coordination and accountability, enabling the organization to assign resources according to priorities and budgetary constraints.
The Smart Grid is about embracing the changes that technology brings to improve the work environment, gain productivity, increase profitability, enhance efficiency, reduce the carbon footprint, and improve customer satisfaction. Addressing the necessary organizational change to transition away from vertical silos to a more horizontal, integrated environment is one of the first steps to success.
John Cooper, co-author of The Advanced Smart Grid, has recently joined the team at UtiliPoint and its sister company, Consonus, to further the goals and realize the vision he developed over the last 15 years as a smart grid pioneer and innovator, captured in this compelling and highly useful new book. John may be reached directly by e-mail at jcooper@utilipoint.com.
