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1 Electricity Forum Training Institute UPGRADE YOUR SKILLS See our upcoming course schedules California Courses Page 32 Canadian Courses Page 38 DIGITAL MAGAZINE 2015 YEAR IN REVIEW Volume 28, No. 6 Subscribe To Our Print YEAR IN REVIEWPage 10

2 2015 YEAR IN REVIEW 2015 YEAR IN REVIEW Looking back and moving forward BY JOHN OLANDER, Burns & McDonnell A massive transformation of the utility industry is well underway. A number of factors continue to drive this change concurrently with the ever-growing necessity to upgrade and improve resilience and flexibility of North America s electrical grid. In 2015 and years prior, electric utilities operated under a goal of achieving 100-percent service reliability. In the current era of constant connectivity, customers demand reliable and sustainable power. Sustained substantial investment is necessary if utilities and system operators are to continue meeting historical service mandates. Additionally, electric utilities require investments to integrate new renewable and distributed generation power sources as well as new technologies to enhance reliable operations. A smooth transition into the grid of the future must be achieved within the context of the legacy grid that has served North America safely, reliably and affordably for so many decades. This year, electric utilities faced and continue to face a number of challenges. Electricity Today Magazine s 2015 Year in Review highlights seven of these challenges that the power delivery industry must face and address if the North American power grid is to meet increasing standards that are intended to support continual advances in quality of life. Burns & McDonnell a consulting firm, provides helpful recommendations for electric utilities and system operators in addressing these seven challenges. 1. PHYSICAL SECURITY North American electric utilities have long recognized the necessity to protect the security of critical assets, but the urgency YEAR IN REVIEW level is increasing dramatically. According to the Federal Energy Regulatory Commission (FERC), the U.S. electrical grid regulator, physical attacks on critical parts of the power infrastructure have continued since a dramatic attack in April 2013 by a team of stillunknown snipers at PG&E s Metcalf substation. Since then, no attacks have caused a comparable amount of damage; however, utilities and regulators must understand and address threats to substation security. According to a recent review of FERC documents by the Gannett news organization, 300 attacks with no convictions have occurred on electrical infrastructure since North America s power industry is responding accordingly. Dominion Virginia Power, for example, will invest $300 to $500 million over the next five to 10 years in a comprehensive program to create multiple levels of security for high-voltage substations and to further strengthen protection for critical equipment. The program, well underway, is first addressing the highest-risk stations. Utilities and system operators must implement substation security measures as part of their overall security strategies. In formal reviews with Burns & McDonnell clients, we recommend a least cost approach to address critically exposed assets. This move encompasses planning, engineering considerations and effects on permits, real estate, and the public. Planning begins with priority ranking of substations and other assets in terms of importance to continued operation of the grid and critical customers served. Generally, regulatory agencies are supportive of security strategies that are flexible enough to rapidly escalate or de-escalate in response to threat scenarios affecting substations or other critical assets. In all cases, we recommend a security strategy that revolves FREE Subscription:

3 CYBERSECURITY around the philosophy of deter/detect/delay/respond. For example, electric utilities can take a number of steps that will deter threats via signage, lighting, or other physical design elements. Tools to enable improved detection include lighting, motion detectors, cameras, and other technologies that enable a fast response to threats. Delay tactics often include measures such as anti-ram devices, hardened fences, walls, or secondary fencing that increase the amount of time necessary for attackers to gain access. In addition, utilities must have a response plan coordinated with local authorities and operations teams should an event occur. 2. CYBERSECURITY As utilities install new technologies, internet-connected devices, and smart networks into their grid control centers, vulnerability to outside hackers increases exponentially. Due to continuing advances in both technology and threats, the North American Electric Reliability Corporation (NERC), a non-profit organization that defines and enforces reliability standards for the bulk power grid, has already revised its Critical Infrastructure Protection (CIP) standards, issued just a few years ago, on multiple occasions. The CIP standards outline security measures that help increase protection for North America s power grid. In a 2015 report entitled The Global State of Information Security, released by the International Data Group, Inc., the average number of detected cyber incidents within the power sector grew six-fold in 2014 and was, by far, the highest reported by any industry. Utilities must understand that a currently compliant cybersecurity program may not be secure from increased emerging threats. Therefore, we recommend that electric utilities move beyond meeting the base NERC requirements with a program that defends against multiple sophisticated cyberattack scenarios. No current system is 100-percent secure from attacks, which is why we recommend a complex and multi-layered Defense in Depth approach, which recognizes that physical and cybersecurity are closely connected and part of the same process. The technologies used to execute cybersecurity strategies are growing more sophisticated. Intrusion-detection systems that formerly notified users when an intruder had entered the system now check continuously for anomalies in activity. If a hacker breaches one level successfully, other tools work immediately to contain and repair the damage, while preventing further penetration into the system. Other security methods can thwart attacks, too: more firewalls to protect operating systems, more robust networks, more sophisticated and data-driven alert and monitoring systems, as well as more advanced algorithms to encrypt data. The threats from cyber-attacks are a reality and affect nearly every person and business regardless of industry. A utility s task is to reduce the impact on customers by taking steps to stop threats from becoming reality. FREE Subscription: YEAR IN REVIEW 11

4 RENEWABLES In November 2015, the North American Reliability Corporation (NERC) hosted GridEx III, an industrywide power grid program. These simulated exercises were designed to provide electric utilities with an opportunity to demonstrate how they would respond to coordinated cyber- and physical security threats and incidents, strengthen their crisis communications relationships, and provide input for lessons learned. Objectives included: - Exercise crisis response and recovery - Improve communications - Identify lessons learned - Engage senior leadership The GridEx Report, highlighting event happenings, will be available in early Source: North American Reliability Corporation (NERC) 3. INTEGRATING RENEWABLES Renewable energy sources ranging from residential rooftop and community-based solar arrays, to microgrids and utility-scale wind farms provide increasing challenges to grid operators. Much renewable generation comes from intermittent sources including wind and solar, and the necessity for load-following quickstart generation from reciprocating engines and other technologies is growing rapidly. As a partial solution, the power industry is experiencing a rising demand for energy storage technologies. In late 2014, Southern California Edison announced that it has signed contracts for 2,221 megawatts of power from renewable and conventional sources, which include 261 MW of grid-connected energy storage. Storage can act either as a load or as distributed generation on the grid. This fact leads to a number of operational considerations. Evaluations and studies are necessary to determine the effect on voltage profiles as well as protection and control systems. Engineers perform calculations to determine necessary changes to system control and protective equipment. Furthermore, these calculations determine the effect that higher duty fault levels will have on equipment and whether system equipment has exceeded its operating capabilities. While increasing the amount of storage on the grid will be helpful, operational issues will be a challenge. Systems operators will need to balance reliability, economics, emissions, and even politics as they determine which resources to dispatch or curtail in response to varying load and generation conditions especially with increases in renewables that are more intermittent in nature. In order to address these issues, system operators must consider both technical and policy solutions. Both wind and solar power have emerged as leading utility-scale renewable power resources. The speed to market is relatively quick and locations of these resources tend to be remote from load. Therefore, the availability of transmission capacity connecting these resources with load centers has proven to be an obstacle. Typical large transmission projects require six to eight years for completion, which is often too long when compared to the development cycle for renewable generation. This length of time creates difficulties when financing projects. Policy makers will need to address these issues by committing to transmission projects in renewable zones if they wish to integrate additional renewable generation YEAR IN REVIEW FREE Subscription:

5 PLANT RETIREMENTS assets is the most prudent step to take due to the speed to market, 4. ACCOMMODATING PLANT fuel abundance, and relatively low emissions of natural gas. Many transmission projects now under way, or in planning RETIREMENTS stages, are in response to relocations of the baseload power fleet At Burns & McDonnell, we have witnessed activity around new gasfired generation projects, both to replace retiring aging coal and utilities must replace gigawatts of coal-fired power exiting the prompted by coal plant retirements. It is an industry reality that nuclear facilities and to support targeted load growth. Although power grid with other forms of generation. Currently, gas-fired concentrating on one energy source provides exposure to potential power is a safe go-to replacement; however, no single fuel or disruptions in fuel supply and price volatility, many utilities have energy resource is a panacea. We remain convinced that future concluded that increasing their percentage of gas-fired generating grid reliability will continue to require diverse power resources. In August 2015, San Diego Gas & Electric (SDG&E) hit a major milestone for renewable energy delivery in its service territory. The utility produced a new record of 1,042 megawatts of renewable generation on its power grid. The 1,042 MW figure does not include the energy produced by the 61,000 of the utility s rooftop solar customers. Source: San Diego Gas & Electric (SDG&E) FREE Subscription: YEAR IN REVIEW 13

6 INFRASTRUCTURE 5. STORM HARDENING OF INFRASTRUCTURE Periodic hurricanes dating back to Hurricane Andrew in 1992 have sparked waves of storm-related infrastructure investments, but Superstorm Sandy was a serious wake-up call. Since Sandy hit the East Coast in October 2012, the U.S. federal government investigated and prepared a report that estimates that power outages caused by severe weather costs the American economy between $25 and $70 billion annually. The report included tornadoes, ice storms, and wildfires in addition to hurricanes. With the economic losses that occur from storm-related outages, few disagree with the need to improve protection of critical assets. Storm hardening fixes sound simple; however, the actual engineering and construction is quite complex. Raising a substation or control station to an elevation that positions it above projected storm surges in coastal areas is a monumental undertaking. Construction companies or electrical engineers cannot simply stretch buried cables and conduit or equipment foundations even if the facility requires an elevation of only five to six feet. In many cases, storm hardening overhead facilities means rebuilding much of the facility along with rerouting miles of control cables. In the densely populated East Coast, the only realistic option for storm hardening is to continue operations on existing sites while a complete rebuild is taking place. This process includes both raising equipment and structure levels and installing larger foundations to support additional height and weight as well as protecting new systems against potential flood-caused erosion. Public Service Electric & Gas Company (PSE&G) has launched a $1.2 billion program to raise and relocate switching and substations in potential flood zones, replace and modernize 250 miles of gas mains in flood areas and invest in circuit redundancy to reduce outages when one part of the system is damaged. In addition, PSE&G will invest in a range of advanced technology systems to monitor systems more efficiently and to increase grid capacity to quickly deploy repair teams YEAR IN REVIEW FREE Subscription:

7 6. AGING INFRASTRUCTURE REPLACEMENT Much of the current and future massive build out of the transmission and distribution infrastructure is simply because transmission lines, substations, switchgear, transformers, and other equipment have reached or exceeded normal design life. North America s power grid has evolved over time with substantial changes starting in the 1920s, when the United States power grid first became an interconnected entity. Subsequently, utilities and regulators added substantial amounts of generation and transmission to the grid in the 1970s due to aggressive load growth projections. Much of the construction for the electrical infrastructure occurred during this time and has now reached the end of its useful life. FREE Subscription: YEAR IN REVIEW 15

8 TELECOMMUNICATIONS As electric utilities replace their aging transmission and distribution assets, they have the opportunity to consider modern technologies that can improve energy efficiency, increase reliability, and provide the ability to monitor and control the system on a real-time basis. Similar to the challenges of storm hardening, utilities must accomplish this feat while keeping the system fully operational at all times. 7. TELECOMMUNICATIONS ENHANCEMENTS & GRID AUTOMATION While the power grid has been interconnected with communications systems for decades, the communications industry is undergoing some revolutionary changes. People once used phones to simply speak to each other, now the youngest generation finds it strange to use a phone strictly as a talking device. Instead, the younger generation has learned to use phones as small supercomputers. With this expansion of communications capabilities, grid control centers have moved along a similar path. Now, with systems automated to detect and instantaneously correct faults and voltage sags, the power grid requires enormous new capacity in wireless and digital communications. With the prospect of thousands of distributed generation points coming online, the only way to establish effective controls is through highly sophisticated telecommunications and computer networks. Building this communications backbone requires investment in a number of advanced technologies that can handle all the data traffic necessary to instantaneously correct problems before they cause service outages. Advanced distribution management systems (ADMS) are a near certainty for utilities as the business of managing multiple distributed generation sources, microgrids, utility-scale renewables, and energy storage become a reality. ADMS will require that utilities invest in advanced monitoring technologies that enable near real-time operational insight with automated responses that drastically reduce impacts from human error and lag time YEAR IN REVIEW FREE Subscription:

9 2016: THE YEAR AHEAD 2016: THE YEAR AHEAD Today s electric utility industry is facing many challenges and 2016 will be a year in which changes transforming the power industry continue to accelerate. Security threats will continue to emerge, but quickly evolving technologies will provide many necessary tools to meet them. The power industry will continue to spend billions of dollars to rebuild its aging infrastructure that responds to new sources of renewable and conventional generation. All the aforementioned changes will occur in an era of no load growth and unrelenting pressures from customers and regulators to maintain efficient rates and historical levels of service reliability. Despite this unprecedented complexity, the power industry remains confident about its future. Burns & McDonnell believes that a combination of progressive regulation and competitive market forces will provide the true answers. ET In March 2015, Hydro One announced the completion of more than $157 million in upgrades through ten transmission station projects across Toronto and surrounding areas in 2014 to improve reliability and replace aging infrastructure. The Ontario utility plans to complete over $688 million in additional improvement and replacement work between 2015 and Source: Hydro One FREE Subscription: YEAR IN REVIEW 17