WMAX-060 Realizing Smart Grid Revenues White Paper_bc3

7/30/2019 WMAX-060 Realizing Smart Grid Revenues White Paper_bc3

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Realizing Smart Grid revenuesUsing WiMAX to fulfill

the M2M promise

White Paper


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2 Realizing Smart Grid Revenues

Contents

03 Executive summary

04 1. What is a Smart Gridnetwork?

05 2. The Smart Grid market

05 2.1 The Market Segments

05 2.2 The Potential for Growth

06 3. Access technology

choice is critical

06 3.1 Access network and device

pair options

07 3.2 Feature set considerations

07 3.3 The WiMAX ARPU

advantage09 4. Business model

build or lease

10 5. Nokia Siemens Networks

Smart Grid solution

WiMAX CSPs

10 5.1 Why

Nokia Siemens Networks

10 5.2 Summary

11 6. Appendix: Smart Grid

open standards andarchitecture

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3Realizing Smart Grid Revenues 3

Executive summary

Machine-to-machine (M2M)

communication is becoming a

potentially very attractive revenue

stream for telecom carriers. One of the

first and most promising M2M

applications is Smart Grid, a

comprehensive vision for improving the

reliability, efficiency and security of the

power system.

The grid becomes smart when the

conventional electric grid is augmentedwith telecommunications infrastructure,

data management, automation and

control technologies. Many of the

elements of a Smart Grid

implementation are already available,

including smart meters, automated

monitoring systems and power

management systems. What has

been needed is a communication

technology that can make the Smart

Grid not only possible, but profitable.

WiMAX is now emerging as that

technology. Factors that are

encouraging many leading utilities to

plan Smart Grid deployments include:

Increased focus on energyefciencyandzeroemissionpower

production

Stress on the electric grid due to

growing power demand and aging

infrastructure

Dramatically lower cost of Smart

Grid infrastructure using wireless

broadband

This paper provides a general

introduction to the Smart Grid market,

a description of the business

case, and a blueprint that WiMAX

carriers can use to capture their share

of the new ARPU that M2M will begin

to generate in the very near future.


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1. What is a Smart Grid network?

More and more, the machines we use

every day are becoming automated

and intelligent. Smart systems such as

manufacturing robotics, automated

inventory controls and power

management systems have long been

among industrys tools, but they

are now entering our households, as

well. We have dishwashers that start

themselves when energy costs are

lowest, refrigerators that are aware of

the products stored on their shelves,

and entertainment systems that can be

programmed over the IP backbone

from anywhere.

In fact, potentially smart machines

already outnumber human

communicators. The European

Telecommunications Standards

Institute (ETSI) estimates there are50-70 billion connectable machines

in the world, compared to about 7

billion people and while the majority

of people are already connected to

one or more communication networks,

only about 1% of the machines are

connected. For telecom carriers,

that makes machine-to-machine

(M2M) communication a potentially

very attractive revenue stream.

Thanks to growing global energy

demand and a number of government-

backed initiatives, Smart Grid

is likely to be the first fully realized

M2M application. In its most basic

form, Smart Grid can be thought of

as a parallel power and

communications network, as

illustrated in Figure 1. The

communication network

provides a means for all major

elements of the electric grid to

communicate with one another in real

time, enabling many energy and cost-

saving features not possible with a

standard, non-smart electric grid.

An electric grid with smart capability

allows power producers, distributors

and users to maintain a near

real-time awareness of one anothersoperating needs and capabilities. With

this awareness, the Smart Grid

can produce, distribute and consume

power in the most intelligent and

efficient manner.

Smart Grid enablesmany energy andcost-saving featuresnot possible withtodays electric grid

4

Smart Grid = Utility + Communications

Electric Grid

Communications Network

Figure 1: Smart Grid Consists of Parallel Communications and Utility Networks

With a Smart Grid system,

everyone benefits:

Energy users can be provided real-

time information on energy rates

by time of day, permitting them the

opportunity to use power when it is

available at a lower cost.

Energy users and producers

can add automation to the grid,

optimizingtheefcienttransport

of power.

Utilities can have immediate

information about the exact scope

and nature of outages, enabling

them to respond more quickly

andefciently.


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5Realizing Smart Grid Revenues

2. The Smart Grid market

The market segments

Just as energy users break logically

into two primary segments, commercial

and residential, so too does the Smart

Grid market. Industrial and large

commercial power users typically

represent just 12% of a utilitys

customer base, but consume

about two-thirds of the power

produced. Massive power usage at a

discrete service location makes

an excellent business case for any

technology that can help monitor and

optimize that usage, so Smart

Grid technology has been in use in

commercial applications for decades.

Among residential users, however,

88% of the customer base consumes

about one-third of the power

generated. The incremental expense of

connecting so many energy users to a

common communication network has

been a serious hindrance to Smart

Grid deployment for this segment.

That situation has changed

dramatically of late, thanks to recent

advances in digital technology and

low-cost WiMAX wireless networks.

The business case for residential

Smart Grid is now strong, as willbe demonstrated as we explore further.

The potential for growth

Several Smart Grid global hot spots

are moving forward with deployments

at a rapid pace:

The Australian government has

committed up to $100 million to

develop a demonstration project

called Smart Grid, Smart City. This

initiative, which will commence in

July 2010 and continue until June

2013, demonstrates Australias

position at the forefront of global

efforts to use energy more

efciently,ensurenetworkreliability

and combat climate change.

SP AusNet recently announced a

comprehensive plan to deploy a

WiMAX Smart Grid network. All

of their customers will have smart

meters advanced meters that can

identify consumption in detail and

communicate back to the local utility

for monitoring and billing purposes

by 2013.

Europe is expected to deploy 145

million smart meters by 2020.

European deployments are being

driven by the EUs Smart Grid 2020

Directive. It calls for 20% carbon

emission reduction, 20% energy

efciencyuse,and20%renewable

by 2020.

The US Department of Energy

recently awarded $4.5 billion in

Smart Grid stimulus funds. The

State of California has published

aggressiveefciencyandCO2

reduction regulations and mandated

the deployment of smart meters.

As a result, California utilities have

projects underway to deploy millions

of smart meters. Various other

state mandates have motivated

US utilities to launch 31 projects

deploying a total of 81 million

smart meters.

China is also moving rapidly,

concentrating on distribution

automation to reduce grid loss. In

thecurrentve-yearplan,allmajor

generators will have Smart Grid

measurement sensors by 2013.

In all, utilities are expected to invest up

to $240 billion to upgrade over 2 billion

utility meters worldwide (see Figure 1).

Each of those 2 billion devices willneed to be paired with an access

network to enable Smart Grid

functionality. The question then

becomes, which network makes the

most sense?1400

1200

1000

800

600

400

200

0Electric Gas Water

NumberofMeters(millions)

Source: Robert W. Baird and C o., January 2010

10 30 30Automated 1

11 65 370 945Unautomated

Global Utility MetersOver 2 billion unautomated meters worldwide

Utilities will investup to $240 billion

on Smart Griddeployments

5

Figure 2 Global Utility Meters


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3. Access technology choice is critical

The choice of access networks canmake or break a Smart Grid

deployment, since the consequences

of selecting an inappropriate access

network and device technology can be

staggering.

For example, consider a utility with

300,000 Smart Grid customers. The

network would consist of 300,000

residential devices, perhaps 200 to

1,000 access nodes and one or two

core networks. One can reasonablyreplace components in the core if the

first choice in design or products is

ultimately not selected. However,

replacement of equipment in the

access network or customer premises

is nearly unthinkable. The choice of

access network and associated smart

meters should be subject to intense

analysis in order to avoid Technology

Regret.

Access network and device

pair options

The access network and devices must

be analyzed as a mated pair. This is

essential because they must

speak a common language (e.g.,

protocol) and very few access

networks and devices are multi-lingual.

For example, WiMAX devices and

access networks speak to one another

over the 802.16e wireless protocol

using equipment in accordance withthe WiMAX specification. Likewise, a

proprietary 900 MHz access network

will only communicate with a 900 MHz

device manufactured by the same

manufacturer as the access network.

Core NetworkandApplications Access Network Residential Devices

CAPEX Cost:

OPEX Cost:

15%

20%

35%

50%

50%

50%

Source: Motorola Internal Study

e.g. WiMAX, 2G & 3G Cellular,Proprietary, Mesh, Others

e.g, BPL, PLC, DLC, DSL,ADSL, HFC, Others

Smart Grid CAPEX and OPEX

Choosing the rightaccess technologywill preventTechnology Regret

The utility faces the challenge ofdetermining which access network/

device pair (i.e., which technology)

is best suited to provide a cost-effective

and reliable communications network

for Smart Grid. There are three basic

forms of access network/device

technologies in the market.

1. Wireless Networks

WiMAX, cellular (2G and 3G) and

proprietary (e.g., 900 MHz)

Wireless networks have the lowestbuild-out costs. Typical installations

range from$120 - $2501 per

customer depending on density of

customers covered. Furthermore,

many regions already have several

networks in place and capacity can

be leased from a wireless carrier at

a low cost. Typical lease costs can

be as low as $0.50 3.00 per

subscriber for large volume, long

term deals.

2. Wired CommunicationNetworks Cable, Digital Subscriber

Line (DSL), Ethernet

Wired communication network build

costs vary from $500 - $2,000 per

customer depending on density of

customers covered. As such, they

are not typically economically viable

for Smart Grid. However, they can

still be considered because they can

often be leased from wireline

communications carriers where

they exist.

3. Wired Power LineCommunications Broadband

over Power Line (BPL), Data

Communications Link (DCL)

Wired power line communications

networks use a portion of the electric

network for data transport. They

have proved viable in a small

number of cases where the electric

grid design permits hundreds of

homes to be served by a single

transformer. This configuration is

uncommon and these deploymentshave typically proved to be cost

effective only in portions of Europe.

On the basis of cost and availability,

then, wireless networks provide a clear

benefit.

6

Figure 3: Smart Grid CAPEX and OPEX

1 All figures in this section are Nokia SiemensNetworks internal calculations based on actualcustomer deployments


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WiMAX is typicallythe optimaltechnology forSmart Grid

The WiMAX ARPU Advantage

For a wireless carrier, WiMAX offers onefinal advantage the rich revenueopportunity afforded by M2Mcommunication over a WiMAXinfrastructure.

A WiMAX base station not only provides alow cost last mile infrastructure, it is alsohighly scalable, able to support from 450to 3,000 subscribers. For high bandwidthusage, a typical load would likely averageabout 500 users, each generating anARPU of about $30/month. So one basestation could generate revenues averagingabout $15,000/month.

Now consider that same base station inuse in a Smart Grid. Because machine-to-machine communications, such as regularmonitoring of smart meters, are focused,predictable and can be managed withouthuman intervention, the communicationload can be optimized to take advantage ofWiMAXs tremendous capacity.

So a single base station can easily support25,000 smart meters. Even though M2MARPUs are much smaller ranging from$.50 to $3.00 the greater volume ofsubscribers served can yield monthlyrevenues between $12,500 to $75,000 ona single base station. The case for WiMAXas the Smart Grid access technology ofchoice is becoming very clear.

Feature set considerations

When building a Smart Grid, careful

consideration must also be given to thefeatures enabled by a given access

technology in order to assure that it

meets the minimum requirements for a

successful service. Figure 4 compares

the features for the access network

alternatives considered to be most

competitive.

As can be seen in Figure 4, WiMAX

offers a number of advantages over

other technologies for Smart Grid

support. It offers the best value to the

utility by providing the greatest feature/functionality at the lowest cost. The

advantages over Programmable

Logic Controllers (PLC), Data Link

Control (DLC) and Mesh networks are

significant and compelling.

Nokia Siemens Networks has outfitted

cellular wireless networks with features

to support Smart Gridlike applications

for several years and they work well for

a limited feature set. To support full

featured Smart Grid deployment and to

future-proof ones access networkinvestment, the speed, performance

and features inherent to 4G technology

are needed. Taken as a whole, WiMAX

is typically the optimal technology for

Smart Grid.

Critical Attribute PLC DLC Mesh WiMAX Cellular

High Bandwidth

Suitability for High

Customer Densities

Suitability for Low

Customer Densities

Security

Standards Based

Scalability

Large Supplier Ecosystem

Reliability

Option to Wholesale/Lease

System Availability

Cost

Source: Motorola Internal Study

Comparing Access TechnologiesWiMAX provides the greatest feature set and functionality at the lowest cost

Figure 4 Access Network Technology Comparison

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There are morethan 500 WiMAXnetwork deploymentsworldwide

WiMAX Forum,March 2010

Best Feature Set

Full QoS regime assures utility

trafcisgivenproperpriority

Strong security features safeguard

grid and customer information

Licensed spectrum assures

interference will not affect networkperformance

Private or Virtual Private Network

supportisolatesutilitytrafcfrom

that of the public carrier

All-IP Architecture assures feature

transparency

Carrier-grade, high availability

network assures system availability

Scalable for very high and very lowdevice densities

New technology just beginning its

service life (i.e., will not be replaced

in the coming decade as is the case

for 2G/3G)

The strengths and weaknesses of the

three strongest alternatives in the

market 900 MHz proprietary

systems, 2G/3G cellular systems andWiMAX are summarized in Figure 5

below. Again, WiMAX clearly has an

impressive set of compelling

advantages that make it worth serious

consideration by any utility planning a

Smart Grid deployment:

IP-based technology

Much higher capacity and lower

latency than 2G and 3G

Genuine standards-basedtechnology

Full ecosystem of suppliers and

equipment assure competitive

pricing

Proven interoperability between

suppliers guarantees the supply

chain

Large installed base of carriers

future proofs the technology

Best Business Case

Cost effective, low OPEX,

end-to-end solution

Enables both build and lease

options

Several suppliers

Field proven

Widely deployed

Open standard

900 MHz Proprietary

2G/3G Cellular

WiMAXHighest capacity

Best feature set

Supplier ecosystem

Open standard

AdvantagesTechnology Disadvantages

Proprietary

Wed to a single supplier

Interference issues

Limited capacity

Limited service life

Deployments in process

Comparing Wireless Access TechnologiesWiMAX emerges a clear winner

Figure 5 WiMAX Advantages and Disadvantages

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4. Business model build or lease

When utilities first began to consider

Smart Grid as a business opportunity,

most simply presumed that they would

deploy and operate their own Smart

Grid access networks. As they have

gained experience, many have come

to understand that they have another

option lease capacity on an existing

Communication Service Providers

(CSPs) network. This alternative has

several tangible advantages, includingfaster time

to market, lower capital costs, and

better ROI.

This alternative has not been

overlooked by cellular network

providers. Verizon and AT&T have

recently established programs and

rates structures intended to capture the

utilities Smart Grid business. A typical

deal structure would be as follows (also

see Figure 6):

Carrier provides the network and

basic connectivity

Utility provides and deploys the

meters

Utility maintains the Smart Grid back

ofce

Carrier bills the utility based on

users per month and call model

Guaranteed minimums andincentives for volume

The cost of leasing network capacity

can vary based on several factors,

including: capacity requirements,

term of lease, services provided,

frequency of meter reads, outage

recovery requirement, etc. The

following carrier ARPU estimates are

considered typical for most cases and

can be used as a starting point for

business case analysis:

Large volume deals: $0.50 - $1.50/

subscriber, depending on the

service

Small volume deals: $1.50 - $3.00/

subscriber, depending on the

service

Low end: Automatic meter reading

(AMR) use case, periodic reads of

usage data and basic health checks

High end:Advanced meteringinfrastructure (AMI) use case, real

time metering

Leasing meansfaster time to market,lower capital costs,and better ROI

Smart Grid Business Structure

To realize all the benefits of Smart Grid, a utility needs to access network, not own it.

Leasing capacity from an existing wireless carrier is a win-win for both partners.

Figure 6 Smart Grid Business Structure

Wireless

Last Mile

Utility

Wireless Carrier

Utility Customer Management

Utility Applications

Network Management

Telecom Customer Management

Carrier Applications

Network Management

IP/MPLS Network Gateways,

Service Edge

and Firewalls

Base Stations Smart Meters

Wireless Devices

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5. Nokia Siemens NetworksSmart Grid solutionWiMAX CSPs

Nokia Siemens Networks offers a

tightly integrated end-to-end Smart

Grid access network solution. The

major components as illustrated in

Figure 7 include:

Smart Grid core network

Wireless backhaul solutions

Smart Grid access network

Smart Grid meters

Design, deployment and

implementation services

Why Nokia Siemens

Networks

The optimal supplier for WiMAX Smart

Grid networks needs a unique

combination of WiMAX experience and

Smart Grid know-how, as well as a

product line that supports smooth

integration and deployment. Nokia

Siemens Networks has that

combination.

Experience: Nokia Siemens Networkshas demonstrated leadership in

WiMAX since its inception by being:

First to interoperate with other

suppliers

First to deploy a commercial

network

First to demonstrate mobility

FirsttobeWiMAXForumcertied

First to build a WiMAX Smart Grid

access network

Know How: Smart Grid is more than

just another wireless application.

Smart Grid applications place new and

strenuous requirements on a wireless

access network. Having deployed the

first WIMAX Smart Grid network, Nokia

Siemens Networks has developed

features, solutions and methods to

assure that the stringent performance

requirements of Smart Grid are met.

Right Product: Nokia Siemens

Networks is a full end-to-end supplier,

providing one-stop shopping. The

solution is fully compliant with open

standards and optimized for Smart

Grid applications, so we can work with

our partners or with the utility providers

preferred suppliers. Nokia Siemens

Networks offers a rich set of smart

meter features that will permit a utility

to get the most from their investment.

Leasing means

faster time to market,lower capital costs,and better ROI

Canopy

Wireless

Backhaul

IP Core

WiMAX

ASN Gatew ay

Consumer

Devices

MetersWiMAX Access

PolicyNet

NMS

MIMO Beamforming

Base Controller Unit

SERVICES

IP Services

Smart Grid

VoIP

Presence

Location

PrepaidGaming

Mobile TV

Push to X

Hosted PDX

IP

MPLSMetro

Figure 7 End-to-end WiMAX Smart Grid Solution

PSTN

Internet

WiMAXs End-to-end Smart Grid Solution

Summary

The Smart Grid is emerging as one of

the fastest growing new businesses ofthe decade. WiMAX carriers have the

ideal access network technology for

the Smart Grid and can leverage their

network to capture a new, large

revenue stream. As the first WiMAX

system supplier to deploy a WiMAX

Smart Grid Access network, Nokia

Siemens Networks is the sole WIMAX

supplier to optimize its system offering

for the demands of Smart Grid

technology. Nokia Siemens Networks

provides the products, services and

know-how that WiMAXCommunications Service Providers

(CSPs) will need to make the most of

Smart Grid revenue opportunities.

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Figure 8 - NIST Smart Grid Architecture

6. Appendix: Smart Gridopen standards and architecture

Early Smart Grid systems were

proprietary. However, the power

industry understood the benefits of

establishing open standards and has

been driving the completion of

standards in both the U.S. and Europe.

The U.S. National Institute of

Standards and Technology (NIST)

recently released its Smart Grid

Reference Architecture (Figure 8)

along with recommendations for the

adoption of 77 existing and developing

standards from organizations including

ANSI, DNP, IEC, IEEE, ISO, NERC,

NIST, OpenADR, OpenHAN and

Zigbee. Several European groups are

also working on Smart Grid standards,

including: the European Industrial

Initiative on electricity grids under the

SET European Technology Platform

(ETP) Smart Grids, Open Meter 7

Group, and European Utilities Telecom

Council (EUTC).

The architectures and underlying

standards being crafted for Smart Grid

are IP-based and have much in

common with 4th generation mobile

network architectures. This makes

WIMAX and other 4th generation

wireless networks particularly well

suited for Smart Grid.

Utilities are leading the standards effort

by making standards compliance a

minimum requirement in the selection

of venders for their Smart Grid

projects. Leading Smart Grid suppliers

are adapting their products to meet the

U.S. and European reference

architectures and emerging standards.

It is generally anticipated that true

interoperability will be achieved in the

coming years. Until then,

interoperability is being tested at each

individual utility deploying a system.

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www.nokiasiemensnetworks.com

Nokia Siemens Networks

P.O. Box 1

FI-02022 NOKIA SIEMENS NETWORKS

Finland

Visiting address:

Karaportti 3, ESPOO, Finland

Switchboard +358 71 400 4000 (Finland)Switchboard +49 89 5159 01 (Germany)

Copyright 2011 Nokia Siemens Networks.All rights reserved.

Nokia is a registered trademark of Nokia Corporation,Siemens is a registered trademark of Siemens AG.The wave logo is a trademark of Nokia Siemens Networks Oy.Other company and product names mentioned in this documentmay be trademarks of their respective owners, and they arementioned for identification purposes only.

This publication is issued to provide information only and is notto form part of any order or contract. The products and servicesdescribed herein are subject to availability and change withoutnotice.

Every effort is made to ensure that ourcommunications materials have as littleimpact on the environment as possible

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WMAX-060 Realizing Smart Grid Revenues White Paper_bc3