European utilities require more fibre

Nov 1st, 2008

by Kurt Ruderman

Fears of dwindling energy sources and a global economic crisis could be the catalysts that telecoms equipment vendors have been waiting for to accelerate the deployment of advanced communication networks by European utilities.

Alcatel–Lucent (www.alcatel–lucent.com), Cisco (www.cisco.com), IBM (www.ibm.com), and other major vendors have begun working with European utilities to build advanced communications networks to manage pan–regional power grids, to control energy consumption, and to reduce the need for new, costly power plants.

Until recently, the European utility telecoms market had been driven mainly by pressure from the European Union (EU) to reduce carbon emissions by 2020 and new market conditions following the deregulation of Europe's utility sectors. However, it has become clearer that achieving the EU goals and modernising utility businesses can be accomplished more efficiently and cheaply through new information and communications technologies (ICT).

The EU is encouraging the ICT sector, which accounts for 2% of global CO2 emissions, to lead the drive towards carbon neutrality and reduce its CO2 emissions by identifying and creating technology and practices that will benefit the whole economy. Without action, the EU says energy consumption could rise by as much as 25% by 2012, which would increase EU emissions despite renewable energy targets.

According to industry estimates, the cost of reaching EU mandated energy targets for 2020 throughout the continent could exceed US$1 trillion. Worldwide, the cost could exceed US$16 trillion. Investments at this level will surely drive the need for new technologies and utility communication projects.

Unlike many industries today, utilities still have money and have attracted the attention of telecoms equipment vendors�many of whom attended this year's European Utilities Telecom Council (EUTC) conference, held last month in Lisbon. The message from the start of the conference was optimistic.

"We are part of the real economy; you can't kill the real economy. There is an ever–growing demand for electricity and gas," said Miguel Angel Sanchez Fornie, chairman of the EUTC and director of telecommunications and control systems at Iberdrola in Spain, in his opening remarks at the conference. "There is a need to control CO2 emissions," he said. "Climate change is a fact. Energy efficiency is an important part of the solution."

Advanced network technologies are needed to support smart metering and smart grids, which are important aspects of the utilities' energy–efficiency projects. Smart grids help utilities cut operating and capital expenses by reducing the need to construct new generators. Smart meters help consumers reduce their energy bills through variable tariffs and the monitoring of household appliances.

Speaking at EUTC's conference, Peter Johnson, vice president for utilities within Alcatel–Lucent's Services Business Group, stressed the need to improve operational efficiency.

"Today, problems in utility networks are arising from a rapid shift in the demand on the existing inflexible infrastructure. Peaks of electricity are changing," Johnson said.

"Traditionally networks have been hierarchicalâ��central electricity production, transmission, distribution. Distribution networks until now have been left to run by themselves. Today, however, there are new energy demands from air conditioning and renewable energy such as wind and solar sources that add electricity to grids at unpredictable rates. There is a need to put intelligence into networks for real–time communications among network elements, and to access millions of meters."

Responding to these new market conditions, most of Europe's big utilities have dropped plans to develop non–core communications businesses and are focusing on upgrading or building communications networks to support their core utility activities. However, to offset costs, a number of big utilities continue to lease or sell excess fibre capacity to telecoms companies.

Smart metering, smart grids, and IP convergence have become the main concerns of the EUTC, an association of European utilities. This year the association's annual conference focused on the three topics.

"The EU has not yet mandated smart metering and smart grids," said Peter Moray, director European services, EUTC. "But they are the accepted way to meet the EU2020 objectives, which call for a 20% reduction in CO2, and say that 20% of energy should be generated from renewable energy sources. Smart metering will be a big driver. For example, in the UK alone there are 45 million gas and electric meters. So if you look around the world, the market for meters and connecting them is staggering."

The smart grid vision requires a lot of small generating plants. A key requirement for smart grids to develop is to monitor and potentially manage through smart meters the way consumers use energy in every home and business across Europe.

"To get the functionality that the energy companies would like," Moray explained, "you need a two–way communications network. The bandwidth for the network depends on the level of functionality you want to run. An issue today is what level of functionality to have in the meter the network is to support. In simplest terms, you can read a meter with a kilobit of data if you want to download tariffs. But the range runs from minimum to broadband capability if you want to download services and add telecoms functionality."

At the local level, the installation of smart metering will create a demand for smart meters and access networks to connect them. The types of access networks will depend on services beyond basic meter reading.

A handful of smart metering projects have begun in Europe. The largest was recently completed by ENEL in Italy. The project, which was launched voluntarily in 2003 by the utility, has connected 32 million meters, says Romano Napolitano of ENEL.

ENEL's project has cost approximately 2.1 billion Euros, but the company estimates that it has resulted in an annual savings in operations of 500 million Euros.

Another project has been launched in the Netherlands by Oxxio, the largest independent energy supplier in the country's newly liberalised market. Working with IBM, Oxxio has set up three large smart metering trials. Other projects have begun in Sweden, which will require monthly meter readings starting in 2009, and in Spain, which requires smart meter for all new houses.

Portugal's electric distribution company, EDP Distribuição, plans to start the full rollout of its smart grid project. Called Inovgrid, the project involves the upgrade of the company's 6,000–km fibre–optic network, 40,000 telemeters, and 6 million meters. The company is finishing a pilot project in preparation for the launch, said João Torres, CEO of EDP Distribuição.

Speaking at the EUTC conference, Torres said Invogrid is an intelligent distribution system, which includes automated meter reading, micro–generation, upload and download capacity, risk assessment management, network operations, and fault location. The project started in 2007. A pilot project was launched in preparation for commercial implementation in 2009 and 2010.

Many utilities had used some leased fibre capacity in the past. However, Europe's telecoms companies, which are moving to all–IP networks, presented a reliability problem for utilities. Telecoms companies' IP networks cannot guarantee security for utilities that cannot endure end–to–end delays of more than 30 msec.

So, as Invogrid illustrates, electric transmission and distribution companies are using their own fibre. RTE of France is completing one of the biggest utility OPGW networks in Europe. It will be nearly 15,000 km when completed in 2009. RTE and Elia of Belgium, which have cross–border electric transmission agreements, are upgrading their networks with DWDM.

Most European utilities have completed or are completing their fibre backbone networks, said Raul Gil of Prysmian (www.prysmian.com). While 90% of the OPGW builds today in Europe are retrofit projects, the opposite is true in North Africa and the Middle East. These regions have become important markets for OPGW. Companies in the regions are building new–generation and transmission infrastructure.

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