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1 2014 Rural Smart Grid Survey | November 2014 smartgridinsights.com | zpryme.com honeywellsmartgrid.com

Honeywell Presents: 2014 Rural Smart Grid Survey

November 2014

Analysis: Zpryme

CONFIDENTIAL AND PROPRIETARY

© 2014 Zpryme Research & Consulting, LLC


Table of Contents

• Executive Summary 3

• Methodology 4

• Key Findings 5

• Consumer Trends by Technology 7

• 2014 Survey Results 8

• Survey Basics 8

• Smart Grid Overview 11

• Smart Grid Technology 17

• Smart Grid Challenges 29

• Smart Grid Spending 34


Executive Summary

Zpryme and the Rural Smart Grid Summit (RSGS) completed a smart grid survey of 77

U.S. rural electric cooperatives and found that cost poses the most significant challenge

for smart grid initiatives. Despite challenges with cost, many rural electric cooperatives

are embracing smart grid technologies, particularly smart meters and data analytics.

Key Takeaways

• Nearly all rural electric utilities have some sort of smart grid effort in place. Most are

at the planning and investigation phase (38%), while others are deploying multiple

applications (21%) or at least have a formal strategy in place (16%).

• Seven out 10 utilities are experiencing a positive impact from smart grid programs.

Many utilities are making smart grid programs part of their core operations (42%).

• Despite challenges, there is smart grid spending at rural electric utilities. In 2014

many companies are spending up to $1M on smart grid technologies; the next 5

years will bring spending numbers closer to $5M or more.

• Although rural consumers typically lag behind their urban counterparts in technology

awareness, interest in home energy management has increased significantly for rural

consumers from 4% in October 2013 to 16% in October 2014.


Methodology

Zpryme and the Rural Smart Grid Summit (RSGS) conducted the survey in November

2014. The survey consisted of 53 questions about smart water initiatives in the United

States. A total of 77 rural electric utilities responded to the survey.

• Data reported in this report are a percent of the total respondents.

• Respondents’ top three areas of expertise were technology and engineering (60%),

grid technology (47%), and strategy and planning (46%).


Key Findings

• Nearly all rural electric utilities have some sort of smart grid effort in place. Most are

at the planning and investigation phase (38%), while others are deploying multiple

applications (21%) or at least have a formal strategy in place (16%).

• Seven out 10 utilities are experiencing a positive impact from smart grid programs.

Many utilities are making smart grid programs part of their core operations (42%).

• In the longer term, smart grid remains a priority for nearly all rural utilities. For most

(53%), it will be a moderate priority.

• The top benefits for smart grid remained foundational benefits, including restoration

time reduction (57%) and increased visibility and control (39%). Another important

benefit included analytics-based decisions (42%).

• About two-thirds of rural utilities are taking on AMR and AMI efforts.

• As rural utilities take on AMI, many of them have already reached the majority of their

customers (57%).

• Current AMI network functions in use include the basics, such as interval reads

(60%) and voltage reads (47%). Other functions are expected to grow in the coming

years as utilities become more comfortable with meter data.


Key Findings

• Nearly half of rural utilities do not have a plan for renewables. Those who do have

plans, are considering both centralized and decentralized generation. Electric

vehicles have not significantly impacted rural electric utilities.

• Opportunities for cloud-based and SaaS solutions are growing. Although more than

half of rural utilities have yet to use these solutions, many others are beginning to

dabble in them for AMI and data analytics.

• Even with the opportunities of a smarter grid, there are still challenges. The most

significant challenge is cost, followed by concerns around technology maturity.

• For technology, the biggest challenges facing rural electric utilities are handling

distribution automation (36%) and systems integration (34%).

• Companies are facing difficulties finding individuals with the skills needed to

effectively take on data analytics (42%) and systems integration (40%).

• Despite challenges, there is smart grid spending at rural electric utilities. In 2014

many companies are spending up to $1M on smart grid technologies; the next 5

years will bring spending numbers closer to $5M or more.


Consumer trends by technology

Source: Source: Zpryme monthly consumer tracking surveys of smart grid sentiment, EV demand, HEMS demand, and Mobile

Energy Monitoring. Data is based upon nationally representative survey of 1,000 U.S. adults (margin of error: +/- 3.5%)

9.2%

8.4%

10.0%

31.5%

12.4%

12.7%

15.1%

35.5%

0% 10% 20% 30% 40%

EV Interest

Mobile EnergyMonitoring

HEMs Interest

Smart GridAwareness

14-Oct

13-Oct

8.4%

7.7%

4.3%

28.4%

8.0%

9.4%

16.4%

28.6%

0% 10% 20% 30% 40%

EV Interest

MobileEnergy

Monitoring

HEMsInterest

Smart GridAwareness

14-Oct

13-Oct

All U.S. Consumers U.S. Consumers Living in Rural Areas

Although rural consumers typically lag behind their urban counterparts for technology awareness, interest in home

energy management has increased significantly for rural consumers from 4% in October 2013 to 16% in October 2014.


Survey

Basics


8%

14%

14%

21%

23%

10%

7%

1%

1%

0%

0% 5% 10% 15% 20% 25%

Up to 1,000

1,001-5,000

5,001-10,000

10,001-25,000

25,001-50,000

50,001-100,000

100,001-250,000

250,001-500,000

500,001–1,000,000

Over 1,000,000

How many electric customers do you have?

Most respondents had 10,001 to 25,000 electric customers and 25,001 to 50,000 electric customers.


Areas of expertise

3%

3%

13%

17%

17%

18%

18%

38%

39%

42%

46%

47%

60%

0% 10% 20% 30% 40% 50% 60% 70%

Power generation

Wholesale market

Customer/retail aervices

Finance/purchasing

Policy/regulatory

Marketing

Business applications

Information technology

Executive management

Metering

Strategy and planning

Grid technology

Technology and engineering

Respondents’ top three areas of expertise were technology and engineering (60%), grid technology (47%), and strategy

and planning (46%).


Smart Grid

Overview


Current smart grid deployment status

No strategy 1%

Planning/investigation 38%

Formal strategy in place 16%

Approving budgets 4%

Pilot deployment 8%

Large-scale deployment

13%

Deploying multiple applications

21%

Nearly all rural electric utilities have some sort of smart grid effort in place. Most are at the planning and investigation

phase (38%), while others are deploying multiple applications (21%) or at least have a formal strategy in place (16%).


Smart grid details

Positive 73%

Negative 3%

None 25%

Impact of smart grid program on your company

Part of your core operations

42%

Phased approach

31%

Pilot 27%

Your smart grid program is:

For 7 out 10 utilities, they are experiencing a positive impact from smart grid programs. Many utilities are making their

smart grid programs part of their core operations (42%).


Overall importance of smart grid in next 5 years

High priority 33%

Moderate priority 53%

Low priority 14%

Not a priority 0%

In the longer term, smart grid remains a priority for nearly all rural utilities. For most (53%), it will be a moderate priority

and for one-third of respondents it will be a high priority.


Top smart grid technology benefits

57%

42% 39% 38%

22% 21% 21% 21%

0%

10%

20%

30%

40%

50%

60%

The top benefits for smart grid remained foundational benefits, including restoration time reduction (57%) and

increased visibility and control (39%). Another important benefit included analytics-based decisions (42%).


Areas of importance for consumer communications

4%

10%

13%

23%

25%

40%

42%

46%

0% 10% 20% 30% 40% 50%

GHG emissions reduction

Addition of green energy

Outage reduction

No outreach

Next gen consumertechnologies

Increased customerparticipation

Peak energy reduction

Cost savings

When communicating to customers about the value of a smart grid, most utilities communicated cost savings (46%)

and opportunities to reduce peak demand (42%). GHG emissions reductions did not enter the conversation often (4%).


Smart Grid

Technology


Is AMI a prerequisite to smart grid?

Yes 77%

No 10%

Unsure 13%

Most rural utilities see AMI as a prerequisite for a smart grid (77%), and 13% of respondents remain unsure.


Most important smart grid applications

3%

4%

5%

7%

9%

12%

14%

25%

35%

56%

58%

91%

0% 20% 40% 60% 80% 100%

Grid storage

Microgrid integration

Home area networks/EMS

Distributed generation

Asset management

Broadband access

Security

Advanced pricing

Demand response

Distribution automation

MDM/analytics

Smart meters/AMI

With the importance of AMI, rural utilities most frequently mentioned smart meters/AMI as a top smart grid technology

(91%). Other important technologies included MDM/analytics (58%) and distribution automation (56%).


Do you have AMR/AMI in place?

Yes 65%

Yes 62%

No 35%

No 38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AMR AMI

About two-thirds of rural utilities are taking on AMR and AMI efforts.


When will smart meters reach a majority of customers?

Now 57%

In next 3 years 20%

In next 5 years 16%

In next 10 years 5%

More than 10 years 3%

As rural utilities take on AMI, many of them have already reached the majority of their customers (57%), and many more

plan to reach the majority of their customers in the next three years (20%).


AMI network functions currently in use

60%

47%

34%

23% 22% 20%

14%

0%

10%

20%

30%

40%

50%

60%

70%

Interval reads Voltage reads Outagemanagement

Transformerload

management

Power qualityreads

Dynamicpricing

Loadbalancing

Current AMI network functions in use include the basics, such as interval reads (60%) and voltage reads (47%). Other

functions are expected to grow in the coming years as utilities become more comfortable with meter data.


Are you offering a dynamic retail rate?

Yes 21%

Planning to offer 14%

No 65%

Dynamic pricing is not yet common in most rural utilities, but some currently offer it (21%) , and others are planning to

offer pricing options in the future (14%).


In the long term, demand response programs are led by:

The utility 47%

A third party 7%

Combination of entities with utility managing

14%

Too early to tell

33%

With demand response, most rural utilities believe it should be run the utility (47%) although many companies still feel

it is too early to tell how responsibilities will play out (33%).


Electric vehicles

Renewables and electric vehicle usage

Yes, centralized generation

14%

Yes, distributed generation

14%

Yes, both centralized

and distributed generation

22%

No 49%

Underway 9% In next 2

years 7%

In next 5 years 13%

In next 10 years 12%

More than 10 years

23%

No plan 36%

Renewables

Nearly half of rural utilities do not have a plan for renewables. Those who do have plans, are considering both

centralized and decentralized generation. Electric vehicles have not significantly impacted rural electric utilities.


Utility application use

64%

12% 13% 7%

9%

8%

17%

7%

10%

23%

22%

17%

5%

7%

7%

9%

12%

51% 42%

61%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OMS DMS Volt/VAR LV/MV sensors

No plan

In next 10 years

In next 5 years

In next 2 years

Underway

The survey also explored many other application areas. OMS is used by most utilities (64%), and other distribution

automation technologies are more in the planning stages.


Concerns about data and analytics challenges

Very concerned 25%

Somewhat concerned

49%

Slightly concerned 21%

Not concerned at all 5%

Data and analytics is an important area for rural utilities, and there are concerns around security, privacy, network

issues and the challenges of integrating disparate data sources.


Cloud-based and SaaS solutions

53%

38%

14%

13% 10%

7% 5%

51%

21% 18%

14% 12%

10% 10%

0%

10%

20%

30%

40%

50%

60%

None AMI andMDM

Big dataanalytics

SCADA OMS Volt/VARcontrol

DMS

The cloud

SaaS

Opportunities for cloud-based and SaaS solutions are growing. Although more than half of rural utilities have yet to

use these solutions, many others are beginning to dabble in them for AMI and data analytics.


Smart Grid

Challenges


Primary challenge to smart grid deployment success

42%

21%

9% 8% 8%

7%

3% 3% 1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Even with the opportunities of a smarter grid, there are still challenges. The most significant challenge is cost,

followed by concerns around technology maturity.


5%

7%

8%

12%

12%

14%

14%

17%

17%

17%

18%

21%

23%

25%

25%

34%

36%

0% 10% 20% 30% 40%

Centralized renewable integration

EV integration

Asset management

Energy storage integration

AMI networks

Customer-owned microgrid integration

Wide area networks

IT architecture

Demand response dispatch

Smart meters

Customer systems integration

Broadband access

Security

Distributed generation integration

Data analytics

Systems integration (SCADA, DMS)

Distribution automation

Technologies with the largest technological barriers

For technology, the biggest challenges facing rural electric utilities are handling distribution automation (36%) and

systems integration (34%).


Smart grid skill gaps in existing workforce

42% 40%

26% 25%

21% 20% 20% 20%

12%

4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Those technology challenges are also reflected in workforce gaps. Companies are facing difficulties finding individuals

with the skills needed to effectively take on data analytics (42%) and systems integration (40%).


Regulation/legislation posing challenges in next 5 years

52%

34% 30%

25%

17%

10%

5%

0%

10%

20%

30%

40%

50%

60%

Looming regulatory and legislative actions are causing rural utilities headaches, including placing a price on carbon

emissions (52%), renewable standards (34%) and energy efficiency incentives (30%).


Smart Grid

Spending


Smart grid spending patterns

< $1M 66%

$1M - $5M 29%

$5M - $10M 3%

$10M $25M 3%

> $25M 0%

< $1M 34%

$1M $5M 42%

$5M $10M 13%

$10M $25M 7%

> $25M 5%

2014 spending expectations Cumulative spending in next 5 years

Despite these challenges, there is smart grid spending at rural electric utilities. In 2014 many companies are spending

up to $1M on smart grid technologies; the next 5 years will bring spending numbers closer to $5M or more.


CONFIDENTIAL AND PROPRIETARY

© 2014 Zpryme Research & Consulting, LLC

About Honeywell Smart Grid Solutions

For more than 30 years, Honeywell Smart Grid Solutions (SGS) has provided utilities

with industry-leading technologies and strategies from automated demand response

and energy solutions to utility customer communications. Working with over 60 utility

clients across North America, Asia, Europe and Australia, Honeywell SGS has delivered

innovative programs and solutions to help utilities exceed their demand management

goals. Energy and sustainability solutions are just the beginning. Honeywell SGS also

helps utilities engage customers for program participation, create and implement

energy management systems, measure and verify energy and demand savings and

serve their commercial and residential customers reliably and efficiently. Simply put, for

utilities around the world, the partner of choice is Honeywell Smart Grid Solutions. For

more information, visit www.honeywellsmartgrid.com.

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