Skip to main content
Jul 10 2017

Why private utility networks make dollars and sense

Twitter: @nokianetworks

Power utilities around the world rely on carrier services to manage their electrical grids, but rising service prices and the phasing out of important legacy services present significant challenges. Given these challenges and the new demands of grid modernization, it’s time for utilities to take a fresh look at their existing communications costs and the expense associated with extending their communications network to additional sites.

The reality is that the rising cost of carrier services is making a private network a more attractive option for utilities. A US utility recently reported a 30% annual cost increase for its low speed DS0 (up to 64 Kbps) service and a 22% annual cost increase for its T1 circuits. Between 2011 and 2016, its monthly bill more than doubled, rising from $24.05 to $54.25 per line.

The discontinuation of carrier TDM and frame relay services which have become unprofitable (a process that is happening worldwide, albeit on varying timetables), strengthens the case for a modern private utility network. Carriers in some markets have already announced end-of-life dates for these services and utilities urgently need alternatives to support critical grid control functions. Migration to new Ethernet and MPLS services offered by carriers are an option, but these services increase utilities’ monthly OPEX and offer more bandwidth than their existing applications need.

Together, these factors make a modern, private network solution an attractive alternative at more sites. This in turn shortens the payback period for this investment.

Customer case for converged private network

Let’s look at one utility’s business case for deploying a converged private network.

The utility in question served several million customers and had all its transmission substations and many of its distribution substations connected with fiber optic infrastructure. It used this infrastructure for teleprotection traffic and relied on carrier network services to support virtually all its data traffic.

The business case focused on eliminating the proposed carrier services and converging all grid operations traffic on its new network. With a three-year migration plan, the seven-year total cost of ownership is 10% lower with network operations managed internally, and 40% lower when operations are outsourced.

This cost profile also represents a shift from a model based on 100% OPEX to a mix that includes 20–30% CAPEX. This shift in cost is important in markets where regulators allow utilities to earn a better return on capital investments - such as networking equipment - than on carrier services, which are classified as operating expenses.

But there’s more to the story than savings and shifting cost composition. A private converged network gives a utility more control over the availability and security of communications for mission-critical grid applications. It also lets the utility support new applications as it modernizes the grid.

In evaluating the private network business case, utilities need to consider the benefits of replacing existing carrier services and extending the network to more sites. For example, many new distribution grid devices are located at sites that are not connected to the communications network at all, or where existing communications technologies provide insufficient reliability, bandwidth, or low latency for mission-critical grid operations.

Managing the rise of solar power

The growth of residential solar as a significant intermittent power source on a feeder triggers the need for more frequent changes in distribution grid device settings to maintain grid stability and safety. This higher rate of change makes it impractical to continue to perform these changes manually with a truck roll. The rapid growth of residential solar makes it much harder to identify and plan for needed changes.

For utilities facing discontinued carrier legacy services and rapid solar penetration growth, the need for modern communications is inevitable. These utilities need an upgrade plan backed by a business case that accounts for the time and cost involved in dispatching personnel to hundreds or thousands of sites. A key risk is that this need will arise sooner than expected.

Download our white paper: Modernizing grid communications, to learn what factors are driving utilities to re-examine their existing communication solutions costs and evaluate modern solutions to control mission-critical grid operations.

Share your thoughts on this topic by replying below – or join the Twitter discussion with @nokiacritcomms using #utilities, #smartgrid, #missioncritical

About David Christophe

David is director of energy solutions marketing at Nokia, where he focuses on the role of modern communications for grid operations and as a foundation for an evolving utility business. More recently, David has also begun putting some of his ‘energy’ into helping oil, gas and mining companies modernize their communications networks.