Ontario’s largest power distributor – Hydro One – is looking to transform the province’s aging electrical system into a state of the art power delivery network. The utility recently selected IBM and Telvent to lead the charge toward a more energy efficient and reliable 21st century power grid.

Built in the 1950’s, Ontario’s electric grid took a centralized approach to power delivery, but the changing nature of electricity generation and transmission, with distributed sources becoming more prevalent, requires a more versatile grid design.

The Hydro One project is another instance of looking at the smart grid from an operational improvement perspective, said Michael Valocchi, VP and Partner, Global Energy & Utilities Industry Leader at IBM, in a recent interview with AOL Energy.

Project planning has been underway for several years with Hydro One to balance technologies, the needs of the province and priorities. As many electrical grid components reach the end of their service life, the decision has been made to replace this equipment with advanced intelligent technology.

“The backbone is analytics,” says Valocchi. The technology provides a wealth of data about asset utilization and consumption trends that can be used to increase grid reliability.

“Visibility” Enables “Mobility”

Hydro One and its newly-selected partners are currently working on the first phase of what will be a multi-phase project. Initially they are focusing on strengthening operational control from the utility perspective. One of the primary objectives is to bolster “grid visibility,” which will allow Hydro One to identify power consumption patterns, observe what portions of the grid are consuming the most power and at what times.

Once that visibility is in place, it could be possible to roll out more consumer-focused applications that share relevant data with residential and commercial customers. Consumer “mobility” is one such option, where utility customers could receive data about energy consumption at their homes and businesses on their smart phones or devices.

But relevance is the key here, says Valocchi, as it is important not to drown people in information. Smart meters and intelligent grid components generate vast streams of data that can be of great value to utilities, but of little interest to consumers.

“When I use a smart phone, I don’t necessarily care what network it’s on,” I just want it to work, says Valocchi.

Setting Precedent

Hydro One’s smart grid ambitions could serve as an example for utilities in the US and other countries, particularly those serving rural customer bases.

The following infgraphic depicts the current state of smart meter adoption in the US:

At the end of 2010, 663 utilities had over 20 million advanced metering infrastructure installations, which accounts for about 6% of the total current US population. The lion’s share of these installations are at the residential level.

With numerous US utilities working on smart meter roll out programs, the number of smart of meter installations could significantly increase in coming years.

The Hydro One project provides an example of reviewing at a rural area and identifying the right business case to serve it. US utilities are focusing more on efficient grid operations and Valocchi would not be surprised to see additional smart grid partnership announcements like Hydro One’s – in the US and overseas – in the coming months and years.

For more about smart grid investment in the US and overseas on Breaking Energy, read here and here.

Hard Versus Soft Benefits

Smart grid investments are often highly capital intensive with relatively long payback periods. As a result, it can be important to evaluate returns on these investments in terms of hard and soft benefits, i.e. both financial and social gains.

Valocchi acknowledges this is a continuing debate, but asserts the Hydro One project offers robust financial benefits in the form of asset replacement, asset life and asset utilization. Additionally, the enormous costs that businesses incur as a result of power outages makes reliability a hard financial benefit, Valocchi said.

“The key here is putting analytics and innovation into the asset intensive part of the business.” Upgrading and increasing intelligence in the “wires” might not be as visible from the consumer or societal perspective, but it’s every bit as important, he said.