Turning to Technology for Energy's Future

Power Systems 2003 Conference
March 12, 2003
Jim Hicks
Senior Vice President, Electric Transmission
Duke Power

Thank you for having me here this morning.

It’s a pleasure to be speaking today before a knowledgeable audience of fellow engineers and technical experts.

As you know, as head of electric transmission at Duke Power, I spent much of my time tackling policy issues affecting the future of electric transmission—a hot topic in Washington, Columbia and Raleigh.

But unfortunately, a typical meeting for me at Duke Power involves three lawyers, two accountants and one lobbyist—which leaves me as the only engineer in the room.

It reminds me of a quote by the late Carl Sagan which basically says that “We live in a society dependent on science and technology, in which hardly anyone knows anything about science and technology.”

So thank goodness we have people like you out there—who not only know about science and technology, but are trying to improve upon it, too!

And it’s not like we all agree on these topics. I know tonight there is a speech on whether distributed generation or new transmission will prevail in the future. I’ve got some opinions on that subject—and they may not be the same as the speaker. But the important point is that we have forums like this where we can exchange ideas on the subject.

And thank goodness for universities like Clemson. This university is turning out future technical experts, who may have answers to questions that get discussed here.

This may surprise you, but Duke Energy endows more professorships at Clemson than any other university. That includes one we announced last week—the Warren Owen/Duke Energy Endowed Professor of Mechanical Engineering—named for the late Warren Owen—a long-time Duke Power executive.

Clemson and Duke Energy have a long relationship—and we share an interest in technology through conferences like this, and by the work of the Clemson University Electric Power Research Association. A true partner in every sense of the word.

I’d like to spend a few minutes today talking about my philosophy of technology—touching on three points:

1. We need to be realistic with high tech—Economics 101 still plays a part in new technologies. It’s been that way throughout history. And it will be that way in the future.
2. Utilities must continue to pursue advancements in our industry. Customers expect it, regulators expect it—and we should expect it of ourselves.
3. The best thing about technology is a success story. I’ll try to share a few of them, and I hope I get to hear some of yours, too.

Probably part of every panel today will be some mention of economics and cost-effectiveness. New technologies live and die by old economics.

The bottom line at many companies—Duke Power included—is how do new technologies stack up with what we are already doing? The cold reality of dollars and cents carries so much weight in our business world, we can’t ignore it. Everybody wants their technology fast, good and cheap—and unfortunately, two out of three isn’t good enough.

From a personal standpoint, many of us weigh the dollars and cents of new technology everyday. Consider the advent of DVD players. Did you buy it a few years ago at $500? Did you wait until it was $199? Did you wait until last month when it was $79? That’s what I did.

Digital cameras? Another good example. When we look at new technologies from a personal standpoint, we ask ourselves:

1. Does it improve on my existing technology?
2. Can I justify spending my money on this?
3. Does it bring me additional personal enjoyment?

For Duke Power, the thought process is much the same when we talk about advancements to our operations:

1. Does it improve on our existing technology?
2. Does it make economic sense?
3. Does it bring value—not to me—but to our customers?

It’s a lesson we must teach our students in the classroom, too. Engineering students should be taking business classes, too. We must learn that our breakthroughs in technology must make as much sense on the business side as they do on the technical side.

But having said that—I will add that the power industry cannot survive on old technology. In fact, right now is an ideal time to pursue new technology and improvements to our existing technology.

There was an article in the Wall Street Journal last month stating that the power surplus in this country would continue to at least 2005—maybe 2006. Duke Energy has more than 38,000 megawatts of installed capacity around the world, and much of that was built over the past five years, so we understand a little bit about power supply.

And we could have a good discussion about whether that prediction is on target or not. Cycles in the power industry seem to be getting more compressed. Two years ago, there were fears that there would be a severe power shortage.

Does anybody remember power shortages in California two years ago? Before Iraq and the “War on Terrorism,” the Administration was pushing a critical Energy Bill. Now, we say there is a surplus. Who’s right? I wish I had all the answers.

But let’s assume that article is correct. With that in mind, I see two paths we can follow:

1. We can relax—knowing that we don’t need to worry about electricity for another 2-3 years.
2. We can start addressing another need for our industry—the need to better utilize technology, and to get technology out of the research labs and into practical applications that make sense to customers—and economic sense to utilities.

I’ll give you a hint - I like the second option.

I like it because of what I see as head of transmission at Duke Power. I see a rate freeze for our company that continues until 2007. I see my budget basically frozen until that time. I see customers asking for more—faster—cheaper —better.

Do you know that retail rates for electricity at Duke Power are basically the same as they were in 1986? Meanwhile, overall inflation has risen almost 70 percent in that same 17-year period. We did it by making advancements to our system; adopting processes that improved reliability and cut costs. Very few industries can say they are delivering more, with less—for less.

The electric industry can say that. It won’t make headlines in your local paper—but holding the line at 1980s prices is remarkable.

So, if power capacity isn’t the No. 1 issue in the electric industry for the next few years, I feel that utilities need to turn to technology to start providing energy solutions for the future. Which is why I’m here today to remind you—technology needs to be our “fuel of choice” as we venture along this 21st century. Whether you work for a utility, an engineering firm, an equipment provider, a university—we need to better utilize technology; better incorporate technology; better understand technology.

I’ll give you an example of why—here at Clemson, engineering students are expected to have a laptop computer. It’s a technical requirement.

When I was an electrical engineering student at LSU years ago, my technical requirement wasn’t much more than a slide rule and a No. 2 pencil.

So if we’re expecting that technical upgrade from our students today, it’s no wonder that our customers on Main Street and Wall Street expect a similar upgrade from us.

Now, that’s a lot of great talk. But I can tell this audience needs an example. So let me talk about the control house installation program we have going on at Duke Power’s major substations.

As you would expect, modernization of our substation equipment is critical if we’re going to provide the service expected by our customers. At many of our substations, SCADA and protective relaying equipment were becoming close to being obsolete.

We learned early on that to utilize the existing control houses at our substations wasn’t practical from an economic or logistics standpoint. So we partnered with Schwietzer Engineering to build a new control house. But this would be pre-engineered, designed, constructed and tested off-site and then installed at the substation. This would allow us to completely test the control house before we got it to the substation site.

Some people call this a “drop-in control house"—but it allows us quicker installation, better automation and better reliability at our substations.

And from that first experience in 2000, we’ve been able to streamline our process—and now look to upgrade our substations faster, more efficiently—and of course, more cost effectively.

In addition to allowing for cheaper and quicker upgrades to aging control houses, our new drop-in design gives us a wealth of real-time data about what is happening in a substation. This is information we’ve never had before, and we are just beginning to capture the increase in reliability and cost control this data gives us.

For instance, one of our engineers was able to see from the data that an air compressor in an oil circuit breaker was cycling every 20 minutes. This is a good indicator that the compressor tank had a leak. By reviewing the data, we were able to catch the problem before the breaker failed.

Also, every time a breaker operates, we track its exact operating time. The slowing of the operating time means the breaker is losing its performance standards and needs to be maintained. Our current practice is to maintain breakers on a routine schedule that sometimes means they are maintained before they really need it.

By having real-time information on breaker operations, we can move to a “just in time” maintenance schedule that lowers our costs while still providing good service reliability.

Bottom-line—better equipment; improve reliability, better communication with our substations.

Now, I will not say that our “Drop-in Control House” program is the No. 1 technology event of the year, but it does illustrate a point I believe is important. We must bring the value of technology to all areas of the power industry—from generation—to transmission—to distribution. Every small breakthrough along the electricity value chain helps our industry—and helps our customers.

I noticed that this conference has added the word “metering” to its title since last year. And the inclusion makes sense. There’s no doubt that advanced metering will be big news over the next few decades.

Advancements in metering have already made great strides over the past decade—so much that the traditional meter reader—walking from house to house—is on the verge of extinction. Duke Power is well on its way to installing remotely-read meters throughout 100 percent of its system. We’ve been able to implement this technology that can be read 400 times faster than the traditional method—and cut costs at the same time.

But customers probably benefit even more. The constant battle between the power company and locked gates, barking dogs and unreachable meters is pretty much over. We’ve given our customers one less thing to worry about.

But I think the future of metering holds a boxful of great possibilities. Power companies have learned how to send one communication to a million meters. But how far have power companies come in receiving information back from those million meters.

Back in December, 1.4 million customers lost power due to a severe ice storm in the Carolinas. There’s a good chance that you may have been one of those 1.4 million customers.

But one of the challenges during restoration was keeping an accurate track of how many customers had been restored—and how many were still without power. There were times when our current system showed us one number—when we knew in our heart we were doing better than that.

That can be a problem when you are communicating with regulators, community leaders and the media—all of whom may think that you’re not making progress quickly enough.

I think one answer is advanced metering—allowing us to receive data from customers on whether they have power or not. Of course, the same economics apply. We have to show the value to ourselves, and our customers.

Real-time pricing and real-time usage is another issue worth considering in regards to advanced metering. We have already seen how it can work with industrial and large commercial customers. You have to wonder how the economics will play out for residential customers.

For example, is it possible for customers to call up their current electrical usage on a home computer—and would customers find that beneficial? I can look at my VISA bill online. I can trade stocks online. Why can’t I look at my up-to-the-minute usage of electricity?

Would customers change their usage patterns if they knew the real-time price of electricity? Maybe—maybe not.

But with the advent of smart house technology, home-based computers could automatically react to changes in the price of electricity to use less power during peak times. For example, run the air conditioner less during peak times, and more during off-peak times. Customers wouldn’t have to worry about whether it’s peak or off-peak. Their own technology could be saving them money.

I wish that could happen next week. But the one thing we can all agree on is that predicting changes in technology is not an exact science.

There is a quote that says “What I thought was 50 years away, was only 10 years away. And what was 10 years away—was already here. I just didn’t know it.”

We may all find ourselves thinking about something 10 years away, only to find that it’s right here. We may learn it at a conference like this. But we should all be mindful of the points I spelled out earlier:

1. We must continue to be realistic about the cost, pace and practicality of new technology. And we must be adaptable. Some technology may never pan out. We have to know when to pull the plug and admit defeat.
2. We must realize that customer expectations are higher than ever—they expect utilities to be tapping the latest forms of technology to lower costs and improve reliability and service. The power industry has set a pretty high standard over the years. The downside to that is that customers want us to do better.
3. We must continue to fight for our success stories. Every time we can increase reliability, improve communication with customers and strengthen service—we are succeeding. I’m proud of the successes we’ve enjoyed at Duke Power. We must continue to look for our next success story.

I’m sure many of you are looking for that next success story. There are many changes happening in the power industry—regulation, legislation, mergers and bankruptcies. But the nuts and bolts of the industry won’t change—getting competitive-priced power to customers in the most reliable fashion possible. That’s the job that customers really care about.

Technology. It’s one of the tools we need to make it happen. The challenge we face is to move ideas from the technical papers and the panel discussions here—to the real-world applications out there. We have important work to do—and if we can continue to improve efficiency and service—we’ll know we’re doing the right work.

Have a productive conference.

Thank you.