Stefan Engelhart talks about the challenges and opportunities represented by smart grids – an intelligent infrastructure designed to balance energy supply and demand.

The New Economy: SAP is very much concerned with delivering practical solutions to companies, so, in practical terms, what are the challenges of the smart grid era for utility companies?

Stefan Engelhart: I think there’s three areas we should mention here. So when utilities consider the implementation of smart meters and smart grids, they have three main challenges.

The first is that they need to adopt their business processes to smart meters, and that is a paradigm shift in itself. Because many business processes are changing dramatically, some in a disruptive matter: because they are now getting data from different sources, they can do things completely differently from the way they did them before.

The second point that should be considered, and which is a real challenge for utilities as well as software providers like us, is the management of the incredible amount of data that you have to cope with. If you imagine, our biggest customers have more than 30 million customers, and they intend to run when the smart grid is rolled out, 15 minute meter readings for each of their customers every day. So every 15 minutes a meter reading! You can imagine how big the data volume will become. So this is a big treasure of data you can use on the one hand; on the other hand, it needs to be managed somehow.

And the third challenge is a physical one, which is the roll-out of the smart meters. How do you do that practically? If you want to roll that out on a large scale, you need to plan accordingly. Normally it goes about a couple of years, because you try to do it in combination with your ongoing maintenance work. And that requires as well smart solutions to get that managed.

The New Economy: So how would you describe SAP’s approach to meeting these challenges?

Stefan Engelhart: The first and most important activity that we started was a development that we triggered three years ago. Together with pilot customers, we launched a very big project at SAP, that we called AMI Integration. And this project had the goal to define and specify the requirements that a smart grid has on software package like SAP, in order to get solution specifications from our customers that we then could include into our software.

So, this project is still going on. We had already two delivery gates where we shipped solutions. The first customers are already picking up and implementing this software in a smart grid environment.

Secondly, we have investigated as well into new solutions that are able to manage this large amount of data in order to rapidly get a lot of information out of this goldmine of data that is out there, in order to support the utilities with the best possible and qualified data that they need for their further planning.

And the third tool that we have developed that supports this roll-out of smart meters was dedicated support to plan the roll-out over a period of time, and secondly to roll-out as well the meters completely integrated in the already running back-end system. That is another investment that we have done, and these solutions are already available in the market.

The New Economy: Smart grids could revolutionise the delivery of electricity to consumers, so what are the essentials that we need to know about smart grids?

Stefan Engelhart: A smart grid is an intelligent infrastructure that has one purpose: that purpose is to balance optimally energy supply and energy demand.

A key element of smart grids is the technical infrastructure that consists of smart meters, so devices that are able to measure load intervals of individual customers and consumers on a very large granularity. And a second option is that these devices have the possibility to bi-directionally communicate and transfer information from the consumption side to the supply side, and vice-versa. That is a key element of the smart grid, in order to make it run optimally.

A second element that needs to be mentioned is the increased importance of decentralised power production. That is another key element that is important to optimise the smart grid as it is. It means to run production sites very decentrally – at the consumers for instance, or at small power producers, and to bring them intelligently into inter-operation in the whole grid, to optimise balance of supply ideally.

The New Economy: So how can smart grids benefit both utility companies and consumers?

Stefan Engelhart: Utility companies will profit very much from the possibility to measure individual consumption in a very detailed way – with a large granularity, as I said already – and to use the data for a lot of subsequent processes. One is of course an optimised forecasting, based on this large amount of data. Another one is the tailored definition of products for the end customers, for instance. And the third one is of course the optimal balancing of the portfolio, in order to make sure that you don’t need to run a lot of balancing energy, for instance, to optimise your network stability. This saves a lot of costs for utilities.

Consumers? Customers will profit as well dramatically from smart grids, because they have the possibility now to get very tailored energy products that take into consideration their individual consumption pattern, that as well allow them to share the risk of energy procurement with their retailer. Because for instance, they could sign in for a tariff that is interruptible, like peak industrial customers do today, or could be reduced in demand depending on the network balance.

These are things that could make energy products much more attractive and much more customer-specific.

The New Economy: Looking ahead, how do you see liberalised marketplaces changing as they adapt to smart-grid technology?

Stefan Engelhart: They’re changing in some areas disruptively. If you look to the market roles that utilities have in liberalised markets, the most affected role will probably be the retailer. The retailer has all the challenges of the smart grid, but as well all the changes that the smart grid will provide. First of all, they have this incredible amount of data they can use to optimise their customer portfolio; optimise their product portfolio for their particular customers.

Retailers will come up with new energy products, bundled products, where they for instance bundle energy services with other services such as burglar alarms or immobility tariffs that support the roaming of energy – for instance for electric vehicles. This is another interesting model that is currently being discussed.

So, we think that the retailer will be affected most from the smart grids. But there will be of course technical challenges for the distribution providers, but this plays on, I think, a different dimension. This is more driven by technical changes than adaptations.

The New Economy: So this is going to be a big business in future.

Stefan Engelhart: We really think so. We really think that smart grids will really disrupt the utility market, and will come up with a lot of new business requirements and business challenges for utilities. But we see many more chances than threats in this whole game.