Frameworks for Strategy Formulation and

Implementation
NTPC School Of Business April 27, 2019

What Makes the Grid “Smart”?

An electrical grid which includes a variety of operation and energy measures including smart
meters, smart appliances, renewable energy resources, and energy efficient resources.
~ Wikipedia
The digital technology that allows for two-way communication between the utility and its
customers, and the sensing along the transmission lines respond digitally to our quickly
changing electric demand is what makes the grid smart. ~ SmartGrid.gov

Figure1: Smart Grid Interpretation

The term smart grid carries two key factors: virtual data processing and communication
networks. Therefore, it could be stated that what characterizes this smart grid is the existence
of a flow of information, between the supplier corporation and the customer, in parallel with
the energy flow. With today’s smart grid goals in mind, energy supply groups are in a
transition between our real electricity grid and the future smart grid, trying to enhance the
conventional network infrastructure, establishing the virtual and also growing new business
method to carry out the capitalization and commercialization of the intelligent network.

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Figure2: Smart Grid Factors

The benefit that we are all expecting from the Smart grid systems are:

Early detection
Error Free of Defects and
Transparent thus resolution
Billing of consumer
grievances

Loss
Remote Profile/Real
Surveillance Time Energy
Audit

Each of the frameworks that were given by you was reviewed and evaluated, we tried to put the
analysis of smart grid technology in possible strategic frameworks. We tried to show each
framework graphically and finally managed to arrive at our own framework lastly.
The following strategic frameworks were used to formulate the smart grid technology feasibility.
1. SWOT analysis
2. PESTEL analysis and the

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3. Balanced score card

1. SMART GRID SWOT ANALYSIS1

2. SMART GRID PESTEL ANALYSIS2

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3. SMART GRID BALANCED SCORE CARD ANALYSIS3

After reviewing the above frameworks we formulated that the Smart Grid Technology requires
frameworks most importantly in the process management and the regulatory aspect.

We tried showcasing our understanding of the strategic framework with respect to the process
and the legal-regulatory frameworks. We have diagrammatically represented the frameworks
which I believe are self-explanatory.

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Current State
 System processes
 System functionalities
 System analysis and evaluation
 System targets
 System limitations
Technology assessment
 Existing implemented solution
 Available commercial solution
 Compatibilities
 Assessment of driving factors
Future state
 Future business drivers
 Business processes transformation
 Future functional capabilities
 Future strategic technologies

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 Technological driving forces

Gaps & priorities
 Business process gaps
 System technology gap
 Business cases and justification
 planning for efficiency
 Asset management
Roadmap components
 Strategy and vision
 Technological prerequisites
 Capital investment
 Implementation

Regulatory decisions have an impact on the overall savings and improvements resulting from
Smart Grid investments, the recovery of these investments through various modes, the provision

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of incentives and penalties to promote the adoption by utilities of new and innovative use cases
and consumer interest protection. The development of the Smart Grid therefore requires dynamic
and flexible regulation.

The frame work should make sure that the technology available for smart grid is adequate or not.
If, adequacy is missing then there should be a push in research and development sector. This
thrust will not be achievable if legal and regulatory aspects are not considered.

My objective is to evaluate the new and emerging technologies and combinations of such like
rooftop solar, distributed generation, and demand response implemented which are going to be
implemented in the distribution sector.

In this course of study, I have framed certain questions such to which I will be answering while
discussing my strategy:

 What key distributed energy technologies can disrupt the power sector?

 What business models may develop, and how will they successfully serve both upstream
electricity market and energy consumers?

 What are the probable visions of the future of the power sector, including changes for
power utilities, regulators, policy makers, and consumers?

 How are the power utilities going to cope up with the renewable surge that is going to
take place in the future?

The policy makers along with the help of the utility are expected to use long-term value as the
main criterion to optimize a transition road map, develop explicit plans for each demand sector,
and align incentives accordingly.

No matter where you are in the value chain process surviving and thriving in a rapidly changing
power sector, the utilities need to understand the importance of demand vis-à-vis the upcoming
new fuel sources.

Scratch if. Think ‘when’, how ‘fast’, and how ‘big’!!

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NTPC School Of Business April 27, 2019

‘Fighting’ the surplus

India is facing a surplus of energy and surplus power is ‘high-cost’ and ‘seasonal’. Let’s not
repeat the history of the Germans where they were in a situation of 61% power surplus in 2013
due to the surge of the renewable energy. The country had to beg people to take free energy and
even the utility had to pay others to take their energy!

Formulating the strategy according to the trends is an important criterion.

The following are the probable threats in today’s scenario of the power sector:

1. Consumer preferences (Open Access)

2. Governmental policy and regulations
3. Declining demand for electricity
4. Renewable energy to create a boom
5. Traditional business
6. Integration of Distributed Energy Resources

“Customer demand is leading to rapid technology advancements. To adapt, we

will need to shift our generation mix and operate our fleet differently so we
produce power and meet customer demand in cleaner, more flexible ways—
changing our business model to one more tied to value than volume.” —Stephen
Parrish, Enterprise Risk Management, Duke Energy.

So truly said, the power scenario is going for a paradigm shift towards focusing on value
enhancement rather than the volume making.

Utilities ‘surviving’ the Renewables

Utilities around the world face unprecedented challenges from rapidly changing market
demands. They must adapt to technological advances such as rooftop solar panels and other
renewable generating sources. This new market context is unpredictable and embracing it
requires a renovation for the utilities in their operating and business models.

Adding to this, the age old tradition of the power utility business with conservative work forces,
limited alternatives and regulatory constraints pose a difficult situation.

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Given the increasing cost of energy, customers are also looking for alternatives either to reduce
energy consumption through more energy-efficient equipment, or to generate their own energy
using rooftop solar panels.

Renewable power generation represents the largest share of new capacity additions in the past
five years in The Organization for Economic Co-operation and Development (OECD) countries,
as a result of the move towards cleaner energy and the continued fall of solar and wind

Figure3: Growth in solar capacity

installation costs. At the same time, utilities are trapped by the high cost of ageing assets, which
still represent over 50% of the installed capacity.

Additionally, the growth of distributed generation presents many challenges for utilities,
including the need for tariff restructure. New laws that are promoting de-carbonization also pose
constraints and hurdles. Coping up is being difficult.

Expanding the Energy Ecosystem4

The utility should cover the wide spectrum of opportunities that are coming up including energy
controls and demand management activities, home control devices, demand side management.

I feel that the strategic actions should be taken accordingly to participate in the rapidly
developing power technology and customer markets.

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NTPC School Of Business April 27, 2019

This framework consists of the different functionalities and the various markets that the utility
should diversify into. These consumer centric approach might lead to diversification and
profitable for the utility business.

STRATEGY FRAMEWORK
From the above discussions I would like to suggest the ‘Energy Circle’ framework, which I
formulated keeping in mind the above threats and opportunities in the power business. It
benchmarks across two broad areas:

 System performance: This measures current performance, based on the crucial “energy
circle,” which promotes an energy system that supports comprehensive economic
development and growth, secure and consistent access to energy, and environmental
sustainability.

 Transition readiness: This measures the future awareness which support effective and timely
progress in system performance. These include investment and capital, effective regulation
and political commitment, and most importantly the ability of the current energy system to
accommodate change.

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Environmental
Sustainability

Energy
Circle
Economic Security
Sustainability Gateaway

A balanced approach is required to maintain a sustainable growth for the utility and achieving
the targets in an efficient manner.

In the end I would like to conclude by saying that the utility

should build its own “brand” that positions itself in the mind
of the customer not just delivery electricity.

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