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Managing supplier risk for smart grid implementation

This author no longer works for DNV GL.

Utilities contemplate investments of tens to hundreds of millions of dollars for the procurement of advanced metering infrastructure (AMI) and smart grid systems. Their objectives vary from power system optimization to preparation for the utility of the future, where customers become actively engaged in managing both energy consumption and production, such as photovoltaic systems and plug-in vehicles that put power onto the grid.

Complicating matters, utilities are investing in nascent or, in some cases, continually evolving smart grid technologies, which have been produced in relatively smaller quantities when compared with full production volumes. While many AMI/smart grid companies, including meter manufacturers, communication developers, and software companies, have been working on their solutions for a long time, the validated use of these individual products together as a large-scale integrated AMI/smart grid system over time has yet to be accomplished.

As AMI/smart grid companies face growing demand, they also risk their ability to manage their supply chain. The demand for electronic components and raw materials is high, and manufacturers that cannot rely on their suppliers could unwittingly subject their utility clients to delays.

In addition, some of these companies receive varied requirements from multiple customers.

AMI/smart grid companies that do not have a structured, disciplined system to manage these complexities will find it difficult to ship finished products that meet customer requirements and work consistently over the life of the AMI/smart grid device or system.

Consumers Energy in Jackson, Michigan, foresaw these conditions and developed a supply chain lifecycle program to identify and manage risk, based on internationally accepted standards for quality and risk. Consumers Energy is working with AMI/smart grid product companies to understand and potentially improve their processes and, thus, mitigate risks.

Brian Pugliese, senior principal consultant at KEMA, joins Bruce Smith, senior business consultant on the QA/QC Metering Team at Consumers Energy, to review the Consumers Energy supply chain lifecycle program and lessons learned from supplier assessments at DistribuTECH, January 26, 2012, 9:30–11:00 a.m.

What steps do you think could help mitigate system/device lifecycle risk?

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