Validating the Business Case for Private Cellular (LTE & 5G) for Electric, Gas and Water Utilities

The shift towards carbon-free power is changing the traditional power supply from steady, concentrated sources to distributed, volatile ones. The significant increase in electric vehicles (EVs) is impacting the demand patterns, and as city buses, ambulances, police cars and shipping trucks electrify, an even greater foundation of the fabric of our society relies on the grid. At the same time, attacks on our digital critical infrastructure are growing every day.

To address these foundational shifts across the industry, leading Utilities are modernizing their grids to improve service reliability (SAIFI/SAIDI), reduce risks (forced outages, cyberattacks, and fires), and enable clean energy initiatives. These efforts drive the need for advanced communication systems that provide hyper-secure, reliable and cost-efficient connectivity across vast service territories.

While LTE has been a proven technology for many years, carriers have historically not met the security, reliability or coverage requirements of the Utilities industry, and it has been cost-prohibitive to lease spectrum directly. With the release of CBRS and an array of companies offering spectrum for private use, several Utilities have gone all-in on pLTE. Making this kind of investment financially sound for ratepayers and shareholders requires the alignment of many groups and technologies.

Based on our engagements with multiple Utilities, WWT has identified key considerations as you assess the business case for a full-scale pLTE investment, and we provide options for a more gradual investment strategy.

The promise of pLTE

Not since the advent of Investor-Owned Utilities (IOU) have Utilities felt a simultaneous and foundational shift in power supply, demand, generation, transmission, distribution, regulations, external threats and commercial models. As a result, Utilities must instrument and operate their grids in a way that considers reliability, affordability, volatile power generation management, demand load profiles, cybersecurity, climate change, workforce dynamics and more — all while contending with greater competitive pressures and tighter operational budgets.

Utilities must safely and securely digitize their infrastructure to enable operational visibility and automation in order to help reduce outages and lower maintenance costs for reliable services.

Think of digitizing your infrastructure as the equivalent of implementing a "Digital Nervous System" for your grid. The Digital Nervous System of the grid requires receptors (sensors) that generate information about the state of the grid. Nerves (networks) move data to the infrastructure that applies cognition (information architecture, analytics and applications) and converts data into actionable insights. Nerves must support a wide variety of data types, latency needs and bandwidth requirements across a variety of climates. Historically, these needs are accomplished through dozens of networks. This critical function is increasingly considered the "Third Grid," a foundational investment supporting all business units that is required to deliver safe, reliable and cost-effective power. Several Utilities view a pLTE network to be an integral part of the "Third Grid."

While cellular connectivity has been available for decades, Utility-specific requirements related to security, reliability, coverage and capital-biased business model (CAPEX vs. OPEX) need special attention. While spectrum was historically unavailable for private use, emerging trends such as the release of CBRS by the FCC and spectrum availability from private firms have changed the landscape.

pLTE networks combine the highly capable, scalable and proven nature of cellular connectivity with the operational, security and cost-model benefits of a private network. pLTE networks are, as the name implies, privately owned and managed LTE networks that are optimized for the unique needs of the operator, as opposed to broad consumer usage.

pLTE consolidates service for critical assets such as:

Advanced Metering Infrastructure (AMI)
Supervisory Control and Data Acquisition (SCADA)
Mission Critical Push to Talk (MCPTT)
Advanced Distribution Management Systems (ADMS)
Fault Location Identification Segmentation and Restoration (FLISR)
EV charging stations
Rural broadband
Mitigating wildfires
Distributed Energy Resources (DERs)

Additionally, pLTE gives Utilities control over their technology lifecycle, thus avoiding heavy costs when carriers reallocate spectrum prior to Utilities' sensors fully depreciating.

Ratepayers (customers) appreciate the reliability and resiliency pLTE networks deliver

A reliable and resilient network is crucial, especially since utility providers require continued operations of sophisticated mission critical and operational technology (OT). pLTE reduces the marginal cost of adding sensors to the grid, which improves operational visibility and enables automation while enhancing reliability indices such as SAIDI and SAIFI. Also, pLTE provides resiliency through greater device assessment, tighter security controls, increased encryption complexity and improved time to response (TTR) to cyberattacks while reducing compliance complexity. pLTE also affords greater control over investment lifecycle and minimizes some existing attack vectors that are common in public networks. This delivers greater system reliability year-over-year and resolves chronic problem areas within your grid.

In summary, pLTE improves ratepayer satisfaction by empowering grid operators to reduce the number of outages and shorten outages that do occur while enhancing cybersecurity.

Shareholders embrace the financial benefits of pLTE

pLTE can deliver for your bottom-line and prepare your organization for future digital transformation initiatives.

Optimizing OPEX spend and reducing the overall total cost of ownership (TCO) are key goals for any Utility. Although spectrum purchases and infrastructure integration investments can require significant upfront capital outlays, they can reduce recurring carrier costs and elongate network asset lifecycles. This leads to long-term OPEX savings.

Furthermore, pLTE diminishes ballooning OPEX costs, thanks to decreased marginal operating costs to connect additional devices. This also allows your network to support growing GridMod needs while keeping OPEX costs relatively steady.

In an ideal scenario, WWT estimates pLTE investment can reach break-even in as few as five to six years with a 20-year TCO reduction of nearly 70%.

Investing in pLTE supports your corporate brand strategy

pLTE can enhance a Utility's brand reputation by enabling next-gen use cases ranging from:

Facilitating the expansion of electric vehicle charging stations.
Initiating your overall clean energy transition strategy by enabling greater operational visibility which is necessary with increasingly volatile generation sources.
Providing connectivity services to smaller Utilities and other organizations in your service territory.
Subsidizing high-speed broadband to rural and underserved communities.

When compounded, the business, technical and customer experience benefits of pLTE adoption are vast. pLTE reduces overhead, shores-up resources and personnel for mission critical projects, drives new business opportunities, facilitates reliable compliance and bolsters your network security.

Evaluating pLTE

There are three critical questions to consider when evaluating a pLTE network for your organization:

1. Is pLTE cost-effective?

Building a pLTE network requires significant upfront capital investment including spectrum, towers, radios and end devices. Companies can spend anywhere from $30M to $118M on spectrum alone. With such a significant investment, entities such as a Utility's board of directors and state government Utility commissions may review your need for pLTE with stricter examination. They will need to approve the investment capital, require a reasonable timeline/expectation for a (capital) return, and establish strong TCO and ROI projections as compared to alternatives.

Broad adoption of pLTE across a range of existing and future use cases is critical for a full-scale pLTE investment to deliver an out-sized return. Doing so requires:

Executive championship: pLTE investment requires cross-organization buy-in, adoption and operational change, all of which require executive support to enact.
Lifecycle alignment: Key use cases, such as AMI and MCPTT, must leverage pLTE capabilities to justify the overall cost of capital investment, and they must be able to retire existing systems.
Consideration of the cost of inaction: Implementing a pLTE network is a lengthy endeavor. If device growth ends up being aggressive, failing to act in a timely manner could be detrimental to your overall business.
Unification of your business and technology divisions: Work within your lines of business to agree upon forecasts, rather than using "industry averages."
Alignment of your technical assumptions with use cases: For example, different types of spectrum, design densities and operational support teams can support different use cases, levels of resilience, and overall performance. Estimating costs with respect to the performance and operational capabilities of pLTE is key.
Value of lifecycle control: Include the expected lifecycle duration differences between a private and public network as spectrum reallocation on public carrier networks are a reality.
Security costs: Leveraging public carriers reduces visibility into your network security and requires additional levels of encryption from private networks which drives additional costs.

2. Does pLTE improve ratepayer satisfaction, reduce organizational risk and improve user experience?

Before approving pLTE investments, state government Utility commissions and agencies will require proof of ratepayer affordability while ensuring reliability and safety. Also, reducing operational and security risks are important to Utility boards of directors, not just bottom lines.

In the case of Distribution Automation (DA), pLTE provides capacity for intelligent edge devices, such as FLISR, to communicate timely outage alerts with greater detail. Furthermore, pLTE helps Distribution Grid Operators pinpoint failures, identify fault locations and respond efficiently with the potential for reducing outages by over 20%. Also, while these devices are deployed on public carrier networks too, the monthly device cost will limit the breadth of deployment. Ultimately, pLTE eliminates marginal costs for adding more devices, so FLISR and other DA devices are more broadly deployed and improve overall grid reliability metrics such as SAIDI and SAIFI.

Additionally, after High-Impact Low Frequency (HILF) events such as wildfires, hurricanes and tornadoes, carriers restore their networks on their own schedule with their own priorities. Utilities that employ carrier networks have little influence on which sites are restored first. Running your own pLTE network allows Utilities to restore critical parts of their own network first.

In geographies experiencing a greater frequency of wildfires, pLTE technology supports sensors that detect faulty wires and trigger fail-safe measures that shut off power before it becomes a public safety risk. This reduces temperature, lowering the dangers of additional wildfire outbreaks and/or spread.

In these ways, the investment in pLTE can support improved overall operations and reduce key risks to grid reliability today.

3. Can pLTE strengthen communities and your brand?

Utilities are a vital backbone of any community and strive towards common goals. pLTE supports environmental imperatives such as decarbonization through connected EV charging stations, DERs and energy optimization efforts that are reliant on data and intelligence. Socially, pLTE helps bridge "digital divides" by subsidizing the related costs of deploying broadband services to under-served communities and smaller, regional utilities.

Can you start small with pLTE?

For many Utilities, the potential benefits of pLTE around grid performance, operating costs and branding are evident. However, committing to a nine-figure investment in pLTE may not be feasible all at once. There are gradual steps that can put your organization on the path to realize the benefits of pLTE over time. Consider the following:

Focus on high-density geographies (metropolitan areas) where population warrants the near-term investment.
Focus on specific business lines and/or use cases such as generation plant wireless connectivity and distribution automation projects.
Leverage CBRS-GAA spectrum for the short term and on specific projects while developing a long-term strategy.
Partner with Service Providers, neighboring Utilities and/or System Integrators to leverage existing Infrastructure (Infrastructure-as-a-Service).

Starting small can reduce the initial time and cost but could create long-term risks such as not having access to the same spectrum across your entire service territory and creating disruptions as you scale usage. Therefore, it is critical to plan for successfully adopting pLTE technology and avoid it becoming another siloed network.

For a deeper dive into a gradual approach to pLTE coverage, read our current insights where WWT Utility-industry experts break down key business considerations and top-of-mind items.

Your trusted advisor for pLTE

Assessing the business case for your pLTE vision requires a deep understanding of mission-critical infrastructure that is operated by Utilities and pLTE technology. Additionally, a solution provider must recognize the costs, complexities and capabilities between public and private cellular technology to ensure financial models and executive-level presentations are accurate.

How should you evaluate solution providers?

pLTE can be a complex solution framework to understand, evaluate and implement. Engaging an experienced partner can accelerate the process and help you avoid time-consuming and costly mistakes. WWT can deliver on your pLTE needs and position you for long-term success.

Our Consulting Services team combines Utility, cellular and business expertise to help you develop your business case and strategy. As you evolve your business model and move towards testing, WWT's Advanced Technology Center (ATC) is a key resource. Our partnerships with more than 200 OEMs, in-house Global Service Provider team and Global Supply Chain services can help you evaluate and de-risk cores, radios, modems, end devices, cybersecurity platforms, analytics platforms, cloud connectivity and more. From "Idea to Outcome," WWT will help you assess, architect, test and implement your pLTE strategy as you embark and/or progress through your digital transformation journey. Learn more from WWT experts by requesting a briefing.