why electric cooperatives are considering broadband · pdf filewhy electric cooperatives are...

Why Electric Cooperatives Are

Considering Broadband Networks

Broadband Communities Summit

May 2, 2017

Tim BryanCEONRTC

Eric FreesmeierCEO

Pulse Broadband

Joel AllenSVP, Member Services

CFC

Bob HanceCEO

Midwest Energy

Lynn HodgesCEO

Ralls County Electric

Tim BryanCEO, NRTC

2

Video Calling

150 - 300 MB per hour

3

Things this room knows about that use data …

Ultra HD 4K

True HD 1080p

Standard HD 720p

0.7 GB/hr

3 GB/hr

7 GB/hr

Streaming Video uses 0.7 GB to 7 GB per hour

Online Gaming

100 – 500 MB per hour

There are a number of other widely used services that consume a lot of data

Streaming Music

30 - 140 MB per hour

4

Forbes, FEB 9, 2016 @ 09:18 AM

Why The Internet Pipes Will Burst When Virtual Reality Takes Off

Things this room might not know about that use data …

File sharing application

Online gaming application

PLC Meter Data Usage

1 read / month 1 KB

Meters 25,000

Monthly data 25 MB

Total/month 25 MB

5

The Smart Grid today is also on a data binge…

Smart Meter Data Usage

1 read / 15 minutes

2,880 reads/month 2.9 MB

Meters 25,000

Monthly data 73 GB

1 read / minute 43.2 MB

Bellweather meters 250

Monthly Data 11 GB

8 Meter snapshots/hr 5.8 MB

Meters 25,000

Monthly Data 145 GB

Queries/overhead 25 GB

Total/month 254 GB

A few years ago…

…to today…

More information and control from an expanding array of end points

6

As we evolve to the true Smart Grid, we will need more data from more end points on a more frequent basis

Energy storageElectric vehiclesDistributed

Energy Resources

Demand response/

Load Control

SCADA

Distribution automation

Power qualitySmart

Capacitor Control

Outage Detection

Transformer Monitoring

High Voltage Line

Temperature & Weather Sensors

Load balancing

More frequent information to enable real time grid analytics and pricing options such as Time of Use pricing and Critical Peak pricing

The true vision of the Smart Grid

1

2

7

How are networks being built to accommodate data?

Your Network

▪ Distribution Management System

▪ Asset Management

▪ MDM

▪ Business Functions

▪ AMI

▪ SCADA

▪ Distribution Automation

▪ Demand Response

Applications

Cellular Networks

Cable/fiber Networks

8

Network Topology, for ALL NETWORKS, starts the same way

Main Office

Fiber Hub

Fiber Ring Network

9

Network Topology, for ALL NETWORKS, expands the same way

Fiber Nodes (or towers)

Main Office

Fiber Hub

Fiber Ring Network

10

Last mile is different for every network

Electrics Cellular Wired

Fiber PON

Licensed RF

Unlicensed

Mesh RFLicensed

RFFiber PON

Coaxial

Cable

Twisted Pair

Copper (DSL)Future

3.5

GHz

11

Cooperatives can build a flexible scalable network!

▪ Real-time synchronous data flow between end points . . . beyond the meter and to the specific appliance and application level

▪ Secure network controlled by utility

Coops will need a fiber communication network to support Smart Grid …

▪ Expand as the market and economics dictate▪ Broadband service for commercial and industrial

customers

▪ Backhaul for wireless and other telecom providers

▪ Partner with local telephone coops and companies

… and they can use this network to provide broadband where and when it makes sense

12

Cooperatives can PARTNER!

Georgia Transmission with telephone cooperatives…

CTC Communications and Arrowhead in Minnesota…

13

The Best Next Step: A Feasibility Study

A great way to model your ideas

▪ Fiber Backbone, or…

▪ Full Fiber-to-the-Home build

▪ Detailed revenue and cost estimates

▪ Competitive analysis

▪ Financing benchmarks

▪ Partnering opportunities

Full Business Plan

Eric FreesmeierCEO, Pulse Broadband

14

Building Fiber Communications Networks for Electric and Broadband Solutions

15

Prediction One

Within the next ten years . . .

Most rural electric cooperatives will enhance

their electric grid with a communications

network – with a redundant fiber optic

backbone at its core – to enable metering,

smart grid, distributed generation, and

smart home applications.

16

Electric coops can evolve their networks over time using a mix of technologies

An expanding number of endpoints …

… Connected using a mix of technologies

… can evaluate extending broadband to community

Fiber to the Home

Wireless BroadbandMicrowave

Licensed RF or cellular

AMI Mesh Networks

Fiber Backbone

17

Prediction Two

Within the next ten years . . .

Many rural electric cooperatives will

leverage this fiber optic backbone network

to become broadband providers – either

wholesale, retail, or in partnership with

other local providers and/or a combination

of both.

18

Why do electrics want to provide broadband?

Broadband leads directly to income and employment gains;Income and employment gains lead directly to electric load growth

Source: 2013 study funded by the National Agriculture and Rural Development Policy Center

Rural counties with high levels of broadband adoption (>60%) compared to similar rural counites that did not

Rural counties with low levels of broadband adoption (<40%) compared to similar rural counites that did not

Median Household Income Unemployment Total Employment Number of Firms

2001-1

0 G

row

th

2001-1

0 G

row

th

2001-1

0 G

row

th

2001-1

0 G

row

th

High BB Adoption Otherwise Similar Low BB Adoption Otherwise Similar

Income grew faster Unemployment grew slower Lost more jobs Lost more firms

19

Coops are the answer for Rural America

Cable MSOs and Telcos will always focus on urban and suburban first

▪ For profit companies seeking to maximize ROI

▪ Can almost always generate a better ROI in areas with higher density

Cooperatives are best positioned to provide Broadband to their communities

▪ Not-for-profit, member-owned

▪ Understand and accept long pay-backs

▪ Like electric, fiber optic networks are multi-generational networks (25-50 year life)

20

Steps in the Feasibility Study process

Initial ReviewOn-Site Plant

ReviewInternet Band-width Analysis

Competitive Analysis

Model Construction

▪ Gather information

including maps,

shape files, GIS

and other data for

analysis by Pulse

Broadband’s

Design and

Construction

teams

▪ On-Site Kick Off

▪ Discuss goals of

project and issues

related to project

▪ Physical review of

plant, substations,

offices etc. to

gather info for fiber

path, make ready

issues & cost est.

▪ Determine potential

bandwidth sources

and associated

costs for financial

model

▪ Research

competitive

environment and

pricing

▪ Recommends

pricing and

packaging plan for

financial model

▪ Develop full

financial model

based on info

gathered

▪ Costs, revenues,

BOM, etc.

▪ Amortization

schedule and

associated detail is

also developed

On-Site Model Presentation

Next Steps▪ Varies by project; Could include member surveys, detailed

timeline and construction plan, design, construction start

1 2 3 4 5

21

Cooperatives can PARTNER! Use the feasibility study!

Overlap of Michigan generation and transmission lines with existing fiber routes

Overlap of ILEC and RLEC rate centers with electric service boundaries in Minnesota

22

Getting Started

Start small

▪ Construct a fiber backbone by connecting offices and substations

▪ Consider Midwest Energy

› Started with 85 miles and 900 homes

› Amended construction plan to smart grid

› 80% of network funded by RUS Electric Loan

› Now constructing 1,800 miles over five years

23

Closing Comment . . .

Let me tell you a dirty little secret that

no one wants to admit.

Most things wireless are not

really wireless.

Without the wired network, there

would be no wireless.

Ernie Carey, SVP Engineering & Construction, AT&T

Joel Allen

SVP, Member Services

CFC

24

Financing

25

Considerations for Broadband Investment

No one size fits all at this point due to the varying approaches co-ops are taking

▪ Delivery methods

▪ Service mix

▪ Network design

▪ Organizational structures

▪ Financing options & approach

▪ Roll-out approach

▪ Partnerships

26


Loan Structure Examples

RECFiber Assets

SubBB Provider

Scenario A

LOAN

REC

SubFiber Assets

BB Provider

Scenario B

LOANREC

Fiber Assets BB Provider

Scenario C

LOAN

CREDIT

SUPPORT

27


Critical Component of a Loan Request

▪ Comprehensive business plan

› Financial projections (5 years) with statement of assumptions

› Market studies

› Marketing plan

› Competitive analysis

› Network design

› Exit strategy

28


Positioning for Access to Capital

▪ Electric co-op in strong financial position

▪ Manageable size and scope

▪ Organizational structure

▪ Equity investment/cash contribution

▪ Guaranty authority/approval

▪ Post-transaction balance sheet

▪ Thorough due diligence

▪ Reasonable financial projections & assumptions

29


Most Lenders looking for:

▪ Phased-in approach to project growth

▪ Business plan, feasibility study, marketing study & financial projections (project & co-op)

▪ Support from Electric Cooperative

▪ If at subsidiary - guarantee from electric cooperative

▪ Loan term(s) recognizing varying life of assets

▪ Project positive cash flow in reasonable period of time

▪ Engage early

30

Thank You!

Bob HanceCEO, Midwest Energy Cooperative

31

Why Electric Cooperatives Are Considering Broadband Networks

32

Who is Team Midwest?

▪ Midwest Energy CooperativeA member-owned electric utility providing electric distribution and an assortment of energy- and telecommunications-related programs and services to more than 36,000 members and customers in 11 counties in southern Michigan and northern Indiana and Ohio

▪ Midwest PropaneA wholly-owned subsidiary of Midwest Energy Cooperative providing service to about 6,200 business and residential customers in 15 counties located in both Indiana and Michigan

▪ Midwest ConnectionsA service of Midwest Energy Cooperative providing broadband communications solutions including fiber internet and telephone, to 4,000+ business and residential customers in southwest Michigan

33

The Smarter Grid

▪ Investing in a robust, two-way fiber communications system across our distribution grid to power utility solutions into the future

▪ Phase I - 243 miles through substations and facilities and 1,800 miles of primary lines

▪ Financed through a RUS work plan loan

34

The Smarter Grid

▪ We don’t know what’s coming, but know it will be driven by technology across the grid and we need to be prepared

› Dynamic voltage control

› Outage management/Distribution Automation

› Integrated distributed generation

› Smart Homes & IoT

35

Utility of the Future

▪ Leveraging our communications infrastructure to deliver fiber-speed data and voice to our members

▪ Five–year deployment across southwest Michigan service area (2015-2019)

▪ 4,000+ now using fiber internet for home and business

36

Best-In-Class Internet Solutions

Grassroots approach: Join the Crowd

37


243 Miles

SW District

121 Miles

SE District

38


▪ 15 Zones now in service

› 2017 build includes West North Dowagiac, East North Dowagiac, Marcellus and Mattawan

▪ 16 Zones in pre-registration

› 2018 and 2019 construction still up for grabs

▪ Next Steps

› Collecting expressions of interest for southeast Michigan service area

› Filling in the gaps

Lynn HodgesCEO, Ralls County Electric

39

Ralls County Electric CooperativeFTTH Project

40

Ralls County Electric CooperativeNew London, MO

41

Project Overview

▪ The project provides a fiber optic network to residential and commercial members and anchor agencies within the Ralls County Electric Cooperatives 5 County service area.

▪ We are also utilizing the fiber network for Substation and AMI communication as well as future smart grid technologies.

▪ We are now building into communities outside the Cooperative service footprint.

42

Statistical Information

▪ Located in Northeast Missouri near Hannibal Missouri or 100 miles north of St. Louis

▪ 1,402 miles of energized power lines

▪ 950 miles of fiber optic network

▪ 170 miles of drop fiber

▪ 6,172 connected meters

▪ 4,725 members

▪ Averaging 4.30 members per mile

43

FTTH Project Cost

Outside Plant $20,047,816.00

Headend $ 1,600,000.00

Total $21,647,816.00

Miles of fiber 950

Drop Fiber 170

Cost per mile $ 19,328.40

# of Members 4725

Cost per member $ 4,581.54

44

FTTH Project

▪ Contractors were utilized on the project.

▪ To minimize make-ready cost, messenger was installed within 20” of the system neutral.

▪ Contractors had to be approved to work within the power zone.

45

Penetration Rates

46

Residential Stats

47

Commercial Stats

48

FTTH Project

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