NARRATOR Welcome to the DNV GL Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.
MATHIAS STECK Welcome to a new episode of DNV GL Talks Energy. My guest today is Martin Hauske, Leading Nokia Networks for Energy in Asia Pacific. Welcome, Martin.
MARTIN HAUSKE Thank you Mathias, for inviting me.
MATHIAS STECK Martin, we want to talk about new technologies, mainly in the electricity grid, but also about implications of these on security on business models. But before we start with this, it would be really great if you could first introduce yourself a little bit as a person.
MARTIN HAUSKE My background is 20 years utility, starting with SAP, then IBM, and last job was partner at Accenture, in charge of smart grids, so, I've seen the shift from traditional ERP to more advanced business models, smart metering, smart grid.
MATHIAS STECK Right, so hearing the name Nokia, when I think back into the start of my mobile career, I think I had small handheld, was a Nokia 1100 or something, and then I saw my boss having a Nokia communicator, and I was incredibly jealous. But for everyone who got stuck in history somewhere there, could you explain what Nokia is today, and how the company got there?
MARTIN HAUSKE Now comes the commercial break. Nokia always had a networking business, and the handset business. So, we had two parts of the company, one more B2B, one more B2C. We’ve sold that handset business to Microsoft for a nice round sum, but we kept the IP. So, we still have got IP, when you see Nokia being sold, Apple are using some of our patents actually, and we get IP revenue. But Nokia in the meantime also merged with Siemens Networks, then later we bought Alcatel-Lucent. So, now we are the only end-to-end telecommunication company going all the way from mobile-based stations, like 4G, 5G, then IP and optical networks, then fixed network, like your fibre to the home stuff.
We have got a growing software business, and enable things, analytics, security, and finally, a decent-sized services business where we manage over 30 operators’ networks, like Optus. So, we have got a broad end-to-end communication proposition.
MATHIAS STECK Talking about communication, and coming back to the electricity grids, if we look into what is going to happen in the next couple of decades, with the buildout of electricity, more renewables coming in, IoT being there, communication IP/MPLS will be the backbone of the electricity grid. So, how do you foresee that happening? Because at the moment you have utilities in isolation, you have transmission grid operators, distribution grid operators, you have technology providers. How do we make sure that these all come together, to then finally build up this backbone of communication?
MARTIN HAUSKE I think it’s the journey we are working with customers on right now. Perhaps if I take a step back, traditionally utilities had ten, 15 communication systems. They had microwave, they had different frequencies for transmission, they had handhelds for their crews. What we see is initially people, in a new business model, they need to become more efficient, they fold everything into an IP-based network. So, the move towards IP I think is a given, IP/MPLS.
Having said that, those new networks still need to support the critical requirement of low latency, etc. This is where our bread-and-butter business comes in, fixed network, DWDM fibre, routing guaranteed latency, protection that works. The next step is when we did Smart Grid, at the beginning we did RF mesh. RF mesh sounded like a brilliant idea, cheap, easy to deploy, but we found very quickly that it does not scale, it does not enable new business models, like EV charging control, solar or batteries.
What we see more now, as customers are moving to private LTE, where it gives them the ability to have a mission critical network across their patch, maybe work with operators for remote areas, but have this controllable environment where they can manage the quality of service. They fulfil the new role of a distribution system platform provider, DSO. With this way, IoT for example, you see more information coming up from devices, from transformers, from solar, from EVs, from storage at home.
The good part is on the technology side, is being accompanied by the move towards 5G, which is designed for something like that. So, we see the early examples now at 4G LTE, like autonomous trucks in mines, and we want to have autonomous cars, we probably need to go to 5G to have this ultra-low latency millisecond. Nokia is very well-positioned as one of the leaders in 5G in this space.
MATHIAS STECK Right. I come back to the point you make that there are so many different communication platforms, which is becoming better now already, but still there are a lot of different communication protocols.
So, the question of standardization going forward, what is your take on this? There are still so many different protocols, different appliance providers, what needs to improve on that role?
MARTIN HAUSKE Nokia is very big on standards, so we are working actively in standard groups. The other part is customers in particular, our industry utilities are very conservative in moving to new paradigms. So, typically you need to support legacy protocols, which we are doing extensively. The last part is we are engineers. My team members say, really want to kick the tyres. I don’t believe any PowerPoint, I don’t believe any sales talk, let me try it out in the lab with my RTUs, with my devices, validate that it really works for my use cases. That’s where we see Nokia stepping up in a major way, different from other providers, where we have a dedicated centre, for example, in plain we work with the University of Strathclyde, where we have large labs to enable this kind of testing; to give the customers and partners the confidence of the solution of our work.
What we see with the shift towards new business models is you’ve got use case level, and from use case it goes down to what is the architecture, and then what is the solution, and actually implementation. So, we don’t start from technology, and just, oh Nokia has got this new mousetrap, but we have got part of the solution that enables like, for Sempra Renewables, the monitoring of windfarms, and bring that information back to analyze it. So, working with partners like OSI, where we help the customer analyze data in a better way.
It’s not Nokia all, but it is a solution with partners, and that maturity of solution, and testing of that solution enables mission critical systems to move towards new technology.
MATHIAS STECK I want to come back to the business models a bit later. One thing I’d also like to talk about, you mentioned EVs already, and 5G being so important for a very fast communication, that leads also towards the question of security. This fast communication is, in this case, a prerequisite for security, but there are different levels of security when we have so much communication.
So, if we have so much data flying around starting things, like one device is sending information to another one, and it reacts to this; that also provides a lot of new entry points for, for example, cyber-attacks. Or, it could lead to things like miscommunication, and things happening around this. What is happening around this whole sector of security in this highly-interconnected world?
MARTIN HAUSKE When you look at what’s the leading example for security, it’s the mobile operators, because mobile operators, your mobile phone is critical for you. You are creating content, you’re tweeting, you are using LinkedIn, email, you’re creating content with YouTube. In that environment, there’s no more parameter defense.
The idea that in the old days SCADA are separate from the rest of all those systems, so it’s safe; I think it’s outdated when you look at RTUs being hacked, cameras being hacked, EV charging points being hacked.
So, the new security model is an integrated model, the network has to be intrinsically secure, and be able to react to threats. There is going to be always attacks, so, how do you detect irregular behaviour with artificial intelligence, how do you then take counter measures limiting if somebody has got access rights to certain base stations, for example, if you suddenly access other assets, those irregularities are automatically being flagged, and then taking counter measures, limiting access or isolating access.
If you suddenly access from somewhere in China, if you’re not on a business trip there, then it’s highly likely that somebody stole your profile data, your log-in data. With phishing, with these tools, it’s impossible to foresee / forestall any kind of intrusion. But how do you deal with the intrusion? Limit the extent, limit the ability to reach out. And then utilities, if you look at Ukraine, Russia hacked down half of the grid, the war was over in a few weeks. It’s just a nightmare scenario. In US, we have got no-accept compliance, where other state actors were hacking. In that kind of environment, we enable this compete monitoring of what’s going on in the security profile, has somebody changed something which should not have happened?
So, we do this tracking, we do the security profile, the processes. With AT&T, for example, we already manage 40 million devices. So, for us this is business as usual, we just apply to utilities.
MATHIAS STECK So, what you just described, that’s already good news that there is some good overview about what’s happening in the grids, but it’s going further than that, there’s also a lot of regulation involved. We hear a lot about GDPR, for example, information is a very valuable thing, it’s something we need to protect. How does technology and regulation play together?
MARTIN HAUSKE I think there are two parts to the question, one is the utilities; the business model is changing. And the natural new areas for utilities are things like smart cities, because we are everywhere, and cities typically don’t have money anymore, but they want to offer new services. More security, better traffic management, utilities are ideally positioned for that.
The second one, utilities have typically fibre for their own SCADA system, for their own backbone; it makes a lot of sense to offer telecom as a service through telcos, to bring broadband to less privileged communities. The typical telco operators and go after the most profitable customers, again Malaysia, TNB just has been asked by the telecom minister to provide two million broadband homes. That kind of leverage is an existing infrastructure, and extends it.
How do you deal with the regulated asset versus competitive asset? Do you have open access for other telco operators? So, like in Singapore, with the fibre backbone, so those kind of things I feel utilities, we need to proactively bring those topics up, and then explain what is the rationale, what is the benefit for consumers. Lower rates or broadband, or some of the profits would be funneled back to the core business, enabling lower rates. Or EV batteries in Germany, for example, batteries were considered generation assets, so, prohibiting naturally the distribution from using that. Which, looking at Germany, with so much solar happening under distribution network kind of defeats the purpose. You and I are not going to look at the network and say, I'm going to put a million-dollar battery out there, five kilometres from the substation. We don’t have the visibility.
So, what I've seen on the opposite side, the customers like United Energy in Australia, they filed a rate case where they were able to demonstrate lower cost of provisioning the network and integrating renewables, thanks to storage. So, the regulator side up on that because the outcome for the consumer is better, lower network charges. So, I think utilities need to proactively engage in those discussions. They will not always win, but Nokia has seen many cases globally, we are more than happy to share some of those with our utility friends, to make sure that the regulated businesses are aware of some of the pitfalls, and how technology can in the end lower cost. I think the German example is probably not the best one, when I look at how massive investment we have undertaken, how high the network cost has become because of renewables.
MATHIAS STECK On this, new business cases for utilities. In the past they had all the power because they were the guys who had the electricity. Now, we see it moving because of technologies you’ve just described, more and more towards the power sitting in the platform, which has the knowledge of what is happening in the grid, which can connect the different players from the generation, to the loads. You’re working together with the utilities, how do you see them react to this now? Years back we had the death spiral of utilities, and they were challenged with distributed generation, now they are challenged by digitalization, IoT, these new business models. How do you foresee the roles of utilities in the future, and what do they have to do to maintain relevance?
MARTIN HAUSKE I think they need to evolve in their role. The old model of distributing electrons is a low-margin, highly-squeezed model. It could become a backup for people generating their own power with solar and storage. On the other hand, if we look at the bigger picture, where we are driving it to decarbonization; I just came back from California, when I look at utilities like Sempra, they actively embrace it, they see it as an opportunity to put storage out in the grid, to enable even less privileged people, who don’t have the villas or the roof space to put in millions of solar. But then you have community solar. Community solar stored in batteries in the neighbourhood, so they can still participate on the technology.
So, enabling even less-privileged customers to have lower energy cost leveraging renewables. At the same time, somebody needs to keep a light on in the end. The responsibility if everybody says, oh I run my own grid, so who is going to make sure the grid stays stable?
There then needs to be an entity, and my belief is that it’s going to be the distribution system operator, tasked by the regulator to say, okay, you are going to be the one who balances the load, who shifts loads with VPP, who has storage to buffer, keeps voltage stable, those tasks somebody needs to do. The utilities can do that.
At the same time, I agree, they need to evolve, become much more value adding, where the decarbonization could mean I offer an electric fleet. In Sacramento, San Diego municipality, they are looking to massively decarbonize, minus 60%. And in order to do that, they expect electricity sales to increase up to 40%, because all transport currently comprises 39% of carbon emissions. If you want to move the transport over, you need to have more EVs, more EV charging, so it becomes an opportunity at the same time.
Here in Singapore, my good friend, Chee Kiong, he’s looking to do smart campuses. We are looking to work together outside of Singapore for rural microgrids; using those new technologies to bring electricity and electrification. So, it becomes more of a services business than the traditional poles and wires business. The punchline in the end is obviously information is key to that. If you want information, and in order to get the information, and contract to transact, you need to have reliable, secure systems with latencies that Nokia provides.
MATHIAS STECK So, it’s Chee Kiong from SP Group actually, who are also having here their new blockchain model for trading ranks. So, that’s probably one utility which is moving quite fast in the grid environment. We’re unfortunately, coming already to the end of this episode, but we are recording here at the site of the Singapore International Energy Week (SIEW) 2018, and I would like to ask you what your main takeaway from this year’s conference would be?
MARTIN HAUSKE It was an excellent conference. I'm very privileged to be part of it as analyst this afternoon. But also, I was amazed looking at some of the ministers yesterday in the dialogue, sharing very aggressive visions of where they want to bring the grid, and Asia with interconnects, with high-renewable targets, and the awareness on climate goals. The 2-Degree goal, so I think it’s very exciting times to be in this industry. There’s definitely change, and one point that we want to be part of is sharing our knowledge, and learning from other people; so, that exchange, I think SIEW has been an excellent format to do that, and it’s been a pleasure to be here.
MATHIAS STECK Thank you very much, Martin, for your very interesting insights. This was Martin Hauske, leading Nokia Networks for Energy in Asia Pacific.
NARRATOR Thank you for listening to this DNV GL Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talksenergy.