The 'Smart Grid' is heralded as one of the keys to reducing carbon dioxide (CO2) emissions, making our power supply more stable and reliable, and lowering our power bills. You will see it illustrated by diagrams of windmills and solar panels feeding into an interconnected mesh of houses, factories, power stations and transmission lines - surrounded by lush green fields and grazing cows.
The intention is to convey the impression of a clean, green ecosystem that is making our world a better place to live. It is an ideal that is popular with environmentally conscious Generation Z, but difficult to envision for the Generation X and Y sceptics among us. In practice, it is actually well on the way to being made a reality.
What do we mean when we talk about a ‘Smart Grid’?
The ‘Grid’ refers to the network that carries electricity from the plants where it is generated to consumers. It includes transmission lines, substations, transformers, circuit breakers and the control and metering equipment needed to control how all of these interact.
In the same way that a ‘smart’ phone means a phone with a computer in it, a Smart Grid can be thought of as a ‘computerised’ electricity network. It uses two-way digital communication with intelligent electronic devices to instantly diagnose problems, continuously balance power production and consumption, and direct power flows in order to maintain a stable, reliable and efficient power supply.
An important feature of a Smart Grid is the ability to capture, analyse and understand the huge amount of operational and non-operational data that is now available from smart devices.
A 2012 report published by the University of Auckland Business School indicated that a $5.5 billion investment in smart grid technology could save New Zealand $23 billion over the next 20 years.
But there are some challenges
Regulators and consumers are pushing for more transparency and lower energy prices, while insisting on the same or better levels of reliability. But much of the existing electricity supply infrastructure, all over the world, dates back to the 1960s or earlier and is reaching the end of its useful life. Sometimes it blows up. Much of it needs to be replaced.
But if you replace it you need (a) the justification (particularly if the equipment is feeding a few hermits at the end of a 50km long, No. 8 wire transmission line), and (b) the money.
To prepare for a Smart Grid, electricity suppliers need funding to invest in intelligent field devices, new communication and control systems, software and information management systems that can gather, analyse and utilise the vast amount of data that will be generated. But they will struggle to find funding to develop Smart Grid technology while there remain conflicting demands on capital.
Exacerbating the problem, uptake of household solar power may increase dramatically as prices come down. Electricity suppliers still need to maintain a sound network for cloudy days, but if revenue shrinks, so does their investment fund. And if they increase prices, it will encourage even more uptake of solar.
In its latest asset management plan, Unison Networks says: “A Smart Grid provides the means for electricity utilities to respond to these drivers (referring to the global drive for lower CO2 emissions and more efficient electricity networks), but will require significant investment and innovation at a time when existing infrastructure is reaching the end of its life. The step changes in terms of asset management practices, utilisation of new technology and engagement with consumers are major challenges facing the industry.”
Electricity suppliers are addressing some of these challenges by developing new tools to help prioritise spend, and using risk-based assessment techniques to identify projects that can be safely deferred (such as replacement of the No. 8 transmission line mentioned above).
They are also considering using standby power and load-shifting technologies to remove the need for immediate network upgrades.
Ultimately the Smart Grid will help with this by providing opportunity to better balance load flows and improve the utilisation factors (the ratio of demand divided by capacity).
What are the opportunities for electricity suppliers?
- Smart Grids provide an opportunity for suppliers to involve consumers in helping to address network problems. Household appliances can be switched or temperature-moderated remotely or alternatively managed by smart phone, PC or cloud-based applications that constantly track usage and hourly tariffs. Generation Y, (the I-Pod generation), love this kind of stuff.
- Consumers will also be increasingly involved in energy generation and storage, helping to instantaneously balance electricity supply and demand while reducing transmission losses. Generation X might be interested in this to supplement their retirement money, Generation Y to reduce power bills, but Generation Z (our ‘screenagers’), will love it because of its potential to save the planet.
Electricity suppliers are uniquely positioned to be the managers and facilitators in such an ecosystem.
- Overall demand growth is flat at present, with more energy-efficient lighting and appliances, and better-insulated homes. But eventually demand will have to increase to cater for an increasing population, especially if uptake of electric vehicles accelerates, as many think it will. This has the potential to be a significant growth market and electricity suppliers are ideally positioned to service it.
- Saving energy doesn’t just advantage customers. It also allows the electricity suppliers to operate more efficiently and effectively, creating productivity improvements that benefit us all.
- One of the most exciting opportunities lies in what we can do with the vast amount of data that is going to be generated by the Smart Meters and intelligent field devices. Data can be shared and used collaboratively to develop new services and new products that haven’t even been thought of today.
Electricity suppliers could become to the electricity industry what the internet has become to the telecommunications industry – a catalyst, platform and facilitator for a complex interconnected ecosystem that utilises every connected network and consumer asset to provide secure, reliable and efficient power.
But they need to be preparing for it now. There is a great deal of work to be done in developing information management systems, standardising telecommunication and SCADA systems, understanding Gen X, Y and Z behaviour and modelling the likely future uptake of edge technologies such as electric vehicles and home energy solutions.
What are the opportunities for consumers?
Industrial and domestic consumers are going to have much more choice about who they buy electricity from and how they use it. They will have real-time price and usage information and be able to use inexpensive automation systems to optimise power use – minimising cost without unduly affecting production schedules or, in the case of domestic consumers, lifestyle.
Consumers will have the option of contributing to the stability of the Grid by being able to offer increments of interruptible load – and get paid for it.
There will be mechanisms for owners of embedded generators to sell power back to the Grid or to nominated individual buyers.
The challenge, particularly for industrial consumers, is to ensure that switching and control facilities are future-proofed, i.e. able to take advantage of the features of the Smart Grid in order to reduce costs and create opportunities to generate supplementary income. Some of these opportunities exist now.
The electricity supply industry is at the cusp of significant change. While the change to a Smart Grid will ultimately result in a more efficient, reliable power supply, and considerably more choice for consumers; the immediate challenge for the industry is how to negotiate the transition while controlling cost and maintaining current levels of service.
It is a complex task requiring overarching coordination, agreement on the technology and data standards that are going to apply and, for consultancies, thinking beyond traditional design service offerings and applying their expertise to a much wider range of problems.
Thinking beyond the immediate challenges, the Smart Grid offers some amazing business opportunities for switched-on electricity suppliers, consumers and product developers.
It’s time for a systems readiness check: are we doing everything we can today in order to be prepared for tomorrow?