Smart grids could be the route to a truly renewable energy system

Keeping the lights on isn’t always as simple as it looks, and, in the future, we may well rely on data to do it. Technological innovations in big data and the Internet of Things are now changing the energy landscape for good, and the grid systems of the future will use data to optimise, automate and manage energy flows more efficiently.

Tomorrow’s smart grid could even resemble a brain, sending reciprocal information between household consumers, grid operators and generators. It would be able to pinpoint potential problems, predict fluctuations and make decisions to re-route electricity accordingly – seamlessly matching demand and supply.

“In the end, the smart grid will self monitor, self control, self manage, self heal and learn by itself based on what happens on the grid”, said Professor Rajit Gadh, Director of UCLA’s Smart Grid Energy Research Centre (SGERC). It may sound like the stuff of science fiction, but the deployment of smart grid technologies is already making an impact on the grid, and will have significant ramifications for the electricity market in the future. Without it, our transition to a green economy will be impossible.

Why the green revolution needs data
Since COP21 in Paris last year, sustainability has become a global watchword, but our growing reliance on renewable energy presents logistical problems of its own. Namely, how do you integrate renewable sources into traditional, and arguably outdated, grid systems?

Without smart grid technologies, our transition to a green economy will be impossible

Grids that were built to support large coal and gas-fired generators are now having to support more and more diverse, and intermittent, sources of energy, like wind and solar. On the one hand, there’s the issue of balancing supply when the wind isn’t blowing and the sun isn’t shining, and on the other, how to deal with oversupply during times of peak output.

In many places where the share of renewables has risen exponentially, suppliers are now jostling to gain access to the grid at times of the day when supply is exceeding grid export capacity. Some are even being asked to switch off by grid operators during periods of congestion, much to the ire of investors and policymakers alike.

It’s a surprisingly pervasive problem. Germany paid out $94m in compensation last year to wind farms that were forced to turn off 1.2 percent of their capacity. China, according to official statistics, wasted 15 percent of its wind capacity in the same year, with some provinces losing out on as much as 60 percent, despite having invested $102.9bn in the sector. This accounted for 36 percent of their global green investments last year. Meanwhile, experts also expect US curtailment rates to rise in the near future.

The US currently boasts 17 percent of the world’s installed wind capacity, and while China is ahead, with one-third of the world’s capacity, curtailment rates are so high it actually produces less electricity from wind than the US. “It’s a huge waste of investment and it’s contributing to emissions”, said Mark Clifford, Head of the Asia Business Council.

One challenge for renewable integration in China is geography, and more specifically, scale. Most of China’s wind and solar resources are located in the north and west, while the energy demand is greater on the densely populated east coast. “They need massive infrastructure to transport power from one side to the other”, said Adrian Timbus, Global Smart Grids Technology Manager at ABB, one of the largest engineering companies in the world.

China’s President, Xi Jinping, announced his ‘green power dispatch’ policy last year in a bid to solve the problem, and is now building the world’s most technologically advanced grid. Ultra-high-voltage power lines are central to the policy, which will see $64.5bn invested between 2011 and 2020 in the deployment of intelligent smart grid technologies.

However, Timbus said different regional requirements are driving the implementation of smart grid technology across the globe, and not just in China. “In Asia, the need for more power is driving investment, whereas in Europe the influence of renewables is the driving force. In other markets, like the US, this is primarily driven by the need to update ageing infrastructure. We need to reinforce parts of the grid so they don’t collapse. Data analytics will help us optimise the transition to the next power system.”

Power politics
In a 2010 report, McKinsey & Company estimated the total potential value generated in the US from a fully deployed smart grid could reach as high as $130bn per year by 2019. But, unlike in China, the focus of smart developments in the US has been on the consumer.

The Internet of Things potentially gives customers considerable autonomy over their energy usage

For the first time, the deployment of sensors, meters and monitors across the grid is allowing two-way traffic of information, gathering real-time data on how and when consumers are using energy.

The key to a sustainable future lies in how data will enable the smart grid to monetise consumer behaviour in real time, and offer financial incentives to modify that behaviour. “If the customer makes no change in their behaviour, then the role of the smart grid is actually harder, but if the customer changes their behaviour, then the role of the smart grid gets easier”, said Gadh.

SGERC is now developing mobile apps that will allow consumers to automatically schedule their appliances to be used during off peak periods. Gadh added: “I see the mobile app as an excellent conduit to study and understand consumer behaviour, and [we can] use the app to provide incentives.”

The large-scale roll out of household smart meters in places such as California, Italy and Germany points towards a future of sophisticated and localised demand response technologies, which Gadh suggested could lead to a radical devolution of power away from larger utility companies.

The Internet of Things, in which washing machines, dryers, electric cars and lights could all eventually be connected to the cloud, potentially gives customers considerable autonomy over their energy usage, both helping to balance grid loads, and save money for the consumer.

“With an app, the consumer could also turn off their rooftop solar panel or an electric car charging station, and that is completely different from a grid operator having complete control”, Gadh said. “The consumer in California and in several places around the world is becoming educated about energy resources, and is driving the policy. They are saying ‘I want control’.”

Whether consumers across the board will jump at the technology, however, is still not certain. Richard Hepworth, Director of Digital Transformation at PwC, suggested it is crucial energy retailers don’t confuse their consumer base with over-complicated products, and ensure the deployment of meters causes minimal disruption.

Despite this assertion, disruption is likely to occur in the electricity market as a result of these innovations – especially when it comes to supply chains. “I think there’s a general recognition that the traditional business model has to change”, added Hepworth.

In the US, more nimble, unregulated suppliers have started to crop up, with larger traditional utility companies creating separate, spin-off businesses to compete with them. In the UK, this could perhaps mean a changing role for the traditional major providers. Hepworth went on, stating: “It’s going to be an interesting space to watch, because different players could take on different parts of the supply chain.”

Whether this will lead to widespread fragmentation is not yet clear. It will largely depend on what regulators decide to do in the face of a rapidly changing landscape, and whether policy choices are made with a view to allowing more or less flexibility. In some regions, operators are allowed to do more than just distribute power, while others have strict boundaries preventing them from doing this.

Regardless of differences, one thing is certain; data is pushing the energy sector towards unchartered territory, and in this brave new world, the businesses involved must adapt or die.