For close to a century, the structure of the electrical grid remained largely unchanged: electrons were generated at a large power station fuelled by coal or gas before being sent down high-voltage transmission lines and distributed throughout homes and businesses across a given country.
This system was originally conceived to support fossil fuel power plants, which benefitted from the economies of scale it presented. In other words, building one large power station was more efficient and cost effective than constructing several smaller ones across the country.
Over the decades, however, consumers have become disengaged with the energy market: having lived miles away from any source of electricity generation for so long, it became easy to take instant access to power for granted.
Today, a quiet revolution is occurring in the dark corners of the grid. Advances in technology are reducing carbon emissions while empowering consumers to take more control of their energy usage. This is causing a seismic change in the role of public utilities, as well as the way electricity is produced, transmitted and consumed.
Decentralising power
Until a few years ago, the centralised system worked for most forms of energy generation. But the adoption of new technologies – particularly solar photovoltaic panels and wind turbines – has started to drive change throughout the market.
The cost of generating electricity from renewables has dropped dramatically over the past decade, especially in the last five years. Investors who were initially wary of green projects are now beginning to embrace them – no doubt helped by the raft of government subsidies prompted by global decarbonisation goals.
Advances in technology are reducing carbon emissions while empowering consumers to take more control of their energy usage
In fact, according to REN21’s Renewables 2018 Global Status report, renewables accounted for around 70 percent of net additions to global power capacity in 2017 – due, in large, to the cost competitiveness of solar and wind power.
These distributed energy resources are fundamentally different from historically centralised power stations. Renewables like solar panels, wind turbines and small-scale hydropower systems lend themselves to a decentralised grid because of their flexibility and modularity – energy from wind, sunshine and water can be captured nearly anywhere.
Despite these changes, the grid will still be an integral framework moving forward. “It’s very clear to us that not only do we need the grid, but we have to think about what a grid is,” Louis Shaffer, Distributed Energy Segment Manager for Europe, the Middle East and Africa at power management company Eaton, told The New Economy.
“It’s the ability to transfer electrons, and that is one of the great things about electricity: you can move an electron from somewhere in Scotland to somewhere in France almost instantaneously.”
The grid network – as well as these interconnections between countries – will be an essential component in managing the coming change, but a centralised model is simply not sustainable moving forward.
Getting smart
Further developments in renewable technology will inevitably redistribute power in the energy market, giving ordinary consumers more control over their electricity usage. At present, there is almost no barrier to building a power generator in your own home – for a small cost, anyone can install solar panels on their roof.
Consumers are showing a strong appetite for this control, too. Although ‘prosumers’ – consumers who also produce their own energy – are still a minority in the market, Pietro di Maria, Chief Commercial Officer at Green Network Energy UK, believes smart meter technology is engendering real change in this area, allowing utilities providers to differentiate costs over the period of a day based on fluctuations in supply and demand. In fact, at the current rate of development, advanced smart meters will soon be able to monitor a home’s energy usage on a half-hourly basis.
70%
Renewable energy’s contribution to net additions in global power capacity (2017)
125GW
Estimated size of the global energy storage market by 2030
“If we introduce this kind of structure… [it] is going to be a revolution because we are going to match the consumption with the production,” di Maria said. There are still a few obstacles in the way, including the slow roll-out of smart meter technology and a regulatory framework that is not ready for revolutionary changes any time soon. In five years or so, however, di Maria envisions a big future for the smart home.
Electric vehicles give prosumers another element of control over their energy input and output. Unfortunately, they will also have huge implications for the grid. Bloomberg New Energy Finance (Bloomberg NEF) has predicted half of all new cars sold by 2040 will be electric vehicles; plugging just one into the grid, however, is said to be the equivalent of adding three houses in some instances.
While overcoming this challenge is not impossible, the infrastructure must still be built and the storage of electricity must be paid for. According to Shaffer, this is something grid managers will “have to get [their] heads around”. It is also crucial for electric vehicles to be charged in a smart way, meaning cars charge when capacity is available on the grid rather than exacerbating an already stressed system.
A smart charging system, therefore, would account for renewables, which generate energy at variable outputs. “You don’t want the electric vehicles to be charging when there isn’t any wind and there isn’t any sun,” said Felix Chow-Kambitsch, Head of Flexible Energy and Battery Storage at Aurora Energy Research. “You’ll want to synchronise the charging with the renewables output.”
This system will take household demand into consideration by charging cars overnight, when demand is low, rather than in the evening, when a large number of people are returning home from work.
While these are seemingly small adjustments, they could have a massive impact on the grid’s capacity to deal with millions of new points of demand. The UK’s National Grid has said accommodating nine million electric cars could require 8GW of additional power generation capacity. By changing to a smart charging system, however, that output could be halved to 4GW.
These benefits could be amplified further through vehicle-to-grid (V2G) charging, a method of two-way charging in which battery-powered vehicles export electricity back to the grid while the car is parked and plugged in. However, most researchers tend to think the impact of V2G would be marginal.
In fact, in 2011, the Massachusetts Institute of Technology stated that modifying conventional, unidirectional car chargers would be “substantial and expensive”, adding that the economic incentives appeared to be weak.
Ultimately, if V2G charging is commercialised, it will be up to consumers to decide whether or not they make the leap. Shaffer believes the decision is similar to installing residential solar panels: “If the payback makes sense to you versus the wear on your battery, some people will choose to do it, and some people will say, ‘I don’t care, I just want my car to be able to go from A to B’.”
The key word for the grid of the future is ‘flexibility’. With electricity generation coming from a raft of new sources, grid managers will need to learn how to cope with variable production as the distance between peaks and troughs of supply grows.
Current developments
To answer these questions, industry experts are looking to further advances in technology. Electricity storage has been around in one form or another since the early 20th century. The ancestor to modern technologies, pump hydroelectric storage, works by stockpiling energy in the form of water in the higher of two reservoirs. The energy can then be freed by releasing the water through turbines to the lower reservoir.
Some utilities are beginning to develop a more service-orientated business model, in which they help consumers manage their energy generation and usage
Despite being around for more than a century, Shaffer believes modern energy storage development is still in its infancy. Instead of holding energy in water, it is now more common to find power stored in lithium-ion batteries. These batteries first came to market in the early 1990s, and can be used in anything from consumer electronics and electric vehicles to grid-scale applications.
While lithium-ion costs are dropping steadily, more advanced forms of energy storage could also help balance the short, powerful bursts of electricity generally delivered by the Sun and wind more effectively. It’s hoped that batteries will eventually have the ability to charge a car in a flash without the worry of overheating or degrading.
The commercial development of energy storage is at a tipping point. And as a crucial component of integrating higher levels of renewable energy to the grid, it could be a game-changer for the electricity system.
According to Bloomberg NEF, the global market for energy storage is expected to double six times between 2016 and 2030, rising to 125GW. This trajectory, while remarkable, is not unheard of – in fact, it follows the path of the solar power industry from 2000 to 2015.
While energy storage will allow for much more flexibility on the grid, another important aspect is still missing. In a centralised energy system, it is easy to organise each element involved in the grid; in a decentralised grid, however, a coordinating mechanism is required to manage the many disparate elements feeding into it, as well as the massive amount of data they create. “[This] coordination system might be blockchain,” Chow-Kambitsch said. “[But] it might not be blockchain.”
Blockchain technology is a shared, encrypted ledger that is best known for its use in the transfer of cryptocurrencies from one individual to another. The ledger system is best suited to industries that depend on a shared set of data, such as the electrical grid, and it would allow people to buy and sell electricity much more easily than the current system.
Not only could a blockchain system provide coordination, it could also facilitate local energy trading. Theoretically, neighbours with solar panels installed on their roofs could simply trade energy with one another rather than exporting the electricity they generate to the grid.
A number of start-ups have already started to explore this, with WePower in Western Europe and Australia, and Power Ledger in North America and the Asia-Pacific region notable examples.
Blockchain or not, a coordination mechanism would help integrate new elements like ‘microgrids’. These small, localised grids can be placed downstream within the main power network to work in parallel with, or independently from, the grid.
Ideally, during times of peak demand, a signal would be sent to a microgrid telling it to work independently in order to mitigate the stress on the system. During times of grid failure or power outages, microgrids could also feed power back to the larger grid. By managing energy demand more effectively and efficiently, energy costs will fall for everyone.
This system is only possible with a more digitalised grid, but Shaffer believes more companies are beginning to accept this fact: “You hear the word [‘digital’] a lot. What it really means is somewhere in the chain we will make smarter decisions about what is actually happening at any given time. And it won’t be people making the decision: it will be software algorithms.”
Together, these moves towards a more digitalised, locally focused energy grid will help ensure all energy consumers and prosumers become more engaged in the market.
Lead generation
One question that still remains at the heart of the decentralised grid debate is the role of traditional utility companies. Currently, large generation plants produce electricity that flows through the transmission grid and local networks to the consumer. The utility is then paid according to the proportion of energy used.
But with renewable costs falling year on year, the appeal of residential solar generation is growing. “The challenge is going to be when people are producing [energy] on their own roof; when they’re able to store power [while] the cost is low and use it when the cost is high,” Shaffer said.
Big utilities will have to adapt or face collapse. “Already we’re seeing some of the more forward-thinking utilities preparing for such a world,” Chow-Kambitsch said. Some utilities are beginning to invest in renewables or develop a more service-orientated business model, in which they help consumers manage their energy generation and usage.
In the future, utilities could be paid a percentage of the energy exported to the grid from solar panels and electric vehicles. Chow-Kambitsch believes a failure to adapt in this way will leave the utilities that are used to the thermal model of electricity generation “finding it hard to cope”.
But crucially, even as traditional providers grapple with their role in a rapidly changing environment, the grid must still be managed and the infrastructure maintained. While utility companies are experts in this area, many in the industry are standing in the way of change, hoping they will not have to deal with the huge challenges hurtling towards them.
“I think we’re going to have to overcome a lot of inertia,” Shaffer said. “The tide is coming. You can stand there, but the tide is coming. We need the utilities. We need them to be almost leading in these areas. This is what they know how to do: how to manage energy.”
As distributed resources transform our view of the sector, the future is all about getting the balance between centralised and decentralised energy right. “It is not obvious that everything needs to be decentralised or everything needs to be centralised,” Chow-Kambitsch said. “Based on the technologies and the cost of those technologies, there will be a natural balance that comes out, and that balance will change over time as technology costs change.”
The fact of the matter is the balance is shifting towards decentralised energy very quickly. While coal, gas and nuclear power still back up a number of today’s renewable energy generators, this base load could soon shift to pump or battery storage – or even something that is yet to be developed.
Scientists, engineers and researchers are continuing to push the boundaries of the energy industry, with technological developments in storage and distribution accelerating rapidly. There is no doubt the electrical grid is sorely outdated, but whatever system comes next will need to be highly adaptable. A wave of change is coming; we cannot afford to resist the current any longer.
