The Rise of Smart Energy

From time to time particularly large waves of disruption have a significant impact on the world we live in. Although it’s not well known outside the energy and utility industries yet, electrical power systems and infrastructures worldwide are about to be transformed out of all recognition. This is being driven by several factors. One of these is the emerging Internet of Things that will enable new business models and new ways of working – a number of our customers in other industries are already reaping the benefits of similar transformations.  Another is a significant increase in demand for electrical power. We will experience these disruption waves in our daily lives, and they will alter our world. This will create new industries and potentially destroy old ones.

The supply of traditional fossil fuels is declining to the point where soon it won’t be economically viable to build new coal, oil or gas-fired power stations. While nuclear will always remain a non-carbon emitting option, Fukushima showed how things can very quickly go badly wrong in one of the most safety-conscious industries in the world.

Electricity consumption is on the rise due to an ever-increasing number of users and a plethora of electrically-powered devices, some of which will consume significantly high levels of energy; partially offset by efforts to improve the energy efficiency of those devices. At the same time, the world’s population continues to grow, contributing to our global carbon footprint and increasing levels of health-impacting pollution. All of this is driving innovation around more clean energy generation using renewables.

Two areas of significantly increasing demand on electrical energy are:

  • Colder climate dwellers will rely more on electricity for business and domestic heating as supplies of oil and gas diminish. While efforts are ongoing to improve building insulation, there is likely to be a net increase in the demand for electrical heating. Hot climate dwellers already use electricity for cooling, and if global warming continues the demand for electrical cooling will increase.
  • The nascent transition from fossil-fuelled vehicles to electric vehicles has begun. To charge a typical Electric Vehicle (EV) battery in one hour requires around 100A of current at 220v. Existing distribution grids assume that most homes are drawing far less than this, perhaps 3A on average throughout the day, and certainly aren’t scaled to supply 100A to several homes in one locality at the same time. Dedicated EV charging stations will require major upgrades to existing electrical distribution infrastructure to deliver the power needed. Additionally, battery technologies are continuing to improve, and with better energy densities comes a corresponding surge in higher charging demands.

Over the last century electricity has been generated in power stations located some distance from where it is consumed – especially nuclear ones that are situated well away from populous areas. Long transmission and distribution infrastructures have evolved to manage the distribution of power from generation to consumption that can balance supply with demand. Up to now this balance has been fairly straightforward to maintain and manage.

However, that infrastructure is unsuited to the electrical demands of the future. It would need such a major update over a short period that it doesn’t make economic sense. Electrical resistance already causes power to be lost through heat all across the transmission grid, losses which increase with current drawn. The predicted increase in electricity demand, especially the very high power demands of EVs, that will ramp-up significantly, mandates a change to existing distribution infrastructures.

This has led to the concept of smart grids, a forward-looking approach that will provide localised power generation, storage, distribution, and consumption. Renewable energy will be generated locally, often by individual homes or businesses, using sources such as roof-top solar or backyard wind turbines. Home battery arrays (like Telsa’s Powerwall), capable of storing several kWh of energy, will feature prominently within the smart grid. Every local power generator (home or business) will store, trade/sell and consume energy within their local area, thereby augmenting (and over time replacing) existing grid power and minimising the need for updated transmission infrastructure and more power stations. And all of this will be facilitated by Internet of Things (IoT) sensors and control systems, which will manage this new intelligent infrastructure. And, energy can be exported from the local smart grid to the national grid or vice-versa, if required.

This movement will result in a localised energy market in order to balance supply and demand within the smart grid. A home owner may agree, for example, that smart grid control systems can manage individual heaters within their home, remotely switch off their freezer for a period of time while ensuring that it gets switched on again before breaching a temperature SLA, or determine at what time overnight their EV is charged, so that demand can be satisfied elsewhere in the grid and their own bills will fall. Energy stored in home batteries will become a commodity that is traded locally. The smart grid will automate all of this, and new types of local grid cabling connecting everything will emerge. People will be incentivised to invest in a certain level of “home renewables” generation, and a certain level of local (in-home) storage, with a diminishing reliance on national grid infrastructure. New energy micro-trading platforms will be established, and tariffs for electricity will become completely variable, and automated, so that at any point in time, energy in a particular location has a specific value that is determined solely by supply and demand, rather than pre-defined by any one supplier or government.

Stakeholders are well aware of the impending disruption to their industries, and work (and significant investment) has already taken place to better instrument and control local transmission and distribution grids as a stepping stone towards a future state. These grids are getting smarter, and many countries have actively encouraged or even mandated the adoption of smart meters. Their primary purpose is to enable utilities to understand exactly where power is in demand at a granular near-real-time level, so that they can help optimize the way that distribution networks can best supply that power. While smart meters are being deployed for both gas and electricity, gas consumption – which is primarily used for heating and cooking – has a very predictable utilisation, and gas is likely to diminish as a natural resource over time anyway. Electricity demand is more opaque, and it will become very hard to predict accurately due to EV battery charging.

Because initial smart-meter implementations have been designed for the benefit of the utilities and not consumers, little thought has been applied to the user experience. The hype surrounding some national advertising campaigns hasn’t been matched by the reality on the ground. This has led to some new market entrants offering an alternative smart metering initiative aimed solely at consumers where, rather than replacing an existing meter, a current sensing clip is simply placed around the incoming supply line. Instantaneous power demand can then be analysed through rapid sampling of current drawn and processing of this data to determine which devices are being switched on and off within the home and the current drawn by each one, giving consumers real insights into their power consumption and valuable personal guidance on how to change their behaviour. Over time, utilities and smart metering companies are going to build or acquire this capability and incorporate it into their smart metering solutions.

All of this is going to disrupt entire industries and markets and create new areas of opportunity. These range from the mining of minerals for and manufacturing of home batteries and solar panels, to smart grid platforms, the rise of IoT players, new energy trading platforms, and as yet unknown and unintended impacts to national grid systems. Many governments are keen to do something to support this transition, but they’re not sure what.

For utilities who currently own the customer relationship, they know their industry will be completely upended. They will either need to transform out of all recognition to stay ahead of all the advances in distribution, technology and usage, or they will cease to exist. It’s going to be a seismic shift, and it will alter the established ways of doing things irreversibly.

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