How can digital help build a more flexible and resilient electricity grid?
In the digitally enabled industry, grid related initiatives can uncover up to $445 billion of value by 2025.
This digital theme – grid optimization and aggregation – is made possible through real-time load balancing and network controls, enabled by connected devices and advanced monitoring capability. Utilities will be able to receive the latest usage information from customers, while customers will receive up-to-the-minute pricing signals and tariffs.
The impact of grid optimization and aggregation is transformational: the system can start to dispatch the most economic, reliable and sustainable sources to meet demand, delivering higher efficiency.
An optimized grid moves beyond a smart grid deployment by combining smart grid infrastructure with analytics and intelligent devices, linking the grid to the customer. While doing so, it also creates an efficient and well-functioning market, offering price signals that promote the right kind of behavior by market participants.
Besides driving greater value from existing smart meter investments, mobile devices and social media tools will improve communications with the customer. Along with better insight, this creates a dynamic customer interface, where utilities can offer genuine value to customers through add-on services, providing the data backbone of integrated customer services.
Insights for an optimized distribution grid can also be applied to the system operators. Because improved data would facilitate better understanding of supply and demand, digital technologies can use demand information to alleviate transmission congestion by dispatching distributed resources as opposed to tapping into distant resources through the transmission grid.
An improved link between wholesale and retail prices can be established, enabling wholesale to factor more real-time information into price decisions. In sum, digital technology has the potential to improve the system’s flexibility by establishing this feedback loop.
We focus on four grid optimization initiatives below: energy aggregation platforms, real-time supply and demand platforms, real-time network controls and connected and interoperable devices. From a value-creation perspective, all initiatives create value for both industry and society.
Grid optimization and aggregation is one of four themes that we believe will be central to the digitization of the electricity industry over the next decade. The other themes we examine are asset life cycle management, integrated customer services and beyond the electron.
Energy aggregation platforms
Platforms for energy aggregation bring small-scale distributed energy sources – renewables such as solar, wind, biomass, or diesel – onto a single platform, enabling a cluster of generators to act as one large power plant. These platforms can both deliver electricity when it is required and store any surplus power, thereby balancing the grid. A common example of such a platform is a virtual power plant; it enables integrating renewable energy sources while avoiding the common pitfalls of lack of scale and predictability. A virtual power plant allows for the system to be optimized based on region-specific grid needs and can provide more economically than delivered electricity. Investment decisions are made more efficient, as they can be based on additional capacity required.
Energy aggregation platforms are estimated to be worth up to $68 billion in value creation for the industry. Societal benefits are also likely to be significant, with value accretion to customers to the tune of $40 billion, likely job creation and an estimated 400 million metric tonnes of reduced carbon emissions.
Next Kraftwerke, a plant operator and power trader, launched a virtual power plant covering 790 megawatts (MW) of distributed-generation capacity in Germany.¹ Real-time data, including kWh prices and weather forecasts, are captured and used to create an operational schedule, managed by a control room in Cologne. The central platform enables Next Kraftwerke to plan and optimize production while also improving monitoring and control. The plant operator is experiencing significant growth: in 2013, it aggregated 1 gigawatt of capacity from 2,400 installations and traded 2.5 terawatt-hours (TWh), mostly from biogas, biomass and combined heat and power plants, which was up from 400 installations and 1 TWh in 2012.
Real-time supply and demand platform
This digital initiative relates to the monitoring and communication of current load supply and demand, paired with a discriminatory pricing framework. This allows for a fundamental change in behavior through tariffs, localized pricing signals and interconnectivity.
Alliander, a major energy distributor in the Netherlands, is currently piloting projects that match supply and demand at the local level in real time and has launched a Realtime Energy eXchange (REX). An example at the municipal level includes smart controls for switching street lamps on and off at optimal times, leading to energy savings. This is expected to be rolled out to 800,000 streets across 14 municipalities in 2015.² At a household level, REX enables nonessential appliances to be run at times when supply is abundant and power prices are low – for example, overnight. Response to demand is optimized by integrating consumer-owned technology with the management of the grid. In addition, by acting as an aggregator, the exchange allows surplus energy to be traded on the energy trade market.
Real-time supply and demand platforms, potentially worth $191 billion for industry, could deliver more value ($632 billion) to society than any other individual digital initiative. As Figure 1 illustrates, this value derives primarily from cost savings to the customer and from reduced emissions. Customers could capture up to $559 billion of value from smart saving choices, with an incentive to postpone consumption during peak hours.
Note: value impact for society is the sum of the impact for customers and the impact from job creation and reduction in carbon emissions.
Real-time network controls
The function of this digital initiative is to enable real-time adjustment to changing loads. Such adjustments can also be made to increases or decreases in generation and to failure conditions of the distribution system. It allows two-way communications and operational signals with the market. Real-time network controls is expected to be worth $113 billion, in total value addition for the industry.
Nordic Power Market
An example of real-time network controls in action today can be found in Scandinavia. The Nordic Power Market, which includes Denmark, Sweden, Norway and Finland, enables electricity trading through aggregation at scale and across borders.³ The Elspot market, which trades electricity for next-day delivery, covers 77% of total electricity consumption across the Nordic countries. To optimize the use of physical resources, electricity volumes are coordinated among the countries up to a day in advance. Communication triggers and control become vital. The transmission system operators publish data every minute on electricity production by generation type, net exchange and consumption per country.⁴ This allows for generation and load to be balanced at any time, and for a price to be provided for participants’ power imbalances.⁵ With large volumes traded daily, strong collaboration is required among system operators to determine the quantities that should be generated, sold and stored.
Connected and interoperable devices
This digital initiative focuses on device-to-device connectivity, and collecting and displaying energy consumption points for the utility. These can then be linked to the distribution network. In this initiative, profits foregone from lower consumption would be offset by higher savings, for a combined value addition of $20 billion for the industry. Increased adoption of smart meters by residential and industrial customers could add a further $55 billion, for a total value addition of $75 billion for the industry.
RWE embarked on a project in 2004 to create an open industry standard for industrial and commercial smart meters. A consortium was launched, including EnBW Energie Baden-Württemberg, E.ON and Landis+Gyr, and the Synchronous Modular Meter (SyM2) metering standard was born. The SyM2 was one of the first meters based on the Internet Protocol, built with open modularity to allow for the introduction of new features and functions. Data quality was improved and costs were reduced for the partners involved; the industry came a step closer to interoperable devices connected to the network.
The PRIME Alliance (where PRIME is PoweRline Intelligent Metering Evolution), established in 2009, aimed to develop an open, public and nonproprietary telecom solution to support progress toward the smart grid. A number of projects followed, including Iberdrola’s deployment of 100,000 meters in 2010; and pilots by Gas Natural Fenosa (Spain); EDP (Portugal); ENERGA-Operator (Poland); EDL (Lebanon); and Energex (Australia). Today there are more than 10 million PRIME smart meters deployed in commercial rollouts and pilots, in more than 10 countries worldwide.⁶
1.ABB, “Optimizing a Virtual Power Plant”. http://new.abb.com/power-generation/in-control/in-control-02-2014/optimizing-a-virtual-power-plant
2. CGI.com, “Alliander and CGI win Nederland ICT Environment Award for open smart grid platform”. https://www.cgi.com/en/corporate-social-responsibility/cgi-alliander-netherlands-ict-environment-award-open-smart-grid-platform
3. International Energy Agency, Empowering Variable Renewables: Options for Flexible Electricity Systems, 2008. https://www.iea.org/publications/freepublications/publication/Empowering_Variable_Renewables.pdf
4. Energinet.dk, “On-line map of the Nordic Power System”. http://www.energinet.dk/EN/El/Nyheder/Sider/Onlinekortoverdetnordiskeelsystemernuiluften.aspx
5. Nord Pool Spot, “Price Formation in Nord Pool Spot”. http://www.nordpoolspot.com/How-does-it-work/Day-ahead-market-Elspot-/Price-formation-in-Nord-Pool-Spot/
6. PRIME Alliance, “Advanced Meter Management and Smart Grid” http://www.prime-alliance.org/
Electricity is one of six industries (along with automotive, consumer, healthcare, logistics and media) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth findings about the digital transformation of the electricity industry are available in a white paper, which can be downloaded here.
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