Euan Davidson, Chief Technology Officer at Smarter Grid Solutions
The unpredictable nature of world events is putting enormous pressure on our energy networks. The volatility of gas and oil prices has underlined the need to transition to the more reliable revenues that will flow from renewables.
One aspect of this envisioned clean energy future that demands close attention is the systems required to bring together and balance what are fast becoming more distributed energy systems. Smart grids allow reserve sources of power – such as batteries, including those within electric vehicles (EVs) – to be managed from day-ahead into the moment of delivery, helping to balance supply and demand.
By contrast, the traditional method of generating and supplying power was heavily centralised. Large coal and gas power stations would feed electricity out through a high voltage transmission network, flowing down to communities through numerous regional and local distribution lines. However, we are now seeing this turned on its head with many sources of renewable energy in areas at the edges of the power network, meaning increased investments into the transmission and distribution systems to enable this new paradigm.
One example of the scale of investment is shown through infrastructure funds and institutional investors already playing a role in making a reality of the offshore wind power with the necessary connections to shore. Therefore, with the falling cost of wind turbines, solar panels and other new energy technologies such as batteries giving a greater rate of return for investors, wide use of renewables and significant investment in grids are only going to accelerate.
This acceleration in investment and the wide use of renewables means that balancing the grid has become much more important, but also more challenging. In the UK, for example, National Grid spends hundreds of millions of pounds each year in payments to balance the network, including paying energy companies to produce less electricity. Investing in smart technologies can contain this already inflating cost.
In fact, smart grids can ‘help us get out of today’s difficulties’, according to the International Energy Agency (IEA). In the first instance, smart grids are able to dial-up demand at times of surplus production. For example, if it is a windy night and electricity is available from turbines then prices or control signals can be sent to heavy industrial users. These signals can harness the power and start their machinery. Additionally, EVs can be told to start charging and even ‘smart’ washing machines can be told to start spinning. In the second instance, the IEA states that renewables dominate investment in new power generation at around 70% of the $530 billion spent in 2021, with the remaining 30% spent on grids and storage.
Therefore, smart grid investment opportunities are surfacing. These opportunities are emerging on two fronts: the first is in the large-scale finance needed to install new energy infrastructure at scale. This includes EV charging points, battery storage, and flexible renewable energy generation.
The second opportunity is in smart grid enabling equipment and software, where innovative solutions are needed by energy project developers, commercial and industrial users, and communities. Even individuals who want to take part in system balancing and flexibility by connecting their own turbines, panels, or batteries are interested in technology that enables them to participate. This decentralisation of power generation creates opportunities for smaller players who wish to see a strong return on their investments.
However, in order for this decentralisation to take place, smart grids must be able to balance supply and demand on a more dynamic system which requires the right policies. Governments and regulators need to put mechanisms in place so that companies or even households can be paid to provide power when it’s needed or offered incentives through dynamic tariffs to encourage them to use electricity during peaks in clean generation output.
The appetite for such smart grid solutions is something we’ve seen grow in recent months. Smarter Grid Solutions has been pleased to support all six of the UK’s Distribution Network Operators (DNOs) with so-called Distributed Energy Resources Management Systems (DERMS) to deliver these smart grid capabilities, with further systems deployed for Avangrid, Con Edison and Endurant Energy to bring solar and storage to the New York electric grid and market.
Another sign of confidence in this area is the fact that last summer, Mitsubishi Electric Corporation, and its U.S. subsidiary Mitsubishi Electric Power Products, Inc., acquired Smarter Grid Solutions. This acquisition enables Smarter Grid Solutions to play its role and help even more grid operators around the world add more clean energy assets to their fleets.
The global smart grid market is projected to grow by more than 20% between 2021 and 2028 to $140.53 billion, with observers noting how it can aid governments as they seek to rebuild post-pandemic economies and meet climate change objectives.
While more work needs to be done to provide investors with clarity and certainty of the opportunity, there can be little doubt now that smart grids are an essential next step in the clean energy revolution.
