Alan Gooding, Managing Director, Smarter Grid Solutions
The power industry faces some significant future challenges: to create a more visible and controllable electricity grid to deliver power more reliably, efficiently, and cost effectively and find smarter ways to accommodate higher volumes of renewables. In the UK, power companies must navigate a complex regulatory backdrop, which offers incentives for discrete smart-grid initiatives but will not introduce more long-term regulatory changes until 2015. The result is that most power companies are likely to concentrate on project-based smart-grid initiatives in the shorter term, while preparing to incorporate smart-grid activity into their standard business procedures and planning in the future. Smarter Grid Solutions Managing Director Alan Gooding observes "There is a lot of industry uncertainty regarding the uptake of low-carbon technologies and changes to demand patterns so our focus must be on answers that are not only valid today, but can evolve seamlessly and affordably to meet future customer requirements. Power companies recognize that an Active Network Management technology can help them use their existing assets more fully, create capacity for more affordable or timely connections, and manage the uncertainty and risks around when to upgrade parts of the network. It's vital that we and other smart-grid technology vendors continuously evaluate the industry's changing requirements to offer a flexible, scalable, and clearly-defined plan that can adapt to overcome the multiple and unforeseen obstacles power companies will face on their journey towards a fully deployed and integrated smart grid." Power companies and utilities face demand for power that is changing in magnitude, timing, and type. They also confront higher operating costs. This makes price rises seem inevitable. Meanwhile, customers are increasingly sensitive to higher prices, so electricity regulators are using a combination of carrot and stick to convince power companies to find cost-effective ways to meet the demand for more power and new connections. In the UK, the biggest carrot has been the Low-Carbon Networks Fund, established in 2010 by the energy regulator, Ofgem. Much of the existing UK smart-grid market has emerged in response to this and various other regulatory and Government incentives. These incentives aim to encourage power companies and utilities to find innovative and cost-effective ways to accelerate the low-carbon economy by enabling high volumes of renewable and low-carbon technologies to connect to the electricity grid in ways that do not rely on expensive, carbon-intensive, and time-consuming grid upgrades. The UK is currently among a group of nations in smart-grid demonstration projects. This is a result not only of the new innovation and demonstration funding incentives, but also the abundant renewable energy sources available, and the impact of various European and UK energy policies. For example the UK Low Carbon Transition Plan sets out a goal of a 34% reduction in carbon emissions on 1990 levels by 2020 and an 80% reduction by 2050. The regulatory framework for DNOs (distribution network operators) in the UK is also changing to give them clear incentives to start planning their long-term smart-grid strategies now. The existing DPCR5 (distribution price-control review) period ends in 2015. From then onwards, the UK energy regulator, Ofgem, is introducing a new price control framework, RIIO (revenue = incentives + innovation + outputs). The aim is that smart-grid design and delivery will no longer be restricted to specific innovation or demonstration projects but will become business as usual in the first RIIO period, which will last for eight years from 2015. Elsewhere in the world, regulators are keeping a close eye on these developments in the UK, as well as introducing their own new smart-grid funding, including the Smart Grid Fund in Ontario, Canada, the US stimulus package, and several initiatives across Europe. It will take some time before smart grids become part of business as usual for all power companies and utilities since the substantial innovation incentives have yet to deliver fully the evidence required for full-scale smart-grid roll out. Nonetheless, a growing number of power companies are keen to explore and develop new smart-grid capabilities and business-as-usual opportunities. This will include finding means to recognize and exploit the opportunities from various grid-connected devices and system-operation participants, including customers, new grid technologies, ancillary service providers, and energy-market participants. From the smart-grid technology vendor perspective, the challenge will be to provide flexible and extensible systems that can evolve to meet changing requirements as we move closer towards a low-carbon grid. These systems will need to flex to facilitate an incremental smart-grid rollout, or a top-down strategic investment approach, whichever proves to be the most cost-effective in a particular geographical or grid area. Active Network Management An Active Network Management scheme gives power companies and utilities more control over the way they deliver power and facilitate connections. It does this by providing greater visibility of the grid to tackle constraints of power flow, voltage, fault level, system stability, and system balancing (figure 1).
This allows power companies and utilities to make use of existing grid capacity to integrate energy storage, demand-side management, renewable generators, and other controllable resources on the grid to produce a smarter and more efficient energy system, helping to reduce reliance on fossil-fuelled power stations and increase the amount of renewable generation connected to the electricity grid (figure 2). Electricity regulators and utilities customers require more for less. They are calling for fewer outages and losses, together with lower costs for customers. For power companies and utilities, the only way to achieve this is to bring about a significant change in system design and operation. A more affordable, visible, intelligent, and controllable electricity system via Active Network Management will enable: increased use of existing assets and avoidance or deferral of new grid infrastructure. new grid-management systems designed specifically to meet new challenges, leaving existing systems to continue to perform their existing role. continuous monitoring of the condition of system components to identify and repair faulty equipment to help prevent outages. monitoring and repairs in response to specific equipment conditions rather than on a scheduled, system-wide basis. real-time monitoring of power flows and voltages across the grid in order to minimise losses and enable more efficient generation. estimation of power system parameters and indications of the errors associated with estimates. better coordination of protective devices, so fewer customers are affected by particular electrical faults. And, of course, power companies and utilities will be able to provide cost-effective and timely connections for large amounts of renewable energy. So, overall, they will have a significantly more compelling offering for their customers. Active Network Management will transform the day-to-day operations of power companies and utilities. Control and field engineers will have ready access to information about the grid through communications systems and clustered databases. This will increase engineer efficiencies, speed up customer response rates, and improve safety. Grid security will also improve as a result. Power companies and utilities will become proactive rather than reactive. They will continue to increase efforts to identify and repair equipment and lines before failure occurs and shed load to avoid overloading the grid to operate within their established limits. They will also be able to use load control to reduce peak and overall electricity demands. Active Network Management will also improve the overall efficiency and reliability of electricity delivery by enabling three capabilities: First, more distributed generation, which helps take load off existing distribution and transmission lines. As electricity travels only a short distance before it is used, less energy is lost in transmission and distribution. Second, new demands on the grid. By ensuring that the connection of new forms of consumption, such as heat pumps and electric vehicles, can be visible and controlled, the grid is better able to accommodate customer requirements. Third, energy storage, which reduces the requirements for spinning reserves to meet peak power demands. This makes better use of efficient base-load generation and allows greater use of intermittent renewable energy technologies. The business case for the benefits of such a smart grid is strong. To realize only some of the benefits outlined above would require significant financial investment to build additional carbon-intensive grid infrastructure and take many years to achieve. Active Network Management could fulfill these ambitions for a fraction of the cost, in a shorter timeframe, and with a significantly smaller carbon footprint. Completed and ongoing Active Network Management deployment and demonstration projects provide evidence for a highly attractive benefit-to-cost ratio. The smart grid will deliver better efficiencies in energy delivery and operations but the transition to smart grid is only just beginning. The electricity industry is accustomed to long replacement cycles of 30 to 50 years and tight regulatory control. Regulators are taking clear steps now to support the transition and enable deployment of new grid-management schemes such as Active Network Management. To date, this support has mainly taken the form of providing various funding mechanisms and incentives for discrete projects or change programmes. However, the expectation is that, as the regulatory framework changes to encourage greater innovation, power companies will adopt Active Grid Management as part of business as usual. Power companies and utilities are likely, at least in the short term, to take a phased and scalable approach to building the smart grid, trialing different elements of new grid management systems as they go. Even in the longer term, with the benefit of a more-supportive regulatory and funding environment, a smart grid will take time to achieve and new obstacles will appear along the way. Power companies and utilities will want reliable, clearly defined, appropriate, extensible, and flexible plans, not only to the specific challenges outlined here, but also to evolving requirements as they start to feel the many affects and full implications of the low-carbon transition. Smart Grid Solutions