Harnessing the Full Potential of the Smart Grid

There are billions of dollars of value at stake for electricity distribution businesses, and they risk missing out on it unless they adapt their business models. Across their business and beyond it, the grid of the future is starting to take shape. Opportunities abound, but to secure a share of the potential, distribution utilities must act now.

Our Digitally Enabled Grid research program revealed that the continued growth of distributed energy resources and energy efficiency technologies can risk driving down utilities revenue by up to $48 billion a year in the United States and €61 billion in Europe based on load reduction by 2025.

However, for distribution businesses, there is a way to unlock new sources of value to ensure success.

Time is growing short as the core concept of the smart grid is increasingly becoming an everyday reality through advances in smart metering combined with distribution automation and controls. However, many utilities are struggling to extract the full value of these investments within their current business model.

To create a truly efficient grid, utilities must not only optimize the smart network, but also the wide array of distributed energy resources (DERs) while capturing the flexibility driven by customer participation.

The traditional model of an electricity transporter, solely responsible for connections and building capacity, will become outdated. It’s crucial that distribution companies become responsible for facilitating network access for new uses of the distribution network, as well as providing services to optimize assets that are owned by customers. This will require a new business model where utilities integrate a broad new set of services, both those they offer and those they purchase into their business processes.

If achieved successfully, distribution businesses will have the insight and control needed to take advantage of the flexibility inherent in both the network and customers. This will enable them to reduce costs, improve access to the grid for DERs, and maintain the highest standard of network performance.

The distribution platform optimizer

The optimum model for distribution businesses is what we call the distribution platform operator (DPO).

It’s an all-new business model, whereby a utility manages and coordinates all elements of the grid, end-to-end, to provide the optimal outcome for the overall system.

As  the most sustainable model for the future of the electricity distribution utility, the DPO removes the capital bias of existing business models to focus on optimizing existing assets in a more balanced way, driving value for new grid services and uses.

Our recent research shows that utility leaders believe the industry will move towards  a model like this, with nearly two-thirds industry executives in North America (64 percent) saying the role of their company will evolve towards that of a distribution system operator or a distribution system provider. Twenty percent think they are already there.

The prize of adopting this new model is substantial. Put simply, it will help to create a grid that’s more reliable, resilient, flexible, efficient and cost-effective. And fortunately, the solution to deliver it lies within utilities’ own control.

A three-level service stack

Achieving the DPO structure will depend on how distribution businesses adopt three new grid services: 1) Market services, or a market framework for commercial decisions on asset operations; 2) Network optimization services to support grid operations in real-time; and 3) Asset deployment services, supporting customers deploying distributed energy resources.

Indeed, in light of this, a wide range of potential models could emerge, each approaching the issue differently as to what should remain within the regulated domain and what should be fully competitive.  

In the short term, it’s likely that regulated bilateral agreements will make up the majority of the market – distribution businesses negotiating contracts with large-scale storage owners to provide network optimization services, for example. Yet, it’s possible we may eventually move towards an open, competitive market with prices and service delivery terms set more dynamically, and more frequently.

Accenture’s Digitally Enabled Grid research shows that many utilities expect network-related storage to play an increasingly important role in active management of the network. This is particularly true in areas like smoothing solar photovoltaic (PV) exports.

Full optimizaton of the smart grid also hinges on end-consumer participation. Demand response is well established in many electricity distribution utility systems at the wholesale level, but it isn’t currently used enough to help  manage distribution network issues efficiently at a granular level. We’ve seen through our research that a significant proportion of distribution utilities are starting to actively pursue this area, through a variety of solutions including remote load control, demand response and electric vehicle charging services. These can all be optimized to react to local grid conditions and needs.

One risk factor though is the final area of asset deployment services and it’s one that many distribution businesses may fail to effectively capture. While the development of core standards for network-connected assets is obviously within the remit of distribution companies, there is potential for utilities to extend these services further, without compromising their regulatory position. Luckily, distribution businesses are starting to recognize this opportunity – close to half of respondents we surveyed say they will offer asset-related services in the near-term to customers deploying storage, microgrids, electric vehicles and distributed generation.

As new, smart technologies deliver flexibility to distributed generators, to the distribution network and to customers, it’s essential that utilities harness this to adapt to a new business model, the DPO. This is how the smart grid will truly deliver on its promise. In tandem, a broad new set of business services must be developed, to ensure distributors will be well placed to secure a significant share of this potential.

 

Source: http://www.energycentral.com/c/iu/harnessing-full-potential-smart-grid?utm_source=2016-10-10&utm_medium=eNL&utm_campaign=IU_WEEKLY&utm_content=133291

SMART GRID Bulletin May 2017


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