Glen Mannering, David Groarke and michael zhan | greentech media | 11 february 2016
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This week, the biggest players from the electric sector convened at DistribuTech to explore the future of the power business.
The conference was materially different from past years. The impact of distributed energy on the utility business is no longer theoretical -- it is very real. And this year’s conference reflected the seriousness with which utilities, vendors and regulators are trying to grapple with the distributed, digital grid of the future.
In recent years, the term Next Generation Utility has dominated discussions at conferences, in corporate boardrooms, and in regulatory proceedings around the country.
It is often framed as a threat to utilities. But it doesn’t have to be.
Clearly, change is coming to the electric sector, and a major driver of that change is the advances and applications of new technologies both from within and outside the traditional power sector. A broad range of distributed technologies are converging on the edge of the grid -- creating a more dynamic power system, with multi-way energy flows, engaged consumers, and many more market players.
This technology transformation (and the resulting change in customer behavior) is been driven by vendors, regulators and utility customers -- with the pace of transformation accelerating each year. The seriousness about that pace of change was evident at DistribuTech.
Initially, consumers may be attracted to new products and services in order to save money, do environmental good, or have greater control over their energy use; however, it is becoming increasingly clear these point solutions are just the beginning.
Distributed energy technologies will soon become part of a broader ecosystem on the grid. Why should your plugged-in electric car, smart thermostat, rooftop solar, or Powerwall battery sit idle when it could be earning money by providing grid services, such as frequency regulation or ramping reserve? This type of thinking across commercial and residential customers will become increasingly common. And these are the types of conversations dominating the halls of conferences like DistribuTech.
Change will be accelerated by competition from third parties. A vast array of electrical equipment manufacturers, information and communication technology specialists, construction companies, and consumer product companies are all vying for a share of the global utility technology market. GTM Research estimates the smart grid market will be worth $400 billion by 2020.
With millions of consumer-owned devices and thousands of third-party companies vying for a piece of the utility’s business, utilities will benefit from pursuing least-regret growth strategies enabled by a strong technology foundation.
In fact, we at PA Consulting believe that utilities can lead and drive this transition -- if they embrace the opportunity.
Looking at the customer analytics market alone, GTM Research projects a major growth spurt for U.S. investment, from less than $300 million this year to more than $1 billion by 2018, representing a significant technology opportunity.
The upside of change
Distributed energy technologies are not necessarily a threat to utilities. They can offer reliability services when aggregated, as well as dynamic control and dispatch, greater situational awareness of grid conditions, decreased operations and fuel costs, and new investment opportunities for customer-centric solutions. Utilities are in a good position to harness these technologies and play a central role in the future power system.
Utilities have operated for decades in an environment that does not reward innovation. In the past two decades, utilities’ R&D investment declined rapidly. In today’s environment, utilities need to balance new investments and experimentation with tracking results in a cost-conscious environment.
Outside of the utility business itself, distributed energy is flourishing beyond early-adopter markets, ensuring that all stakeholders across the industry will be forced to adapt. And now it’s time for the utilities and regulators to catch up.
So what can utilities do to prepare for this future?
While the Next Generation Utility can be defined many different ways, we define the technology transformation vision in this sector as “DynamicEnergy.” This is a technical vision of the future we are laying out in a new white paper released this week.
In a DynamicEnergy system, the line between producer and consumer is less defined. All parties in the electricity market are able to participate in two-way transactions, with responses triggered by price and engineering signals. Full automation and machine learning increase the transparency, efficiency, reliability and speed of grid operations.
The DynamicEnergy future has three main components, each with their own technology journey and foundational elements (as shown in figure above).
1) A Dynamic and Bidirectional Grid: The next-generation grid will be far more distributed and leverage smart sensors, switching systems, field analytic devices, and network adapters -- all empowered by advanced software and communication networks to manage and enable two-way energy flow.
2) Real-Time Customer Engagement: Enable customers to interact with an online hub that provides easy access to new services, billing information, rate choice, supply choice from the utility or third parties, as well as other community energy programs.
3) Virtual Grid Architecture: The overall grid architecture will be increasingly digital as more applications and data moves to the cloud. This enables a virtual architecture where applications, data, real-time communications and infrastructure are acquired and configured in an “app store” model.
The journey toward a DynamicEnergy system will be unique for each stakeholder, revealing different value propositions, problems to overcome, and competitive pressures. They are, however, all converging on a common future.
Customers will be empowered with new technology options and unprecedented access to the grid; grid operators and owners will rely on sophisticated analytics and machine learning to increase automation and reduce the need for human oversight; generators will build more flexible portfolios and asset-management approaches; and market operators will manage the DynamicEnergy hub, a real-time multi-stakeholder market driven by economics and reliability needs.
There are a few possible paths toward this future. In order to map out how to make business decisions in an uncertain world, PA is unveiling a series of white papers to help utilities assess their options under four different scenarios.
By planning technology investments with this vision in mind, utilities can improve future asset leverage, reduce regulatory risks, improve their customer relationships, make the grid more resilient, and build new revenue streams.
The move to a world of DynamicEnergy is one of the biggest opportunities in the history of the electric sector. The first step in this journey is ensuring that the right technology strategies and foundations are established today.
Glen Mannering, David Groarke and Michael Zhan are energy experts at PA Consulting Group