Are utilities ready for distributed generation and the “prosumer” energy economy?
The electric power industry is just at the beginning of a transformation in business models due to disruption by new technology that has parallels to many other industries. In the case of electric utilities, a descriptive label could be "generation everywhere."
One of the fundamental tenets of this transformation to smart grid is the regulatory/legislative requirement for utilities to accept non-utility-owned generation at every point on the grid. Policy goals for reduction of greenhouse gases and reduction of peak loads hope to avoid construction of new generation through integration of increasing amounts of renewable energy or power. These are promoted through various incentives such as net metering, feed-in tariffs, tax incentives, mandatory purchase requirements and the like. The result has been an increasing volume of wind, solar, and other technologies at large scale (megawatt-scale wind and solar farms), mid-scale (parking lot solar, warehouse rooftop solar), and small scale (residential solar).
Although there may be generation everywhere, even with anticipated advances in solar power and in energy efficiency and management, solar power systems as designed and installed today and for the foreseeable future cannot generate enough power to support 100 percent of end-user needs. This leaves us with insufficient generation everywhere.
The capacity and availability of renewable resources are much lower than has been best practice in the design and operation of thermal central generation. Reliable operation of the bulk electric power systems with high percentages of renewables has been and remains a significant challenge.
Need for a New Business Model
The vast infrastructure of the electric power utility industry and all of the corporate machinery and personnel needed to construct, operate and maintain the systems are, of course, paid for by the sale of electric power. Increasing production volumes of renewable technologies have resulted in decreasing costs per kilowatt, with the very real future prospect of price parity with utility supplied power.
Today, the percentage of power actually delivered onto the grid by distributed generation is fairly small, amounting to about 0.1 percent generated by solar in 2010. However, within the 25-year capacity planning horizon of utilities, present regulatory policy direction aims to have power from renewable resources, including distributed generation, be 16 percent or more, with short-term goals set by Renewable Portfolio Standards in individual states of 15 percent to 33 percent by 2020.
Energy from large-scale renewables such as wind or solar farms enters the grid and the electric power supply chain in a manner similar to legacy central generation and is delivered at a charge per kilowatt-hour. Distributed generation at the edge displaces energy that would have been delivered by the grid, reducing the power delivered, which is, of course, the intent. As future revenues from the sale of electric power decline, there is an absolute necessity for the electric power industry to create a business model that is sustainable. This is the core of rate structures that incorporate what is known as “decoupling."
There remains a requirement for a supplier of last resort for additional electric power. The industry as presently structured, from both a physical infrastructure standpoint as well as a business model standpoint, is ill suited to that role.
Industry players around the world can look to northern Europe, especially Germany and Scandinavia, to see what the near-term future may look like. In those countries, we see some of the highest levels of renewables integration in the world, driven by national policies that include generous feed-in tariffs.
New Use Cases for the Industry
How can the industry innovate to meet this challenge? We have seen what’s happened in other industries disrupted by new technology where the incumbents are unwilling to contemplate changes to their business models and operations.
What will be needed from the electric power industry? We can imagine a number of use cases:
- Continuing role as primary supplier of electric power during the decades required for distributed energy resources to become "generation everywhere."
- Supplier of last resort with the ability to source power for peak usage, during extended severe weather, and during other times when local generation is not sufficient.
- Real-time matching of supply and demand, integrating many sources of distributed generation over a wide area, smoothing local variations, and moving excess power to areas of need, along with the market systems to manage the economics as well as the power flows.
- Integrated management and control of distributed energy resources inclusive not only of generation, but also of storage and demand, especially as the usage of electric vehicles increases.
- Replacing the forecasting, dispatch and balancing model of today’s grid operation with a new model that implements a modern distributed architecture and control model.
- Services to install, secure, maintain and upgrade a communications infrastructure for telemetry and control -- to link distributed energy resources into a network of energy generation, storage and consumption.
There is essential value in these use cases, as even with the hoped-for development of cost-effective reliable electric power storage, all of the operations described above will be required to sustain the essential role electric power plays in today’s and tomorrow’s world.
Essential value means business opportunity. Are these opportunities for today’s utilities? Or are they opportunities for new companies without the constraints of legacy infrastructure and an outdated regulatory framework?
The Role of Communications Infrastructure
Stable, reliable operation of the grid requires managing power quality and balancing supply with load. As complex as that task is with the number and types of generation assets in today’s grid, it pales in comparison to the challenge and opportunity of managing thousands or even millions of distributed energy resources. An essential enabling technology of all of these use cases and business opportunities is communications.
Reliable communication networks will be essential for:
- Bringing to the management and control systems the status, requirements and capability of each distributed energy resource.
- Integration of variable output power over a number of resources to deliver stable, reliable power.
- Linking distributed control systems to central oversight to prevent local optimization from resulting in wide area instability.
- Giving grid control engineers system-wide as well as regional, district and local grid state awareness to manage the system as well as take action in the event of failure or disruption.
- Providing the necessary real-time information for matching supply and load.
- In some cases, managing load that will only connect when certain price conditions or type of generation is available. In other cases, managing load that will disconnect when prices are unfavorable or that may be disconnected when supply is insufficient.
- Recognition and management of threshold conditions that may cause large numbers of devices to connect or disconnect, potentially causing large power disturbances.
- Recognition and remediation of loop flow and oscillation conditions, and new protection issues.
As the growth of distributed energy resources and consumer-generated power increases, utility companies will need to evolve their business models to adapt to the shift in revenues. The industry’s primary mission of safe and reliable power remains. The use cases point to opportunities to provide new and additional value that can form the basis for evolving business models. Delivering that value will require leveraging a reliable communications infrastructure while providing opportunities for utilities, industry vendors and the new class of power generating consumers to partner as they address the challenges arising from "generation everywhere."
Originally published by Greentechmedia.com.