Northeast Group defines a smart grid as a power grid that is fully integrated with ICT (information and communications technology). These ICT tools and applications give both utilities and customers improved analytics and control over power flows and usage and help to better optimise supply and demand.
A smart grid extends from the generation plant all the way to behind-the-meter technologies in a residential customer’s home. To create a smart grid, a wide array of technologies are deployed. Historically, advanced metering infrastructure (AMI) has been the foundational layer of the smart grid but AMI alone does not constitute a smart grid. It also involves grid automation, the integration of distributed energy resources (DERs), intermittent renewables and customer engagement applications.
As the need for digitalisation and decarbonisation intensifies, smart grids have become a vital aspect in helping utilities to achieve their energy transition and digital transformation goals. This article explores economies that have led the market in the past few years, smart grid market drivers, as well as countries that are set to lead the sector through 2030.
Smart grids benefits
Benefits of smart grid infrastructure include but are not limited to saving energy, reducing costs, and increasing reliability. Smart grid infrastructure is also essential for transitioning to a low-carbon electricity grid that includes intermittent renewable generation, such as utility-scale wind and solar, and smaller-scale DERs. And as such, as more and more governments call for the decarbonisation of the energy sector, utilities are turning to smart grid rollout to ensure they are able to meet set net-zero goals.
For instance, Canada has launched, through the Ministry of Natural Resources, its Renewables and Electrification Pathways (SREPs) programme, a four-year Ca$960 million (US$795 million) scheme in which it will support the rollout of smart grid technologies. The aim is to expand its portfolio of renewables to decarbonise and to modernise. The programme will enable the introduction of next-generation and smart utility services. Commenting on the development, the Canadian Minister of Natural Resources, Seamus O’Regan Jr, said: “Our new SREPs programme will increase our grid’s renewable capacity and improve its reliability and resiliency. This means a cleaner, more reliable electricity supply for Canadians. This is how we get to net-zero by 2050.”
In Thailand, the Ministry of Energy has partnered with the New Energy and Industrial Technology Development Organisation (NEDO) and Marubeni Corporation to help the Electricity Generating Authority of Thailand (EGAT) to maximise the management, operation, and maintenance of its energy generation plants. The project will enable the reliability of the entire grid network through smart grid technologies and data optimisation. By deploying advanced digital solutions including Thermal Efficiency Optimisation Solution, Boiler Combustion Optimisation Solution and Anomaly Detection Solution, EGAT will be able to leverage artificial intelligence and machine learning capabilities to analyse big data in real-time. Access to real-time data regarding the operation of the grid will enable EGAT to optimise the operations of its generation systems, detect abnormalities before a failure, and meet growing energy demand.
A report, Technology Advancements Enabling Prosumerism in Energy Sector, released by market intelligence firm Frost & Sullivan, states that smart grids are driving an increase in prosumerism, which is vital for the energy transition. The convergence of energy management systems, energy storage, microgrid technologies, and intelligent communications and information platforms owing to smart grids is creating greener, locally managed, reliable energy supply mechanisms while ensuring financial benefits for both utilities and consumers. As a result of smart grids, consumers are being turned into prosumers and are able to participate or play a key role in the reliability of grid networks.
Shrinivas Tukdeo, TechVision programme manager at Frost & Sullivan, said: “An automated approach for managing and controlling the onsite generation, energy storage, and consumption has enabled effective optimisation of residential and C&I energy requirements through establishing a bi-directional energy exchange, ensuring grid resiliency.”
“Rapid digitiation across the industry peripheral has enabled a shift from conventional business models to advanced go-to-market strategic imperatives. Restructuring operations and instant response to technological enhancements remain the primary factors required to streamline the business process.”
Access to real-time data regarding the performance of DERs enables utilities to detect power outages in the event of a failure. This development would help enhance customer services through quick utility response and reduced duration and occurrences of power outages. Some smart grid solutions enable energy companies to detect asset failures even before they occur. Self-healing capabilities owned by smart grids enable grid assets to heal themselves in the event of a failure and some applications are designed to enhance customer engagement through operations such as self-services and personification. In developed markets such as the UK where regulator Ofgem is encouraging increased competition amongst service providers through consumer switching, improved customer engagement helps reduce customer churn.
Smart grid market leaders
The United States and Western Europe are leaders in terms of investment in and deployment of smart grid infrastructure owing to increased rollout over the past years, according to Northeast Group. Rollouts in these regions have been driven in part because of available financial resources but also owing to public policy and private utility decisions. The European Union, notably, has implemented some of the most ambitious smart grid mandates for member countries, prompting high levels of investment. Many other countries and regions are catching up as the benefits of smart grid infrastructure become well understood. Significant levels of investment have already been made in countries as diverse as China, Japan, Malaysia, Saudi Arabia, Uruguay, Slovenia, and Jamaica, to name a few.
In descending order of cumulative investment, the top five countries in terms of smart grid investment over the next ten years are China, United States, Japan, India, and Germany, forecasts Northeast Group.
- China is expected to lead in terms of AMI deployment as the country replaces its first-generation smart meters with more advanced systems. Research company Berg Insight predicts that China will account for as much as 70–80% of smart electricity meter demand across Asia in the next few years.
- As the United States strives to reach 100% smart meter penetration, with some 75% of all households having been equipped with a smart meter by May 2021, according to the Institute for Electric Innovation, the market is expected to follow China in terms of smart grid investments and deployment over the next decade.
“As electric companies continue to manage, operate, and invest in an increasingly digital energy grid, a critical next step is to continue to utilise the data generated from smart meters as a strategic asset to improve grid operations, use customer resources more efficiently and offer new services to customers,” stated the Institute for Electric Innovation.
3. During the World Smart Energy Week held in Tokyo, Japan in 2015, the Japanese government identified six pillars vital to accelerating smart grid rollout to help the country’s energy sector recover from the failure of the Daiichi nuclear power plant in Fukushima following what is known as the Great East earthquake in 2011. The key pillars include; smart meters at the core of the country’s smart grid rollout, solar PV, communications technologies, energy management systems, battery energy storage systems, and the deregulation of the electricity market. Japan accelerated its smart grid technology deployments as the country aimed to ensure a secure energy supply during the 2020 Olympic games that were set to be hosted by Japan. However, COVID-19 disruptions have delayed the country’s smart grid plans, and as such continued investments are expected throughout 2030.
4. Although the penetration of smart grid technologies, especially smart metering, has been slow in India over the past few years, the market is expected to play a key role in the expansion of the market over the next decade. Berg Insight anticipates the Indian market to experience a compound annual growth rate of 76.2% through 2025 and account for as much as 15–20% of smart meter shipments in Asia in 2025.
Commenting on smart grid trends within the Indian market, Levi Ostling, a smart metering analyst at Berg Insight, said: “Ambitious targets to roll out some 250 million smart meters within just a few years’ time has so far failed to materialize, with the installed base of such devices merely doubling over the past two years to reach a modest 3 million units at the end of 2020.”
However, increased funding by the government towards smart grid deployment and the need by utilities to enhance operations and revenue collection is expected to be the key drivers of the Indian smart grid market. For instance, the Indian government is considering launching the SAMARTH funding scheme for smart grid rollout.
5. Although Europe’s largest economy, Germany, has lagged behind smart grid deployment compared to its regional counterparts over the past years. New regulation is expected to help increase deployment and investment in smart grid infrastructure in Germany is expected to hit $23.6 billion by 2026, with up to 44 million smart meter units being installed.
Other smart grid segments such as advanced sensors, communications and software for distribution grids and battery storage are expected to account for $14.1 billion in investments with the country’s largest utilities RWE, E.ON, EnBW and Vattenfall leading the race. Commenting on developments within the German market, Ben Gardner, president of Northeast Group, stated: “Germany is finally providing some clarity regarding its intentions for smart grid infrastructure investment.”
He said the enactment of the Act on the Digitization of the Energy Transition, which calls for the deployment of smart meters, laid the foundation for much-needed investment in smart grid infrastructure required to integrate the country’s growing supply of intermittent renewables.
Significant investments are also expected to be made by emerging smart grid markets such as Brazil, Malaysia, Saudi Arabia, and the United Arab Emirates. Emerging markets are expected to direct up to $40.7 billion in funding towards AMI between 2020 and 2024 and up to $47.9 billion in additional smart grid infrastructure segments. This will result in some 430 million smart meters being installed in across 50 emerging smart grid markets through 2024, up from 111 million units at the end of 2019, according to Northeast Group.
It is fair for one to conclude that financial constraints, lack of supporting regulation, and limited knowledge on the benefits of smart grid technologies have in the past hindered adoption. However, with access to funding improving and governments worldwide introducing policies on digitalization and decarbonisation, an increasing number of countries and utilities are bound to follow the rollout suite. Moreover, consumers are demanding advanced and digital services which can be major result of smart grid deployments.