What are the key energy grid or market disrupters to be addressed by the energy industry and customers? This is the question that the Smart Grid Australia (SGA) Board thought should be addressed. In order to explore this further, the SGA Board chose five disruptors and ran a summit to determine the extent of their influence. The summit was held with five thought leaders and consisted of a series of discussions around the key issues to be examined to bring the concepts of smarter energy, the smarter home, the smarter network and the smarter industry to fruition.
In March 2015, Smart Grid Australia compiled a report, Building our Energy Future – The Five Disrupters, which draws together the key ideas, discussions and subsequent consultation with industry thought leaders, summit attendees and the SGA Board.
The report highlights five key trends that have given rise to the five disruptors in the energy sector, which have been identified as:
- Ecosystem of the grid
- Distributed generation and storage
- Future of transportation
- Renewable economics
- Cost to value
Identifying the Five Disruptors
The report presents five key takeaways or deductions under each topic, SGA’s introductory thoughts and opening statements as well as feedback from participants in the forum. Here’s what they had to say:
Ecosystem of the Grid
Some of the ideas around market trends causing “disruptive change” in the market include an intensified focus on the customer. The report states that customer control and choice are the new focus with customers increasingly being able to access a wider range of providers and products. It adds that collaboration between providers to meet customer needs will be important, and both technical and regulatory advances are required to support the new customer focus.
There is a need to trial, build and experiment. The exact future state of the industry, the business models and path to the future are uncertain. The new approaches will need to start small and then scale up to meet customer demand. This will require flexibility.
Collaboration between the customers, industry and rule makers will be important to both foster the new business models and provide access for new entrants.
The SGA notes that the customers are at the centre of the ecosystem but only 30% of them understand the sector. The balance want reliable service with minimal cost and effort. The nature of the customer is changing: with both prosumers and passive users being part of the mix. Customers are more informed, which enables the rise of the prosumer, a customer with detailed, relevant knowledge. This is all leading towards multi-directional relationships at a site supply, load or hub with the customer tending towards being a trading partner rather than a consumer.
Participant discussion also highlighted the changing and complex nature of customers.
There is a paradox of engagement where the customer wants to be more in control but may not want to put in the effort – “set and forget”. While there are 30% of customers who are interested in energy matters, the other 70% are disinterested for a number of reasons. As the traditional roles and interactions between customers and energy providers continue to change, there will need to be a balance between the types of services for the enthusiasts/ prosumers and the 70% that just want convenience.
Ranil Sharma, Industry Lead: Utilities, Telstra Global Enterprise and Services, said: “The change in the role of the grid as a source of supply to a platform for the exchange of value presents a challenge for the industry, both the networks in how they will do business and the participants in how to interact in the new market.”
Distributed Generation and Storage
The second energy disruptor is distributed generation and storage. The SGA reports suggests that in this regard supportive regulation is required to provide confidence for investors and to ensure the value is shared – enabling customer choice, control and flexibility.
Flexibility, open access and interoperability are vital. Networks remain central to power supply, but must become a platform for competition, access and choice. This requires open access to information, true cost reflective tariffs and efficient product pricing. This will allow flexible bundling of services and allow customers to choose the combination of services they require.
Collaboration will be important to remove roadblocks, align incentives, and develop new business models. Advanced metering and open data will be essential to allow the value and costs of products to be measured. Systems will need to allow for easy connection to the grid and the marketplace and allow for “Plug and Play” capabilities using standards and protocols.
SGA has established 3 development areas under which the above can be achieved:
- Developing a common vision for the future – developing a set of key principles, such as cost reflective pricing and the necessary collaboration to build alignment of the industry including suppliers, customer advocates and other parties.
- Developing and mapping out an efficient, rational and orderly transition plan – this involves the identification of problem statements to build the key enabler to foster innovation and allow the industry to act with active intervention on development as a last resort.
- Building a centre of excellence – a future roadmap needs to be demonstrated to expand the learnings and test hypotheses. Open access models, notes SGA, will be required for sustainable and sensible solutions.
John Theunissen, manager for network modernisation at the Asset Management Division of AusNet Services, said: “This report presents a synthesis of several dominant influences that will shape the future of our energy ecosystem. It suggests responses that challenge existing operating models and create new opportunities for enhancing the benefits that can be realised from effectively integrating new distributed energy resources and the broader digitisation of the industry.”
Importantly, storage is an enabler. Storage can unlock renewable energy allowing it to support the market and the grid. It can provide more efficient products to customers as well as assisting the network providers to provide better, more efficient services to customers. The regulations surrounding storage need to balance customer needs with the development of the industry.
Future of Transportation
The introduction to this topic from the SGA think tank focused on the benefits of EV load to the grid but noted that there will be impacts with a mobile load. The question is when – not if – EVs will predominate but the “when” is highly uncertain.
Transportation will be a key component, says the report. How the forces of efficiency, technological advancement and driverless cars combine will determine the take up but the grid and providers will need to be able to support wide scale adoption of EVs.
Networks will need to support the introduction of EVs and adopt a new model for dealing with mobile sites and competitive access to services. The need is to establish how it can work.
Storage and charging facilities are likely to be key factors for adoption and some countries already provide assistance. SGA states that government regulation will be important and must recognise the changing nature of transport as a shared/ common resource. In addition, standards need to evolve in the industry; and government needs to assist with smart policies to support development in the sector. Car sharing will play a role, with incentives around parking and priority lanes in some cities providing more support.
Participants to the summit agreed that electric vehicles will impact the grid as the need to ensure supply at different locations will be an issue for the grid. On the supply side, smart infrastructure is needed to generate more power at peak periods. SGA cautioned that slow charging could exacerbate peaks if not managed.
The grid has the potential to become the platform for market and value exchange. The connection point becomes an exchange point for the buying and selling of energy. Participants in this discussion said that the challenge is to create a network as a platform that can still provide its key purpose of reliable supply while accommodating new devices. Devices need to operate flexibly with other providers (including telecommunication providers) and energy utilities open to selling each other’s services.
In order to achieve this, change will require:
- maintaining reliability, but targeted reliability to meet the requirements of the customers;
- incentives to nudge the transformation along; and
- providing choice in pricing and access, including open networks and standards to support interoperability.
The Association notes that disruption will come from other participants and customers as new technology and new models enter the market. This will include new approaches hitting critical mass for adoption or lease based energy solutions that require minimal upfront payments for the use of new technologies.
Cost to Value
Customers vary in what they wish to put their focus on (see diagram 1). This means that it is important that they are aware of their options and understand what is possible. The grid and market need to provide a platform for the market and new providers and applications. This will involve:
- The networks as the basis;
- Plug and play connections;
- Interoperable plant and equipment; and
- Open access to data and systems.
Tariffs will need to reflect true costs and provide true value to allow customers the information and the ability to trade off cost, convenience and reliability.
Services will also need to be unbundled to allow the development of flexible, variable and customer-focused products.
This last is that the “one size fits all” approach is no longer the best approach and customers will want control. There will always, however, be a need to ensure that vulnerable customers are not disadvantaged.
Finally, it is important that the technical standards required for customer supply are not compromised. The standard must be minimal to cover safe and reliable supply to all customers and to allow businesses to meet their obligations.
Milan Vrkic, general manager for Marketing and Strategy at Landis+Gyr, said: “Consumers are getting more actively involved [in the energy ecosystem] and the edge of the grid is moving towards the centre.
“The existing investments in the grid will not be wasted as it continues providing reliable supply and it gains an additional role supporting new trading relationships via open access and interoperable platforms.” MI
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