The Necessity of Smart Grids

The other article talked about how consumers and regulators are turning against smart metering, time-of-use tariffs (where charges for usage rise or fall throughout the day according to a pre-set plan that mirrors the demand placed on the grid) and the whole toolbox that might allow utilities to fight just such high peaks in demand.

The two arriving together was coincidence.  It is people like me who are putting them together and asking whether we have a fundamental problem here; and it strikes me that this comes down to a marketing and market management failure, more than anything else. 

You could argue that smart grids are unnecessary and that traditional system reinforcement with copper and steel will do the job.  I can’t argue the physics of that, but I can argue on the commercial side.  I know of a utility that complains that 30 percent of its copper and steel is idle for 350 days of the year, only getting used during the peak of summer.  And its forecast is that this will progressively get more extreme with time.  To install more metal infrastructure for progressively shorter periods of peak demand is just not economically feasible.

This is where smart grids, using information and communications technology, are supposed to come into play – making better use of existing infrastructure and reducing demand when there is not enough supply.  Unfortunately, the problem is that to this point we haven’t sold the benefits of the concept adequately.

Now let me leap ahead, say, 15 years to another really hot week, but one in which there are a large number of electric vehicles.  It’s late afternoon and the grid is already straining to cope with the excessive use of air conditioning, then a whole fleet of electric vehicles arrive home from work, get plugged in and bring down the grid.  At least that is what would happen if the operators weren’t able to manage demand through differential tariffs or even direct control.

Now let me add my final complication to the story.  Staying 15 years hence, we add a whole load of small scale renewable energy sources embedded throughout the grid.  While the sun shines this great – it is a local source of energy supplying local demand and is a relief to the grid.  Until, that is, the storm clouds gather and the sky goes from blue to grey.  Now I am no expert in solar panels, but I imagine that as the storm clouds rollover in this hypothetical early evening, that the power from these power sources will drop immediately, putting yet another strain on the overworked energy company.

Let’s now replay that scenario but with smart grid technology.  During the day, using market signals (in other words, time of use tariffs), the utility has managed to reduce demand and now has some capacity headroom.  As electric vehicles plug into this network, the driver is asked if recharging can wait for a cheaper time.  I imagine that most people will say “yes” and so there will be minimal extra load from the few who need to reuse the vehicle in the near future.  And finally as the storm clouds converge over the solar panels and local production drops, the utility is able to instruct the city’s thermostats to rise by 1 degree, again protecting the grid from failure with minimal inconvenience. 

In 15 years time, if my hypothesis (and not just mine alone) is correct, we have no choice but to have intelligent grids:

• to make the most of the assets that exist
• to manage the different energy sources, especially the intermittent ones
• to avoid blackouts, which fundamentally are the classic way of managing demand, through dynamic management of load.

The impact of this is to require change.  

As consumers and utility customers, we will need to reassess our expectations.  If we want to avoid the potential for massive energy charge hikes and increased outages in the longer term, then we will need to think about getting used to the idea that our demand for electricity may not always be met in the way we want it.  This may mean the air conditioning temperature rising by a degree for an hour or so each day or it may mean we have to pay a premium if we want to charge our electric car during peak time periods in the day.   

Utilities can see this coming, albeit with differing timelines depending on geographic region.  They will have to assess how best to market the longer term benefits of this new technology and, just as tricky, how to create innovative tariffs that are attractive to the consumer, but allow utilities to achieve effective demand management.

It is the regulators who will enable this.  Their role is to protect the customer both in terms of energy reliability and the charges levied on customers.  They have a very delicate balancing act.  That makes it an interesting piece of marketing for the utility to the regulator, as interesting as that from the regulator to its public.

So perhaps we in the industry need market the benefits of smart grids better:  to our regulators and to the public.  That way we can have everyone pulling together for a more reliable, more efficient and more environmentally friendly electricity network.  That way, we will all get the best of all worlds.