Electricity Needs To Go Smart

It’s no surprise that today’s world is facing a true energy dilemma: how do we deliver secure, affordable, low-carbon energy to everyone? It is widely agreed that energy conservation and renewable energy are critical to securing our energy future, but smarter electricity systems – smart grids – are imperative if we want to tap the full potential of modern energy solutions.

A smart grid is an intelligent, digitized electricity system that provides an energy network that delivers electricity in an optimal way from source to consumption, enabling better energy management, minimizing power disruptions and transporting only the required amount of power.

Just as the current grid facilitated the industrial innovations of the 20th century, smart grids could substantially support clean energy growth and innovation in the 21st century.

What a smart grid does better than our older grid is maximize the contribution of clean energy and new energy solutions such as wind, solar power and electric cars. Today’s grid was not built to handle large and increasing amounts of renewable energy production and send it from remote places to where electricity is consumed. Without a smart grid system, it would be virtually impossible for electric vehicles to work on a large scale. A smart and modernized grid is therefore the missing link for the use of clean energy to be within everyone’s grasp.

A smart grid can also serve as a platform for innovation in energy services, which gives customers more information about their energy footprint and ways to manage their electricity consumption. There is a carbon emission reduction potential, directly through more optimal production and transmission of electricity, and indirectly through influencing consumer behaviour.

We are witnessing a trend of government stimulation and industry focus on smart grids and low-carbon technologies as a cornerstone for future industrial strategy. Last year, China alone spent over US$ 7 billion on smart grid developments focused on transmission and distribution – with a vision of building a "strong smart grid” by 2020.

The U.S. has directed US$ 4.5 billion of its fiscal stimulus package to smart grid activities. In Europe, Japan and South Korea, significant initiatives are currently underway. Recent studies, such as the European Climate Foundation 2050 Roadmap, highlight the importance of upgrading the electricity systems to achieve a low-carbon Europe. Innovative cities are spearheading “intelligent city” concepts, whereby some smart grid capabilities are applied. Major industry players from across the electric utility, ICT and energy technology sectors are also developing smart grid strategies.

With all this, what are the chances that smart grids will succeed? A World Economic Forum report, Accelerating Successful Smart Grid Pilots, launching today at the Annual Meeting of the New Champions 2010 in Tianjin, outlines the conditions for success and numerous challenges that we currently face.

The report explains the survey responses of more than 50 industry stakeholders and experts who are engaged in identifying the factors that will determine the success, or failure, of smart grid pilots. The report emphasizes the importance of getting a larger number of ambitious pilot projects underway to test new technology and business models.

The investment and time required to deploy smart grids is significant and cannot be underestimated. For them to succeed, government, regulators and industry players must work together to create the conditions for success by supporting pilot projects and revisiting regulation to ensure alignment with policy priorities.

Most of the regulatory frameworks that currently exist were created during the period preceding the emergence of the low-carbon agenda, with the focus on a low-cost and reliable service. Although many aspects of the regulatory frameworks are still valid, some actively discourage the changes that are needed to transition the electricity systems towards a smart grid. To make a smart grid a sound investment for electric utilities and other companies, the business case in many countries must be strengthened – regulation will be the key.

In addition, there are important issues around setting standards for technology and tackling data security that must be addressed and will determine whether or not smart grids will be a success. Globally, we are at a critical point where clean energy will play a prominent role. Electricity systems will need to be flexible to allow for the incorporation of new low-carbon technologies and to give customers more visibility and control of their energy consumption.

Smart grids will play an important role in making electricity go smart, but the journey will be long and challenging. By acting now, decision-makers can increase the chances of success and avoid having the electricity infrastructure become a bottleneck to delivering a low-carbon, efficient and secure energy future.

[Editor's note: Keep your eyes out for an in-dept look at World Economic Forum's Accelerating Successful Smart Grip Pilots in the next issue of Renewable Energy World magazine.]

Roberto Bocca is Senior Director and Head of Energy Industries at the World Economic Forum and can be reached at rboc@weforum.org.

To hear an interview with Espen Mehlum, Associate Director, Head of Electricity Industry at the World Economic Forum about the 'Accelerating Successful Smart Grid Pilots' report, please play the video below.