The need for reliable power has never been greater, and the established way we deliver energy has never been more under threat. It’s the utilities’ mission to balance that equation.
The world has an insatiable appetite for energy. Global energy consumption is expected to double by the year 2050, according to the International Energy Agency (IEA)’s World Energy Outlook. At the same time, greenhouse gas emissions responsible for driving climate change must be reduced by half over that same period, as define by the Intergovernmental Panel on Climate Change’s 2007 Synthesis Report. The global challenge is learning how to drive economic growth while reducing energy consumption.
The energy waste and consumption problem isn’t insolvable. With over 42 per cent of CO2 emissions coming from the power sector, according to the IEA, electric utilities—along with governments, citizens and energy technology providers—must play a role.
Schneider Electric believes that access to energy is a human right. Everyone on our planet should have access to safe, reliable, efficient, and sustainable energy. But we know the current way of managing energy is unsustainable. As a global leader in energy management and automation, we can address this paradox by using today’s technologies to design and build our energy ecosystem differently.
The world is more digitised
Our devices are smarter and computing and communications are becoming more embedded in the home and workplace. Energy should follow suit. From a utility control room to the electrical outlets in a house, digital technology makes our energy use smarter and more efficient. Distribution equipment is being enhanced through the integration of sensors, IT, and communications systems, making power generation, delivery, and consumption more adaptive, dynamic, and efficient.
By enhancing operational technologies with an intelligence layer, connected solutions are energizing work and living spaces. Home and business efficiency goes up; power consumption goes down.
This transition starts with utilities leveraging the exponential growth of data. Almost 90 per cent of all the data in the world have been generated over the past two years, and people and machines can access more and more information. People expect solutions that connect to that intelligence and put those data to good use.
And more decentralised
The centrally managed, fossil-fuel-dominated approach is challenged as new energy technologies emerge, demanding prosumers and regulatory agencies push for more decentralised sources. That change is reflected in how power networks are designed and upgraded, for example to enable two-way flows. But these changes have a cost, of course.
In Europe, feed-in tariffs often place an additional burden on operations. At first these tariffs rewarded electricity generation from renewables. But over time, they’ve penalised centralised production and discouraged investment in gas-burning generation. The lack of economic coordination of renewable integration with centralised generation has led to sparing coal plants while squeezing gas plants out of business in some European countries.
Elsewhere, legacy equipment and aging infrastructure delay a move from a centralised power structure. In an ideal world, outdated equipment, substations, and transmission networks could be ripped out and replaced to accommodate modernised infrastructure capable of controlling renewables. But the smart grid isn’t starting from scratch. It requires reconfiguration and reimagining existing networks, which usually work reliably and in which capital investment has not fully depreciated. That’s why stakeholders realise that greater cost control gains can be had within the operations realm by improving grid efficiency and lowering operating expenses of utility business processes, despite the legacy infrastructure.
The intelligent use of data and the rapid expansion of connected technologies are key to reducing operational expenditures in a decentralised smart grid era. There’s growing access to and affordability of this technology, often called the Internet of Things. This is a critical tool for managing increased grid complexity, automating electricity distribution, and enhancing customer satisfaction.
Forward-looking utilities should see these changes as an opportunity for rebirth and a chance to build trust with customers. But transition is never easy. Skills gaps and technology adoption within an existing grid and entrenched culture require utilities to manage this transition carefully with the support of trusted partners. In addition to achieving operational excellence through a managed transition, utilities will seek new revenues by offering new services.
Regulation is pushing for reliable and decarbonized power
Regulatory authorities constantly scrutinise emissions. When making important decisions site location, technology interoperability, regulatory approval, and financing, utilities must account for both regulatory risks and consumer trends. Otherwise they risk making costly missteps resulting in stranded assets as the energy market evolves.
Further, the price of renewables is coming down. The cost of wind and solar power has never been more competitive with fossil fuels than it is now, both in terms of physical equipment and the market rate. Hydro is a highly predictable energy resource and a worthy replacement for backup diesel power plants due to its immense storage capabilities.
Renewable energy integration will doubtless bring more advantages than drawbacks for utilities that move toward the smart grid. While the roadmap can appear unclear, experienced intermediaries like Schneider and the right technology mix make the transition much easier.
From national governments to the local level, regulators are demanding that utilities comply with ever-changing requirements regarding reliability, renewable portfolio size, and time-of-use or critical-peak pricing. On the other hand, governments are also providing grants, acts, and initiatives to encourage the research and development of clean and efficient energy, while also fielding calls for energy independence and the need to secure infrastructure from security threats. In fact, multiple national and international agencies are now applying pressure for utilities to comply with standards around the growing challenge of cyber security.
How can utilities conquer these challenges?
Part of the answer is with smart tools, harvested data, and connected technologies—all of which belong to IoT. Convergence of IT and OT, the Internet of Things, and the proliferation of big data are essential to a new digital ecosystem for utilities. The free-flowing but structured data management also lets utilities control energy flows with a real-time visibility into asset and network states. This helps operators optimize their systems based on actual asset capacities.
Consider advanced metering and customer relationship management (CRM). These platforms deliver clarity to customer service reps, who can use local data to help customers solve problems. For example, should a customer call to report an outage, the representative can ping the meter to check its status and nearby consumers’ meters to confirm the nature of the outage, and then troubleshoot. This two-way communication between the utility and the customer can also enable energy incentive programs, where customers are rewarded for shifting energy use to off-peak times, giving some relief to the network.
Utilities must adopt a system-centric approach because changes to one variable have consequences elsewhere. Traditional priorities of local system optimisation must give way to the higher priority of system-wide optimisation. The new network of widely connected intelligence is critically important to a modern utility’s viability.
IoT also offers cost savings for maintenance. While routine maintenance is a major part of asset management, it’s a huge time drain for grid managers. As updated hardware and software applications are integrated into the network, equipment performance is measured remotely via a central control panel. Substation maintenance can then be adapted to real operating conditions.
Connected technologies also allow new predictive models, where monitoring allows the identification and proactive servicing of weakened assets, saving a great deal of time and money by avoiding failures or emergency servicing.
The transformation of utility business and operating models
Utilities also need to focus on their customers’ new requirements for services and technologies to support safe and reliable decentralized power sources on the grid, lower demand, and manage new energy assets (like storage and microgrids) to retain large industrial customers and promote the electrification of other industrial sectors, such as transportation.
At the same time, many customers have begun taking more direct control of the cost, reliability, and green mix of their energy supply. City districts, educational institutions, military bases, hospitals, commercial buildings, factories, and residential homes are becoming proactive energy consumers, or ‘prosumers’, that consume energy, produce energy, and control it. That’s thanks to the convergence of new and widely available technologies that can automate and fully monetise their energy resources’ flexibility.
With this potential flexibility, customers’ controllable energy-consuming loads and any onsite energy generation capabilities are now considered important distributed energy resources (DERs), which are critical to helping balance the grid.
In Europe, for example, it’s estimated that 3 million energy users already generate at least some of their own power. These prosumers are taking energy consumption and management into their own hands by purchasing smart products that turn on or off in response to changes in energy pricing or peak loads. For utilities, the prosumer revolution is an opportunity to go behind the meter to manage assets and bring an extra layer of flexibility to modern-day grid constraints.
The term ‘demand management’ is used to describe one of the major change drivers in the industry today. The goal of demand management is to provide utilities with an alternative to building more power plants to meet capacity needs. By having the ability to modify energy usage on the demand side through smarter technology, education, and energy-efficiency improvements, utilities can both save money and accommodate the demands of the prosumer movement.
Schneider Electric’s vision of new world of energy
The need for reliable power has never been greater, and the established way we deliver energy has never been more under threat. It’s the utilities’ mission to balance that equation. Utilities need to embrace more collaborative, common-sense energy and decarbonisation.
We know where we’re headed: through changing business models and renewable energy, through smart grids and prosumers, right down to electric bills. And its utility industry stakeholders who must assume leadership and act. Those who do will deliver smart, reliable, safe, affordable, and clean energy in non-traditional ways, and provide new customer services.
As a global leader in energy management and automation, Schneider Electric can help utilities accomplish this by using the technologies of today to leverage innovation to design and build the new digital energy ecosystem in a very different manner.