Smarter distribution networks required to meet changing energy demand

22 June 2017

Distributed energy generation is taking off as economics, sustainability and new technologies converge. The fast paced development is disrupting the the traditional network operators' operational and business model, creating considerable uncertainty for incumbents. A new report considers the benefits of investing in customer facing smart distributed generation integration.

Distributed energy generation by consumers has, quietly, grown over the past decades, as consumers seek to being, among others, more sustainable, reduce costs, and become more self-sufficient. In Australia for instance, the number of new solar panel PV installations per year has increased from around 3,500 in 2007 to 360,000 by 2011. Today the country has more than 1.66 million home installed PV systems, representing around 15% of the population. The UK too has seen considerable investment by residential households in PV systems, with the country’s consumers’ total net contribution up from 1GM to 11GW over the past four years.

According to a recent study from Accenture, titled ‘Power Surge Ahead: How Distribution Utilities Can Get Smart with Distributed Generation’, the consulting firm finds that consumer sentiment for distributed energy generation remains strong, with 40% planning to invest in rooftop PV over the next five years. The shift of residents towards distributed energy generation is set to impact the wider distribution network – which tends to be in the hands of private enterprises. The report considers how the networks intend to deal with the disruption.

Small scale/prosumer distributed generation to create stress

Network operators are increasingly facing a range of technical and economic effects as a result of the distribution of its form business models from the rise of distributed energy generation. The consultancy firm asked respondents to indicate what they expect to place the greatest stress on their networks – 59% indicated that small scale/prosumer distributed generation will place the greatest stress on their network, while 28% say that medium- or high-voltage connected distributed generation will created the greatest stress.

FOTO: Implementing changes in face of distributed energy increase. Page 8, bottom image: attached.

Network providers are facing a number of daunting challenges as small scale distributors continue their influx onto networks. Capital investment at the scale required to address the challenges tend to lag behind the speed of adoption among consumers, creating a range of pitfalls for network operators.

One way networks may be better able to deal with distributed generation are smart grids. The research notes that investment in smart grids remains somewhat lacklustre. As part of the development of smart grids, 26% have to a great extent developed new skills, 24% have engaged in process redesign, 16% have centralised roles and 14% have pushed through governance changes.

Implementing changes in face of distributed energy increase

The study notes that network providers face considerable difficulties on various fronts, particularly in terms of increasing capital investments and optimising operations and maintenance (O&M) spending. While, side from economic benefits to consumers from the installation of distributed energy generation, governments faced with the reality of various environmental threats are set to increase focus on renewables. Furthermore, the rise of energy storage systems means that a breakthrough in energy storage could create significant revenue reductions, particularly if network operators begin to punish consumers for switching to distributed generation.

The disruption in the generation and distribution of electricity is likely to create considerable risks for investments therefore. According to Accenture, investment in customer-facing smart grid solutions may be able to create considerable value at considerably lower costs to more traditional models. Base deployment costs savings could, according to the firm’s analysis, hit 30% by 2030, to $20 billion in the US and €58 billion in Europe.

Reinforcement spend for small scale distributed generation deployment.

The investment would focus on three key areas to improve the various networks’ ability to utilise distributed energy generated by consumers: locational incentives, curtailment and non-firm contracts and storage or demand response. The firm notes that network operators will need to develop a range of strategies that fit likely regulatory changes, changes in consumer behaviour, technological advances as well as wider changes in the energy market.

A spokesperson for the firm said, “Success in developing the new capabilities to operate in this fast-changing market hinges on seamlessly integrating technology that can enable advanced grid operations and new commercial models.”