Explaining decentralisation for the new energy grid

• 5 years ago (2018-05-19)
• Junior Isles

Digitalisation 10

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By Darren Farrar, Energy Segment Manager at Schneider Electric

Globally, we are witnessing the most significant transformation of energy grids for a century. The efficiency and sustainability of our energy sources have become central concerns for organisations as they prepare for a clean, low-carbon future. The cost of technology is declining rapidly while computing, storage, and bandwidth capabilities are growing exponentially. Affordable, small but powerful and communication-enabled sensors are becoming embedded in everything around us, leading naturally to increasing asset interconnectivity as the Internet of Things expands.

When it comes to energy, the combination of emerging innovations that produce, transmit, and consume energy all add up to one big change: decentralisation. Decentralisation describes the transformation of energy, from a ‘one-way street’ of providers selling energy to consumers into a multi-directional, multi-lane highway.

Centralised power generation is increasingly giving way to decentralised production as new technologies continue to allow for different forms of power generation, storage, and transmission. This means that the grid as we know it, and everything related to it, is changing rapidly. Decentralisation is nothing less than a revolution in how we generate, store, move, and consume energy.

Enter the prosumer

In a traditional centralised energy grid, energy producers, transmission and distribution operators, and suppliers work together to bring electricity to consumers. However, advances in renewable energy and distributed energy resources (DER), IoT connected devices, and peer-to-peer networks are reshaping that paradigm dramatically.

We already see consumers in many industries demanding more control. Online buyers, for example, can both buy and sell products online, often on the same platform. In the new energy landscape, energy-consuming devices will, in many cases, become assets capable of storing and redistributing energy as needed.

For those of us who now merely consume energy, whether in our homes or businesses, decentralisation means we will become more and more involved in energy production and storage as well. We will evolve from one-way energy consumers to multi-directional energy prosumers, consuming but also producing and selling energy to the grid.

Consider a hypothetical example using solar energy. Prosumers could install meters with sensors and smart technology. These smart meters measure energy from the solar grid and send information about energy production, consumption and excess energy to a mobile app. The informed prosumer then sells the surplus to the consumer market via an online trading platform.

The transaction would be fully automated based on smart contracts, and a block chain-based network records the sales. The power grid (assisted, perhaps, by forward-thinking utilities) delivers the purchased energy to consumers or other prosumers. Using blockchain, it is possible to envision a decentralised energy grid that facilitates the production, distribution, and marketing of renewable energy by local homeowners.

Each company an energy company

Operating in a decentralised future, every large organisation will need to become an energy company, capable of producing, storing, and selling energy on a real-time basis. This will bring both complexity and many new financial opportunities. Companies that have the generation, storage, and IoT devices necessary to participate will be able to open up new revenue streams by selling excess energy to their peers. On the other hand, this will also require either on-site or outsourced staff to manage energy in this new, dynamic environment.

Decentralisation means consumers and businesses alike will continue to gain new opportunities and, further, utilities themselves will be presented with the opportunity to evolve into something new, to become facilitators of the new world of energy.

For power utilities, decentralisation presents an enormous opportunity. As a key player in established, centralised grids, utilities contain much of the expertise required to facilitate the transition from the uni-directional power flow of today to the multi-directional flow of tomorrow. Some of the largest energy companies are investing in a decentralised future.

All this is not to say there will be no challenges for utilities. Integrating DERs, which often produce an inconsistent or less predictable output, at a time of growing demand will force operators to place greater importance on balancing their grids. As these systems evolve they may also need to scale their security capabilities to head off cyberattacks from over the IoT.

In this climate, the evolution of utility business models seems certain. The way for utilities to face the challenges, as well as capitalise on the opportunities, presented by decentralisation is through their own digital transformations.

The next stage of decentralisation

Where then is this revolution heading? All of the specifics are not yet clear, but the resulting future of the energy grid - the end product of decentralisation - is what we call the MeshGrid™ ecosystem. The MeshGrid ecosystem will web together the physical and virtual world, allowing energy generation, storage, and consumption to be optimised continuously through automation. The foundation of this ecosystem is already being set in place through the advent of technology enabling networked microgrids and nanogrids capable of producing, using, and storing energy and transacting energy with others.

While a fully functional MeshGrid has yet to be realised, decentralisation is here to stay and is only just starting to pick up its pace. As with any revolution, decentralisation will be disruptive. It will confront utilities with fresh challenges while presenting us with new and exciting opportunities, but only if we have the right technologies in place. The companies that embrace decentralisation now will have the competitive edge that helps them survive and thrive in the future.