People power in the energy market

Remarkable things have happened since governments in Australia and elsewhere began to stimulate the use of PV energy through subsidised solar panels and/or attractive feed-in tariffs.

The electricity companies were totally unprepared for the enormous enthusiasm of the consumers. Within two years solar panel penetration in Australia went from nearly zero to over 10%, and in some areas this is already approaching 15%.

As with smart meters BuddeComm has argued that for these new developments to take place in an orderly and sustainable manner the energy companies would need to create smart grids to enable them to cope with the requirements of these new applications. While there was initially a lacklustre response to this it is clear that, with all the negative developments that followed smart meters and PV installations, there is no longer any electricity company that doubts its need for a smart grid. Be it belatedly, all electricity companies around the world are now working very hard to put these systems in place.

The problem is that one can’t just physically stamp a smart grid out of the ground. Very substantial changes first need to be made to the often many-decades-old operational systems of the companies involved – the so-called back office upgrades. Only when those are in place can one start looking at the network, add applications and begin to interact properly with the market directly, with consumers, and/or with devices such as smart meters, home gateways, solar panels, electric vehicles, air conditioners and eventually the various other devices in the homes.

Having said this it is remarkable how quickly some of the Australia electricity companies in Victoria have been able to speed up their overall smart grid plans; they are now among the world leaders in their field.

Nevertheless, in many cases the market is now moving much faster than the industry. In the case of solar panels, in many countries the industry lobbied energetically, and successfully, to put limits on the PV subsidies. However, to their surprise this didn’t stop consumers. The electricity industry is now reaching a point where they have to stop people installing solar panels. This obviously will not be a popular move and the politicians and the media will most certainly become heavily involved in this.

Horizon Power in Western Australia is like all other utilities facing the same problems, but it has decided to start a community engagement program, whereby they propose to sit down with the community to discuss the pros and cons of adding more renewables to their electricity supply. They are prepared to explore what the boundaries are and push them further if possible. If, for instance, the community accepts certain fluctuations there would be room for discussion.

Once storage of electricity becomes possible this situation will change dramatically, with more and more people simply going off-grid; and communities could, for example, develop their own micro-grids. Horizon Power is already looking at what role it can play in such circumstances, accepting that traditional electricity revenues could easily drop by one-third 20 years from now, and that only by becoming involved in new smart developments will it be able to  continue to create value for the communities it serves.

One of the biggest problems with the rollout of the smart meters has been engagement with the customers, and political, media and consumer backlash has been enormous, scarring many electricity companies. However the interesting development here is that, with millions of these meters now in place globally, consumers are beginning to understand the benefits – not that they necessarily already receive those benefits, but they can understand the concept, and consumer support for smart meters has increased and continues to grow.

What this means is that with a better understanding of what smart meters can do for customers they will start to push for applications and services that will become possible.

The big question is whether the electricity companies and their retailers will indeed be the right companies to deliver the benefits to the customers; or will it be newcomers in the market who will start to fill that gap. The Australian Government, theoretically at least, supports such developments through its Power of Choice plan.

The tide is turning and, as happened in the telecoms industry, the power is moving away from the operators to the customers – a development that, in the telecoms industry, led to the most remarkable innovations. Will the electricity industry now follow a similar path?

Paul Budde

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