The benefits of Smart Grids are slowly becoming accepted. One of the catalysts for change has been that more and more utilities around the world are recognising the mounting problems presented by energy and environmental concerns. These concerns include:
- inevitable limitations on energy generation, while usage is skyrocketing;
- the decades-old networks are under greater stress;
- the utility workforces are aging and there is a resource squeeze;
- increased use of alternative energy sources in their networks;
- wastage of energy and the resulting high penalties; and
- the inevitability of carbon trading.
At present the infrastructure of the utilities is unable to deal with all of these concerns, so the usual “do-nothing” approach, or more of the same narrow(band) thinking, is no longer an option.
The utilities which are anticipating these developments are embracing the concept of an end-to-end solution in the total energy chain – from energy generation to network operation, distribution and retail services at the customer level. Those companies also understand that the consumer is part of the solution and will need to play a key role in the process.
However, the fragmentation of the industry (generation, distribution, retail) enables companies to pass the buck on to the next segment in the market. Some segments actually have no incentive whatsoever to implement energy saving solutions because they are making huge profits from energy wasting and stresses in peak demand.
It therefore doesn’t make sense for one part of the chain to move forward while another part is holding back.
Leadership is all that is needed
We are certainly not saying that smart grids are the silver bullet. We think there is now a widespread understanding that we need to address many elements of various environmental issues:
- old generators need to be upgraded and modernised;
- new alternative energy sources need to be implemented;
- energy efficiency standards for appliances and building construction need to be improved,
- education to enhance awareness about energy savings; and indeed
- smart grids.
In order to address the issues of the energy crisis, global warming and energy saving, an end-to-end business solution is required. Fiddling with one aspect only is not going to do the job.
All the technology which is needed for a smart grid is in place, so technology is not the issue.
What is needed is industry leadership, and even more importantly, government leadership.
We also believe that most of the finance required to implement smart grids will become available. Over the next decade billions will be allocated to energy networks so, with regulatory vision and leadership, smart grids can, to a large extent, be financed by existing investments.
Utilities need to be modernised
Unfortunately many electrical engineers working in the utilities have little understanding of IT and what new end-to-end business solutions can do for their network and energy management. It has been stated that the ICT industry, technologically, at least, is 10 years ahead of the utilities industry.
However, the industry is also heavily regulated and the government determines what the utilities can or can’t build. So in the absence of any encouragement or promotion from the regulator, it is understandable that many utilities are not going to build a smart grid within such a regulated environment.
This will necessitate regulators taking a different perspective on purely economic return models. The triple bottom line, which includes the social impact of not acting now as well the harsh economic analysis of recent government reports, needs to be considered by regulators to support business innovation to solve these problems. If we don’t act now, the economic and social impact will be much more severe in 20 years.
At the same time, major breakdowns in the old energy networks which involve massive outages and disasters at substations are causing the engineers to look at modern telecoms and IT technologies to help solve some of these problems. “Doing nothing” has been a great strategy for the last decade, but it is not going to work in the future.
Tightened environmental and energy legislation will inevitably result in higher penalties, and so this is another reason for utilities to start looking at smart grid solutions.
Further information is available from separate reports:
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