Networks are in the throes of transformation. Technology is providing potential solutions to the competing demands of affordability, sustainability and security of supply – but they can be difficult to implement. Businesses need to change what they do and how they do it if they are going to maximise on opportunities such as the smart meter rollout.
Utility Week, in association with Accenture, gathered a group of senior representatives of energy and water networks to discuss the challenges ahead, based on a global research project by Accenture looking at the digitally enabled grid.
Evolution or sea change?
One delegate posed the question of whether the introduction of a smart grid was a natural next step for network businesses, or whether it represented a sea change in how they do business. The answer was a little bit of both. As one respondent replied: “It depends what you want it to be.”
The introduction of new, technologically improved kit is business as usual. But demand-side response, and the cultural changes that entails, are far more. Historically, network businesses have tended to build an asset and then move on to the next job. One delegate described this approach as “fit and forget”.
Today, that needs to change to “fit and manage”, because demand-side response and other aspects of a responsive grid demand ongoing engagement with customers. As smart grids become more sophisticated, these arrangements will become more complex and can be made to work for customers’ benefit as well as utilities’. Industrial and commercial customers that agree to turn-off or turn-down solutions, for example, could have their contract price reduced in consequence. Delegates from DNOs said this solution was currently fairly uncommon, and where it did occur, tended not to have commercial aspects.
All this is set to change: “It’s a completely different level of customer engagement. It challenges the whole mindset.”
Consistence and convergence
One of the challenges identified by delegates was the lack of consistency and convergence of solutions across the industry – for example, the lack of a market framework for demand-side response makes it difficult to talk to customers about such solutions.
But who should lead the convergence? There was no consensus on this, although government and the regulator seem the obvious choices. Irish delegates provided an interesting example of a small and focused market led by government and a regulator. Some delegates pointed out that there are already a number of cross-market bodies, for example the Smart Grid Forum, and that work is being carried out. As one delegate cautioned: “Let’s not be too gloomy! This is a Goldilocks moment – the time is right.”
Innovation
Among the UK DNO representatives there was strong agreement that companies are committed to innovation and that it makes good business sense. All DNOs have signed up to save millions of pounds through innovation in the ED1 regulatory period. As delegates admitted, they do not yet know exactly how they will make these savings – but they are backing themselves to do so, and if they fail, they will take the financial hit.
Value for money
Delegates were fierce in their defence of the value for money the sector is gaining from innovation. Indeed, it seems one of the greatest attractions of the smart grid approach is that it saves money, as well as increasing reliability and sustainability.
As one delegate pointed out, traditional network solutions have been based around capital programmes, and therefore have been so expensive that any alternative approach is bound to make significant savings.
One DNO representative explained how one of his company’s demonstration projects would recoup its development costs after being applied to just four streets. Others shared similar experiences.
Customer engagement
Delegates agreed the rollout of smart meters in the UK was the moment when customers could be educated and brought on board with the smart grid. One diplomatically described the nature of the supplier-led rollout, which is different from the approach taken everywhere else in the world, as “interesting”.
Another posed the controversial question: “Are they yesterday’s technology today?” There is a growing sense that the pace of technological developments could render smart meters obsolete. This provoked some fierce debate around the table. One delegate said simply: “They’re happening! What every business should do is take advantage of it.”
The ability to capitalise on smart meters depends on a business’s ability to transform big data into meaningful and actionable information. As one delegate said: “The challenge is in the sheer volume of data; how geared up will we be to manage that and sift out the information that will be useful? Is the customer on or off and how can that information be used?”
Smart meters will have far-reaching impacts for the networks business – some obvious, some less so.
For example, if there is an outage at night, the network operator will be notified immediately, rather than when calls come in as people wake up in the morning. This will mean different working patterns for response teams.
Ticking all the boxes
While numerous challenges lie ahead in the implementation of smart grids, delegates were unanimous in their support for the model and in their belief that it is really happening.
Several observed that whereas smart grids were just talk a few years ago, they are now becoming reality. Given that smart grids address all three sides of the energy trilemma – cost, sustainability and security of supply – there can be no doubt that they are the future.