Smart grid touchstone: accommodating variable renewable energy
By Allan McHale
In the previous article we discussed why 2012's smart grid growth isn't sustainable without a new business model and in trying to develop a framework for a smart grid, policy makers and regulators often overlook the importance of building a system that can accommodate Variable Renewable Energy (VRE).
That’s misguided, because maximizing the amount of VRE that can be accommodated is the touchstone for a smart grid. We are moving from a central system that provides consistent power quality that can quickly cycle load up and down, to a decentralized one with variable on / off power from many different distributed sources.
The thinking in the U.S. is that it would require conventional spinning reserves to be operational to accommodate VRE and that in the case of wind power, the tipping point for benefitting CO2 emissions could not exceed 20% of the total central power generated. Over this limit and spinning reserves will create more CO2 emissions and nullify any benefits which are the sole reason for installing wind power in the first place. It is not clear whether this is based on the present rickety transmission and distribution network or a fully modernized smart grid model. But if it is the latter, then VRE has a limited part to play in the U.S.
In Germany they are pressing ahead on a new energy model that assumes 80% of their power needs will be provided by VRE by 2050, making conventional spinning reserves unnecessary. But the whole concept of eliminating the need for conventional base load generation is dependent on a smart grid that can balance supply and demand, has a mix of renewable generation with some storage on its PV solar content, and is locally distributed. The proof of this is going to be played out over the rest of this decade, as Germany plans to have renewable sources providing 35% of its electricity by 2020. If this model is proven, then it opens up much wider options on which countries can base their energy policy, trading cost with long-term availability, security and safety of energy supply.
But are we ready?
Our report -- The Smart Grid Business 2012 to 2017-- shows that the supply side is changing to meet the challenges of a modern grid. Billions of dollars are being invested in smart grid supplier companies through M&A and venture capital. We're seeing a shift though, with a perceptible move away from the dominance of the international majors to the medium and small companies that are increasing their share of the business. Also, a significant number of new entrants from outside the industry -- from the IT and communications sectors -- are increasing competition and strengthening the industry. These supply side structural changes are strongest in the U.S. as is investment in new startups and innovative companies.
The technology also appears to be in place with no known bottlenecks to restrict smart grid development, although in some areas a full working prototype at utility scale has yet to be proven. That's also the case with new technology surrounding communications and "big data," although it is being used in other industries at a utility scale.
OFGEM, the UK regulator of electricity and gas markets, recently reported that electrical generation will plunge to 4% spare capacity from its present level of 14% by 2015. Some 12GW of coal-fired plants, equivalent to a sixth of the total generation capacity, can now only operate for a limited number of hours before they are closed to comply with the European Union air pollution regulations.
Similar news has been broadcast in the U.S., so it appears both countries are heading for some significant disruption in power supply -- unless they can leverage smart grids to take on more VRE and distributed power or significantly reduce peak load demand. This scenario should push regulators to hastily deliver the new model so that the smart grid develops on a firm foundation.
Allan P. McHale (CEng, MIMechE, MEI, MBIM) has spent 45 years in the energy and building controls industry -- from design and commissioning utility power stations in the 1960s to managing global sales and marketing operations and subsequently starting up three marketing consultancy operations all in energy related businesses during the last 20 years.
Memoori’s report - The Smart Grid Business 2012 to 2017 - is a definitive resource for the smart grid industry, combining clearly defined market sizing statistics, a review of the structure of the supply side and financial analysis of M&A and Investment opportunities. It is available for purchase in the SGN Research Marketplace.