Utility disruption, adaptation: Smart grid year in review

2014 will be known as the year the utility industry gained momentum to adapt its business model -- spurred in large part by disruption from distributed generation, data-intensive technologies and customer empowerment

Distributed generation (DG) is growing fast, altering the landscape of energy supply. It has finally reached a level sufficient to impact the traditional utility business model. Currently, the worldwide installed DG capacity is 87,300 MW -- which is expected to more than double in the next nine years. In fact, DG will comprise most of the new generation capacity in the next several years. New DG resources will be mostly, but not exclusively, renewables; and they are operated by utilities, customers and third parties.

The growth of DG represents a challenge to regulators as well as utilities. Power grids must become more transactive, and markets and policy are adapting accordingly. New York State's "Reforming the Energy Vision" initiative is one example in the right direction for utilities to embrace change in business model. This reform proposes a major re-engineering of the state's power grid.

"How successful utilities are at adapting their business model to DG and other disruptive trends depends on good cooperation with regulators," said Larsh Johnson, CTO, Siemens Smart Grid Services. "Together, they must assess in hard, quantifiable terms the value that the energy system offers to consumers, and reconfigure they utility business model and regulatory approach around that. This will almost certainly result in a phased approach to transforming the current regulatory landscape and business model."

Data and analytics in edge devices. The "Internet of Things" is infiltrating the energy industry, with data and analytics supporting automation and interoperation at all levels. "Analytics are embedded in almost every device in the smart grid and energy supply chain now, offering autonomous operation and control." said Larsh Johnson.

A microgrid controller is one example of this technological trend. Once installed at, say, an office campus, this device communicates continuously with other sensors, devices, data streams and controllers. It decides autonomously how to balance and optimize on-site generation, energy storage, controllable loads and power purchased from the grid.

Digitalization (blending the realms of information and operational technology) is a growing trend for utilities. Making effective use of ever-increasing amounts of data, of more types and from more sources is both a challenge and opportunity.

"Right now, utilities are having to manage hundreds of gigabytes at a time -- and soon that will expand into the terabyte range," said Usman Sindhu. "Utilities are exploring solutions to manage and use data; to apply it to clear use cases like demand response. Customers can benefit directly from data-enabled services via portals and mobile applications."

Responsiveness to customers. Usman Sindhu also noted that because of the increased availability of data, and customers' increasingly active role in the grid, utilities are adapting to become more responsive to customer needs. He recalled that at the recent European Utility Week conference, Ian Merchant (former CEO of Scottish and Southern Energy) observed: "If utilities don't change, customers become the disruptors."

This presents special challenges for distribution system operators, which ultimately must bear the cost of supplying energy to consumers -- and also the responsibility to manage transactions in a complex market structure.