The evolution of transmission and distribution (part 2 of 2)
My previous post drew a comparison between flying cars and the power grid of the future. The similarity lies in the transitions from their current states. How would our centralized air traffic control system adapt to consumers flying their own vehicles? It would have to operate on much smaller scales with tremendous increases in volume and efficiency.
The utilities industry will have some of the same challenges moving to a bidirectional, or even omnidirectional flow of electricity. While the grid infrastructure has been significantly updated and improved, we’re still a long way from realizing the full consumer, economic and environmental benefits of a digitized grid.
Technology drives transformation
From a technology perspective, greater emphasis and investment in several areas will be required to achieve these benefits:
Seeing the bigger picture: Instead of solving discreet problems at their location or based on utility organizational structure, technology solutions must increasingly take a holistic view of the grid as a system. The broader impacts of increased distributed generation, changing load shapes, demand spikes and cyberthreats must be understood in the context of their impact on the whole grid.
Monitoring, awareness and control: The digital grid requires significant investment in advanced sensors and software, from phasor measurement units at the transmission level to advanced distribution management systems on the lower-voltage network. It’s the only way to manage the operational challenges posed by the intermittency of increased distributed generation such as voltage fluctuations, equipment overloads etc.
Putting intelligence where it’s needed: We hear so much about the advantages of cloud computing, edge computing, distributed intelligence and machine learning. All will be critical to the digital grid and integrating operational technologies with IT. Cloud computing will optimize IT costs and system-wide analytics, while edge computing will allow rapidly changing grid conditions and transactive energy markets to be managed at a localized level.
Regulators must keep pace with the changes in the utilities market
The key question for so many utilities is the regulatory environment. Regulatory uncertainty makes investment decisions perilous. But we’re starting to see some clear patterns in terms of regulatory initiatives across multiple states as commissioners recognize the significance of this transformation and the importance of regulatory clarity.
From coal plant retirements to more diverse integrated resource planning to the accessibility of renewable energy, regulators in states both blue and red are going greener. They’re also encouraging adoption of:
- Electric vehicles and storage technology
- Time-variant pricing programs
- Blockchain-enabled transactive energy pilots
- Higher energy efficiency goals
Perhaps most importantly, regulators are starting to take meaningful steps in reforming the utility business model. The traditional rate-based, cost-of-service model is adapting to new realities and approaches to driving innovation. These steps include performance-based ratemaking (PBR) in which utility shareholders are compensated, in part, on their ability to improve reliability, efficiency and customer service.
Several states are also changing the rules around CapEx versus OpEx, enabling utilities to recover costs of cloud-based software and services that improve customer service and enable new offerings. And generous net metering tariffs won’t propel the residential solar market forever. Regulators are directing utilities to plan distribution systems based on the true value of solar assets, determined by their location and impact to the grid.
The future looks bright indeed
These are just some of the technology and regulatory requirements to move us toward a digital grid and a more distributed energy marketplace. Many of these themes are captured in New York’s Reforming the Energy Vision (REV) proceeding, which is considered by many to represent the leading edge of regulatory reform. Many are watching New York closely to determine if they’ve found the right formula.
Billed as a comprehensive energy strategy for the state of New York, REV promises a host of policy outcomes that include:
- Customer choice and empowerment
- More clean energy and resulting CO2 emissions
- A more flexible and resilient power grid
- Driving innovation such as the evolution of Distributed Energy Resource Management Systems (DERMS)
- Testing new business models and market designs
All of these dynamics represent a remarkable confluence of need and opportunity, where new technologies to address key challenges are available and cost-effective. The outcome will be more clean energy, a more resilient and flexible power grid, and empowered consumers making choices based on their needs. Building this digital energy infrastructure may not be quite as exotic as the notion of flying cars, but it still may be the most important engineering feat of the 21st century.