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Smart grids key for greener world economy

Smart grids are key for a greener world economy, according to the World Economic Forum report Accelerating Successful Smart Grid Pilots to be presented at the ‘Summer Davos’ in Tianjin, China.

The report on smart grids was developed with Accenture and over 60 industry, policy and regulatory stakeholders.

“With an estimated US$150 billion lost in a year in the US due to power cutes, smart grids can deliver a more reliable system with flexibility to utilise the full capacity of renewable energy,” says Espen Mehlum, Head of Electricity Industry at the WEF.

“However, utilities are struggling to create the business case for smart grids, as regulatory incentives often fail to provide the right incentives and reflect the low-carbon agenda.”

Around 90 smart grid pilots have been identified over the last year. China alone has spent US$7.3 billion on smart grid developments and the US has directed US$4.5bn of its fiscal stimulus package to smart grid activities.

“Smart grids have the potential to cause a paradigm shift in our energy system – changing the way people and businesses interact with energy – and how value is created in the utility market. Smart grid pilots are an initial both exciting and fundamental step on the path to a low-carbon economy,” says Mark Spelman, Global Head of Strategy at Accenture.

So far, most of the smart grid pilots have been in North America, Australia and Europe, but there is also considerable activity in South America, South Africa, China, India, Japan and South Korea. Most of these are advanced meter readings (AMI – smart metering) pilots, but there are also pilots including network optimisation and inclusion of renewable energy.

The Forum says that “carefully crafted pilots can significantly accelerate the adoption of smart grids. However, the contrary also holds true. A poorly planned and executed pilot can set back the adoption of smart grids and negatively impact public perception.”

The trends

The study has found three broad trends over the last year in smart grid developments:

The rise of smart grids as an industrial imperative:

Many governments are seeing smart grid and the broader low-carbon technology industry as critical to the evolution of their manufacturing and knowledge economy. In the East Asian economies, strategic investments are being made to develop intellectual property and manufacturing capabilities in this sector with a view to growing the export market globally;

The broadening of the smart grid concept to intelligent cities:

The debate has also notably shifted from being a discussion on pure ‘smart grids’ and electric infrastructure to include intelligent infrastructure, thereby the sensing and control capabilities inherent in the smart grid are applied to multiple physical infrastructure layers within the urban environment (e.g. water, waste, buildings, etc.);

The emergence of new entrants in the utility value chain:

We are beginning to see a new breed of industry participants, such as consumer products, telecoms, retail companies, explore their potential roles within the industry. We have not yet seen a significant disruption in the traditional business model; however, as the new entrants develop their understanding of the industry dynamics, we expect disruptive business models to emerge.

Recommendations

The study finds that regulatory incentives are needed to de-risk investment and to decrease uncertainty in the market.

Issues such as data privacy, cybersecurity, interoperability and standards are also important issue to take into considering when developing smart grids and smart grid pilots.

Finally, it is crucial for smart grid developers to have clear communication with customers and raise awareness and understanding in the public in order to run successful projects.

Lessons learnt

The study has grouped the lessons learnt about smart grids and smart grid pilots into four main areas:

  1. Political and regulatory context
    • There is a need for the right regulatory and policy frameworks for innovation and investment;
    • Global standards are needed.
  2. Scoping phase
    • Clarity and ambition in design must be present – i.e. developers need to have clear test parameters, and design holistic and smart pilots;
    • Looking at the grid vs. consumer pilots’ capabilities is very important;
    • Full commercial collaborations through consortia are recommended;
    • Developers should experiment with new operating and business models;
    • Consumers should be segmented by behaviour; and
    • Business customers should be targeted.
  3. Execution
    • It is important to engage and educate consumers; and
    • Problem solving will and should take place in the field.
  4. Dissemination of the lessons learnt
    • Developers should share lessons from the field; and
    • They should inform the regulatory and policy environment.

 

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Energy efficiency  •  Energy infrastructure  •  Policy, investment and markets

 

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