Global electricity supply has evolved around a central market structure for over fifty years, based on a traditional supply model whereby national or regional electricity grids take power from a small number of large power stations with the grid being responsible for ensuring that at any time there is sufficient supply to meet demand. Proponents of this model argue that it ensures effective demand management, which it has done, but this effectiveness has been undermined by inefficiencies, both in terms of cost and electricity waste – the need to keep generation plant on standby in order to provide supply at short notice is costly, while ‘waste’ is incurred through unavoidable transmission losses due to the long transmission distances from the central grid to the distribution points.
Rightly, this centralised market structure is now being questioned. Driving this re-evaluation of generation infrastructure is the rapid growth of renewable energy and the need to introduce energy efficiencies in order to mitigate climate change. In order to meet the renewable/efficiency requirements the market has to change from a centrally based to local-based generation model, which can be facilitated by developing a decentralised generation market based on smart grids.
Proponents of decentralised generation argue that a central grid market is financially unsuited to the development of renewable energy plants, which have smaller installed capacities compared to gas, coal and nuclear. This being so, a far greater number of these smaller plants will have to be developed to replace the fossil fuel plants, with all these new plants having to be connected into the central grid. This is a costly exercise. To give a flavour of it – the UK government’s Electricity Networks Strategy Group recently estimating that in order to connect up to 35 GW of new renewable capacity to the grid by 2020 will require an investment of over £4 billion.
But as these renewable plants, mainly onshore/offshore wind farms, are typically being developed to meet the supply needs of the local community/region, why should this capacity be connected to a central grid if the electricity generated is simply going to be distributed back to the same community/region where the generation plant is sited?
A second problem faced by a central grid as a consequence of the mass development of renewable generation is the intermittency of generation output. Wind turbines are dependent on unpredictable wind speeds and, as such, produce intermittent generation supply. This intermittency has to be managed by the grid in order for supply to meet demand. The conventional solution has been to offset the intermittent generation source with a base load source (ie coal, gas or nuclear) but this potentially increases the grid management problems. Last month Spain recorded the highest ever load capacity from its wind farms of over 40%, yet these same farms have also recorded average load factors of nearer 15%, and it is this load factor volatility that presents central grids with unnecessary demand management problems. And in extreme cases where wind farm capacity is much greater than forecast it could trip the grid and result in blackouts.
Adding to the rationale for a re-think on grid management is the steady growth in micro-generation as both homes and businesses becoming increasingly receptive to the idea of being energy self-sufficient. And with governments concurring on the need for a new sustainable green economy there will be increased financial incentives to encourage the uptake of micro-generation, potentially making this a boom market in the next decade. But as micro-generation typically produces more supply (on average) than is required by the home or office, the electricity distribution system has to be two-way so that the surplus micro-generation output can be sold back into the grid. This requires a smarter grid system with two-way communication.
If the market infrastructure for the next fifty years is to meet the demands of the fast evolving generation market there has to be a move toward decentralised generation and investment in smart grid technology.
There has been growing interest in decentralised, embedded and micro-generation over recent years, with a radical change towards a decentralised energy system being strongly advocated by a number of interest groups. By far the most vocal advocate of a decentralised system is the environmental lobby, which present a utopian vision of individual homes and workplaces becoming mini-power stations generating huge amounts of electricity and leading the fight against climate change.
Such a vision was presented in a 2005 Greenpeace report, Decentralising Power: An Energy Revolution For The 21st Century, which argues that electricity system reform is urgently needed to end the ‘environmentally destructive wastage of generation’ that, it says, is so inefficient that two-thirds of the energy in the generation fuel is wasted before it reaches the consumer. It says the solution is to generate electricity close to where it is needed, or ‘decentralise’ it.
Greenpeace’s vision of a decentralised energy system would see everyday buildings playing host to devices such as solar panels, small wind turbines and combined heat and power boilers, which generate electricity as well as providing heat and hot water. The electricity created would be used directly by the house or workplace, and the surplus would be fed into a local network. This electricity would then be locally distributed, avoiding the significant loss that occurs when electricity is transported long distances.
Advocates of a decentralised system argue it is more suited to hosting renewable energy and as such could make a significant contribution to the overall reduction of carbon emissions. The Netherlands, for example, already meets 40% of its electricity demand through decentralised energy. And support for decentralising energy is not confined to the environmental lobby.
In January, UK Conservative party leader David Cameron identified the two key policy requirements as a system of feed in tariffs and an electricity internet. Explaining his vision of an electricity internet, Cameron said ‘We will add computing intelligence to electricity networks by introducing a smart grid and the use of smart meters in homes. This will allow demand and supply to be intelligently managed, and pave the way for large-scale use of renewable energy resources.’
Energy supply has to be smarter if it is to meet the challenges of tomorrow’s energy/climate market. And the smart approach is to invest in smart meters, smart grids and decentralised generation.
