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Which R&D and Demonstration Priorities for 2019? Part II

How to educate policymakers, regulators and investors on the possibilities emanating from the deployment of advanced technologies?

Electric utility customers and, to a lesser extent the utilities themselves, are the benefactors of a new set of enabling technologies. Why, then, don’t these same utilities eagerly embrace the prospect of providing adequate research, development and demonstration (RD&D) funding?

By their nature, electric utilities are sometimes resistant to rapid change. The electric power delivery system (i.e., the grid) is a vast and complex network. It’s composed of a range of assets including transmission lines, substations, distribution feeders and related equipment representing one of the largest capital investments of any industry.

Ownership is complex and consists of various structures with equally complex and conservative governance. Where these entities are regulated, they are often subject to a state regulatory regime where investments are understandably scrutinized, and must be found to be prudently incurred and be “used and useful” in serving the needs of that utility’s customers. Under this test RD&D must usually stand the test of providing specific benefits to a utility’s customers or run the risk of having the investment disallowed. For example, the US is served by over 2700 individual utilities, and each one is reluctant to embrace the burden of individual technology development.

Electrical apparatus manufacturers are the other likely benefactor from RD&D in the smart grid sector, since it provides more products for them to sell. And they do conduct some of their own RD&D. However, the market for smart grid technologies is difficult to navigate for the reasons stated above. This is especially true where important technologies like a computer for a control center only face a market of a few hundred potential buyers, the incentive for manufacturers to invest is not sufficient. Larger smart grid technologies -- like those which embody advanced power electronic devices -- most utilities lack the size, financial strength and mandate to undertake the research, development and demonstration of new technologies. In addition, they are no longer able to maintain properly equipped laboratories or test facilities. Although U.S.-based utilities do undertake collaborative research through the U.S.-based Electric Power Research Institute (EPRI). Industry funding of EPRI is voluntary, and EPRI’s research spending has declined sharply since the early 1990s.

Utilities around the globe are confronting the costs of securing the electric system against cyber and physical attacks; adding new pollution control equipment to existing generating units; and maintaining system stability and reliability while replacing aging assets and facing potential declines in revenue growth resulting from structural shifts in the economy, increasing end-use energy efficiency, as well as regulatory and market innovations that emphasize the value of demand-reducing resources.

How to educate policymakers, regulators and investors on the possibilities emanating from the deployment of advanced technologies to produce and transmit, distribute, store and use electricity at both a utility scale and directly at the consumer’s premises? One key is dialogue among market participants to advance the development of common standards and architectures that can accelerate cost-effective grid modernization, ensure security, and enable interoperability. While the development of a smarter power system will involve investment decisions by thousands of market participants (from utilities to end-users), it will be influenced by the evolution of technology. Another major catalyst for change is economic “guidance”, via incentives provided by government regulators and policy makers. This helps to encourage ongoing engagement in the development of common standards and architecture – all in the spirit of reducing costs and risks.

It’s high time to begin educating decision makers by illustrating capabilities (through proof of concept projects and investments in promising technologies) and sponsorship of interface standards to enable the interaction between the technologies deployed in the smart grid. There are a number of areas where the utilities, regulators and policymakers need support in their efforts to guide the development of the grid, including support in these five areas:

  1. Characterization of the impacts of the changing physical topology on the power system including various configurations of central generation, bulk energy power, integration of transmission and distribution planning and operations, dynamic control of transmission and distribution topologies, distributed energy technologies (including distributed generation, responsive demand, and storage) and microgrids. This includes assessment of the impact and benefit of wide scale use of variable resources including wind and solar power generation on electric power system reliability and greenhouse gas reduction.
  2. Development, demonstration and deployment of sensors, communications, protection, control, data management, and information systems to manage a more dynamic power grid and the integration of distributed energy technologies.
  3. Development and demonstration of new computational ability, new algorithms to utilize the high-performance computing technologies and operational analytics.
  4. Development and identification of applications of various advanced technologies which promise to enhance the functionality and performance of the grid.
  5. Review and reporting of potential cyber and physical security threats, and recommendations for security improvements.

RD&D results are critical to address power industry challenges. The appropriate application of key learnings and deployment of proven technologies will be essential in addressing the power industry’s key long- term and near-term challenges, by assuring stable and reliable communications; continuing to assure long term reliability; ensuring physical and cyber security; and enabling both new supply, storage and end-use resources to be utilized in an integrated manner.

Any list of examples would need to include these:

Natural disaster impacts

Concern is growing regarding the electric infrastructure’s vulnerability to widespread blackouts and power outages resulting from natural disasters. Recent examples include super storm Sandy, hurricane Katrina, the October 2011 storms in the northeastern US, and the tsunami and resultant Fukushima Daiichi nuclear disaster in Japan. In each case, the electric infrastructure suffered considerable damage and left citizens without power and often without clean water, food, and fuel for heating or transportation. As an additional consequence of the digital age, the communication now often provided by cell phone technology failed as well, because many cell towers were without power, and telephone users were largely without power to charge their phones (except for a few with solar chargers).

Investment efficiency

Smart grid strategies may be able to significantly improve utility load factors and asset utilization. However, more study is needed to show potential improvement. This could play a key role in helping utilities manage new investment requirements. The average U.S. generation capacity factor has been below 50 percent for the last decade.4 Many transmission and distribution facilities have average use rates that are even lower. In order to enable greater variability in supply while still meeting consumer needs innovative techniques are needed to allow greater response by consumers and their energy technologies to power system conditions. In the electric industry, state regulators have been reluctant to expose consumers to dynamic pricing (due to political reasons), thus limiting the consumers’ propensity to conserve at times of peak demand.

Cybersecurity

One key US National Academy of Sciences report (“Terrorism and the Electric Power Delivery System, National Research Council”, 2012) identified what is at stake in protecting the power system from a cyber or a combination of cyber and physical attacks. This report suggests steps including the use of sensors and development of micro-grids to reduce the grid’s vulnerabilities. While it is doubtful that microgrids by themselves will provide sufficient “firewalls” against cyber-attacks, work on the smart grid has helped lead the way in building cyber-security into processes and grid technologies and in developing comprehensive cyber-security architecture.

Integrated DERs (including electric vehicles at scale), and accommodation of carbon policies

The European Union estimates that meeting current European targets could result in a reduction of greenhouse gas emissions by 80% by 2050 (“Roadmap for Moving to a Low-Carbon Economy in 2050”, from the European Commission in 2010). This could require largely decarbonizing the electric sector while meeting significant new loads in a comparatively short time.

To support this, electric utilities would need the infrastructure to support local load pockets and eventually large-scale adoption of DERs and electric vehicles. These requirements could arise more rapidly than would be anticipated based on historical experience. For example, one McKinsey study found that the cost of fully installed residential solar photovoltaic system could fall from more than $4 per Watt peak in 2008 to $1 per Watt peak in 2020. Smart grid technologies would enhance the ability of the grid to “host” increasing amounts of these and other distributed technologies by providing visibility and control needed to manage what will be a more complex system. It should be understood, however, that some form of the traditional transmission, distribution, and generation resources will be needed to support the normal operation of Distributed Energy Resources at both peak and off-peak conditions.

Integration of responsive demand

Intelligent devices, such as thermostats that automate customer preferences for savings and comfort, smart appliances, and building and home energy management systems are poised to take advantage of advances in data analytics and the falling cost of digital technologies to provide broader and deeper levels of demand participation. Google’s US$3.2 billion purchase of Nest, and Apple’s announcement of its HomeKit platform for energy applications are only one part of a growing supplier base. This base includes utilities and energy service companies, technology and controls companies, cable and telecom providers, big box retailers and a range start-ups. For most uses of electricity, intelligent devices create an opportunity to take advantage of the thermal inertia available in heating and cooling buildings, heating water, and refrigeration or flexibility in the timing of power uses for pumping loads, batch processes, dishwashers, and charging electric vehicles and other devices. Automated choice engines that integrate energy using devices with power markets or system operations could identify the least expensive times to use power, implement savings strategies, and match individual preferences for comfort and services.

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