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Grid Modernization: A Global Perspective

image credit: ID 121276237 © Leowolfert |

How is grid modernization shaping up around the world? 

A recent discussion at Columbia University on the topic of changing grids for the future provided some answers.  

“What happens in Asia is very important,” said Anna Shpitsberg, director of global power at IHS Markit. While China and India are among the leading consumers of coal, they have set ambitious targets for renewable energy production and integration into the grid. The fate of grid modernization (and integration of renewable energy) plans has a direct impact on our ability to reach Paris agreement goals and make the transition towards a renewable energy-powered future. While both countries tout impressive figures and projects, an analysis of figures in these projects reveals more than is evident at first glance. 

A further complication is the lack of access to institutional capital for renewable energy projects in these countries. As I have documented earlier, there are no clear standards for such projects and accountability, for the most part, is absent. As a result, institutional investors are hesitant to invest in greenfield projects in these countries. In Europe and America, the move towards renewable energy and smart grids is being driven by industrial and commercial customers, who in turn are under pressure from their stakeholders to move this path. 

The European Extremity 

Europe represents the other extreme. Conversations there have moved beyond hardware. “They (European utilities) have realized hardware is going to get commoditized,” said Shpitsberg. Instead utilities are focusing on software and services. The move towards focusing on services occurred on account of three reasons. 

First, European utilities function in a much more geographically diverse region. For example, France’s Engie has operations that span multiple regions and countries and it deals with a variety of customers, making the expansion of its suite of services a necessity. 

Second, European utilities function in a deregulated environment. Theoretically, at least, this has led to unbundling of the functions of a traditional utility and banned them from vertical ownership of the grid. Software and services have become differentiating factors in an energy market that offers choice to customers. Interestingly the panelists pointed to Sweden and Denmark       

Finally, thanks to the diversity of their geographical regions, European utilities have to contend with integrating a variety of renewable energy sources, making a software platform that can handle fluctuations and ramp up or decline demand accordingly a necessity.  

Utilities in North America fall somewhere in between. They are characterized by an asset mentality in which they are busy mopping up renewable energy assets as opposed to figuring out how those assets fit into their existing framework. This change, which is driven by policy and demand, is occurring at a fast pace. 

Melissa Lott, a senior energy researcher at Columbia, told audiences about her meeting with a power plant manager. “I used to plan in thirty-year chunks and think that coal would always be a part of the future,” the plant manager told her. “I plan on ten year chunks now and natural gas is our future. I wonder how long that future is going to last.”

Of course, this future will bring its own set of changes. The prosumer, a consumer who produces and consumes electricity, is still a miniscule fraction of the grid and is expected to remain so in the future. Utilities will still have to do most of the heavy lifting. Increased digitization means that utilities will have to manage billions of data points while planning out future demand. They will have to ramp up their predictive analysis tools for this. 

Utilities around the world are also struggling to figure out how to optimize new forms of energy. For example, storage batteries can be optimized based on services provided to consumers. In this context, the type and frequency of battery use makes a difference. Example, Li-Ion batteries are useful for frequency regulation markets while zinc batteries can be used for locational capacity. 

Still grid modernization, across the world, is a mammoth task and will take time. “It takes time. It is learning. Are we working on it? Absolutely. Are we going to have an answer on it in five years? I don’t know,” said Lori Lybolt, director of ConEd’s Utility of the Future initiative.

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