Smart Grids, or Grid Modernization, refers to the integration of new technologies, processes, models, and equipment in the existing grid system. There is an ongoing shift from the traditional model of how electricity is delivered—namely through a centralized power plant—to an electricity system that allows faster responses between supply and demand, largely enabled by advancements in technology. This ongoing shift has attracted significant investment in new technologies. The reason for optimism around advancements in smart grid technology is that they can help reduce inefficiencies currently experienced in the power system, such as imbalances in supply and demand that can cause spikes in electricity prices or power blackouts.
Smart grids are also better able to incorporate variable, smaller-scale renewable energy supply into the power mix and distribute it over fossil fuel sources when available. The result is a more integrated, decentralized, and cleaner power system. This works when operators, end-users, and power generators are in constant communication through devices such as sensors or smart meters that generate data, helping to inform real-time conditions.
To achieve all the benefits that a smart grid offers, will require massive investment on the part of governments, utilities, and other stakeholders. This blog will highlight some of the key developments and trends occurring within the smart grid paradigm and incorporate relevant examples being undertaken around the world. The trends discussed are by no means exhaustive, as modernizing an entire electrical grid is too great to cover in one blog post.
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For any grid, reliability is a critical feature upon which its end-users rely for heating and business operations, among other uses. With an ever-greater amount of variable renewable energy being added to electricity grids, the ability for grid operators to offer a reliable power supply becomes more challenging. One trend that has been gaining traction to cope with this increased amount of variability is demand response management—or just demand response.
While not a new idea, demand response in the context of smart grids is made much easier through the proliferation of ‘smart’ devices connected to the internet that can constantly communicate with the wider grid. When there is a spike in electricity demand, users can lower their consumption or shift it to periods with lower demand, following signals from their smart meters or through an automated process. In exchange, that customer receives lower energy costs or potentially other financial incentives. In essence, users—be they residential or industrial—become important players in the energy system, as their flexibility in changing their demand consumption in turn affects the supply needed for the market.
One recent policy implemented to this effect was in Australia, which in 2021 introduced the Wholesale Demand Response Mechanism (WDRM). The WDRM allows large consumers of electricity, such as mining operations, to participate in national electricity markets by selling their foregone consumption in those markets. Demand response policies like the WDRM give grid operators managing a grid with more Distributed Energy Resources (DERs) important flexibility, especially at times of tight supply. Going forward, expect more utilities to propose innovative policies like the WDRM that provide consumers with the opportunity to be important participants in electricity markets while also saving money on their energy bills or generating new streams of revenue for their organization.
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Another emerging trend that incorporates consumers and end-users into the energy mix is the development of Virtual Power Plants (VPPs). A VPP is an aggregation of various DERs, including small- to medium-scale wind and solar, battery storage, electric vehicle batteries, or even home appliances, that act as a single entity for the purpose of boosting energy production or selling electricity to the grid. A VPP could also aggregate the demand of several end-users and would resemble the demand response scenario described above. For the supply-side version of VPPs, the combined capacity of the various sources in a VPP is connected through cloud-based software that can provide up-to-date information on available supply and dispatch it when the grid operator requires it.
While still not widely commercialized, VPPs could serve as an important procurement tool for clean electricity and provide more localized control of the electricity system for the owners of VPP resources, especially in the residential sector. A recent example of a VPP came from a pilot project in the small Dutch village of Loenen. The village had set the target of being completely energy independent but needed a modern management system to operate as a cohesive unit. When the VPP was instituted, it was done with the shared input of village residents and consisted of resources including rooftop PV, heat pumps, and EV charging.
Not every VPP will resemble that of Loenen’s, as each one may be structured differently to meet the standards and regulations of a particular electricity system or may be made up of far more dispersed energy resources. However, their advancement provides another promising contribution to mitigating the challenges that utilities and grid operators will face as they continue to scale up DERs.
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With the rapid increase in the number of DERs, automated systems, and other forms of digitization becoming prevalent on electricity grids, a final trend worth discussing is grid security. As more processes on the grid become digitized, they are more vulnerable to attack. Ensuring a safe and reliable grid is imperative for governments and utilities to uphold their responsibility to provide secure and reliable electricity to citizens. However, this becomes challenging with millions of devices connected to the internet participating in a smart grid system, each generating user data that must be kept secure.
Electricity grids have always been considered critical infrastructure, and systems have been in place to protect them against physical attack. As grid modernization progresses, governments and utilities are having to find new ways to safeguard against digital attacks, as this is where the majority of the new vulnerabilities lie. Enhancing security will be a matter of both regulatory requirements for grid operators and incorporating security protocols into the design of the software and hardware present in DERs and devices like smart meters that communicate data back to a more centralized operator.
Finland is a country that is regarded as a leader in the field of cyber security. In their 2019 cybersecurity strategy, the document highlighted the need to integrate cybersecurity into the activities of sectors whose work may have major cybersecurity implications, such as energy. Basic competence and guidelines were also stated as ways to ensure that cybersecurity becomes a requisite for business operations where its presence has been deemed critical for future security guarantees.
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Demand response, virtual power plants, and cyber security are only three of many components of a smart grid, a list that will no doubt continue to grow as technology progresses. The goal of highlighting these three use cases was to demonstrate the range of technologies, tools, and considerations that utilities and regulators will have at their disposal when transitioning to a cleaner grid. The examples brought in from around the world show how they are already being used and the ways in which different countries may approach their application depending on their specific energy needs and strategy.
About Blue Harp Consulting
Blue Harp Consulting consults in the renewable energy industry and works with municipal governments, renewable energy companies, and Indigenous organizations who all have differing interests and goals. Having been involved in renewable energy projects in Alberta and elsewhere in Canada, we are available to support your project and can help your team assess what impacts and opportunities this decision may have on your organization.
Blog Sources:
- Energy Storage News, 2021: https://www.energy-storage.news/australia-launches-wholesale-demand-response-mechanism-enel-x-first-to-join/
- Australia Energy Market Operator, 2022: https://aemo.com.au/en/initiatives/trials-and-initiatives/wholesale-demand-response-mechanism#:~:text=The%20WDR%20mechanism%20allows%20demand,prices%20and%20electricity%20supply%20scarcity.
- Interreg, North West Europe: https://www.nweurope.eu/media/10893/20200619-rural-cvpp-loenen-eusew-webinar.pdf
- Finland’s Cyber Security Strategy, 2019: https://turvallisuuskomitea.fi/wp-content/uploads/2019/10/Kyberturvallisuusstrategia_A4_ENG_WEB_031019.pdf
- IRENA: Demand Side Flexibility for Power Sector Transformation, 2019.
- International Energy Agency, Smart Grids, 2022: https://www.iea.org/reports/smart-grids.
