The global electricity systems are in the midst of a transformation, as technology and innovation disrupt traditional models from generation to beyond the meter.
Three trends, in particular, are converging to produce game-changing disruptions:
1. Electrification of large sectors of the economy such as transport and heating, where they were not electrified before;
2. Decentralization, spurred by the sharp decrease in costs of distributed energy resources (DERs) like distributed storage, distributed generation, demand flexibility and energy efficiency; and
3. The digitalisation of both the grid, with smart metering, smart sensors, automation and other digital network technologies, and beyond the meter, with the advent of the Internet of Things (IoT) and a surge of power-consuming connected devices.
These trends act in unison and in a cycle, enabling, magnifying and reinforcing developments beyond their individual contributions. Electrification is critical for long-term carbon reduction and will represent an increasingly relevant share of renewable energy. Decentralisation makes customers active elements of the system and requires significant coordination. Digitalisation supports both the other trends by enabling more control, including automatic, real-time optimisation of consumption and production and interaction with customers.
These trends at the grid’s edge pave the way towards a system where traditional boundaries between producers, distributors and customers are blurred and giving rise to a new class of participants in the electricity markets, being the prosumers. Customer preferences and expectations are shifting towards fewer carbon emissions, greater choice, real-time interaction and sharing, resilient systems, higher transparency, better reliability and security.
Considering the nexus with the media industry and the internet revolution, it can be expected that customer engagement will change. The traditional role of the grid is evolving becoming a platform that also maximises value through distributed energy resources. Revenue models will see a smaller share of income derived from centrally generated energy but could be compensated by revenue from new distribution and retail services. Individual customers will be able to select the technologies of their choice, connect them to the grid and eventually transact with other distributed and centralised resources.
This smarter, more decentralised and clustered electricity system could increase reliability, security, environmental sustainability, asset utilization and open new opportunities for services and business. Previous analysis by the World Economic Forum has pointed to more than $2.4 trillion of value from the transformation of electricity over the next 10 years. Society will benefit from a cleaner generation mix, net creation of new jobs related to the deployment of these technologies and a larger choice for consumers. Grid edge technologies can also improve social equity by creating value for low-income segments of the population. Under the right regulatory model and targeted innovative business models, low-income households could participate and benefit from the value created by grid edge technologies.
Globally, many regulatory changes showcase the regulatory trends taking place, including:
1. New York’s Reforming Energy Vision initiative;
2. Jeju Island’s Carbon Free Island initiative;
3. The UK’s RIIO regulation; and
4. The European Commission’s Energy Winter Package.
There is also change in the private sector, with new partnerships to deliver the enabling infrastructure and company reorganisations to develop new business models.
The adoption rate of these grid edge technologies is following the typical S-curve seen in other new technological adoptions. It has always been difficult to accurately forecast when technologies reach their tipping point and spread at an exponential pace. The current trend for mass adoption indicates 15 to 20 years period.
We consider transition towards this new energy paradigm faces four main challenges:
1. Market perception of Electricity is still largely only as a commodity, making customer engagement a one-dimensional endeavour.
2. The current regulatory design is centred around the old paradigm hindering distributed resources from providing their full value to the system.
3. Regulatory and rules uncertainty hampers key stakeholders engagement.
4. Cultural change in the industry.
Grid edge technologies offer substantial potential for transformation of the electricity industry, one that creates more choice for customers, greater efficiency, more efficient decarbonisation, and better economics for stakeholders across the value chain.
Atlantic Power Exchange
Atlantic Power Exchange is building a platform to enable the adoption and maximisation of value at the grid’s edge. Our business aim is targeted at empowerment of the consumers, disrupting the energy retail model but still keeping the retailers relevant, and encouraging clean energy adoption. Atlantic Power Exchange with its international team of experts, is aiming to develop this technology to bring value to all stakeholders on a frictionless energy ecosystem.
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