Smart grid trends: 3 potential points of disruption on the grid
DistribuTECH, the leading annual smart grid conference and trade show, kicks off next week in San Antonio. It covers a breadth of topics, from AMI to grid data to cybersecurity.
But as we near conference time, I wanted to look beyond the trends—smart meter deployment, capitalizing on grid data and new opportunities in demand response—that we can expect to see emphasized at the conference.
Rather, I’ve been thinking 4-6 years out at how the utility market place and the utilities themselves could face some unexpected disruptions. So with that in mind, here are three trends I’m paying attention to that I think could shape the grid marketplace forward.
1. The solar scalability argument. At the end of the year, an administrative law judge at the Minnesota Public Utilities Commission ruled that solar power was more cost competitive than natural gas powered electricity. The judge didn’t like the idea of building a large scale natural gas plant for a number of reasons, including the uncertainty of future electricity demand as well as risks related to future carbon regulations.
These were reasonable if not entirely new arguments. But what was interesting was the judge’s final argument—that solar power would allow the utility to scale to meet power demand at a more organic and natural pace because solar could be deployed in much smaller increments like single digit megawatts installations, if needed. This is a compelling argument because it relates to risk. By deploying solar at small increments, utilities have a hedge against a future collapse in demand. Natural gas remains a major threat to renewables and the scalability argument could be helpful in assessing the true cost of deploying either solar or natural gas power.
2. Third party competition: Generation. In a couple months Toshiba will begin its planned rollout of solar in Germany’s residential market. The company isn’t going after homes. It’s going after apartment buildings, putting in large scale solar installations for Gagfah SA, the second biggest owner of German residences. Toshiba will have none of the transmission and distribution costs that the utility has to deal with. And with Germany carrying the second highest electricity prices in Europe, Toshiba believes it’ll easily beat its competition—the local utility. Gagfah, in turn, has an incentive to offer its tenants lower price power so that it can attract renters.
3. Third party competition: Energy storage. And it’s not just generation where we’re seeing potential third parties competing with utilities. Energy storage could open up as well. As renewable energy comes online along with associated challenges that come with an intermittent generation source, the presumption had always been that utilities would have to manage this problem via energy storage.
But when Hitachi announced it would be conducting field trials this year for its new energy storage system to support wind and solar power deployments, the company noted that it didn’t just see utilities as customers but anyone who wants to sell power into the market. If companies like Hitachi can make price competitive energy storage systems at the right scale, it becomes easier and easier to set up microgrids that are increasingly grid dependant. More importantly it opens up these third party energy storage partners to be able to monetize their investments by providing grid stabilization services like demand response and frequency regulation. Hitachi thinks the U.S. market for grid stabilization devices will be 20 gigawatts by 2020 with the market for energy storage systems being 7.5 gigawatts.
There are many other looming questions here, like how the utilities will address revenue declines should increasing number of customers shift toward their own power generation solutions and what role utilities should play going forward. But from a 30,000 foot view, what I see is that the marketplace is opening up and coming apart as new competitors are allowed in, with potential for disruption in areas ranging from generation to storage. And for an industry that has historically consisted of regulated monopolies, we may for the first time actually see the consumer start to have some choices.