Smart Grids and Future Electricity Distribution

NERI Winter Lights 2011

Alan JenkinsENA

16 June 2011

NZ’s Smart Grid Building Blocks

• Ripple control legacy• 2008 Commerce Act reform• Renewal phase of electricity infrastructure• Australian post-2004 push for ‘DRED’ control• Technology explosion – smart meters, HANs,

fibre, cheap data storage,….• Possibly some belated government awareness

of need to build for tomorrow, not yesterday.

What will/should smart networks look like?

Everyone has a view, with the hype way out in front of the

engineering:

- Network artistry

…every picture tells a different story

Smart grids are a global fixation

Some use very simply concepts,

…and others very complex ones

Common Themes

Jockeying for position• Powerful interests (and some less powerful

ones) are all focussing on smart grids/networks, and there’s lots of spin/hype.

• At present the traditional players are the most active:– Generators– Transpower– Distributors– Equipment and software providers

• A reasonably modest focus at this stage.

Others getting interested

• New players are emerging or will appear- Regulators- Large end users- Commodity markets & speculators- End users & end user aggregators- Environmental interests…..

Mixed messages for consumersChicago News Cooperative

Promise and Peril in Utilities’ Smart GridBy DAVID GREISINGPublished: May 28, 2011

Smarter hackers lurk in smart-grid future

Thursday, May 26,2011 Smart grid or smart grab?Consumer advocates blast ComEd rate increases

…. mixed messages

• Claims of inflated consumption readings – probably wrong

• Views that extra costs being loaded onto consumers – benefits not shared

• Fears of consumer privacy degradation

• Cyber security issues

…things not wanted

Aggressive competition for all the benefits. Managed well, NZ’s smart networks deployment should maximise efficiencies for suppliers and consumers, and not be captured by one set of interests.

…things not wantedIt would be unfortunate if market speculators found ways to use network information & control to extract excessive rentals – turning off loads to cover themselves; diverting power flows to manipulate prices; gaming transmission & network constraints…..

Positive messages

• think of tomorrow’s smart networks as the platforms for tomorrow’s commerce.

• think of them also as systems that will allow the electricity system to do what it’s always done, but better.

• and think of them as portals for the demand side to play an influentual role in markets and in the electricity system.

…but not the step change some see coming!

• Electricity networks evolve as new and established technologies become cost-effective:– Scada systems – Smart meters– 3G / 4G wireless comms– Ground fault neutralisers– Fibre, …..

• Expect elements making up smarter networks to phase in continuously.

What distributors want from them (what they’ve always wanted)

• To improve power quality (data instead of estimates; better voltage control)

• To quickly locate and fix faults• To defer capital projects, shift peaks• To develop new services to consumers• To optimise the greater lines industry (best net

outcomes & investment signals for combines transmission/distribution system)

• Part of wider programmes - smart cities, ….

What others want from them

• Energy traders – reduced energy losses, ‘sharing’ risks of wind etc, managing hedging shortfalls, billing data.

• Generators – not necessarily reduced energy losses but managing shortfalls would help.

• Transpower – grid optimisation, defer capex and manage peaks.

Some of the issues 1. Who owns demand-side data?

The consumer?

… issues 1. Who owns demand-side data?

The distributor?

… issues 1. Who owns demand-side data?

The trader?

… issues 2. Existing networks are not so dumb

NZ still leading with ripple control, but it’s aging.

New network technologies are appearing. The ‘poles & wires industry’ is becoming technology-driven.

… issues 3. Do we need a regulatory boost?•Draft ENA work suggests that benefits to NZ are major and distributors are the parties who’ll need to invest to achieve them.•No one party can ensure all the benefits are achieved – we need the efforts of many, including regulators.•Current regulation creates disincentives. Revenue falls/ costs rise if we invest in efficient transformers, loss reducing DSM, etc.•Rules on electronic data exchanges are a priority now

What about market reform?

• Need focus on consumer/investor, not on market convenience.

• Need for cost-reflective distribution pricing to optimise smart network investments.

• A number of energy market structures provide perverse signals:

– e.g. spot prices set by most expensive generator needed (hardly an incentive to optimise demand management for NZ-inc);

- Hedge markets remain weak.

Commerce Act provides scope for reform to overcome disincentives

• “The Commission must promote incentives, and must avoid imposing disincentives, for suppliers of electricity lines services to invest in energy efficiency and demand side management, and to reduce energy losses...”

The tools are there but ComCom so far prefering orthodox control, not forward looking innovation.

The Way Forward

• Smart networks started evolving with the appearance of Ripple control in the 1940s.

• The only step change needed to build momentum again is a regulatory one.

• ‘R&D’ gets a rough ride under the current regulatory rules.

• So does distribution innovation.• Policy makers are fixated on power markets,

undervaluing power systems!