January’s heatwave that struck across southern Australia (and the one that is occurring this week) appears to have had a dramatic impact on the country’s network operators: It is forcing them to look more seriously at electric vehicles and battery storage as a way to address peak demand.
There seems to be an even split among utilities who think that their future lies in the past, and those who think it lies with new technologies and new ways of doing business. That much was revealed by the way the media reported how various energy sources and delivery mechanisms coped with huge demand caused by days of 40C plus temperatures.
One thing that did not go un-noticed by the utilities themselves was the influence of rooftop solar. Various studies showed that solar produced by consumers reduced overall demand by nearly 5 per cent. It doesn’t take much imagination to consider what might happen if the amount of solar doubled or trebled in coming years, and battery storage options were added to the menu.
Much is made about the ability of Australia to generate cheap electricity with fossil fuels. That may be true of coal (but no longer of gas, given the export parity about to occur due to the LNG boom), but it doesn’t matter a jot if utilities do not have a cheap delivery system. The need to supersize the grid to cater for ‘super peak’ demand periods have helped subsidise the earnings of utilities in recent years, but it now seems little doubt that the arrival of the pro-sumer is challenging the status quo.
This is clearly occupying the minds of the incumbent utilities, says Ann Burns, the head of utilities in the Asia Pacific for consulting group Accenture. So much so, that they have become increasingly interested in looking at how battery storage and electric vehicles can be deployed to deal with the main problems.
“They are concerned about (the cost of ) building infrastructure (poles and wires) to meet peak demand,” Burns says. “There is lots of interest in how to do things differently.”
One scenario Burns proposes is to imagine a household in a small community. It has EV in the driveway – and the battery in the car could be used to augment the solar panels and the household battery storage to deliver air conditioning. In effect, a household is meeting its own needs. Rather than detracting or “free riding” on the grid, as solar households are accused of doing now, it is delivering a tangible benefit.
It is certainly true that utilities – be they generators or network operators – have been considering the potential for EVs, and storage, to address one of their critical threats, the fall in overall demand from consumers. This was an important part of a critical strategy meeting last year. Origin Energy has even suggested the deployment of EVs could be considered as part of the new government’s Direct Action policy.
Whatever the policy and the political debate, utilities better get used to the idea because it is coming anyway.
Jack Azagury, the New York-based global head of smart grids for Accenture’s utility business, notes there has been a lot written in the past two years about the so-called “death spiral” caused by the proliferation of rooftop solar, the emergence of the pro-sumer, the reduction in demand, and regulatory impacts – and by the movement on to micro grids as companies and individuals then add storage.
Azagury describes the “death spiral” scenario as both true and overrated. Which one it becomes depends on how each utility reacts. Transformation, he says, is happening. Solar is growing exponentially, storage is coming down in price, but most consumers will look to grid for back-up, for stability, for peak load, and for insurance. How much they do so depends on how willing the utility is to move with new technology.
“There is a lot is hype, but the trend cannot be ignored. Utilities are not going to go away overnight, but they need to adapt,” Azagury says.
Right now, he says, there appears to be an even split between utilities who have a glass half full attitude, and those with the glass half empty. And there are those who haven’t even thought about it.
“Half are looking at revenue upside. Half are looking at trying to stop development, and looking to slow down the advance of technology. But trying to stop technological development is a losing proposition.”
Australian utilities, he says, are – or at least should be – at the forefront in terms of thinking about new models – because of the country’s high electricity costs (due to its expensive delivery through extended grids) and excellent solar resource.
Utilities will be able to source new revenue, but it will come in new models that are emerging around storage, solar, and micro grids. Some are now looking at how to bundle solar and storage to make it attractive, and to keep their skin in the game.
Azagury says the grid is heading to what he calls a “hybrid distributed model”. Which is to say that distributed generation, even micro-grids, will become prevalent, but the bigger grid will not simply disappear.
“The grid will exist, but it will provide a service around connection. But there will be more options for consumers,” he says, in solar and storage, that could provide support or even alternatives to the grid.
Some utilities will make the transition, and others will not. Just as occurred in the transition away from fixed to mobile telephony. Importantly, he warns that hanging on to the coat-tails of the regulators will not save those that don’t want to adapt.
“If utilities are waiting for regulators and policy makers to help that transformation (happen more slowly), that is not going to happen,” Azagury says. “ That will not save them because regulators and regulation lag. This will be a transition unlike any we seen since electrification.”
Utilities, across the globe, are also struggling with a lack of trust at the consumer level. This is creating opportunities for other service providers that have experience “inside” the home, not just delivering to the front door.
That’s why home security firms, home automation device providers, and even internet and cable firms are looking at home energy management. Google, for instance, recently paid $3.2 billion for the energy measurement and management firm Nest. The distinction between network operators and retailers will also blur.
Azagury suggests analytics will be crucial, hence the importance of “smart grid” technology, and good data. Azagury says the availability of good data, and the analytics, saved 35 transformers from being “browned out” during the mid-January heatwave.
The fact that most networks have operated as what some describe as “dumb grids”, means that most utilities don’t know customers are offline until the customer tells them. And they don’t know if they are reconnected until they see the lights on in the house.
“Solar will not be the death of the utility … but these organizations will live and die by the quality of the data and the analytics that they have access to,” Azagury says.
Which is one reason why Accenture has partnered with Siemens in a joint venture called Omnetrics. It recently conducted a survey on how utilities judge threats and opportunities, and what they are doing about it. You can read it here.
