Challenges for a smarter energy system

+ Achieving a smart energy system is more challenging than you may think, renewables make the system less flexible and therefore dumber. Today we are not getting closer to a smart system – to achieve a smart system investors and businesses should be rewarded for contributing to system smartness.

We live in a world of smart phones, smart cities, and smart energy, or do we really? Is our energy becoming smarter? I think to achieve a smart energy system we need to answer the question of what entity is responsible for optimising an energy system to be smarter? 

A smart energy system should be efficient, flexible and deliver value. Efficiency means high utilisation, low levels of energy losses and costs. Flexibility means fast frequency response, upside and downside regulation, two way digital communication and automation. Maximum value to consumers means simple and clear services, and fair pricing while exceeding existing safety and reliability requirements.

For a smart energy system the many elements of this complex system need to act simultaneously to create an optimum outcome. The issues are:

1. that the elements that make up an energy system are at different levels of smartness, and 

2. the system is not optimized for smartness.

Firstly, according to our recent survey the smartest element of the system is only 7.5 on a scale of 1-10, 10 being smart. The dumbest element is just 2.9. Storage and Demand side response are seen to be smarter while Transmission, Distribution and Consumers are not smart. You may say the system is as weak as its weakest element, which implies large smartness gaps that must be filled.

Do investments flow to fill in these gaps? No, not today. Arup's recent workshop with key stakeholders identified that 2015 investments are not in line with identified smartness gaps. In 2015 in Europe more investment went into renewable generation ($48bn) than Transmission and Distribution ($39bn) while most of us agreed that Networks have a long way to go before becoming smart. Demand side response investments are negligible even if they promise to make the system smarter. 

Secondly, the system may be becoming dumber overall, even if smart individual elements are being added. For example the more renewables we deploy the dumber the system will become because wind and solar are very inflexible. Or distributed generation - another smart element - can overload the system and cause distribution level congestion leading to capacity restrictions such as seen in South West England. We may think to solve the problem on one level but create a problem on another level. This shows that the UK energy system is not optimised for smartness. But why is that? Who is responsible for system level optimisation?>

The system operator’s responsibility is to balance the energy system in the short-term with focus on seconds, minutes, hours, days ahead. In this system of short-sightedness the ‘capacity mechanism’ was introduced to provide longer-term capacity. Regulators and policy makers use incentives and requirements to guide each system player. But of all the system elements, policy and regulation are seen as the bottleneck hindering further development in the UK and Europe.

I raise the question: if the money is not flowing into the right parts of the energy system something must be wrong with business incentives and rewards. Could businesses be rewarded for making the system smarter? 

The commercial deployment of smart energy solutions has been much slower than can be justified by the technology advancement over the last decade. Faster progression towards smartness will be required to deliver the COP21 climate targets but without targeted investments we are not on the smart path. 

In order to get back on to the smart path I suggest we need to face the question of responsibility: what entity is responsible for optimising an energy system to be smarter? What entity will take the lead towards a smarter energy system? Who is responsible for a country’s energy future?