Arup Thoughts: Challenges for a smarter energy system

The many elements of a smart energy system need to act simultaneously to create an optimum outcome.

By Szilvia Doczi, Arup, Los Angeles January 10, 2017

This is a world of smartphones, smart cities, and smart energy. Is energy becoming smarter? To achieve a smart energy system, a question must be answered: What entity is responsible for optimizing an energy system to be smarter?

A smart energy system should be efficient and flexible as well as deliver value. Efficiency means high use and low levels of energy loss and cost. Flexibility means fast frequency response, upside and downside regulation, two-way digital communication, and automation. Maximum value to consumers means simple, 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. Elements that make up an energy system are at different levels of smartness.
  2. The system is not optimized for smartness.

First, according to a recent survey, the smartest element of the system is only 7.5 on a scale of 1 to 10, with 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. The system may be 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 were not in line with identified smartness gaps. In Europe, more investment went into renewable generation than transmission and distribution, and it was 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 those seen in Southwest England. A problem solved on one level can create a problem on another level. This shows that the U.K. energy system is not optimized for smartness. Why is that? Who is responsible for system-level optimization?

The system operator’s responsibility is to balance the energy system in the short term with focus on seconds, minutes, hours, and 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. Of all the system elements, policy and regulations are seen as the bottlenecks hindering further development in the U.K. and Europe.

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 past decade. Faster progression toward smartness will be required to deliver the COP21 climate targets, but without targeted investments, we are not on the smart path.

To get back on the smart path, the question of responsibility needs to be faced: What entity is responsible for optimizing an energy system to be smarter? What entity will take the lead toward a smarter energy system? Who is responsible for a country’s energy future? 

Szilvia Doczi is a member of the management consulting-transaction advice team at Arup. This article originally appeared on Arup Thoughts Blog. Arup is a CFE Media content partner.