Growing levels of distributed generation and the rise of prosumers present some key challenges for utilities. On the one hand, the need is to maintain the balance of the grid with this intermittent generation but on the other, there is the potential loss of revenue that could occur as consumers reduce their utility energy spend.
While these are obvious disruptions to the traditional utility business, they also present opportunities. The consensus view is that utilities will need to transition to a smarter, platform and service-oriented model – in whatever form that may take – in order to secure their business into the future.
This view is given further impetus with the latest Digitally Enabled Grid study from Accenture, which finds that utility executives regard the integration of distributed generation as the business challenge that has grown most over the past two years.
The survey involved 100 utility executives across 20 countries. Other findings were that with the further rise of distributed generation almost 60% expect grid faults to increase by 2020, that the inherent hosting capacity of their grids would be exhausted within the next 10 years if they aren’t already, and that revenue reduction would be caused by 2030.
In earlier research, Accenture had found that globally almost half of consumers planned to sign up for rooftop solar in the next five years.
As Accenture’s MD Transmission and Distribution Stephanie Jamison puts it, “Distributed generation (has been pushed) from the fringe to a mainstream factor on the grid” – driven by the falling prices of the technologies alongside the sustainability and emission reduction imperatives.
Various approaches, both regulator led – such as the New York Reforming the Energy Vision – and utility led – such as investment in or acquisition of grid edge companies – are being pursued towards the future utility model.
But to date the number of utilities that have embarked on the full transformation is limited. Despite the hosting capacity concern, only 14% of distribution utilities have a very clear forecast of their potential distributed generation network hosting capacity, the survey found.
And only a limited number have implemented key changes in their smart grid deployments such as skills development (26%), process design (24%) or governance (14%).
So, what can utilities more generally do to prepare for this transformation?
According to Accenture, action on multiple fronts needs to be undertaken now.
Actions for distribution utilties (Source Accenture)
From a customer standpoint, utilities need to invest in forecasting capabilities. Depending on their regulatory context, they should focus on providing consumers with new distributed generation-related value propositions such as PV system design, locational incentives and financing services.
From a network perspective, forecasting and grid operations will be key to moving toward real-time distributed generation optimisation, including curtailment and the provision of ancillary services. These will require regulatory changes to provide an optimisation mandate to utilities and realign the distribution revenue model to become output based.
Jamison advises a balanced, network-wide approach for utilities to successfully integrate distributed generation and to benefit from its proliferation.
“The key will be to strike the right balance between prudent capital investments, optimising operations and maintenance spending, while managing regulatory constraints on deployment and investing in smart solutions.”
The impacts may be more significant than they first appear. Alongside the survey, Accenture conducted economic modelling on the deployment of customer-facing smart grid solutions.
These revealed that such deployment could reduce the capital spending for small-scale distributed generation network reinforcement by around 30% in Europe and the United States by 2030. This equates to reductions of €16bn and $6bn respectively.
For example, in Europe, the base deployment costs of 139GW of PV and wind power are estimated at €58bn to 2030. Reductions in spending are estimated at €1.6bn through locational incentives, €6.1bn through curtailment and non-firm contracts and €8.3bn through storage or demand response.
Locational incentives could provide simple structures to help improve asset utilisation by directing new distributed generation to appropriate locations on the network, depending on the available capacity and other factors such as timing of peak demand.