Growing levels of renewables and other distributed generation and a deepening of customer engagement are disrupting the utility business – but the core utility functions don’t and, at least in the short term, won’t disappear.
“The notion that everyone across residential, commercial and industrial spaces could be self-producing and that there would be no grid makes for interesting conversation, but just doesn't fly, for both technical and commercial reasons,” says Steve Callahan, Vice President Strategy and Solutions, Global, Energy and Utilities Industry at IBM, explaining that this notion forms the basis for IBM’s “energy integrator” concept for the utility of the future.
“Our point of view, and we think that of the industry, is that the requirement to provide safe, reliable, low cost and sustainable energy will remain, but that the underlying core structure of the current utility model and the design point is going to shift radically – indeed it’s already starting to do so,” says Mr Callahan.
The energy integrator
In broad terms, IBM defines the energy integrator as the body that provisions the systems of engagement that sustainably balance distribution side energy supply and demand safely, reliably and securely. Such a role may fit the incumbent utility or potentially a new entrant.
“From the industry perspective, there are some incumbent roles embedded in this definition,” says Mr Callahan. “These include safety and reliability, which traditionally have been a function of utilities. For example one needs to have one party responsible for ensuring people don’t burn down their properties and there are well defined metrics for reliability. But there are also some new or expanded energy roles, such as security – both cyber and physical, in addition to system security – and sustainability, which we think utilities should step up to and own.”
To this end, IBM proposes two broad metrics for sustainability – the penetration of renewables, which is typically and increasingly under a renewable portfolio standard, and most radically the effectiveness of implementation of programmes, technology and approaches that get facilities to net zero.
“The reality is that energy efficiency is way more effective than demand response or wind or solar energy in terms of measuring sustainability and net zero is the new design point. Whereas in the past one would design the grid for the peak with a margin of error, in the future the design point is that for a large percentage of the time, there will be a net zero demand population and therefore one will have to design for when it's not net zero. It's a completely different design paradigm.”
Roles of the energy integrator
Mr Callahan talks about the energy integrator having roles, rather than functions, and he refers to four predominant roles. These are energy network management, or keeping the lights on; distributed resource enablement, which provides a market with dispatchable resources; settlements, which previously consisted simply of bills but in the future will also include demand response; and underlying these the IT and technology platform which integrates all the processes in the system.
“We think that's the energy integrator and we think this is the wave of the narrative for the next couple of years, if not five years, in the industry.”
Towards the energy integrator
So far there are no specific examples of an energy integrator, although there are moves towards it, such as the Reforming the Energy Vision proceeding in New York and California’s distribution plan process, Mr Callahan states. [Engerati-Distributed Energy Resource Markets Coming To New York]
“We are arguing a bit broader than the distributed system platform provider model in New York, but it is coming close. California utilities have started to implement this model but without settlements, and Texas has implemented a lot of it already.”
He adds there is also growing interest in the model in Europe, for example in France and in the Nordic countries.
Incumbent or new entrant?
There is also the question of whether the role of energy integrator should be taken by an incumbent utility or a new entrant.
“In California, there's a big debate on who that should be. In New York, they're pretty well placing it in the hands of the incumbent utility. In other parts of the world, it's evolving. It doesn't have to be an incumbent utility, but a large swathe of this is in the incumbent utility space and for a new entrant it would be hard to do,” says Mr Callahan.
Given this fact, Mr Callahan also argues that the incumbent utilities should be taking the lead over regulators in moving to the new utility model on the grounds that they should “want to own the space.” He also says that as part of the development of the energy integrator model, IBM is working to define the minimum roles it should have. For example, on the distributor resource enablement side, is it a minimum that the role is a market maker or is it simply a transaction hub?
“It's unclear where this will all go,” says Mr Callahan. “Almost unanimously, the energy integrator model has been pretty well received. In some cases, it's a firm grasp of the obvious, but in other cases, we think we're pushing the envelope. I’d say it’s an exciting time in the industry – up to the last nine to twelve months there has been a lot of conversation about direction but now people are more or less on the same page. Sustainability, renewables and net zero notions are real and are not going away. So you see the executives more accepting and putting out their plans on how they're going to deal with it. I think that's good for the industry.”
IBM will be launching its energy integrator model in Europe at European Utility Week 2015.