It lights up the dark, powers your phone, and keeps your beer cold. But how much do you know about your electricity and how the grid is being disrupted? Eric Gimon and Hallie Kennan from Energy Innovation take us on a tour...

Most of us don’t think much about where our electricity comes from. So long as the lights stay on and the milk stays cold in the fridge, this modern marvel doesn’t impinge on our consciousness except briefly when we pay our electric bill or a storm takes down a nearby line and leaves us without power. Electricity is crucial to our modern lifestyle, but gets very little of our attention. Soon enough, though, big players in the electricity space are expecting residential and commercial customers to sit up and take notice of new technologies and businesses coming to an electric meter or plug near them.

How does the electricity grid work?

The modern electricity grid is built mainly on two layers: a transmission layer and a distribution layer. The transmission layer is a web of high-voltage transmission lines connecting large power generators to the cities, suburbs, and rural locations that count on them for dependable power. This highway-like network allows electricity resources to be shared over large territories. Despite its more than 200,000 miles of wires, most homes and businesses rarely interact with the transmission grid; instead they connect with the distribution layer. 

The distribution grid ‘branches off’ power from the central transmission system to reach all the smaller, more dispersed electricity consumers. In the same way that branches carry a tree’s nutrients from its trunk to its leaves, the power lines of the distribution grid carry lower-voltage electricity from the substation (the link connecting transmission and distribution infrastructure) all the way into homes and businesses. These twigs and leaves of the ‘distribution tree’ are what experts refer to as the distribution edge or grid edge.

How is the grid changing?

The transmission layer has undergone a major evolution in the last couple of decades; grid operators are using fancy new control rooms to manage power flows over bigger and bigger regions, and technological innovation has turned nuclear, gas, and renewable energy into major power contributors. But despite this transformation on the transmission side, the poles and transformers on the distribution end of things have remained unchanged. Historically, the grid edge has been a rather boring place; more the home of mature 20th century technologies and techniques than that of visionary innovators and venture capitalists looking to take the world by storm. Expansions, repairs, and maintenance could be scheduled using decade-old methods, a few phone calls, and very little data. However, quietly but surely, the silent backwaters of the distribution edge are becoming alive with new opportunities and disrupting business as usual.

Five trends occurring at the grid edge

 

  1. Distributed energy enters the playing field. The most visible trend transforming the grid edge is the rise of cheap distributed (customer-sited) solar photovoltaic (PV) energy. Such installations are almost always owned or managed by the homeowner or business owner – once purely an electricity consumer, now becoming an electricity “prosumer.”  Calling this trend disruptive may seem strange, as in most places the effects of this added generation are still just barely being felt. However, with millions of new installations every year, and accelerating, these distributed assets are starting to seriously affect more and more utility business models. It’s forcing all utilities to decide whether this development will lead to their demise or to a great renaissance as their role evolves.
  2. The information technology (IT) revolution meets Thomas Edison. The electricity sector is one of the last bastions of the 20th century economy that has yet to feel the full transformative power of the internet and information technology (IT) revolution. But times are changing. Billions of dollars of investment have gone into deploying smart meters, which collect information about a system’s electricity consumption and provide value as people learn how to access and use their data. Appliances, light bulbs, and thermostats are connecting directly to the cloud, allowing homes and business ever more capability to manage their consumption and understand what is happening inside their buildings. Even new rooftop solar panels are moving with this trend, as they increasingly come equipped with devices like micro-inverters and DC optimizers which connect them to the internet so that the panel owners can track performance and track any problems.
  3. Distributed storage. In the past, electricity storage has been too expensive to deploy. It’s been much easier just to adjust the output from power plants or balance electricity surpluses and deficits over larger areas. In the last few years, however, we’ve seen a steep decline in the cost of batteries, and the business case for them is starting to emerge. While generally it is still more economical for solar PV owners to feed all their extra generated electricity onto the grid, there is some interest in connecting to batteries that can store this spare power and save it for a more useful time. In countries like Germany and Australia, new owners of distributed PV pay a lot for electricity from the grid when the sun isn’t shining on their solar panels, but they are compensated very little when they feed their extra electricity back onto the grid. For cases like this, storage allows customers to hold onto their surplus electricity so they don’t have to pay the utilities for power that they’ve already generated themselves – just not at the right time. Solar plus storage has become an especially compelling alternative to backup generators or grid connection in places with frequent blackouts or poor access to the grid.

  4. Electric vehicles. Electric vehicles (EVs), on the verge of being the real deal for several years now, are ready for primetime. The Tesla model S, 2013 Motor Trend Car of the Year, has amazed the world with what is possible for EVs, while the more mainstream Nissan Leaf has quickly grabbed market share in this exciting space. Worldwide 2014 sales of electric vehicles reached roughly 320,000 in 2014, a 60% increase on 2013. Meanwhile, California regulators have set a target of 1.5 million zero-emission vehicles by 2025. Over one million new EVs means a lot more electricity consumption, which is good for utility business.  But it also presents new opportunities for customers at the grid edge. Because an EV represents something like a one-third increase in a typical home’s electricity usage, new incentives (like cheaper electricity rates at certain times of day) and infrastructure (like more EV charging stations around town and at work) will help families decide the most affordable and efficient way to charge their cars.

  5. The digital grid. The grid as a whole, and especially the grid edge, is seeing more smart grid hardware installed that can control voltage and redirect current in a coordinated manner. Start-ups like Gridco, Varentec and GridBridge are offering new solutions that will make operations at the grid edge cheaper, more responsive, and more reliable. Throughout the distribution network, this new generation of solid-state electronics will play a pivotal role in integrating and enabling new technologies and business models at the grid edge.

All five of these trends reinforce each other, with distributed PV just the tip of the spear.  They gather steam as deployment of distributed assets increases. Many of the new interactions will be automatic and under the radar so as not to waste our precious time, but that’s not to say that their impacts on costs, services, and the environment won’t be noticed. Pretty soon, we will all be called to re-examine how we interact with our electricity. 

– This is a guest blog by Eric Gimon and Hallie Kennan of Energy Innovation. As it is a guest blog, it may not represent the views of Virgin.com. Please see virgin.com/terms for more details.

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