Energy distribution is approaching a very important turning point. Until recently, the energy distribution business was the same for one hundred years or so: there was one spot where energy was produced, and it was delivered to consumers in a controlled manner. There was one party who owned and managed the entire chain. Everything was more straightforward. In the 2000s, new laws governing energy markets were enacted: the production and distribution of energy were separated. In Europe, this is a common trend.
With smart grids on their way, the situation is far from simple. In short, the idea behind smart grids is to minimize energy consumption and to optimize network design. Smart grids are about building, expanding, operating and maintaining future electricity networks in a way that will also help meet the European Union’s 20/20/20 climate change objectives. These targets for the year 2020 include 20% reduction in greenhouse gas emissions, 20% share of renewables in overall EU energy consumption and 20% savings in consumption by improving energy efficiency.
If even a fraction of the smart grids visions came true, it will be the biggest change in energy distribution and energy distribution business ever.
What smart grids bring to the old way of energy distribution is, on the one hand, the basics, i.e. distributed production. In addition, smart grids mean measures for saving energy, using renewable energy resources and new ways of using energy, e.g. electric cars. Smart networks controlling the entire network will be built alongside traditional electricity networks. There will be more and more telecommunication – with or without wires – and smart components at the customer, at distribution substations and in the network itself.
There will be a flood of information that can be received from the network. This is a big challenge not only for the energy utility but for Tekla as well. All the information must be controlled and utilized in the best possible way in the network information system. One of the technical challenges of smart grids is that when more IT is involved, the network will become more vulnerable to attacks. Information security will play a big role in the development of smart grids.
On the financial side, smart grid goals require great investments. These investments, however, enable the establishment of new business models for energy utilities. For example, the energy utility might not own the actual network components at all. Instead, there will be service providers which will provide the utilities with information from the network. In this way, it is easier to assess the relationship between the investment and the benefits. Reaching smart grid visions and building the path to 20/20/20 must be reasonable and cost-effective to all parties.
With all the new technologies, business models, vendors and regulations, there is a risk of complexity. Because of the great investments, smart grid solutions must be well planned to be future proof. Otherwise repairs will have to be made along the way. This has already happened in some cases with the rapid shift to automatic meter reading (AMR).
Despite megatrends such as smart grids, we must not forget the basics: asset management, which forms the basis of any network utility’s operations. Infrastructures are ageing, and renovation gives opportunities to new technologies. Controlling network assets from planning, documentation and operation to maintenance and reporting is crucial. So are the benefits for the utility and for the customer.
Tekla Xpower Days 2010 (TXD10), the 8th international biennial seminar for the members of the Tekla Xpower community will be organized on Wednesday 13 and Thursday 14 October 2010 in Latvia in cooperation with Latvenergo. I warmly welcome all the leaders of Smart NIS to TXD10. See you in Riga!
Pekka Hämäläinen
Segment director, Tekla Infra & Energy, Energy distribution