The future is bright for the electricity sector. Here's why

Written by:

Francesco Starace: CEO and General Manager, Enel Group

Jean-Pascal Tricoire: Chairman and Chief Executive Officer, Schneider Electric

Look around. This decade has seen its fair share of rapid transformations, brought on by innovation in the digital space. The smartphone. Consumer-driven social media. Intelligent manufacturing. Ever-present connectivity. And, soon, self-driving cars on a larger scale. No sector has been untouched by this digital revolution.

Today, the electricity system is on a similar, life-changing, fast-paced trajectory. As in many of these transformed areas, consumers stand at the centre of a disruptive convergence of digital technology advancements; consumer engagement; on-demand, tailored consumption; and a decentralized infrastructure. In the midst of this quickly-changing new energy world, we need to ensure that we set electricity’s future on the right path. If we don’t, there are earth-shattering implications.

Consider that the global demand for energy consumption will increase 30% by 2040. At the same time, close to 2 billion people still don’t have access to reliable energy. Now is the time to close this energy gap by balancing energy demand while enabling greater worldwide access. This will require keeping clean energy at the forefront of change. Together, we can do it. Grid edge technologies will get us there.

What needs to be done

Innovation is on our side. We’re in the midst of the Fourth Industrial Revolution, which, according to the World Economic Forum, “builds on the digital revolution and combines multiple technologies that are leading to unprecedented paradigm shifts in the economy, business, society, and individually.” Therein lies incredible opportunity for industry, customers, and the broader society as we transform the electricity system.

Three trends are producing game-changing disruptions:

• The rapid technological evolution of electrification of certain energy uses, such as heating and electric vehicles
• The shift from centralized power plants to the decentralization of electricity,meaning that energy now is generated, stored, and distributed closer to where it’s used thanks to solar, wind, and other renewable energies and storage technologies
• Intelligent metering and a digital network infrastructure, which let consumers and utility companies “see” — and better control — where, when, and how electricity is being used, in turn more efficiently managing consumption and cost

The whole is greater than its parts

What’s exciting is that these three trends act in a virtuous cycle: enabling, amplifying, and reinforcing innovative developments beyond what each trend can do on its own. For example, the second trend opens up the world of renewable energy. Combine that with intelligent metering, and we now have a real powerful means by which to advance energy efficiency.

What does this cycle mean for consumers? Choice. Today’s technologies enable consumers to be active players within this dynamic electricity system, making cleaner sources of electricity a reality. And when you scale from residential consumers up the chain to commercial and industrial, you have empowered, engaged customers who have a stake in carving out new rules for clean energy supply and demand, all through the energy chain.

At present, most of us don’t know how or where energy is produced, nor do we know when it’s best to consume it. Most residential consumers may not even know that the price of electricity varies daily, hour by hour, according to peak demand and other factors. With connected devices providing an eye on energy cost and consumption, we now have the chance to become proactive with our energy use and efficiency.

Times are changing

Let’s take a closer look at the three trends previously mentioned. Together, they facilitate cost-saving efficiencies and clean energy choices on a heightened level. Within a fully digitalized electricity system, customers will be able to select their preferred energy technologies, connect those choices to the centralized grid, and eventually transact with other distributed and centralized resources with real-time interactions.

Picture a solar panel on your neighbour’s roof. That neighbour is generating household power. Over time, the utility company may even mail him a cheque since he’s offsetting the total grid load. Or perhaps you may start receiving utility credits simply by programming your laundry cycle to run at 3am instead of early evening. Peak demand prevention has its perks, and grid edge technologies empower you to claim this value.

Image: REUTERS/Stringer: Solar panels are seen on the roofs of residential houses in Qingnan village of Lianyungang, Jiangsu province January 8, 2014.

On a bigger scale, solar energy can have a profound impact on electricity’s future. The largest electricity distributor in Italy, Enel, for example, has about 32 million customers. Using Schneider’s advanced distribution management system, Enel has been able to reduce energy loss by about 144 GWh per year. That’s equivalent to the energy consumed by approximately 50,000 Italian households each year. See how Enel is optimizing its distribution network.

A grid that heals itself?

We have the technological means to fully automate grid operations via connectivity, and we can manage resources with greater flexibility and mobility than ever. This smarter, more decentralized electrical system has the potential to increase overall efficiency, resilience, security, and environmental sustainability — all while opening new opportunities for services and business.

Consumers and businesses alike can benefit from this innovation. With grid edge technologies, power distribution networks can be equipped to enable self-healing. For example, at ENEL, over 110,000 secondary substations are equipped with this technology that performs fault isolation in a completely automatic and decentralized manner. As another example, the Dutch utility Stedin and Schneider developed Europe’s first decentralized self-healing underground power distribution network. Watch how it can re-connect two-thirds of its customers within one minute of a power outage.

The economic value of grid edge technologies

Choice and convenience are impressive benefits. Perhaps more so, though, is the economic value of grid edge technologies. Previous analysis by the World Economic Forum has pointed to $3.3 trillion of net economic value from the transformation of electricity over the next 10 years — increasing reliability, resilience, efficiency, and asset utilization of the overall system; reducing CO2 emissions; creating new services for customers; and creating new jobs.

With this transformation, the “rules of the game” are changing. Together, the three grid edge trends are evolving the role of the network beyond supplying electricity. The network is fast becoming a platform that also maximizes the value of distributed energy resources, greater shares from new distribution paradigms, and the economic potential of retail services. Expect to see new revenue models as well.

It’s no wonder we’re so optimistic.

Yet we know that an efficient transition faces challenges as well. Collaboration engenders concrete solutions and new solutions will ensure our electricity system indeed has a brighter future.

This blog was originally published on World Economic Forum's Agenda.