How to start an energy revolution
Globally, the energy and utilities industry is experiencing the most significant period of investment it has ever known. This is fuelled not only by the rapid rise of the developing nations, where energy infrastructure development has become a priority to support the booming economy, but also by the need to replace now aging infrastructure in the developed world.
The British energy sector is poised for a quantum leap within the medium to long term. The imminent introduction of smart metering has initiated a wave of reforms across the industry and, following on from similar developments worldwide, the network businesses in Britain are now considering the forthcoming development of smart grids.
Logica has undertaken a survey with key executives from network businesses in Britain to assess the current maturity of smart grids (or, more accurately, smart grid strategies) in the British electricity distribution sector and the drivers and challenges faced in its development. The survey highlighted three key elements of the smart grid evolution in the UK.
Firstly, the regulatory environment is the single biggest driver for influencing any transformation. The electricity distribution businesses are regulated natural monopolies owned by investors who consider them a source of safe long-term returns. In such an environment, real business change will not happen by itself. It must be driven by catalytic measures from the regulator and even then, should lead to a safe, predictable ROI. The respondents to the survey were keen to emphasise the amount of influence the regulator has over their businesses and how an appropriate regulatory regime is essential to influence the development of their strategies and investment decisions towards smart grids.
Secondly, that smart metering and smart grid programmes are inseparable. It is true that smart metering has been the initial driver for industry change here, if not in other countries. As a concept, in Britain smart grids have been very much the latecomer to the party. Most of the respondents recognised this but echoed the interdependency of both projects. The key message from this discussion was the significant overlap across the programmes and the need to carefully orchestrate resources and plans in order to harness the maximum possible benefit for Britain.
The current key drivers that respondents believe will influence the business case for smart grids include capital avoidance, reducing network operating costs and better planning and management of load. Their view of the future drivers shows that demand side management, management of capacity change and management of load from new technologies like renewables and electric vehicles will take the majority of attention. The responses show the opinion that only in the medium to long term will there be genuinely new drivers dictating the evolution of the grid. We believe that this survey will help establish a baseline for smart grid readiness in Britain and will provide food for thought to key stakeholders towards ensuring continued development and transformation of the energy networks sector.
Editor’s note: This was a guest commentary by Rich Hampshire, principal consultant at Logica, a sustainable business and technology service company. You can learn more about Logica’s smart grid survey here.
