Enabling a fair and just transition: Digitalization of the grid is holding us back
To reduce greenhouse gas emissions from fossil fuels by 45% by 2030, the way we generate, distribute, manage and consume energy must undergo a transformation, enabled by innovative clean technologies, new business models and crucially — rapid digitalization.
As it stands, the top-down, centralized power system that has long underpinned our wider energy system is already becoming a more decentralized network, formed of millions of devices and renewable generators of various sizes (anything from a 1kW smart thermostat to a 100 MW battery storage system).
With this increased load growth occurring on the local distribution network, utilities and state regulators will have to invest significant capital to manage their respective networks using toolkits designed decades ago. A study conducted by Kevala in 2023 estimates that California could spend up to $50 billion in grid infrastructure investments if they operate in a business as usual paradigm to accommodate the amount of distributed energy resources (DER) expected to come online by 2035. However, demand side flexibility could save $1.8 trillion of grid investment globally by 2050 through deferring network investment.
The current IT landscape of the energy sector rests on a foundation of siloed systems designed for centralized grids, where energy is created in bulk, and flows one way from generators to consumers. When trying to restructure this foundation to serve the emerging bi-directional, decentralized value chain, providers are attempting to integrate fundamentally incompatible systems with incorrect capabilities, at the expense of end consumers.
Still, if a transition that rests on a clunky outdated IT base risks delays and high costs — building our emerging system around cutting edge technologies has the potential to unlock a true, rapid transformation, with cheaper, cleaner, more reliable energy for all. With that in mind, to ensure a just energy transition for everyone, we believe there are four key tech priorities.
- Digitalization of the grid — outmoded tech is the biggest blocker
Across transmission and distribution networks, digitalization lags behind the buildout of renewables and electrification. In a landmark 2020 decision, Order 2222, FERC directed regional transmission operators and Independent System Operators to remove barriers to DER participating in wholesale power markets. While some ISOs are hoping to be fully compliant by 2026 (such as New York), others are on track for 2029 — nearly a decade after the ruling. Simply put, the technology, operational processes, and administrative systems used by grid operators haven’t been designed to accommodate thousands of smaller devices connecting to the grid and participating in markets. The US is not the only country dealing with this hurdle; it is present in other markets globally where dispatching smaller assets is currently a manual process.
On top of this, in many countries only 5 percent of low voltage distribution networks are monitored and visible to distribution utilities. With more intermittent renewable assets connecting to the system and increased electricity demand from electrification, enabling real-time monitoring will allow utilities to detect congestion or voltage issues and then contract with local flexible assets to alleviate these problems.
2. Shifting to holistic tech platforms
Since the Internet went mainstream more than 20 years ago, it has been a disruptive force for good across countless sectors and industries — and we now have the opportunity to do the same for the energy system. But there’s a challenge.
The energy system of the future should be able to monitor, manage, control, dispatch and optimize any asset against any kind of problem or opportunity — whether driven by the market, networks, people’s consumption or generation. To do that, the system can’t be broken into disparate platforms.
The energy transformation we need requires much faster action; this means moving away from using siloed tech platforms and embracing modern, fully integrated operating systems that are agile and able to rapidly accommodate new technologies and functionality.
3. Leveraging data to orchestrate millions of assets
We have an unprecedented opportunity to leverage the current proliferation of smart devices. For example, where unmanaged, a rise in EVs will increase demand, but when managed well, we could turn this challenge into a powerful solution. Residential assets could provide peaking capacity at 40 to 60% lower net cost to a utility than using intensive carbon alternatives. But, for grid operators and utilities to be able to make the most of assets such as these, each electric car, heat pump, smart thermostat must be connected to a platform that can monitor and optimize each device.
Controlling so many assets requires seamless integration and understanding of each device’s unique behavior, response accuracy, optimization profile and constraints. Optimizing these assets while accounting for multiple factors, including wholesale prices, network congestion, weather conditions, and other unique constraints is paramount to the development of a truly transactive, efficient, and low-cost energy future.
4. We need a consumer-centered approach
To meet any of the aforementioned challenges, customers need to be at the center of efforts. Residential, commercial and industrial consumers must be rewarded for their flexibility in a way that benefits the total system. This requires evaluating performance and baselining asset behavior in new ways that haven’t been previously required.
The value proposition must be understandable and the customer journey needs to be seamless. People should be able to connect their assets quickly to the grid, via their utility, and incentives for doing so should be straightforward. Technology can facilitate this interaction, automating and streamlining a wide array of processes, which ultimately makes it far easier and much more desirable for customers to engage.
Conclusions
We are now entering one of the most critical and challenging phases of the energy transition, with the system set to undergo its biggest transformation yet. Investment in infrastructure needs to be channeled to the right places and this goes far beyond hardware — an overhaul of multiple aspects of the system is required. We must learn from other industries and recognize the extent to which we’re limiting potential by tying our sustainable energy future to the over-customized language and logic of yesterday’s legacy systems. Fortunately, the tools we need for a true, green, digital transformation are finally at hand. Holistic, intelligent, agile operating systems are ready, with full end-to-end capabilities to manage and monitor; control and optimize. All that’s left is to start harnessing.
