Smart grids

Phasing out fossil fuels requires a massive scaling up of renewable-powered electricity but the grid that channels energy from producers to consumers is not ready for the surge. These complex networks, consisting of power generation stations, transmission lines, and distribution infrastructure, were built in a different era in which centralised energy sources, predominantly coal and gas-powered plants, provided a one-way flow of energy to individual points of consumption. This structure has limited flexibility for emerging renewable technologies or rapid changes in distribution across the network.

“In one sense, a grid is a really complex, large-scale machine,” says Professor Phil Taylor, Pro Vice-Chancellor for Research and Enterprise at the University of Bristol and director of the EPSRC Supergen Energy Networks Hub, a research consortium in the UK. “In other ways, it’s really quite basic because, for many years, it didn’t need to be any more sophisticated.”

Government funding for grids has grown alongside their complexity. An estimated USD310 billion was invested in power grids worldwide in 2023, a 5 per cent increase from the year before, making grids the third-largest sector for investment in the global energy transition after electrified transport and renewable energy.BloombergNEF, “Energy transition investment trends 2024” Rising investment has been focused on renewable energy and smart technology. The largest investor was the US, contributing USD87 billion focused on increasing grid resilience to environmental threats and improving distribution grids. China contributed over USD79 billion, including funding the integration of large renewable energy clusters into its grid.

However that’s not enough – meeting net zero emissions by 2050 will require public sector investment in grids to nearly double by 2030, according to the International Energy Agency (IEA).

The situation is arguably most complex in the developed world. Electricity grids in advanced economies are older, as these countries were the first to electrify; only around 23 per cent of the grid infrastructure in advanced economies is less than 10 years old, and more than 50 per cent is over 20 years old.IEA, “Electricity grids and secure energy transitions”, 2023 More funding is needed to modernise this infrastructure to be compatible with new energy resources. While a lack of investment in emerging economies has been a barrier, the presence of newer grid infrastructure may benefit them, as it will facilitate the integration of renewable projects when compared to the difficulties of modernising old infrastructure for the energy transition.

Power everywhere

The clean energy transition entails large increases in electricity demand, including for the electrification of industry or vehicles, and the widespread rollout of variable renewables like wind and solar, placing greater demands on power grids. Renewable energy installations mean potentially thousands of small generators distributed around the grid rather than a small number of large power plants.

“We’ve got to transform grids to be much more flexible and dynamic, with power flowing in all sorts of different directions,” says Taylor.

Smart grid technologies can help to manage this transition while reducing the need for costly new grid infrastructure. They can also help to make grids more resilient and reliable.

“If you can move to a more innovative approach to grid investment and operation, you can add intelligence and real-time monitoring and make the algorithms operate differently in different parts of the grid at different times, you can adopt new technology, integrate disparate systems, and optimise in real time,” says Taylor.

Sophisticated sensors, automation, forecasting, and two-way distribution are among the grid-enhancing technologies that will optimise delivery and stabilise the variability of renewables. Digital technologies and software can better match the supply and demand of electricity in real-time, minimising costs and maintaining the stability and reliability of the grid.

A smart grid is highly distributed, meaning that the components that generate, store, and deliver electricity are spread out geographically instead of concentrated in a few large power plants. This is particularly helpful in deploying energy in remote areas and accommodating intermittent energy sources like solar and wind, as it can shift to other sources when one is unavailable. It can also shift to energy sources that are most cost-effective in real time based on pricing dynamics.

Smart grids can also protect energy sources against the consequences of climate change, as they offer the flexibility to shift to other sources if one is damaged or unable to function in severe weather, and optimise for energy sources that are most effective for particular weather conditions.

“Smart grid arrangements would definitely allow you to be more resilient to severe weather events,” says Taylor. “It helps you in implementing renewables and minimising carbon, but also in delivering greater resilience.”

Security, regulation

Although smart grids offer solutions to many energy issues, Taylor notes that their reliance on large amounts of data does create cybersecurity risks. Several high-profile cyber attacks on crucial infrastructure have been reported in the last few years, causing problems ranging from energy theft to persistent blackouts. New detection and protection measures, alongside improving regulation for data security, will be required to safely scale up smart grids.

Another challenge, says Taylor, is the need for regulatory reform to facilitate investments. “The innovative smart grid technologies have been developed and trialled, and we know they work,” he says. “But we’re waiting for the correct commercial and regulatory environment to be able to deploy them. At the moment, there’s much more of an urgent need for commercial and regulatory innovation than there is tech innovation.”

Most grids are fragmented systems whose components – generation, storage, and transmission – are managed by separate entities with different regulatory bodies, which is a complex ecosystem to sell services into. “Building a battery project that would have benefits across the entire value chain sounds wonderful, but who builds the project? Who owns the storage? There’s quite a lot of risk involved,” says Taylor. “Energy storage devices don’t have a clear and accessible categorisation in the energy market, so you’re not sure what you can do. The rules are not there to fully incentivise and make it easy for people to participate in the flexibility market.”

Currently, grids are not optimised to favour the lowest carbon energy sources. For example, grid connection in the UK operates on a “first come, first served” basis, meaning that many sustainable grid plans have been put on hold despite being more feasible and cost-effective than those that are being prioritised. The Energy Networks Association has proposed a “first ready, first connected” model that would help speed up the implementation of many of the renewable projects that are ready to be connected. Renewable energy developers are keen for the government to move faster.

Professor Taylor notes that countries with state-dominated energy systems may be better able to adapt their energy grids to accommodate renewables. South Korea, Singapore, and China have already made progress integrating renewables, as state oversight enables more rapid system change. This pattern supports the notion that governments will play an important role in the process of adapting regulations to facilitate these changes. “We need regulatory change to allow more flexibility,” Professor Taylor. “This will be essential to incentivise the best value and the lowest carbon solutions for the overall energy system.”