How the Evolution of the Electric Utilities Affect the Consumer Through the Smart Grid

 By Peter Wung

IEEE has nine Smart Grid Domains that were created by members who were inspired by the National Institute of Standards and Technology (NIST) Conceptual Model to create technical communities to advance the development of the Smart Grid.

The IEEE Smart Grid Customer Domain is the only one that directly links Smart Grid activities with the customer. This was not an intentional bias, it is because the concept of the Smart Grid is amorphous, based on broad vision rather than details. Indeed, the issues that affect the customer as a result of the Smart Grid implementation were too far into the future to concretely address in 2011. In addition, customer-related issues are closely dependent on prior decisions made by the policymakers, the utility industry’s implementation of the policy, and the resulting system and market responses to the implementation.

In the ensuing five years, while the Smart Grid concept has burgeoned into a viable reality, and this work has in turn flowered into executed actions, the Customer Domain can now be considered in the overall discussion. Indeed, it is probably quite timely, as the global trend is becoming in synchronism with the rapidly developing technology flow that has buoyed the Smart Grid and Internet of Things conversations in the general press.

“Customer” is a broad term describing the average consumer, but it also describes commercial and industrial users of electrical energy. While there is a Non-Bulk Generation Domain as one of the nine domains, the intersection between the present definition of the Customer and Non-Bulk Generation is an area of open development, subject to the rapid evolution of the utility business model.

The initial logic behind the Customer Domain is developed along the line of traditional customer service philosophy that includes:

• restoration of service in the event of outages
• economical delivery or energy to the customer
• energy management strategies to make the energy costs attractive to the customer while also profitable for the utility
• the ramifications of new customer loads on the electric power supplier
• means of measuring customer usage of electrical energy and ways of leveraging that information to best serve the customer as buyers of electrical energy
• impact of utility technical decisions on the customer electrical energy usage habits

All of the ideas are rooted in the traditional business model of the customer being the load. The paradigm is that the utility is the generator and deliverer of electrical energy while the customer is the consumer. The flow of energy is unidirectional, the price and methods of interchange between generator and the consumer is regulated by the Public Utility Commissions of each state. As a result of this paradigm, the subdomains for the Customer Domain had been limited to: Customer Enablement, Demand Response, Plug-In Vehicles, and Smart Metering Systems, while the extended reality of the Customer Domain had outgrown those limited sub-domains.

In the meantime, there has been a trend that is a result of both technological development and market evolution. As a response to the difficulty of building future large central generating plants in combination with the small capacity margins that exists on the central national transmission network, distributed generation has been tapped as a viable supplement and possible replacement for the large central generating plant. An unintended consequence of the distributed generation phenomenon, “cascading natural deregulation” became a theoretical possibility.

“Cascading natural deregulation” can be described as follows: as the electrical energy sector strives towards energy efficiency, as well as, working towards distributed generation, the total demand for electrical energy drops, i.e. consumers stop purchasing kilowatt-hours as their needs have diminished.

According to the U.S. Energy Information Administration the rate of growth in electricity demand of the United States experienced a downward trend, between 1950 and 2010. The last few years indicate that the electricity demand has diminished to the point of having negative growth. ; that is, while the early load growth projection was on the order or 7 percent per annum, the actual annual load growth has diminished to the 2-3 percent per annum level.

As consumer demand drops, the amortized cost of the high capacity large generating fossil fuel plants continues to sit in the debt column of the utilities, which causes the utilities to charge higher prices to the consumer, which, in turn, make the energy efficiency and distributed generation all the more attractive since the utility generated energy rate is rising in comparison to the new initiatives.

In addition, the combination of energy efficiency, distributed generation and the evolution of energy storage technology will not only give the consumer cheaper prices, but also more independence from the central generation model since the need to be constantly connected to the electric utility for their generation needs evolves to being unnecessary. While there will always be a need for the central electric grid as the stability and reliability of the national power system depends on the central electric grid, the business model of the public electric utility must respond to the “cascading natural deregulation”. Indeed European countries, notably the UK, Germany, and the Netherlands, amongst others, have enacted legislation and regulations which serve to decouple the electric utility business model from strictly being based on energy sales.

The combination of the advent of distributed generation and the “cascading natural deregulation” has created an environment which transforms the Customer Domain from one that deals theoretically with a subject that is just a passive consumer of electrical energy to one that breaks through the wall created by the distribution switch and loosen the constraints that had existed between the traditional energy producer and energy consumer.

The customer can now be both a consumer and a generator of electrical energy, and by incorporating the micro and nano grid concept, the customer could theoretically island their systems from the central grid, even as the central grid becomes dependent on the distributed generation derived from the customer as a portion of the system generating capacity. The energy flow can now be bi-directional. This particular result will motivate technological developments in bulk power devices, such as smart bidirectional switches, power electronic devices to both monitor and actuate the distant devices from the central grid as well as doing the same thing for the distant load with regard to the central grid.

The open market that can possibly result from the anticipated policy and legislative actions will also motivate manufacturers to enter markets that had been closed to them. The micro and nano grids, for consumer, commercial, and industrial customers enables the customer to make economically efficient and effective decisions. Which could allow a cornucopia of possibilities: the utility could remain the energy management service provider, a third party vendor could act as an intermediary between the customer and the power generator, or the customer can manage their energy usage themselves. In all three scenarios, the development and evolution of technology, policy, and legislation will transform the present Customer Domain as it exists now to a very large degree.

In addition, with the rapid acceptance of the Internet of Things and the Industrial Internet of Things, the enhanced ability of the customers, service providers, providers of electrical energy to communicate with vast numbers of devices and measurement points, capture and analyze data in a timely manner, and actuate devices in accordance with operational efficiency will revolutionize and complement the Smart Grid in unaccountably many ways which, in turn, will enrich the Customer Domain even more.

The untapped potential of the Customer Domain can be so large and progress at such a rapid rate that the Customer Domain can conceivably dwarf the other domains. It is an exciting time to be involved in the Customer Domain of the Smart Grid, because the potential for growth and revolutionary transformation seem limitless.

For a downloadable copy of  July 2016 eNewsletter which includes this article, please visit the IEEE Smart Grid Resource Center.

Contributors