The Power of Disruption in the Business of Energy
By Sasan Mokhtari
For more than a century, AC systems dominated the grid without major changes to the physical nature of generation, transmission and distribution infrastructure and operation. There were numerous rules, standards, processes, and technological advancements in transmission, but no change to physical transmission operation. The physical nature of the grid is now changing because of the ever increasing penetration of “Distributed Energy Resources” (DER), referred to as Disruptive Technologies.
Recent technological changes and Smart Grid applications have been suggested as Disruptive Technologies that cause significant impact on the existing energy business model. A recent example of a disruptive transformation Uber/Lyft dislodging the more traditional taxi industry. Whether or not Smart Grid technologies are disruptive enough will depend on the drivers of industry changes and how utilities respond and react to these changes.
The major drivers of energy industry changes include:
- Customer demand for flexibility, information, and competition
- Greenhouse gas reduction policies and renewable energy standards
- Regulatory/environmental barriers, and costs of new transmission/generation projects
- Uncertainty in fuel supply, geopolitical instability, terrorism, and severe weather impacts
- Proliferation of renewable energy resources at both bulk and distributed levels
- Significant advancements in information and communications technologies, with a drastic reduction in computing costs
- Behind the meter DERs
These energy industry changes will create challenges and opportunities:
- Utility: Challenges in predicting load/generation due to nature of new customers, stochastic nature of variable generation, and lack of visibility/control of assets. Significant new services and sources of revenue will replace initial loss of revenue, due to DER and energy efficiency.
- Regulatory: Significant regulatory impacts in both bulk power dictated by FERC/NERC, as well as regulatory retail changes mandated by Public Utility Commissions.
- Customer: The new paradigm will be more customer-centric with customers having access to more information and control over their supply of power and cost.
- Grid Operation: Significant impact on power grid operation reliability and economics, with significant requirements for additional visibility and control by Balancing Authorities and Regional Transmission Organizations (RTO)/Independent System Operators (ISO)
- Grid Control: Increased complexity with bidirectional power flows and information. This makes control of the system much more complicated.
- Elctricity Market: Market prices and operation will be impacted by changes in net load profiles due to DER. For example, California Independent System Operator (CAISO) is already seeing negative clearing prices in mid-day. Additionally, sudden changes in DER power generation will cause ramping issues on the load profile shoulders where there are sustained increases or decreases in the load level.
- Distribution Grid: Distributed energy resources may impact the distribution grid on a localized basis. For example, a circuit with high penetration of solar PV may experience reverse flows in mid-day, while at the feeder level the impact could be small and manageable. Distributed resources could also impact distribution voltages. For example, standard PV installations could increase circuit voltages, and on cloudy days, the variations could be very significant.
- Intermittency: One of the issues regarding renewable resources is the intermittent nature of the generation, due to cloud cover movement and changes in the wind pattern.
To respond to these impacts, the power grid is evolving thanks to Smart Grid technologies. The conventional paradigm was designed and operated around a relatively small number of large centralized generation sites and high voltage transmission. Stability was ensured through the rotational inertia of the large generators. These generators also provided necessary ancillary services for the safe and reliable delivery of power to loads. At the same time, load and generation were very predictable and relatively easy to forecast. In the new paradigm, the power grid will be oriented around a very large number of small distributed generation and other smart assets in front of and/or behind the meter. It is also highly interactive, and automated with customer interaction. The load and generation will also be considerably difficult to forecast. These changes in grid composition will require significant re-design, re-engineering, and innovation to assure reliable, economical, and secure operation of the new power grid.
What would the power grid of the future look like? In the past a few years, studies conducted by NIST, DOE, EPRI, and other entities have resulted in the following categorizations:
- Grid 1.0: Legacy power grid
- Grid 2.0: Current power grid with low DER penetration
- Grid 3.0: A grid penetrated with DER representing 50% of the total generation. This scenario is expected to occur within the next 10 years with extensive communication infrastructure for information and interaction among new market players.
However, looking beyond Grid 3.0, when most fossil fired generation units will be retired and DER generation technologies will have fully matured, bi-directional power flow at many points in the grid could be witnessed. Thus, the roles of transmission and distribution systems may be very different. In this scenario, most generation will initiate from the DER with non-utility generation providing most of the base load. Some hydro and nuclear generation might be the exception to this. It is anticipated that more than 60-70% of energy transactions will occur at the distribution level. The exact behavior of operational issues and controls related to Grid 4.0™ are not known and are subject to further discussion. Additionally, the emergence of the Internet of Things (IoT) and integration of other critical infrastructure such as water, will have significant impacts on SmartGrid.
In this scenario operators need significant monitoring and control capabilities to manage grid reliability. DERs will be utilized to improve reliability and mitigate operational challenges, including the supply of grid services, management of congestion, managing circuit, feeder and/or transformer load, phase balancing as well as managing voltage profiles and voltage levels on the distribution circuits.
Sasan Mokhtari, with over 32 years of experience in the North American Energy Industry, holds the position of Chairman of the Board, Chief Executive Officer, and President of Open Access Technology International, Inc., (OATI) which he founded in 1995, to provide innovative solutions for the deregulated energy industry. As CEO and President of OATI, in 1996, Dr. Mokhtari guided OATI to inaugurate the paradigm-changing “Application Service Provider” (ASP) business model in the energy industry to leverage the business value of the internet, and led OATI to become the premier Software-as-a-Service (SaaS) solutions provider in the North American energy industry and developing the OATI Data Center in Minneapolis, Minnesota. Dr. Mokhtari received his Bachelor of Science, Master of Science, and Ph.D. in electrical engineering from the University of Missouri – Colombia.