Smart Grids Yet to Tap Renewable Energy

October 17, 2014 by


Transforming generation markets, smart meter roll-outs by utilities are under way in the US, the UK, Ireland, and France, and are complete in several Nordic countries. While increasing renewables in the mix is often cited as the reason for the smart meters, it’s up to utilities and governments to use them in a way that increases renewables’ share beyond current levels.

Smart meters may be used to collect near-instant data on supply and demand levels. With this data, utilities can combine day-ahead power markets with real-time markets, allowing more accurate billing of energy from intermittent sources — for example, distributed renewables. Utilities can also start buying and selling distributed power, stored power and contracted load-shedding opportunities during peaks.

Peak demand has soared with increasing use of electronic devices, and could reach new seasonal highs with the introduction of electric heating and electric cars.

Smart meters offer a two-pronged approach to solving the utility’s problem of needing to finance peaking capacity, often gas fired power plants that generate for peaks but don’t profit much the rest of the time, as regulated renewable generation targets eat away at demand for baseload plants.

Peaking plants are expensive for utilities to operate in renewables-heavy markets, as German utility RWE’s decision to idle gas power plants in Germany shows. A smart grid can potentially allow charging higher dynamic or “Time of Use” (TOU) pricing to finance running these pricey fast-start plants, and some claim it can remove the need to build new ones altogether.

While smart meters allow utilities to finance peak capacity through new kinds of pricing and contracts, they can also potentially “shave” peak demand. In other words, they can use smart meters to shed peak loads through appliance timing, consumer switch-offs, price rises to persuade consumer shut-offs, and use of distributed renewables as peak demand reduction assets.

So far, smart meters’ load-shedding, renewables-contracting capability has not been used, and they are used mainly for billing. In Italy, smart meters have been used to switch off electricity for clients with unpaid bills. In the UK, half-hourly meters and TOU billing have for decades been used for billing commercial and industrial businesses.

While generally consolidating the market, smart meters by themselves do not give utilities sufficient incentive to boost renewables’ generation share — although utilities may be amenable to regulations requiring they contract power from distributed sources.

Enabling utilities to start buying and selling distributed renewable power on the real-time market, assign it flexible generation profiles allocated credit rather than pay from tariffs, smart meters could not only open a new market but also circumvent the challenge of distributed energy producers competing with the utility, some distributed generators argue.

On the other hand, utilities can realize fuel efficiency savings if they use the real-time market to sell distributed gas-fired power, biomass-fired power or renewable heat.

There is potential that — with the right regulations — smart meters could increase the use of renewable power in new niche markets; for example, with wide-scale introduction of consumer-side energy storage devices, peak demand reduction, powering car batteries, or powering appliances. In the future, smart-grid-operated appliances and battery storage could switch on to absorb wasted or ‘spilled’ wind power at night.

Balancing wind


EcoGrid EU is an ongoing, EU co-funded smart grid project launched in 2011 on the Danish island of Bornholm. Bornholm’s generation mix features heavy wind (30 per cent) and also includes solar PV, biogas, coal power, oil-fired power as well as energy imported from Sweden via cable. (Bornholm’s utilities decided that importing energy from Sweden was an expensive way to supply peaking capacity in a system with heavy wind power, so they set up a new kind of electricity market that operates within the existing market, Nordic Operation Information System, or “NOIS,” which includes bids from Danish, Norwegian, Swedish, and Finnish generators.

The project plans to increase the renewable share further through greater generation from more wind, solar and potentially biomass-fired combined-heat-and-power (CHP), with the goal of achieving up to 76 per cent penetration by 2025. EcoGrid’s system has been posited as a way to keep peaking costs down in EU countries required to meet EU’s 20-20-20 decarbonisation targets, aiming for 20 percent renewable generation across the union by 2020.

On the island, wireless Landis Gyr smart meters were installed for 1,900 residential customers. These record energy use every five minutes so that power generators can react quickly to supply and demand imbalances. When smart meters, together with EcoGrid’s control system, record that supply is exceeding demand, transformers cut off from distributed generation sources — or the surplus is used to charge electric cars. If demand exceeds supply, prices are increased over the day-ahead price as reserve capacity starts up.

Energy prices are generated without bids based on NOIS prices and a dynamic pricing tariff that reflects demand levels recorded by smart meters. Prices from Nord Spot, the international spot market, are also used in day ahead price forecasting.

Consumers can switch off to reduce demand during peaks and receive credit towards bills. They also can use a smartphone application to make scheduled purchases of renewable power for electric car batteries.

However, no increase in distributed energy sources is expected in Bornholm, as the type of contract offered to distributed generators for peak generation is an electricity bill discount, and does not specifically endorse renewable generation.

Existing subsidies and fees for renewables are also not impacted by the trial: the share of distributed solar in Bornholm increased by 2 megawatts, but this was unrelated to the smart grid.

As Kim Behnke, Energinet.dk’s head of research and environment, explains: “The main purpose of EcoGrid is not to increase the penetration of renewable energy sources, but the concept will reduce the costs of integrating higher shares of renewable energy, thus improving the overall business case for sources such as wind power.”

As smart meters have had no impact on renewable energy penetration, the success of the contract models based on real-time pricing will decide the attractiveness of the business case for renewable energy sources in the future.

Like Nordic states, the US state of California implemented an ambitious plan to encourage more renewable power usage. The state’s Renewables Portfolio Standard requires utilities to procure 33 per cent renewable generation by 2020, up from an average of 22.7 per cent procured in 2013.

The state water regulator’s move to protect the marine environment from turbine cooling effluent has led to decommissioning of a nuclear plant, sending utilities in search of alternative solutions that can provide flexibility and 4-6 hours of energy to help meet summer peak demand.

American grid-scale battery manufacturer, Eos Energy Storage, is launching a new battery product that could be deployed to address these needs in smart-grid enabled markets such as California and New York.

“Smart meters have, for the most part, already been deployed in California,” said Philippe Bouchard, vice president of business development at Eos Energy Storage. “This represents the first wave of intelligent communication and control. We’re just now seeing the enabling effects on distributed resources such as solar PV and storage.”

Eos Energy Storage’s battery would be used in schemes that allow the utility to contract renewable energy for peak reduction — meaning batteries combined with solar or wind could be aggregated and dispatched as virtual power plants that obviate the need for new gas turbines.

Bouchard explains why California is a good market for battery storage. “Once again, California is leading the way in market transformation with landmark legislation that will require utilities to procure 1,325 megawatts of grid-connected energy storage. We’ve officially moved beyond the era of demonstration projects and are entering the realm of commercial deployment.”

Third-party solar developers and energy service providers, such as California-headquartered solar power installer SolarCity, are making aggressive moves into energy storage and are now offering battery-integrated solar arrays.

“With a battery-connected solar PV system, customers can island themselves from the grid to maintain reliability in the event of an outage while providing value-added services to the utility when the grid is up and running,” Bouchard explained. “Smart grid technologies provide the information platform required for optimization of distributed resources in real-time. This opens up new revenue streams that will ultimately make batteries and renewable energy more affordable for consumers.”

Sweden innovates


Sweden’s climate policy lays out a target of 40 per cent for emissions reductions and 50 per cent for renewable power’s generation share. Almost all of Sweden’s electricity is generated from nuclear and hydropower, with wind and solar gaining a small fraction. (With temperatures falling below freezing in winter, peak demand in Sweden mainly comes from heating.)

Utilities in Sweden use the real-time market to charge consumers on TOU pricing, fixed pricing and dynamic pricing, with different plans available in different parts of the country. There are currently no peak demand reduction contracts available to distributed renewable generators.

The Swedish Coordination Council for Smart Grid, a government-appointed body, is coordinating smart grid research and will submit a national action plan for optimization of smart grids in December of this year.

Susanne Olausson is smart grids program manager for Swedish consultancy Elforsk, which researched and developed transmission for powerline-type smart meters that were rolled out for the entire country before 2009. “We talked about having a rule for small-scale production,” she explained. “People buy solar panels and install them on their homes. They want to sell energy on the same tariff as they buy it, but the government hasn’t decided on it yet because there is resistance from the power companies.”

According to Olausson, power companies have a problem in that they don’t want to buy much electricity during the summertime because nobody uses it. Rather, they want electricity in the winter time, when people demand the energy. “We have more wind now, but that has nothing to do with smart meters,” she explained. “Now the discussion is over whether — when the wind is blowing a lot — the hydropower has to be reduced.”

Questions like these may be on the table for the years to come. “The market is not mature yet,” Olausson stated. “You could force more renewables generation, but then I think the Swedish economy would go bankrupt. It is the responsibly of our politicians to keep energy cheap so we can afford schools and such.”
One impact smart meters has had is convincing consumers to use power when the wind is blowing — although choosing to shut off the heat in response to pricing at other times represents a painful change of lifestyle.

Since 2012 a trial has been taking place on the Swedish island of Gotland, targeting increasing wind capacity above 38 per cent with high day/cheap night tariffs. It is now testing model-based solutions to transmission constraints that can use smart grid data.

Coal-free Ontario

The Canadian province of Ontario’s smart meter roll-out began in 2006. With the government’s environmentally motivated decision to phase out coal power by taking four coal plants offline, the province ramped up generation from renewable sources under a popular MicroFiT scheme and plans to contract 50 megawatts of energy storage this year.

Ontario’s Power Authority (OPA) as of December contracted 37 per cent renewable generation from combined bio-energy, solar and wind power; it plans to increase wind power 8 per cent by 2025. Around 50 per cent of capacity comes from nuclear generation from state-owned company Ontario Power Generation (OPG), with hydropower taking a large share.

Ontario’s non-profit wholesale market operator, Independent Electricity System Operator (IESO), led the smart meter rollout with the implementation advantage of state-owned generation through OPG and distribution networks through Hydro One.

Thanks to smart meters, commercial consumers can now get bill reductions if they agree to reduce their energy use during peak time s— when there is increased demand from air conditioners. However, renewable generators are not currently offered peak demand reduction contracts for generation.

The government of Ontario in January surprised the industry by shrinking MicroFiT capacity targets, scaling back on future contracts, possibly due to limited taxpayer support. As OPA moves to a ‘more competitive procurement model’ in awarding contracts to renewable generators, bigger renewable energy generators with more capital could have a competitive edge on new projects in the province, observers say.

Installers of small-scale MicroFiT generation think there may be a link to decreased MicroFiT availability and smart meters.

“If everyone in every industry had their own power system, they wouldn’t be paying for power at all,” said David Cooke, founder of consultancy Cooke and Associates, as well as solar and wind power installer, True North Power. “That is a problem for government, because if you can’t control the meter, you can’t bill it — and you can’t collect any taxes.”

Cooke says the utilities have been putting up “roadblocks” in every way possible. This includes financial disincentives. “I had to spend $1,500 on engineering, $500-600 on equipment and maybe $500 on labor and time just to put in the required smart meter monitoring — and approve the installation of a 4 kilowatt-hour array on my roof,” he explained. “In Germany, that would have cost far less to approve and taken only a few days with an on-line application and approval process.”

On this issue, Cooke has a theory: "I think they’re afraid of losing control of the monopoly they’ve had with no competition,” he said. “It’s no more energy than a hot tub, but they made a big deal about it because you’re producing power they can’t control.”

Greener someday

A higher tech grid will not necessarily remove the need for grid reinforcement costs for transformers or connection fees currently applied to new renewable generation. For example, these fees are still required in the Swedish smart grid market.

High voltage, direct current (HVDC) transmission — while not necessarily part of smart grids — might also still be required to reach the highest renewable generation targets.

It remains to be seen, in many cases, whether a smarter grid is necessarily a greener grid — and whether peak demand reduction contracts (largely unused so far) will open a gap in the market for distributed renewable suppliers to fill.

Because of this, increasing renewable targets may be a reductive justification for smart meters’ frequently higher pricing schemes, but it goes to show renewable players have significant leverage over public opinion that is crucial for utilities dealing with the sensitive issue of rolling out higher prices. They can use this to their advantage when negotiating with regulators and utilities to secure a market share in smart grids.

By Cristina Brooks 01 October 2014, For Renewable Energy Focus