With a better understanding of the complexity involved in the transformation of the electricity industry the words smart or future energy' are becoming more prominent. BuddeComm believes that the term smart grids' is too narrow and that smart energy' is better suited especially once the communications developments in national mobile and fixed broadband networks start to converge with smart grid developments. Smart grids unfortunately have become synonymous with smart meters, again leading to too narrow a view on this market.
Smart energy signifies a system that is more integrated and scalable, and which extends through the distribution system from businesses and homes and back to the sources of energy. Developments at the edge of the network will increasingly determine its future direction. A smarter energy system has sensors and controls embedded into its fabric. Because it is interconnected there is a two-way flow of information and energy across the network, including information on pricing. In addition to this it is intelligent, making use of proactive analytics and automation to transform data into insights and to efficiently manage resources.
This links with the telecoms development known as M2M or the internet of things' (IoT). For this to happen various functional areas within the energy ecosystem must be engaged consumers; business customers; energy providers; regulators; the utility's own operations; smart meters; grid operations; work and asset management; communications; and the integration of distributed resources.
With energy consumption expected to grow worldwide by more than 40% over the next 25 years demand in some parts of the world could exceed 100% in that time. This will produce an increase in competition for resources, resulting in higher costs. In an environment like this energy efficiency will become even more important.
Quite apart from any increased demand for energy in specific markets, the move to more sustainable technologies for example, electric vehicles and distributed and renewable generation will add even more complexity to operations within the energy sector. As was again confirmed at the COP21 in Paris, technological innovations will have to play a larger role in climate change adaptation.
Concerns about issues such as energy security, environmental sustainability, and economic competitiveness are triggering a shift in energy policy, technology and consumer focus. This, in turn, is making it necessary to move on from the traditional energy business model. Renewable energy, linked to distributed energy systems and battery storage, is going to be the game-changer here.
As a consequence electricity utilities could end up in a spiral of death' situation similar to that of the companies that invested in the building of the internet infrastructure they may own the means of delivering electricity and associated services, but may not be able to take advantage of the new business opportunities that will arise. This will limit their opportunities for future growth. Instead companies should develop a vortex of opportunities'.
Another problem will surface when, due to users reducing consumption and producing energy themselves through energy efficiency strategies, the traditional pricing models become inadequate in terms of maintaining the energy infrastructure.
The potential for transformation of the energy industry to smart energy is still at a very early stage. Valuable advances have already been made in some areas but consensus needs to be reached regarding a collective approach to interoperability and technical standards.