It is a time of great turbulence in the electric utilities space.
In most regions globally, wind and solar are now our cheapest sources of electricity generation, even without subsidies.
As a consequence, wind has overtaken nuclear, hydro, and coal to become the second-largest source of electricity generation in EU in 2016. And at the same time in the U.S., the solar market is smashing records, growing 95% in 2016 alone.
Then there is storage. Costs here have been tumbling too; so much so that Morgan Stanley predicts the storage market to grow from roughly $400 million in 2016 to $2-4 billion by 2020. This will have big implications for utilities’ ability to add more variable generators (renewables) to their mix without destabilising the grid.
Speaking of grid stabilisation, the refrain until now has been that for every MW of renewables built, a MW of gas had to also be built as a backstop (for days with no wind, overcast days, and nights). However, this too has changed. Last August First Solar ran a tests with CAISO (the California grid operator) to test a solar farm’s ability to smooth out grid fluctuations. The results of the test demonstrated that solar farms are able to meet, and sometimes exceed, the frequency regulation response usually provided by natural-gas-fired peaker plants.
Things are also changing on the consumption side:
Source: GTM Research/SEIA U.S. Solar Market Insight report
As shown in the chart above, installations of residential PV are rising, as is home storage. And another form of potential consumption and storage (v2g), the electric car, saw sales rise by 37% in the US in 2016.
Then there is the whole digitisation of the grid. Now all new equipment is being built with inbuilt “smarts” and connectivity, and even older infrastructure can be retrofitted, so with the advent of the smart grid, we will finally have the possibility of the Electricity 2.0 vision I was talking up back in 2008/09.
This is a smart grid where appliances in the commercial or residential worlds can “listen” for pricing signals from the grid and adjust their behaviour accordingly, taking in electricity when it is plentiful and switching to alternative sources/lowering consumption when electricity is in high demand.
With the cost of generation dropping with no end in sight, and the cost of storage similarly falling, as I have posited previously, there is a strong possibility that utilities will have to switch to broadband-like “all-you-can-eat” business models, with the utilities differentiating and making their revenue on added services.
Everything is changing for the electric utility industry. Inspired by that fact and my presentation on IoT and Utilities at the upcoming International SAP for Utilities Conference in Lisbon, I decided to have a chat with IDC research director Marcus Torchia about the implications for utilities of these huge changes. We had a great discussion, and many of the themes we touched on, I will be discussing at the utilities event in Lisbon.
Check out our chat in the video above, or listen to it on the IoT Heroes podcast site.
Blog first published on TomRaftery.com