Modernizing the Grid Exponentially to Keep Up with the Rapid Deployment of Renewable Energy

With the explosive growth of new solar and wind capacity, the Australian grid is experiencing the pain of fast technological change on a legacy distribution network. More than 6.3 GW of new capacity was installed in 2018, which was double the amount installed in 2017. 

“If you’re investing into renewable energy anywhere, but particularly in Australia, focus on grid. Do not take a developers’ grid due-diligence report; you need to go much deeper. You need to look at engineers’ reports. You need to look at the whole energy map. A coal-fired plant turning off a year earlier could impact your solar site 3,000 km south of that.”

Sam Reynolds, Managing Director, Octopus Investments 

This unprecedented growth has broken the traditional utility business model, which focused on forecasting demand and upgrading or building new generation to supply consumers and businesses. With the decoupling of generation from supply, this model has broken, yet it relies on the same legacy grid that supported the old business model. Grid operators are alive to the issue and are contemplating local reinforcement investments, projecting how the grid will be able to serve clients in a fast-moving market over the next few decades. 

Changes in Capacity and Clients

Today, however, new distributed capacity is being approved, financed, and constructed, and the role of utility clients is also experiencing change. Corporate clients are no longer simply consumers of power. They are likely to have installed onsite generation, storage technology, and the ability to control their energy consumption through active building management. The distinct roles of utilities, distributors, generators, and consumers have blurred. 

Investors in Australian renewable energy projects now face greater risk in financing the correct assets. They may face significant curtailment and could even be affected by neighboring projects being built at the same time and sharing the same grid network. This means equity returns for investors are more volatile and less certain. 

Steps to Rapidly Modernize the Grid

While grid modernization is a long-term endeavor, the evolution of the energy market continues at pace. The question for utilities, asset owners, investors, and technology platforms that make up the energy market is the same: how can the grid be modernized exponentially to align with the rapid pace of change established by clean technologies? The response by a growing number of clean technology startups is clear:

1. Finance and operate battery storage projects on the same grid connection as an individual solar farm to charge in peak generation hours (when power prices are lower) and discharge during peak consumption hours (typically 4 p.m.-7 p.m.). 
   
2. Implement demand-side management software to reduce the pressure on the grid and help asset owners benefit from enhanced returns (driven by the wholesale market price for power). 

The rise of virtual power plant startups, such as Enbala, AutoGrid and Limejump (which was recently acquired by Shell), enable the management of thousands of distributed energy resources, including storage, generation, and even refrigeration assets. These resources are actively managed to respond to the needs of the grid at a given moment in the day. What emerges is more value being generated through asset optimization than through the traditional generation business model. 

“The grid is inverting. We are beginning to create more value at the bottom of the system—the grid edge—than at the generation level, so we must focus on the customer and the benefits we are providing to them.”

Bud Vos, CEO, Enbala