Smart grid technology looks set to change future energy distribution, and create important economic benefits for Britain. But while the case for action on smart grid is overwhelming, it’s not yet clear exactly how and when progress should be made. Bill Easton and Jenny Byars report.
Smart grid is an electricity revolution in the making. Just as the internet changed communications, smart grid’s more intelligent, efficient and secure networks will bring major changes in how electricity is generated, distributed and consumed.
Delivering smart grid in Britain will need substantial investment, but our report, commissioned by SmartGrid GB, shows this expenditure will deliver significant economic benefits.
Britain also has an opportunity to position itself as a world leader here, provided it acts soon. But implemention is complex, and moving forward needs a comprehensive understanding of the challenges and how to overcome them.
Benefits across the supply chain
Early-stage research, undertaken by the Smart Grid Forum (SGF) and analyzed by Ernst & Young, suggests £23 billion will be needed between now and 2050 to upgrade networks with smart technology.
While the cost is significant, the research also suggests this would save almost £20 billion compared to the cost of increasing network capacity without smart technologies.
The savings are also projected to remain as high as £10 billion even if only low levels of decarbonization or electrification occur. The costs of starting soon also appear low, so there is no great benefit to delaying development.
The investment is also expected to sustain 8,000–9,000 new jobs in Britain during the 2020s and 2030s, with benefits also arising from manufacturing and intellectual property exports.
Costs and risks of inaction
Not moving forward with smart grid implementation could expose Britain to a number of risks:
- Deteriorating network performance
- Reduced growth of secondary and supply chain industries and associated export potential
- Failure to meet carbon reduction targets
- Potentially higher energy costs.
The Department of Energy and Climate Change has recognized that smarter electricity grids and the development of cleantech industries will be key to enabling the UK to meet carbon reduction targets.
If a conventional grid inhibits growth of these industries, Britain could end up having to buy international carbon credits to reach targets, and face further upward pressure on electricity costs if a smart grid is not deployed.
Complexity and uncertainty are the biggest challenges
The report finds that the complexity of smart grid and the uncertainty around when new technologies and demand patterns will develop are the main challenges for Britain, but most of those interviewed agreed it would deliver substantial benefits.
|Multiple complexities ||Major uncertainities |
|Some of the multiple stands highlighted included: ||Regarding the uncertainities, responses emphasised a number of themes such as: |
|The technologies that will be adopted by customers that will influence the demands they make of networks; ||How quickly technologies can be adopted by customers; |
|The technologies that influence what networks can provide to customers; ||How quickly new technologies will provide new capabilities on grids; |
|Interaction with other elements of energy policy; ||Future change to energy policies, and whether the regulatory regime can adapt sufficiently quickly; |
|Understanding of the benefits created and whether they align with the costs incurred; ||The location and extent of clustering impacts on the networks; |
|The best market models and network service definitions to adopt. ||How smart meters and smart grids will interact and co-develop. |
So the concern is not so much about the best destination – but when and how to get there.
Moving forward while balancing risk and opportunities
The report suggests government, regulators and industry will need to think in new ways to address smart grid’s challenges.
Specifically, it is reasonable to expect more detail from policymakers about changes that may or may not be needed now. Flexibility around current network standards and rules could also be keyin reducing the cost of meeting future demands on our networks.
Progress also depends on changing the regulatory mindset. It’s important to focus on protecting customers by making sure network investment is sufficient to protect against risks. More engagement with customers will also help them understand smart grids, smart meters and their positive benefits.
Finally, it is important for future projects to explore how suppliers and networks can work together to address upcoming challenges, instead of taking the current industry model as a given. A coordinated approach to building the nation’s skills is also key to help ensure Britain can make the most of smart grid’s opportunities.
Why Britain is a natural smart grid leader
Britain has strengths that could help it become a global leader in smart grid development:
- Positive government and regulatory initiatives are already in place.
- Legally-binding carbon budgets are seen as a strong commitment to decarbonization and electrification.
- Britain’s complex energy market creates a perception that something made to work well here will meet other markets’ needs.
- Britain has strong academic research capabilities, especially in electricity networks, and commercial acumen.
About this survey
In order to help inform the policy making process and wider stakeholder community SmartGrid Great Britain (SGGB) commissioned us to conduct a short study to identify and quantify the major economic benefits smart grid development can bring for Britain.
The report deliberately takes a broader perspective than others, and looks at the potential benefits to Britain beyond a network perspective. It draws on existing British and international studies, interviews conducted with stakeholders, and our own economic analysis.
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