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The future of electricity is set to move a long way from the centralized grids that have dominated modern power systems to date. The industry is moving fast toward a new energy ecosystem with a blurring of distinctions between distribution, transmission and generation.

A range of technological innovations are likely to result in big changes to grid efficiency. These innovations will facilitate automation to reduce cost, improve quality and enable the optimal use of distributed generation, as well as promote interaction between supply and demand technologies and between the consumer and the utility.

Smart energy motivations

Investing in smart grids is high on the list of priorities - second only to upgrading or replacing generation capacity, according to the utilities who participated in our latest "Annual Global Power & Utilities Survey." Putting money into smart grid technologies is also deemed equally important as investments in transmission and distribution networks. Interestingly, survey participants rate the customer relationship potential of the smart meter as the most important factor in smart grid investment.

Two-thirds (66%) of respondents view smart meters as an important or very important opportunity to get close to their customers, with the management of peak demand (62%) also at the top of the list. These "customer interaction" goals edge out pure operational gains, such as improved grid reliability (59%) and reduced operational costs (55%).

Companies would be wise, however, to be cautious about the customer opportunity - particularly among residential customers. The nature of the customer-utility relationship varies widely across different regulatory regimes and market frameworks. So far, the experience of smart grid and smart metering deployment suggests that benefits such as an increased level of "smart" end-user energy management and peak load shifting are difficult to achieve. Customer inertia is a potential barrier to realizing the full potential of smart energy systems.

Customer engagement

There is increased recognition by the industry about the challenges involving customer engagement. Two-thirds of survey participants say there is medium to high probability that smart technology will be in place, but shortcomings in customer engagement will limit its potential - even looking as far ahead as 2030. This view is particularly strong in the mature markets of North America and Europe.

In contrast, respondents in Asia and South America were more positive about the prospects for customer engagement and behavior changes, with fewer than half anticipating a medium to high prospect that customer engagement would limit the potential of smart grid and smart metering technology. Industry survey participants in developing markets see more positive potential for customer smart grid interaction than their counterparts in mature markets, where a greater proportion of smart metering and grid systems have to be "retrofitted."

Distributed generation

Nearly half (48%) of survey respondents stress the importance of smart grids as an enabler of distributed generation, but they also point to barriers in the way of distributed generation, the biggest of which is cost-effectiveness. Nearly three-quarters (73%) say the long return-on-investment time for customers remains a major hurdle, while 69% point to the lack of policy support.

Fewer than one in six respondents expect distributed generation to supply more than a 10% share of electricity demand by 2025. The consensus estimate is that distributed generation will contribute a 2% to 5% share by that time. Within this share, solar photovoltaic is expected to account for 42% of distributed generation (49% in Europe), compared with a 22% share for fuel cell technology and 22% for geothermal.

Energy storage breakthroughs

The intermittency and, in some cases, location of renewable and distributed generation sources will make breakthroughs in energy storage important for the future energy ecosystem. Pumped-storage power stations are a good solution for short-term load balancing, but there is only limited capacity available, and it is only suitable in certain locations. Long-term storage is the big challenge.

Electric vehicles could play a significant role within the smart grid, enabling such vehicles and their batteries to provide an outlet for intermittent renewable energy to act as a surplus. But battery technology, both for vehicles and wider applications, needs to improve in terms of capacity and cost if it is to greatly transform transportation and renewable energy storage.

Research continues in improving battery performance and longevity, and breakthroughs are expected with new technology, such as lithium air batteries. If successful, new batteries will replace gasoline-fueled engines, improve electricity transmission and impact a host of other potential uses.

Superconducting magnetic energy storage (SMES) systems are currently used for some grid stability applications, but major cost and scale barriers need to be overcome before this technology can be used for large-scale storage.

SMES systems store energy in the magnetic field created by the flow of direct current in a superconducting coil that has been cryogenically cooled to a temperature below its superconducting critical temperature. These systems are highly efficient, power is available almost instantaneously and very high power output can be provided for a brief period of time.

Researchers in Europe are also testing "gassified" or "power-to-gas" technology that involves the use of excess power to produce hydrogen by electrolyzing water and, if required, in a second step converting hydrogen into synthetic methane by reacting with carbon dioxide.

The existing natural-gas infrastructure, namely the gas grid and its associated underground storage facilities, could be used to store this methane, as well as some of the elemental hydrogen. The idea is not new, but it has become more important in the light of the growing share of renewable generation in the energy mix.  

David Etheridge is global power and utilities advisory leader at PwC, and Andrew Roehr is a managing director in the firm's power and utilities smart grid practice.

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Hybrid Energy Innovations 2015
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