The smart grid's role in increasing energy efficiency


The past decade has seen governments across the globe introducing targets aimed at increasing energy efficiency and lowering carbon emissions in the face of growing environmental concern. The European Union (EU), for example, introduced its ‘20-20-20’ targets in 2008, which call for a 20% reduction in EU greenhouse gas emissions based on 1990 levels; 20% of energy sources to come from renewable energy; and a 20% reduction in primary energy usage; all by 2020. Bastian Fischer, vice president of industry strategy at Oracle Utilities explains


Alarmingly, the European Commission recently found unless governments and utility companies start taking greater action now the EU will only cut primary energy usage by 10%, falling well short of the 20-20-20 targets.

As a result, some industry bodies are calling for even tougher energy efficiency measures to help address the energy crisis. For example, experts from the University of East Anglia are proposing a new EU target of a 40% reduction in primary energy usage by 2050.

It’s clear greater action must be taken now to meet these goals and safeguard the future of energy; especially when you consider that fossil fuels are unsustainable in the long-term and the rapid industrialisation of emerging economies is adding to global electricity demand.

The smart grid and smart meters: The benefits
A critical factor in delivering the required change will be the introduction of information-rich smart grids, able to automatically balance power supply and demand in the distribution grid, deliver a deeper insight into energy consumption and efficiently integrate renewable energy. If implemented correctly, the smart grid has the ability to transform the energy landscape.

Firstly, a greater insight into energy consumption means utility companies can better manage the grid during periods of high and low demand, which helps conserve energy and encourage further savings. It can also help utility companies identify consumption patterns within the grid, helping them to tailor offerings and offer financial incentives to customers to reduce their energy consumption.

Additionally, the smart grid rollout will encourage the uptake of smart meters among customers. Smart meters, coupled with in home displays, can record and display energy usage in near real-time. This delivers an overview of energy consumption, which will help create awareness of energy usage, build client engagement and encourage users to adapt their consumption patterns accordingly.

The Organisation for Economic Co-operation and Development (OECD) predicts greater consumer awareness of energy usage can reduce domestic consumption by up to 20%. As Jessica Stromback, executive director of the Smart Energy Demand Coalition argues in Oracle Utilities’ Future of Energy report, once customer involvement is secured “these initiatives are delivering results year after year.”

A recent British Gas analysis of 6,000 smart meters found 46% of business electricity use occurs outside normal working hours. Using the data collected by smart meters, customers can tackle this problem, which can simply be caused by leaving lights, computers and vending machines on overnight, and thereby increase energy efficiency.

Renewable energy in the power network
Because the smart grid is capable of integrating renewable energy, the number of power sources being used within the grid will increase, helping to reduce primary energy consumption as there will be less demand for fossil fuels.

In fact, renewable energy consultancy, Ecofys, predicts if 100% of our energy demands are met by renewable sources by 2050, energy demand will be cut by 15% over the next four decades. Renewable energy not only delivers environmental benefits however as the same report found that this reduction in energy demand would deliver savings of nearly €4tn compared to a ‘business-as-usual’ scenario.

An increase in the use of renewable sources also means countries can be less dependent on fossil fuels, something which according to the European Commission cost the EU €350bn in 2008. Additionally, The European Renewable Energy Council predicts that the number of people employed in the renewable energy sector in Europe could increase from 500,000 today to over six million in 2050. Considering the environmental and business benefits delivered by renewable energy, utility companies and governments must ensure it is integrated into the power network.

The role of data in increasing energy efficiency
Data is a fundamental aspect of the smart grid and will play a crucial role in helping shape the power grid of the future and increasing energy efficiency. To enable the required energy transformation, the grid needs to be capable of converging data, energy and ICT, which will allow utility companies to increase operational efficiency and safeguard energy security.

The guiding principles of interoperability, openness, scalability, security and distributed intelligence can also ensure that the grid is information-rich and able to integrate renewable sources. Additionally, the smart grid provides the foundation for energy and business innovations for a more sustainable energy environment.

The fact European governments and utilities are making the installation of smart meters in households mandatory, or making plans to do so, shows just how important the initiative is to delivering greater energy efficiency. The UK government, for example, aims to fit a smart meter and smart energy display in every home by 2019.

Driving the smart grid rollout
In some countries smart metering is yet to become a significant political or social issue, with some regions lagging behind in their uptake of the infrastructure. The implementation of government legislation, in the form of ‘nudge’ policies and choice architectures, which encourage greater energy efficiency, can help accelerate the rollout of the smart grid in these regions. For example, governments can offer financial incentives to consumers aimed at increasing energy efficiency, such as vouchers for installing renewable energy generators such as solar panels within their home.

Additionally, governments should address consumer concerns relating to the technology to encourage its uptake and this can be achieved by increasing investment in better educating consumers about the benefits it can deliver.

Similarly, a greater understanding of the technology will ease consumer fears surrounding security in the smart grid. The protection of ICT platforms and integrity of all active smart grid components is a pre-requisite of the platform and will encourage consumer adoption of the technology.

The implementation of industry standards will also help ease consumer fears. This point is supported by David Weatherall of the UK’s Energy Saving Trust in The Future of Energy report who believes “if we get the education and awareness phase right I think people will be willing to let their information be used in a flexible and empowering way so that we can help them save energy.”

The smart grid’s ‘killer apps’
Innovative new applications and services, which rely on the smart grid, can also drive the smart grid rollout by creating consumer demand. One such service which is being touted as the killer app for the smart grid are electric vehicles (EVs). EVs have a significant role in helping reduce carbon levels and increase energy efficiency and will help governments meet carbon emission targets set by the European Commission’s Transport 2050 strategy, which calls for a cut in carbon emissions of 60% by 2050.

Therefore, utilities looking to implement e-mobility platforms to support EV uptake should ensure it is based on smart grid principles. A worthy example of this is Portugal’s MOBI-E platform, which saw the installation of 1,350 public charging stations across 25 municipalities. The e-mobility platform is able to provide detailed knowledge of current and forecasted energy loads, allowing consumers to charge their EVs in locations other than their homes and enabling the integration of renewable energy sources into the network, as well as identifying excess power.

Increase energy efficiency today for tomorrow
If utility companies and governments do not implement the technologies and processes needed to increase energy efficiency the impact will be felt for generations to come. The installation of a smart grid infrastructure will enable the integration of renewable and variable sources of energy, increase energy awareness and allow utility companies to better manage the power grid. The smart grid network will also support technologies and services which increase energy efficiency further, such as EVs.

We have already seen instances where the smart grid has benefited both the economy and the environment and it is imperative that utility companies and governments encourage its adoption, whether through nudge policies or increased investment. The smart grid rollout is set to revolutionise current energy systems and in doing so it will play a critical role in achieving the EU’s targets.