The volume of solar panels and electric cars connected to the grid is still manageable for now. But massive new load expected from electric vehicles in the coming years will require stepping up network digitalisation, warns Serge Colle.
Serge Colle is global power & utilities advisory leader at EY, a consulting firm. He spoke to EURACTIV’s Frédéric Simon on the sidelines of an event organised by industry association Eurelectric on 24 January, From Pipes to Platforms New DSO Business Models. Colle is the lead author of an EY report on the digitalisation of the electricity sector that was presented at the event.
European electricity utilities and grid operators – how far have they come in the digital transformation?
It’s a mixed picture. If you look at the volumes of solar panels and electric cars put on the network, you can say that utilities and DSOs are coping with this. So in a sense, you could say they are doing well.
But if you look at digitalisation, Europe is lagging behind countries like the US where over 50% of consumers already have a smart meter for example. But this is not necessarily the DSO’s choice – smart meter deployment is often driven by a regulatory agenda.
The question of smart meters keeps coming back in Europe, as an obstacle to the digitalisation of electricity. It’s taking a lot of time to deploy them, so what’s the way forward?
First of all, consumers are facing a digitalisation of their environment – in their homes, or in their cars. So the general acceptance of being connected will increase over time.
Nevertheless, people’s concerns about data privacy are real. The data captured by your smart meter can tell when you’re home, how many cars you have, how many air conditioners, and so forth. So there is a concern that will not necessarily go away. And it’s up to the regulators and utilities to address them.
That being said, we have to digitalise the network to make sure the energy transition works. Digitalisation is necessary in order to understand what’s going on in the network. This means placing sensors on the network in order to see where investments are needed to reinforce the grid with copper cables. But that will be very expensive.
How advanced are European grid operators in this digitalisation effort? They don’t need citizen’s permission to digitalise the parts of the electricity grid which is outside people’s premises.
Not advanced in general. The load put on the grid by private consumers, through electric vehicles, for example, is still fairly manageable at the moment. In places like Southern Germany, the DSOs are able to manage the amount of renewables put on the grid just by reinforcing the network where needed, putting more copper into the ground.
For me, the black swan in this discussion is electric vehicles. Whilst they represent an enormous opportunity for decarbonisation, they will also bring massive amounts of new load on the network. If EVs reach 10-20% of new car sales by 2024, in line with current projections, that means up to 5 million electric cars per year. With a 40kw battery, that’s 240GW. So the volume all of a sudden will become massive, immediately.
So when I’m talking about sensors, it’s two things: the first is measuring, which can happen outside customers’ premises, and the second is controlling consumption. And if you want to start doing that, then you need to sensorise connection points with consumers – be it charging stations or homes, using smart meters.
This is where we need to see who is going to be responsible for what. There might be better acceptance from the public if it’s car manufacturers dealing with the installation of smart meters. And in return, consumers get the convenience of having a charged car whenever they need it.
So car manufacturers could be the ones taking care of installing smart meters in private homes?
Yes, we already see Nissan and Tesla moving forward on this. VW is also moving in the same direction.
The car industry is slowly moving in the direction of new business models, whereby they are offering solar PV installations in conjunction with the battery in the car. And all of that can be wrapped up in one contract, which includes the energy required for your home.
Business consumers – private companies – are usually the trailblazers when it comes to adopting new technologies. Is this the case with electric vehicles and the digitalisation of electricity?
Yes, this is growing. Fleets are being electrified and all sorts of incentives are being offered for electric vehicles. We could certainly do more but it’s already starting.
Still, we heard today that business consumers in Portugal did not show much interest in adopting dynamic price contracts for electricity. So how can private consumers be expected to take such a leap forward when business consumers don’t do it?
You’re putting the finger on one of the most sensitive questions in the energy transition. As self-consumption increases, that creates kilowatt hour defection – as in kilowatt hours not moving over the network anymore.
Today, energy companies bill customers using consumption-based tarification. But as soon as you tweak that a little bit, there are winners and losers. And that is a concern for many companies: if you take part in a new tarification system, the consequences are potentially massive. And that creates a lot of uncertainty for companies as well as consumers, who don’t want to end up on the losing side of those changes.
Electricity companies and grid operators have expressed anxiety about the huge amounts of data they will need to process in the future. They are asking themselves whether they should acquire the skills to do this job or whether they should externalise it. How do you see things developing? Do you expect DSOs to develop those competences internally, or do you think companies like Google or IBM will do it for them?
Both. I believe there will be an absolute requirement. If DSOs want to fulfil their balancing duties, keeping the electricity system in balance to ensure the lights don’t go out, they will need big data to understand what’s happening on the network. And based on that, send signals to customers in order to trigger flexibility options. So one way or the other, utilities need to acquire those capabilities.
At the same time, we are seeing convergence of industries. If you look at the platforms that are being created – connected homes, connected cars, connected PV installations, and energy aggregators – you can see technology companies moving in strongly.
For example, around connected homes, there is Google with its recent acquisition of Nest. They are slowly but steadily extending their footprint when it comes to sensors – cameras, charging systems, etc. You also see insurance companies and banks converging around the home trying to understand your behaviour. Utilities are also getting in this space, with energy management services and home monitoring services. Centrica, for example, launched their Hive Link system in December, which ensures the elderly can stay longer at home.
So everybody is converging around those platforms – both new and traditional players.