Grid operators boss: ‘Time for energy utilities to re-invent their model’

"The speed of the renewable energy revolution and EV deployment is absolutely massive. I think we need to accept that speed," says Laurent Schmitt. [Carlos Sánchez Pimienta / Flickr]

This article is part of our special report Electricity networks: Connecting the dots.

Digital technologies like blockchain and artificial intelligence bring “total revolution” in the electricity industry, allowing energy communities to proliferate, says Laurent Schmitt. Utilities should not resist the change but embrace it to become “community enablers”, he told EURACTIV in an interview.

Laurent Schmitt is secretary general of the European Network of Transmission System Operators (ENTSO-E). He spoke to EURACTIV’s energy and environment editor, Frédéric Simon, ahead of ENTSO-E’s annual conference, on 5-6 December 2017.

Parts of this interview related to cybersecurity were edited out, at the request of the interviewee.

INTERVIEW HIGHLIGHTS:

  • Grid capacity needed for blockchain energy transactions
  • More grids required to take rising share of renewables, cut overcapacity
  • TSOs and DSOs “need to be integrated in some decision-making processes”
  • Connected appliances increase the “surface” of cyber attacks, risk to wider power system
  • Speed of renewable energy revolution and EVs is “absolutely massive”
  • Time for energy utilities to re-invent their model around energy communities

***

The buzzword these days when talking about electricity grids is digitalisation. How advanced are European countries in the process of digitalisation? Are we just at the beginning?

First, I agree with you: digitalisation is too much of a buzzword. What is important is to put concrete meaning behind that name. At ENTSO-E, we understand digitalisation as something that helps optimise transmission of electricity.

There are already large amounts of data collected in our control centres to optimise systems, markets and so on. In that context, digitalisation simply helps do better calculations. And artificial intelligence is one example where we are pretty confident that it will improve the quality of forecast for renewable loads, for example.  And a lot of trials are being done in that direction.

Another example is blockchain, which can help Transmission System Operators (TSOs), Distribution System Operators (DSOs), prosumers and energy communities to work in an integrated manner when it comes to data-sharing – down to the consumer.

The blockchain is a technology which maybe will allow peer-to-peer transactions of blocks of energy between prosumers. And for that to happen, you need to make sure that the system is able to reserve the required grid capacity to enable these small transactions to take place.

That means capacity at the distribution and the transmission levels. And that will allow much more micro-transactions at the edge of the system, which need to be taken into account by the wider system.

So these are two examples of digital technology use cases that we are very much looking forward to.

These are very much future-oriented applications. Can you tell us what is happening right now on digitalisation?

Right now, we are developing new network codes, which require very fine capacity calculation to better inform the market and release as much capacity as possible onto the markets. And that requires building a very strong grid model, which is our short term focus. We’re building a data hub for sharing information to build a common grid model which is pan-European.

When will this common grid model be completed?

We have a very strict commitment in the network codes deployment.  We have a clear roadmap with milestones to develop a Common Grid Model and Operational Planning Data environment (CGM-OPDE), which is a backbone infrastructure. A first prototype release of this platform is planned for January 2018. And then we will develop applications around this over the next 2-3 years.

The roadmap is committed and clear. Now, as with all IT projects there can be delays related to the complexity of such a project – for example the alignment together of all the TSOs, building the right data agreement between them, building the right cybersecurity environment around it, and so on.

Assuming all goes according to plan and the platform is deployed, when will consumers feel a difference?

First, it will be the market players who will feel a difference. They will have much more information in terms of capacity calculation, through the regional security coordinators because this cannot be looked purely from a country point of view.

And that means more and better allocated capacity. Today, grids tend to be more congested. People want more and more capacity for their trades and we have less and less to offer. Because at the moment, renewables don’t come in the right place in our grids.

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So less congestion means easier flows and more possibilities to take up renewable energies?

It means more flows of green electricity, and an increased need to rebalance the system maybe with other types of generation.

Does it also mean some generators can be taken offline?

That can be a consequence. Some of this backup infrastructure is being used as flow re-dispatch. So a power plant that was purely used for re-dispatch maybe is going to be de-commissioned.

Do you know how many of them? Some EU member states are eager to build more of those ‘capacity mechanisms’ as back-up but maybe they aren’t needed after all?

This is the question of the regional adequacy assessment. We know we need to do more on that, so we can put in place a capacity market or strategic reserve. But we shouldn’t over-estimate the need for capacity.

The situation in Europe is clear, there is overcapacity in generation. And it probably won’t be the case anymore in the future if we phase-out the current coal capacity and the rest of nuclear in Germany. The overcapacity at some stage is going to disappear.

** BLANK SPOT: THE TSO/DSO JUNCTION **

Going back to digitalisation, where are the main blank spots – or the missing links – in Europe? Is it inside EU countries at regional level or between countries?

The complex part obviously in the next few years will be the interface between the Transmission System Operators (TSOs) and the Distribution System Operators (DSOs). That’s why our annual conference put the focus on ‘connecting the dots’.

TSOs and DSOs cannot be designed, controlled and operated separately – they need to be integrated in some of the decision-making processes.

And so the question is what kind of information should be exchanged, and whether there are pieces of the IT infrastructure that needs to be built together. There is currently a lot of debate on how can the flexibility be shared between TSOs and DSOs to address congestion issues in the future – the DSO being more related to electric vehicles and TSOs more related to flows of renewables.

And so the question is to define the best architecture in order to orchestrate this interaction between the two. That is one of the difficulties with digitalisation: defining what kind of information from smart meters TSOs need to see, and vice versa: what kind of information DSOs need to get from the TSO.

This is all about data exchanges then?

Yes: data exchanges and platforms, APIs, etc. Should cooperation go as far as planning joint investments for instance? This is one of the questions we are asking ourselves.

Can a completely integrated TSO/DSO infrastructure be envisaged?

That would be complex from a governance point of view. TSOs are national unbundled bodies while DSOs are sometimes very local and very regional, and in a lot of cases owned by suppliers/generators. But that does not prevent having a joint IT tool which can be operated together. And we see some of them starting to do that, for example TenneT in the Netherlands in the form of joint investment.

In terms of future digital investment, this is where there is currently the most uncertainty. And we want to anticipate it – we’ve had a TSO/DSO platform for some time and we want to continue that effort.

It’s still at the beginning?

We have done a lot already. It was more at high level last year and now we are going to drill down more into the detail of what it means in terms of active coordination of network management, data exchanges, joint projects, etc.

That must mean a lot of standardisation effort with DSOs, who are quite numerous…

Yes, there are about 4,000of them. The good news is that the backend systems are not as un-harmonised as you would think. There are several vendors in the industry who are using quite similar standards. Under the International Electrotechnical Commission (ICE), there are a lot of efforts that have been made around building a common information model, with one chapter on TSOs and another on DSOs.

So once we are out of the marketing buzz around digital and we get down to the detail, I’m pretty sure convergence will be there.

Do you have an idea of when this is expected happen?

The DSO/TSO interface will be more on a trial environment in the next three years, while we develop this Common Grid Model. And around 2021-22, the DSO EU association will probably be well established. And then we will have the right framework to start going further in implementing the digitalisation of the TSO/DSO interfaces. So we will do things in the next three years for sure but it will be on a trial basis.

This sounds like a relatively short timeframe…

You know, we have no choice. The speed of the renewable energy revolution and EV deployment is absolutely massive, just look at the projections from the International Energy Agency. I think we need to accept that speed. And if you compare current projections with the decarbonisation goals of the Paris Agreement, there is still a gap.

So the speed of the transformation, even though it is already high, can still accelerate further if countries manage to align themselves on climate action.

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What could possibly slow down the electrification of the economy? Renewable prices are going down, EVs are taking off more slowly. You say TSOs are ready for it… So what’s blocking?

Clearly, it’s the regulatory environment – the complexity of aligning all interested parties around the topic. And that’s why we are so attached to our network codes: it took three years to write these documents and if we had to restart from scratch, that would be a lot of regulatory alignment effort.

And I think that is what’s going to slow down efforts: defining the roles of each participant in the electricity market, how we organise it.

** CYBERSECURITY **

With digitalisation also come cybersecurity concerns. Is there a clear and present danger already now?

Cybersecurity is a topic on which by default I don’t speak much about, for obvious reasons. So yes, we see concrete examples and are we monitoring this very closely. And we see things can happen.

Can happen or have happened?

So far, I’m touching wood, there has been no major incident. We have taken cybersecurity much more seriously into consideration as part of our Common Grid Model platform. We have tightened our cybersecurity strategy, we are preparing now a new document which is about to be released – again confidential for obvious reasons.

What I can say is that security is very much a national constraint, relying on a national political environment. But the grid is interconnected in Europe. So the question is how to bring a national perception of security into a topic which requires an interconnected system like in Europe. And that is what we are currently working on.

I will never say that we are perfect because anything can happen. But we are prepared to monitor properly what happens and to take the right actions if something happens.

It’s all about data again…

This is the issue, yes. You know, on the one hand TSOs are being asked to release more and more data about grid capacity and availability. But on the other head, the more we release data about the system, the more vulnerable and exposed we become to cyber-attacks.

So can data be contained in a way that takes care of cybersecurity concerns?

There are ways of containing data. Again, I will never say that we are 100% sure. But fundamentally, grid operators are risk managers, they are used to deal with these kinds of incidents so I think we can manage that risk.

The issue is to get the population to understand that this risk is very real and to adapt our process to those risks. And that will have an impact on what we can do with our data, for sure.

Can walls be erected, for example between the European Union and Russia?

You raise an interesting question on which I don’t want to comment further. But yes, we do often see attacks between Russia and some areas of Europe. And so there are risks.

Should citizens be worried about their smart meters or connected fridges becoming a kind of Trojan Horse for hackers or cyber-attacks?

There are various elements to that question. The first is what kind of data protection consumers need to have. And I think there is a consensus now that consumers own this data. So whoever operates this data for them has an obligation to be sufficiently secured in terms of privacy protection.

The other element, which is also true, is that these connected devices increase what I would call the ‘the surface of attack’ of the wider electricity system itself. The potentially exposed assets used to be purely owned by the utility. Now, because of demand response, it goes as far as assets which are in the garage of people.

So of course it’s easier to hack those assets than have people with guns trying to penetrate sub-stations owned by utilities. It increases the risk and that has to be taken into account.

That “surface” as you call it is not just going to increase – with connected devices it’s going to rise exponentially…

Let’s not over dramatise this. Connected home appliances like a solar panel or a smart meter are much smaller assets than a nuclear power plant for instance. So the impact on the wider system won’t be the same. But connected appliances do increase the surface of attack, that’s a fact.

The consumer himself is not directly exposed. The people who are exposed are those who are connected to the aggregator or the utility, which can be disturbed in their operation.

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** ENERGY COMMUNITIES **

Another buzzword linked to digital is microgrids. Do you expect those to sprout like mushrooms in the coming years? And could that become an issue at some point?

When I was at GE, I always said microgrids were at the centre of smart grid development. And I’m still very convinced about that. But my vision of microgrids is different – I see it as a small system that is connected to the main system.

And that fits very well with the definition of energy communities in the European Commission’s Clean Energy package. What we are saying is that those communities should be connected to the main system – the DSO or the TSO depending on their size.

And here, there are various questions to be asked: how do they connect with the AIM, do they run on an aggregator, are they themselves an aggregator, are they vertically integrated in the microgrid environment, etc.

So there is a lot of R&D still to be done. But as an entity, I think microgrids are going to develop simply because demand-response and solar PV tend to happen through communities: you see your neighbour with a solar PV on their rooftop or an electric vehicle and you want one too. This is how communities are built – it’s the prosumer adoption model.

As TSOs, we should not oppose this but think about how to integrate these people. And if they own a few wires, for sure they need to be properly regulated against the DSO or the DSO. And they must also pay their share for grid access because they receive services from their connection to the wider electricity system.

So the question is not to resist those communities but put a framework in place to integrate them: the connection, the grid tariff, etc.

Do you see a risk there in terms of keeping the stability of the wider electricity system?

Yes. But they can also help in that regard: with their own storage, their own EVs. So we see this as a potential win-win situation.

As TSOs, we are selling these people insurance. 80% of the time, communities will be able to live on their own, without input from the outside. For the remaining 20%, they will need insurance, and this is where we have to agree on a price and a number of conditions. These are new business models that need to be looked at.

Should communities be encouraged, are they the future of energy? This may sound a bit utopian at times…

Technology is sold through adoption curves, with early adopters and late adopters. The early adopters speak to their neighbours – real or virtual. Maybe one area of Brussels will want to claim that they are clean and green, become energy self-dependent and save the planet. And it’s positive – people want to be part of something bigger, they want to be renewable, efficient.

I think this is how the prosumer movement is going to evolve in the future – it’s clear form what I’ve seen over the past ten years working on microgrid demonstration projects, for example Nice Grid. The most difficult in these projects was to stop them – people wanted to continue, they thought it was cool.

That community element should not be overlooked – it’s coming. I am myself an electric car driver, and I love sharing my experience with my EV community.

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Energy communities, peer-to-peer exchanges: could all of that put the energy utility model into question?

Yes, it could.

Should power utilities be worried?

It’s certainly time for energy utilities to re-invent their model in this new environment. At the end of the day, managing energy is a complex skill – the entry barrier is quite high. So it’s up to them to update their business model to manage energy in a different way. Instead of blocking communities, they could become community enablers for instance.

For us, as grid operators, we don’t see communities as a major threat. If tomorrow we see communities starting to mushroom – that will bring further flexibility which is good for the system.

What fans of renewables sometimes don’t understand is that wind or sun power might come from far-away places, north or south, because it might be cheaper there.  So the value proposition is to offer them Over the Top (OTT) services where green energy is part of the mix of services available through the grid. And then comes the blockchain to enable peer-to-peer exchanges.

So I think this is going to really revolutionise the power industry in the next five years – total revolution. And that’s really fun.