2017 has been another fast-moving year in the world of energy. There were “big” batteries, records in low-cost renewable electricity and a slew of announcements to phase out internal combustion vehicles and replace them by electric ones – to name just three disruptive challenges to the industry status quo.
All these are particularly relevant to the power sector, which is my particular focus. Changes here have been happening quickly, on timescales more akin to the “tech” sector and unfamiliar to the once slow-paced, long-term planners of traditional energy players.
So what about 2018?
I’m not here to make specific, short-term predictions or forecasts – you can find plenty of those elsewhere! Instead I want to mention a few key topics which I believe are fundamental to transitioning electricity markets. They will attract growing activity, not just over the next twelve months, but well beyond. That’s exactly why I’ll be following them all closely in 2018 – because they are crucial, long-term issues.
On the one hand they might seem diverse, but on the other they are – as I hope you’ll see – all closely interconnected.
Grid readiness for mass-market EVs
I’m a car enthusiast, so I’m very interested in electric vehicles as a product.
However a far more interesting set of challenges (and opportunities) lie not in making the vehicles, but in how millions of these will integrate with and impact on the grid. How much extra generation will be required? More importantly, can electricity be delivered to them where and when required? What will a power system able to do this look like?
Even cursory analysis of these questions arrives at two unarguable conclusions. Firstly, there cannot be mass market EV adoption without “smart charging”. Secondly, there cannot be ubiquitous charging (particularly fast-charging) without careful consideration of changes and constraints at the edge of the grid network (the distribution network).
So I’ll be closely following both technical and business model innovations in charging infrastructure, charge management, distribution networks and vehicle-to-grid (V2G) services; plus the vital policy and pricing decisions that need to be made to support and implement them.
Further ahead? It will become abundantly clear that we can’t separate these “grid” issues from those around social and behavioural trends in mobility: car sharing, acceptance of vehicle autonomy, changing work patterns, “charging psychology” and more. All will have profound impacts on patterns of demand, and hence on the best solutions in meeting them. As past technologists have discovered, human behaviour tends to be the least predictable element of any new market, and the hardest to model!
Longer duration storage
The story of storage in 2017 has been the story of Li-ion batteries. Not only have they largely quashed hydrogen cars (at least for now), they have dominated talk in the stationary storage sector too.
However the markets for storage vary widely, both in the range of possible applications and in the local competitive environments. Is Li-ion really the best answer to everystorage question? 2018 could be the year when other storage solutions either start to find their feet – or risk getting swept away without trace.
A key trend that could open up new opportunities is that storage will increasingly be asked to deliver over longer timescales. Short duration “power applications” like frequency response have proven to be attractive, but such markets quickly face saturation.
Where storage is used in bulk “energy applications” – for example to displace peaking power plants, prevent grid bottlenecks, support microgrids or deliver “dispatchable” renewable power (see later) – longer duration and deeper discharge patterns will need to be supported. In one example here in the UK, National Grid’s de-rating of short-duration storage looking to enter the capacity market auction early next year points to the direction of travel.
It’s possible project developers will simply stack up more shipping containers filled with Li-ion cells. Nevertheless, I’ll be monitoring key announcements in other solutions out there: for example flow batteries, thermal storage and innovations in new pumped-hydro siting and construction. Can they compete, through which differentiating features or economic benefits, and in which segments of the market?
Further ahead? Power-to-fuel technologies (hydrogen, ammonia and more) are a long-term play, unlikely to compete directly with the kind of storage needs described above. Nevertheless, it’s my opinion that they are well worth keeping an eye on too, as part of the long-term “flexible power system” landscape; perhaps ultimately providing energy shifting across very long (even seasonal?) timescales, or a sink for excess renewable electricity.
Controlling demand, not just supply
Flexibility in past power systems was designed around controllable supply, adjusted to meet variable demand. In current and future power systems, key generation sources include solar and wind: variable supply. While solutions like storage will play a big role in allowing these supplies to match demand, it’s becoming clear to system operators and policymakers alike that “controllable demand” provides another solution. Encourage electricity consumption when supply is plentiful. Discourage it when supply is scarce.
Even if electricity consumers receive financial incentives to adjust demand, this can be an economic option. After all, aside from smart metering, controls and clever software, “demand side response” (DSR) doesn’t require expensive new infrastructure to be built. It may often prove cheaper to pay people to adjust their patterns of demand than to invest in alternatives such as new storage or generating capacity (particularly little-used “peaker” plants); or to pay generators for energy that must be curtailed and so is never supplied.
Some studies suggest the potential for DSR is very large (pdf). I agree that we’re just scraping the surface of this market. So I’ll be closely following the players and the evolving policies and market operational models driving its adoption. I’ll be paying particularly close attention to the natural linkage between DSR and behind-the-meter storage: a battery acts as a generator when discharging, but as a source of demand when charging.
As with storage, I expect to see continued growth of DSR across a broader range of timescales and applications during 2018: from quick frequency response to longer duration peak shifting and curtailment avoidance (e.g. demand turn-up when there’s “too much” midday sun).
I also expect to see ongoing diversity of DSR markets and business model innovation, in particular beyond large energy consumers and into the domestic sector (enabled via aggregators; a role which I believe will be hugely important in the power business). As with the future of EVs, those who succeed will be those who best understand, navigate and can motivate changing patterns of consumer behaviour.
Further ahead? Bear in mind that future large fleets of EVs will become important sources of grid-connected demand too, meaning that DSR and smart charging will become inextricably linked. Cars will be more than just a means of getting around; they’ll be an important component in managing the future grid too.
Policy in a “post subsidy” renewable power world
For good reason, there has been plenty of talk of “base cost” and “subsidy free” renewable power during 2017.
However it’s also important to recognise that there remain a variety of mechanisms through which policymakers help the business cases for renewable power projects. They vary widely from market to market, but include everything from guaranteed long-term, fixed-price PPAs to priority grid access and dispatch, curtailment protection, favourable tax treatment, “shovel ready” land access, clean power mandates, carbon prices, loan guarantees and more. Without them, we wouldn’t have seen the rates of market growth and cost reduction that we have.
It will be vital to follow how policymakers react to market conditions where, at least from the power plant gate, renewable electricity is, or soon will be, cheaper than fossil-generated electricity. Should the former start to “stand on its own feet”? Or – since policy support has helped drive wholesale energy prices down – is it justified in remaining? The probable answer lies somewhere in between.
In particular I’ll be looking closely for moves where policymakers and electricity market operators start to push more “system costs” back onto variable renewable power generators and/or start to explicitly favour renewable power projects which are more “system friendly” (i.e. able to dispatch more flexibly and provide more grid support services). We’re already starting to see storage becoming a value-add feature, both at a project level and a product level. Policy and market operation adjustments to encourage more of this, plus technologies such as synthetic inertia, are likely.
In short, system flexibility will cease to be something that happens around renewable power, it’ll be something that it must actively contribute to. More than ever, those involved in project development and investment will need to understand where they fit into the local electricity mix and how they impact the system a whole.
Further ahead? While eye-catching low prices in the renewable power sector this year have been focused on big, utility-scale projects, don’t forget distributed power generation (specifically solar PV). We’re already seeing innovative business models which integrate distributed generation, storage and aggregation, turning consumers into active “prosumers”. As PV and battery costs continue downwards, expect business models like these to grow and diversify – and to see grid-connected EVs and DSR mechanisms be integrated within them too.
Which trends will you be watching in 2018?
The above isn’t an exhaustive list, but gives some idea of where I’ll be focusing my gaze during 2018. It’s on key, durable themes which are all interconnected by a common thread: the need for growing flexibility to manage disrupted and reshaped power systems, ones which can accommodate greater proportions of renewable power and the electrification of transport.
I certainly look forward to discussing them in depth with colleagues, clients and customers over the course of the next twelve months. And I’d love to hear what’ll be occupying your thoughts over the coming year too.
In the meantime, Happy Holidays!
[Article first published on LinkedIN]