Grid Gold Rush: McKinsey’s $1T projection means now is the time for the agile distribution grid

by Vince Martinelli

McKinsey Global Institute’s latest report projects customer led disruption will liberate on the order of $1 trillion in annual savings globally in 2035 by electrifying transportation, improving efficiency and increasing renewables as a fraction of the world’s energy mix. That really shouldn’t come as a surprise since consumers worldwide are driving change in how electric utilities are regulated, what services they will offer and how they will be compensated.

Customers want cleaner energy with even better reliability, flexibility and convenience. They produce energy and participate in markets. Some allow their electric utility to manage home appliances as an energy resource. Customers want to ride in efficient electric vehicles, regardless of whether the driver is human or virtual. They will insist on charging options that eliminate range anxiety. Customers want ubiquitous connectivity and costs of basic services to remain low. These unprecedented demands on the electric distribution system are enormous and happening outside the carefully scripted utility forecasting and planning cycle. Given the scale of the opportunity this represents, it is no accident that a “grid gold rush” is happening right now.

In the US, the signs of this race can be seen in the grid modernization activities taking place at many utilities. These programs have nearly doubled the annual capital investment by investor owned utilities (IOUs) in recent years, surpassing $100 billion in aggregate, with a growing share, now more than 25%, targeting modernization at the distribution grid level.

Our view is that capacity management and service quality just outside the core of the distribution grid is being overlooked and it is a strategic need for the modernized system.

In particular, the distribution transformer, currently a passive element in the grid where voltage is stepped down for end customer use, can either become a choke point, stalling the growth of service offerings to satisfy consumer demands, or an enabling point. Our mission is to deliver on the latter vision.

At Gridco Systems, we create infrastructure systems that make the existing electric distribution grid better; better at supporting distributed energy resources; better at increasing energy efficiency and reducing peak load; better for service quality and reliability; better for consumer choice. Much like a Cisco of the Grid our offerings are transformational, taking a system designed for one purpose — one way power flow to a growing number of rate payer endpoints — into one that becomes a platform for entirely new service offerings and business models.

Gridco Systems introduced the first generation of secondary grid automation devices — autonomous, plug-and-play intelligent utility appliances that enforce reliable service quality independent of grid topology, legacy systems or operating state, and provide direct capacity management at the service edge of the grid.

How big is this nascent market? Let’s consider where this class of device is applied on the grid — at the low voltage side of the service transformer. As you read this, you are likely within a few hundred feet of the transformer that steps voltage down from thousands of volts to the 240 V / 120 V service delivered to residential customers. There are more than 40 million such transformers — on poles, on concrete pads or in vaults underground — in the US alone. Deployments of our first generation systems, what we call in-line power regulators and static var compensators, start by prioritizing those neighborhood level locations where the needs are already acute.

Until now, these transformers, unlike their much larger counterparts at the substation, do not have any form of automation. With one-way power flow, it was okay for the service transformer to be dumb as a rock. Similarly, brute force methods based on passive infrastructure, which might support new service capabilities by over-dimensioning grid capacity using a rip-and-replace approach, simply upgrading transformers and conductors throughout the system, are both excessively costly and disruptive to customers and their communities. This approach also stresses the operating capability of the utilities where line crews are a limited resource. But changing times necessitate revisiting this architectural choice.

Secondary automation does not preclude any technology approaches being proposed for grid modernization, but it makes nearly all of them better. It can act autonomously or receive policy updates from a centralized system. It can share networks with advanced metering systems, pushing information to the same data warehouses. It can verify power flows in support of market mechanisms and is able to play a role in fairly managing behind-the-meter resources.

This architectural flexibility combined with the multi-function nature of our product suite offers new agility that is becoming increasingly important. Among the interesting outcomes of placing automation in a grid appliance at the distribution transformer is that it can resolve scattered, point issues, participate in end-to-end circuit management processes and also lends itself to creating a tier of it’s own — joining generation, transmission, and distribution of medium voltage as a new service layer where power is transacted with many connected participants.

There is a giant opportunity afoot, with plenty of buzz as players large and small vie for position. Incumbent suppliers of grid equipment, technology start-ups with breakthroughs or novel software applications and players who leverage customer assets to participate in new markets, all contribute to the din. There will certainly be some big winners in this race, and many for whom it doesn’t pan out.

Secondary automation systems may not be flashy and aren’t grabbing headlines. But if you look more closely, you’ll agree our prospects are bright.

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