Why should you care about the digitalization of your electricity?
The Corona pandemic highlighted the lack of foresight we have about the future. Scientists had been warning us for years about the possibility of a global pandemic. But no one was really prepared for anything like we are going through right now. Digitalization of so many sectors has been accelerated across the globe to cope with some of the challenges. Things that were not imaginable a year ago are the new normal today. The downfall of cash payments in Germany in recent months is one of the big examples of this change. In the pre-pandemic era, the phrase ‘cash is king’ was applicable in the country as about 74% of all transactions in 2017 were performed using cash. With a lot of restaurants, cafes and kebab shops having no options for cashless payments, Germans were used to carry a higher amount of cash in their wallets compared to their neighbours. With the pandemic coming about, the cashless transactions have been on the rise. Many stores had to overnight set up the options to pay with cards and mobile phones in order to protect their customers and employees. In a survey performed in April, over 57% of the respondents said they are using more card payments than in the past.
Looking at this example and many others from our daily lives, it makes one question if there is a need to digitalize other sectors in order to prevent or reduce the impact on our lives in case of another global crisis.
One of the sector that is in great need to be digitalized is the electricity sector. As the sources of generation are slowly being changed from centralized fossil fuel-based power plants to decentralized energy resources (DERs) such as wind turbines and solar panels, the electricity sector has been seeing a lot of changes. Germany has been leading the way with 46% of the total electricity generation in 2019 came from renewable energy sources. But, the growing share of DERs also comes with its own set of problems.
Since a significant amount of DERs are weather dependent generators (wind turbines and solar panels), the peak generation of electricity does not always align with the consumption peak. These imbalances are larger in winter where the sunlight hours are minimal and winds are unreliable. Therefore, extensive electricity storage solutions would need to be added, or the renewable capacity would need to be overbuilt, or other fossil-based generators would need to be used to meet the peak electricity demand. Additionally, these generators stress the grid infrastructure that is required for the transportation of the electricity from the site of generation to consumption. With the rising share of renewables, the maintenance cost of the electricity grid is only going to increase.
As most countries are aiming to significantly increase the share of renewables in their electricity generation, these problems need to be addressed and other parts of the electricity ecosystem (transmission, distribution and retail) needs to evolve in order to manage the growing number of decentralized electricity generators.
‘Smart grid’ is a term often used to describe the electricity grid of the future and its many functions. There are a lot of technical solutions that were being researched under the smart grids banner for the last decade, but not a lot has changed for the end consumer. Other than installing solar panels on the rooftop slowly becoming an economical option, the interaction of the end customers with their electricity has not evolved. Every household needs to have a contract with an electricity provider who buys electricity on their behalf and charges them according to their yearly consumption. The only effort one might have to do is to send the analog meter (Ferraris meter) reading once a year. So this brings up the question, what role do you, the end consumer, have in this revolution and why should you really care about it?
There are a few good reasons for investing your time and energy in it.
Higher degrees of autonomy
The future electricity system relies on a hierarchal approach which promotes usage of electricity generated nearest to the location of consumption. With the help of smart meters, it is possible to communicate electricity consumption and generation in near real-time. Therefore, it opens up the world for an end customer in ways never imagined before. Concepts such as Local Energy Markets (LEMs), Local Flexibility Markets (LFMs), Smart charging of electric vehicles, real-time power labelling, Power-to-X solutions, etc become possible and offer the end customer much more freedom to make decisions for their electricity needs.
Pay what you actually value
Since most of these smart grid solutions require higher participation from the end customer, the incentives need to be strong for people to change their behaviour. One of the big incentives is the potential of saving on the electricity bill. With solutions such as LEMs and LFMs, the whole process becomes more streamlined in terms of ease of access, transparency and reliability. The end customer pays exactly how much the electricity is currently valued when they trade with their neighbours in LEMs and receive compensation for changing your electricity requirements to help balance the grid. Additionally, as electricity from solar panels become cheaper around the world, the support schemes such as subsidies for installation and compensation for feeding in excess generation in the grid would be slowly removed. Therefore, for end customers that have or are planning to install solar panels on their rooftops have lower monetary incentives than before. With a lot of the smart grid solutions, these small scale electricity producers can get a better price for their excess generation in an open market and hence increase their share of savings on the electricity bill.
Freedom to choose
Another major benefit that has been identified for the end customer is to have a higher degree of control of their electricity-related interactions. Increase investment in your local community: buying electricity from your neighbours rather than large coal power plants hundreds of kilometres away, support the energy transition and contribute to the reduction of greenhouse gas emission by buying green electricity, influence your electricity consumption based on different market and technical factors, choose which reward scheme you would like to use to get compensated for the services you offer and decide how much you want to pay for your electricity.
Why not have it all on your phone?
Since the majority of services can be availed by a click on your phone, it only makes sense to transfer your electricity-related interactions also on your phone. Having an app with an appeasing user-interface that tells you all about how much electricity you are consuming or producing in real-time, your current monetary balance, how much carbon emission you saved by buying green electricity, the highlights about your electricity patterns based on the historical data, if any of your electric devices are consuming too much, and maybe even alert you if there is a spike in your electricity consumption while you are on your vacation, like a burglar alarm.
As electric vehicles become an attractive option; heating via electricity (using heat pumps) becomes common for household and the network-connected devices per person keep on increasing, the stress on the electricity grid is only going to increase along with the household electricity bills. Therefore, there is an even bigger need for these smart solutions to be implemented. A lot of research and development work still needs to be done to realise many of the proposed solutions. But there is a consensus among the researchers and the industry, that none of these solutions would be possible unless the end customers are brought on board.
