The role of the ‘Energy Cloud’ and of intelligent market design featured prominently in a session focusing on facilitating the transition to renewable energies at POWER-GEN Europe in Milan on Wednesday.

Ian Smyth, Managing Director, Energy at Navigant Research said the energy cloud would be an important component of what he believes is the start of the 4th industrial revolution.
Ian Smyth of Navigant
But the transition will not be without discomfort and to illustrate that Smyth said, “its 400 years since the birth of William Shakespeare and we are reminded that every great story has a good, a bad and an ugly. We are despite current difficulties on the cusp of a boom time in the energy sector.”

“Surviving through the 4th revolution will be ugly and hard to finance and hard for some to adapt – but there are amazing opportunities for utilities who can engineer the physical system and transform themselves into network orchestrators.”

Smyth believes the energy cloud, closely linked to cloud computing, is the game changer at the heart of the revolution, bringing an entirely new level of sophistication to the power generation scene.

The cloud is evolving as a result of four major megatrends, renewables and energy efficiency proliferation driven by carbon emissions regulations, declining costs of distributed energy resources, evolving energy consumer demands and the evolution of smart grid infrastructure/ digitilisation.

Navigant estimates that between 2014 and 2023, DG will displace the need for more than 320 GW of new large-scale power plants globally. Meanwhile customers are increasingly focused on engaging in both the purchase and sale of energy, and if appropriately incentivized, can provide other services such as balancing, voltage support, and voluntary load management that address broad industry goals of greater efficiency and resilience. Finally there is increased grid automation and demand response (DR) spending across the advanced energy economy, for example, reaching a combined $70bn in annual revenue globally in 2014,

“Outages across the heart of the grid lead to catastrophic blackouts, and grid operators go to great lengths to avoid such events. Downed power lines across the distribution grid, while equally disruptive for those without power, are an accepted reality with few tools deployed today to improve resilience. Customers in this outdated model have few options to insulate themselves from catastrophic events causing disruptions to service.”

“The grid of the future, which will provide the backbone of the energy cloud depicted in Figure 2.2, aims to integrate decentralised energy resources (DER) more fully into the distribution grid. This architecture will enable a two-way power flow such that distinctions between distribution and transmission grids will blur.”

The Navigant chief said that the acceleration in the sophistication and pervasiveness of remote monitoring and automation equipment, combined with robust data analytics, is allowing more granular and real-time control over generation and consumption at the edges of the grid. This mix of hardware and software enables greater precision with respect to matching localized supply and demand with higher levels of frequency.

“Perhaps more importantly, this functionality hardens the grid against external events and allows for greater coordination with human intervention. Offered via the energy cloud, these capabilities may be delivered as services by utilities and third-party vendors alike.”

Smyth predicted that the cloud facilitates emerging technologies and services to be patched into the existing system in real-time, thereby leaving assumptions related to traditional supply and demand forecasts obsolete.

“The emerging energy cloud will also need to remain flexible in order to integrate rapid innovation across many interrelated technology verticals. Utilities and grid operators will need to become more holistic in their planning to anticipate the complex interdependencies these solutions will create.

Describing renewable and fossil fuel distributed generation, energy storage, and technology configurations such as microgrids and virtual power plants (VPPs) as the workhorses within the energy cloud landscape, he said embedded hardware and software will form the glue that binds the energy cloud together and enable its operability.

Smyth’s presentation focused primarily on the potential of solar pv, energy storage, virtual power plants and building energy management systems.

“Representing just a small piece of the energy cloud landscape, these technologies, along with the services they enable, demonstrate that the scale of the investment opportunity in the energy cloud is substantial and the rate of change or evolution is occurring rapidly. Each is deployed at scale today. Viewed together, they represent nearly $1 trillion in potential cumulative investment over the next decade.”

There were, he said, many variables to consider in how the energy cloud will evolve, depending on geographies, consumer attitudes, penetration levels of DER and regulatory landscape.

“A holistic approach to planning in these markets will support the implementation of broader standards and interoperability that will favour accommodation of emerging technologies and allow for unique services and capabilities to be layered into the system.

While it remains to be seen whether this approach will be effective in leveraging the broad suite of capabilities offered by a fully functioning energy cloud, early efforts to address market changes across Europe, New York, California, and Hawaii will provide early use cases.”

Among the statistics presented to power professionals were that addition of DER is expected to reach 30 GW in the US this year, compared to central capacity addition reaching just 19.7GW. Meanwhile on a five year basis distributed generation is projected to grow three times faster than central generation with the former reaching 168 GW and the latter 57 GW.

“The end result of this transformation is a reimagining of how we generate, store, and consume energy in the next 20 years. More specifically, the energy cloud represents a transition from one-way power flow to a dynamic network of networks supporting two-way energy flows at the periphery of the grid,” Smyth said.

In a POWER-GEN Europe Q&A session after his presentation Smyth said he had noted unease among top utility executives as to the possibility of the much wealthier oil and gas industry firms taking advantage of the opportunity being presented and colonising the space.

“An executive I spoke to became enlivened about the competitive threat from oil and gas progression along the value chain-it is an existential threat to utility existence- that’s debated and felt keenly at board level of utilities and they feel it is a fight for survival.”