What is the grid edge? (And does it really mean cheaper energy bills?)

New technology has been disrupting industries all over the world, and now we are on the cusp of a new dawn for the electricity industry.

A lot of power stations and electrical infrastructure were built many moons ago: they need modernizing if they are to keep pace with the world today. The “grid edge” is where this is all happening.

According to a new World Economic Forum report published today, The Future of Electricity: New Technologies Transforming the Grid Edge, innovation will boost the electricity industry by $2.4 trillion over the next 10 years. This transformation of electricity will benefit not only the industry, but the customer and the environment as well.

The term is a hold-all for the many types of connected technologies that have sprung up outside the electricity grid. There are the technical types, such as distributed storage and distributed generation (where smaller power sources and storage can be aggregated to provide power), and there are those in the home, such as smart meters, smart appliances and electric vehicles, which will become commonplace and will change how we interact with our energy supply.

And the trillions of dollars of value? According to the report, these will come from new jobs and a reduction in carbon emissions (thanks to the increasing efficiency of the overall system), optimized capital allocation and new services for customers.

Image: World Economic Forum

More widely, there are three trends driving change in the industry:

1. Electrification, which is where more things become powered by electricity, such as within trucks and domestic heating. Due to the increasing availability of renewable energy sources, electrification will reduce our reliance on fossil fuels. In many cases, electrification will also increase energy efficiency.

In OECD markets, the most promising electrification opportunities are in those segments that are among the largest polluters: transportation, commercial applications and residential heating and cooling.

For decades we have relied on massive power plants and grids to bring us our energy, but that landscape is about to change dramatically.

2. Decentralization takes the power supply and storage away from the main grid and into locations closer to where it’s needed. There are various advantages to this, such as reducing losses of energy during transmission and lowering carbon emissions. Blackouts will be reduced as the security of supply is increased, thanks to the larger number of available power sources. Decentralization also enables control of energy use during peak-demand and high-pricing periods.

3. Digitization is the increasing use of the internet within this space. For example, smart meters, which measure exactly how much energy is being used, will connect with a digitized grid. The grid, in turn, will be able to process and use all that information to maximize its efficiency.

In effect, what’s happening is an Uber-izing of the electricity industry. In the same way that the car-sharing company disrupted the transport industry, grid-edge technologies could do the same to electricity infrastructure. Like with Uber, the customers will take centre stage.

They will be able to produce their own electricity, store it and then consume it at a cheaper time or sell it back to the grid. They’ll even be able to conduct decentralized, peer-to-peer transactions, and could become a source of income generation. Meanwhile, demand flexibility creates value for customers and the grid by shrinking customer bills (by as much as 40%), reducing peak demand and shifting consumption to lower-price, off-peak hours.

More choice, greater efficiency

Grid-edge technologies are at the tipping point of the adoption curve, and both industry and regulators need to prepare for digitally connected, distributed resources. California, New York, South Korea and the United Kingdom are already leading these changes, says the report. This transformation is inevitable and status quo is not an option.

“Both the public and private sectors will need to contribute, to successfully accelerate adoption of grid-edge technologies, as neither can do it alone,” concludes the report.

“Grid-edge technologies offer the potential for an exciting transformation of the electricity industry, one that creates more choice for customers, greater efficiency, full and more efficient decarbonization, and better economics for stakeholders across the value chain. By following the recommendations in this report, policy-makers, regulators and private enterprises can work together to accelerate the adoption of these technologies and the positive changes they offer to electricity markets worldwide.”

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