Network modernisation: a requirement needed from utility companies

By John Coffey, Schneider Electric

The electricity industry is set for significant change. With the proliferation of distributed energy resources, widespread deployment of PV panels, customers making sustainable energy choices, a decline in manufacturing, and wide-reaching changes to power regulation, the consumption of electricity in Australia
is decreasing.

An efficient electricity grid is imperative for the success of Australia’s economy but the industry is facing complex and unprecedented challenges. These challenges demonstrate the need for the energy industry to adapt and new market structures and business models to emerge.


• Consumers are cutting back:
Looking at the ABS Energy Account data, we can see the average annual household expenditure on electricity grew strongly until 2009 to 2010. However, since then it has barely increased. Consumers are responding to the increase in electricity prices, by looking for more sensible ways to manage their energy consumption and to reduce household expenditure.

Australians have been driving the solar panel revolution, with more than 1 million rooftop solar PV systems installed in Australia in 2013, up from 8000 in 2007. There is strong motivation in Australia for renewable energy, but for the energy industry, this is causing significant issues.

• There is an oversupply of energy: In 2005, manufacturing industry accounted for more than 25 per cent of Australia’s energy usage. But with the decline in manufacturing and heavy industry made evident by the impending exodus of Toyota, Ford and General Motors (Holden) and the increase in the use of renewable energy following customer response to price increases, there has been an unprecedented fall in both maximum demand and the consumption of energy. The decline in consumption has adversely affected the turnover for both retailers and generators and led to claims of inefficiency in the distribution networks. Excess capacity and reduced network utilisation will in turn reduce electricity distribution company capital expenditure and revenue, as the Australian Energy Regulator (AER) has tightened the regulatory regime.

• Shift towards other energy solutions: The distribution companies are now being challenged to deliver more efficient network solutions and to starve off any potential significant migration from the grid by consumers. We have seen significant interest by property developers to use alternative technologies such as micro-grid to lower the total capital cost of development. These microgrids can be grid connected via a connection not capable of supplying the entire demand or completely isolated from the main grid.

If grid connected, these developments could also export excess capacity from renewable sources back to the grid to further reduce total energy costs. Microgrid technology could also be used by distribution companies to lower the total cost of network particularly when combined with Demand Response Technologies to avoid or delay network reinforcement at network “pinch points”.

As the cost of solar panels and battery storage technology reduces, an increasing number of consumers are complimenting solar installations with battery storage. Some are predicting that technology developments will allow even individual consumers to become self sufficient in a cost effective manner within twenty years or less. Defections from the grid increase the charges other consumers would have to pay under the current business model for the distribution companies.

• Changes to regulation:
With all of these challenges and changes some regulatory bodies have changed or are changing the regulatory regimes under which the distribution companies operate. Previously some jurisdictions prescribed security standards for the distribution and transmission companies which embedded substantial redundancy within the grid. This is commonly referred to as N-1 or N-2 security standards. N-1 security required networks supplying large loads to be fully redundant such that if a major plant item failed or was out of service for maintenance, the system could still supply the entire maximum demand to that part of the network. N-2, used typically in the CBD, required that if one item was out of service for maintenance and a second item failed that the system could still supply the entire maximum demand to that part of the network.

These prescribed standards are now being revoked and the utilities are being given freedom to determine other more cost effective means of delivering their reliability outcomes.

What can the electricity sector do to respond?

Utility companies must deal with the challenges they are confronted with and make the most of modern technologies that will increase efficiency and minimise the total costs of network provision. At Schneider Electric, we suggest the provision of more effective management systems, the installation of equipment, which provides greater visibility, and analogue metering of the network and remote control of plant.

Combine this with demand response and distributed energy resources management will allow for more efficient planning and operation of networks through the leveraging of embedded capacity to allow load transfers following faults or the deployment of alternative more cost effective solutions for asset replacement. As an example, if a utility distribution company can deploy a fully automatic self-healing system, they may be able to substantially delay the replacement of an ageing cable network.

As the utility and the customer can now accept if faults occur, they are reassured that supplies can be rapidly restored to all affected customers without unduly affecting customer service or compromising reliability metrics. In fact, reliability metrics are likely to be significantly improved.

The industry stands are at a cross roads, both the network and consumer behaviour is changing forever. The scale of reductions in expenditure and revenue proposed by the AER in its most recently published draft decisions are unprecedented. Consumers and the economy as a whole require an efficient grid.

The gauntlet has been thrown down to the utilities to leverage modern technologies to deliver the required efficiency gains.