Energy Must Become Smarter
Accelerating Successful Smart Grid Pilots, a new World Economic Forum report to be presented at the "Summer Davos" in Tianjin on 13 September developed with Accenture and industry experts, sets out the centrality of smart grids as a key enabler for a low-carbon economy and in response to increasingly growing energy demands. Today, 40% of energy is consumed in creating electricity; yet, electricity systems are based on technologies that are over 50 years old. The outdated electricity grids of today require smart grids as a dramatic upgrade to be able to support 21st century energy requirements.
Over 60 industry, policy and regulatory stakeholders were engaged in the Accelerating Successful Smart Grid Pilots report, to identify the factors that determine the success, or otherwise, of smart grid pilots. The research unearthed a number of "lessons learned" from existing pilots, and the report puts forward pragmatic recommendations to accelerate the success of smart grid pilots.
"With an estimated US$ 150 billion lost in a year in the US due to power cuts, smart grids can deliver a more reliable system with flexibility to utilize the full capacity of renewable energy," said Espen Mehlum, Head of Electricity Industry at the World Economic Forum. "However, utilities are struggling to create the business case for smart grids, as regulatory incentives often fail to provide the right incentives and reflect the low-carbon agenda."
The report identifies that, through information and communication technologies, the electricity grid would become "smarter". The efficiency and carbon reduction gains would be substantial. Moreover, consumers would obtain access to new solutions to optimize their electricity consumption.
Governments have begun to recognize the significance of smart grids as an enabler for a set of low-carbon technologies and are increasingly viewing smart grids as a strategic infrastructure investment. Over the past year, China alone has spent US$ 7.3 billion on smart grid developments, while the US has directed US$ 4.5 billion of its fiscal stimulus package to smart grid activities. As a result, there has been a substantial increase in the number of smart grid pilots being implemented, with industry estimates at around 90 pilots globally.
"Smart grids have the potential to cause a paradigm shift in our energy system - changing the way people and businesses interact with energy - and how value is created in the utility market. Smart grid pilots are an initial both exciting and fundamental step on the path to a low-carbon economy," said Mark Spelman, Global Head of Strategy, Accenture.
The report also highlights the crucial role pilot projects should play in shaping a regulatory framework that reward investors for the risks they are facing and incentivize the benefits smart grids can deliver. Utilities and their partners will also need to rethink the way they engage and deliver value to the consumer. Carefully crafted pilots can significantly accelerate the adoption of smart grids. However, the contrary also holds true. A poorly planned and executed pilot can set back the adoption of smart grids and negatively impact public perception. There is an opportunity to launch the next wave of development towards a lower carbon energy system, and successful smart grid pilots will be a key step in this process.
