Almost half (45%) of utility industry executives surveyed by Accenture worldwide, and 64% in Europe, reported that the traditional electricity distribution model is no longer fit-for-purpose. Unless the industry undergoes a digital, regulatory and business model transformation, utilities warn of increasing pressure on supply reliability and prices, according to Accenture’s Digitally Enabled Grid research, now in its third edition.
The proliferation of distributed generation has been a key challenge for utilities. Accenture’s survey of 85 industry executives across 18 countries finds that more than half (56%) expect grid faults to increase by 2020 as a result of distributed renewable generation, such as residential solar photovoltaics. In addition, improving economics could make electricity storage another key disruptor, with 32% of executives expecting it to cause an increase in grid faults, up from 14% in 2013.
Complementing the survey, Accenture conducted economic modeling to assess the potential impact of growing electricity storage on the grid network. The company says the falling price of energy storage could strengthen the economics of residential PV deployment in places like Germany, where the price for selling renewable generation back to the grid is lower than the retail price, or places like California where the utility charges a premium for electricity consumption during periods of peak demand.
“As consumers invest in residential storage and are able to use stored electricity instead of purchasing it from the grid at times of peak demand and price, distribution businesses will face a decrease in demand and consumption on their network. This will impact the utilization of grid resources, putting revenues at risk,” says Stephanie Jamison, global managing director of Accenture Smart Grid Services.
“However, we see utilities learning from their experience with PV, where they faced rapid growth in residential deployment without sufficient means to manage the effective integration of the new supply, and lagged in developing complementary services, like installation, maintenance and dispatch optimization, leaving the doors open to new competition. Utilities recognize that PV-plus-storage represents an existential threat to their businesses if they don’t get into the game early.”
Although storage promises to fast become a new battleground, with 66% of executives expecting competition in this area to rise in the next five years – up from 48% in 2013, utilities executives are not standing by. As many as 77% are already investing or plan to invest in storage solutions in the next 10 years.
“While storage could trigger an additional disruptive deployment of small-scale renewables, it also has the potential to improve grid operations,” explains Jamison. “If deployed across the network, it could reduce grid faults caused by renewable electricity exports, where large amounts of excess distributed generation are dumped on the grid at times of low demand and high output. What is more, our modeling showed that relatively small-scale network storage is enough to reduce exports to the grid from a typical residential PV system by 50 percent.”
In addition, Accenture says investing in storage solutions could create new revenue opportunities for utilities, with almost half (47%) of the executives surveyed expecting moderate or significant revenue upside from these investments by 2030. In fact, in the next five years, 49% expect to be offering network-level storage services, and 30% are likely to be offering customer residential storage services, such as maintenance.
Accenture says that in order to reap storage deployment benefits, utilities need to transform the role of their distribution business. Yet most utilities are still at an early stage of this journey, with only 15% of utility executives worldwide, and 29% in Europe, saying this transformation is already under way.
According to the company, the current regulatory approach is the main roadblock, so tighter collaboration with policymakers is needed to enable this transformation. For example, executives believe that the top-three regulatory changes required include new tariff and pricing models (84%), a greater role for distribution businesses in permitting and authorizing distributed energy resources connections (66%), and incentives for the deployment of innovative technologies on the network (64%) to develop a digitally enabled grid.
“We expect a fundamental shift of the market structure, which will include greater use of competitive markets, but utilities and distribution businesses need to push the boundaries, collaborate with regulators to innovate, and strategically invest in solutions that will support a more digital and distributed grid, providing new choices and value streams for customers,” concludes Jamison.