Enview Executive Summary

The sanitary and economic crisis triggered by Covid-19 pandemic rightly-so attracted all attention of governments, corporations and citizens over the last months. However, the sustainability challenge has not gone away.

The extreme slowdown of economic activities during Covid-19 deepest crisis only bended down emissions by less than 20%, demonstrating that Malthusianism would not be the way out.

But Covid-19 also came with its load of valuable learnings: only general aligned mobilization of Public Powers, Economic Players and Individuals, combined with technology innovation, could address a problem of this magnitude.

Coming back to Global Warming, containing expected temperature increase below 1.5 to 2° Celsius below pre-industrial levels, as per the targets of Paris Agreement, requires a similar urgent and general mobilization.

Envision’s mission, at the heart of all activities of the Group, is to solve sustainability challenge for mankind. We deeply believe in three core principles: all parties must get into actions in a concerted and converging way, sustainability is a systemic issue requiring systemic resolution and technology innovation has a central role to play.

EnView expresses the point of view of Envision Digital’s Global Center of Excellence for “Smart Grids and Vehicle-to-Grid” (located in Paris, France) on critical challenges and opportunities of our century. This first edition is dedicated to the flexibility challenge and the ways to address it.

Electrification is a major step towards a more sustainable economy and significant measures have been taken to enable and foster electro-mobility or electric heating. However, this only makes sense if electricity itself is not only decarbonized but renewable. Renewable electricity is not only eco-friendly: its cost also follows the “Moore’s Law” of technology, unlike fossil fuels’ cost. Oil and gas’ costs are following market laws and subjects to exploration and production decisions of majors, diplomatic negotiations between petroleum exporting countries as well as other forms of speculation. To the contrary, the cost of wind and solar energy constantly goes down, year after year (8% per year and 18% per year for the respective Levelized Costs of Energy for Wind and Solar between 2010 and 2019). It means renewables are on a journey to provide more and more affordable electricity to the many, critically enabling global sustainable development.

Significant investment programs and stimuli are already identified to commission more wind and solar capacities. However, most of renewables are intermittent as they depend on natural forces and meteorological goodwill. It means an unprogrammable quantity of renewables electricity will be injected into the power grids, in the same time as an undocumented consumption pattern materializes from new usages such as electro-mobility. In addition, generation, which used to be centralized, is now increasingly distributed: companies and individuals produce electricity via local solar panels or small wind turbines, meeting their needs as well as injecting into the power grids.

Share of renewable energy generation by country

Source: ourworldindata.org – 2019 generation

In the absence of evolution of both the transmission and distribution grids, we will face a situation by which renewables generation, renewables’ share in the overall electricity mix and adoption of electric vehicles will be heavily constrained and limited. Countries which most broadly adopted renewables already faced some of those challenges during Covid-19 crisis, when demand plummeted, controllable traditional electricity generation sources were consequently shutdown, leading to a challengingly high proportion of renewables in the overall mix. Electricity prices turned negative certain days (producers were penalized for injecting electricity into the grid) and situations of “quasi blackout” were witnessed. Similar issues occur at local level. The increasing adoption of electric vehicle or the local production of solar energy by personal or corporate solar roof-tops reach the limits of the local grids or the local substations. Bottlenecks appear, here and there, at macro and micro levels.

Fig 1: Wind and solar curtailment value for the US Market

Note: In US, RE have a merit order inferior to traditional electricity production methods that induce frequent curtailment of both wind and solar energy plant. This curtailment represents a consequent loss of revenue. In continental Europe, on the contrary, DRE comes first in merit order, generating high disturbances in case of high production day as other production sources as not as responsive (e.g. nuclear). Those two different problems still advocate for the same solution which is to increase drastically electrical storage availability on the network in order to balance out production and retrieve revenue loss.
Source: US regional TSOs

If “old recipes” are applied, new high tension and low tension lines should be invested which represents not only billions of investments (TenneT alone plans to inject €35 billion over the next 10 years to increase the capacity of its German and Dutch networks), but also environmental impacts (be it buried or air lines) and, last but not least, significant implementation cycle times due to social and technical complexity to structure such capacity expansions. Moreover, the overall economic model of “pumped-up” grid is questionable. Today, grid costs represent up to 40% of consumers’ electricity bill in many countries.

Fig 2: Transmission and Distribution costs* components in selected countries – % over final households bill

*Refers to direct costs of transmission and distribution as well as taxes related to renewable subsidies

Note: In US, France and Germany, T&D costs represent on average 40%* of household electricity bills, this is inflated by taxes related to renewable subsidies. If no smart solution is implemented to support grid balancing, traditional network maintenance and expansion costs could even increase this percentage, pushing electricity prices higher.

Source: Florence School of Regulation, Trinomics, ENTSO-E

The regions which are experiencing the highest percentage of self-consumption of decentral- produced electricity struggle to collect the grid remuneration. Grids can end up being comparable to huge highways, over-sized to cope with rush hours, and that less and less people use, leading to inflationist tolls for the fewer remaining drivers.

Electricity storage solutions (lithium-ion batteries, which cost is also falling according to a “Moore‘s Law” effect, or hydrogen, not mature yet when it comes to economically avoid curtailing the production of renewable electricity) can create “buffers” between generation and injection of wind and solar electricity into the grid, creating some degree of “controllability”.

However, the only convincing way out of these challenges is to introduce proper financial incentives and suitable market mechanisms to foster “virtual grids” and “virtual power plants” ie to ensure some adaptation of demand, storage and supply will be triggered to avoid shocks on the grid and to find more ecological and economical balancing solutions.

For example, the ‘substation of the future’, digitally enabled and eco-friendly, for advanced control and automation of power systems, will be key to balance regional and decentralized power supply, storage and demand. The share of Artificial Intelligence and Internet of Thing (AIoT) and operational control systems, run by highly skilled operations teams (all associated costs mostly sitting in the OPEX category) will be much higher than in the traditional CAPEX-heavy solutions (ie investments in transmission and transformers physical assets). However, what most grid regulatory environments cope with, to date, is physical CAPEX, excluding “smart” mechanisms supported by AIoT optimization.

We would summarize our recommended way out by: “more fiber, less coper”. This would mean a pervasive use of “smart” technologies to create and unlock new sources of flexibility. The combination of Artificial Intelligence and Internet of Thing allows to gather information about demand and supply but also weather and historical patterns, to better model and predict future balance challenges and, finally, to anticipate, schedule and execute smoothing actions. Such action can consist in differing peak loads (e.g. smartly scheduling the time of charging of an electric car, knowing cars sit idle 95% of the time) or orchestrating smart storage to retain and reinject electricity timely. Grids have been smart for many years already, but they were designed to handle different configurations (top-down centralized and controllable generation, no decentralized generation and no prosuming, no massive electro-mobility). So, in order to address the “new normal”, full use of available devices and data (in respect with GDPR1 and other data privacy expectations) is needed, combined with relevant incentives and rewards and supported by multi-dimensional investment programs. In the lack of proper coordination of all those dimensions by the Public Powers and the regulators, we may end up with a “zero paper” effect : we stopped printing pages to create the next challenge in congesting massive data centers with stored emails!

With the right systemic design and implementation, technology can reconcile “green” and “growth” and our core belief is even that, thanks to ongoing innovation’s adoption, “green can feed growth”.

SYLVIE OUZIEL
International President
Envision Digital