In a recent FT article (https://www.ft.com/content/a95e24b5-2983-4e45-9d8a-983a39d59ad3?desktop=true&segmentId=7c8f09b9-9b61-4fbb-9430-9208a9e233c8#myft:notification:daily-email:content ), a German utility leader claimed that Europe must “boost grid to cope with renewable power surge” that involves new investments of “up to €39bn a year to 2030”.
Not only is that thinking passé, but it’s also extremely expensive thinking!
But is there a better way?
One of the mega trends advanced societies are witnessing is decentralisation and localisation, enabled by technology advancement. Decentralisation provides more efficient and transparent products & services and “buy local” is a growing theme, given that globalisation has not benefited as widely as promised.
And the two sectors that are decentralising in hyper-mode are the financial & power sectors.
The traditional financial sector is under attack by fintech companies (e.g., Revolut, Nexo) that provide better service & better customer experience. The crypto markets may be suffering due to the unprecedented number of scandals in 2022, but de-centralised finance (#DeFi) is here to stay and it will continue to grow at the expense of financial institutions. Bitcoin is also here to stay and will survive yet another “crypto winter” to, once again, prove its detractors wrong (mostly because fiat is failing & has always failed over human history – but that is a topic for an entirely different post).
As for the energy sector, large-scale thermal power plants requiring mega transmission grids may have once served a purpose … but no longer. The simple fact of the matter is that new wind and solar PV installations provide cheaper electricity than new large scale thermal (think natural gas & coal) generation assets. Plus, they are cleaner, although these positive attributes come at the cost of intermittency.
So, back to this FT article.
The old, centralised, utility mindset way of thinking would be - Let’s build more big, expensive grid to move electrons hundreds of kilometres! - rather than prioritise a more local, decentralised and flexible approach. Technological advancement now enables a new approach, a new way of thinking.
I have several ideas:
more retail decentralisation: (re) introduce retail PV + energy storage (ES) support schemes. Most of Europeans now have smart meters so adding more flexible generation at the site of the load & perhaps enabling TSOs to "call on power" when needed is a win-win.
I am currently installing 9kW of PV and ES at my house and I can most assuredly state that there is minimal state support. But given uncertainty about electricity supply – especially for this winter due to the Ukrainian war but I can see this issue remaining as our society continues to electrify everything – onsite generation with electricity storage capability just makes sense.
And it would make more sense to more people if there was public funding support.
better grid utilisation: renewable projects today utilise grid very inefficiently. A 20MW wind project, for example, will secure a 20MW grid capacity. However, it will utilise the full 20MW only a few weeks per year, on average. Yet co-locating PV and, possibly ES, would produce:
more stable power injection into the network; and,
better & more efficient overall grid utilisation
Whilst at Vestas, we worked with an Australian developer that co-located all 3 technologies at a site and achieved greater than 80% grid capacity. In other words, this site produces nearly dispatchable power. Now, this is a “world-class” site so European sites wouldn’t have such a high-capacity factors, but even small improvements help. Put simply, better inputs (more stable and predictable) benefit the electricity grids, especially at an aggregate level.
European governments could pass new legislation supporting technology integration (e.g., hybrid auctions), thereby accelerating this trend (the will occur regardless).
Demand-side management: the internet of things, smart meters, artificial intelligence & cheap computing power means that a lot of power usage can be optimised across grids, countries, EU-wide, to better match supply & demand. As always, price should be used to best-allocate resource. So, if someone really wants to wash their clothes at 6pm, then they will pay much more than someone doing the same at 4am.
Adding electric vehicles into this mix also would provide much needed grid flexibility. Say I have a Tesla and I plan to only drive 20km tomorrow. That means I’m a seller of power from my Tesla battery if power prices go above my chosen price level. Conversely, if I know I will drive 300km tomorrow, I am a buyer of power. At an aggregate level, this provides grid operators with a lot of new flexibility.
Power-to-x: there is much in the news about various large-scale green hydrogen initiatives (the EU alone is providing ~ €500bn in public monies over the next 2 years to jump start green hydrogen “valleys”) but there are many other technologies that can soak up electricity at certain prices points but shut off at other price points. Again, it’s all about providing flexibility to the grid.
One such example is Soluna, a zero-carbon cloud compute company where I current serve as a non-exec director. Put simply, Soluna utilises curtailed renewable energy to mine bitcoin. Soon, we will use curtailed renewable energy to power our clean data centres. Both activities provide much needed flexibility for grid operators.
(side note – the EU nearly banned crypto proof-of-work activities earlier this year. Fortunately, they didn’t pass this legislation, but it goes to show you that our political leaders – much like some utility leaders - are not thinking as innovatively as they should.)
New technologies: I recently attended a luncheon hosted by the Future Planet Capital - a group associated with Lord Norman Foster - where we discussed the potential utilisation of distributed micro and mini nuclear power technologies. Whether these types of technologies will ever be adopted widely is still to be seen but such an approach is fully in step with decentralisation, helping alleviate stress on power grids.
In summary, technology innovation, cheap renewables & the EU’s desire to support green hydrogen have, together, presented Europe with a huge opportunity to build a future, green-powered economy.
The last thing we should do is squander this opportunity by applying yesterday’s approaches to tomorrow’s problems.
End note caveat: I am not a grid specialist nor an electrical engineer. I am sure Europe needs to invest in certain grid enhancements, including more interconnectors. My main point in this article is that a grid-led strategy to “solve” renewables intermittency is misguided and wasteful.