Introduction to the theme

Distributed energy generation: "The end of the grid as we know it?"

The power sector is witnessing a complete transformation: electricity used to be exclusively generated by large centralised conventional power plants and transported unilaterally from high voltage lines to low voltage lines and eventually to the end-consumers.

Over the past years, the costs of renewable energy sources (RES) - solar panels, geothermal and wind - have been falling dramatically. The large-scale deployment of RES leads to a less carbon-intensive and more intermittent power generation that is more distributed across the grid. 

In parallel to that, Demand Response Mechanisms are getting more mature and flexibility mechanisms are becoming increasingly popular. Also, the cost of batteries has decreased sharply, thereby likely enabling more local energy storage in the near future in an economical way.

During the case, we will ask you to build your own vision of this future and to prepare a pitch for one of the following sub-themes (which you can freely choose as a team).

Sub-theme 1: How should the distribution tariffs be reshaped in order to adapt to this new reality?

A growing decentralized energy generation is creating major challenges for Distribution Grid Operators (DGOs).

On the one hand, local injection is likely to require an upgrade of the local grid in order to absorb the bidirectional load, especially at certain peak moments. This will require significant investments from the DGOs.

On the other hand, households’ net consumption will decrease (since their own production is subtracted from their consumption), meaning that the number of kilowatt-hours (kWh) which is today the basis of the contribution for financing the grid, will shrink.

However, even if there is less net-consumption of the energy, the major tasks of the DGO remain and even more challenges are added. Hence:

"How should the distribution tariffs be reshaped?"

Debates have already started about the compensation to be paid by photovoltaic (PV) panels owners to the DGO. A distribution tariff under the form of a ‘prosumer’ (producing consumer) tariff of 88.44 eur/kW/year (PV lifetime) exists in Flanders (Sia Partners, 2016). This tariff was introduced by the regional regulator VREG for residential PV (less than 10 kVA installations) owners for burdening the grid in two directions, with the amount of the fee dependent on the capacity of their installation. The prosumer tariff is determined based on the maximum capacity of the PV installation inverter.

But what about the other regions? Should the tariffs evolve to fully balance the costs incurred by the DGOs or should it remain unchanged to avoid any incentive distortion for new PV installations? What about consumption?

Under what form should these new tariffs be designed especially if, in the future, most people will produce their own electricity in a decentralized way while still needing access to the grid to secure their supply? As a fixed fee related to the installation capacity depending on the peak demand or is a fee linked to what is really injected into the grid more appropriate? What about industrial or professional consumers? 

Sub-theme 2: Could households go 'off-grid"?

The evolving power landscape in the power sector has given birth to a new segment: prosumers

Prosumers are a combination of producers and consumers. They refer to customers that are that are making use of local small-scale generation technologies. Example of prosumers would be residential households that have equipped their rooftop with photovoltaics or a professional business that operates a CHP.

With the increase of retail electricity prices  over the last years, cheaper batteries  and the ever increasing popularity of, and subsidies for, small-scale renewable generation the question arises whether it can become economically profitable for prosumers to be completely self-sufficient in terms of electricity supply without any connection to the power system (commonly referred to as going off-grid).

 

Of course, this would require significant upfront expenses. Prosumers would need to operate within their own microgrid, equipped with sources of power, such as photovoltaics, small CHP or even miniature-scale wind turbines, in combination with storage mechanisms such a batteries or electric vehicles. On the other hand, off-grid prosumers would no longer have to bear the electricity retail prices, including grid access fees.

"Should households be allowed to go off-grid?"

Is it profitable for households? How can it be efficiently achieved? Is the distribution grid becoming obsolete or, on the contrary, will it be a mandatory back-up solution? What about energy consumers (e.g. professionals) still connected to the grid? 

 

Sub-theme 3: Which products or services can suppliers and/or DGOs offer?

A decreasing net consumption will affect DGOs and suppliers’ revenues under the current main business model. How should they adapt to this evolution? Which new products or services can they offer?

The more kilowatt-hours generated by rooftop solar panels, the fewer kilowatt-hours sold by utilities… Should those companies invest in house insurance or financial products – such as solar loans or leasing in order to finance renewables infrastructure? Another innovative service could consist in recycling the 4 million tons of currently installed solar panels (IRENA, 2016).

"How should suppliers and DGOs adapt to this evolution?"

Should the development of energy management services such as energy metering and monitoring systems rather be considered?

What specific role could DGOs and energy suppliers play to respond to new uses of the grid?With a target of 60,000 electric vehicles for 2020 in Flanders (Flanders Minister of Energy, 2016), suppliers could invest in the deployment of smart charging stations and DGOs could invest in smart grids or other ways to adapt the network to future uses including electric vehicles. This would therefore contribute to create additional electricity demand while ensuring grid stability.

We are calling upon your creativity to identify the products and services needed by the suppliers and DGOs in order to thrive in a rapidly evolving energy market !