What Benefits Are Driving Smart Grid Adoption?

January 2023

Sustainability & Smart Cities

Nick Maynard

VP of Fintech Market Research

Over the past years, problems in the global energy supply chain have underlined the increasing necessity of renewables, including solar and wind power.

However, renewables do not generate electricity continuously, meaning that alleviating the ongoing energy crisis (and any future disruptions) requires energy systems to be more actively managed as well as any energy generated to be better stored and distributed; hence, the growing adoption of smart grids worldwide.

That said, smart grid deployments can also yield significant benefits not just for industry, but for the environment and society. This blog, therefore, is intended to highlight the diverse benefits of smart grids, how their underlaying technologies achieve these, and where these are needed, what stakeholders can do to drive improvements.
 

Reducing Consumers' Energy Costs

In the context of the current energy cost crisis, the benefits of the smart grid become even more pronounced. The smart grid significantly reduces the cost to serve consumers, thereby allowing utility companies to be more competitive in retail pricing for end users despite potential rises in wholesale prices.

Under this model, consumers have the option of aligning themselves with cost-effective rates and can get incentivised for using energy more consciously. For instance, in the UK, the National Grid ESO (Energy System Operator) declared in late August 2022 that homes with smart meters will be able to receive a discount on their energy bills, provided they avoid using high powered devices at times of peak demand (ie EVs).
 

Greater Environmental Sustainability

By improving the amount and consistency of the intermittent renewable energy provided to the energy system, smart grids increase renewables capacity, and help decarbonise the grid. In a similar vein, techniques such as distributed generation, assist in reducing carbon emissions by better integrating energy from renewable sources such as solar and wind.

The smart grid also incentivises localised renewables generation, for instance, via solar PVs (Photovoltaics), providing an alternative energy source to meet local demands, thereby alleviating demand pressures put on national grids. The impact of the smart grid on business-side energy demand and management, is also an important consideration. The smart grid allows for different modelling based on data to optimise energy efficiency.

Furthermore, businesses can now incorporate RES and improve on their existing electricity use, either in manufacturing processes or simply in facilities, through data generated by smart grids.

At a granular level, the smart grid assists in communicating energy efficiency to customers/end users in practical terms. This is achieved by smart metering, which helps households monitor and measure electricity consumption, and in doing so, it also allows collection and analysis of collective data, especially in urban areas, to identify patterns leading to adoption of sustainable practices. 
 

Improved Ability to Meet Energy Demands and Peaks

It is essential for the energy grid to be able to respond to new demands and peaks effectively. The smart grid achieves this response in two ways: by triggering actions that minimise or and/completely avoid power outages and restore energy back more rapidly if outages occur, and secondly, distributing electricity more efficiently thanks to its communication capabilities to ensure supply-demand balance and mitigate peaks.

This capability is called DR, which is a method to encourage consumers to decrease their consumption for shorter intervals to be able to store electricity to be used either in emergencies or at peaks, which can involve both energy conservation and load shifting. Through measurement and monitoring of supply by smart meters, a central unit, called an aggregator, decides on the supply by comparing signals from the service provider and the demand and electricity generation.

Meeting new energy demands and possible peaks is, therefore, facilitated without straining the electricity supply in the grid. 

An advancement of DR is called ADR (Automated Demand Response), defined as systems which automatically detect the need to shed load, send signals to participants, and control all devices that use electricity within a home or business.

However, ADR is still under development and its integration to smart grid systems remains a challenge. Nonetheless, thanks to the data provided via smart meters, suppliers are enabled to feed data back to customers in real- or near real time to achieve the balance between supply and demand in current smart grid systems.

Another aspect of demand management is the integration of renewable energy sources into the generation and distribution layers of the smart grid; allowing operators to meet new, and perhaps more dispersed, patterns of consumption demanded by emerging technologies, such as EV charging.

These charging stations/facilities, in particular, have the potential to significantly increase the electric load, impacting local and neighbourhood networks negatively. With the smart grid, the load impact can be mitigated without straining the other components of the network, consumption can be monitored, and utility companies can collect EV specific data and troubleshoot in charging stations owing to its communications infrastructure.
 

Efficiency for Energy Companies

Thanks to advancements in the smart grid, energy companies now have much improved ability to increase their operational efficiency in providing electricity to business and individual consumers. In addition, data collected within the smart grid helps energy companies to predict supply needs more accurately, while also opening possibilities for new business models utilising functionalities such as time-based pricing, load management, budget billing, high usage alerts, push notifications, and web services for customer energy management.

Another related benefit of smart grid deployments is the assistance they provide in countering rising wholesale electricity costs. By integrating renewables and enhancing flexibility in managing customer demand, the smart grid helps balance increased demand with market prices, enabling companies to provide stable pricing for end users. This benefit also extends to other ancillary services or technologies of the smart grid, for instance, battery energy storage systems, which can produce and store energy at off-peak prices, thereby better managing supply and ultimately enabling to reduce the costs for end users. 
 

Related Reading

Our complimentary whitepaper, Combatting the Energy Crisis with Smart Grids, examines how automation and other technological approaches are enabling utility companies and governments to fight back against the energy crisis.

 
"A new study from Juniper Research has found cost savings from smart grid deployments will exceed $125 billion globally in 2027; increasing from just over $33 billion in 2022. This 279% growth will be driven by rising energy prices, with smart grid technologies playing a critical role in increasing network efficiency and optimising resource management."