The Benefits of Smart Grid Adoption

October 2021

Sustainability & Smart Cities

Nick Maynard

VP of Fintech Market Research

The needs of the energy distribution market have become increasingly complex, with the advent of alternative energy generation, an ageing infrastructure, significant increase in demand, and questions around environmental sustainability in terms of carbon emissions and how to distribute energy efficiently, continuously, and safely at lower costs. In response, the modernisation of energy management systems commenced with the transformation of the most crucial element of the energy infrastructure, namely, the electric grid. 

Whereas traditional electric grids are unidirectional systems comprising centralised, large-scale power plants at the electricity generation level; the smart grid enables full integration between different sources of electricity, allowing for new use cases and capabilities. It also ensures visibility and control along the entire chain; making every actor, including suppliers and end users, a part of the supply process. All this is made possible through interconnected IoT (Internet of Things) components including sensors, control systems, automation and analytics and decision-making technologies that function and support the electricity grid through communicating both with other systems and actors, and each other.

Investing in the smart grid deployment will yield significant benefits across the environmental and societal spectrums. For example, in recent years, consumers have become increasingly connected to electricity grids, with their expectations for a reliable and efficient system growing. Consumer demand is becoming more extensive, specifically with the rise of energy-intensive consumer products, such as EVs. It is thus essential that the grid can respond to demands and peaks effectively, by leveraging DR (Demand Response). The smart grid achieves this in two ways: firstly, by automatically triggering actions that minimise or and/completely avoid power outages and restore energy back more rapidly if outages occur, and secondly, distribute electricity more efficiently thanks to its communication capabilities to ensure the supply-demand balance and mitigate peaks. 

Following from the point above, energy companies now have improved ability to increase their operational efficiency in providing electricity to businesses and individual consumers. In addition, data collected within the smart grid helps energy companies predict supply needs more accurately, while also opening up possibilities for new business models, such as dynamic pricing. Another related benefit of the smart grid deployments is the assistance they provide in countering rising wholesale electricity costs. By integrating RES 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. 

Smart grids can also help alleviate energy poverty. An IEA study in 2019 found that 770 million people worldwide, most of whom live in developing countries, do not have access to electricity. In developed markets, energy insecurity can refer to discrepancies in access; leading to excess winter deaths and prolonged physical and mental health issues. Smart grid deployments can help reduce insecurities by providing the capability for better energy management; leading to a reduction in bills. Furthermore, since industrial-scale energy storage systems that store RES are integrated with the smart grid, by facilitating opportunities to invest in alternative energy sources, dependency of energy-insecure households can be lowered. 

Increased sustainability and energy security are critical to the appeal of smart grids, with analytics and demand-responsive networks able to have a dramatic impact in a renewables-heavy future. Vendors who can best combine analytics that deliver operational insights to energy companies, with low-cost sensors and connectivity will achieve the greatest success.