Challenges we face: Long-term megatrends

We consider there to be five global megatrends that drive electricity-sector transformation and are likely to fundamentally change the structure and function of the electricity system over the long term. These are the trends that we need to consider when developing our pricing and services plan and how we prepare for the future.

As People’s Panel members it is important for you to be aware of these megatrends so when discussing a range of topics we have a good understanding of how trends are shaping our electricity network

Decentralisation

In the last decade, there has been a gradual decrease in demand for electricity from centralised sources like power stations. Conversely, generation from, and consumption of, electricity from Consumer Energy Resources (CER) and decentralised systems has increased.

• This means that more energy is being created from a range of decentralised sources that put electricity back into the grid.

Digitisation

It is impossible to escape the digital revolution. In the electricity system, digital technologies have enabled devices across the electricity network to communicate and share data that might be useful for both customers and the management of the electricity distribution grid. These include smart meters, sensors, automation, machine learning, artificial intelligence and other digital network technologies. As well as the state-wide smart-meter rollout in Victoria, many networks are investigating—or have deployed—advanced metering infrastructure and smart grid technologies to digitise their networks as a way of reducing costs and realising financial savings.

With the move to cloud computing and increasing offerings of software as a service (SaaS) and IT asset co-location, we are witnessing the growth of large data centres, requiring high volume and reliable power supplies.

• The growth of data centre represents an opportunity for Jemena to increase the electricity throughput of its distribution network, benefiting all customers through increased scale in the long-term.

Decarbonisation

The Paris Agreement entered into force on 4 November 2016. As of April 2018, 175 out of 197 countries (parties) had ratified the convention, including the Australian Government. In light of this, and the expected retirement of the coal generation fleet between now and 2050, it is likely that significant amounts of intermittent renewable generation—whether large-scale or CER—will enter the electricity system in its place

• From a network perspective, the more variable renewable generation sources that enter the system, the greater the need for flexible, dispatchable and coordination to maintain system reliability and security.
• How are you planning to adapt your own energy usage in the future?

Electrification

As generation shifts to more renewable sources, electrification is likely to be recognised for its environmental benefits by shifting end uses of energy—including transport and heating—away from fossil-fuel sources such as oil, coal and natural gas. This shift is already happening in transport, where there has been a strong global increase in electric vehicles since 2010:

• Electric Vehicles – EVs present an opportunity to increase the utilisation of the electricity distribution network and more so if the additional electricity used in EV charging can be managed so it does not significantly add to the peak demand. With vehicle-to-grid technology, EV can behave like “battery-on-wheel” and becomes a valuable generating resource if coordinated properly.
• Gas substitution – The global energy sector is shifting away from the production and consumption of non-renewable fossil fuels and moving towards the use of low carbon and renewable energy solutions.
• For Jemena, this means our electricity network will be utilised more by delivering more electricity with the same or only small incremental investment, this will translate into lower prices for our customers in the long term. These benefits can only be achieved if the we work closely with customers, technology providers and regulators to orchestrate or coordinate how these changes operate in the electricity distribution system.
• What uncertainty worries you in the energy transition?

The rise of energy storage

Energy storage is made possible by converting electricity into other forms of energy that can be stored. A growing form of energy storage is in batteries. The cost of battery energy storage is rapidly declining and likely to continue to decrease. Australia is one of 8 countries expected to see the highest battery storage uptake.

• For Jemena, we need to work closely with customers, technology providers and other industry participants to coordinate the sharing and charging batteries at times that meet the network and electricity market needs.

Our role as an electricity distribution network

As our society progresses towards a decarbonised future, the electricity system is changing and as it transforms, so too does our role as an electricity distribution network provider.

There are lots of ways that customers want to connect to, and interact with, the electricity system. This includes the use of electric vehicles, community batteries and solar. It also includes the generation of electricity back into the grid from rooftop solar. As we move to more electricity use and generation, we need to manage congestion of the network and the electricity that flows back up into the grid.

This is what we see as an increase in the take-up of Consumer Energy Resources (CERs) (such as solar panels, electric vehicles and community batteries) as customers take meeting their energy needs into their own hands.

The transition to this new role will be heavily influenced by customers, governments and regulators, as well as other changes in the external market environment. With a changing role, we need to pre-empt the transformation, minimise the impact, and embrace the opportunities it presents. We see that greater dependence on data and communications will be necessary, and our interactions with markets and customers will increase.

Network ‘hosting capacity’ for consumer energy resources

If the electricity network does not have the spare capacity to receive electricity that is being fed back into the grid from household solar systems, there are impacts to the reliability of power supply. The voltages start to increase and transformers can start to fail. This increases the pressure on the assets in the network and triggers increased costs to replace them.

The other impact is on customers themselves. If a solar PV system turns off, which can happen with increased voltage levels, the amount of electricity fed into the grid is less than it could have been and the customer loses money that they could otherwise have earned through feed-in tariffs (or in some cases caused customers to draw energy from the grid that they would otherwise have self-generated).

On top of this, customers may get even better value from their solar PV when complemented by battery energy storage. Apart from meeting their own electricity needs, the surplus can be traded in local or national electricity markets when CER markets are established. This, however, can only occur when the electricity network—for grid stability reasons—is not constraining CERs.

• Over the next regulatory period, we need to consider whether investments need to be made into new technology that will allow us to better monitor, manage and plan the network, to deal with ever increasing levels of CER.
• How do you think we could fairly share the cost of building network capacity to account for the increased use of CERs?

Better planning and management will allow us to quantify the levels of solar PV, storage and—over the long term—respond to the megatrends under different operating configurations with sufficient lead times, but not invest too early. Knowing this information will also allow us to invest in the right areas of the network to support the needs of our customers where they need it most.

As shown in Figure 10, the Australian Energy Market Operator (AEMO) is forecasting a significant increase in CER in the years to come. We are starting to see the impact of this across our network, particularly with high penetration of solar panels. We’re expecting to see minimum demand caused by solar PV installations trigger either load-shedding or Victoria’s emergency backstop mechanism within the next 5 years, which will mean us temporarily turning off solar exports in certain areas to preserve grid stability. Electric vehicles will add load to the network in peak times, and many of their owners are likely to plug in their vehicles as they get home and not consider peak charging times, increasing network demand in evenings.

Knowing this, we can do something about it. We are taking steps to physically augment our network to meet the changes we’re expecting in the coming years. However, augmentation of the grid raises costs for all customers, not just those who have access to CER.

• We’d like to use tariffs as a tool to make some of this augmentation unnecessary by incentivising different customer behaviour, as well as ensuring that the customers causing the network to incur the costs are those paying for them through their tariffs.
• How do you think we could fairly share the cost of building network capacity to account for the increased use of CERs?