In the first of a series of articles, Power Ledger Co-Founders Dr Jemma Green and John Bulich examine the road to a new energy future and how a new concept - the Internet of Electricity - is paving the way.
The integration of renewables and legacy fossil energy hasn’t been going very well, wherever you look in the world. Australia, Germany, California in the US and Poland come to mind.
In Poland, the regulator has described the situation as a “tragedy”.
California now regularly throws away, or “curtails”, huge amounts of solar energy – last May more than 220,000 Megawatts was thrown away. The problem is most acute in spring with more sunlight and no air-conditioning to use up the surplus.
Germany, which has the highest carbon footprint of any European country, has some of the most expensive electricity – and high subsidy levels – for solar energy globally. The worst of all worlds, you might say.
But apart from all the metrics being in the wrong direction, there is also a considerable renewables-fossil fault line present that has proved increasingly divisive.
Germany is home to both a strong green movement and an arguably stronger dirty coal (lignite) interest on the other side. It’s caused ongoing protests and a series of arrests in the Hambach Forest.
Many German business leaders don’t like the way their energy policy (called Energiewende) is playing out. McKinsey issued a damning report that summed up the situation as “disastrous”.
“Problems are manifesting in all three dimensions of the energy industry triangle: climate protection, the security of supply and economic efficiency,” wrote McKinsey.
According to the 2019 report, Germany had faced three critical situations in June of the same year where demand for power was 6 Gigawatts more than the system was able to produce. This caused the spot price for electricity to rise to a hefty €37,856.
McKinsey and the grid operators haven’t yet concluded exactly why this came about, nor what the role of internal markets were in creating this moment, but McKinsey predicted the problem will only get worse as nuclear capacity is retired in 2022.
The romance of the renewable, versus the certainty of the fossil
In Australia, things aren’t much better, with a distinctly conflictual feel continuing to frame energy discussions..
When Prime Minister Scott Morrison walked into the Australian Parliament with a lump of coal in his hand, saying “there’s nothing to fear”, he was speaking for a huge number of his constituents who also believe that getting rid of coal is “reckless”.
These people ask why their power bills keep increasing, despite the promises of cheap solar electricity. Pauline Hanson, an outspoken right-wing politician in the same parliament, reflects similar views.
Together, they don’t buy the romance of the renewable, they want the certainty of the fossil.
And who can blame them? We never reckoned for electricity prices going to an all-time high.
On the other side, there are the renewables supporters in all shades in many parts of Europe and the West, including the more extreme Extinction Rebellion.
They look to the bushfires in Australia and say that our planet is “on fire”, set alight by the higher temperatures created by the carbon in fossil fuels.
They block roads and bring cities to a halt. Theirs is a moral crusade and justifies higher prices, extending fuel poverty to the many, and are ready to live with blackouts caused by uncertain amounts of electricity at peak demand times.
For supporters of renewable energy, all of this is reluctantly accepted given the moral imperative and the predicament of the planet.
But Australia has been making huge efforts to invest in renewable energy with big infrastructure projects like Snowy 2.0, a hydro project designed to store excess solar electricity for the evening period. It’s just the effort hasn’t been much of a success to date.
So what’s missing?
It’s becoming increasingly clear that there are missing pieces of the jigsaw that are needed to produce the new grid.
If a hybrid renewables-fossil power system is to succeed, there are some important pieces of technology that have to first be created.
The first, most obvious, element is a way of managing the differences in demand and supply.
At present, transformers and generators are often close to blowing fuses and suffering harmonic and reverse-flow meltdowns.
That’s because the solar PV energy coming from rooftops is, at times, more than the system can take and large reverse flow plays havoc with the frequency stability that the grid must maintain.
So the solution is often one of two things: if there’s a shortfall, you get a fast response “peaking power” plant, which is basically a generator armature driven by a jet engine, and this can kick in with minimal prep time. If, however, there’s a surplus, you dispose of the extra energy, often by paying people to use it.
Both aren’t great options. Throwing away energy isn’t good value for money and neither is it always easy.
At the root of this problem is a simple truth: electricity isn’t like a consignment of cocoa beans, and kilowatt-hours can’t be stored in a shed until they are required.
Rather, a more intensive and expensive way of storing those kilowatt hours is required, or else supply and demand needs to be better managed.
Without new solutions, the very real problems that renewables create for the grid will continue to threaten electricity networks in ways that are expensive to fix.
The problem of intermittency
So how do you solve the problem of intermittent renewables playing havoc with random power surges that can happen in the few seconds it takes for a cloud to disappear from the sky?
Many on the renewables side believe you can tariff your way out of the problems with the grid. They hope that there’s just one more tariff or incentive package given by the government and the whole thing will magically work.
But that approach is flawed, because for every tariff created, another dysfunction is inserted into the system that then requires further tariffs to iron out.
And you get sucked into a never-ending spiral of tariffs, which sooner or later results in anomalies that are worse than whatever you started with. You might have tariffs aplenty, but your transformers can still blow up due to reverse flows.
In Australia, for example, there’s a feed-in tariff for producing solar. But there’s too much solar around noon each day, leading to talks of a bonus tariff for using the surplus solar power that’s produced from the first tariff. What industry pays you to make something and then pays you again to consume it?
One attempt at solving this time shift problem is seen in the Snowy 2.0 project, which consumes excess solar power at peak times and releases it to cover demand in the evening. Turbines pump water uphill in the afternoon and the same turbines generate power as the water cascades down in the evening.
Its creation is highly controversial, and despite its AUD$11 billion price tag, few can see it delivering the service it has been built for.
Then there’s battery power, à la Tesla Megapack. While this has merits, it currently lacks capacity or the appetite for investment. It’s generally thought that battery capacity will expand to fill the demand created, but not unless there’s an incentive for doing so.
So what to do? Where is this missing piece of the new grid?
Another solution that is both ambitious but also inevitable is what people are terming the Internet of Electricity (IoE).
Although the IoE requires us to rethink the grid in a radical way, the change it will bring is inevitable.
The internet of electricity
In this new conception of a grid, every power device – whether it be a huge power plant, a washing machine, an electric car, an air conditioning unit or even the grid itself – gets assigned a set of just five attributes: a device identifier, a geopositional marker, a blockchain address and a bid and offer price for electric power based on its need state.
On top of this layer is a market that allows for rapid, real-time transactions between ordinary household devices, with payment in digital currency.
In short, this conception of the grid has every device becoming an economic entity, rather like a player on a monopoly board, trying to optimise its use of electricity and profit. Except, there is no monopoly; the paradigm is essentially a distributed, decentralised one.
In this new conception, the management of the grid becomes a neural network, a brain that is finding the solutions to its own problems of supply and demand.
If those devices are constantly sending price signals depending on their need states, it follows that market pricing will sort out supply and demand.
Some of those devices will be batteries and electric vehicles, but many will be washing machines, pool pumps and air conditioners adjusting activity cycles to help make the grid work in a more coordinated way.
Some devices could even be evolutions of an air conditioner mixed with a thermal storage device. Whatever device, or whatever it offers, it will have those five attributes. And they will all be active assets in the IoE.
It won’t all be about decentralisation, though. There will still be a wholesale price administered by centralised boards responsible for grid stabilisation, but they will have a reduced role.
In some states in Australia up to 50% of electricity is used by the biggest 20 customers, so it won’t be the end of the centralised electricity system, more a hybridisation of it.
Spikes and troughs become price signals
Power Ledger’s recent peer-to-peer energy trading trial involving 48 households in Fremantle, Western Australia, which is a localised energy market, showed that when faced with making decisions, devices and people fall into patterns, which demonstrated this emergent behaviour of optimising resources.
The very spikes and troughs in the electricity system, rather than being vulnerabilities, become price signals that allow for a new resilience.
Perhaps, most importantly, the study suggests that price signals in these localised markets will lead to organic growth of important grid resources in an optimal way.
These developmental resources favoured by new organic electrical economics are likely to be a series of battery units of maybe 10-15 kWh in many households.
What’s certain is that price signals will favour resources that offer the most value, not the best political optics. It probably won’t be state-driven, high-profile projects like Snowy 2.0.
Maybe it will be electric vehicles in all forms – cars, buses, trackless trams, light rail and trains, as well as e-scooters, e-skate boards and e-bikes and their attendant battery capacity – that will provide new resilience for the grid.
Whenever more power is called for they could make up the shortfall, and when a destination for surplus power is required, they can provide this, too.
At current growth rates, 100,000 electric vehicles could deliver 500MW of standby capacity, and this would be available as soon as any electric vehicle is plugged into the network.
Perhaps with the new resilience offered by the IoE, the gap between the real grid value of distributed electrical assets and perceived political optics of them will reduce. And maybe closing the gap between real value and optics can free energy policy of the conflicts that rumble on in such an entrenched and bitter way.
Perhaps it won’t be the sense of moral outrage from the likes of Swedish teenage climate activist Greta Thunberg that eventually moves us forward. We will get there only when we can manage renewable energy to the same level of dispatchability and confidence that we enjoyed with fossil and nuclear.
And when that happens, no doubt the conflicts, confusion, and doublespeak will stop, and real success with growing renewables and lowering the emissions footprint will emerge.
A new energy ecosystem emerges
There is evidence that an IoE will take us inexorably and scalably to the new energy ecosystem – just like the first http protocol eventually brought us Youtube, Netflix, Google and Facebook.
The difference is that this new ecosystem will be filled with watts and joules and perhaps transacted in cryptographic tokens and cryptocurrency, not just bits per second. It will be a new world where energy is cheaper, cleaner and energy systems more resilient.
This system can’t come too soon. According to the Australian Energy Market Operator (AEMO), South Australia incurred more than $100 million of extra costs for frequency control, with the AEMO required to intervene in the market 229 times in Q1 of 2020. This is compared to just 15 times three years ago.
So the road to the new energy system won’t be a smooth one. But just as steam delivered a Victorian technological boom that was characterised by confidence and economic success, so it might be with solving our energy problems.
In the next part, we take a deeper look into how the IoE will work and how it could resolve the central problem of intermittency that seems to have plagued the grid.