Germany takes distributed power seriously
By Alan McHale
One of the main tasks in delivering a smart grid will be to install and bring together smart grid systems such as AMI and automated demand response with distributed energy and smart buildings to win negawatts. This will go a long way to achieving the main aim of smart grid, which has to be to accommodate the maximum amount of renewable energy on the grid and to reduce carbon emissions.
The smart grid manufacturer, installer, and supply business underwent a massive consolidation in 2012. Investment through venture capital amounted to $779 million after adjusting for senior debt finance transactions.
The structure is changing in a perceptible but slow way with a shift from the dominance of the international major players to the medium and small specialist companies that are increasing their market share. A significant number of new entrants from outside the industry (the information technology and communications businesses) are increasing competition and strengthening the business.
However, the industry is still too fragmented with hundreds of companies. Consolidation will continue for years to come. It is the demand side and structure of the utility market that needs to change if smart grid is to be realized in the next 20 years.
The present business model needs to be changed from its current centralized structure to a hybrid decentralized one that allows all stakeholders to benefit. All forms of distributed power, microgeneration and microgrids need to be incorporated into the electrical supply system because they can integrate renewable energy, balance supply and demand and deliver locally to make the system more reliable.
Even if this could be orchestrated through electric utilities and they could acquire the skills to manage this new technology, they could not raise the $2 trillion needed to build the world smart grid while at the same time replacing the fossil fuel-fired fleet of generating stations that would need to be taken offline.
A new business model for the development of smart grid in many countries, particularly the U.K., could be based around capital investment coming from state-owned investors and pension funds — possibly the Middle East and Asia. IT and communications companies could supply and operate IT infrastructures and the pricing and billing mechanism, but the day-to-day operation of the smart grid would remain the responsibility of the utility companies.
There are other business models that could work, but they all depend on the electric utility companies taking up the initiative and working with the cooperation of all stakeholders. This is not an easy decision for them to make because in many cases they still have excess generation capacity that they want to work. If they are to play a role, they must adapt to sharing responsibilities and benefits of smart grid with all stakeholders.
Distributed power is a critical part of achieving a cost effective smart grid solution. A good example of a utility company taking the initiative on distributed power is RWE. The virtual power plant operated by Siemens and RWE, which went online in 2008 as a pilot project, has been expanded with the merging of about 20 MW of electrical generating capacity planned for the first year of operation (2012), which is to be increased tenfold to about 200 MW by 2015.
The objective is to integrate distributed energy sources like biomass plants, biogas block heating plants, wind turbines and hydroelectric plants throughout Germany. In February 2012, RWE began marketing the virtual power plant on the EEX energy exchange in Leipzig. This is the first centralized direct marketing of electricity from a large number of EEG-compliant (Renewable Energy Sources Act) energy sources in Germany. At the same time, RWE and Siemens are starting the further expansion of the virtual power plant, which RWE and Siemens signed an outline agreement.
By the close of 2012, RWE connected more than 250,000 plants to the distribution grid that feed in subsidized electricity pursuant to the Renewable Energies Act. They are driving the use of smart grid technologies to guarantee secure integration of renewable energies and improve opportunities for grid control.
One key aim of this coordinated use of distributed production plants — other than the economic advantages — is to contribute toward improving the market integration of distributed generation system from many hundreds of stakeholders. They enable the provision of system services in the transmission network to be organized by combining emergency generating units or electrical end-use equipment. The virtual power plant aggregates the electrical output from a multitude of plants and makes this supply available to the transmission system operator. If requested, the virtual power plant controls the immediate dispatch of the connected plants, thus contributing to grid stability.
There are those who think distributed energy has a part to play, but only in certain applications like rural areas, military bases or college towns. Others envision communities driving future microgrid development, particularly those with building codes that require solar, wind or other forms of self-generation. Big Data will have a major impact on how this can work successfully.
Judging by the column inches that this subject has produced over the last 6 months, distributed energy will continue to gain momentum in the U.S. The Obama administration set a target for the U.S. to build 40 GW of combined heat and power by 2020. The Connecticut Department of Energy announced in February that it would evaluate 27 microgrid projects for possible funding. The projects, some of which range in size to as large as 10 MW, were among 36 that sought $15 million in state grants. Gov. Dannel Mallow has recommended an additional $30 million for the program over the next 2 years.
One of the main tasks in delivering a smart grid will be to install and bring together smart grid systems such as AMI and automated demand response with distributed energy and smart buildings to win negawatts. This will go a long way to achieving the main aim of smart grid, which has to be to accommodate the maximum amount of renewable energy on the grid and to reduce carbon emissions.
The smart grid manufacturer, installer, and supply business underwent a massive consolidation in 2012. Investment through venture capital amounted to $779 million after adjusting for senior debt finance transactions.
The structure is changing in a perceptible but slow way with a shift from the dominance of the international major players to the medium and small specialist companies that are increasing their market share. A significant number of new entrants from outside the industry (the information technology and communications businesses) are increasing competition and strengthening the business.
However, the industry is still too fragmented with hundreds of companies. Consolidation will continue for years to come. It is the demand side and structure of the utility market that needs to change if smart grid is to be realized in the next 20 years.
The present business model needs to be changed from its current centralized structure to a hybrid decentralized one that allows all stakeholders to benefit. All forms of distributed power, microgeneration and microgrids need to be incorporated into the electrical supply system because they can integrate renewable energy, balance supply and demand and deliver locally to make the system more reliable.
Even if this could be orchestrated through electric utilities and they could acquire the skills to manage this new technology, they could not raise the $2 trillion needed to build the world smart grid while at the same time replacing the fossil fuel-fired fleet of generating stations that would need to be taken offline.
A new business model for the development of smart grid in many countries, particularly the U.K., could be based around capital investment coming from state-owned investors and pension funds — possibly the Middle East and Asia. IT and communications companies could supply and operate IT infrastructures and the pricing and billing mechanism, but the day-to-day operation of the smart grid would remain the responsibility of the utility companies.
There are other business models that could work, but they all depend on the electric utility companies taking up the initiative and working with the cooperation of all stakeholders. This is not an easy decision for them to make because in many cases they still have excess generation capacity that they want to work. If they are to play a role, they must adapt to sharing responsibilities and benefits of smart grid with all stakeholders.
Distributed power is a critical part of achieving a cost effective smart grid solution. A good example of a utility company taking the initiative on distributed power is RWE. The virtual power plant operated by Siemens and RWE, which went online in 2008 as a pilot project, has been expanded with the merging of about 20 MW of electrical generating capacity planned for the first year of operation (2012), which is to be increased tenfold to about 200 MW by 2015.
The objective is to integrate distributed energy sources like biomass plants, biogas block heating plants, wind turbines and hydroelectric plants throughout Germany. In February 2012, RWE began marketing the virtual power plant on the EEX energy exchange in Leipzig. This is the first centralized direct marketing of electricity from a large number of EEG-compliant (Renewable Energy Sources Act) energy sources in Germany. At the same time, RWE and Siemens are starting the further expansion of the virtual power plant, which RWE and Siemens signed an outline agreement.
By the close of 2012, RWE connected more than 250,000 plants to the distribution grid that feed in subsidized electricity pursuant to the Renewable Energies Act. They are driving the use of smart grid technologies to guarantee secure integration of renewable energies and improve opportunities for grid control.
One key aim of this coordinated use of distributed production plants — other than the economic advantages — is to contribute toward improving the market integration of distributed generation system from many hundreds of stakeholders. They enable the provision of system services in the transmission network to be organized by combining emergency generating units or electrical end-use equipment. The virtual power plant aggregates the electrical output from a multitude of plants and makes this supply available to the transmission system operator. If requested, the virtual power plant controls the immediate dispatch of the connected plants, thus contributing to grid stability.
There are those who think distributed energy has a part to play, but only in certain applications like rural areas, military bases or college towns. Others envision communities driving future microgrid development, particularly those with building codes that require solar, wind or other forms of self-generation. Big Data will have a major impact on how this can work successfully.
Judging by the column inches that this subject has produced over the last 6 months, distributed energy will continue to gain momentum in the U.S. The Obama administration set a target for the U.S. to build 40 GW of combined heat and power by 2020. The Connecticut Department of Energy announced in February that it would evaluate 27 microgrid projects for possible funding. The projects, some of which range in size to as large as 10 MW, were among 36 that sought $15 million in state grants. Gov. Dannel Mallow has recommended an additional $30 million for the program over the next 2 years.
The smart grid manufacturer, installer, and supply business underwent a massive consolidation in 2012. Investment through venture capital amounted to $779 million after adjusting for senior debt finance transactions.
However, the industry is still too fragmented with hundreds of companies. Consolidation will continue for years to come. It is the demand side and structure of the utility market that needs to change if smart grid is to be realized in the next 20 years.
The present business model needs to be changed from its current centralized structure to a hybrid decentralized one that allows all stakeholders to benefit. All forms of distributed power, microgeneration and microgrids need to be incorporated into the electrical supply system because they can integrate renewable energy, balance supply and demand and deliver locally to make the system more reliable.
Even if this could be orchestrated through electric utilities and they could acquire the skills to manage this new technology, they could not raise the $2 trillion needed to build the world smart grid while at the same time replacing the fossil fuel-fired fleet of generating stations that would need to be taken offline.
A new business model for the development of smart grid in many countries, particularly the U.K., could be based around capital investment coming from state-owned investors and pension funds — possibly the Middle East and Asia. IT and communications companies could supply and operate IT infrastructures and the pricing and billing mechanism, but the day-to-day operation of the smart grid would remain the responsibility of the utility companies.
There are other business models that could work, but they all depend on the electric utility companies taking up the initiative and working with the cooperation of all stakeholders. This is not an easy decision for them to make because in many cases they still have excess generation capacity that they want to work. If they are to play a role, they must adapt to sharing responsibilities and benefits of smart grid with all stakeholders.
Distributed power is a critical part of achieving a cost effective smart grid solution. A good example of a utility company taking the initiative on distributed power is RWE. The virtual power plant operated by Siemens and RWE, which went online in 2008 as a pilot project, has been expanded with the merging of about 20 MW of electrical generating capacity planned for the first year of operation (2012), which is to be increased tenfold to about 200 MW by 2015.
The objective is to integrate distributed energy sources like biomass plants, biogas block heating plants, wind turbines and hydroelectric plants throughout Germany. In February 2012, RWE began marketing the virtual power plant on the EEX energy exchange in Leipzig. This is the first centralized direct marketing of electricity from a large number of EEG-compliant (Renewable Energy Sources Act) energy sources in Germany. At the same time, RWE and Siemens are starting the further expansion of the virtual power plant, which RWE and Siemens signed an outline agreement.
By the close of 2012, RWE connected more than 250,000 plants to the distribution grid that feed in subsidized electricity pursuant to the Renewable Energies Act. They are driving the use of smart grid technologies to guarantee secure integration of renewable energies and improve opportunities for grid control.
One key aim of this coordinated use of distributed production plants — other than the economic advantages — is to contribute toward improving the market integration of distributed generation system from many hundreds of stakeholders. They enable the provision of system services in the transmission network to be organized by combining emergency generating units or electrical end-use equipment. The virtual power plant aggregates the electrical output from a multitude of plants and makes this supply available to the transmission system operator. If requested, the virtual power plant controls the immediate dispatch of the connected plants, thus contributing to grid stability.
There are those who think distributed energy has a part to play, but only in certain applications like rural areas, military bases or college towns. Others envision communities driving future microgrid development, particularly those with building codes that require solar, wind or other forms of self-generation. Big Data will have a major impact on how this can work successfully.
Judging by the column inches that this subject has produced over the last 6 months, distributed energy will continue to gain momentum in the U.S. The Obama administration set a target for the U.S. to build 40 GW of combined heat and power by 2020. The Connecticut Department of Energy announced in February that it would evaluate 27 microgrid projects for possible funding. The projects, some of which range in size to as large as 10 MW, were among 36 that sought $15 million in state grants. Gov. Dannel Mallow has recommended an additional $30 million for the program over the next 2 years.
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