The digital transformation to create over US$2.4 trillion of value in the electricity sector over the coming decade

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A new report published the World Economic Forum and Bain & Company, The Future of Electricity: New Technologies Transforming the Grid Edge, concludes that the adoption of new grid edge connected smart technologies in OECD countries could generate over US$2.4 trillion of value for society and the electricity sector over the next 10 years, stemming from new jobs and from the reduction in carbon emissions arising from the increased efficiency of the overall system.

The report describes the main changes facing the electricity sector, given the impact of technology and innovation on traditional models, from power generation to “behind the meter” energy management. Its conclusions particularly point to three trends that are converging to bring about these changes in the sector: electrification, decentralisation and digitilisation. These trends are currently found in grid edge connected smart technologies such as: distributed storage, distributed generation, smart meters, smart apparatus and EVs, all of which are impacting on the electrical system.

 

The rapid fall in the costs of these technologies is driving their adoption by customers. Smart meters, connected devices and grid sensors will enhance grid management efficiency and, more importantly, will make real time information available to customers as regards the supply and demand of energy throughout the system. The anticipated increase in the uptake of electric vehicles could offer the grid greater flexibility in the form of storage, but could also lead to problems of congestion, for example, if a large number of EVs want to charge up in a specific geographical area at the same time.

These technologies could improve the electric infrastructure utilisation rate. The electrical system was constructed to cover the maximum demand, meaning that a significant proportion of the infrastructure is inactive most of the time. In the USA, the average utilisation rate in 2015 of the majority of the power generation infrastructure was under 55%. A 10% reduction in peak demand could create up to US$80bn of value by increasing the overall utilisation rate of the infrastructure.

The deployment of these technologies will place the customer at the centre of the electrical system. With correct pricing and market design, customers could generate their own electricity, store it and then consume it during a cheaper time slot or sell it back to the grid. A system of this type can even permit decentralised “peer-to-peer” transactions.