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20 October 2020updated 05 Nov 2021 5:33pm

Digital consumers can make renewables targets reality

Smart meters are often dismissed as a gimmick but without them targets like the one announced by Boris Johnson this month will be unachievable.

By Gerard Wynn

Smart meters have had bad press over the years. However, these much-maligned digital electric meters, deployed intelligently at scale, are critical for a sustainable energy revolution. They will enable the hyper-efficient demand management that in turn will be needed to meet ambitious wind power targets, such as the one announced by UK Prime Minister Boris Johnson early in October.

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The wind power market has grown at a CAGR of 14% between 2010 and 2021 to reach 830 GW by end of 2021. This has largely been possible due to favourable government policies that have provided incentives to the sector. This has led to an increase in the share of wind in the capacity mix, going from a miniscule 4% in 2010 to 10% in 2021. This is further set to rise to 15% by 2030. However, the recent commodity price increase has hit the sector hard, increasing risks for wind turbine manufacturers and project developers, and the Russia-Ukraine crisis has caused further price increase and supply chain disruption. In light of this, GlobalData has identified which countries are expected to add the majority of wind power capacity out to 2030. Get ahead and download this whitepaper for more details on the current state of the Wind Power Market.
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The UK is one country where smart meters have come in for significant criticism. There are a host of reasons for this negative reception. These include: poor kit in the first phase of the rollout; poor-to-disastrous communication of their purpose or use; cynicism around allowing the unpopular ‘big six’ utilities to manage deployment; and an overly ambitious adoption rate that will be missed by a wide margin.

Other European countries such as Germany have resisted smart meters entirely, not least because of data protection concerns. On the other hand, others like Norway, Sweden and Finland have achieved universal coverage.

Boris-Johnson

After previously saying it “wouldn’t pull skin off a rice pudding”, UK PM Boris Johnson now has ambitious plans for wind power. (Photo by TOBY MELVILLE/POOL/AFP via Getty Images)

Rolled out correctly, digital meters can be revolutionary, allowing a new, direct connection between retail consumers and wholesale power prices.

Until now, householders were ‘dumb’ consumers of electricity, with suppliers and grid operators having to accommodate their customersneeds, second by second, by flexing supply. This approach works out as rather expensive, especially with a variable supply from renewable sources, as the operator needs a large reserve capacity on standby in case demand surges or the wind drops.

Digital meters have upended this status quo by, unlike their analogue predecessors, recording demand and communicating with utilities in real time. If utilities provide a tariff with a variable price through the day, which tracks the wholesale price, customers can now set a threshold price below which their chosen devices, such as an electric vehicle (EV) charger, automatically turn on.

Wholesale power prices vary according to events, ranging from an exceptionally windy day to a failed overseas transmission cable. If customers automatically respond to these signals, the balancing act for grid operators to integrate wind power suddenly becomes a whole lot easier and cheaper.

Johnson this month reversed his view on offshore wind, targeting a total of 40GW in Britain by 2030, seeing wind power benefits that had apparently previously eluded him.

Some commentators have wondered about the achievability of the goal, which is equivalent to more than two-thirds of peak UK electricity demand. Certainly, new approaches and technologies will be needed to shift surplus wind power supply to times when it is most needed; for example, using batteries or hydrogen as energy carriers.

Smart tariffs

Digital meters are a big piece of this puzzle, and some companies are already ahead of the curve. In the UK, the once-upstart, now mainstream energy utility, Octopus Energy, has introduced a range of smart tariffs especially targeting customers with EVs, alongside digital meters. Its Agile Octopus tariff tracks the day-ahead wholesale power market, varying each day for each half-hour settlement period, in the same way as the wholesale market.

At times when wind and solar supply is very high, and demand weak, it is not unheard of for the UK day-ahead market to turn negative. During the coronavirus lockdown, demand was weaker than usual, and negative prices more common.

Octopus reports that in April, when day-ahead power markets turned negative, its Agile tariff price also turned briefly negative. During that period, its Agile customers responded by increasing their energy use by an average of 1.5kW each – for example, turning on appliances from EV chargers to washing machines – says the utility. This could be interpreted as the maximum rate, under this tariff, at which customers can flex demand, given the appeal of being paid to use electricity.

If that 1.5kW is multiplied by Britains 27 million households, a figure of 41GW is reached. That amount is about the same as Johnsons offshore wind power target in 2030.

In other words, in theory, if every household had a digital meter and was subscribed to a smart tariff, Britains entire offshore wind capacity could be integrated into the grid from zero wind to maximum power simply by consumers intelligently flexing demand, without installing a single battery.

In the meantime, there are issues of scale.

First is the scale of meter roll-out. Britain has only a 33% deployment rate of smart meters to date, or less than nine million meters across 27 million domestic meter points, versus its target (set by the last Labour government in 2008) for 100% deployment by 2020. Second is the adoption of smart tariffs. Octopus says the utilitys goal is to sign up all its customers to smarter tariffs. To date, the adoption rate is only tens of thousands” of its 1.7 million customers.

This will change as smart meter deployment increases and as customers become more aware. Change will also come as customers shift to EVs, increasing their energy use and incentivising them to avoid peak charging times and prices. And, ultimately, regulators could step in and require utilities to apply smarter tariffs.

This future is already here in Norway, with its successful digital meter roll-out and where half of all new vehicle sales are EVs.

Because of the significant capacity of EV chargers, up to 50kW and more, the new threat for grid operators in Norway is that power demand overwhelms grid capacity. Responding to that risk, Norways energy regulator, NVE, will require from next year domestic tariffs to reflect this new reality by incentivising consumers to control peaks in demand more than managing overall energy consumption.

One half of the tariff will be fixed, based on maximum power intake, and the other half variable, based on actual energy use. That can be compared with a broadband contract that charges a fixed fee for the speed of connection, and a variable fee for connection time.

The fixed part of the tariff could have various steps, with a much higher tariff rate, say, if the consumer exceeds a 10kW threshold. This would incentivise the use of domestic batteries, which the household would set to discharge power automatically as it approaches this threshold.

Norway is rather advanced because of its high EV market share, which has meant more grid stress, and the need to move more quickly. We will now see the same trend in countries with a lot of wind, and a big digital meter roll-out, like Denmark and Britain. Countries like Germany, which were slower off the blocks, will now struggle to adapt their grids to handle a high market share of EVs and wind power.

While the initial problems with smart meters were real, they were perhaps unsurprising given the scale of the infrastructure challenge involved. Now consumers can really benefit, not only by managing their own individual power supply, but by contributing collectively to a greener grid.

Free Report
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Wind Power Market seeing increased risk and disruption

The wind power market has grown at a CAGR of 14% between 2010 and 2021 to reach 830 GW by end of 2021. This has largely been possible due to favourable government policies that have provided incentives to the sector. This has led to an increase in the share of wind in the capacity mix, going from a miniscule 4% in 2010 to 10% in 2021. This is further set to rise to 15% by 2030. However, the recent commodity price increase has hit the sector hard, increasing risks for wind turbine manufacturers and project developers, and the Russia-Ukraine crisis has caused further price increase and supply chain disruption. In light of this, GlobalData has identified which countries are expected to add the majority of wind power capacity out to 2030. Get ahead and download this whitepaper for more details on the current state of the Wind Power Market.
by GlobalData
Enter your details here to receive your free Report.

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