EET&D : Rick, you have been in the energy business for some time, why is the integration of renewable and distribution energy resources such a challenge for utilities?

Nicholson : There are a couple of fundamental challenges, actually. The first is economic as the growing adoption of distributed energy resources impacts the traditional utility business model. For example, GTM Research projects that U.S. distributed generation from solar PV will more than double over the next two and a half years. As that kind of exponential growth continues, grid revenues from the sale of kilowatt hours will naturally erode, leading to rate increases, in turn leading to even faster adoption of alternative energy sources, and so on. This is a scenario that is keeping a lot of utility execs awake at night. Regulators are also concerned about this, as evidenced by the New York Public Service Commission’s recently released utility business model reform proposal.

The other big challenge is operational. The grid was designed for one-way power flows from large central plants to consumers. By injecting power at the edges of the grid, distributed energy resources change this picture significantly. Now, there is a two-way power flow. Also, with large coal or nuclear plants, you have predictable and controllable energy output. Renewable energy resources, on the other hand, only produce power when the wind blows or the sun shines. Add them to the mix, and you introduce intermittency to the energy supply.

All of this makes the grid more complex and harder to operate. Nevertheless, renewable energy sources are what customers want and what policy-makers and regulators are mandating.

EET&D : Where do you see the operational challenge playing out today, and in what markets do you foresee it being a problem in the future?

Nicholson : Increased grid complexity is going to be a problem in any region where there is high adoption of renewable and distributed energy resources, including the U.S. Right now we are seeing considerable activity in Northern Europe, a region that has been at the forefront of integrating renewable energy sources. What they’ve found is that increased grid complexity translates to increased stress on control center operators. This in turn leads to mistakes that can cause outages or overstressed equipment. Taking the bull by the horns, E.ON Sweden is developing a next-generation smart grid control center aimed at increasing automation and operator visibility across the grid and providing greater control over distributed generation.

Another interesting Swedish project is underway on the island of Gotland, which is home to much of the country’s distributed generation facilities. Called Smart Grid Gotland, the project will let customers control consumption based on energy prices while helping the local utility, Gotland Energi AB, which is partially owned by Vattenfall, meet ambitious EU carbon reduction targets.

I believe that these and other current projects will provide valuable reference architectures that can be emulated in utilities the world over.

EET&D : Speaking of Europe, German utilities are struggling financially because of high penetration rates of solar. This has led to a number of investment banks warning investors that solar could put utilities out of business. Will the grid survive?

Nicholson : Like roads and rail lines, the grid will survive. It’s how individual utilities will survive and prosper that is in question. One of the most important socioeconomic trends of our time is the new sharing economy, which has already completely refashioned key industries from music and entertainment to journalism and publishing.

With the rise of companies like Uber and Lyft, sharing is even hitting taxi and limo services. And, when sharing comes to an industry, companies that stay wedded to legacy business models inevitably fall by the wayside.

There is no way that utilities will be immune to the sharing economy. Already we’re seeing ‘solar gardens’ that share the costs and benefits of installing solar, nascent networks of electric vehicle charging stations that are utility-independent, and internet-connected thermostats that slash power consumption. These and other innovations all have the potential to damage utility revenues and profits.

But utilities can innovate too and augment or transform their traditional business model, and many are working with regulators and policy makers to do so. Consider that most innovations around energy connect to the grid at some point, and who best understands the local grid and energy markets? Who has the expertise and inside track to energy consumers? Rather than staying wedded to selling kilowatt hours, utilities can leverage all of these advantages and resources to create new revenue streams based on value-added grid services, either by providing those service themselves or by partnering with third-party energy service providers. Those that seize this opportunity today will be tomorrow’s players.

EET&D : Where do you see plug-in electric vehicles fitting in? The grid wasn’t designed to handle them in large numbers. How is it going to cope with their rising popularity?

Nicholson : Plug-in electric vehicles are introducing new challenges for utilities, particularly around demand peaks at night, which the grid isn’t prepared to handle gracefully. It’s a bigger problem than you might think. A single 240-volt EV charger adds the grid-load equivalent of three homes with air conditioning, lights, and laundry appliances running simultaneously, according to IEEE.

And, the problem isn’t going to go away. According to a recent report by IHS Automotive, global production of EVs is expected to grow 67 percent in 2014, to a total of more than 400,000 vehicles. This will bring the total number of EVs in use worldwide by the end of 2014 to 1.1 million.

The key to facing this growing challenge is employing technology to harmonize and optimize how EV owners use the grid with how the grid is designed and operated. This is being done in places like California, where utilities are working to synchronize EV charging demand with power from wind farms, which tend to deliver their energy output overnight. There, utilities and regulators are harnessing smart meters to choreograph EV home-charging stations to the grid’s available power.

Many utilities in other regions around the world are working on solutions to this challenge as well. For instance, Ventyx and ABB are working with a major Swedish utility to develop EV/charging station/utility demand response systems that monitor local network conditions and adjust EV charging accordingly. By creating a smart, flexible automated EV infrastructure along the entire supply chain, from grid to plug, utilities can enable residential customers to let utilities throttle fast EV chargers as necessary, delivering maximum available power to EVs while maintaining local network integrity.

EET&D : You have your eye on a lot of different technologies. Tell me, what technologies should utilities be considering when addressing the distributed energy challenge?

Nicholson : Addressing the challenge effectively requires a combination of information technology, or IT, and operational technology, or OT. Operational technologies include the latest generation sensors, communications networks, intelligent switches, energy storage systems, and intelligent solar inverters that underpin the smart grid. Information technologies unlock the value of this smart equipment.

The overarching IT solution that utilities need to be focusing on is Distribution System Optimization, which encompasses technologies for advanced distribution network management, demand response management, business analytics and – this is particularly important – demand forecasting. Going back to the Smart Grid Gotland project I mentioned earlier, all of these IT components are being deployed to integrate large quantities of renewable energy sources into the grid, empower consumers to make smart usage choices, and meet environmental goals. The next-generation smart grid control center project at E.ON Sweden that I mentioned highlights how these IT components meld with OT components such as grid sensing to give operators real-time visibility and ensure network reliability and efficiency.

Interestingly, Distribution System Optimization is bringing to distribution environments certain advanced applications commonly used in transmission. I’m talking about applications such as state estimation and contingency analysis that are becoming just as important to distribution as grid complexity continues to soar.

EET&D : I know that you’re incredibly busy Rick and I can’t thank you enough for taking the time to enlighten and encourage us. It’s certain that you have a complex job in front of you. I know our readers will find it refreshing to understand your take on real solutions and the associated technologies for utilities that Ventyx ABB will integrate in the transformation of the new mix of electricity generation.