More than a third of distribution utilities regard energy storage as a growing threat to their revenues according to Accenture’s 2016 Digitally Enabled Grid research. The annual survey of utilities industry executives also reveals that almost half of those surveyed believe that the traditional electricity distribution model is no longer fit-for-purpose.
The findings reflect the changing nature of the sector as another disruptive technology, battery storage, is emerging on the scene. This follows in the footsteps of the advent of mass market solar photovoltaics (PV) that caught the industry off guard and resulted in missed opportunities for investment and disrupted demand before the required interconnection details and regulatory constructs were developed.
As residential battery storage becomes more commonplace, consumers will be able to use stored electricity instead of purchasing it from the grid at times of peak demand and price. As a consequence, distributors are confronting a decrease in demand and consumption on their networks with over a third surveyed regarding energy storage as a growing threat to their revenues. Of course the important corollary of declining revenues from peak demand is the longer term positive impact of potentially avoiding costly network augmentation.
The further proliferation of distributed generation as the prices for solar PV continues to fall combined with a new era of batteries represents both an opportunity and a threat. Two thirds of survey respondents expect their companies to evolve towards the integration of these distributed energy resources (DER) and facilitate the market for DER services, in other words becoming a distribution platform optimiser.
Despite this expectation of playing a new role in the network, Accenture found that most utilities are at a very early stage of the journey with only 15 per cent underway with transformation. For most the reality of this role of being a distribution optimiser is likely to be in the 2020 – 2025 time frame
As energy storage technologies improve and deployment accelerates all of the players in the sector including utilities, industry regulators and battery manufacturers are seeking the best way to value storage. The question is, does its roll-out fundamentally pose a threat to utilities?
In fact, many DNSPs see storage as a significant opportunity area with 47 percent of respondents seeing it as a source of moderate to significant revenue upside. The large majority of survey respondents (84 per cent) also believed that a new tariff model for distribution should be the focus of regulatory change over the coming years. This could potentially allow distribution companies to incorporate beyond-the-meter storage deployment by consumers into a more efficient network design. There is emerging thinking that is suggesting that the new grid with distributed storage and generation may represent the ‘internet of electricity’ whereby these devices are all IP address enabled and could be called on to help manage peak loads and the imbalance between supply and demand.
The report concludes that distribution businesses need to work with policy makers to ensure that all customers of the network will benefit from the trend towards beyond-the-meter storage by devising a more optimised and cost-effective network. Evolving the role of the distribution business toward a distribution platform optimiser would also help to break the constraints that currently prevent third-party assets from contributing fully to a more optimised network.
The task ahead is translating the opportunities that are emerging into concrete use cases that deliver value for network players and their customers while also working out how the regulatory environment needs to change to enable this to happen.
Simon Mezger is a managing director for Accenture Utilities in New Zealand and Australia.
