2012 Australia - Smart Grids - Key to the transformation of the Electricity Industry

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Last updated: 1 Feb 2012 Update History

Report Status: Archived

Report Pages: 158

Analyst: Paul Budde

Publication Overview

This report provides overviews and critical statistical information on the electricity market, as well as detailed information on smart grid, smart meter projects and the key players in this market. Developments in PV and smart cars and their implications on national infrastructure are also highlighted.

Researchers:- Paul Budde, Stephen McNamara, Kylie Wansink
Current publication date:- January 2012 (8th Edition)

Executive Summary

Smart Grids essential for future energy management

For decades the electricity market has been a stable and rather boring one. The basic business model remained steady-as-you-go and developments in the market were largely dictated by government policies, which were basically aimed at keeping energy prices down and ensuring the reliability and safety of the network.

The privatisation of the industry in some parts of the country during the 1990s did change ownership structures but overall it did not do much to change the structure and dynamics of the market.

During the early 00s some entrepreneurial electricity companies started to venture into the telecommunications business, and while they ultimately moved out of this market they left behind several new telecommunication companies that provided competition, particularly in the heavily monopolised telecoms infrastructure market.

This brush with the telecoms market as an enabling technology was useful later in that decade when climate change issues started to dominate the political agenda. While the industry was very slow to take these political issues seriously a change in government in 2007 forced them to pay attention and to begin to take action.

Slightly predating these activities were the energy problems that several utilities experienced earlier that decade. A combination of climate change developments, resulting in extreme hot weather and the purchase of more air-conditioners by an affluent population, led to peak-demand network problems and major blackouts.

Electricity companies not just in Australia but around the world were all facing similar problems, and they began to investigate smart meters. These devices would allow them to better manage peak demand, thus avoiding breakdowns in energy supply.

Several problems now started to intersect with each other:

  • Customers became concerned about climate changes and the environment.
  • An unprepared industry system suddenly faced the need for major new investment in energy efficiency, which led to significant price increases for their customers.
  • Both the government and the industry were unprepared to engage and communicate with their customers about all of this.
  • The industry lacked the culture and flexibility to react swiftly to the changes in society and in the market.

The smart meter rollouts started to collide with these developments. Customers were either poorly informed or not informed at all about any potential benefits for them of this development. At the same time the customers faced significant price increases and they began to revolt against these smart meter rollouts. In Australia this happened in Victoria.

A problem, associated with this but of a more technical nature, was that by the time the smart meter rollouts were planned there was already an understanding among experts that a far more comprehensive plan was required to address the broader range of challenges that the industry was facing – this was the smart grid concept. However, a rather sluggish utilities-based industry had never seriously taking into account the upcoming rather rapid changes. Again, all of these political and technical issues started to intersect with each other:

  • Climate change policies would lead to a price being put on the heaviest polluters – and the electricity industry is the key industry in this. This requires them to bring pollution down and smart technologies can assist in this.
  • Under-investment over decades had largely left the electricity grid a dumb network, with little or no intelligence that could – in a timely fashion - improve maintenance and management.
  • Clean industry initiatives such as PV (solar panels) and electric vehicles require a far more sophisticated infrastructure.
  • Customers – under cost pressure and concerned about the effects of climate change – require smart tools to enable them to better manage their electricity use.

It is obvious that this perfect storm cannot be addressed in the linear fashion of the last 50 years or so. It requires nothing less than a total transformation of the industry. These changes are well beyond the capabilities of the electricity industry; they will require far broader industry collaboration – or, as BuddeComm calls it, a trans-sector approach.

Key sectors that need to be involved in the transformation of the industry:

  • Federal and state governments
  • Regulators
  • Consumer organisations and advocacy groups
  • Large energy users (manufacturers, mines, industry)
  • Electricity companies (generation, transmission, distribution, retail) and its vendors
  • Renewable industry
  • Telecommunications infrastructure (mobile , fixed, broadband)
  • IT industry (systems, integration, software, hardware)
  • Data processing, analytics, data centres, cloud computing
  • Consumer electronics, consumer appliances and consumer applications (internet)
  • Management consultancy companies and system integrators
  • Consumer communication and education companies

There are numerous issues that need to be addressed, but the key ones include:

  • Review of the old  policies and regulations
  • New set of integrated government policies and related regulations
  • Consumer issues, especially energy prices
  • Infrastructure and smart technology issues

It has become clear that it is essential that the government needs to address all of these issues in an integrated way. Current policies in relation to home insulation, solar panels, energy efficiencies, clean energy, renewable energy and electric vehicles all need to be addressed within one national blueprint, from which individual strategies can be developed.

Smart infrastructure and smart tools are the glue that can provide the horizontal integration of the various sectors and projects involved in this complex transformation process, and it can also provide the platform for a cohesive policy aimed at sharing infrastructure. This, in turn, leads to significant cost savings.

The government has already launched two significant trans-sector projects: the NBN (national broadband network) and the Smart Grid/Smart City project. These projects provide answers as to how these diverse issues can be addressed within one national blueprint. The experience and knowledge that Australia has been building up in these projects now needs to be extended to include all of the abovementioned issues.

Economic data all points towards a green economy that will create a large number of new jobs and offer business opportunities for innovative entrepreneurs. And if Australia can maintain its leadership role that would support its export earnings also.

This report provides overviews and critical statistical information on the electricity market, as well as detailed information on smart grid, smart meter projects and the key players in this market. Developments in PV and smart cars and their implications on national infrastructure are also highlighted.

Market Highlights:

  • Australia’s Smart Grid/Smart City project is a world leader
  • Australia saw residential PV (solar panels) increase from 1% to 5%, the highest growth in the world
  • The world is waiting for the electric vehicle (EV) tsunami (watch out for China)
  • Both PV and EV require smart grid infrastructure
  • Smart cars are being positioned as have-to-have products (like smartphones)
  • Urgent need for a comprehensive federal energy policy to bring all the different projects together
  • The smart meter development in Victoria is being used as a case study around the globe
  • Electricity industry is at the heart of all these developments
  • The industry needs a business transformation similar to the one that changed the telecoms industry.

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