Best of 2016: The Days of Separately Managed Electricity Systems Are Over: Balance, Flexibility Key in Transition to Lower-Carbon World

Thursday, December 29, 2016 1:30 pm EST

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Lisa Davis, Member of the Managing Board, Siemens AG

Looking back on 2016, the growth and success we’ve seen across our businesses directly reflects our commitment to next-level innovation as well as being a company that does well by doing good. It was a year of milestones. We’ve partnered with new customers, strengthened existing relationships and positioned Siemens as a continued leader in the next generation of digitalization, automation, and electrification. Over the next few days, we’ll feature some of the highlights in this series. To see more of Siemens’ Best of 2016, sign up for our blog and follow us @SiemensUSA.

As seen on the Energy Collective on Monday, June 27th, 2016

As the historic Paris climate agreement moves forward and the future of the Clean Power Plan in the United States is still being determined, energy leaders gathered at the annual Edison Electric Institute Convention in Chicago recently to discuss how developed and developing nations can reduce greenhouse gas emissions.

It was a well-timed conversation. Looking at energy systems around the world, I’ve never seen a market with so much change happening all at once. We’re witnessing a global energy transition that is enormous and also deeply complex.

My suggestion to senior executives and policy-makers attending the conference was simple: think differently.

The days of separately managed generation, transmission and distribution are over. Today, the only truly successful energy systems are those that manage the entire energy value chain – from generation to consumption – as one system.

Magnitude of change

Global demand for electricity is growing by about two percent annually. That’s not just because population is rising by approximately 90 million people each year. It’s also the result of increased urbanization and electrification. There are more and more electric cars on the road, as well as a growing number of electric trains on railways.

As the appetite for electricity grows, we’re simultaneously seeing a tectonic shift in the global energy mix. While coal had long been the world’s fossil fuel of choice, today that’s changing – with natural gas and renewables leading the way.

Affordable and abundant natural gas – unlocked by unconventional drilling techniques in the United States – is reshaping energy systems. Liquefied Natural Gas (LNG) is becoming much more transportable, creating more global demand for low-cost natural gas as countries seek lower carbon energy sources.

Wind and solar are also growing, buoyed by dramatic reductions in price. For example, the price per kilowatt hour of onshore and offshore wind generated power has come down by about 30 percent over the past ten years. In many places, onshore wind is able to compete on cost with natural gas-fired power plants; the price of offshore is coming down dramatically as well.

Complexity grows

Beyond the magnitude of change in the energy marketplace, advances in technology are adding to the complexity of energy systems.

We’re seeing digitalization make power generation much more efficient, maximizing the performance of turbines while optimizing service. And software is playing a bigger role in balancing energy systems. For example, with software it’s possible to create a ‘virtual power plant,’ bringing together a number of smaller point sources of generation to leverage those in a utility system. New battery technology also stands to be a game changer in storage.

One thing is for certain: technology will be a driving force in transforming the energy landscape as we know it today.

Path ahead

With all of these dynamic yet interconnected forces at play, a central question emerges: how can governments and power investors chart a course that reduces carbon while also ensuring reliability?

What we see a need for is balance and flexibility to manage increasingly complex energy systems. As more renewables are integrated into the grid, and the rapid trend toward distributed energy continues, there will be a need to focus on new technologies that enable systems to be more flexible, manage resiliency, and allow for bidirectional flow – technologies such as microgrids and smart grids, as well as new forms of transmission.

Given the certainty that systems will become even more complex, and even more challenging to manage, policy-makers and regulators will need to think long-term as they contemplate the path ahead. As our energy future is determined, engagement between the public sector and technology providers will be essential – sharing experience and expertise that helps create the conditions for lower-carbon solutions to flourish while meeting society’s demands.

We were very pleased to be part of that important dialogue during EEI’s convention. And we look forward to continuing this conversation as the world moves toward cleaner energy sources, and digitalization and software make energy systems more reliable and efficient.

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