29/11/2024
What are smart grids?
Smart grids are an electricity network that use digital communication and other technologies to monitor and manage the distribution of electricity from all generation sources to meet the varying demands of end users.
To realise this, a smart grid includes various operation and energy measures such as metering infrastructure, smart distribution boards integrated with home control, renewable energy resources, etc.
Why use smart grids?
As the clean energy transition fuels electricity demand, and power from more transient energy sources such as wind and solar is added to the national grid, increased stress is placed on the national grid.
Significantly, there is a huge demand on power grids in recent years. Electricity is the fastest-growing source of final energy demand, and will continue to outpace growth in total energy consumption over the next 25 years. According to IEA’s statistics, electricity demand in emerging and developing economies (excluding China) will grow by around an additional 2500 TWh by 2030, roughly equivalent to five times the current demand of Germany.
In particular, as AI demands soar the world’s data centres are using ever more electricity. In 2022, they consumed 460 terawatt hours of electricity and are expected to double this consumption in just four years to roughly equal the electricity consumption of Japan.
IEA stats reveal that digital technologies could save $1.8 trillion of grid investment globally through 2050 by extending the lifetime of grids, while also helping to integrate renewables and minimise supply interruptions. On the other hand, failure to smarten the grid with digital technologies could cost nearly three-quarters of the projected savings.
Providing a more sophisticated energy distribution network therefore enables the energy transition to be managed more efficiently, reduces the need for costly new infrastructure, and improves grid resilience and reliability.
Innovations in smart grids
Patent statistics provide a useful proxy for quantifying innovation. According to a recent patent study conducted by the European Patent Office, patenting activity for smart grids in the previous decade falls some way behind other technologies enabling the energy transition, such as batteries or the use of hydrogen. As shown in figure 1, patent filings in the most recent ten years (2014 to 2023) indicate that there was a rapid increase since 2014. This may be mainly due to the unrelenting and disruptive introduction of new digital platforms, including the Internet of Things, 5G communication networks, cloud computing and artificial intelligence.
However, it is evident that the growth rate of patent filings in the most recent three years is decreasing, although the total filing numbers each year is increasing.
According to the “A Global Review of Patent Data for Smart Grid Technologies” report published by IEA, this is largely due to the lack of stability in grid investment, especially in developing economies. The report highlights that overall investment in smart grids needs to more than double through to 2030 – from around USD 300 billion/year currently to almost USD 600 billion/year – to get on track with the Net Zero by 2050 Scenario.
While solar, wind and other renewables receive a lot of attention in emerging markets and developing economies, a blind spot regarding the role of grids is increasingly evident. Without adequate and timely investment in electricity transmission and distribution networks, developing and deploying new generation capacity may fail to deliver on both climate action goals and purely economic terms. However, there is room for optimism as it is evident that big players in the field such as E.ON and Siemens are continuing to develop innovative solutions to address these problems.
It will be interesting to see how this crucial area of technology develops in the coming years, as our insatiable appetite for energy shows no sign of abating.
Read the previous article of our Digitalisation Mini-Series here: ‘Illuminating where Future Innovation may lie in Solar Power Generation’
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
