What’s Driving Energy Efficiency Improvements at Electric Utilities?

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The pressure to improve energy efficiency is constant and intense. The burden is particularly high for electric utilities, since changes to power production and distribution can have a cascading effect that impacts the energy efficiency efforts of both utilities and consumers, who increasingly expect demand-side advancements. In this quest for improvements, it’s easy to lose sight of why you should want more energy efficient operations.

Two energy efficiency operations drivers are top of mind:

  1. Cost and energy savings
  2. Regulatory challenges

The opportunity to cut costs is always a motivator for change, and for utilities, the rewards for reducing network losses are great because annual electricity transmission and distribution (T&D) losses are substantial. They average around 5 percent in the United States and 8.3 percent worldwide, which represents billions of euros in energy that is wasted every year in distribution. Improving T&D efficiency is a big step in reducing that loss.

Regulations are providing a big push for utilities to make improvements. Countries around the world have ambitious energy goals for cutting electricity network losses and enhancing efficiency. Two initiatives that stand out as change drivers are the EU’s Energy Efficiency Directive and the Paris Agreement.

The European Energy Efficiency Directive 2012 is an EU directive that established binding measures to mandate EU energy efficiency improvements, which will help the EU meet its target of 20 percent energy efficiency by 2020. The directive requires EU countries to use energy more efficiently in all phases of the energy supply chain — from production to consumption — and seeks to establish a common framework to promote energy efficiency and eliminate energy market barriers. The directive will be revised and is currently under negotiation as part of the so-called “Winter Package” of energy policy reforms aimed at aiding and expediting the EU’s transition to cleaner energy and reforming the electricity market’s design and operations.

On a global level, in 2016, 195 countries committed to the Paris Agreement, with a goal of undertaking rapid reductions in greenhouse gas emissions and a long-term target of limiting the increase in global average temperature to well below 2 degrees Celsius above pre-industrial levels.

A third, related change driver is facilitating the smoother integration of distributed energy resources (DER) using smart grid technology and an advanced distribution management systems (ADMS), which can minimize technical losses. The use of DER and local production has exploded as utilities and consumers seek more sustainable, efficient energy. Adding DER to the energy mix is a perfect chance to produce and provide cleaner energy as well as add flexibility and security to your system. However, the current power distribution networks were not designed to handle this influx of DERs, so utilities are focusing on the infrastructure and technology, such as smart grids and ADMS, that are necessary to successfully integrate alternative energy into the grid.

In the second post of this series, I’ll describe strategies for maximizing grid efficiency to improve operations, save money, and comply with current and upcoming regulations.

For an in-depth look at how you can leverage smart grid tools to meet energy savings obligations as well as strategies and best practices for cutting costs, read “Smart Distribution Utility Strategies that Maximize Grid Efficiency.”


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