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Efficiency is a fundamental component of utilities’ future and the opportunities for improvement are everywhere.
The importance of energy efficiency is being recognized worldwide, as shown through a flurry of new initiatives and legislation. Governments from 106 countries are working together to make sustainable energy a reality through Sustainable Energy for All, a global initiative led by the UN Secretary-General and the President of the World Bank. One of its three main objectives is to double the global rate of improvement in energy efficiency by 2030. The EU has also set its own ambitious goal of making a 20 percent improvement in energy efficiency by 2020 as part of its Energy Efficiency Directive.
These regulatory pushes alone are strong motivators for change but energy efficiency provides many other benefits for both utilities and consumers:
- Lowers CO2 emissions and reduces greenhouse gases
- Saves billions of dollars annually worldwide through energy cost savings
- Improves utilities’ system reliability
- Lowers costs of energy generation
- Reduces investments in transmission and distribution (T&D) infrastructure
- Decreases risk
- Improves energy security
- Reduces dependence on scarce resources
- Stimulates economic growth and development by providing more affordable, useful energy and creating jobs
But there is a flipside for electric utilities: Their sales of kWhs of energy will drop. Because increasing prices to maintain revenue seems difficult, they should foster electrification of usages to compensate for this drop (e.g. heat pumps, electric vehicles). But for electricity to be competitive, they must engage in optimization across the board.
Beyond energy efficiency, there are indeed two more types of efficiencies utilities should improve: capital expenditure (CapEx) efficiency and operational expense (OpEx) efficiency.
CapEx efficiency: Utilities can smarten their CapEx spending rather than systematically going for plain network reinforcement or capacity extension. They must identify areas where they can invest in new hardware and in digital solutions — this could mean adding smarter equipment, redesigning existing assets to embed intelligence and automation, or investing in new technology, such as storage or demand-side management that will reduce or even cancel the need for physical infrastructure altogether.
Right sizing equipment (e.g., transformers and switchgear) and networks (e.g., fewer lines, cables, and trenches) also means less grey energy, the energy embedded in their manufacturing and installation.
OpEx efficiency: The utility industry has often been considered to have a high degree of inefficiency, which drives up operational costs. For example, the U.S. Energy Information Administration (EIA) estimates that electricity T&D losses average about 6 percent of the electricity that is transmitted and distributed annually in the United States. To contain costs, utilities must control energy-consuming operations and monitor performance because energy losses translate to wasted energy, which comes at a high cost. Planning, measuring, and improving T&D efficiency can reduce operational costs.
Utilities must also factor the migration from centralized plants to more local generation into their OpEx strategy, as well as the shift toward modern condition-based maintenance strategies, which allows equipment to be configured and operated near to its physical capacity. Known in the utility business as asset sweating, this allows DSOs to get the most out of their existing infrastructure and even defer equipment purchases, all while providing the same standard of service to customers.
Energy efficiency: Energy losses in an electrical system are the difference between the primary energy input and the energy output at the consumption meters. The biggest energy losses occur in generation (in the range of 25-50%) but network losses can also be significant (3-12%). Downstream savings are multiplied by their impact upstream, where more efficiency improvements are limited by the laws of thermodynamics. Thus utilities should use efficient equipment in their networks such as low-loss transformers, but also actively manage power dissipation in their grid by dynamically reconfiguring it, thanks to sensors, software such as ADMS and analytics that constantly calculate the shortest and least resistant path to the flow of electrons.
The potential for efficiency in electric utilities can be freed by efficiency-enabling technologies. The future of utilities lies in using them with sensors and actuators scattered across the field, combined with analytics that give a much better understanding of energy flows and supply-demand balancing. Efficiency is what will make electric utilities stay relevant.
To learn more about the future of the utility industry, read our free ebook, Powering an Always-on World. And be sure to check out the other blog posts in this series: