What is this fourth industrial revolution (4IR) that people are raving about? It’s a digital revolution that will transform the way people live, work and relate to each other. Societies will be ‘hyper-connected’, where digital interfaces such as the internet of things (IoT), big data, robotics, mobile devices and artificial intelligence will trigger connection with everything – including electricity grids.
The traditional model of utilities being responsible for generation, transmission and/or distribution has allowed for the provision of affordable electricity to a large part of the global population. Electricity is typically generated at large facilities using fossil fuels such as coal and natural gas or from large nuclear power plants. Subsequently, the electricity is transmitted through international and national high voltage grids to local distribution networks. However, this model has also resulted in a lack of flexibility, restrictive and archaic regulations and the externalisation of many environmental costs, such as environmental pollution. Furthermore, this structure has restricted the interactive participation of customers in the sector.
Trends in the electricity sector
The electricity landscape will transform significantly as a result of the 4IR, and essentially there are three noticeable trends in the electricity sector; namely Decentralisation, Digitalisation and Democratisation (also referred to as the 3D trends).
a) Decentralisation: Significant technological advancements in the past decade have drastically decreased the cost of renewable energy technologies, on both a large and small scale. This has enabled the generation of electricity to become more localised and decentralised. Currently, customers still need grid connection to fill in the gap where renewable energy cannot meet energy demands; however, decreasing costs in storage technology will add a new dimension to this.
b) Digitalisation: Increasing integration with information and telecommunications (IT) networks has permitted electricity systems to become not only connected but also ‘smart’. Digitalisation of both the grid – with smart metering, smart sensors, automation and other digital network technologies – and beyond the meter. The advent of the IoT and a surge of power-consuming connected devices will be the norm as a result of the 4IR.
c) Democratisation: The convergence of both decentralisation and digitalisation will enable customers to freely access electricity according to their preferences from multiple sources such as their own generation or storage, their neighbours or utilities. Consumers will have greater control over the management of their consumption.
The 3D trends have the potential to unlock significant economic, social and environmental value that will increase the efficiency of the overall electrification system, optimising capital allocation, and also driving a customer centric culture in the supply of electricity.