Future Networks - Microgrids and the Regulation

Renewables, battery technologies, microgrids. They’re coming, in one form or another, that’s a given. But do they need to be a threat to the utilities of today? Or, could we think of ways to cooperate in order to turn the development into something great for us all – the utilities, the energy consumers, the entire society?

Drawing from his interest that I introduced previously, the backcasting methodology, Tarmo Mere, Segment Director for Electric & Gas at Trimble Energy, encourages utilities to consider their decisions and actions today, in order to gain a better tomorrow. “As for the technologies affecting the utility business, for example the solar power will evolve, and it will become more efficient and more affordable for households and companies alike,” he states.

​Further, combining the alternative energy sources with the battery technology is likely to result in independent microgrids, which, in turn, will significantly affect the electricity distribution business. “Whether it’s a single household or several ones,” Tarmo explains, “they can be totally independent from the network because they are producing and consuming the energy at different times, so this will even up, and it provides a viable alternative for the traditional utility customers, so that they actually no longer need the distribution network.” The remaining question is how to store the energy well enough at daytime in order to consume it at night.

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Food for thought: Cooperate - But Why?

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​Where the renewable energy sources are already used in countries where there are a lot of resources such as daylight or wind, it’s still a challenge in the northern regions. “The development of the technology will enable this also in regions where there is less light especially in the winter time. For the Nordic countries, I believe in 5 or 10 years - who knows - the technology will have matured enough for building up independent microgrids,” Tarmo continues. However, this is heavily dependent on the battery technology. “For example, for the solar power, we need to be able to store the energy when there is sunlight and consume it when it’s dark. When the technology evolves to this stage, I believe the solar power becomes a very feasible solution for the northern regions, as well.”

“If the network companies make big investments that are then never taken to use - someone has to pay for it.”

Tarmo Mere comes from a CEO background from Elektrilevi, the electric distribution company of Eesti Energi. Joining Trimble in 2017, he today leads the Electric & Gas sales, consultation and partner management at Trimble Energy in Europe and the APAC region.

​As the development is inevitable, also the distribution networks need to start looking at it from the perspective of finding a new business model for them - and in order to succeed, they need to have the regulators on board, too. “I believe the regulators play a very important role here, because they steer what the network companies can and should do, and how,” Tarmo says, and continues: “A model where one party sets the rules and the others are to follow is not the most effective. Instead, the knowledge from both sides should be combined in a collaborative way to get a wider benefit also for the entire society.”
 
As an example, many countries have quite hard regulation on the distribution reliability of the network, and this motivates the network companies to invest more in cabling. However, this investment stays underground for 40 to 60 years. “For me, it’s quite terrible to think that we wouldn’t find any kind of replacing technologies during that time,” Tarmo points out. “So there is a good chance that there will never be a payback time for those cables, as the alternative technology will evolve faster.”

​“Considering every participant in the game, whether it’s the regulator, the consumers, or the network companies, if they’re optimizing only from their point of view, there will be no overall optimal solution,” Tarmo reflects. Therefore, he encourages the utilities to take more role in the development and try to cooperate with the regulators more. “Providing the regulators both with the utilities’ understanding on the new technologies, as well as with insight on how they affect the utility business will allow the authorities to better adapt the regulation, making it more suitable also for the future needs. This kind of cooperation can lead to a better good in the society, I think,” Tarmo concludes.
 
Food for thought, indeed! What are your thoughts - are the utilities really threatened to be out of business? I’d love to find your comments on our LinkedIn page!

-Hanna

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