The New Challenges Facing Power Grids

Fabien RoquesAssociate Professor at Université Paris-Dauphine and consultant at FTI
"The electricity sector is undergoing a truly Copernican revolution, driven by the combined forces of technology and society."

The Future Electricity Market Will Be Hybrid

The rise of distributed powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... generation and the development of “smart communities” within buildings, districts and regions are radically transforming the traditionally centralized structure of power systems. In this article, Fabien Roques, Associate Professor at Université Paris-Dauphine, analyzes the future relationships between power grids and new local ecosystems.

The electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor... sector is undergoing a truly Copernican revolution, driven by the combined forces of technology and society.

Technological disruption is being achieved through new decentralized generation techniques – first and foremost in the area of solar power – which are enabling us to put a definitive end to a century dominated by what is known as “increasing returns to scale”, that is to say “the bigger, the cheaper”. This phenomenon is epitomized by nuclear power, where reactors were first built with capacities of 900 megawatts, which rose to 1,300 megawatts, and will soon increase to 1,600 megawatts. Today, we can do more with less, as the saying goes.

The social aspect comes from a fundamental shift in our society, as people are now willingly moving toward self-sufficiency as part of local communities and as individuals consuming what they produce. This is a very deep aspiration, which is not just limited to energy systems.

The economist in me must, of course, wonder about the cost of this transition to a decentralized world and the economic efficiency needed to benefit from the potential synergies between production and consumption areas.

Moving from one extreme to another, i.e., from a highly centralized structure to a completely decentralized one, will incur substantial costs. It is difficult to say where we will be on the spectrum in the long term, but the most likely outcome is a hybrid structure, with local ecosystems coexisting alongside a centralized system that will need to be updated. In other words, there will be an overlap, or a “tiling” effect, from the local to the national or even European level.

The Central Power Grid Acting as “Insurance”

Maintaining the central power grid is essential for a variety of reasons.

First, we must ensure economic efficiency and solidarity. Not all regions will have the same production costs or consumption patterns. For solar power alone, the amount of sunshine will create disparities in output. Additionally, the cost of connecting and maintaining the network for an isolated house in the countryside is not the same as for an urban residence in a dense environment. It will therefore be necessary to reinvent the historical equalization provided until now by the power transmission and distribution networks, which ensure exchanges between regions and solidarity between urban and rural areas.

Then there is the intermittency, or variability, of renewable energies. But at what level should we address this issue? At the individual house level, consumption rarely peaks at the same time as production periods. It is possible to store power, but battery costs today make this difficult. With modern technologies, a completely self-sufficient house would therefore incur substantial extra costs. It is, however, a different issue at the district level, where offices and residential buildings are built side by side, and the inhabitants have different working hours. Under these conditions, consumption profiles can be “smoothed out” and there is a wider range of local production resources. This diversity makes it possible to imagine a certain degree of self-sufficiency, bearing inmind, however, that total self-sufficiency is not economically efficient.

For these reasons, local networks and the overarching national grid will see their roles change to providing “insurance” that guarantees continuous and high-quality service.

This development must be supported by changes in the feed-in tariff and power pricing model. Until now, consumers have essentially paid in proportion to the kilowatt-hours of energy consumed. In the future, they will probably pay a larger fixed portion, regardless of what they actually consume. This fixed amount will cover the insurance that the grid provides and not the electrons flowing through it. However, this model is not the first of its kind, as all motorists pay an annual insurance premium, even if they never have an accident.

Insurance of this kind can also guarantee a “level of service”. Private consumers may choose to allow their electricity supply to be suspended for specified periods, resulting, for example, in their heating being switched off for an hour. Similarly, a manufacturer may decide to stop a plant’s machines during certain times. However, both may decide to pay more for a higher level of service and/or continuity of supply.

Lastly, networks will make it possible to take full advantage of the gradual development of battery storage in homes, districts or directly in support of the grid, which is one of the challenges of the decades to come. The move to roll out large-scale power storage has begun in areas where electricity prices are high, such as California and Germany. The cost of batteries is still an obstacle today, but this will decrease, although at a rate that is difficult to predict. Battery storage will have a highly transformative effect on the power system, and more broadly on society in general, because it is linked to another fundamental aspect of the future: mobility and electric vehicles.

Fabien Roques is an Associate Professor at Université Paris-Dauphine and, alongside this role, also serves as a consultant at FTI – Compass Lexecon. After obtaining an engineering degree from École Centrale de Lyon, he completed his Ph.D. in energy economics at the University of Cambridge. He then worked as a senior economist for the International Energy Agency (IEA)An independent, intergovernmental organization founded within the framework of the OECD... , where he oversaw the electricity sector for the World Energy Outlook publications.

Thomas Pellerin-CarlinResearcher at the Jacques Delors Institute on European energy policy issues
"Users are becoming increasingly active in the energy transition, and are now core players in an innovative process encompassing technologies, habits and business models"

Energy Transition Success Depends on Europe

The gradual construction of a European energy union has profound implications for the powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... grids of European countries. As these networks become more interconnected, we will be able to find solutions to problems that would otherwise be too complex to resolve on a national level. In this article, Thomas Pellerin-Carlin, a researcher at the Jacques Delors Institute, sheds light on the topic.

The approach to power systems has long been based on the energy source, i.e., is it better to produce energy with gas, nuclear, wind or oil? But the focus is now shifting to how best to deliver the “energy services” that the user wants. As energy users, we do not need gas, nuclear, wind or oil as such but rather an energy system that enables us to regulate temperature (e.g., heatIn the field of statistical thermodynamics today, heat refers to the transfer of the thermal agitation of the particles making up matter... or cool our homes), move around (e.g., go to work) and power the electrical devices we use every day (e.g., charge our phones). Additionally, we expect this system to be carbon-free so as to protect us from the effects of climate change.

The energy sector is currently undergoing three radical transformations in the areas of energy efficiencyIn economic terms, energy efficiency refers to the efforts made to reduce the energy consumption of a system... , the digital transition and renewable energies. There is also a fourth emerging in the form of electric vehicles. Among today’s many energy challenges, one often highlighted is the issue of intermittency (or variability) in renewable power generation. These words are not chosen by chance: “intermittency” betrays a reluctant approach whereas “variability” is more optimistic. This challenge is problematic at a national level. For example, a lull in wind or sunlight requires back-up measures to be put in place, mainly in the form of conventional thermal power plants. At a European level, the solutions are simpler.

Greater Potential in Europe

The energy transition can be more efficiently achieved at the European level than the national level, largely thanks to the benefits provided by the proliferation of production and consumption areas. Regarding production, the idea is that a lack of wind in Germany can be offset by wind in Spain, which is also true for solar energy. In terms of consumption, we can exploit the varying energy usage habits among countries. France, for example, can import electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor... from Spain because it knows that its peak consumption period is in winter between 6 p.m. and 8 p.m. Similarly, France is able to help Spain manage its own peak consumption, which falls around 9 p.m. to 10 p.m., because the Spanish typically have their evening meal later and, more generally speaking, because of the use of air conditioning during extremely hot weather in the summer.

Of course, a European energy union will not happen overnight. We need to continue developing power transmission networks, and investments to this end are already well underway.

We must also prepare for periods that combine extremely low temperatures, which increase consumption, fog, which reduces solar power production, and low-pressure areas, which reduce wind turbine output. This is a major issue but there are a variety of possible solutions.

One such solution, supported by Claude Turmes, a Member of the European Parliament (MEP), involves installing wind turbines on oil and gas platforms in the North Sea once they have been shut down after depleting their deposits. The electricity generated by these wind turbines can be used to produce hydrogenThe simplest and lightest atom, the most abundant element in the universe. via electrolysis or methane (ch4)The main component of natural gas deposits and oil deposit gas caps. Methane is produced naturally by landfills... through synthesis (referred to as power-to-gas). This renewably sourced natural gas can then be stored in former deposits and utilized in the event of exceptional shortages.

We may also see an alternate social organization emerge if European societies in the 2030s opt to limit their electricity consumption rather than spend tens of billions on building capacity just to be on the safe side.

Finally, users can change their consumption habits and play a more direct role in the energy transition, particularly by varying when they use energy. In this way, solar-powered heat pumps can be used to heat the home for half the day, and consumption can be interrupted if necessary during short periods while still guaranteeing the desired temperature. Equally, an electric car can be charged between 1 a.m. and 5 a.m. when consumption is low and the wind tends to be stronger. All these individual batteries can also act as backup storage that the central grid can use if necessary.

Users are becoming increasingly active in the energy transition, and are now core players in an innovative process encompassing technologies, habits and business models. It is by combining these initiatives at the local, regional, national and European levels that we can make the energy transition a success for all Europeans.

Thomas Pellerin-Carlin is a researcher at the Jacques Delors Institute, a think tank, where he focuses on European energy policy issues. A graduate of the College of Europe in Bruges, Belgium and the Institut d’Études Politiques in Lille, France, he has also worked for the French government at the French General Secretariat for European Affairs. In addition, Thomas Pellerin-Carlin was one of the organizers of the SPECQUE, an international Francophone simulation of the European Parliament set up in 1998 by students from Université Laval (Quebec, Canada) wishing to create a forum for Francophone dialogue among young people to enable them to better understand how the European Institutions function.