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EEI International Insights:
Electric Company Investments in Smarter Energy Infrastructure
November 2018

EEI International Insights: Electric Company Investments in Smarter Energy Infrastructure

Around the world, electric companies are investing in new transmission and distribution infrastructure to protect the energy grid from cyber and physical risks and enable it to deliver new services to customers. Total global spending on smarter energy infrastructure has risen steadily over the past decade, topping USD 300 billion in 2017, according to the IEA World Investment Outlook. For some regions, including much of Asia and Africa, these investments are being made to meet rising demand. In others, including much of North America, Europe and Japan, investments are helping to upgrade the energy system so that it can provide customers new services and capabilities they desire. In both cases, smarter energy infrastructure is the key to delivering the energy future that customers want by enabling electric companies to collect, analyze, and share energy data, as well as monitor and remotely control grid-connected devices and equipment. Together, these new “smart” capabilities are enabling the energy grid to be managed more reliably, safely, and efficiently than ever before. 

Japan: Competition and Changing Demographics

In Japan, investments in smarter energy infrastructure are occurring against the backdrop of the deregulation of Japan’s retail electricity market, ongoing mitigation of damage from the historic 2011 tsunami, and an aging and shrinking population. As the electricity markets in Japan are evolving, many electric companies are exploring new grid technologies, digital services, products, and platforms to improve customer satisfaction. For example, Tokyo Electric Power Company (TEPCO), which is an early investor in blockchain technologies, announced in March 2018 the launch of a new online retail entity that offers services such as flat rate renewable energy purchasing and home installations of battery storage and solar PV that soon may be capable of participating in a peer-to-peer energy trading platform. TEPCO has also made investments in emerging technology companies such as Moixa Energy Holdings, the UK’s leading residential battery company, and United Wind, Inc, a U.S.-based provider of small wind power generation. Kansai Electric Power Company is also developing its own peer-to-peer platform, accounting recently a deal with Australian startup Power Ledger to trial blockchain technologies and bring a virtual power plant project to the city of Osaka. These types of programs have the potential to unlock new opportunities for consumers seeking to self-generate and for grid operators that can harness DERS to provide the grid with reliability services. 

To increase energy grid resiliency in the wake of Japan’s 2011 tsunami, electric companies are also working with cities, such as Higashi-Matsushima and Ashiya, and large industrial customers including Toyota​, to develop smart city projects built around microgrids and flexible and distributed energy solutions. Several microgrid projects in Japan are utilizing a combination of solar photovoltaics, battery capacity, and backup biodiesel or gas generation to provide continuous power during potential future outages. 

Finally, to meet the needs of Japan’s aging population, electric companies are investing heavily in automation and software platforms that use artificial intelligence (AI) and Internet of Things (IoT) enabled devices. The goal is not only to use AI to automate IT and business processes, but also to improve customer experiences by bringing home energy management systems into mainstream use. These home energy management systems are expected to reduce electricity and gas consumption by automatically optimizing whole home systems, increase customer control and comfort through applications like interactive voice response technologies, and even prevent health emergencies in the elderly by notifying family and health providers when potential emergencies are detected.   

North America: Storm Resilience and Customer Solutions

In North America, where smart meter rollouts have reached 60 percent of U.S. households and more than half of Canadian households, electric companies are using meter data to make the energy grid more resilience and more capable. For example, electric companies such as American Electric Power, Baltimore Gas & Electric, and DTE Energy are using power quality information from smart meters (such voltage and reactive power) to automate distribution networks and circuit reconfiguration, perform volt/VAR management, monitor the performance of connected devices, and predict and proactively service transmission and distribution network assets. Consumers are also benefitting as companies leverage smart meters to enable customers better services for electric vehicle ownership, such as pay-as-you-go billing and EV charging management. By 2020 in California, Pacific Gas and Electric, San Diego Gas & Electric, and Southern California Edison will have built 12,500 new EV charging locations, while in Canada, Hydro-Québec’s research institute, IREQ, is leading research on vehicle-to-home solutions that would allow electric cars to temporarily provide power to homes during outages. 

Europe: Decentralization and Decarbonization 

In Europe, where Eurelectric members have committed to delivering a carbon-neutral power supply by 2050, smarter energy infrastructure provides an enabling condition for pursuing the electrification of transportation and other aspects of the economy in order to rapidly reduce carbon emissions. With increasing amounts of distributed energy resources on the grid, European electric companies are developing new services that collect and store electricity data, actively control decentralized generation, and balance localized demand and enable demand response. European electric companies are investing heavily in distributed energy resources. For example, EDF Group of France recently announced plans to invest approximately $10 billion in energy storage technology applications over the next 20 years while expanding storage business operations in North America. To identify new frontier technologies, Electricity Supply Board of Ireland and other European and global electric companies are making early stage investments through Free Electron, an accelerator program helping bring smart data monitoring and other technologies to market.  

Unique drivers, common goals

The path forward for infrastructure investment in any particular jurisdiction depends on numerous factors, such as regulatory design, ownership model, customer preferences, equity considerations, etc. When leaders from Asia, Europe, and North America’s electric power industry associations met in Washington​ for the 25th International Electricity Summit this year, a common refrain from all corners of the globe was the delicate challenge the industry faces in balancing the opportunities for new technology deployment with the imperative to provide affordable and accessible electricity to all consumers. The experience over the past decade would indicate that as the electric power industry continues to transform, smarter energy infrastructure will play a key role in helping deliver on the promise of reliable, resilient, affordable, and increasingly clean energy to meet customer needs.