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Why utilities should invest in distributed energy

By Elisabeth Brinton, Executive General Manager, New Energy for AGL
shutterstock_278061698While distributed generation could be seen as a threat to utilities and their energy business models, it is actually unlocking a new area of growth and providing benefits for the grid, the consumer and the environment.

elisabeth_3379_01As we transition to a carbon-constrained economy, distributed energy resources (DERs) offer an exciting pathway for helping to achieve this at scale.

Behind-the-Meter or customer-sited DERs expand the supply of green electricity being used in the overall energy system and advance overall sustainability for Australians as a whole, while opening new opportunities for energy retailers to address carbon reduction and offer practical solutions, which are affordable and scalable for all consumers.

DERs also give consumers greater control of their energy consumption and new choices for how they manage their energy use.

The world is changing rapidly. While the traditional grid system has functioned well, delivering proven reliability and allowing participants to share the cost and economies of scale, low or no carbon is our future and it’s a key driver of industry, pushing new technologies and moving at scale with renewables.

We’re collectively trying to find and offer affordable, low carbon solutions. The cost of distributed energy resources is dropping, making them affordable and increasingly accessible for all.

This has a dual benefit – helping society as a whole solve for carbon, while providing affordable energy for everyone in our community across all socio-economic ranges.

Different DER technologies provide different uses and solutions. Residential rooftop solar, for example, provides localised generation and lowers the consumer’s bill. It also adds green electrons into the grid, which help us all solve for carbon.

Then if you add in storage technologies with a digital meter and digital inverter and integrate them with energy management software, you can have a local asset that when connected to the network and aggregated together with other such DER systems becomes a practical tool to help solve regional energy constraints.

Essentially this is what a virtual power plant or VPP is all about, solving for multiple benefits: consumer, energy system and climate.

As a whole, DERs have multiple bottom line benefits and benefactors – the energy wholesaler, the network, the grid system, society, and customers. For consumers these new technologies enable them to participate and engage with their home and its essential energy in new ways and make decisions that best meet their individual household needs.

As a first step for example, just adding a digital meter can help people manage their bill to their budget through new data enabled  customer service tools like AGL’s mobile app.

AGL’s focus is our customers and being a personalised retailer for them so alignment of our business with what’s important to our customers is paramount. This is why we believe DERs are an essential part of energy’s new retail paradigm.

DERs give individual customers more control, more choice and more options which align with their own choices, priorities and ideologies. It also gives our customers their own financial planning around energy and design of an energy system that best meets their individual needs.

Some have large families and they’ll have different requirements to a smaller family. Some businesses have a requirement for high voltage supply because they’re running shop equipment.

When a consumer has a solar and battery system on premise it allows them to better plan energy usage so they can avoid highest congestion prices and therefore save money. We call it time-of-use tariffs for peak periods; put simply, it is congestion pricing.

It’s just like rush hour traffic – you can visualise electrons as cars on the road and so align pricing with traffic. In dense urban places there’s lots of demand for the same roads at the same time. Uber for example is using congestion pricing in rush hour.

Distributed energy resources can enable the consumer to monitor and control their energy consumption in peak and non-peak periods, and therefore manage their costs.

Distributed generation can help shave the spikes in load demand during peak usage times such as high temperature days. This can avoid hefty investments in new substations or transmission lines by the networks.

This is one of the multiple value pools our South Australian Virtual Power Plant (VPP) program is aiming to demonstrate.

For trial participants, they want to have not only backup power for their own household, individually they also think it’s really cool to help the environment, to be able to participate in the reliability and the stability of the grid and earn value for that.

Our aim is to help demonstrate that value. What that does for AGL is it unlocks growth in the area of ancillary services to the grid, it gives us a new type of commercial customer, the network itself.

We’re working in partnership with the network as well as the Australian Renewable Energy Agency (ARENA) and they are good partners. This is exciting as I think it’s a potential model for Australia going forward.

As a major energy retailer, we see where new technologies are going and opening up new areas of value with customers. That’s an exciting place for AGL.

As global energy analysts such as the likes of Gartner, Bloomberg and McKinsey have shown, the energy value chain is moving closer to the customer. We see our role as a personalised retailer – that’s our focus and rightful place to be.

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