The Electricity Industry is going through a rapid transformation. The stability and reliability of current Energy Market and the Electric Grid is under threat with decentralization, decarbonization and democratization of the electric industry. The transformation also provides an opportunity to improve our electric infrastructure, improve security, improve renewable portfolios, and reduce cost.
The rise of distributed generation (solar, wind, biomass, cogeneration etc.) combined with affordable storage is starting to reduce dependency on central generators that are often fossil-based. Central generators – including those from renewable sources – have traditionally been a reliable source of electricity supply in the energy market and a provider of predictable capacity to the grid. With the rise of distributed generators and storage and other technologies collectively referred to as Distributed Energy Resources (DER), business models are starting to evolve from a handful of reliable, well known, high capacity and centralized generation sources to a myriad of distributed generation sources that are distributed, intermittent and with varying asset capacities. It’s axiomatic that decentralization is good, but decentralization of energy assets will initially lower stability and reliability, resulting in increased grid complexity.
This transformation also provides opportunities. The proximity of the distributed generation and storage to the consumer load will reduce infrastructure cost. The potential to accelerate the reduction of carbon footprint could generate a wave of opportunities for renewable energy that is driven by consumer demand. To realize these opportunities, legacy retail and wholesale markets will need to adapt and distributed generation owners and aggregators can choose to become active participants in these markets. The traditional transmission and distribution models will also change. Trends such as consumers becoming producers (prosumers), peer-to-peer trading, affordability of electric vehicles and storage batteries will create new opportunities in the retail market that will impact the wholesale market.
Over time, efficient operation or evolution of the retail and wholesale markets will foster alignment of energy prices with the supply and demand of electricity with real-time grid controls, grid balancing and real-time transactions. Eventually in the long term, a true Transactive energy grid and market will evolve.