The rise of distributed generation

The world of electricity is embarking on an incredible new journey and there's going to be a once-in-a-lifetime degree of upheaval associated with the changes we will experience. With these hugely significant changes come enormous opportunities for electrical and communications contractors.

The most significant change we're already seeing in the electricity system is the rise of distributed generation. Today's large, centralised gas- or coal-fired power stations will soon be replaced by much smaller electricity generators — located much closer to where we use that electricity. Perhaps the most familiar of these generators is the solar electricity generator, which we now see on roofs all over Australia. The amazing thing is that we're only just starting on the solar revolution.

Australia today has around 1.4 million solar installations covering around 12% of our homes. Even the most conservative commentators expect this to dramatically increase in the years to come. In fact, many leading organisations, including CSIRO, are expecting distributed generation, like solar, to make up around 50% of our generation in the decades to come. That's around another three million installations to be done!

There are many benefits to generating electricity from solar. But the key drivers for its incredible uptake in years to come won't be 'green', or related to saving the world or combating climate change. It's just going to be simple economics. Today, in many parts of Australia, electricity from solar panels is cheaper than the price of retail electricity from the grid. And the price of solar will continue to drop. In fact, it has been decreasing by around 20% every two years for decades now. Incredibly, in many parts of the world, the biggest cost when purchasing a solar system today isn't the price of the solar panels, or the installation labour, or the inverter. It is actually the finance — or more to the point, the interest being charged to fund the system. And while this seems incredible, it is, in fact, a cost that can easily be reduced. As banks and the broader industry get more familiar with the technology, interest rates for funding solar could easily drop. So when homes and businesses realise that electricity from solar is simply cheaper than their alternatives, imagine what that will do to the uptake of these systems?

Of course, electricity from solar isn't without its challenges. What happens on rainy days or at night when there's no sunshine? Traditionally, storing electricity for these times has been incredibly difficult. Battery systems have been available for years but they are expensive and need careful maintenance, so they have almost never been used in a regular suburban house setting. Once again, this is all changing. And once again, it's being driven by simple economics. The arrival of new battery technologies such as advanced lead acid and lithium batteries has completely transformed things.

Today we are seeing compact, maintenance-free battery systems appearing on the market from major vendors such as Panasonic, LG, Samsung, Tesla and Enphase. These new batteries are specifically targeted at installation in people's homes. And again, the price of these systems has been decreasing at an amazing rate. Common lithium battery cells have been dropping in price by around 15% per year over the past several years. Many independent commentators predict that these batteries will be commonplace in just a few years' time.

Solar isn't without its challenges though. For example, a high concentration of solar systems can make voltage control on the electricity grid quite difficult to manage. While in the past, concerns around such issues might have limited the uptake of solar across Australia, today, once again things are changing dramatically. Now, there are new inverters and Australian Standards (AS4777) coming onto the market that introduce new functionality for inverters to allow them to help maintain power quality — these new inverters can provide, or absorb, reactive power and actually help prop up the grid around them. Rather than large numbers of solar inverters being considered a risk, they will soon be seen as an asset for the electricity grid.

Earlier this year, these new capabilities were demonstrated on a huge scale in Hawaii, when the electricity grid operator recognised that the amount of solar in Hawaii was now close to the capacity of Hawaii's largest traditional generator. They therefore decided to reconfigure many of the solar inverters on the island, so they could “ride through" grid disturbances, helping stabilise the grid. With this goal in mind, the grid operator in Hawaii contacted the control room of Enphase, a manufacturer of many of the solar inverters in Hawaii. Operating in real time, Enphase engineers in Los Angeles (thousands of kilometres away) were able to transmit a command that reconfigured over 800,000 solar inverters, on 51,000 homes across Hawaii, so they would stay online despite rapidly swinging grid conditions.

It's worth pausing here. Today, solar isn't just cheaper for the end consumer than conventional grid electricity, solar systems are now even being used to maintain the reliability of the broader electricity grid. Imagine what this will do to the uptake of this technology across Australia?

If Thomas Edison — the father of electricity — were alive today, he'd probably recognise most of the components in today's electricity system. And that tells you just how slowly things have developed over the past century. But within five years from today, he probably wouldn't recognise many of the technologies that will be commonplace in our system. Unfortunately for Edison, even if he'd have gotten his head around all the localised generation, storage and reactive power control on the power system of the immediate future, things wouldn't stay the same for long. Further changes are coming.

Already in Australia trials are underway of microgrids and 'transactional' energy systems, where local houses and buildings essentially trade energy between themselves. This provides complete independence from the grid, and often actually improves power quality and reliability. In doing so, these systems demonstrate that we don't really need 'baseload' power generation — rather, what's needed is to ensure that generation is carefully matched to supply at any instant. To achieve this, microgrids are managed by automated controllers that can accurately predict future load and generation, and then proactively manage loads and energy storage to keep things in balance with the available generation, all the while maintaining power quality to the end user.

Driven purely by economics and their practical benefits, the uptake of distributed solar and battery storage in Australia is akin to the disruption digital photography caused film or the mobile phone caused traditional telephony. Importantly, while the approaching changes will be massive and profound, they aren't anything to be afraid of. In fact, they represent an incredible opportunity for electrical and communications contractors. Solar, batteries, energy management systems and other new technologies operate using the same electrical and communications systems and technologies that have been around for years, but now there are some new developments, and electrical and communications contractors need to acquire additional skills to keep up.

The technologies and changes mentioned here are now becoming mainstream, to the point where major investment banks like Morgan Stanley and UBS are now publishing papers on how they expect solar and batteries to be a huge industry over the next few years. For example, Morgan Stanley predicts around 2.4 million Australian homes will install solar and battery systems, and these systems will have a payback time to the household of less than 10 years. Ultimately, this means more work, more challenges and more opportunities for our industry.

Somehow I think Thomas Edison would have been a bit disappointed if he had come back and recognised so many of the things in our electricity system today so many years on from his initial inventions. However, if he knew about the massive changes just around the corner, I think he'd be incredibly excited for us all. Edison once said, “Everything comes to him who hustles while he waits..."

Exciting times are ahead — hustle on I say.

*Glenn Platt, who leads CSIRO's Energy Flagship, will be the keynote speaker for the National Electrical and Communications Association (NECA) conference to be held in South Africa from 17–21 April 2016. Platt leads the Grids and Energy Efficiency program within CSIRO's Energy Flagship, focusing on solving the energy challenges of consumers, businesses and grids. The program's work ranges from energy storage, electric vehicles, smart grids and the integration of large-scale solar systems, through to solar cooling, energy management systems, economics and understanding people's response and uptake of particular low-carbon energy options.

Glenn is a Vincent Fairfax Fellow and a recipient of the Australian Financial Review Young Executive of the Year award. Glenn is a graduate of Harvard Business School, holds PhD and electrical engineering degrees from the University of Newcastle in Australia, and is an adjunct professor at the University of Technology, Sydney. Prior to CSIRO, Glenn worked in Denmark with Nokia Mobile Phones on the standardisation and application of cutting-edge mobile communications technology. Before his time in Denmark, Glenn was employed in an engineering capacity for various Australian engineering consultancies, working on industrial automation and control projects.

Image credit: ©iStockphoto.com/Howard Oates