In first part of this article, we briefly discussed the four new and emerging trends that have been posing serious risks and challenges to the traditional way of supplying and delivering electricity to consumers. In this part, we will identify a number of ways in which our government and power sector entities can not only deal with these challenges effectively but in fact can translate them into viable opportunities. The key to this transformation, however, will be to cast away the traditional ways of doing this business and adopting in its place a more innovative, creative, and flexible business operating model.
The traditional electric utility business operating model in which power flows predominantly in one direction (from publically- or privately-owned power generating plants to the end-users via the transmission and distribution grids) and revenues flow in the opposite direction (from end-users to the power company) with electricity prices fixed and controlled by a regulator is not proving effective any more in dealing with the new risks and challenges of the emerging electricity market.
In the changed environment, power can and will flow in either direction, sometimes within localized loops, as some of the consumers may now be able to meet part or all of their electricity demand by generation at their own premises,either avoiding the utility’s grid altogether or using it only for back-up, and not infrequently, providing the utility their excess power and generating facilities to contribute to grid security and reliability. Like the power, revenues can and will also flow in either direction.
There is a compelling need, therefore, to transform the existing electric utility businessin the country along more imaginative and innovative lines to deal with the technical and economic challenges that these new developments pose to this business and to derive the true valuethat these hold for our country.
In the absence of a favorable environment and a facilitative business operating model, these newer technologies and distributed systems will be merely”connected” with the utility grid, and not optimally “integrated” with it, thus raising numerous technical and financial challenges forgrid operators and utility managers. Consumers will lose too because many of the benefits that their newer technologies and schemes hold for the utility may not be fully realized and compensatedin the existing operating model.The society on the whole will thus suffer.
In order to deal with the above challenges and to derive the most value that these new developments can provide to our nation, the existing electric utility business in the country will need to be recast along the following suggested lines.
The new policy framework should also encourage deployment of storage technologies in the country as these can enhance the value of renewable energy technologies while easing their intermittency and variability constraints
First of all, the government will need to provide an enabling legal and policyframework toencourage the promotion and deployment of distributed energy generation,storage technologies,and demand management schemes in the local electricity system. This framework should empower power sector entities to devise and introduce innovative and flexible pricing and compensation schemes to induce consumers and other investors to install such distributed technologies in the system. It should also enable proper accounting, allocation, and recovery of the various costs from the participating consumers and other investors while allowing them a fair remuneration for the benefits their facilities contribute to the power grid.
The new policy framework should also encourage deployment of storage technologies in the country as these can enhance the value of renewable energy technologies while easing their intermittency and variability constraints. Similarly, besides being a source of new electric demand, battery packs in electric vehicles (EVs) can also support the power grid in more economical ways than the traditional and largely generation-based solutions.
Second, the electricity business in the country will need to be reorganized along more open and flexible lines to treat these new distributed supply and demand options not as competitors or threat to the utility business but insteadas partners and complements to the utility’sown efforts to serve the economy and society with reliable and economic electric power. The utility managers should not just encourage, but actually seek out aggressively, potential contributions from customers and investors on such options and technologies.
In the new business environment, energy service companies can play an important and critical role in promoting demand-management schemes and behind-the-meter or distributed electricity generating options that individual consumersmay find difficult to invest owing to their limited budgets
In the new business environment, energy service companies can play an important and critical role in promoting demand-management schemes and behind-the-meter or distributed electricity generating options that individual consumersmay find difficult to invest owing to their limited budgets. These companies can facilitate consumers, on one hand, by investing on their behalf and the local utilities, on the other hand, by aggregating and offering at a meaningful scalethe demand reduction and electricity supply capability of small, distributed, and dispersed optionsas cost-effective alternatives to grid upgrades and extensions.
Third, the various entities that have the mandate to serve the electricity demand in the country will need to develop appropriate tools and data and information bases and make these freely accessible to potential customers and investors so that they can use these to assess the scope and technical and economic viability of such options and schemes in meeting customers’ own demand for electricity as well as their contribution to the local utility’s system. This should also include any technical assistance or support customers and investors might need for making such assessments.
As the electricitytransmission and distribution (T&D) grid will act as the enabling platform and conduit for integration and operation of diverse and distributed technologies, the fourth and perhaps the most critical pillar in the above reform effort must focus on modernizing the exiting T&D networks in the country to transform these into a smart and intelligent electricity grid that can facilitate the successful integration and operation of such technologies and schemes.
The modernized grid, especially the distribution system,will have to be made capable of bringing together a range of energy technologies and processes, both electric and non-electric, and various market actors, producers, operators, and end-users, with the aim to optimize resource utilization and operational performance, minimize economic and environmental costs, and maximize system security, reliability, and resilience.
Pakistan’s energy sector decision-makers simply cannot afford to sit passively in the face of these new trends and let these pass by or disrupt the existing electricity business,as the political, economic, and social costs of their inaction to the nation would be huge and serious. They should instead embrace these new trends as a challenge and use them as a good opportunity to transform the currently ailing power sector into a vibrant and self-sustaining business in the future.
The writer is a freelance consultant, specializing in sustainable energy and power system planning and development. He can be reached via email at [email protected].