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Modernising the grid without breaking the bank

A start-up based in Scotland is confident it has found an affordable silver bullet to allow the world’s grids to deal with massive amounts of renewables, but system operators are not so sure

Explainer:
Significant amounts of investment are needed in the European transmission grid so it can deal with high levels of renewables. One company thinks it has the answer to making the grid fit for purpose without costing the earth

The problem:
Electricity bills are falling in many countries and solutions to the energy transition need to ensure this trend continues

Solutions:
A mixture of improving the status quo, innovative technologies and well designed grid tariffs

Key quote:
International markets, local flexibility and a strong grid are key for an efficient green electricity system in terms of security of supply and from a socio-economic perspective.”
Making the European transmission grid ready and able to deal with high levels of renewables and changes in the transport and consumption of electricity will require investment worth €114 billion by 2030, says the European Network of Transmission System Operators. The Faraday Grid, a private, investor backed company based in Edinburgh, Scotland, believes it has the answer to modernising the world’s electricity grids without breaking the bank, but system operators are doubtful about the idea of a silver bullet. Grid improvements are mainly financed by tariffs defined by national regulators, and investment costs are generally passed to consumers in electricity bills, which also include the costs of electricity consumed and other charges. Despite the need for investment, in many countries electricity prices are going down, largely because of increasing shares of low-cost renewables”, says Antina Sander, deputy CEO of the Renewables Grid Initiative (RGI), representing environmental non-governmental organisations and transmission system operators (TSOs) from across Europe. A report published by the European Commission, the EU executive body, in January 2019, shows that in 2017 EU household retail prices decreased for the first time since 2008. The trend of rises in network charges and taxes and levies stopped,” says the report. Levies did not increase, partly due to the falling unit costs of renewable energy investments which reduced the revenues needed to invest.” Taxes and levies make up 40% of average EU electricity prices. Germany now has the highest electricity prices in Europe, says the report, with Reuters reporting, in the same month, data from internet portal Check24 revealing that household electricity prices in Germany have reached record highs. This is a trend that will continue, suggests Richard Dowling, Faraday’s chief economist. Around the world the cost of generating clean electricity is falling rapidly, yet consumer bills continue to rise due to the growing costs of balancing services, network infrastructure, backup power and environment policies,” he says. The European Commission, however, implies the tools are there to stop this becoming a prevailing trend. A solid framework is in place, ranging from national taxes to EU energy, climate and capital market policies to ensure Europe’s energy prices and costs evolve in an efficient manner consistent with ensuring affordable and sustainable energy for all,” says the report. Andrew Scobie, Faraday Grid’s founder, is clear the energy transition should mean affordable electricity for everyone. His company’s solution is to replace traditional transformers in the grid with a network of exchangers”. Faraday is keeping the exact technology behind this under wraps, but Dowling describes it as: A system of decentralised control that puts the grid at the centre of our energy system for the first time ever in history.” The exchangers” allow power to flow bi-directionally to anyone anywhere across a network, unlike existing one directional networks,” he says. It autonomously and continuously adapts to variations throughout the network, creating a highly stable system capable of managing major fluctuations in supply and demand.” Andrew Wainwright from National Grid, the main UK TSO, comments that: Historically electricity networks have been developed to transmit and distribute power from large remote generating stations to consumers’ homes across the UK. We recognise that through decarbonisation, decentralisation and digitisation this picture is changing to a multidirectional set of systems.” But insists: We do not believe that transmission is, or has ever been, one-directional, with regions of Britain being net exporters and importers of power in different periods of time.”

Doubling capacity

The Faraday Grid can more than double a grid’s capacity for renewable energy, to at least 80%, and reduce the cost of energy to consumers by enabling more penetration of cheap renewables onto the grid and removing wasteful network and balancing costs,” adds Dowling. But Sander points out that with already known tools, it is technically and economically feasible to safely operate an electricity grid with a share of 80% of variable renewables, such as wind and solar”. Portugal, Spain, Italy and some parts of Germany already have periods of several days where amounts of renewables are higher than 60-70% in the electricity consumption with a dominant share of this coming from wind and solar energy sources. The Faraday Grid also allows cost savings since changes can be made one exchanger at a time; there is absolutely no need to rip up the existing grid and start again,” explains Dowling. The exchanger simply replaces legacy grid transformers, just as we introduced routers to create the internet without disturbing the telephone system. It is complementary to existing distribution and other technologies, improving performance and efficiency, while being significantly cheaper than the sum of the technologies it replaces.” The exchangers can be installed as part of the normal transformer replacement cycle already budgeted for by network operators” and be delivered at no net cost”, he says. And the solution can be applied anywhere in the world, eliminating waste by design and so ultimately reducing the cost to the end consumer”. Faraday’s claims will be put to the test in the real world in spring 2019, when UK Power Networks, which owns and maintains electricity cables in southern and eastern England, begins live testing the exchangers in London. But even before this takes place, the company is massively bullish about its system’s advantages for all countries, including Denmark, more used to receiving praise, than criticism, for its energy transition advances. But for Scobie, Denmark is failing to deliver. Denmark is not sorted at all,” he asserts, insisting the country’s exceptionally high energy prices” mean it has not found a solution to the energy trilemma of ensuring the transition means low carbon sources, ensures security of supply and is affordable. The Commission’s data shows Denmark’s households pay, with Belgium, the second highest electricity prices in Europe. Other countries cannot follow Denmark’s model,” says Scobie. Denmark can do what it does because it gives free energy to the rest of the EU and buys in coal from elsewhere. It is playing a political game. We cannot scale Denmark’s behaviour to anyone else.” He adds: Energy is an input to human welfare. We have to have solutions that work for everyone and do not export problems to others.” Unsurprisingly, he believes the Faraday Grid would offer massive advantages for Denmark”. It is rare, however, that a silver bullet exists for any problem and Peter Markussen from the Danish TSO Energinet suggests no one solution” can solve the energy challenge and rejects many of Scobie’s criticisms. In general we do not see higher prices in Denmark than in other countries, also including subsidies for renewables and grid tariffs,” he says. Imports and exports have been a part of Danish electricity supply for many years, before the integration of renewables. The charges from Faraday are exaggerated and the benefit of exchanging electricity is a socio-economic benefit compared to national solutions.” Markussen admits Denmark is unique in many ways. Regarding the comments from Faraday on the Danish model for integrating renewables, we have used our first mover advantage and our geographical location between the hydro-dominated Nordic electricity system and the German/central European thermal-based electricity system. This model can of course not be copied directly, by Germany or Scotland for example, but the mix of solutions is, in our opinion, still advantageous.” As to the potential benefits of Faraday’s exchangers for Denmark, Markussen says: We understand the arguments from Faraday and its interest in selling its grid components, but at the same time we have to secure good investment decisions and compare [their products] with market alternatives or changes in operational procedures.” The jury is also out on whether the introduction of the Faraday Grid in Denmark would bring down prices. It would depend on a specific analysis,” says. Markussen. International markets, local flexibility and a strong grid are key for an efficient green electricity system in terms of security of supply and from a socio-economic perspective,” he adds, explaining the interdependence between them. Markets only work if supported by a grid that can transport the electricity and flexibility is only delivered if there is an economic benefit for the flexibility providers.” Changes to the grid are vital to integrate 100% renewables, including local solutions, he says. Denmark invests around €100 million a year in making its internal grid fit for purpose.

Innovative options

To ensure the right solutions are put in place and that new technologies and market participants have a chance to deliver, Energinet tries to identify the products and system services needed for security of supply in a technology neutral definition, not as a demand for a given technology or type of electricity production”, explains Markussen. The products or system services will be energy and reserve capacity, but also other technical capabilities such as inertia and voltage regulation.” He adds: When we define our demand, we also take a critical look at our operational procedures, maybe it is too expensive to uphold the level of security of supply compared to the market solutions or investment costs in new grid components.” If this is the case, it is back to the drawing board to see what other innovative options are out there. Wainwright takes a similar view. We need to encourage new innovative technologies and ensure that they are given the opportunity to trial new ways of working,” he says. We do not believe that there will be any single solution to the challenges of decarbonisation, decentralisation and digitisation, but we need to source outcomes that generate value for the consumer.” National Grid is trying to meet these challenges by actively working with other network organisations and the broader stakeholder base to ensure arrangements continue to work for consumers and drive efficient outcomes”. RGIs Sander agrees there is a need to invest in new technologies that can provide flexibility and greater market participation by all actors” to balance the grid and reduce future investment needs. But she suggests focusing on the hardware alone is not enough. The massive changes” in the energy sector mean the costs of new infrastructure will need to be shared in a more balanced way,” she says. Sander advocates designing grid tariffs so they are fairly divided among all consumers independently of where they are located” given that renewable energy generation sites are more common in remote, scarcely populated areas”.

Writer: Philippa Nuttall Jones