In the move towards greater deregulation, the industry has to pay closer attention to energy economics, and make increasingly better use of available resources. This requires a better understanding of customer needs, and the resources available to respond to those needs, to give more intelligent solutions.
The general public is becoming increasingly aware of the role being played by the energy supply industry, covering a range of aspects including the price paid for energy, and the impact the supply industry has on the environment. As a result, the industry must pay closer attention to energy economics by making better use of available resources. The industry also has to consider a host of other implications that impinge on general public interest, of which the environment is just one among many.
In recent years, the situation has been complicated by deregulation, which has led to greater attention being paid to commercial realism. As a result, the energy supply industry has to be more intelligent and responsive in the way that it conducts its business in the future.
Historically, the energy supply industry was based on such tenets as ‘adequate, safe, economical and clean’. Electricity was supplied from within the framework of largely monopolistic structures. This process is undergoing radical change in most of the industrialised world.
Deregulation is turning energy into a commodity that can be purchased through a free-market economy, with energy being purchased according to the availability of supply and specific demand. Companies that have undergone this industrial and commercial metamorphosis are faced with the new situation of competition and the resultant new commercial imperatives.
Deregulation leads to the following effects:
Energy is a commodity that is easily obtainable at any time, at any place and for any application.
Increased competition leads to power importation, cost reduction and efficiency improvement.
There will be new players and new partnerships. These include the producer, the grid operator, the energy pool, and any supraregional energy exchange.
Development of supplementary decentralised energy generation.
Development of new business segments, including heat, waste, communication and comprehensive services.
Import of cheaper electricity may result in prices dropping in the short- to medium-term, and cost-saving measures will be necessary as a result. These cost-saving measures include: shutting down unprofitable power plants, reducing or outsourcing maintenance and construction work, improving the efficiency of the energy production and administrative processes, and marketing of corporate competence outside traditional fields.
Deregulation is resulting in the separation of generation, transmission and distribution. This, combined with the arrival of new operators, typified by independent power producers (IPPs) and energy exchanges where prices are updated every half hour, is leading to a rise in supra-regionally exchanged energy and more flexible tariffs.
The new freedoms acquired by end users have led to an increasing trend to decentralisation of energy supplies, running parallel to the existing centralised ‘top-down’ structures. This is resulting in greater local optimisation, based on economic and environmental criteria, which in turn will lead to more widespread use of combined heat and power generation, for example, with packaged cogeneration units, fuel cells, micro-turbines and energy recovery that is fed into the existing distribution grid.
This is an entrepreneurial challenge of enormous proportions for traditional utilities. In addition to cost cutting and efficiency drives, they will also need to embrace new areas of business, such as heat recovery, environmentally acceptable waste disposal, telecommunications, and building management services.
How can established product and system suppliers to the energy sector help utilities overcome these hurdles? What new opportunities are opened up by technological progress? Even though the energy sector may appear to be relatively conventional in comparison with other sectors of industry, there is, nonetheless, a growing demand for innovative solutions capable of handling new tasks and resolving old problems.
The outstanding new technology is high-voltage direct-current (HVDC) transmission. This technology enables a stable link, with very little lost power, to be set up between remote energy sources and far-flung consumers. For example, it will be possible to use HVDC to transmit hydroelectric power from Siberia to Europe. The global grid concept of the future could incorporate a system of compensation across continents and time zones that would be able to accommodate seasonal changes. There are also moves to employ relatively simple DC systems to optimise the management of distribution networks.
With respect to three-phase operation, modern power electronic systems called FACTS (Flexible AC Transmission Systems) incorporate compensation and load-flow controllers to optimise energy transmission. These systems significantly enhance a transmission network’s operational utility from the point of import to the end user, and will see increasing use in future in deregulated market conditions. Simply upgrading many of the world’s transmission and distribution networks with FACTS will make it possible to save more electrical energy in a shorter time, usually with less effort, than by modernising existing generation plant.
Soon, high-temperature super-conducting systems, such as cables, current limiters and and magnetic energy storage devices, will provide economic alternatives in non-standard conditions for use in built-up areas to enhance system operation and quality management. Quality will become increasingly important as deregulated suppliers compete and, as a result, differentiate the quality of their products. This will be typified by the supply of ‘premium power’. Furthermore, new cogeneration technologies using micro-turbines and fuel cells are under development, and will be available for decentralised power supplies shortly after the millennium.
The greatest innovative boost to the energy supply sector will, however, come from better information technology in the form of integrated communications and distributed intelligence. Better protection of relay systems and power system control will help make operational management more effective, and increase the level of grid automation. In part, such improved facilities will be brought about by use of better control algorithms and network simulation techniques. Powerful monitoring and diagnostic systems will acquire all relevant data, detect incipient faults, initiate maintenance and issue planning and plant optimisation instructions on the basis of information systems for both operational and administrative processes.
In addition to the measures to improve profitability and efficiency, power management concepts will increasingly facilitate localised ‘bottom-up’ optimisation, down to the lowest level of a distribution system. Such a management system will include other services such as gas, water, heat and cogeneration and energy recovery.
It is probable that these locally optimised systems will communicate with one another, and will compare different optimisation states as autonomous agents on the basis of predefined criteria. This is happening in Britain, where gas suppliers are involved in electricity supply and vice versa. If deregulation is taken to its logical conclusion, the next millennium will see the emergence of ‘energy utilities’, suppliers of power – and perhaps of other services such as telecommunications. If this happens on a large scale, optimised and integrated management systems would be vital, the key to which will be better information technology. If integrated energy suppliers become standard, then the optimisation process would need to be escalated to higher distribution levels to open up new options for ‘bottom-up’ energy supply optimised according to economic and environmental criteria.
Integrated communication – which will initially only be necessary to optimise the energy supply system – will pave the way for billing management. This can lead to a more flexible incentive-based tariff structure, and, at the same time, allow the utility to explore new business opportunities.
Building and enhanced domestic services are just two examples of potential opportunity. Once a service connection has been made inside a building or home, the prospects for offering other communication-related services will be enhanced; TV, ISDN telephony, the Internet, home banking, building-services management and security are just a few areas of opportunity.
It is against this background that Siemens has evolved its vision for an energy supply concept for the millennium. Three different scenarios are envisaged.
Urban areas and industrial regions with power needs of the order of gigawatts will continue to be served by a conventional centralised grid with large generating capacity and powerful energy interfaces, such as HVDC. In urban concentrations, such as Tokyo, the problem of route shortages could be solved and system voltages reduced by the use of superconducting cables. Dynamic energy storage and power conditioners will ensure the contractually guaranteed quality at the interfaces to sensitive or demanding consumers. Inadmissibly high short-circuit currents will be prevented by superconducting current limiters.
At the other end of the supply spectrum are domestic dwellings with installed loads of the order of a few kilowatts. These can be served by CHP systems in the form of packaged cogeneration units, batteries of fuel cells, a micro-turbine-driven generator or, if incident sunlight levels are sufficiently high, photovoltaic generation. The ‘autonomous house’ is not that utopian in concept, as in future, less energy will be drawn directly from the electricity grid, because equipment will use electricity more efficiently.
Between these two extremes are the collective megawatts consumers, either cooperative residential consumers from blocks of flats, or small industrial firms. This is the level at which locally available energy sources can be optimised to make best use of available resources with minimum environmental impact. This will be made possible by the use of intelligent decentralised energy management systems. Such a system would provide key data to the next level in an operational hierarchy. When additional supply and demand values are taken into consideration, it will come closer than ever before to optimisation of energy supply.
This optimisation process is similar to those taking place in other industries affected by deregulation and decentralisation. In abstract terms, these can be described as networked systems, the basic mechanisms of which are independent of the transported ‘commodity’, and which only develop particular attributes when superimposed on specific applications.
The network control system of the future will tell the user what is available from alternative sources at any given time. Assuming similar terms and conditions, consumers tend to prefer local supplies and services over national or international ones. These must, however, be integrated as effectively as possible in an overall system. Failure to do so would not accrue the benefits of scale.
There is the question of operational flexibility, and how much deregulation and decentralisation affects working at the lower levels of the network. Sensors acquire data to allow the measurement of quality, efficiency and disturbances. Through such means, it is possible to compare individual system parameters and relative performances. If a system becomes overloaded, the direction of energy flow is diverted via other nodes in the network, at which point, the power consumption would be calculated and charged. The energy flow would be in accordance with prior load simulations.
Such networked systems could provide the infrastructure necessary to achieve maximum efficiency and competitiveness in the 21st century. They will provide the means of disseminating information vital to the commercial and operational well-being of most service organisations.
It is possible to gain the impression that the trend towards decentralised supply systems coexisting with centralised grids is a consequence of the deregulation process. In fact, the reverse is the case. Current energy systems developed from decentralised islands that gradually came together, mostly driven by commercial considerations. A similar coalescing process is currently taking place in developing countries, although over a considerably shorter period of time. This process is happening to both centralised and decentralised supply systems, which will subsequently merge, driven by a variety of social and economic factors.
This is because it is disproportionately costly in time and money to link remote rural regions in underdeveloped countries lacking an infrastructure to a central supply system. There is an urgent need to act, due to widening social differences, unemployment, population drift to the cities, and foreign currency shortages. The one asset held by many of these countries is natural resources. The obvious solution is a nation-wide but decentralised energy supply forming part of an overall energy mix, which includes elements for the optimisation of power system control. However, it must be appreciated that the standards that must be applied are completely different from those of deregulation in industrialised countries.
Economic and ecological optimisation often conflict with the need to cater for basic needs, or, in some cases, to cope as effectively as possible with permanent shortages. This resource allocation is one of the fundamental considerations of economics.
The most important elements of a local supply concept are small-scale energy-generating systems (probably based on wind, solar, water, biomass or gas), a means of storage (possibly in the form of batteries), and industrial and private consumers. Diesel-powered stations or other fossil generating facilities already in existence can also be integrated in the same way.
In addition to electrical energy, a biomass power plant can also generate heat, which can be extracted and supplied to consumers either for driving production processes or for heating. The parameters of generation – starting with the weather forecast – are measured in an energy management centre. This is, in effect, a more sophisticated version of a system control centre, where requirements are optimised according to economic and environmental criteria based on consumer demand by means of controllable loads for different supply requirements. Consumers would be given an opportunity to determine the amount of imported energy through the use of interactive meters; and, as is current practice, they can be motivated to alter consumption behaviour through flexible tariffs.
Decentralised energy management
A decentralised system might begin with a prediction, possibly a weather forecast, as one of the variables influencing electricity production and use. The likely total load requirement can be ascertained from this.
The medium-term operations plan, which would be derived from predictions, would be used for the actual optimisation process, and influence such key parameters as power and frequency control, load dispatch and load control functions. Here, the calculated set points would be forwarded to the generation unit via a process interface. The actual real-time on-line values are subsequently returned by the process.
These functions would be coordinated by means of interaction rules and strategies. All data can be visualised on-line via a graphical user interface (GUI). The process system would also have a simulation mode with sufficient verisimilitude to enable planning and design. This involves the diverse generation and storage facilities, load characteristics, as well as the performance and possible future systems expansion to be optimally adapted to new and changing consumer requirements. The information technology installed would be characterised by the use of object-oriented software with artificial intelligence coupled to neural networks for forecasting, generic algorithms for operations planning, and fuzzy logic for on-line optimisation.
The operation process for a decentralised energy supply system with CHP generation and possible energy recovery would also require a local area network (LAN) to facilitate communication with discrete generation units. Discrete loads would be switched via a substation control system, while distributed generating unit/consumer combinations, such as CHP, would be controlled by a power acquisition and control system.
A decentralised energy supply system of this kind would operate based on an island structure in developing and newly industrialised countries. In industrialised nations, it is likely to be integrated with existing systems, and would normally be part of the distribution system to provide optimised power to a transformer substation. In the overall control system, this would be positioned below the network control system within centralised power management. The system control centre would communicate with the transformer substation via the conventional channels usually provided by the utility concerned. It should be noted that it would be more than likely necessary to install new communications facilities from the transformer substation to the consumer. The alternatives range from simple ripple control with limited switching functions through radio links to fibre-optic transmission systems – currently the most powerful and reliable solution. The end-user connections would take the form of metering telecommunication units (MTUs) that measure and regulate power and forward all communications to the appropriate addressees.
Opportunities from deregulation
The key element to these opportunities is an intelligent management centre for energy and information, purchasing and marketing, and back-up services.
The first step to optimisation of a system according to economic and environmental criteria is to gather all relevant data from the generation units – such as capacity, costs, and possibly the ecological characteristic code – and the network input data of the management centre. This data would be compared with the corresponding consumption data and load characteristics, and optimised locally. In addition, the information from the energy pool, updated every half hour, permits permanent comparison between local costs of generation and free market energy prices. If the utility has a better offer, it reduces storable energy production (gas and possibly biomass), for example, and purchases energy from the cheapest supplier. The measured values and the billing data are likewise calculated in the system control centre.
In addition, the management centre can advise consumers on matters such as power management, tariff structures, the introduction of new systems, consumption levelling, in-plant generation and energy recovery, possibly leased and controlled by the utility because of its familiarity with consumption profiles. This substantiates the claim that supplementary services of every kind can be offered, and is a fair indication of the opportunities that exist for added-value business in deregulated markets.
Summary: objectives of intelligent networks
The objectives of the intelligent energy supply concepts can be summarised as follows: transformation from a supply structure that is mainly generation-dominated and characterised by a preoccupation with security and energy reserves to a consumer-oriented, economic and ecologically optimised energy supply. The transformation is being marked by several principal developments:
All energy resources to be utilised and integrated as decentralised energy supplies.
Greater use should be made of renewable energy sources within the framework of an energy mix that also includes storage, controllable loads for different supply requirements and CHP generation.
The supply of energy available at any time should be compared with current load and short-term forecasts.
New energy and information technology systems must be used.
New areas of business activities in the utility sector should be considered.
The most crucial aspects of any enterprise will, however, continue to be profitability and the overall success of the company. Integrated enterprises that pool supplies of gas and electricity undoubtedly possess the greatest potential for optimisation and, therefore, long-term commercial success.
What does all this add up to? In essence, the energy sector needs intelligent solutions that offer all concerned optimum benefits in terms of choice, economics and ecological considerations. Many of the equipment and systems suppliers have developed the means of achieving this in the changing world of deregulated electrical energy markets.