Positioning to capture the next wave of distribution services opportunityHow electric utilities can harness the optimized grid to drive value and growth

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Introduction: Completing the journey to a smarter grid

The electric grid of the future continues to take shape. The core concept of the smart grid is increasingly becoming an everyday reality through technological advances such as smart metering and distribution automation and controls. However, many utilities still struggle to extract the full value from these investments from their current business model. While smart technology components are important, achieving the vision of the 21st century power network, one capable of harnessing the full potential of a smarter grid, requires more.

Creating a truly efficient grid will require utilities to optimize the smart network itself, along with a wide array of distributed energy resources (DER) and flexibility from customer participation. Gone will be the traditional model of an electricity transporter, solely responsible for connections and building capacity. The new model will see distribution companies become responsible for facilitating network access for new uses of the distribution network, and providing services to optimize the broader system, including customer-owned assets.

To achieve this new model will require utilities to integrate a wide-ranging new set of services into their business processes—including services they offer and those they purchase. With these new services in hand, distribution utilities will have the insight and control needed to take advantage of the flexibility inherent in both the network and customers, enabling them to reduce costs, improve access to the grid for DER, and maintain a high standard of network performance.

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The way forward: The distribution platform optimizer

The prize for achieving this engagement and participation is substantial. Put simply, it will help to create a grid that is more reliable, resilient, flexible, efficient and cost-effective. And fortunately, the ability to deliver this is within utilities’ own control.

In our recent point of view—Evolution is no longer optional for utility distribution companies—we described the emergence of a new business model for utilities: the distribution platform optimizer (DPO), an organization that manages and coordinates all elements of the grid end to end to provide the optimal outcome for the overall system. We believe this is likely the most sustainable model for the future of the utility industry. It removes the capital bias of many current, traditional business models and focuses on a more balanced view of optimized existing assets, combined with value for new grid services and uses.

Our Digitally Enabled Grid research confirms utilities assertion that the industry is turning toward the DPO-type model. As Figure 1 shows, the drive toward the DPO is strongest in Europe, but it’s also supported by the majority of North American utility executives we interviewed.

An inherent element of the DPO model is that the utility would expect to purchase an array of services from a diverse range of third parties. Again, our Digitally Enabled Grid research shows that utilities expect this change to occur within the next decade—especially in Europe (see Figure 2).

Figure 1: Do you believe the role of your company will evolve toward that of a distribution system operator (DSO) or a distribution system provider (DSP), whose role is to integrate DER and facilitate the market for DER services?

Figure 2: Do you expect to be able to purchase energy or ancillary services from distributed generation, storage, demand-response providers or electric vehicle owners within the next 10 years? 

Global Europe North America*

18%

66%

16%

12%

73%

15%

16%

64%

20%

Yes NoWe already operate as a DSP/DSO

Base: All respondents; *please note: due to limited North America sample, results for this region are to be interpreted with caution and within context. Source: Accenture’s Digitally Enabled Grid program, 2016 executive survey.

Global Europe North America*

Yes NoWe already purchase these

Base: All respondents; *please note: due to limited North America sample, results for this region are to be interpreted with caution and within context.Source: Accenture’s Digitally Enabled Grid program, 2016 executive survey.

20%

65%

15%

9%

79%

12%

40%

44%

16%

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A three-level service stack for distribution utilities and customers

The smart grid will be a trigger for a wide range of new business models. The distribution business is well positioned to become the market facilitator and information hub that is at the core of this transition.

The DPO structure will be predicated on an array of new grid services:

• The first service area is market services: creating a market framework for commercial decisions on asset operations.

• The second service area is the set of network optimization services offered to support grid operations in real time.

• The third service area is a broad set of asset deployment services available to customers deploying DER.

A wide range of potential models could emerge, each taking a different stance on what should remain within the regulated domain and what should be fully competitive.

Our research shows that 68% of industry executives expect the market model to be a blend of competitive and regulated mechanisms in the next 10 years.

In the near term, we would expect to see regulated bilateral agreements forming the bulk of the market. For example, utilities negotiating contracts with large-scale storage owners to provide a range of network optimization services. As information quality increases across the network, it is possible to foresee a progressive move toward an open, competitive market—with prices and service delivery terms set more dynamically and more frequently.

Figure 3: Which of the following market model approaches will form the basis for these new distribution optimization services within the next 10 years?

Global Europe North America*

Base: All respondents who expect to, or already have, purchased energy or ancillary services; *please note: due to limited North America sample, results for this region are to be interpreted with caution and within context.Source: Accenture’s Digitally Enabled Grid program, 2016 executive survey.

A blend of regulated incentive mechanisms and competitive market approaches

Competitive market mechanisms in which all players (distribution operator, storage operators, generators and consumers)

Regulated distribution business incentive mechanisms

68%

16%

16%

60%

20%

20%

7%

7%

86%

Figure 4: What extent of growth do you expect to see in the following types of storage on your network between now and 2025?

Storage to support renewable integration/

optimization(e.g., smoothing

PV exports)

Storage to improve network operations/ power management

(e.g., frequency regulation, voltage)

Storage to allow deferment of

network capital

Moderate growth Significant growth

44%

21%

45%

12%

34%

6%

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The viability of such network optimization services is underlined by our research findings. As Figure 4 illustrates, many utilities expect network-related types of storage to play an increasingly important role in active management of the network, in areas like smoothing solar PV exports. These areas are likely to be targeted ahead of alternative drivers of investments in storage, such as enabling deferment of network capital.

Similarly, utilities expect optimization to encompass end-consumer participation. Demand response is well established in

many utility systems at the wholesale level, but rarely used to support the efficient management of distribution network issues at a granular level. It is clear from our research that a significant proportion of distribution utilities are starting to actively pursue this area through remote load control, demand response and electric vehicle charging services—optimized to react to local grid conditions and needs.

The final service area of asset deployment services is one that many distribution utilities have historically failed to capture effectively, for example; missing out

on developing services to support PV deployment. While the development approval of core standards for network connected assets is clearly within the remit of distribution companies, there is often the potential to extend the service offering further, without compromising the regulatory position. Close to half of respondents to our research indicated that they are going to offer asset-related services in the near term to customers deploying storage, microgrids, electric vehicles and distributed generation (DG).

Figure 6: Which of the following distribution services do you expect the distribution business to offer within the next five years?

Microgridservices

(e.g., design, deployment, operations,

maintenance, etc.)

Electric vehicle integration

services(e.g., development

of charging infrastructure, smart charging mechanisms, promotion of adoption, etc.)

Distributed generation integration

services(e.g., connection

standards, enable sales back

to the grid, manage locational

incentives, etc.)

Storage services

(e.g., provision or enablement

of storage services for peak power,

congestion, quality, etc.)

Base: All respondents.Source: Accenture’s Digitally Enabled Grid program, 2016 executive survey.

49% 46% 45% 42%

Figure 5: As a distribution company, which of the following “beyond-the-meter” services are you likely to offer within the next five years?

Remote load control

Demand-response services for

optimization of the distribution

network

End-consumerelectric vehicle

charging services(e.g., demand information,

conservation advice, e�cient appliance

advice, etc.)

Base: All respondents.Source: Accenture’s Digitally Enabled Grid program, 2016 executive survey.

49% 48% 37%

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Smart inverters: A key piece of the smarter grid jigsaw

Whatever grid services DPOs choose to offer, a vital enabler will be the implementation of smart inverters alongside storage or small-scale DG, as a way to provide and manage the necessary control signals and response monitoring.

Traditionally, small-scale PV was considered to be a relatively passive, and often inconvenient, addition to the network. Operational regimes were generally fixed, with the PV always exporting to the grid at unity power factor and switching off in times of network disruption.

A solar PV system that has a solar inverter converts the variable direct current (DC) output of a PV solar panel into a utility frequency alternating current (AC). To be defined as “smart”, an inverter needs to have a digital architecture, bidirectional communications capabilities, and sophisticated software infrastructure.

As pieces of kit they generally only cost about US$100 to US$150 each, but are more cost effective if installed with the DER rather than retrofitted afterwards.

If the solar inverter is also given smart capabilities, it will be able to play the additional role of managing frequency variations or reactive power in a flexible and responsive manner to help the grid as a whole. As a result, the inverter can become a valuable tool for utilities to use for optimizing the delivery network as well as an opportunity for the customer to earn additional revenue.

Conclusion: Time to put the pieces in place

Advanced smart technologies are delivering flexibility to distributed generators, the distribution network and to customers. It is by harnessing this flexibility that the smart grid will truly deliver on its promise.

Accenture believes that the new role of the DPO will provide an excellent basis to deliver on this potential—and that in tandem will come a need to develop a broad set of new business services. As a result, distribution businesses could be well positioned to secure a significant share of these services, both in the regulated and competitive domains.

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About Accenture’s Digitally Enabled Grid research program Accenture’s Digitally Enabled Grid program provides actionable insights and recommendations around the challenges and opportunities utilities face along the path to a smarter grid. Drawing upon primary research insights from utilities executives around the world as well as Accenture analysis, The Digitally Enabled Grid examines how utilities executives expect smart grid technologies and solutions to contribute to their future networks.

About AccentureAccenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 375,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

ReferencesAccenture’s Digitally Enabled Grid research Program

About Accenture Smart Grid ServicesAccenture Smart Grid Services focuses on delivering innovative business solutions supporting the modernization of electric, gas and water network infrastructures to improve capital efficiency and effectiveness, increase crew safety and productivity, optimize the operations of the grid and achieve the full value from advanced metering infrastructure data and capabilities. It includes four offering areas: Digital Asset Management, Digital Field Worker, Intelligent Grid Operations and Advanced Metering Operations.

Executive sponsorship Stephanie Jamison Managing Director Accenture Smart Grid Services DEG@accenture.com

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