By Michael De Vivo, depsys
2020 – what a year that was. Every new year is a time for reflection, but it’s hard to recall a January where things felt quite so different to the one twelve months ago.
And that is as true in power distribution as any other professional sphere. Ours is an industry with a reputation for being slow to change, but in many ways 2020 has genuinely felt like a turning point. Even putting aside the hope offered by COVID-19 vaccines for the moment, there are reasons to be cautiously optimistic about what this year holds.
So, what did 2020 tell us about distribution system operation and what changed? Which of these changes were the natural result of long-term trends and which were caused or moulded by the unique events of 2020? And, given all that, what can we expect (and hope) for 2021?
The power industry as a whole can be proud that the pandemic never stopped the sector fulfilling its responsibilities. The lights did not go out, even when workforces were forcibly relocated to kitchen tables and were depleted by staff sick or self-isolating.
But not only did the sector keep the electrons flowing during these challenges, it also maintained its forward momentum: the energy transition never halted. Electric vehicles (EVs) continued to win market share, solar photovoltaic panels continued to be installed and DSOs continue to work on and execute their digitalisation plans. World leaders making grand plans may have been forced to call of COP 26, but the engineers and programmers on the ground rethinking the energy system carried on much as before.
When I spoke to DSOs seven or eight years ago, these trends could not be taken for granted. You had to make the case that transition and digitalisation were coming, that EVs would take off etc, before you could start a conversation on what those plans might be. Two or three years ago, those arguments were generally accepted but still often seen as a problem for the future. By the time 2020 arrived though, all but the most old-fashioned DSOs accepted the direction of travel and a need to plan.
That said, some are ahead of others. From our vantage point, we can approximately categorise DSOs into four categories.
- Those with a strategic vision and digital ambition but low capabilities to execute it.
- Those with a strategic vision and digital ambition with high capabilities to execute it.
- Those taking a more tactical, ad hoc approach and with low capabilities.
- Those taking a more tactical, ad hoc approach and with high capabilities.
On this understanding, we can track progress on two metrics: movement from a tactical to a strategic approach to the energy transition and digitalisation (one could also say from reactive to proactive), and from low execution capabilities to high.
This latter category encompasses a lot, from available capital to invest, to the skills in the organisation to more nebulous things like effective leadership and processes. It is easy to imagine that some of these may have been impacted by the coronavirus pandemic and its economic fallout in 2020.
However, what we have unambiguously seen is an accelerated trend towards strategic thinking. We have seen utilities take more steps, more quickly to move from Category 4 to Category 2, and from Category 3 to Category 1. This was the direction of travel already, but this year has seen a step-change. Why might that be?
The 2020 factor
We have already noted that part of the pressure for greater strategic planning comes from long-term trends: EVs, PV and so on. We can also add that, with each year, the new graduate entrants into the workforce bring more digital skills and expectations into the sector. However, 2020 undoubtedly added an additional catalyst.
Why would 2020 specifically have made DSOs look more closely at strategic digitalisation? I can think of a few reasons.
One is operational: the pandemic has forced us all to rely more on remote working, and reduced utilities’ ability to monitor and maintain their networks using a small army of field engineers. Instead of sending people to where the data and information can be found, it’s become necessary to send the data and information to where the people can be found (at their kitchen tables).
This entails a more digital, transparent grid. It means sensors collecting data throughout the distribution grid at both medium- and low-voltage (MV/LV) levels – something traditionally only done at MV level (and then only sparingly due to cost). It then means advanced analytics to make sense of that data from afar, without the luxury of extensive physical inspection.
Secondly, there are economic reasons for more digital grid planning. Most DSOs are publicly funded and may be anticipating tighter budgets when the pandemic eventually subsides. Though it may seem counterintuitive to therefore spend on digitalisation, that’s only the case if you compare with investing in nothing.
That is unrealistic. DSOs are always having to make investments in anticipation of and response to grid issues. Typically, this takes the form of grid reinforcement: adding new cables, transformers etc to bolster the distribution grid where there are concerns over capacity or faults. This is incredibly expensive, and utilities are almost certainly over-spending as they are forced to take a ‘better safe than sorry’ approach whenever there are question marks.
What transparency and digitalisation do though, is remove those question marks so that the utility only spends on reinforcement when absolutely necessary, saving money in the long-run while improving performance.
2021: hopes and expectations
So, what next? It is both my sincere hope and firm expectation that we will continue to see that movement from tactical to strategic approaches. Those acting tactically now will begin to put in place their strategies. Those already taking strategic approaches will refine them based on early findings and better data.
In that respect, the energy transition genie is out of the bottle. There is no putting it back.
However, there remains work to be done on that other metric: the capabilities of the DSO to implement those strategies.
There has been good progress on this front, but some significant hurdles remain. For example, the budgetary and governance models of many DSOs create a built-in bias towards capital expenditure (capex) over operational expenditure (opex). This is due to the historical emphasis on grid reinforcement projects and has worked well in the past. However, software and solution-based investments are ongoing initiatives and more typically made using opex budget.
This inherent balance needs to be addressed in order to free DSOs to pursue strategic digital initiatives. However, the problem for publicly funded and regulated bodies is that change can take a long-time. In Germany, for example, regulations typically move on a five-year cycle.
Things are changing, but not at a speed in-line with the urgency of the energy transition. It is my hope for 2021 that we can find ways as an industry to accelerate this.
So, what did 2020 teach us about the power distribution sector? It taught us that our utilities are resilient, capable; that strategic digitalisation is more important than ever and that utilities recognise this. What does this mean for 2021? That change will continue apace, but that it’s vital we work to remove the barriers still slowing progress. I hope and expect we can do so together.
About the Author
Michael De Vivo is CEO of depsys and is an engineer in power electronics, specialized in electrical grids, namely in monitoring and control systems for low-voltage networks.