Despite the massive technological advances that have occurred over the last century, the systems being used to distribute electricity are largely those designed 120 years ago.
Electricity has traditionally been distributed through systems which have a small number of central power plants that distribute power across a one-way grid. This system is inefficient and increasingly unstable.
Electricity has to be used the moment it is generated. There is currently no economical way for a power plant to store surplus energy for later use when electricity is in higher demand. As a result, all surplus electricity is wasted.
As fossil fuels such as coal produce most of our electricity, there are large amounts of carbon emissions produced in making electricity which isn’t used.
A more efficient system which reduces surplus electricity generation could have a big impact in reducing carbon emissions. The US Department of Energy estimates that if the United States electricity grid were merely 5 per cent more efficient, the energy savings would be equal to the emissions from 53 million cars.
In the last few years ‘smart grids’ have begun to be developed that have the potential to revolutionise how electricity is sent out across a network. This doesn’t involve the construction of a whole new electricity grid, but rather enabling the distribution of energy on the grid to become more efficient and reliable.
Smart grids use two-way communication to allow feedback between the providers and the users of electricity.
In a typical smart grid, energy providers are able to monitor which periods of the day electricity is in most demand and adjust the amount of energy they produce at these times. This is possible through the use of smart meters. Australian Ethical invests in a US company, Itron, which is one of the leading manufacturers of smart meters.
Smart meters are able to record the electricity use of households and businesses at regular intervals and instantly relay that information to utility operators. This gives utilities the ability to see where in the grid electricity is being used and at what times of the day.
The electricity consumers can also use the smart meters to respond to changes in the grid. They can decide to use less energy in periods of peak demand when electricity prices are more expensive, and use more energy when electricity is more readily available. This benefits both electricity consumers, who are able to save on energy bills, and electricity providers, who are able to reduce instances where the network is overloaded.
The ability for households and businesses to change their energy use in response to grid conditions has been enabled by companies such as EnerNOC. Our globalsmartenergy focused fund, the International Equities Trust, invests in EnerNOC.
EnerNOC is the world’s largest provider of demand response services. EnerNOC works with companies that can significantly reduce their electricity needs to make electricity consumption reduction plans. When electricity demands peak, EnerNOC tells its network of businesses to implement their energy saving plans. This reduces peak demands of electricity and the likelihood of overloading the network.
Another common feature of smart grids is the ability to have multiple generation sources. In a traditional electricity distribution network, electricity is generated at a small number of sources. With modern networks electricity can be fed into the grid at a large number of points. These new energy sources include households with rooftop photovoltaic systems.
Smart grids allow the energy being fed into the system from these sources to be monitored and to respond to changes in local grid conditions. A number of companies in our globalsmartenergy portfolio, such as photovoltaic panel manufacturer Trina Solar and inverter manufacturer SMA Solar, make products which allow households and businesses to not only generate their own energy but to also feed electricity in to the grid.
As advances allow smart grids to become even more efficient and adaptable, we will continue to look for investments in this exciting area.
Find out more about who we invest in.