January 24, 2015


All change : The power industry's main concern has always been supply. Now it is learning to manage demand (The Economist, Jan 17th 2015)

THE BASIC MODEL of the electricity industry was to send high voltages over long distances to passive customers. Power stations were big and costly, built next to coal mines, ports, oil refineries or--for hydroelectric generation--reservoirs. Many of these places were a long way from the industrial and population centres that used the power. The companies' main concern was to supply the juice, and particularly to meet peaks in demand. Most countries (and in America, regions) were energy islands, with little interconnection to other systems.

That model, though simple and profitable for utilities and generators, was costly for consumers (and sometimes taxpayers). But it is now changing to a "much more colourful picture", says Michael Weinhold of Siemens, a big German engineering company. Not only are renewables playing a far bigger role; thanks to new technology, demand can also be tweaked to match supply, not the other way round.

As a result, the power grid is becoming far more complicated. It increasingly involves sending power at low voltages over short distances, using flexible arrangements: the opposite of the traditional model. In some ways the change is akin to what has happened in computing. A 2010 report for BCG, a consultancy, drew a parallel with the switch from mainframes and terminals to cloud storage and the internet.

Traditional power stations and grids still play a role in this world, but not a dominant one. They have to compete with new entrants, and with existing participants doing new things. One example is the thriving business of trading what Mr Lovins of Rocky Mountain Institute has named "negawatts": unused electricity. The technique is known as "demand response"--adjusting consumption to meet supply, not the other way round.

Posted by at January 24, 2015 8:44 AM

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