iPower brings together a total of 10 universities and 16 companies, including DONG Energy, Grundfos, Vestas, IBM and Danfoss. Danish Energy Association leads the working group dealing with infrastructure.
I the last few years initiatives on smart grid have been growing in number and scope all over the world and in Europe. Denmark has the main share of all smart grid projects. 22 per cent. of all the smart grid projects in Europe are located in Denmark.
In a global context projects like iPower are very important if we are going to be competitive in the future.
In a global and digital world like the one we witness right know, we have to be very careful that we are investing and focusing on the right activities.
In Denmark we are not competitive when it comes to the segment of modular assembling of standard component into products.
We need to focus on knowledge-intensive R&D, product definition, design, knowledge-intensive branding, marketing, distribution and customer service. That’s why we have established iPower.
However, for smart grid to deliver, the realisation of physical infrastructure alone will not be sufficient and must be complemented by emergences of new business models, new regulations and changes to consumer behavior.
New business models
We will witness the emergence of the energy service company.
Visionary CEO’s in the energy sector will understand how to develop new business models with a high focus on services instead of kilowatt hours.
This is already happening but in the years to come more and different models will emerge, with a high focus on customers needs.
However, development and success will largely depend on regulation and our ability to understand customers and their basic needs.
A new regulation-regime
Current regulation of DSO’s is focused on providing owners and operators with the incentives to improve cost efficiency by reducing operation costs rather than upgrading grids towards a smarter system.
With the present regime DSO’s will just continue to operate and invest as they are used to. As it is expected the DSOs should deliver the majority of upfront smart grid investment, we will not get the smart grid investment without a new regulation regime designed for supporting the future and not the past.
iPower is the first step before massive deployment of smart grid solutions. We cannot do without projects like iPower and on the other hand iPower cannot at the end deliver without and modern regulation regime for DSO’s.
We need a clear investment case, and this may well be one of the biggest challenges in smart grid implementation.
DSO should be allowed to invest in smart grid without being punished and they should be allowed a normal return on their future investments. That’s a return comparable to the alternative use of the capital given the risk of the investment.
Finally, DSO should also be allowed to offer a smarter electricity pricing or a dynamic pricing. Smarter electricity pricing will be one of the most important hallmarks of the smart grid.
But offering smarter pricing is not the only thing. What if the customers do not understand this?
Traditionally, the link between customers and the utilities have been rather week. This is a paradox but have to change in the future. And yet again iPower has a role as the project will focus on customers.
It is very important not to try to solve it through a technology fix without understanding the needs of the customers.
Focus on what customers want and not the technology. Furthermore they are not demanding kilowatt hours – they are demanding service, such as transportation, heating and cooling light, entertainment. This is B2C but what about B2B. Here the value of information on the behavior of end users will increase. The Smart grid model has an important role to play here.
It can turn out very bad if we do not understand customers. An example of this is the case of Pacific Gas & Electricity (PG&E). They have learned some hard lessons on their way to installing more than 8 million smart meters.
Customers did not understand the concept and many customers ended up with high energy bills when smart pricing was introduced – especially elderly people. The result was that many customers turned against the smart grid idea.
iPower will contribute with a better understanding of the customers.