limited access to information as a key barrier to
entry for new market participants. Access to
information about distributed energy resources
and network conditions may also grow in
importance in the future. This information may
provide a foundation for new opportunities for
system balancing, as new participants could enter
the market and find more efficient balancing
solutions.
A data exchange could be part of an efficiently
functioning set of future energy networks but
would need to be managed carefully to mitigate
risks while being accessible. A data exchange is a
secure store of data, for example, on customer
use patterns, available distributed energy
resources, local prices and network conditions.
The availability of this data raises privacy concerns, so a balance would need to be struck
between accessibility and protection. Use of data
exchanges will require adequate institutional
arrangements. For example, if DSOs, who participate in markets for electricity system services,
ran data services to which they gave themselves
preferential access. In the long term, digital
developments may make the operation of data
exchanges by centralised authorities unnecessary, particularly if electricity trading shifts
towards peer-to-peer exchange.
(6) Accommodating future innovations
Innovations in electricity networks include new
network structures and peer-to-peer electricity
trading, which may offer significant benefits.
New network structures, including microgrids
and fractal grids (a system of multiple microgrids) have the potential to make electricity
systems more resilient to failure (see Sect. 1 on
new network architectures below). Peer-to-peer
trading through a distributed data management
platform, such as a blockchain, offers the
potential to lower transaction costs and reduce
the role of intermediaries in electricity markets
(see Sect. 2 on peer-to-peer trading below).
These innovations can be facilitated by the
necessary policies and models needed to deliver
efficient networks today and in the future. Most
fundamentally, liberalised electricity markets
provide a supportive environment for the
development, demonstration and adoption of
innovations. More specifically, an institutional
model that aligns system operator incentives to
public policy objectives will be needed to mitigate any incentive for incumbents to block the
spread of innovations. A model for control of
decentralised resources will also be needed to
offer innovations, such as new network structures
and peer-to-peer electricity trading, the opportunity to participate in electricity markets.
It is possible that over time these and other
innovations will drive or enable larger changes
that have the potential to restructure the electricity
system more significantly. It will be worthwhile
monitoring new technologies and business models, so that policy and regulation can respond
appropriately, to realise value and address risks.
(1) New network architectures
Microgrids and fractal grids are innovative network architectures. Both architectures provide
greater resilience than the radial links of conventional distribution networks. Microgrids
achieve resilience through redundancy in generation, while fractal grids achieve resilience
through redundancy in network infrastructure.
A microgrid is a small-scale, partially
self-sufficient network, incorporating both generation and demand sources. Microgrids may be
connected to the local distribution network,
importing or exporting electricity according to
system conditions, but may also disconnect from
the distribution network and operate as an island.
As a microgrid can meet some or all of its own
demand, it is more resilient to wider system failures, caused by a fault or cyberattack, than a radial
network, and is well suited for critical functions
such as hospitals, military installations or data
centres. As microgrids are self-sufficient, they
may require more on-site generation than conventional networks. The deployment of on-site
generation in microgrids may result in a larger
volume of generation assets in the wider electricity system, implying a degree of asset redundancy and an increase in costs. In principle, the
redundancy can be mitigated if sufficient generation is deployed to serve only essential loads when
islanded. A microgrid can aggregate its resources
102
W. Xiaoming et al.
entry for new market participants. Access to
information about distributed energy resources
and network conditions may also grow in
importance in the future. This information may
provide a foundation for new opportunities for
system balancing, as new participants could enter
the market and find more efficient balancing
solutions.
A data exchange could be part of an efficiently
functioning set of future energy networks but
would need to be managed carefully to mitigate
risks while being accessible. A data exchange is a
secure store of data, for example, on customer
use patterns, available distributed energy
resources, local prices and network conditions.
The availability of this data raises privacy concerns, so a balance would need to be struck
between accessibility and protection. Use of data
exchanges will require adequate institutional
arrangements. For example, if DSOs, who participate in markets for electricity system services,
ran data services to which they gave themselves
preferential access. In the long term, digital
developments may make the operation of data
exchanges by centralised authorities unnecessary, particularly if electricity trading shifts
towards peer-to-peer exchange.
(6) Accommodating future innovations
Innovations in electricity networks include new
network structures and peer-to-peer electricity
trading, which may offer significant benefits.
New network structures, including microgrids
and fractal grids (a system of multiple microgrids) have the potential to make electricity
systems more resilient to failure (see Sect. 1 on
new network architectures below). Peer-to-peer
trading through a distributed data management
platform, such as a blockchain, offers the
potential to lower transaction costs and reduce
the role of intermediaries in electricity markets
(see Sect. 2 on peer-to-peer trading below).
These innovations can be facilitated by the
necessary policies and models needed to deliver
efficient networks today and in the future. Most
fundamentally, liberalised electricity markets
provide a supportive environment for the
development, demonstration and adoption of
innovations. More specifically, an institutional
model that aligns system operator incentives to
public policy objectives will be needed to mitigate any incentive for incumbents to block the
spread of innovations. A model for control of
decentralised resources will also be needed to
offer innovations, such as new network structures
and peer-to-peer electricity trading, the opportunity to participate in electricity markets.
It is possible that over time these and other
innovations will drive or enable larger changes
that have the potential to restructure the electricity
system more significantly. It will be worthwhile
monitoring new technologies and business models, so that policy and regulation can respond
appropriately, to realise value and address risks.
(1) New network architectures
Microgrids and fractal grids are innovative network architectures. Both architectures provide
greater resilience than the radial links of conventional distribution networks. Microgrids
achieve resilience through redundancy in generation, while fractal grids achieve resilience
through redundancy in network infrastructure.
A microgrid is a small-scale, partially
self-sufficient network, incorporating both generation and demand sources. Microgrids may be
connected to the local distribution network,
importing or exporting electricity according to
system conditions, but may also disconnect from
the distribution network and operate as an island.
As a microgrid can meet some or all of its own
demand, it is more resilient to wider system failures, caused by a fault or cyberattack, than a radial
network, and is well suited for critical functions
such as hospitals, military installations or data
centres. As microgrids are self-sufficient, they
may require more on-site generation than conventional networks. The deployment of on-site
generation in microgrids may result in a larger
volume of generation assets in the wider electricity system, implying a degree of asset redundancy and an increase in costs. In principle, the
redundancy can be mitigated if sufficient generation is deployed to serve only essential loads when
islanded. A microgrid can aggregate its resources
102
W. Xiaoming et al.