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Podcast S15E06

How do we get more out of the grid?

How do we get more out of the grid?

In this episode we’re looking at electricity networks, and the increasing stresses and strains that they’re going to be under as more renewable generation is connected, and heat and transport is increasingly electrified. To explore this, and some of the solutions, Jon Slowe is joined by Susanne Nies, General Manager for Germany at Smart Wires, a US based company providing technology and products to network companies; and Delta-EE colleague and expert, Jon Ferris.

Episode transcript

[00:00:03.970] – Jon Slowe

Hello and welcome to the episode. Today we're looking at electricity networks and the increasing stresses and strains that they're going to be under as more and more renewable generation is connected, heating and transport are increasingly electrified. The patterns of how electricity is transported and distributed have already changed, in some cases dramatically over the last couple of decades. And that change will carry on over the next years and decades as well. So we're already seeing in some countries, renewable generation being curtailed or switched off in growing quantities due to network constraints. And to get us to a zero future, clearly we've got to take as much advantage and connect, of renewable generation, as we can and connect as much of it and make sure that we can meet the electrification of heat and transport as well. So, lots of challenges to unpick these and explore them and look at some of the solutions. I'm joined by two guests today. Let's say hello first. Hi. So Susanne Nies, who's General Manager for Germany at Smart Wires. Hello, Susanne.


[00:01:14.990] - Susanne



[00:01:16.970] – Jon Slowe

Welcome to the podcast. Now, can you give us a quick elevator pitch maybe for you in terms of your background because you've had a long background in the sector and for Smart Wires, who our listeners may not know.


[00:01:29.210] - Susanne

Absolutely, yeah. Well, I'm very happy to join this podcast today. It’s a very important topic how to get more out of the grid. I’m Susanne Nies. I'm since more than 15 years in energy, beginning in gas and then power sector working for your electric ancillary. And since two year and a half being the general manager for the so called Dach region - Germany, Switzerland, Austria, but also for Ukraine, which is interesting, of course, and Spain. So what is the role of Smart Wires? We are a young twelve year old company was set up in the Silicon Valley after a blackout in one of the US federal entities. It's power electronics. It has devices that help optimise the existing grid.


[00:02:19.550] – Jon Slowe

Okay. And the existing grid for transmission, for distribution, for all different voltage levels.


[00:02:28.890] - Susanne

Everything. It is transmission, the impact is very high on high voltage. That is maybe the low hanging fruit to start with, but also the distribution, the grid faces more and more challenges and can be optimised with our devices. Actually, it's kind of an artificial lengthening or shortening of lines. You put a DC component into a line and make it artificially longer or shorter. The distribution of the system is much better after and you can put much more removals, generation electricity into the system so that the transport capacity of your network is increasing. You'll know that lines come late - twelve years on average in.


[00:03:15.270] – Jon Slowe

Okay, thanks for that. We'll come back to you shortly. Let's say hello to our second guest today, my Delta-EE colleague and expert, Jon Ferris. Hello, Jon.


[00:03:24.870] - Jon Ferris

Good morning.


[00:03:27.510] – Jon Slowe

Jon, can you give us a bit of context in terms of those network challenges? That I outlined at the beginning and bring that to life a bit more for our listeners.


[00:03:39.030] - Jon Ferris

Yes, certainly. So networks are really the last natural monopoly in the energy sector, not facing competition incentivised as they have been for decades, to build more grid to accommodate growing demands. They are not the traditionally quickest companies responding to the energy transition, and yet they're now facing a huge change in a very short space of time, where we are looking at bringing a Terawatt of renewable generation to the European grid, often located in areas that haven't traditionally cited generation, in areas where it's a long way from demand. And the need to transport power from where it is generated to where it is consumed is a hugely important part of the electricity system. At the same time, we're seeing a big increase in electricity demand as we electrify heat and transport and changing the time pattern and the location of demand. Meaning that we're increasingly seeing bottlenecks on the grid, we're seeing congestion, and we're seeing massive under utilisation of grids that are being built to accommodate the peak power flows that might occur for just a few hours of the year, leaving a lot of spare capacity unused.


[00:05:17.370] – Jon Slowe

Okay, so they're really more and more in the spotlight then. And what struck me about what you've said is that a couple of things you said and one thing Susanne said, Susanne, you talked about twelve years being the average time for building a new line. Jon, you said the network companies have traditionally not been fast moving. I guess I've not needed to be fast moving, and that's not been their culture and it's not been the way they work.


[00:05:52.230] - Susanne

Exactly what you said on the role of networks. We need to add to this also the fact that we see an increasing complexity now. We talk about hydrogen, the gas networks, linking up networks in a totally different way from before. Transport was mentioned by you when it comes to speed. The question that you made, Jon, they are not known for moving fast. That's right. They are not known for moving fast. And very often the argument is used, they are in charge of security of supply. And this is always a bit kind of passe-partout argument, it's the joke they have, but it's also the nightmare they have. So it's a bit of both, I would say in between of the nightmare and the joke should be transparency. And that is also a challenge that you see with such monopolies. The transparency on decision making, on data they have is not exactly where it should be today. And it would help to crowdsource ideas how to make solutions that are more efficient than those that are used today.


[00:06:58.290] – Jon Slowe

So we might have some people from network companies, I'm sure we do, listening to the podcast saying, yeah, but we're doing a lot, we're changing, we're moving forward. Jon and then, Susanne, how much do you see that change. And I guess coming back to the point about speed, what's your view on speed?


[00:07:21.270] - Jon Ferris

We're definitely seeing a lot of change in a lot of network companies. Often it's in the form of innovation departments and innovation teams that are tasked with looking at these new approaches. And I think that we're starting to recognise that the traditional approach of gradually upgrading the grid, building it out, building that long term infrastructure, which is always going to be part of what needs to be done, is going to be inefficient from a cost perspective and impractical from a time perspective to address the challenges that we're facing now. The difficulty that I see across a lot of the businesses is how do you bridge that gap between the innovation team that is looking at pilot projects and trials of new technologies and bringing that into the business as usual. Changing the mindset of how you go about operating. Planning and building a grid to accommodate new technologies and new approaches like flexibility markets. Particularly when the regulatory structure is still incentivizing them to build networks over the longer term.


[00:08:42.720] – Jon Slowe

Okay, so there's a couple of things there. There's the innovation to business as usual and there's a regulatory framework. As you said at the beginning, Jon, these are natural monopolies. So the way they earn money, the way they make profit if they're privately held, is all down to the regulator. And so the regulator, in a way, drives and dictates a lot of their behaviour. Susanne, before I go to you on regulation, Jon, is that as big a challenge as the what is that one of the biggest challenges in this area?


[00:09:25.630] - Jon Ferris

I think typically the one type of organisation in the electricity system that moves even slower than the networks is usually the regulator. So I think it is a challenge. Regulation often does persist. Even short term regulation tends to last longer than it's intended to. So the importance of getting that right, of consulting widely with the industry, of making sure that it's accepted and meets the needs, means that that does take time and is often quite slow to react to new technologies and new approaches. We are starting to see performance based regulation certainly being discussed and starting to be implemented in a number of countries in the GB market. The move towards totex or total expenditure rather than pure capex regulation is one example of how that's changing. So having incentives for efficient use of the network, not just how big the network is, but there's a lot more that regulators could go to incentivize use of new technologies, implementation of innovations and look at how efficiently the grid is used. Part of the challenge in doing that is that the level of monitoring that we have on grids is inadequate for that type of regulation because we haven't been installing network monitoring because it hasn't been needed.


[00:11:12.000] - Jon Ferris

So the digitalization of the grid is a prerequisite to then be able to change the regulation. So you have this circular argument where falling behind technology means that regulation is slowed, which means the implementation of new technologies is slowed and trying to break out of that cycle is happening in small pockets in the innovation teams, but it's not yet how networks are run.


[00:11:41.590] – Jon Slowe

Susan, you're in the thick of this, trying to get new technology into these networks.


[00:11:49.130] - Susanne

We have a lot of people probably listening on the TSO side and they say hey, things are happening, is that true? So when I ask myself the question is this happening? You can always say yes, something is happening. Yeah, but the question is when you look at, say, German congestion costs in my country, those have been €1.4 billion 2020, they have been €2.4 billion in 2021. They have reached €2.4 billion in April this year and they will be reaching at least €5 billion this year. So how can a TSO tell me that the situation is about right if people like me have to pay this in my electricity bill and the German customers - sorry, it is not going well. And when you see curtailments coming up and I see in the Netherlands that a full region is completely congested, you can't connect anything to this. And I hear from TSOs that they tell me we get request to be connected for demand. They need supply for data centres or companies that will create jobs. And then the TSO says guys, sorry, maybe in six years time come back again. Don't tell me the situation is about right.


[00:13:05.740] - Susanne

So what is the reason for those problems? Clearly regulation, you mentioned that. I totally agree. Regulation is running behind this capex heavy regulation is not fit for purpose. We have examples in the world and in Europe even, where it's going better. UK have this fantastic path finder programme which says essentially the system operator finds a problem, a challenge and says please give me a solution. Market. The market comes with a solution and this is paid for. We do not have any incentives for TSOs to spend any time on finding new solutions. It's not the case. We are wasting a lot of time in the bureaucratic approval process by the regulators to do anything. That's a big challenge. So no reward. A mindset issue is there as well. So there is a certain degree of complacency sometimes. Also we are knowing everything already and also security of supply and prices. And so we do not take advantage of also the combination of solutions. I'm also the chair of the little association in Brussels - currENT and we've done a study, we have a German consultant. It shows the combination of technology solution can reduce to 90% those €5 billion costs.


[00:14:23.360] - Susanne

Why don't we do it? I think we really need to have a completely different mindset. Given that again, in Germany, for example, we have increased by level four or five the ambition on building removals and all the war, the next winter are putting even more urgency on finding fast solutions. So we need to totally change the approach that we are having and we need to get out of an approach also to say, which often an argument that we have no time, our resources are constrained because we do this and that he's like we're the one that pushes the bike because he has no time to sit up. And this is not possible.


[00:15:01.010] – Jon Slowe

How optimistic are you, Susanne? It's a lot of challenges but as you say, 90% of the problems could be solved with technology that's available today. So how optimistic are you? Are you glass half full or glass half empty or are you worn down by the challenges or are you super optimistic about what you can do the next year?


[00:15:25.310] - Susanne

Optimism is really helpful or pessimism. It's more like looking at reality. What we need is to be prepared for uncertainty. That is the most important thing. And we have seen things happen that no one ever expected. I never expected already in 2015 terrorism to tackle Brussels where I was living. I never expected Covid to come, I never expected Ukraine war to come. All these things came unexpected. I didn't expect this past renewable spilled out. So we need to be prepared for uncertainty and technology solutions that are mature and come fast are absolutely perfect for us. So there needs to be a new combination. The brain is there, the engineers that across Europe and globally are outstanding. But I think you may miss a conductor and what makes me happy. So I'm optimistic on this one. Maybe in Europe as well. From the line faster months, they push, they understand we have a government here in Germany. I think they push, they try to get our bureaucracy, they try to push. If you have that political support to find solutions, the TSOs and the regulatory will align, if you do not have that, it's going to be bad.


[00:16:39.290] - Jon Ferris

I think it's important to recognise that it's not just technology solutions either, that there are lots of market solutions that are being tried both at transmission and distribution level to address congestion, whether it's local flexibility markets, whether it's microgrids, the evolution of ancillary services. However, I think at that point you made, Susanne, about the redispatch costs. That is a cost that is imposed on consumers. There's no incentive to address that either through markets. And when we look within flexibility service about the value of flexibility or the opportunity for flexibility. We look at the redispatch costs in Germany and have to exclude that from our evaluation because that's the cost that isn't open to markets. That isn't open to demand side flexibility to help address in conjunction with technologies and the various grid enhancing technologies that could be used to reduce those costs.


[00:17:51.230] – Jon Slowe

It seems to me that the spotlight is going to shine more and more on networks in the next years. There's been lots of examples, one you gave Susanne was in the Netherlands. Big parts of the grid where you can't connect. And yet for the energy transition to hit our carbon targets, we desperately need more connections, both for renewable generation and for load. So maybe part of the challenge has been that networks have been in the background quite a lot. They performed an incredibly valuable job, a super important job, but they've been in the background and yet they're increasingly in the spotlight. And I wonder what the effect of that spotlight increasing in its intensity will be? Defensive reaction? Or really, actually, will that help to change the mindset that you talked about? Susanne?


[00:18:49.370] - Susanne

I do think it's a great question. I just remember when I worked for your electric and for the established industry, it was totally unimaginable to see any renewables to take up at all. It sounds like you are in a kind of a little sect or something that renewables could become the story, but exactly the spotlight that you are talking about, the many people that got interested, why do we need these big blocks of those guys that tell us what we have to do while we have another idea? It’s also about democracy, and I do think even the choices made by the TSOs, or by DSOs need to be questioned sometimes there is, of course consultation and all these kinds of things, but you always need to question yourself. I also need to question myself. I think putting them in the spotlight will lead to a more humble approach, finding collaborative solutions with other parts of the community. I think that's, yes, I agree.


[00:19:52.920] - Jon Ferris

That joker card that you mentioned earlier of security of supply is going to be tested. More and more we are seeing blackouts on modern grids, whether it's in America, Australia, in the UK market. So as that objective of delivering security of supply becomes tested, that is going to put them in the spotlight and highlight that the approaches that have been taken are being tested, aren't delivering security of supply. So that might be the impetus driving the need to take a different approach and to look at new solutions.


[00:20:38.190] - Susanne

Yeah, I think there's a lot of things changing faster than we can follow because we believe something is in a certain way, but actually not. I'll give you the example of France. This year, for the first time, France is importing massive electricity. While you don't have much electricity. We all know that the prices on the wholesale, even in the Baltics, are beyond 4000 yesterday. So France has the challenge there. With nuclear fleet, there's a lot of outage management, but also the rivers are heating up, which is unacceptable, of course. So there's maybe 20% of the fleet in operation these days. Those things we didn't know before they could happen, but they completely changed the dynamics of the system and put the system itself at risk. And therefore this need for having fast and flexible solutions is absolutely paramount to keep security of supply as we are used to it.


[00:21:32.410] – Jon Slowe

Susanne, the company you work for, Smart Wires, you mentioned they started or spun out of Silicon Valley and you're active in lots of different geographies. When you look at Europe compared to other regions and look at networks, what contrast do you see or do you see the same story in different parts of the world?


[00:21:57.730] - Susanne

It's also really a very good question. I can only unfortunately say that Europe for me is my home continent is so slow and you see that the motion in Australia, Latin America, which honestly, I don't think that Europe takes Latin America as a standard, but they are a standard when it comes to adopting new solutions. It's not because they say it doesn't matter, we have a blackout. No, it's just really take those solutions on board, the US, Canada, all of them are going faster than Europe, those days. And that's a pity. And just like this morning, I talked to a German association that works with the Ministry to export our solutions, german solutions to the world. And I just thought that if you want to export something, our solutions, you need to be the best, otherwise you want to export. So I think we are a little bit in the nice idea of the Golden Age. Where we have certainly been the best. But this is like the light from the stars in the universe now with the Webb telescope. We really need to be more humble and understand what's not going on. What needs to change and then we need to implement not only invent.


[00:23:13.210] - Susanne

But implement solutions that we have. If we fail, sometimes you try that's part of innovation but go for a different mentality of taking some risk because even though there could be a blackout, but the blackout are without any tests, this is exactly the best counter argument. So we really need to change the gears and the mindset fast, different and be the best compete.


[00:23:40.670] – Jon Slowe

And in other geographies is it a mindset that is the difference. Is it regulation or is it just too much of a generalisation to say it's one or the other?


[00:23:53.390] - Susanne

Yeah, it's the attitude more humble, I would say it's more like the attitude in the company telling you you need to have let's call it a partner alliance, you need to have people that really believe the system can be done differently and must be done differently. The regulation is a big challenge, so it needs to be a solution oriented approach that's not a capex, heavy approach and build out your asset base, which is ridiculous. And the speed, and the mindset.


[00:24:30.850] - Jon Ferris

I think that mindset has been driven in some way by how successful both European network operators have been and how well the European grids have integrated with each other to provide that wider resilience. Whereas some of the countries that we have seen moving faster in taking up new solutions have experienced blackouts much earlier, whether it's Latin America, Australia, in the states, whether we go back to 2003 or the more recent blackouts in Texas and California, you've got those drivers shifting the mindset in Europe. We haven't had that until very recently.


[00:25:20.030] – Jon Slowe

It's really interesting, Jon, I've heard the European network industry talk really proudly about its levels of reliability, the quality of service. Contrast that with maybe North America, which is lower, but maybe there's a need to have shocks or a need to have something that really forces a change of regulation mindset attitude in the way you described.


[00:25:47.810] - Jon Ferris

I think so. And you can look at just how we talk about North America, but North America is not one grid, it is multiple grids. And seeing how interconnected the European grid is across multiple countries, that's a huge achievement. That's bringing a lot of resilience just from a physical perspective and the moves that have been made to couple the markets and allow trading not just of energy but of flexibility across borders, being able to do that across so many countries in such a large area, that's a great achievement. However, over recent years we're also seeing that big grid face events where it splits in two and we need to recognise that, we need to take new approaches, we need to be able to respond to those events. Otherwise, assuming that we're going to be able to share resilience and flexibility across 30 countries with no impediments means that we don't have the resilience to deal with the events that are coming along, whether it's driven by the weather patterns or any other cause, we will see those shocks and they will come more frequently.


[00:27:13.110] – Jon Slowe

So, yeah, I'm thinking of the analogy between a frog in water that you're heating up gradually and a frog being put into a pot of boiling water. And the numbers you talked about, Susanne, those congestion costs in Germany of  €1.4 billion, €2.4 billion, €5 billion. Trouble with those gradual changes is that people get used to them. And maybe I'm not wishing a blackout on Europe at all as to provide that shock, but maybe you do need some kind of spur or some kind of real stimulus or event or maybe the current energy crisis is yeah, I do.


[00:27:50.820] - Susanne

So I think we already have this test now coming and even the anticipation of this test, Germany or Europe, we never thought about having a winter where we need to freeze, in anticipation of the next winter. But even also like these terrible droughts, when you look at the rivers, when you look at all these climate events around us, everything suddenly is real. And even with all the repower use statements that the renewables filled out and this management of the energy crisis are perfectly compatible and go in one direction, I would say that reality shows some elements of those not doing this, like coal are being used massively again and that kind of thing.

[00:28:35.070] - Susanne

There needs to be a complete step change in the way we are living the energy amount we are consuming and the networks, how they are operating. And that needs to happen now. So I do think that this dissipation of the crisis, real crisis already being there when it comes to climate, helps the government to take action. Even a government that wants to take action very often is blocked by the technical knowledge of the regulated monopolies that we would like to as well. But unfortunately for this and this, they.


[00:29:14.440] - Jon

Put out the joker you talked about.


[00:29:17.970] - Susanne

I think this is going to stop. And there's some evidence I see in Germany that this is going to stop. These packages that come out, these fast measures that are taken to build the energy terminals in Germany, in Western, and see the cable between Poland and Ukraine that's going to be built by half a year. By the way, I also wanted to mention, optimization is very important, but building more grids is as well very important. We just need to make this bid. All this has to change fast.


[00:29:51.830] - Jon

And I guess being optimistic. Jon, the UK is probably a leader in terms of the regulatory framework. Susanne, you mentioned the Pathfinder projects. Do you see the UK moving in the right direction? Jon, do you think it's doing enough? Is it got that pace and mindset that we've talked about?


[00:30:14.210] - Jon Ferris

Well, we're definitely seeing movement both at the ESO level. So separating the national market operator from the transmission network owner at DSO level, looking at local markets, we're seeing the similar moves as Susanne mentioned, that complexity, we need more of everything. So we need more grid, we need to optimise the grid we have that can be done both from new technologies and through markets. So we're seeing movement in all of those areas. We're also seeing moves towards the future system operator. So, looking not just at electricity, but how do you optimise the system, the energy system as a whole? How can you be better coordinated between heat and transport and gas and electricity? So we're seeing a lot of movement and a lot of progress. But as I think we've explored, the shocks are coming perhaps sooner than had been expected. I think that the risk of losing gas supplies during the winter would mean that availability of power is much reduced and where power is flowing across the network is hugely changed. That would be quite a shock. That is probably a wake up call to move faster and really make some changes very quickly.


[00:31:55.550] – Jon Slowe

Okay, so moving in the right direction, but coming back to that question of speed, now, time is getting the better of us. So let's bring out the talking new energy crystal ball and I'll set the dial this week to 2030. So, question for both of you. Susanne and Jon, if we look at 2030 and imagine ourselves there, to what degree will transport of electricity be a constraint when we're looking at decarbonising power and electrifying transport and heat? So I don't think you can answer that with a number, but with a feeling. So Susanne, do you want to go first and then Jon?


[00:32:39.170] - Susanne

Yeah, so I think it's a very good question. Is it possibly a constraint when it comes to build out renewables? Clearly we need to massively build out in January, 20-30gW PV, 50 today. We need to connect all these loads. You need to transport it and it's not going to be north south anymore, it's also going to be east west on new constraints on the grid. The grid needs to be fast enough to adapt to those new constraints, build out the network to make this happen. The window offshore stuff and make this right among the countries is a big challenge. They're building efficiency. All these heat pumps, the mobility or the emobility by directional charging in all those countries. So it's not one of those elements of the energy transition. Plus industry, industrial electrification, the industry which is important for jobs and prosperity of the continent, all this is exposed to the bottleneck of grids. So if you do not focus on the grid, you're going to fail on all the others.


[00:33:45.650] - Jon

So my guess is that you think there's probably some bottleneck, but you're hoping that there's as little of that bottleneck as possible.


[00:33:53.090] - Susanne

Exactly 3% of the curtailment is acceptable. It's always good, like for renewables, saying 3% credit is fine because the cost of connecting the 3% is much higher than the benefit of doing it. But don't go beyond it. Don't have areas where companies cannot set up business.


[00:34:11.670] – Jon Slowe

Yeah, okay, thanks then. Jon.


[00:34:16.930] - Jon Ferris

I would echo that. I think by 2030 we will have a change in mindset that upgrading the network's, building more grid in order to eliminate constraints is just not going to be practical. From a cost perspective, from a time perspective, from the opposition that you get from people not wanting transmission lines going through there where they live. It is going to be a feature of the new energy system, that there are constraints, that there are congestion, and we have to do what we can to address that through markets, through making best use of the grid that we have. But recognising that. If you curtail solar energy in the middle of a sunny day when there's more than enough generation being produced, then that's okay, because adding more capacity means that there's more solar generation in the morning as demand ramps up and perhaps in the evening when it's needed. And the curtailment in the middle of the day is less important because it's offset by having more generation when you actually need it.


[00:35:35.800] – Jon Slowe

Yes, or maybe some curtailment after you've heated up your water tank and charge your electric vehicle and a battery, if you have on us as well. Accepting that curtailment, I think a really interesting point you both made that yes, some curtailment will be a part of the future, any part of. The system for sure, but not to the sort of level. Or sort of costs that we're seeing us moving in at the moment. Well, we better leave it there, trying to get the better of us. It's been a fascinating discussion. Thanks so much, Susanne, for joining us.


[00:36:12.910] - Susanne

Thanks a lot.


[00:36:14.060] - Jon

Thanks, Jon, for your contributions.


[00:36:16.870] - Jon Ferris

Thank you.


[00:36:18.490] - Jon

And maybe we'll have an episode with a couple of network companies soon and hear their perspectives, but it's been really interesting. A critical part of the energy sector, as I said. I think the spotlight will shine more and more on it. And like other parts, every part needs to do its bit to have a successful transition. Thanks, Jon. Thanks, Susanne. Thanks, everyone, for listening. I hope you found that interesting and look forward to welcoming you back next week. Thanks and good bye.


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