Energy for the future: Smart grid business models

Digital energy networks are a central element of this development. In the future, these smart grids will link all players in the power supply chain – from producers and network operators to consumers and components that store electricity such as batteries. The basis for it all is smart meters, i.e. digital electricity meters. German legislation driving the digitalization of the country’s energy transition in 2016 has helped speed up the gradual replacement of analog electricity meters with these intelligent metering systems. This has advantages for both energy suppliers and consumers: IoT sensors installed in smart meters transmit data on electricity consumption in real-time. That means meter readings no longer have to be read on site. Consumers can also network their PCs, tablets or smartphones with the IoT sensors, gaining an overview of their consumption and being able to swiftly identify any power guzzlers they might have at home. And the smart grid and digital electricity meters are even helping create entirely new business models.

Energy suppliers are currently developing strategies to manage and quench demand from their customers in a decentralized, software-supported and cost-effective manner. For example, since renewable energy does not flow steadily or predictably into the power grid, they are offering flexible electricity prices. If the sun shines for a long time or the wind blows especially strongly, electricity becomes cheaper because there is a lot available. Private households benefit from the low prices by programming household appliances so that dishwashers, washing machines or even electric cars start or charge automatically when electricity is particularly cheap. Companies can also make effective savings here: Water suppliers don’t have to operate their electric pumps and storage tanks constantly, instead only when the market price for electricity is low. Third-party suppliers could also buy and store electricity for electric cars, for example, if it is particularly cheap and then resell the electricity to car owners regardless of the weather and at a higher price.

Germany’s energy transition is also set to change the very nature of its power plants. Instead of a few large ones generating electricity for the whole nation, there will be many smaller units connected to the grid. Photovoltaic systems, cogeneration units, wind turbines and hydroelectric power plants, for example, will work together to feed electricity into a decentralized network. Intelligent technologies such as IoT will reliably control the flow of energy, store excess power and release it again when needed, so that the electricity supply from renewable energy sources is both plannable and reliable.

But this is likely to take at least another decade. Comprehensive smart grids only exist in theory today. According to the German Federal Network Agency, expanding the grid with high- and extra-high-voltage lines has to be tackled first, along with better connecting offshore wind farms to the network. Plus, additional power lines are needed to ensure that wind energy can be easily transported from Germany’s northern coast to its southern regions. The government aims to replace all electricity meters with smart meters or at least modernizing them by 2032. So the introduction of smart grids will not happen overnight. But the energy transition is comming – and with it the potential for innovative technologies and business models for sustainable power generation.