The growth of electricity is closely linked to the growth of productivity and has been essential for the industrialization of Western nations. As the expectations on power systems become increasingly more demanding, perhaps it is time for countries to embrace a more distributed model instead of the traditional centralized power system.
In Europe, manufacturing facilities are leveraging existing grid connections and building out behind-the-meter (BTM) solar PV and battery energy storage system (BESS) capabilities to hedge against high power prices. With the wait for new grid connections in the UK up to 15 years and power prices reaching £5500/MWh in some hours, it is hardly surprising that companies are embracing behind-the meter solutions.
In addition to solar PV, which asset owners in most European countries have been able to sell back to the grid for years, there is noticeable growth in BTM BESS capacity. Car manufacturers BMW, Renault, and Mercedes Benz are building out stationary storage by using second life EV batteries, but other companies, such as Amazon and chemicals manufacturer BASF, are also embracing behind-the-meter BESS solutions.
Bi-directional grid connections that allow BESS owners to sell power back to the grid via the same connection used to charge BESS is also facilitating new business models. For example, Finnish company Cactos offers its clients a leasing and revenue sharing model, whereby Cactos builds and manages BESS on a C&I (commercial and industrial) client’s site and splits the proceeds from the power trading with the client. At the end of the leasing period, Cactos will own the BESS asset.
Tale of Two Grids
It is becoming painfully clear that global power systems need more flexibility but the adoption for grid-side measures that allow for more flexibility has been uneven. Big central assets are easier for the TSO’s (transmission system operators) to control and manage, while integrating new distributed energy assets into the grid adds significant complexity.
The UK TSO National Grid has made great strides in integrating both demand and supply side flexibility in the grid and it is paying dividends. In the years 2023-2024, the UK power grid saw a seven-fold increase in flexibility, which delivered 7.8GWh of power.
On a number of occasions, utilities were able to mobilize significant battery capacity to offset unplanned outages in the grid and thus avoid grid failure. On October 8th, the NSL Norway-GB HVDC interconnector, the North Sea Link interconnector that connects the electricity systems of Great Britain and Norway, tripped and 1.4GW of Norwegian import capacity fell to zero. Energy suppliers Octopus, with its Kraken software, and Arenko were able to mobilize 1.5GW of BESS capacity in seconds, avoiding any system disruption.
By contrast, on April 28th of this year the whole Iberian Peninsula was plunged into darkness following cascading blackouts after 2.2GW of capacity tripped. Spanish authorities explicitly warned people to stay off the roads because most traffic-light signals were dark, and the entire national rail network was out of service.
Building a new grid is increasingly difficult — interconnection queues are astronomical, the supply chain for new transformers and inverters is congested, climate change, fires, and other natural events will put power grids under increasing stress, and whether regulators and TSOs like it or not, there is a new wave of load centers coming, such as EVs and data centers.
Data Center Demand
Much of the new demand growth will come from data centers, but these large new demand centers will also face the same challenges of any new load center – it’s almost impossible to get in the interconnection queue and difficult to manage renewable supply. We are already seeing the emergence of distributed data centers, with hyperscalers Amazon and Google embracing edge solutions. This allows for low latency and for tasks such as inference to be processed outside the central GPU. This is yet another way to circumvent the grid connection problem.
Some more innovative solutions include digital boilers, such as the one developed by Watter – a server that heats up water by rejecting heat. UK-based company DeepGreen that heats up swimming pools with waste heat from data centers raised $200M last year from Octopus Ventures.
This mishmash of a new grid also needs new smart power electronics ensuring the seamless operations of distributed assets. This is what smart transformer developer Ampersand CEO Gary Lawrence calls the “borderless grid” that incorporates big assets, small assets, new load centers, such as distributed data centers and EV’s, and manages them effectively.
There is also a need for new revenue models. Virtual power plants (VPPs) are now widely used in Europe and the U.S., allowing utilities, DSOs (distributed system operators) and TSOs to tap into distributed resources for grid balancing without building new large, centralized assets. However, this has been facilitated by the existence of liquid power markets and other revenue models, such as demand response. In developing countries, in particular, that is the key to how to ensure that non-grid connected microgrids would be incentivized to be connected to the central grid.
Finally, the electric and increasingly complex grid will also need to make way for new large dispatchable power assets, such as long duration energy storage (LDES), that will likely become strategic assets for utilities and TSOs.
