Distribution Grids and Energy Transition: The Status Quo

It is undeniable that distribution grids play a central role in the energy transition. Yes, the development and expansion of renewable sources of energy are key to reaching the net zero goals, but all that generated power could hardly be used without the ability of the power grids to transmit and distribute the electricity further along the line. And this is where on a global scale, we are faced with mounting challenges: aging electric grid infrastructure, rising grid integration issues of renewable energy sources, as well as shortage of skilled labor are just a few of them. So, let’s take a closer look at the most pressing issues and how they can be approached today.

Grid integration of renewable energy systems is exploding, and the distribution grids do not keep up

2022 was the year that experienced an unprecedented growth of solar generation adoption. According to the latest report by Solar Power Europe, installation of solar PV systems in EU countries hit a new record in 2022, increasing by 47 percent compared to the previous year. This confirms what we have been hearing from our own customers and partners: Many European DSOs reported a significant increase in grid connection requests for PV installations, sometimes twice as high compared to 2021, with the majority of new installations coming from private households.

In addition to that, according to IEA’s roadmap to net zero, the pace at which renewables are rolled out between now and 2050 must be increased 20-fold for solar!

The heat pumps market saw in 2022 an unprecedented growth, too. The European Heat Pump Association (ehpa) report showed a new record of nearly 3 million units sold Europe-wide. This is almost 38 percent more compared to an already record-breaking 2021. Sales of electric cars – both battery-powered and hybrid – broke a new record as well, albeit less phenomenally as solar or heat pumps – “just” 21 percent growth compared to the previous year.

While these numbers show that we’re on a solid path towards replacing fossil fuels with renewable energy, and therefore towards the energy transition, they also mean that the Europe’s power grid is increasingly getting under pressure.

New power generators and loads call for more visibility into the distribution grids

Clearly, distribution grids require more investment in order to accommodate for the renewable sources of energy generation and become the true driver of the energy transition. Moreover, adding new power lines is crucial not only to enable all solar generated electricity to be fed into the grids and transported to the consumers, but also to stabilize and relieve the power grid to support the growing use of heat pumps and e-car chargers.

The pace at which renewables are rolled out seems, however, to have caught everyone off-guard, with renewable energy expanding at a much higher rate than the required grid expansion happens. One of the reasons is that particularly at the low-voltage level, there is at the moment less visibility into the grid ecosystem as opposed to high- and medium-voltage level. This makes it harder to predict where the load peaks are more likely to occur on a regular basis or where demand for more capacity is growing at an alarming rate.

With this in mind, in addition to the grid expansion efforts, we must aim for a much better transparency into the existing grids to ensure more efficient planning and distribution of new connection points. If we can gain a comprehensive and holistic view of the current grid status and capacity, we will be able to evaluate much more precisely to what extent the integration of renewable energy sources will affect certain areas of the grid and where its expansion will prove to be more urgent. In this context, digitalization and automation of related processes are key to making such insights-based decisions.

Aging grid infrastructure and the need for grid modernization

The challenge of the integration of renewable energy sources is closely linked to the next big issue that grid operators face – existing electric grid infrastructure requires substantial modernization in order to handle the influx of energy from new sources.

The traditional power grid system was built for centralized power generation sources such as coal, gas, nuclear and hydropower – all with varying levels of control over energy production but none considered intermittent.

Renewables like wind and solar, however, are decentralized and their energy production varies based on weather conditions; it is, therefore, less predictable. This results in issues such as voltage fluctuations, unequal power distribution, and grid instability. All of this sometimes calls for measures that are completely at odds with the energy transition goals, for example, switching off wind turbines when the volume of wind-generated energy threatens to cause grid congestion. For instance, in Germany, 5.8 billion kilowatt hours of electricity from wind were wasted in 2021 due to this practice.

Such measures are, however, considered to be a lesser evil at the moment. According to the IEA’s report from December 2022, “many transmission and distribution networks have insufficient capacity to connect new solar PV and wind plants.” In the Energy Industry Insights 2022 by DNV, Louise Rullaud, Head of Distribution & Market Facilitation Team, at Eurelectric says: “If we do not modernize now, almost half of the low voltage lines in Europe will be over 40 years old by 2030, which is near the end of the technical lifetime for some of these assets.” This is an alarming estimation that underscores the urgency to roll out grid modernization measures as soon as possible.

Better transparency can help improve grid resilience already now

It would be too easy to say that the only way to solve this issue is to invest more into the modernization of the current grid infrastructure – although that is certainly required, too. Other measures can at least alleviate the status quo and help us bridge the gap between the “how-it-is-now” and “how-it-should-be” situation with minimal losses.

A better overview of the current load state of the grids could, for instance, help identify the most problematic line segments and then enable grid operators to put out “local fires” by focusing on those segments first. Being able to run scenarios on physical assets such as underground cables and transformers would also help apply modernization “patches” exactly at the spots that require increased capacity most. This won’t replace the need for overall measures aimed at sustaining the existing distribution grids, but it will allow us to ensure better grid resilience at the moment and avoid unnecessary overloads that lead to grid instability.

Shortage of skilled labor puts grid operations and development plans at risk

Not only the grids are getting older; the staff is, too. In about five years, baby boomers will begin to retire from the active workforce, which will bring the already noticeable shortage of skilled workers to a new dimension. In addition to that, the energy industry registers a growing skills shortage in general in all different areas. Several recent reports, including one from the International Energy Agency, warn that shortage of skilled laborers is currently one of the top five barriers to faster grid expansion and hence, the energy transition.

For instance, forecasts by Statistics Sweden predict a shortage of engineers in energy, electronics, automation, and computer science by the 2030s. According to the Berlin consulting firm LBD, DSOs can expect to struggle or be unable to secure the necessary personnel resources in the coming years to stabilize or expand their distribution grids.

It’s not all gloom and doom, though. To address the shortage, many utilities are already expanding their hiring methods to include individuals with transferable skills from other industries and partnering with colleges to attract top graduates. In addition, it’s a general understanding that current grid operations managers require additional training that will allow them to pivot their skillsets to accommodate digitization, automation and advances in data analytics. And the good news is – the necessary digital tools that can effectively support this kind of upskilling training are already available on the market.

For example, more sophisticated monitoring capabilities will help even less experienced staff in identifying critical events quickly and trigger a timely response to those. This way, the lack of a decade-long experience can be at least up to a certain extent made up for with smart tools that provide real-life, data-driven insights. Increased levels of process automation and digitalization will also help reduce the need for manual input in such tasks as grid capacity evaluation for new connection point requests. This will free up personnel resources for more complex and strategic tasks such as short- and long-term grid planning, and enable efficient operations even with less staff.

New times bring new challenges but also new opportunities for distribution grids

It wouldn’t be far-fetched at all to say that the energy industry is going through unprecedented times. It is one of the most complex physical systems developed by humanity over decades, and now it has to undergo a major modernization and redevelopment in the shortest time possible to ensure not only stable power supply but also that we drive the energy transition and reach our net zero goals.

It is also undeniable that this is a highly complex and challenging task that requires extensive coordination of multiple entities, a variety of skills, and of course, substantial investments. However, new times bring not only new challenges, but also new opportunities. While digitalization of distribution grids and higher levels of process automation are not the proverbial silver bullet to fix all issues, with the help of the right tools we can gain a more holistic view of the grid allowing for more transparency and visibility, better planning capabilities and more efficient management and coordination.

In the second part of our mini-series, we are going to take a closer look at the concept of digital twins in the context of the so-called smart grids. While the energy sector is one of the latest to explore and adopt this technology, it is promised to benefit tremendously from it. So, next time, we’re going to briefly go over the general concepts of digital twins, the prerequisites for creating a good electrical digital twin, and how exactly digital twins can help tackle at least some of the main challenges in the energy sector and help us drive the energy transition. Follow the link to read the Part 2 >>> Electrical Digital Twin Enables Better Grid Stability and Transparency.

This project is supported by the German Federal Ministry for Economic Affairs and Climate Action as part of the Renewable Energy Solutions Programme of the German Energy Solutions Initiative.

German Energy Agency (dena)

The German Energy Agency (dena) is a centre of excellence for the applied energy transition and climate protection. dena studies the challenges of building a climate-neutral society and supports the German government in achieving its energy and climate policy objectives. Since its foundation in 2000, dena has worked to develop and implement solutions and bring together national and international partners from politics, industry, the scientific community and all parts of society. dena is a project enterprise and a public company owned by the German federal government. dena’s shareholders are the Federal Republic of Germany and the KfW Group.

German Energy Solutions Initiative

With the aim of positioning German technologies and know-how worldwide, the German Energy Solutions Initiative of the Federal Ministry of Economics and Climate Action (BMWK) supports suppliers of climate-friendly energy solutions in opening up foreign markets. The focus lies on renewable energies, energy efficiency, smart grids and storage, as well as technologies such as power-to-gas and fuel cells. Aimed in particular at small and medium-sized enterprises, the German Energy Solutions Initiative supports participants through measures to prepare market entry as well as to prospect, develop and secure new markets.

Renewable Energy Solutions Programme (RES Programme)

With the RES programme, the Energy Export Initiative of the Federal Ministry of Economics and Climate Action (BMWK) helps German companies in the renewable energy and energy efficiency sectors enter new markets. Within the framework of the programme, reference plants are installed and marketed with the support of the German Energy Agency (dena). Information and training activities help ensure a sustainable market entry and demonstrate the quality of climate-friendly technologies made in Germany.