Posted on February 07, 2013

This Q&A is intended to bring information to the general public on these two topics, which are of crucial significance for the development of the soaring electricity supply industry and the development growth of the Middle East. While the smart grid is a more recent innovation, restructuring has been with us since the early 1970s, although only the most advanced countries, and a few middle income ones, have undertaken the restructuring of their electricity sectors.  

Smart Grids

Q: Could you explain – briefly and in layman’s language – what a grid is, and how it becomes a smart one?

A: A power grid is the network structure linking the source of power generation to points of use of the power, such as a factory, offices, and homes. A smart power grid results from the integration of advanced communications and information technology into all aspects of power utility operations, from the source of generation to the points of use. This provides entirely new levels of visibility and control, which then help improve reliability and efficiency.

Q: How did smart grid get its start?

A: Smart grids are an outcrop of the Energy Management Systems (EMS) that have been in operation in many countries for several years. An EMS uses available information and communications technology to provide real-time data flows between generating plants and associated high voltage transmission systems, improving both the efficiency of generation and the management of the load on the transmission systems. Advances in technology have led to ever-greater integration of generation and transmission, and now it is possible to start extending into the distribution system, to consumer machinery and even household appliances, to enable information flows between the power source and the end-user.

Q: What are the benefits of a smart grid?

A: By enabling full information across the entire grid in real time, a smart grid significantly increases efficiency of operations in several ways, including:

  • Improved grid and overall system reliability
  • Better management of the load on the system
  • Better understanding of use patterns
  • Reduced utility operating costs
  • Increased energy efficiency thanks to overall reductions in demand and end-end system losses, and better peak demand shifting
  • Integration of renewable generation
  • Fewer emissions of pollutants and greenhouse gases

Q: Are all these benefits guaranteed for a smart grid?

A:  No. The transition has to be done right – and you have to have the right elements in place before this can start. First and foremost, the existing system must be technically sound across the board. Next, distribution must be fully automated, and the tariff structure must be unbundled to reflect daily and seasonal fluctuations in the cost of supply. Finally, there must be sufficient numbers of smart consumer appliances that can switch on and off according to the tariff structure. Absent these conditions, the performance of a smart grid cannot be guaranteed.

Q: What are the security concerns, if any?

A: This is a key consideration, especially for systems located in large cities and/or grid systems that supply critical loads. The vulnerability of a smart grid is the fact that its communications are Internet Protocol-based, which makes them potentially accessible to hacking. Needless to say, the importance of a power grid to modern life means that every effort must be made to prevent malicious attacks and mitigate their effects when they happen. And planning for such events requires a shift in thinking to address the possibility of a coordinated attack on multiple facilities by an intelligent attacker over a network.

Q: So why does a smart grid use the IP-based architecture?

A: Because it brings several benefits, including greater ability to share information across systems boundaries, simplified communications and control, and improved end-to-end visibility.

Q: What is the world-wide experience with smart grids?

A: It is fair to say that smart grid is still very much evolving, mainly because some of the prerequisites listed above are not in place. No utility has fully installed a smart grid. Most of those in the developed countries and some in the middle income countries have or achieved full (or almost full) distribution system automation, but this is a far cry from a genuine smart grid. The Middle East has one of the most dynamic electricity growing sectors of the world and should definitely benefit from the latest technologies.

 

Roudi Baroudi, CEO of Energy Environment Holding, an independent consultancy based in Doha

Electricity Sector Restructuring

Q: What is electricity sector restructuring all about?

A: Fundamentally, the process is relatively straightforward. An electricity sector is network infrastructure, consisting of points of production/generation and a network that transports the electricity to users and consumers, all vertically integrated under a single owner. Restructuring means a) un-bundling these structures into independent entities for production, transportation/transmission, supply, and distribution; and b) establishing new laws and regulations to oversee the changed activities in the region.  

Q: Why restructure an electricity sector when utilities are working well, tariffs are reasonable, and reliability and quality are good?

A: The main reason for restructuring is to increase the potential of an electricity sector far beyond its existing performance. Restructuring allows significant efficiency gains through cost reduction, lower tariffs, and improved reliability and quality of supply thanks to the advent of competition in generation and supply. All of this has been made possible by advances in both the economic theory that allows network utilities to be viewed as two distinct components, and the technology that allows small, highly efficient generating plants to compensate for the economies of scale enjoyed by larger facilities. In addition, the need to free up public funds for social uses has spurred efforts to restructure, liberalize and attract private sector participation.

Q: Has restructuring been attempted in the Arab region?

A: Only one Arab country, Jordan, has undertaken significant restructuring of its electricity industry, largely out of the practical need to husband scarce public resources. Elsewhere, all Arab countries have vertically integrated power sectors because they have abundant energy resources and/or significant financial ones, both of which reduce their incentives to change. Already, however, the inefficiencies of some of the Middle East electricity sectors are gobbling up uncomfortable amounts of money, and local voices are increasingly worried about environmental impacts as well. The bottom line is that restructuring will have to occur at some point, and the earlier the better.

Roudi Baroudi is the CEO of Energy Environment Holding, an independent consultancy based in Doha.

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