OPPORTUNITIES IN ENERGY
SG3
Innovation in
Electricity Networks
grid integration of
variable renewable energy
Contents
Introduction ........................................................................................................................................... 1
Innovation in electricity networks ......................................................................................................... 1
The smart grid opportunity ................................................................................................................... 1
Grid integration of variable renewable energy ..................................................................................... 2
The challenges ....................................................................................................................................... 3
Market for grid integration of variable renewable energy ................................................................... 4
Summary ................................................................................................................................................ 5
How we support innovation ................................................................................................................... 6
Useful links ............................................................................................................................................ 7
Sources .................................................................................................................................................. 8
Acknowledgements ............................................................................................................................... 8
Introduction
Scotland’s huge renewable energy resource coupled with its commitment to
fulfil ambitious climate change targets offer the potential for Scotland to
become one of the world leaders in renewable energy development. This,
however, implies large amounts of variable renewable energy coming online in
the next few years.
This paper is the third in a series, authored in partnership with Highlands &
Islands Enterprise, the Energy Innovation Centre and the Energy Technology
Partnership, setting out the opportunities open to Scottish companies in the
growing market for innovative products and services that will allow electrical
power transmission and distribution networks to handle the ever-changing
demands put on them by the changing mix of generation, as well as variations
in consumption. New products and services are specifically needed to enable
integrated power network systems (Smart Grids). This will allow more flexible,
cheaper implementation of distributed power generation; mitigate the need for
expensive infrastructure upgrades; and help overcome the variability of
renewable power generation and the capacity constraints in existing networks.
Innovation in electricity networks
Recent market foresighting by Scottish Enterprise indicates that Scotland has existing company and
academic strengths that can be developed and diversified to take advantage of the key market and
technology opportunities in the areas of:
 New business models for supplying electricity and additional services;
 Customer energy management;
 Data acquisition, monitoring and analysis;
 Network automation and optimisation;
 High-Voltage Direct Current (HVDC); and,
 Energy storage.
It should also be noted that opportunities exist for companies to develop products and services that
improve the effectiveness and efficiency of, or reduce the cost of, operating, maintaining and
reinforcing existing networks (the Energy Innovation Centre has published a list of the UK industry’s
technology requirements on their website – see their Innovation Needs section). Further
information can also be found on the Energy Networks Association ‘Smarter Networks’ portal.
The smart grid opportunity
The 2020 global market for Smart Grid products and systems has been estimated at £24 billion
(range £18-£47 billion). The corresponding cumulative global market size taken over the period
2011-2020 has been estimated at approximately £185 billion (range £128-£292 billion). Significant
growth is forecast for Europe and Asia. The European market is estimated at £12 billion in 2020; the
Asian market at approx. £7 billion in 2020, with further expansion beyond that. (1)
Grid integration of variable renewable energy
A variety of options exist that can enable successful integration of Scotland’s significant renewable
generation resources onto the electricity networks. Similar challenges are also occurring globally.
‘Appropriate adaptation’ of existing grids will mean they will be able to support significantly higher
proportions of renewable energy. These include: upgrading the existing network; interconnection
with other countries; demand side response; adding flexible generation to the grid; and
incorporating storage (both large and small scale) into the system. The above technologies are
required for the following reasons:

To transmit electricity from areas of high generation to demand centres;

To balance the electricity system, ensuring the generation supply is balanced with demand. This
includes balancing the system in the event of loss of generation plant or loss of a transmission
circuit;

To balance local generation with local demand, avoiding the need for reinforcement.
Based on findings from SE Foresighting research a number of technologies were identified as key
areas of importance for Scotland in terms of enabling integration of renewable energy. These
included:

Active networks potentially incorporating demand side response (DSR) and distributed storage

Reinforcement technologies, including multi-terminal VSC (Voltage Source Converter)-HVDC

Interconnections with other countries also offer a significant potential, but opportunities appear
to be more long-term.
However this call is very broad and there could be a variety of possible solutions.
Analysis shows that costs of integration technologies often exceed costs of curtailment of renewable
generation. This is particularly significant for integration technologies at a distribution level.
Technical solutions that approach or match curtailment costs would be particularly useful for
reducing the overall costs of integration. A mid-point estimate of constraint costs is around
£550/kW (based on annual curtailment costs of renewables in Scotland). (2)
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The challenges
Active networks
This challenge was covered in an earlier opportunity paper on Network Automation & Optimisation.
Most renewable generation is connected to the electricity distribution network – a network that has
to date been of a passive design. Distribution networks of the future need to be better able to cope
with the effects of this generation. They will need innovation in several key areas of information
technology and control. Active control of networks using advanced sensors will be used to achieve
higher degrees of network automation and better system control, while pervasive communications
will allow networks to be reconfigured by intelligent systems. Protection and control systems will
be able to react to faults and unusual transient behaviour and ensure recovery after such events. It
is worth saying that affordable solutions should not be overlooked; it might be more about the
innovative use of existing technology rather than developing new (expensive) technology.
Demand Side Response
Flexing the consumption of energy to match variable renewable energy production is the essence of
demand side management. Demand side management business challenges include: new ways of
supplying electricity; home energy management services; aggregation and trading of
micro-generated electricity; etc. Customer energy management systems, data acquisition,
monitoring and analysis of demand, generation and network data, products, services and integrated
systems are also required.
Another challenge area is the manufacturing of smart devices for consumer equipment, such as
fridges, washing machines etc, to enable them to respond to demand levels.
There is also a need for companies to capture a share of the smart meter market (particularly
installation).
Grid reinforcement and interconnection
Scotland is a region of high generation and low demand, and it requires sufficient transmission
infrastructure to allow for exporting excess of generation to regions of high demand. This implies
provision of new network infrastructure and/or upgrades to the existing network – both of these are
the types of reinforcement. Reinforcement can involve new or upgraded overhead lines, cables
transformers and switchgear. The major risks to reinforcement projects are planning and consent
issues and the financing of work.
Scotland has historically also been a net exporter of electricity and exports around 20% of its
generation to the rest of the UK. As well as exporting excess energy to the rest of the UK, there is
potential for Scotland to connect to other neighbouring countries, in particular to those with large
volumes of renewable generation. Such interconnection has a potential to play a significant role in
balancing supply and demand (i.e. export at times of high supply and import during times of peak
demand). In addition, electricity trading can lower the cost of electricity to consumers as cheaper
sources of electricity can be made available. This may lead to a decrease in the costs of
decarbonisation.
The underlying technologies for the development of interconnectors are a subset of those
technologies that are used for general reinforcements such as HVDC subsea cables. Many of the
issues are similar to those experienced for reinforcements, such as planning, consenting and
technical issues. But there are additional issues relating to the interconnection of countries and
offshore grids.
These include issues such as standardisation of voltages and differing
arrangements for balancing and trading.
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Storage
There are many different forms of energy storage that may be feasible for widespread deployment.
Energy storage could be a key method of addressing future energy challenges and not acting now
would: endanger the stability of UK energy supply; increase the price of electricity to the consumer;
and, miss valuable market opportunities by allowing overseas competitors (facing the same
challenges) to develop solutions faster. Due to cost and functionality reasons only pumped hydro
storage (a mechanical solution) has been widely deployed to date.
Market for grid integration of variable renewable energy
Active networks
The current market for network automation and optimisation is substantial and is projected to grow
rapidly in the next decade to come. As can be seen in figure 1 below (‘Grid’ column), projected
spend on grid optimisation systems is expected to reach over 40% of the overall cumulative smart
grid spend market by 2020 and be worth £120Bn of 10 years cumulative spend by 2030.
Realistic total market spends by Smart Grid segments by 2030
Total Value 2011-30, £Bn
Metering
CEMS
Data
Grid
EV
Scotland
0.2
0.2
0.2
4.7
0.1
Great Britain
2.2
1.8
0.7
11.2
1.1
Europe
28.7
19.3
7.9
62.6
11.5
North America
11.6
8.2
3.3
18.3
13.4
Asia
28.7
8.5
10.4
21.7
5.7
Rest of World
4.4
1.2
2.0
1.7
0.2
Total
75.9
39.3
24.4
120.1
32.1
Source: Scottish Enterprise internal based on IPA (3)
Total
5.5
17.1
129.9
54.9
75.0
9.5
291.8
Demand Side Response
If we consider demand side response opportunities to cover smart metering, customer energy
management systems (CEMS) and data acquisition and analysis, the cumulative value of these
markets to 2020 will be worth £140Bn.
Grid reinforcement and interconnection
The Electricity Networks Strategy Group (ENSG) report “Our Electricity Transmission Network:
Vision for 2020” (February 2012) specified the reinforcements required to be made to the existing
transmission network in the UK and Scotland to incorporate changes in the future generation
portfolio as part of a so-called “Gone Green” scenario.
The total investment in reinforcement required in Scotland by 2020 to meet the “Gone Green”
scenario has been estimated as £2.5 billion to connect 10.2GW of additional generation and a further
£3.56 billion to reinforce links between Scotland and England that will enable them to accommodate
a further 1.1GW.
The European Network of Transmission System Operators for Electricity (ENTSO-E) estimates that
around £85 billion of investment is required to develop European interconnectors over the next 10
years of which £19 billion is the cost of subsea cables. This investment is to be shared between 34
European countries with the UK’s share being the second highest at around £16 billion. (4)
Storage
The USA, China, Korea, Japan and Germany are amongst the countries making significant
investments in storage technologies, so Scotland may need to act fast in order to remain
competitive and ensure maximum economic benefit. California is planning to install 1,525MW
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energy storage between 2014 and 2020. A market research firm predicted that global storage
installations will grow to more than 6GW by 2017 and 40GW by 2022, with 43% of this market being
in the USA up to 2017. (5)
Global market
The opportunities exist all over the world. The table below estimates projected geographical market
sizes for network optimisation for three different scenarios. It shows that the potential cumulative
UK market spend could exceed £20 billion by 2030 with about 40% of it in Scotland alone. The
cumulative European market could potentially reach nearly £100 billion and the market elsewhere
in the world ranges between £102 billion and £123 billion.
Network optimisation cumulative capital spend to 2030 (£m)
by region
Conservative
Realistic
Scotland
£4,531
£5,785
GB (ex. Scotland)
£9,555
£14,485
Europe (ex. GB)
£71,418
£78,117
Asia
£23,543
£79,398
North America
£78,462
£24,478
Rest of World
£9,692
Optimistic
£8,379
£19,673
£86,550
£96,584
£25,656
Source: IPA (6)
Summary
A variety of options exist for integrating renewables into the electricity network. Upgrading
networks to be better able to cope with renewable energy through innovation in areas of information
technology and control is one method (Active Network Management). Others include improving
interconnections between networks; demand side response (DSR); adding more flexible generation
to the grid; and, incorporating energy storage into the system. Each of these options represents a
challenge and therefore an opportunity for Scotland to become a leader in technological
development; export its skills and expertise; and, expand into international markets.
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How we support innovation
Annually, Scottish Enterprise spends between £15 million and £20 million to support research and
development and innovation. It has a number of Research & Development and Innovation support
mechanisms that can assist companies from the early stages of investigating market and technical
feasibility; through product, process or service development; to market launch.
Where a company’s R&D or Innovation project presents a convincing technical and commercial case
Scottish Enterprise will identify how best to support your project. This could include reimbursement
of eligible costs at:
 up to 70% for feasibility studies; or,
 depending on company size, up to 35% for closer to market R&D projects (further
reimbursement, up to 15%, may be available if Scottish Enterprise deems the project to be
multi-participant collaborative R&D).
Academic and Research Institutes with early stage, ‘proof of concept’ projects that present a
convincing case could be awarded up to 100% reimbursement of eligible costs.
In a global economy, the ability to innovate can determine the success or growth of a business and
in turn, an economy. Of all the triggers for success, the ability to innovate is perhaps the most
critical, and therefore the biggest challenge. Highlands & Islands Enterprise spends around £8m
per annum to support account-managed businesses develop fresh thinking through a variety of
support programmes and also discretionary grant support.
The Scottish Investment Bank supports the development of Scotland’s private sector small- and
medium-sized enterprise (SME)1 funding market to ensure both early stage and established
businesses with growth and export potential have adequate access to growth capital. It operates a
suite of investment funds. The three equity funds (Scottish Seed Fund, the Scottish Co-Investment
Fund and the Scottish Venture Fund) adopt a highly innovative co-investment and shared risk
intervention model to encourage more private investors to invest in early stage Scottish companies
with high growth potential. SIB is also the lead investor in the privately managed Scottish Loan Fund
which operates on a fully commercial basis and is aimed at established companies.
The Energy Innovation Centre is a partnership between Electricity North West, National Grid,
Northern Gas Networks, Northern Powergrid, Scotia Gas Networks, SP Energy Networks, Scottish &
Southern Energy Power Distribution, UK Power Networks and Wales & West Utilities. It exists to
bring energy innovation and industry together. It can help to translate ideas into a commercial
reality through access to energy funding for innovation (the Innovation Funding Incentive, the Low
Carbon Network Fund, the Network Innovation Stimulus) and access to industry customers and
commercial expertise. Funding obtained through the Energy Innovation Centre is considered private
funding and as a result is not subject to state aid regulations.
The Energy Technology Partnership is an alliance of twelve independent Scottish Universities,
engaged in world-class energy research, development and demonstration. With access to 250
academics and 700 researchers, and over £250 million of testing facilities through the Scottish
Energy Laboratory, it can provide the spark businesses need to get their ideas into the market. The
Energy Technology Partnership does not charge for its time and can provide business and
technology development support, help in finding and securing innovation funding, and guidance in
identifying suitable testing facilities. It can support SME R&D projects by funding academic time to
assist with company innovation (actual funding is determined on a case-by-case basis).
1 http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm
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The Power Networks Demonstration Centre is a venture between the University of Strathclyde,
Scottish Enterprise, the Scottish Funding Council, Scottish Power and Scottish and Southern Energy
aimed at accelerating the adoption of novel research and technologies into the electricity industry.
It aims to meet the needs of utilities, equipment manufacturers (including SMEs) and academia by
providing a unique facility for research, development, demonstration and commercialization of novel
technologies. This unique, world-class, collaborative research, development and demonstration
venture offers a range of services:





Access to indoor and outdoor laboratories
Equipment and expert staff for research
Support for licensing and commercialisation
Collaborative ventures
Technology demonstrations
Useful links
Scottish Enterprise –Smart Grids
http://www.scottish-enterprise.com/knowledge-hub/articles/guide/smart-grid-funding-introduction
Scottish Enterprise – Innovation support service
http://www.scottish-enterprise.com/iss
Scottish Enterprise – Develop new products and services
http://www.scottish-enterprise.com/services/develop-new-products-and-services
Scottish Enterprise – Attract investment
http://www.scottish-enterprise.com/services/attract-investment
Scottish Enterprise –Proof of concept programme
http://www.scottish-enterprise.com/services/support-for-entrepreneurs/proof-of-conceptprogramme/overview
Scottish Enterprise – Scottish Energy Laboratory
www.scottishenergylaboratory.com
Highlands & Islands Enterprise – Research and Development Funding
http://www.hie.co.uk/business-support/funding/research-and-development-funding/default.html
Energy Innovation Centre
http://www.energyinnovationcentre.com/
Energy Technology Partnership
http://www.etp-scotland.ac.uk/
Power Networks Demonstration Centre
http://www.strath.ac.uk/pndc/
Scottish & Southern Energy Power Distribution Innovation Strategy – RIIO-ED1 2015-2023
http://www.yourfutureenergynetwork.co.uk/12_innovation2014.pdf
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Scottish Hydro Electric Transmission Ltd Innovation Strategy – RIIO-T1 2013-2021
http://www.ssepd.co.uk/uploadedFiles/Controls/Lists/Resources/Compliance_report(1)/SHETL_InnovationStr
ategyUpdateJanuary2012.pdf
SP Energy Networks Innovation Strategy – RIIO-ED1 2015-2023
http://www.spenergynetworks.co.uk/pages/distribution_business_plan_supporting_annexes.asp
SP Transmission Innovation Strategy – RIIO-T1 2013-2021
http://www.spenergynetworks.co.uk/userfiles/file/2011_SPTL_Narrative_8%20Innovation%20Strategy.pdf
Sources
1. C.Brys (Scottish Enterprise), Scottish Opportunities in Smart Power Grids, June 2011.
2. Scottish Enterprise, Integrating Variable Renewable Generation into the Grid, June 2014
3. IPA Energy + Water Economics, Smart Grid Market Analysis – Report to Scottish Enterprise,
February 2012.
4. European Network of Transmission System Operators for Electricity, 10-Year Network
Development Plan 2012, July 2012
5. pv magazine (www.pv-magazine.com), Grid connected storage market set to explode, January
2014
6. IPA Energy + Water Economics, Smart Grid Market Analysis – Report to Scottish Enterprise,
March 2011.
Acknowledgements
Front cover images courtesy of: SSE, Scottish Power, Skills Development Scotland, Smarter Grid
Solutions, Ewgeco and Scottish Enterprise.
Page 3 images courtesy of: Scottish Enterprise, University of Strathclyde.
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