A locally managed power grid is preferable to our centralized system

At a time when our society is facing increasingly pressing climate challenges, how can we anticipate an energy transition that is as successful as possible? In a world where technologies evolve at high speed, as artificial intelligence is about to reshuffle the cards once again, will we have the capacity to meet energy demand without too many sacrifices? And what about mobility, whose ongoing electrification excites as much as it worries people?

These are the kinds of questions we asked Mario Paolone. President of the Distributed Electrical Systems laboratory at EPFL, he is considered a world authority in this field, author of more than 360 scientific publications. Interview.

We have been very concerned with strengthening renewable electricity production. Haven't we forgotten to invest in modernizing the grid and in energy storage?

Let's start with the storage part. It should be borne in mind that its management has historically been the responsibility of private companies. The decision to invest capital therefore does not fall to politicians, but to a purely economic decision. Obviously, to encourage these private actors to invest the necessary funds, it is important to put in place a favorable legal and market framework.

The situation is different when referring to the investments needed to improve the grids. I use the plural because one must distinguish those who handle distribution of energy from those who handle its transmission.

In Switzerland, we have more than 700 groups responsible for managing distribution networks — which are called GRD. By contrast, there is only one actor in charge of transmission: Swissgrid. The strengthening of electrical transmission networks, and especially distribution networks, is financed by all of us, and optimal planning is the responsibility of the operators of these networks.

Concretely, what are the main issues?

Let's talk about electricity distribution. Here, the main goal is to reduce system congestion caused by the increase in supply associated with decentralized electricity production, as well as by demand (for example, the electrification of private mobility and heating by heat pumps).

These investments in strengthening and expanding the grid are paid by consumers through the stamp, a tax on electricity comparable to the associated transmission fees.

In practice, strengthening the grid is relatively simple to carry out, because it requires replacing already existing lines or building new lines to connect new users and electricity producers.

“The energy transition implies a paradigm shift in the way electricity is produced.”

What will change fundamentally?

The energy transition implies a paradigm shift in the way electricity is produced. From a model of large power plants, with few production sites, we are moving to a model with thousands of small producers. This evolution disrupts distribution networks, requiring a revision of their operation and planning. This gradual shift accentuates congestion problems and necessitates strengthening both distribution and transmission networks.

In our laboratory, we conducted a study showing that from 13 GW coming from photovoltaic production plants, the Swiss distribution network would be congested. Currently, while we are at 4.5 GW, we already observe some problems of this nature. To give an order of magnitude, recall that the Confederation's objective is to reach 40 GW in the long term.

Specifically, there is a feeling that we are falling far behind. The fact, for example, that the Confederation is considering an ordinance to curb private individuals, who have become small photovoltaic producers, isn't that absurd? We tell them to produce more in order to earn more, but once investments are made we tell them that we might no longer want their energy...

It is not a question of delay, but a question of adapting the instruments necessary to absorb renewable energies.

But how do we get out of the deadlock?

Strengthening the grid is indisputable; adaptation will happen naturally in the long term to reach the 40 GW target. In the coming years, both the GRD and Swissgrid will have to invest for this transformation and pass these costs on to consumers. But it is true that the economic and legal model still needs to be adapted to the new paradigm of renewable energy production.

What would be the ideal business model to minimize the bill for society?

Our observations carried out at EPFL and by other colleagues have shown that the least costly formula would be that of local markets managed by a GRD, and not that of a unified market as is currently the case. Simply put, it is about balancing electricity demand and supply at the local level. The advantage? The network manager (GRD) is both owner and operator; he knows the network perfectly well and the decisions to make to strengthen lines or the storage capacities needed.

If such a local balance can be established, the GRD could also position itself vis-à-vis the centralized market, allowing it to buy or sell energy as needed. According to our research, such a model would also reduce the national general reserve, thereby lowering the overall costs of the energy transition.

But let's be clear, such a model, which we believe is best suited for Switzerland, does not yet exist. And it would require a significant adaptation of the current energy law.

“For Switzerland, the least costly formula would be that of local markets managed by a GRD, and not that of a unified market as is currently the case.”

Do we already have an order of magnitude of the savings according to the decentralized or unified model? 

It is difficult to answer this question because the quantification depends largely on the market model adopted. 

Why are we not moving towards such a model? 

It is a very important change. Within the framework of a current project called UrbanTwin and financed by the Swiss Federal Institutes of Technology, in collaboration with the industrial services of Lausanne (SIL), we simulate such an energy management model at the local level. We have been able to demonstrate that the adoption of a local market, coupled with an optimal strategy for strengthening the distribution network (based on the mixed adoption of distributed energy storage systems and line replacement), generates the lowest costs while better optimizing the management of the network at the global level.

To take this direction, it must be understood that it will require political and economic discussions. To be transparent with you, the political path drawn today rather assumes continuing with a centralized solution where the market absorbs all local production and consequently increases the reserve required.

Who, then, has an interest in a centralized system? 

Given the massive investments made by large energy producers (Alpiq, Axpo, FMB, etc.), they currently have no interest in advocating for a decentralized system but rather in defending the current situation which drives up reserve prices, i.e. the value of their assets.

Is there anywhere in the world where such a local balance has been established?

The concept of locally managed energy communities exists in many European countries and is also well framed in the Mantelerlass (federal law regarding a secure electricity supply based on renewable energies). Needs there are managed to achieve a certain balance and to avoid injecting too large quantities of renewable energy onto the grid.

So this model exists, but it has not yet reached its full potential. Often, the system pushes to use available solutions, such as batteries, in an unintelligent way, without taking into account the necessities of the grid as a whole, notably the reserve in system services.

Are there today storage solutions mature and technologically advanced enough to reduce the bill?

It depends on the time scale considered. Concerning, for example, daily storage, batteries are technologically and financially mature.

The current challenge lies on a larger time scale. On a monthly or seasonal dynamic, the choice is limited to one solution: transform excess electricity into fuels.

“Compressing hydrogen requires a lot of energy and its transport is inefficient. The ideal would therefore be to bet on synthetic gas.”

Transformation into hydrogen or synthetic gas?

Rather gas, given that hydrogen is easy to produce but very expensive to manage. Compressing hydrogen requires a lot of energy and its transport is inefficient. Using current gas networks, it is possible to transport only a very small percentage (less than 10%).

The ideal is therefore to bet on synthetic gas, given that the infrastructures already exist. This strategy will also valorize combined-cycle gas plants, which have very good thermodynamic efficiency (50–60%).

The other advantage of synthetic gas compared to hydrogen is at the CO2 level. Admittedly, its manufacture requires green hydrogen, but also carbon dioxide which can thus be used and valorized, whereas today it is a waste that we try to eliminate. To close the loop, the best solution will be to marry synthetic gas production with CO2 capture systems in thermal power plants or at production sites where methane is currently burned.

Who is interested in these fuels?  

The gas industry, particularly in Switzerland, is banking on this storage solution for the future. But it depends on collaboration between the GRD and gas companies. In short, their alliance would allow transforming renewable energy surpluses into fuels, capturing CO2 so that it does not return to the atmosphere, and constituting a seasonal energy reserve that is technically and economically interesting. Unfortunately, these two worlds do not speak to each other or speak too little.

In an ideal scenario, can Switzerland consider a form of energy self-sufficiency?

Energy self-sufficiency is a fantasy that haunts the political world. From a technical and economic point of view, it is not at all optimal. If Europe interconnected its entire electricity grid, there is a reason: to pool its assets in order to adapt to the needs and production capacities of its members, while lowering overall costs.

For countries, it is financially interesting to be able to resell their energy surpluses beyond their borders.

Why does it seem that political powers have lost confidence, that they no longer believe in the virtues of the market?

I grant you: confidence is not total. But, in reality, the system, with all its flaws, works. Daily exchanges through the markets are very important. Honestly, despite some signs of tension, the system holds up and operates 24 hours a day. However, it is clear that this is an extremely complex and highly strategic infrastructure. We must therefore ensure that markets respond well to the needs of the energy transition and provide the right information and incentives to invest and adapt the networks.

In an ideal world, a monopoly could be the best solution; a single actor would have all the cards in hand to optimize costs and benefits for society. Economists discuss this openly; it is no longer a taboo. But, as you know, monopolies also have disadvantages. Nevertheless, the question deserves to be studied.

“In an ideal world, a monopoly could be the best solution; a single actor would have all the cards in hand to optimize the costs and benefits for society.”

Do we have an idea of the cost of the investments needed to modernize the Swiss grid?

That's the million-dollar question. By observing what happened in other regions of the world, one can try to estimate it. Take the region managed by CAISO (California Independent System Operator), the equivalent of our Swissgrid in California. For this region where the amount of renewable energies covers 40% of electricity demand, operating costs have doubled. Even if the system is different from ours, it is possible to conclude that the costs needed to adapt infrastructures will also increase significantly in Switzerland. We have already experienced this with the rise in the price of primary and secondary reserve at Swissgrid.

Now, giving a precise amount is very difficult. Everything will depend on our ability to synchronize renewable energy production with the needs of the population, as well as to achieve a perfect balance between supply and demand in order to reduce our reserve needs. Moreover, do not forget that electrification allows us to be more efficient and to reduce the economic and environmental costs associated with fossil fuels.

Ultimately, does this mean that decarbonized energy will be much more expensive for the consumer?

The energy transition aims to reduce our impact on the climate. The economic aspect is secondary and will be determined by our ability to balance production and consumption.

Can we control this demand through consumption?

Yes, this is referred to as "Demand Response". It is a set of technologies enabling a form of real-time flexibility in our electricity consumption. They include systems to better manage the charging of electric vehicles, aggregation of heat pump consumption or the consumption of conditioning systems.

“The electrification of mobility is excellent news because 100% electric vehicles fit the logic of ‘Demand Response’, the flexibility we will need in the future.”

Is the electric car an opportunity to achieve this stability on the power grid?

The electrification of mobility is excellent news because 100% electric vehicles have their own technology allowing direct control of their charging. Since everything is configurable, they fit the logic of "Demand Response", the flexibility we will need in the future.

Bidirectional charging of cars also represents a step in this direction, provided manufacturers allow this possibility. It is not a question of chargers, but of vehicles that are capable or not capable of injecting electricity back into the grid. For the moment, a business model to evaluate the economic fallouts of this technology is missing.

What about battery aging induced by bidirectional charging?

It is clearly a parameter that will need to be taken into account to develop a satisfactory economic model. At EPFL, we are working with major electric car manufacturers to quantify this aging and remunerate it correctly.

Recent tests show that this battery bidirectionality will be achieved in the near future. The next generations will indeed be able to go through 4,000 to 5,000 cycles, allowing the vehicle to travel about half a million kilometers and then serve as a battery for home storage, for a second lifetime of equivalent length.

Couldn't we imagine manufacturers renting the batteries and then recycling them to use in grid storage?

Yes, it is possible; this model would have the advantage of offering a second life to batteries and reducing the cost of electric cars.

Still, electric cars have a bad reputation, and many think that batteries are polluting and non-recyclable...

These are myths and unfortunate preconceived ideas. We have just completed an experimental campaign during which we aged several batteries. After the end of their first life, corresponding to some 300,000 km of driving, we reused them in a grid cycling context, therefore to create reserve. The conclusion? The battery was just as effective for this second use. The recycling potential of batteries is therefore enormous. It is all the more so because, in ten years, we will need a huge quantity of batteries to feed the reserve for frequency control and for the needs of energy communities.

At what horizon do you think Europe and the world will have 100% renewable electricity?

We must remember that we currently have infrastructures built over the last seven decades, a grid that required five generations of engineers and investors! So even though we have today the technical capacities necessary for this transition, it will take time and massive investment to complete it.

Some observers or experts say that we are entering an era of energy abundance thanks to renewables, while others believe that sacrifices will be necessary or that nuclear must be massively redeveloped. What is your opinion? 

The potential of renewable energies is gigantic. It is all the greater that we have the capacity to extract this energy efficiently and at a reasonable cost.

The remaining barrier lies in integrating this energy into a grid that is not yet sufficiently adapted. Yes, we are entering the era of abundance provided that we know how to seize intelligently all the opportunities offered by renewable energies.

Nuclear? It is an interesting form of energy that should not be left aside. But today, society is not ready to accept a new plant. The obstacle is both political and economic. As the prices of renewable energies fall, a private investor will not start a plant project because of the years required to build it and above all to amortize it.

“The potential of renewable energies is gigantic and we are entering an era of abundance provided that we know how to intelligently seize all the opportunities.”

Let's talk about the current boom in artificial intelligence (AI) and our frantic need for servers and computing centers. We know this will require an increasing share of energy. Does this evolution worry you?

Yes, enormously. Currently, data centers consume 2% of the energy produced worldwide. By 2030, this figure should rise to 10%, which amounts to colossal growth. In Switzerland, with 77 data centers on the territory, we are even one of the countries with the most data centers relative to its population.

To try to reduce the impact of this frantic energy consumption, we have developed a project called “Heating Bits”. The aim of this research is to recover and reuse the heat emitted on sites to help heat local urban infrastructures in winter or — during summer periods — to transform a residual part of the heat into electricity.

We also seek to synchronize the tasks executed by data centers with renewable energy sources, to orchestrate an optimal balance between demand and supply in order to minimize the carbon footprint of these data centers and the power grid.

The final advantage is that we use old servers for this project in order to create more heat. There are therefore interesting benefits for recycling systems considered obsolete today.

In research, are efforts sufficient?

On a theoretical level, many efforts have been made worldwide. Now we are at the stage where we must act and apply existing techniques with bold industrial partners.

Are there bold industrial players?

For several years, I have observed a generational change in large energy companies. Young engineers graduating from EPFL are being absorbed by the industrial sector. The positive aspect is that they are aware of new technologies and are beginning to influence the philosophy of private actors in favor of renewable energies.

In short, is your message that the solutions exist and that it remains only to apply them even if many politicians still doubt?

Exactly. We showed it concretely in Aigle with a project carried out in collaboration with Romande Energie. We proved that it was possible to fully control a network with production capacity twice the demand. With an efficient storage system, we were able to achieve a good local balance.

In conclusion, we know well the problems of the energy transition. The good news is that we have a range of solutions that are mature today. We can act without fear.

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