Mastering the energy transition in Germany will require a fundamental transformation of our energy infrastructure. This is because our energy supply is in a state of upheaval: the switch to renewable energies means that we are also moving to a volatile and decentralized power supply, and this presents our grids with new, complex challenges. It requires consumption, generation and grids to be intelligently interconnected in order to continue to ensure a resilient power infrastructure. The concept of smart grids is often seen as a prerequisite for the transition to renewable energy sources.
What are smart grids?
Smart grids are modern power grids that use technology and automation to make the flow of electricity more efficient, reliable and secure. It links all the components of an energy system with each other, i.e. power generators, consumers, storage facilities and the power grid itself, and creates a constant exchange between them. Through the use of digital communication and information technologies, smart grids can match electricity demand and generation in real time and respond dynamically to peak loads, weather forecasts or disturbances. Data-driven control thus ensures a stable and reliable power supply, which is particularly necessary in the case of fluctuating renewable generation sources. For this purpose, an additional data network is created alongside the normal power grid, on which the communication and information technologies rely.
Today's power grid is not designed for the integration of renewables
The power grid as we know it today is governed by a centralized system that generates energy from power plants and distributes it to end users via long transmission lines. It is designed to provide a steady flow of energy. This made sense for fossil-fuel power generation as it operated for decades, because power generation from the existing fleet of power plants followed consumption. Few overloads occurred.
But this very premise is being reversed by the increasing share of wind and PV, and is now posing major challenges to the power grid. And it's striking: The power grid was not designed to integrate renewables!
In the future, the number of decentralized power generators will continue to grow, which in addition will not always feed a constant amount of power into the grids. This is because renewable energy sources do not depend on our electricity demand. In the past, conventional power generation required a comparatively low output to ensure a very continuous flow of electricity. Today, however, significantly higher installed capacity is required to meet energy demand because renewable energy sources are volatile and have a lower number of operating hours at full load than conventional plants. At the same time, the expansion of renewable energy sources thus leads to a significant overproduction of electricity during peak periods of renewable power generation, which puts pressure on the power grid. This results in a high simultaneity factor, which increasingly leads to overloads in the grid. The only solution at these hours is to shut down renewables. At the same time, electricity consumption is changing due to the electrification of various sectors, and in the future more and more electricity will be needed at the same time.
Smart grids have a portfolio of flexibility technologies and can facilitate and accelerate the transition to a renewable energy supply. They are particularly effective in the areas of integration of renewables, flexible load management, efficient storage, demand flexibility, and promotion of energy efficiency and optimization of grid utilization.
What role does battery storage play in the smart grid and how can the power grid benefit from it?
In the smart grid, generation and demand are to be coordinated dynamically and in real time. Due to the increasing share of renewable energies, driven by Germany's climate targets, energy storage is also playing an increasingly important role. This is because volatile power generation from renewable energy sources must be brought into line with the load at all times. Storage facilities therefore assume central functions in smart grid concepts, primarily by counteracting volatility and grid overloads through the introduction of flexibility.
One option is to use them as a buffer between generation and consumption to compensate for fluctuations in the power supply. In the event of surpluses in power generation, for example on days with a lot of wind and sun, the additional power is diverted by the smart grid and stored by battery storage units. This prevents line congestion and avoids any feed-in management. In the reverse scenario, the storage system then feeds the additional electricity back into the power grids at a later time in line with demand. Ideally, intelligent electricity meters and metering technologies would enable the power grid to know exactly when demand arises and to explicitly control the storage units accordingly. In this way, the storage systems act not only in surplus management but also in load shifting and contribute overall to the stabilization of the grid.
At the same time, storage can also be used to reduce peak loads. When large amounts of energy are consumed during periods of high demand or congestion in the grid, which will increasingly be the case in the future due to sector coupling, battery storage can provide additional energy for a short time to reduce the load and maintain grid stability. This helps to reduce the load on the grid and increase supply security.
Both of these use cases are already being served today by our battery storage systems at Kyon Energy. The storage systems detect times of high demand and provide the grid with the additional energy needed here at short notice to reduce peak loads. This grid-serving performance is also recognized by the grid operators, at least in part. This is because there is currently still a lack of a clear regulatory framework. On the one hand, there is no follow-up regulation from 2023 to allow battery storage to continue to be used sensibly for buffering demand peaks, and on the other hand, there is no explicit transfer of this to renewable energies so that battery storage can also buffer maximum generation peaks in a grid-serving manner in addition to demand peaks. In the future, not only the reduction of load peaks will be an important issue, but also the buffering of overproduction. Here, battery storage offers great potential, but is still far too little in the focus of the debate.
The power grid benefits from the integration of battery storage systems in that, on the one hand, storage systems provide enormous relief for the grids and stabilize them; on the other hand, they create supply security in the integration of volatile renewables and also provide flexibilities that enable faster reactions to changing conditions. This can reduce both the need for conventional expansion of the power grid and investment costs. Overall, battery storage enables a more efficient, reliable and cost-effective use of our grid infrastructure.
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What challenges does Germany face in the introduction of smart grids?
Several factors and measures are necessary for the introduction of smart grids in Germany.
First, the existing infrastructure must be significantly renewed and technologically expanded. A wide range of technologies, such as sensors, communication networks, data analysis software and control systems, are needed to collect, analyze and manage data. The integration of smart meters that make it possible to measure and monitor electricity consumption in real time is also necessary. This is the only way that all participants in the power grid can communicate their consumption and generation with each other. The "Digitization of the Energy Transition" Act was passed in 2016 for implementation, and was renewed again in January 2023 with the aim of further accelerating and simplifying processes. The law provides for a mandatory rollout of smart meters by 2030.
Similarly, there must be a clear regulatory framework to encourage investment in smart grid technologies and at the same time enable cooperation between energy suppliers, regulators, technology providers and end users in the first place. This includes creating incentives for grid operators to invest in smart grid technologies, as well as creating standards for interoperability and interconnectivity of smart grid systems.
Overall, however, the implementation of smart grid systems requires above all considerable investment sums in infrastructure, technology and research and development. The investment sums must be differentiated into those for grid expansion in general, which forms the basis for the development of smart grids. And then, in the next step, investments in additional technologies, for example in the areas of communication and data analysis, in order to intelligently optimize the potential for load shifting (demand side integration) through generation and consumption.
So are smart grids pure dreams of the future?
Smart grids play an important role in the modernization of power grids and in increasing the use of renewable energies, improving energy efficiency and making the power grid more stable at the same time. They are therefore already being used in model regions (e.g. in the SINTEG projects), are being tested and are demonstrating their immense potential in reality. It is also clear that the energy transition and a changeover to 100% renewable energies in our power supply in the long term will not succeed without more intelligent power grids.
But as much as smart grids appear to be the solution to the energy transition, the hurdles to implementation are just as great. The transit from centralized systems to fluctuating, decentralized systems while maintaining grid stability is a major challenge for grid operators. This requires comprehensive modernization and digitization of the power grid, which is associated with enormous investment costs. According to the Federal Network Agency, grid expansion must first be driven forward, especially the expansion of north-south power lines.
It remains to be seen how quickly Germany can develop from a centralized to a smart grid. Technologically speaking, we are on a very good path. Politicians and regulators are therefore called upon to significantly accelerate current processes in order to be able to achieve the goals of an almost greenhouse gas-neutral energy supply in 2035. The players have long been ready to put theory into practice on a grand scale.
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