Digitalization and Modernization of Distribution Power Utilities in The Energy Transition Era

Marcio Szechtman

Ex-CIGRE Technical Council Chair and Honorary Member of CIGRE, IEEE/PES Life Fellow

The challenges for distribution systems are mainly caused by these four issues: role of distribution companies in the energy transition or eco-transition; agile measures in service restoration against extreme weather conditions; repositioning for new services, towards becoming distribution system operators; more efficient management, more transparency for stakeholders, consumers and society.

Status in Europe, MENA and LATAM

In Europe, according to the data from Digitalizing the energy system, EU action plan, the huge amount of investment in distribution, probably 70% is going to be invested to modernize grids with digital technologies, including Digital Twin, Data Interaction Analysis, 5G/6G, Edge Computing, IoT Device, Smart Meter and Network Security, etc. Meanwhile, European power companies are very much aligned with the global utilities on what should be done in terms of modernization and digitalization. For example, the future proofing architecture will be decentralized with edge infrastructure; the smart meter data will be use to improve grid monitoring; the management structure of distribution network will be decentralized; the Low Voltage Supervisory Control and Data Acquisition (LV SCADA) platform will be centralized. And we will have more open standards like IEC 61850 and IEC 60780 5 104.

Here I want to share an interesting set of numbers for better introducing the Europe wholesale electricity market. The electricity demand of Europe in 2023 decreased 3.4%, when the average Europe day-ahead price is 93 €/MWh. The occurrences of negative prices increased 12-fold, because of the great amount of renewable energy, with the additional wind and solar generation being over 84TWh. Therefore, there is a transformation being seen by the European companies.

Moving to the Middle East, I will talk about Egypt and Jordan, because they have very well established CIGRE national committees and personally I am familiar with them. But I'm pretty sure that Dubai, the UAE, and Oman, and Saudi Arabia probably all have the same sort of demands and challenges. In Egypt, the utilities are attracting multi track foreign investments with large services, support and opportunities provided by government agencies for the expansion of the concentrated solar energy market and their industrial applications, while they are also seeking for unified platforms for all services in distribution network, and busy with a huge cooperation program with North African countries. In Jordan, the utilities have different emphases: they focus on the new data centers, achieving interoperability of the data center with Cloud Operation of SAP.

In Latin America, we have similar challenges. The incorporation of energy (eco) transition, which gathers electrification of other sectors might impact on tariffs, such as new data centers and hydrogen loads. We also have a particular issue — the tariff revision in many countries in Latin America were based on the benchmark model company, which means that it is an economically aggressive tariff regulation and every cost strictly regulated. In fact, all these models were conceived in the 1990s, over 30 years ago, when carbon neutrality or net zero or energy transition were not issues at that time. So, the regulation should be modernized to accommodate the investments, which the distribution companies should make towards digitalization and build more efficient and cleaner grids with more renewables. This should be recognized in the tariffs but it has not been 100% established. Therefore, there is a dilemma of investments and tariff recognition in Latin America.

Meanwhile, in South America, the planning and operation of distribution grids become more complex due to uncertainties and progressive use of renewables, many distribution utilities still showing a “passive” role on distributed PV. The System Average Interruption Duration Index (SAIDI) is the average outage duration for each customer and it shows a positive correlation with renewable energy penetration, which means that the more renewable energy is available, the less predictable the electricity supply is. In the US, for example, the distribution SAIDI is as high as 6 hours 45 minutes in the states with higher penetration of renewables.

Highlights from Brazil and Mexico

In addition to the SAIDI indexes, another topic we are discussing in Latin America is the power flow reversal. As the distributed PV increases, there are the issues of power flow reversal in the transformers. Obviously, the technological solutions should be contemplated to solve all these issues. To guarantee the stable power supply under extreme weather conditions is a big challenge for utilities of many countries and districts. Here is an example from one of the utilities of Brazil. In this picture, the SAIDI increased from 10 hours to almost 30 hours in the end of 2023 because of extreme weather conditions. Last week, the same problem occurred again in the same company. It really requires digital and modern solutions, to monitor the system in a predictable and very agile form and to reduce the high SAIDI.

Mexico's electric utilities are undergoing similar reforms. They have already deployed more than eight million smart meters for almost 48 million customers, with many millions more to come. These smart meters will be the basis for their digital solutions, providing real time data on energy consumption, which enables more efficient management of the grid, reduces technical and non-technical losses and contributes to sustainability by both reducing energy waste and making it easier to integrate renewable generation into the system.

The future door to all challenges is technology and it is the key driven mechanism to sustainable and socially equitable performance of distribution companies worldwide. On the one hand, we should aggregate intelligence for asset & business monitoring and data management/analytics for transmission and distribution companies, enabling companies to respond more efficiently to extreme weather events and effectively reduce SAIDI. On the other hand, talking about technology advancement or technology progress, we need to move forward together in terms of standards and reference architecture, such as the standard for a reference architecture for Power Distribution IoT (PDIoT). Also, the more efficient use of communication through fiber optic (fine grain optic transportation network, or fgOTN for short) is of fundamental importance.

In summary, distribution utilities around the world are more or less confronted with the following challenges: pressure to reduce tariffs against more efficient business operations, increased levels of losses, especially non-technical (billing) losses, the need for rapid response to extreme weather conditions to avoid prolonged interruptions, and more transparent information systems to enable a better image for societies. In terms of remedies, we suggest that power utilities select intelligent application of digital solutions, employ innovative technological means to streamline all internal processes, aggregate new services to play a more active role in the energy transition, and incorporate functions of a Distribution System Operator - DSO to transform electricity companies from electricity suppliers to service providers.

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