What does grid edge mean? Here, we explain the different facets of change in the electricity market and why we use the term grid edge to describe the technologies and business models advancing this transition.
Sweeping changes are occurring in the electricity sector
The electricity market is changing fast. Technology advancements, evolving consumer preferences, and new policies are leading to a surge of adoption of solar, energy storage, microgrids, electric vehicles, and other new energy technologies. These distributed energy resources are forcing utilities and regulators to rethink how the grid works. Consequently, new models for customer energy management, grid infrastructure and electricity market design are arising to address these changes.
These changes require a new and transformative framework
Historically, the electricity market was comprised of centralized power stations, with centralized, top-down monitoring and control of the grid. It was a platform comprised of one-way energy transactions; generators produced power, distributors and service providers laid down access to consumers, and end users consumed power. The rise of distributed energy resources is decentralizing power generation and delivery, creating new types of interactions on a two-way grid. These new relationships and transactions are redefining the role of end users (who are now power producers) and traditional energy players (who are becoming service providers). To understand these emerging dynamics, a new understanding of the electricity landscape is required.
What is the Grid Edge? And how does it define these changes?
Innovation and disruption often play out at the boundary, or edge, of traditionally stable and well-understood industries. Over time, change moves inward. Greentech Media calls this phenomenon in the electricity sector the Grid Edge. The Grid Edge comprises technologies, solutions and business models advancing the transition toward a decentralized, distributed and transactive electric grid.
How does the evolution of the Grid Edge alter the electricity business?
End users in the electricity sector have traditionally only been consumers. However, new technologies and business models are allowing them to generate and store their own power. Consumers are now “prosumers” of energy, while utilities are looking to become platforms for brokering these new transactions. As a result, a new grid architecture is evolving to accommodate technological changes. At the same time, regulators and policymakers are looking at how new rate designs can enable a marketplace of services for customer-sited, “behind-the-meter” projects – and use them to benefit the grid.
Andrew Mulherkar, Senior Grid Edge Analyst discusses the impact of these changes on consumers and utilities:
What are the technologies, solutions and business models included in the Grid Edge?
Technologies at the Grid Edge can be categorized into four categories: physical infrastructure assets, network or control, applications, and analytics. These technologies and solutions form an “internet-of-things” that can be networked to improve power delivery. Utilities and third-party service providers are exploring how to improve grid operations through aggregation of these distributed resources, using a combination of power electronics, communications tools and analytics software. Entire new business models are being formed around delivering these distributed energy services.
Who are the major players this electricity market?
A variety of stakeholders are involved in this new market construct. Traditional energy players include grid operators, utilities, energy service providers, regulators, and policy advocates. Newer players include third-party companies that are aggregating resources like solar and storage; industrial energy companies building new types of hardware to accommodate distributed resources; and a range of software companies developing analytical tools.
Steve Propper, Director, Consulting, explains how utilities are adapting to this new market:
What is the size of the Grid Edge market?
GTM Research (now Wood Mackenzie) tracks deployments and investments in 10 separate markets along the Grid Edge, including advanced metering infrastructure, customer energy management, DER services, distribution automation, electric vehicle infrastructure, energy storage, grid edge customer analytics, grid edge network analytics, utility back office, and utility network operations. Between 2010 to 2016, there were over 4,000 deployments of Grid Edge technologies. In 2016, $1 billion in venture capital and private equity funding flowed into the Grid Edge sector, while the M&A market was worth $4.3 billion with 36 deals in 2016. Learn more about our Grid Edge Data Hub.
Find out more about the Grid Edge
Looking to keep up with the steady stream of new developments in the space? You can read the latest Grid Edge news from our editorial team at Greentech Media. If you’re looking for deeper editorial insights, read Jeff St. John’s weekly analysis for GTM Squared, called “Dispatches From the Grid Edge.”
Looking to do business in the space? You’ll find endless networking and thought leadership at our conferences, especially our flagship Grid Edge event, Grid Edge World Forum.
Looking for even deeper insights and market tracking? You can get in-depth analysis and data on the Grid Edge from our team at GTM Research, now Wood Mackenzie.
Want ongoing research spanning the grid edge? Learn more about Wood Mackenzie's Grid Edge Service.