In no fields the role of digital innovation can be illustrated as well as in the domain of sustainable energy. This also applies to the connection between technical and social innovation. 
Today, utilities rely on a dedicated infrastructure of centralized generation of electricity, followed by one-way transmission and distribution to customers.
In the future, a three-layered grid structure will most likely often be in operation. In a decentralized and transactive power system stability will be enabled by digitalization. In 2016, approximately $47 billion was spent globally on infrastructure and software to operate the electricity system more flexible, integrate more renewable energy, and better manage customer demand.
In many households, multiple energy-consuming devices and assets have to be managed (for instance: cooling and ventilation equipment, heat pumps, photovoltaic equipment, electric vehicles, stationary batteries, and so on). Many energy consumers are becoming partial producers of their own energy supply (so called “prosumers”). As a consequence, the central grid will not only distribute energy from powerplants to consumers, but will receive energy too, at cost of its stability. This stability can only be guaranteed if the main grid can communicate with all the prosumers’ micro-grids, for instance to start loading batteries and even to stop the production of local energy. At the same time, it will have to manage the production of energy in its own powerplants.
To deal with these assets most efficiently, an automated monitoring and control system that will facilitate decentralized electricity transactions has to be on place. The exchange between micro grids and the main grid has a lot of privacy aspects, in particular if the impact of the electricity company goes behind the meter.
However, energy cooperations will operate in many cases between household level and electricity company’s level. These cooperations will enable households to exchange their surpluses and deficits without interference of the company that is managing the main-grid. This company will take care of with the surpluses and shortages of the cooperation as a large, thus surpassing the necessity to interfere in individual households, which will be one of the tasks of the energy cooperation. The energy cooperation equalizes the consumption and production of electricity by its members and sometimes its own facilities (like a solar park or a district battery).
Smart grid: Picture: Phoenix Contact
In an advanced grid structure, lower level grids can be seamlessly disconnected from the main grid. They can temporarily create a situation of autarky, increasing the resilience of the power supply in the face of disturbances.
In a three-layered grid structure, demand and supply of energy have to be balanced between households and cooperation and between cooperation and main grid at the same time, in order to take care of the stability of the grid. A digital system operator will monitor real-time operational data across the distribution grid and calculate prices for electricity services every few minutes at each local node in the network. The cooperation will then transact in those markets.
The same will happen in the interface between individual customers and the cooperation. Smart software agents will save customers the trouble of managing their energy usage and distributed energy resources themselves, instead controlling multiple customer devices for them simultaneously to most efficiently clear the market and save customers money.
Low prices might for instance result in automatically loading all available batteries within houses or in cars or even temporarily stopping wind-mills. Alternatives are pumping water into higher basins as a resource for hydro-energy later or to heat an underground stockpile of hot water. In case of high demand, the system can start using stored electricity.
This all will happen without substantial interference of human agency. Artificial Intelligence will develop a pattern of energy surpluses and deficits and thus proactively induce actions like the temporarily reduction of energy production or better the use of surplus energy to increase energy of hot water reserves.
A decade or more from now, distributed energy resources might reduce overall demands on the grid, for example by enabling locally managed microgrids that require minimal support from the central grid or by enabling the aggregation of large amounts of customer demand into virtual power plants that can help the grid balance supply and demand just as conventional power plants do.
The video below illustrates how a smart local grid is working:
The necessary software for digital control of the components of the grid is already available. PowerMatcher, OhmConnect and Sonnen are examples of interactive software that modulates household’s supply and demand in response to electricity grid’s needs, Newatt is a real-time consumption and device-level control. Interference with individual prosumers’ privacy will be limited at the cooperation level, and it is here that technical and social innovation converge.
An energy cooperation is a collective endeavor of a small or medium group of households, who decide decide about the algorithms that manage the ‘currency’ of the electricity together, for instance when all available battery capacity is used (process is high) of how much currency if sold to the main grid is electricity become scarce (high prices). But they also decide when households have to mitigate the production of electricity, because the main grid’s capacity is at maximum. At the same time, members of the energy cooperations negotiate with the electricity company about its algorithms.
Rules (algorithms) in digital systems are based upon human decisions and as a consequence groups of consumers/producers have to create collaborative and democratic structures to decide over the rules and to influence the electricity company’s behavior.
Probably even more important is that the members of a cooperation together will be confronted with an ever-growing number of options to produce energy collectively, for instance by developing a sun park of its own or by collective participation in the construction of a wind mill. In the long turn, these options are much cheaper than the coverage of every roof with a number of solar panels. Elsewhere, I wrote about the small community of Feldheim (Germany) that became energy autarkic by collective decision making, driven by arguments about price.
The power grid of the future will embrace the values of digitalization and human collaboration: it will permit dynamic balancing of electricity supply and demand with active steering by prosumers and it will easily accommodate the intermittency of renewable energy.
 I wrote this blog post after reading: Promoting Digital Innovations to Advance Clean Energy Systems. Edited by Varun Sivaram, June 2018. To be downloaded free: https://cfrd8-files.cfr.org/sites/default/files/report_pdf/Essay%20Collection_Sivaram_Digital%20Decarbonization_FINAL_with%20cover_0.pdf
*) Source header: Electricity supply – picture Pixabay
**) This article was brought to you by Professor Herman van den Bosch, Professor at Open University of The Netherlands.