Energy IQ: Digitization to Electrification: Five Macro Trends Transforming Electricity Markets

Digitization to Electrification: Five Macro Trends Transforming Electricity Markets

Trends ranging from digitization to electrification are driving an increase in the adoption of distributed generation over traditional centralized generation

We’re currently living in an era of choice when it comes to distributed generation. Or so says Satish Jayaram, General Manager of Distributed Generation Business at Cummins. 

“It has transformed how we access healthcare, revolutionized the telecom industry and reshaped how we think of transportation,” Jayaram said. “It’s also transforming the century-old electricity markets and offering customers the power of choice.” 

Today’s electricity markets look very different compared to the markets of just a few decades ago. To better understand this shift, we have compiled five main macro trends that are driving this transformation and how their outcomes create an environment favoring distributed generation.

De-regulation

Over the last two decades, electricity markets have increasingly been de-regulated end to end: from generation to distribution, and directly to the end user. Today’s customers that live in fully de-regulated electricity markets enjoy the freedom of choosing their electricity supplier. Beyond offering customers the choice, de-regulation has also re-shaped the industry that once was dominated by vertically integrated utilities covering generation, transmission and retail. In de-regulated markets, many companies generate and sell electricity to a wholesale market, and retailers purchase electricity from the wholesale market to sell it to their customers. In summary, de-regulation results in a market where de-centralized grid co-exists with the centralized grid.

De-carbonization

Historically, fossil fuels, nuclear and hydro were the primary components of society’s energy supply mix. In recent years, increased focus on de-carbonization has resulted in wind and solar accounting for more than half of new power generation capacity additions. Moreover, it is expected that more than 50% of power generation will be renewable (including hydro) by the year 20351. This increasing focus on de-carbonization results in changes to energy supply mix. 

Digitization to ElectrificationElectrification

We use more electric vehicles (EVs) on our roads. We use more space cooling and appliances in our buildings. We use more hybrid boats on our seas. In summary, we are using more electricity and expected to increase electricity’s share in our total final energy consumption. This increased use of electrification results in changes to electricity demand patterns. 

Digitization

Electric power infrastructure is getting digitalized end-to-end. For instance, consumers experience this digitization in the form of smart meters. On the supply side, utilities take advantage of digitization through energy management systems utilizing economic or market-based constructs in managing the generation, consumption or flow of electric power. This increased digitization of electric power infrastructure results in monetization opportunities for customers. 

Technology

Recent technological advancements have reduced costs on generation and storage solutions. Both solar and wind generation are now near or at subsidy free levels. For storage, levelized-cost-of-storage for lithium-ion has decreased 80% in 10 years, making it economically viable for more applications and users. These cost reductions driven by advancing technologies result in increased customer adoption of Distributed Energy Resources (DERs). 

Distributed generation solutions - Infographic
Distributed generation solutions enable easier adoption of DERs (including renewables) to electricity infrastructure. DG solutions also help market participants manage changing electricity demand patterns. 

In summary, the outcomes of these five macro trends favor adoption of distributed generation over centralized generation. Customers, through Distributed Generation solutions, could more easily adopt DERs while also taking advantage of monetization opportunities. Market participants, through DG solutions, can integrate renewables to electricity infrastructure while managing changes in electricity demand patterns. 

Reference(s): 

  1. Global Energy Perspective 2019: Reference Case [PDF document]. (2019, January). Retrieved from https://www.mckinsey.com/ 
     
Aytek Yuksel - Cummins Inc

Aytek Yuksel

Aytek Yuksel is the Content Marketing Leader for Cummins Inc., with a focus on Power Systems markets. Aytek joined the Company in 2008. Since then, he has worked in several marketing roles and now brings you the learnings from our key markets ranging from industrial to residential markets. Aytek lives in Minneapolis, Minnesota with his wife and two kids.

Cummins Custompaks are being used for water management as Thailand struggles with its water crisis

CustomPak on site

Water crisis

Sixty Cummins Inc. CustomPaks are in service in Thailand as part of a critical water management plan aimed at easing the country’s water crisis – a crisis that has caused enormous economic and social damage and stirred conflict among communities.

Over the past several decades, Thailand has continually faced water problems caused by severe drought. Water reserves in dams and reservoirs are insufficient while water resources are often contaminated with toxins caused by urban communities and the industrial and agricultural sectors.

Severe flooding is a threat, too, at a time when the realities of climate change are hanging over the country.

As a result, the allocation of precious water resources, which must be shared among various stakeholders including new and existing industry, large and small agriculture, and cities and villages has become a flashpoint.

Kittithanapat Engineering Co. (KTP), has been involved in the water management system since 1996, working closely with authorities such as the Royal Irrigation Department, Department of Water Resources, Bangkok Metropolitan Authority and others.

CustomPaks on site

600 hp CustomPaks

To help KTP meet its often urgent requirements, Cummins DKSH (Thailand) has recently supplied 60 Australian-built CustomPaks – 45 powered by Cummins’ X15 engine rated at 600 hp, and 15 powered by the QSL9 rated at 325 hp. These fully self-contained powerpacks are emissions certified to Tier 3.

The CustomPaks are coupled to hydraulically-driven, large-volume submersible water pumps sourced by KTP from US company Moving Water Industries (MWI); KTP is the exclusive distributor in Thailand for these MWI Hydroflo pumps.

Prior to Cummins’ involvement, KTP was using another diesel engine brand but service support wasn’t up to the standard required.

Long-serving KTP engineer Kittisak Thanasoot says Cummins DKSH’s reputation for technical and aftersales support along with the reliability of the Cummins product were a key reason behind KTP’s decision to specify the CustomPaks for the Royal Irrigation Department.

The ability of Cummins DKSH to respond to short delivery times was also important.

“Supplying large quantities of high horsepower diesel engines for emergency situations such as flash flooding can be a challenge for KTP,” says Kittisak Thanasoot.

“Responding to the needs of the government agencies to manage such problems in a timely manner and with least impact on communities, KTP has found the answer in our partnership with Cummins DKSH.”

Power, pride and passion

Parked semi truck

The switch back to Cummins power has been beneficial for iconic New Zealand company Uhlenberg Haulage. It's all about whole-of-life costs.

Uhlenberg Haulage is closing in on 60 years in business, having been founded in 1966 by Mike and Carol Uhlenberg.

Based in Eltham, Taranaki, in New Zealand’s North Island, the operation is today owned and operated by their sons Chris, Daryl and Tony Uhlenberg.

Describing the Uhlenbergs as “old school family truckies”, Daryl talks about the company’s time-honored journey with a definite tone of pride, especially the work of his parents in laying the foundations for what is today an iconic fleet in its own right.

Cummins Inc. made its debut in the Uhlenberg fleet in 1971 with an NH250 powering a second-hand Kenworth K923 used in logging. A second Kenworth, a new W924 with a Cummins NTC335, followed soon after hauling an LPG tanker.

The Uhlenberg operation today comprises 40 prime movers and a variety of trailing gear to cater for the myriad of a jobs the fleet is involved in.

A number of Peterbilts feature in the fleet although Kenworth is now the brand of choice with six new units to be delivered over the next 12 months to cater for business growth.

Cummins’ X15 Euro 5 engine rated at 550 or 600 hp is the preferred power specification, with 18 red engines currently in the fleet.

Uhlenberg family in front of truck

Whole-of-life support

“The switch to Cummins has been a very good experience for us. We have nothing but praise for the Cummins organization,” says Daryl.

“The whole-of-life picture is the key thing for us and we’ve got that nailed with the support we get from Cummins – parts availability, scheduled maintenance, life expectancy and in-frame rebuilds.

“So the red engines turn up, we run them to life, which is 900,000 to 1.2 million kilometers, and then Cummins does an in-frame overhaul in a timely manner. If there’s an issue, parts and support are close by.

“The support we get from Cummins Palmerston North is fantastic, second to none.”

Daryl recently looked under a Kenworth that was in the workshop for a service and was surprised to see no oil leaking from the one-million-kilometer X15. “I remember when I was a fitter we had to wear a raincoat when working under a truck,” he jokes.

Fuel agnostic

Acknowledging that the push to decarbonize is now “very real”, Daryl likes the idea of Cummins’ fuel agnostic concept where one base internal combustion engine, optimized to run on diesel, can also be customized to run on ultra-low and zero-carbon fuels like renewable natural gas and hydrogen.

“My father was a pioneer of linehaul trucking in New Zealand and he always embraced new technology. He was never scared of it,” he says.

“I tend to be a little more cautious but I can see where a 500 hp natural gas or hydrogen engine would work for us in short haul applications,” he admits. “We’re certainly willing to look closely at these alternative fuel technologies when suitable infrastructure is in place.”

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