Rise of the Energy Cloud Signals a Fundamental Shift in Power

April 16, 2015 by Jeff Shepard

Moving from a centralized hub-and-spoke grid architecture based on large centralized generation assets toward an increasingly decentralized electrical grid that makes extensive use of distributed energy resources (DERs), the power sector is undergoing sweeping changes. These changes can be summarized as the rise of the energy cloud: a decentralized architecture based on intelligent network technology and two-way energy flows, encompassing a diverse suite of technologies that includes energy storage, virtual power plants, demand response (DR), and advanced software that enables greater interoperability across heterogeneous grid elements. According to a new white paper from Navigant Research, the end result of this transformation expected to be a fundamental reimagining of how we generate, store, and consume energy in the next 20 years.

“As a vehicle for advanced technologies and solution integration on the electrical grid, the energy cloud represents a far more dynamic, responsive, and democratized network than today’s hub-and-spoke architecture,” says Mackinnon Lawrence, senior research director with Navigant Research. “Although the cloud is not a complete replacement for current grid infrastructure, today’s electric utilities will need to be more flexible than current regulatory models allow and remain nimble to prosper in an increasingly competitive marketplace.”

Although the rapid spread of distributed generation provides many benefits to the grid and to energy consumers, it also poses complex challenges for utilities and grid operators, according to the white paper. Many utilities have expressed legitimate concerns about declining revenue due to the increasing penetration of DERs and energy efficiency measures. At the same time, the emergence of the energy cloud provides opportunities for forward-looking utilities to capitalize on the rapidly changing landscape.

The white paper, The Energy Cloud, analyzes the emerging energy cloud, describing its basic elements and examining its likely impact on the power utility sector. The growth in the deployment of key technologies like distributed solar PV, energy storage, and virtual power plants (VPPs) is profiled in order to demonstrate both the velocity and scale of an evolutionary shift toward the energy cloud. A discussion around how this paradigm shift is expected to affect the traditional utility-consumer relationship offers insight into challenges facing utilities as their customers embrace distributed generation (DG) and opportunities provided by new entrants to engage more proactively in the market. Finally, the paper explores the emerging strategies that utilities are taking to both embrace change and thrive in this evolving environment.