The term smart grid refers to advanced and improved platform for new technolo-gies to provide flexibility and new information for both customers and electricity providers. Technologies that are able to do this include metering, distribution, elec-tricity storage and transmission technologies. All of these combined lead to more efficient usage and distribution of electricity. The defining factor for smart grid is advanced metering infrastructure (AMI) which allows for two-way communication between the electricity provider and the measuring smart meter (customer). This al-lows the providers to access real-time information on each consumers needs and to offer better services for example dynamic pricing. In dynamic pricing the provider can alter the price of electricity depending on demand and generation, which in turn allows the customers to adjust their electricity usage from peak to off-peak times for cheaper electricity. [20]
A valuable asset smart grid brings to energy system is smart distribution system and its ability to handle more widely spread network of generation, for example house-hold generated wind and solar power or plug-in hybrid electric vehicles (PHEVs) which could sell electricity back to the grid from their batteries if needed. This distributed generation in turn would reduce transmission and distribution losses born from transporting electricity generated in larger centralized power stations to consumers. As renewables in most cases are intermittent, the increase of dis-tributed renewable generation should accompany the increase of electricity storage to "smooth" the peaks in generation which in turn would increase the flexibility of
the power system by having electricity reserves during times of low generation or high demand. More flexible power system in turn allows for a far higher deploy-ment of PHEVs, which allows for greater electricity storage possibilities in form of selling electricity from batteries in cars during high demand and charging the batteries during times of cheap electricity (low demand/high generation). While an increase in PHEVs will decrease traffic relatedCO2emissions, it will increase the need for electricity since the vehicles will now rely on electricity instead of gaso-line therefore increasing the power sector’sCO2 emissions, unless the electricity is produced by GHG-free large-scale means such as nuclear power. [20]
Study by Brattle Group [21] states that nation wide implementations of AMI, dy-namic rates and automating technologies in the USA could lead up to 11,5% re-duction in peak demand and shift this demand into time of lower demand. This by itself does not reduce the overall electricity consumed but enables the reduction of running more expensive peaking power plants and reduce the expenses andCO2 emissions by utilizing the base-load generating power plants more efficiently during off-peak hours. [20]
2.2.1 Demand side management
The principle idea behind demand side management (DSM) is the ability to impact power consumption and thus have some form of control on demand side of the power system. This is based on the consumers ability to decide on their electricity consumption and how these consumption habits might be changed to better suit the needs of the power system. Benefits that can be achieved via DSM are load shifting from high to low demand which allows for more efficient usage of existing and more effective power plants (less need for peaking plants). This also increases system stability as there are less high demand peaks therefore decreasing the chance for blackouts occuring due to reached capacity limit. [22]
DSM can be roughly split into two different control methods, indirect and direct load control.
• Indirect load control allows the consumers to keep full control on their con-sumption but are given encouragement on shifting their concon-sumption to times which better suit energy system, this usually means the times of low demand.
This would most likely be done through affecting the price of electricity to appropriately affect the consumer behaviour. For example when there is sur-plus generation on intermittent renewables compared to demand, the price of electricity would drop to encourage the use of flexible loads such as charging PHEV. Machinery could be automated to some extent to react to price signals so that when the price of electricity drops to certain level, the machine would turn on and for example do the laundry.
• With direct load control consumer grants the control of some devices to mar-ket aggregator so that utilities can more effectively affect the demand. More effective control over demand makes it possible for utilities to offer even cheaper electricity prices or some form of bonuses for the consumer as a compensation for losing the control over these devices.
Limiting the consumers ability to control one’s electricity consumption might prove to be problematic in many cases as people might be reluctant to give up their control over heating in winter or ventilation in summer for example. So the applications are limited to some degree in how the direct load control would work. Indirect load control however gives incentive for the consumer to change his consuming habits but is still restricted to some degree. For example Finland’s electricity consumption peaks during morning when people wake up and prepare to leave to work. To some degree it might prove to be difficult to affect this demand peak via price signals alone as people still need to make their morning preparations in any case. Nevertheless DSM is able to help in maintaining the increased need in balancing generation and
demand and as new technologies and innovations are discovered, DSM might find new opportunities not yet realized.
2.2.2 Supply side
Supply side of the smart grid is operated with the use of a virtual power plant (VPP).
VPP consists of many (hundreds to thousands) distributed and renewable power generation stations connected to each other via modern information and communi-cation technologies. The control entity which continuously observes the generation has the power to switch on and off any individual generator as demanded, allow-ing for scheduled and optimized operation of said plant. The benefit of connectallow-ing enough distributed generation is the level of control achievable, which is almost the same as compared to operating conventional power plants. This is possible due to the ability of VPP to offset to a some degree the innate unreliability of intermittent generators with a proper mix of unreliable generators. For example wind and so-lar power complement each other pretty well as typically good conditions for both generation methods do not occur at the same time therefore offsetting their intermit-tency to some degree. Intermitintermit-tency can also be offset by connecting enough gen-eration from different weather conditions through a big VPP to cover large enough geographic area for different weather conditions. [22]