Global Market Scan: Smart Grids

As the world continues its transition to renewable energy, solutions are needed to balance generating capacity to complement intermittent energy sources and adapt to the next generation of green energy.

Batteries, pumped-storage hydropower, supercapacitors, etc. are among the main solutions. “Smart” grids will play a key role in integrating new energy sources and regulating supply and demand to ensure stability.

Today, renewable electricity generation is growing faster than in the past. According to Renewables 2023, installed renewable energy capacity worldwide increased by 50 percent in 2023, reaching about 510 gigawatts (GW), with solar photovoltaics (PV) accounting for three-quarters of new installations. By 2028, the deployment of onshore wind and solar photovoltaics (PV) is expected to double from current levels in the US, EU, India, and Brazil.

The use of renewable energy sources in homes has also increased as more homeowners choose to install solar panels and other clean sources of electricity on their properties. Implementing solar energy systems is now more cost-effective than it was 10 years ago, and installation costs have fallen by almost 40 percent.

1. SEIA estimates that U.S. residential solar capacity will grow by 6,000 to 7,000 MW per year between 2023 and 2027. By 2030, more than one in seven American homes will have solar panels installed. This rapid growth underscores a strong move toward distributed green energy that will also require a strong expansion of smart grids.

Today, grids consist of a system of substations, transmission lines, transformers, and other components that move electricity from power plants to homes or workplaces. Digital technology can enable electric grids to adapt to rapidly changing electricity needs. Smart grids speed up power recovery from outages and improve energy transmission efficiency. They can also reduce peak demand, ultimately leading to lower electricity prices.

According to the Japanese government, achieving the country’s smart grid aspirations will depend on smart meters, which will be the focus, as well as other fundamental elements such as increasing photovoltaic capacity, energy management systems, communication technology systems, battery storage systems and removing restrictions in the electricity market.

The Electricity Innovation Institute states that “as utilities continue to manage, operate and invest in an increasingly digital power grid, the next critical step is to continue to leverage the data generated by smart meters as a strategic asset to improve grid operations, more efficiently utilize customer assets and offer new services to customers.”

Various countries are looking to expand smart meter coverage as part of their overall smart grid rollouts. For example, China is replacing its first-generation smart meters with more advanced systems.

The country is expected to lead the world in the deployment of AMI (Advanced Metering Infrastructure). In the coming years, China will account for 70-80 percent of Asia’s total demand for smart electricity meters.

The North American smart grid sector is expected to grow at a compound annual growth rate of over six percent through 2029. By the end of 2024, 80 percent of U.S. energy consumers are expected to have smart meters.

COVID-19 has had a negative impact on the industry, but it has recently returned to pre-pandemic levels. The United States will dominate the smart grid sector in North America by 2029. Government support and targeted policies will be key to help.

By 2022, India had installed over 50 million smart meters. The government has started rolling out various smart grid technologies, including distribution automation, energy management systems, and AMI. However, the installation of smart grid technologies in India continues to face hurdles in the form of lack of technology standards, lack of consumer awareness, and poor financing.

In Europe, Germany has lagged behind its peers in smart grid deployment. However, Germany is expected to install 44 million smart meters by 2026, driven by $23.6 billion in smart grid infrastructure investment, partly driven by new regulations.

Large-scale renewable energy projects, the growing use of home storage, and solar systems in general have taken critical places in the global energy landscape. As a result, effective power rebalancing solutions have become paramount for a successful energy transition.

Integrating distributed energy resources, increasing system resilience, and optimizing energy consumption all depend on smart grids and improved metering infrastructure. The future of smart grids around the world is bright, driven by large investments and supportive government regulations.

Dmytro Konovalov has over 10 years of experience in global equity research and analysis at leading international financial institutions.