Presentation for the Energy Innovation Academy organised by the FSR Energy Innovation Area. 28-30 November, Florence

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Digitalization of electricity sector…
[I] An introduction
[II] A toolkit
Jean-Michel Glachant, Director FSR
Florence
28 November 2018

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I was born analogic, not digital

3. Analogic world / Digital world…
• -- -- -- -- Analogic (roughly) -- -- -- --
• Each type of (data) and (device): a particular coding, storing, program, etc
• Only humans are universal go-between: via specialization of tasks & labour
• -- -- -- -- Digital (as roughly) -- -- -- --
• All data in similar codes, permitting: storing, transmitting, aggregating,
disaggregating, checking, injecting into programs for analysis & decision
• Programs for devices, similar too: Thanks A. Turing, computers & smart
devices have storable & replaceable programs expressed in codes similar to
data
• >Universal access >+>Universal compatibility are doable: Data, programs,
devices, and humans can be deeply intertwined
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4. 1st wave of electricity digitalisation…
Opening wholesale markets, 30 years ago
• Before elec.: Markets for stocks, bonds, currency; Markets for
commodities – much more convenient & more informative
New-York, Chicago, got mainframes, private lines & terminals,
stopped being cooperatives of traders: Traceability guarantee
• 1st Step: UK Electricity Pool (1 April 1990) took “Plants Merit Order
Program” of integrated utility, made it “Open Merit Order” fed by
each plant’s bids
1996, NordPool; 1997, PJM, California wholesale markets
• Parallel Step: Power Transmission self-equips with new ITC to
manage the system & implement market decisions (ex: ISO, RTO)
A Joint Wave (Wholesale Markets) <:> (Smart Grids 1.0)
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5. • 2 Big Bangs (Decentralization) + (Digitalization)
1- Decentralizing “Big Bang”.
Generation new technology : Wind mills by MW - PV Panels by KW
Pushed by decarbonisation: EU, Maryland, California. Or not: State of
Texas.
New wave in Chile, Mexico. Etc.
“Utility scale Wind & Solar” can be very cheap, can beat coal: India; or
gas: US
(And more to come: V. Sivaram -2018- Taming the Sun. Innovations to
Harness Solar Energy & Power the Planet)
Storage revolution (on the top) growing, challenging system operation
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2nd wave Digitalization today also a twinning…

6. • 2 Big Bangs (Decentralization) + (Digitalization)
2- Digitalization is parallel “Big Bang”.
1st wave digitalization (“mainframes”, smart grids 1.0) supported
wholesale market
2nd wave digitalization (+ new smart grids 2.0) supports new
decentralization shift
(S. Vadari -2018- Smart Grid Redefined. Transformation of the Electric
Utility)
Consumer technology shift: Aggregation. Multiple small consumption
units are gathered, & become new offer entering wholesale market as
“virtual units”
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2nd wave Digitalization today also a twinning…

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Why are Decentralization & Digitalization so twins?
1/ Decentralization changes size & scope of assets;
then their operation, & the decision making
New Ownership structure for assets <:> New Operation rules for assets
<:> New Governance structure for industry
2/ Digitalization changes information, control, decision making;
then operation of assets, the services they deliver > new decision making
New Technology frame for <:Information, Control, & Decision Making
:> New Operation Rules, New Services delivered <:> New Governance structure

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1/ Decentralization has two children
*1*End of single centralized Utilities; substituting multiple
players, all along the value chain
**2**End of single centralized System Operation; substituting
multiple levels of control & optimization (micro-grids;
distribution grids; transmission grids)

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2/ Digitalization too has two children
*1*Arrangements outside traditional Electricity Sector
regulation
(as Aggregators playing with consumption, hence “Behind the
Meter”)
**2**Coordination of new ‘digitalized’ tasks within Electricity
Delivery Loop
>Remember 1st wave: Coordinating Transmission & Wholesale
>2nd wave > Amazon “Delivery Loop”
= coordinating “Distribution Grid Platform” with new actions
such as
(prosumers + prosumagers + all other Behind the Meter)
entering the interactive core of the El.system

10. Interactions between twins:
Decentralization <-> Digitalization

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Decentralization opens two streams of changes
1* Distributed Generation expands
with novelties, as
°“Utility Scale Renewables”
°Or distributed Prosumers (PV or Wind PPAs)
°And Prosumagers (Storage)
°Plus other “Behind the Meter” (electric Cars; smart buildings)
2**While Aggregators & Platforms (2-sided markets)
offer new ways of coordinating decentralized units
Up to “Sharing Economy” Platforms (which are) = Peer2Peer

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Digitalization favors two streams of changes
1/ Playing from outside Traditional Sector:
Fleets of “Behind the Meter devices” can be gathered &
controlled to be managed as system smart assets
>think electric car fleets; or “zero net consumption” buildings
2/ New ways of coordinating all decentralized units:
thanks to Agregators & Platforms P2P;
down to Blockchain networks
>Blockchain network is P2P with NO intermediary, NO UBER
between Peer-2-Peer
3/ BUT, but, BUT…

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Digitalization favors two streams of changes
1/ Playing from outside Traditional Sector
2/ New ways of coordinating all decentralized units
3/ BUT, but, BUT WITHIN “Amazon Delivery Loop” constraint
It is the needed / desired “Distribution Grid Platform”
>Ignacio Perez-Arriaga “Utility of the Future”, when perfectly
set up (MIT Report 2016)
>>New York “Distribution Platform” project, if implemented
(Sioshansi Fereidoon 2017; 2019)

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Decentralization & Digitalization can only strongly interact
1/ Because they have similar wings of change
> “Behind the Meter” targets of “smart assets”
>> Aggregators & Platforms P2P offering ways of entry to the “El. Amazon
Loop” delivery constraint
2/ Because both 2Ds (Decentralization & Digitalization)
touch upon the same: tasks, assets, operation, apps, integrators, platforms
> Up to Governance
with new types of players going to play, as
*Communities of Peers
**Clubs of Partners
***Smart Local Authorities

15. Conclusions of Introduction: key challenges
for industry, consumers & prosumers, and… regulators
1> New Coordination Tasks: Beyond “Utilility”+ “Behind the Meter”
activities + interactions Transmission/Distribution
2> New Incentive Regulation: to favour structural business innovations
& new business models <through> incentive Regulatory Frames
3> New Protections needed: a) individual privacy - from abuse of digital
power (typical: EU new regulation; but)
b) all industry chain - from piracy & organized crime
c) system bones, assets & all hardware - from extreme natural events,
as forest fire, flood, tornado…

16. Going Ahead:
Digitalization of electricity sector…
[II] A toolkit, of 6 building blocks
(= 6 elementary forms of digitalization)
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You know me: born French analogical, not digital

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Something else to know: 1st recorded French Blockchain

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All details explained: in our Florence Policy Brief

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21. 1st Block - Infrastructures: Switching from Analogical, to Digital
-- -- -- -- -- Digital World (1st wave: Mainframes yesterday) -- -- -- --
• All data coded in a similar code : storing, transmitting, aggregating, disaggregating, checking, injecting
into programs for analysis & decision
• Programs for devices similar codes: Thanks A. Turing, computers & smart devices have storable &
replaceable programs expressed in codes similar to data
• Universal compatibility & universal access doable: Data, devices, humans can be deeply intertwined
---- -- -- -- Digital world (2nd wave: ~Today) -- -- -- --
• Internet (internetting private networks) + Cloud Computing
+ One day: Comprehensive Internet of Things
(all connected, all interacting)
• Today (3 billion) SmartPhones & (4 billion) Internet users
+ One day: Comprehensive Internet of Home Lives…
(all home lives connected, and interacting with all Things
& the World, via vocal assistants)
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22. 2nd Block - Infrastructures: from Grids doing the same, to doing something else
• 1- Doing the same: (Wholesale Markets) UK Electricity Pool (1
April 1990) took “Plants Merit Order Program” of integrated
utility, made it “Open Merit Order” fed by each plant bids
• 1- Following the same: (Smart Grids 1.0) Power Transmission
equips with new ITC to manage the system & implement market
decisions
------------------------------------------------------------------------
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23. 2nd Block - Infrastructures: from Grids doing the same, to doing something else
------------------------------------------------------------------------
• 2~ Doing something else: (Decentralization of the power
system)
Decentralization Towards “Escamoles” (Ants) Power Cuisine:
2GW nuclear, 200MW CCGT, 2MW Wind mill, 2kW PV panel
(+ Interactions) storage + el.cars 450/900 GWh + ZNC buildings +
Smart Cities
• 2~ New Grids integrating all innovations: (Smart Grids 2.0… 3.0
“Distribution System Operation” as “Amazon Delivery Loop”)
>S. Vadari 2018 “Smart Grid Redefined. Transformation of Electric
Utility”
>> I. Perez-Arriaga 2016 (MIT) “Utility of the Future”
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24. 3d Block: New market arrangements, the Digital centralized
• Markets are tools & have technological foundations
Markets revolution goes ahead with new digital support (platform
is a delivery loop)
------------------------------------------------------------------------
• Digital supply of centralized services: the Tech & Social Media
Google Map, Google Search – Apple Music – Netflix series
> Hybrid (the platform is the delivery loop; but you do your
homework)
Gmail, YouTube, Twitter, Instagram, Facebook
------------------------------------------------------------------------
• The electricity industry:
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25. 3d Block: New market arrangements, the Digital centralized
------------------------------------------------------------------------
• The electricity industry: Digital supply of centralized services
> Hybrid (the platform is the delivery loop; but you do your
homework)
Aggregators create units acting within the wholesale market
(microeconomics) by virtual (digital) aggregation of too small units
(nanoeconomics)
Aggregators link “Behind the Meter” with the core of the power
system: generation & operation of the system
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26. 4th Block: New market arrangements, Coordinating the decentralized
• Markets are tools & have technological foundations:
Outside classical Wholesale Markets, more decentralized markets
are created with digital support (platform is not delivery loop, but
does its following –up)
------------------------------------------------------------------------
• Digital coordination of decentralized services: Uber, Airbnb
Nobel Laureate Akerlof 1970 (“Market for Lemons”)
> Strong information asymmetry on true quality of the good, kills
the market
Nobel Laureate Tirole 2016 (“Economics for the Common Good”)
>> Digital platforms offering cheap & credible good quality
guarantee, recreate markets
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27. 4th Block: New market arrangements, Coordinating the decentralized
------------------------------------------------------------------------
• The electricity industry: Digital coordination of decentralized
services:
Platforms for distribution system operators: congestion
management services
Platforms for selling renewables or green certificates
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28. 5th Block: Transacting at Frontier Self-coordination of the decentralized
• Markets are tools & have technological foundations:
Markets Peer2Peer full delivery with no intermediary: Blockchain,
Communities, Clubs
------------------------------------------------------------------------
• Self-coordination of decentralized trade: Blockchain
A strong chain of decentralized trade certification via encryption
algorithms, can give enough guarantee to the players involved
>“Pure”: miners competing in an open space, as for crypto-
currencies
>>” Hybrid”: an already existing community of peers, or club of
partners, add to encryption algorithm an external mechanism of
governance
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29. 5th Block: Transacting at Frontier Self-coordination of the decentralized
------------------------------------------------------------------------
• The electricity industry: Self-coordination of decentralized services
#Blockchain cases presented in Mexico (13-15 November) >> See my Tweets
#“Energy Communities” as foreseen in coming EU new energy law package
#”Clubs of Partners” (to share storage, charging stations, etc)
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30. 6th Block: Transacting at Frontier, Recentralizing within embedded
asymetry, Virtual Resort for Artificial Intelligence
• Markets are tools & have technological foundations:
Markets are suppressed: the producer deletes the consumer’s
decision rights & encapsulates delivery of usage into automated
Artificial Intelligence delivery loop
------------------------------------------------------------------------
• Automated-coordination within centralized operation “resorts”:
self-driven cars
> “Type Pure”: A Google car will do what its proprietary grogram
(produced and managed realtime by Alphabet network of artificial
intelligence) will tell it to do
>>”Type Hybrid”: smart homes equipped with vocal assistant;
coming Internet of Things
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31. 6th Block: Transacting at Frontier, Recentralizing within embedded
asymetry, Virtual Resort for Artificial Intelligence
------------------------------------------------------------------------
• The electricity industry: Automation of centralized operation
“resorts”
>Fleet of el. self-driven cars managed by a fleet management
program
>>Fleet of coming “Zero Net Consumption” buildings managed by
a fleet management program
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32. Conclusions:
1/ You haven’t seen yet much of the digital revolution we
are entering in…
2/ Fasten your seat belt!
3/ Open all your mind, and all your eyes

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Muchas Gracias!
Email : jean-michel.glachant@eui.eu
Twitter: @JMGlachant >45 000 tweets
Web site: http://fsr.eui.eu/

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Y ademas: Muchas Gracias!
Email : jean-michel.glachant@eui.eu
Twitter: @JMGlachant >45 000 tweets
Web site: http://fsr.eui.eu/