One of the main benefits of the Smart Grid is increased reliability. Investing in Smart Grid technologies that improve reliability may have a good benefit-to-cost ratio or not, it will depend on the value of the improvement and the avoided outage or interruption costs. Examples of such technologies are; automatic outage restoration systems, Wide Area Monitoring, energy storage at distribution level, geographic information maintenance systems, advanced protection systems, etc.
The cost to improve reliability follows an somewhat exponential curve, as having a 100% reliable system is close to impossible, the cost is close to infinite. This leads to an asymptotic curve towards the end. Something like this:
The benefit-to-cost ratio is normally positive for the increases in reliability up to a point where the investment is not compensated by the limited increase in reliability, and then becomes negative. For example, installing additional back-up generation power that is necessary to cover 2 hours/year when there is expected unavailability of other units.
There is a niche where reliability is so necessary that the cost has sense, for data centers, for example. There, cost of unreliability compensates the extra investments. However, for these industries, the Smart Grid Technologies to be built are local (i.e. self-generation and storage), not done by the network operator. As society moves towards a digital and knowledge economy, the need for higher reliability increases, improving the business case for these stakeholders.
When assessing different options of Smart Grid Technologies, those that increase reliability will be a better option when avoided outage costs are very high. But once the network has high reliability, other technologies improving efficiency will be a better option. Proof of this is the ISGAN survey results for the motivational drivers of Smart Grid Implementation, where developed economies are motivated by efficiency increases much more than reliability, as is the main motivation for developing economies:
One important conclusion of this is the following:
When efficiency is the main motivational driver, the Smart Grid Technologies to be used are more linked to the Prosumer (Producer-Consumer), than with the Distribution System Operator. When efficiency is the goal, technologies such as self-consumption, building and home energy management systems (smart buildings and smart homes), electric vehicle integration (e.g. V2H) and microgrid technologies, are the key. Demand response and advanced metering are also relevant and is where the operators have the link with the Prosumer. As I proposed before, implementing these technologies is the way of building the Smart Grid bottom-up.
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