An increasing part of the primary energy sources, such as gas, coal, wind, solar etc, is being used to generate electricity. The electricity grid requires sizeable investments to be able to cope with the projected increase of electricity generated from renewable energy sources.
This has lead to the introduction of the concept of smart grids. Smart grids are hot. Headlines like ‘the Department of Energy is investing $3.4 billion in Smart Grid technologies’ (22 February 2010) and ‘Global smart grid market to reach $187 billion in 2015 (20 April 2010)’, illustrate the development of smart grids.

What is a smart grid?
This is not an easy question to answer. There is still no consensus on what smart grids actually are. Various definitions are being used to define smart grids:
* ‘a smart grid uses digital technology to improve reliability, security and efficiency (both economic and energy) of the electric system from large generation, through the delivery systems to electricity consumers and a growing number of distributed-generation and
storage resources’ (DOE/OEDER 2008a(1)).
* smart grids: ‘electricity networks that can intelligently integrate the behaviour and actions of all users connected to it – generators, consumers and those that do both – in order to efficiently deliver sustainable, economic and secure electricity supplies (the European Technology Platform Smart Grids).
Others argue that smart grids are a comprehensive vision that combines physical assets, operating systems and new engineering design standards with economic, policy and consumer behavioural changes (ADICA). The focus is more on the capabilities of smart grids like enabling active participation by consumers, reducing efficiency losses, integrating all forms of generation and storage options etc. The difficulty is to create a common vision amongst all stakeholders.
The different definitions and visions illustrates that smart grids have become a catch-all term that encompasses various perspectives of different stakeholders.

Figure 1: Levels of competition

What is the role of gas in smart grids?
Currently, we can distinguish five levels where gas is converted into electricity and where the primary energy source gas is in direct competition with the secondary energy source electricity.
The first level is the supranational level. On this level, gas is being converted into electricity which is being transported cross-border. Already at this level, choices have to be made because electricity at present cannot be transported economically over distances above approximately 500 km while the primary energy source natural gas can be transported over 5000 km and more. On this level, gas supply competes with other primary energy sources like large offshore wind farms, large solar projects (DeserTec), nuclear and hydropower from Norway.
The second level is the national level. On this level the electricity generated is mainly used for national purposes. The same choices as on supranational level have to be made but here coal fired power plants, onshore wind farms etc are also in competition as primary energy sources with the gas-to-power option.
On the third level there are the industrial areas. These can differ in size but in general gas is being converted locally into electricity and heat. The choices are limited here. Gas has a strong position but is competing against wholesale electricity prices. Surplus electricity and gas can be traded to other customers at this level. On the other hand, the heat generated has to be efficiently used for industrial processes. The combined generated heat and power provides the economic incentives which explains the strong position of gas-to-power option at this level.
The fourth level is the local community. Conversion from gas into heat and electricity at local community level where heat and electricity are distributed through grids. This often limits the choice of individual households and small businesses for direct connection to the gas grid and other possible sources of heat and power. In addition to this, a dedicated electricity and heat grid limits the future possibilities of the integrated approach for innovations in gas applications.
The last level is the household and small businesses. The presence of a gas connection provides future possibilities of introducing economical and efficient gas appliances generating heat and/or power and cooling. An example is the micro combined heat and power, allowing households to become prosumers (connected users can both consume (buy from the grid) and produce (sell back to the grid). Making the right choices to convert gas into electricity determines the efficiency of the energy delivery to the society.
Smart grids should take the gas option into account in order to become possibly even smarter and more efficient. Gas competes with electricity on each of the above described levels. The demand for the amount of electricity and/or heat also influences the choice whether to use gas or electricity.

Energy versus economic efficiency
The choice has to be made whether to use gas to generate heat and power, which is best done where the heat can be used most efficiently, or to use electricity generated by wind, solar etc, for both heat and power. On what level the choice to convert gas into electricity is made, can be based solely on energetic grounds. However, on economic grounds a different outcome might result in a different choice. For example electric heat pumps were installed in an area in Zutphen. However, the costs for preparing the electricity grid were fivefold as compared to the original combined gas and electricity grid. This example illustrates that the choice has to be made on energetic and economic grounds.
At the moment we are at a cross-road. Within now and five years, huge investment decisions in energy infrastructure will be taken which will determine the future energy mix. Investments in smart grids are incentivized, especially driven by electric vehicles, solar panels, wind turbines etc. The question is how gas will be present in the future energy mix, especially on the lowest level. To make this choice, one should not only base this choice on energetic grounds, but should make an economic evaluation. Eventually this can result into smarter grids but if this choice is solely for the electricity option, this could lead to a suboptimal system for the coming decades. It all boils down to who is setting the course. Is it the government or the market? Who is deciding what is an optimal grid (electric versus combined gas/electric)? The question is how to make this choice…
 

Leo Hoenders en René Snijder