It will take decades for Britain to set up a smart electricity grid, and this will require large investment in energy storage and communication networks, an IBM executive said.
One of the ideas of a smart grid is to enable households and businesses to use high power consuming appliances or recharge electric cars at a time of day when electricity prices are cheapest.
Its success largely hinges on whether end consumers see the financial benefits from investments made in smart grid technologies such as energy demand monitoring systems, said Jon Bentley, smarter energy lead at IBM global business services.
"We see smart grids as being fundamental to ensuring that customers, particularly domestic customers, benefit and benefit financially from these significant investments in the energy system," he told Reuters in an interview.
"This is actually going to require a whole-scale change over 30 or 40 years," he said.
The UK government has estimated up to 200 billion pounds ($A315 billion) will be needed by 2020 to revamp large parts of its ageing energy infrastructure in order to provide clean, reliable, affordable and efficient forms of energy.
Britain is not alone in the smart grid race. Australia, Canada, India, Japan, South Korea and the United States are among several countries taking up smart grid initiatives.
UK technology research firm Innovation Observatory has estimated the global market for smart grid infrastructure will reach $US376 billion by the end of 2025.
Like IBM, General Electric, Siemens, Toshiba and Wipro are among a diverse group of companies keen to get a slice of the global market.
Energy problems and solutions vary from country to country, Bentley said.
"In some places, energy theft is the major issue," he said. In others it is the resilience of the network, encouraging a shift towards renewable energy, rolling out electric cars, shifting peak or cutting total consumption for carbon benefits.
"The UK faces a complex mix of these challenges," he said.
Around one quarter of Britain's electricity production capacity will shut down by the middle of this decade as old and polluting coal-fired power plants are phased out.
Over the next eight years, up to 30 per cent of its power supply is expected to come from renewable energy sources, including wind and solar.
But once wind and solar produce electricity it needs to be fed into the grid immediately, whether it is needed or not, because it cannot be stored.
"The issue of how do you deal with times of plenty and spread it across to different times of shortage – mirrored on the demand side with the peaks and troughs – is really a fundamental issue for network balancing," Bentley said.
In one of its UK projects, IBM is among several firms working on a smart grid initiative to integrate the future solar, tidal, geothermal and wind power on the Isle of Wight, England's largest island located in the English Channel.
The government has made plans for every household and business to be fitted with a so-called smart meter, a system to allow them to monitor their energy demand, by 2019. This target requires the replacement of around 53 million gas and electricity meters.
A 500-million pound fund, which started in 2010 and is monitored by energy regulator Ofgem, supports projects sponsored by the distribution network operators to try out new technology, operating and commercial arrangements.
"The UK program for a smart grid, while it is in its early days, and many argue it needs to be accelerated, is world leading in its ambition," said Bentley. "The challenge is there is so much change and in any complex change programme the more you're changing the more challenge there is."
This story was originally published by Reuters. Republished with permission.