Surge

Whenever we flip a switch, we tap into a vast network of power stations, lines and substations. The stability of that network relies on careful management to match power supply with fluctuating demand.

It’s not just about making sure there’s enough electricity for everyone: if there’s too much on the grid and not enough demand, that is not only wasteful but can even trip the system and lead to blackouts and brownouts as well. So the amount of power put into the grid must match the sum taken out. This takes considerable effort as demand falls and rises. 

Traditionally, coal, natural gas and nuclear plants would feed into the power system at steady levels, with adjustments taking some time and making it hard to stay ahead of rapid changes in demand. So peaker plants have been added as an alternative measure; they’re kept on standby to quickly ramp up gas-powered turbines as needed. It’s a costly fix: an estimated 10% of the U.S. electric system is built to meet peak demand, which accounts for just 1% of the hours in a year. 

This balance remains a central challenge as the energy mix shifts away from fossil fuels. The rise in solar power is positive, but the variability of solar output reveals the duck curve: a graph illustrating the mismatch between solar energy production and demand throughout the day. The shape of the bird is seen in the upturn in the morning, potential oversupply around the middle of the day when the sun's rays are strongest, and a demand peak in the evening. 

Storing renewable energy is the key. The world’s largest source of energy storage capacity, pumped hydro storage, has the geographical limitations linked with hydropower. So there are high hopes for advancements in battery technology – from short-duration Tesla Powerwalls ($TSLA) for households, to large-scale vanadium redox, zinc or iron flow batteries for longer periods.

Until batteries are up to the task, virtual power plants (VPPs) might just redefine the grid’s future. These digital systems integrate a variety of decentralised energy resources, such as rooftop solar panels or industrial wind farms, and quickly coordinate supply and demand to save billions – potentially US$35b by 2033 – for utilities or wholesale energy markets. As a more localised solution, VPPs can ease pressure on ageing transmission infrastructure and enhance grid efficiency and reliability without the need for a physical plant.

The Department of Energy in the U.S. believes that tripling the current VPP capacity by 2030 could cover 10% to 20% of the country’s peak power demand, making it a focal point for policymakers. It’s worth noting that favourable grants have set in motion projects by solar power firms Enphase Energy ($ENPH), Sunrun Inc ($RUN) and SunPower Corp ($SPWR), as well as grid-focused business Generac ($GNRC).

If policies also force energy retailers to make off-peak tariff incentives more attractive, consumers might play a bigger role. Today’s smart devices can automatically adjust to take advantage of such incentives, but adoption may stay patchy until the savings are worth giving up control of your home’s temperature or your electric vehicle’s recharge.