To keep pace with the global connectivity needs and the projected GDP growth, it is estimated that the world should invest an average of $3.7 trillion annually through 2035 in economic network infrastructure only, with the electrical industry accounting for 29% of the total investment.
Electricity consumption, which is growing faster than overall energy demand, is expected to increase from 19% of total final consumption of energy in 2018 to 31% in 2040, according to the IEA Future is Electric Scenario. Driven by digitalization and progressive electrification of transport and heat production systems, electricity - which global demand is expected to reach 38,700 TWh by 2050 following latest BNEF estimates, that is 57% more than 2017 - will be pivotal to accelerate energy transition and tackle climate change.
These trends, coupled with decarbonisation and urbanisation, are shaping the world of energy into a new ecosystem that requires a rapid transformation of utilities business model. With renewables providing two-thirds of electricity supply by 2050 - and cities hosting 68% of total world population (6.6 billion people, 13% more than today) - electrical network operators need to rapidly readjust their infrastructural assets, supporting the energy economy transformation and the building of smart cities by digitalizing their operation and processes, and by enabling a highly dynamic energy system at all layers and timescales.
Actually, global investments in electricity networks in 2018 declined by 1% from the previous year, although estimates showed a significant increase of total spending in the United States, and in India and Europe where investments rose by around 5%, with regulators continuing to emphasise grid resilience and reliability. Consistently with exponential increase of data intelligence and digital services, investments on digital grid technologies continued to rise, growing by almost 10% up to $35 billion, mostly for smart meters and grid automation equipment, with EV charging stations rising by 60% to over $3 billion.
In its latest strategic plan, Enel - world leader in renewable energy and electricity customers, and operating the world’s largest electricity network among private-sector distributors, included a € 5.4bn-capex for the next 3 years aimed to digitise its assets, operations and processes and to enhance connectivity along the whole value chain, with about €4bn specifically addressed to networks digitalization, while introducing specific targets to achieve the United Nations Sustainable Development Goals (SDGs) as well, as the SDG #9 (Industry, Innovation and Infrastructure) and SDG #11 (Sustainable Cities and Communities); by 2021, the Group expects to reach 46.9 million smart meters installed and 455,000 electric vehicle charging points respectively.
Distribution system operators (DSOs) are indeed at the crossroads of energy customers and all energy related services of the near future, thus they can play a key role as neutral market facilitators, steering the digital evolution through deploying smart technologies with the ultimate goal of guaranteeing network stability and quality of service, while improving reliability and resilience of the entire energy system, benefitting the various stakeholders.
In this context, the role of smart grids, with smart metering as main pillar of energy networks digitalization, is strategic for DSOs: by integrating and optimizing distributed generation from renewable sources, storage and demand response, smart grids contribute to sustainability, facilitating the complete transformation of the energy systems, while generating opportunities for new revenues streams, enabling for example the development of electric vehicle charging infrastructure; in addition, leveraging on digital solutions, smart grids allow distributors to optimize grid operations managing different needs from all actors involved in the power systems (producers, regulators, consumers, prosumers, etc.), and enabling efficient electricity supply and higher electricity service quality.
Yet, any step ahead cannot be fast enough without a supportive regulatory framework, and requires the combined effort of stakeholders at all levels. Regulatory authorities have to identify an appropriate framework for future electricity market design and cooperation between national Transmission System Operators (TSOs) and DSOs, in terms of technical requirements and rules for deployment of distributed resources, ensuring a wide sharing of information and facilitating access to electricity.
In the future paradigm of the energy system – featured by a transition towards consumer-centricity, decentralization and integration of significant share of renewable sources, mainly installed at local level – the backbone of the European energy infrastructure will be increasingly centred on smart grids run by DSOs at local level.
As of today, European financial resources for infrastructures are mainly directed to Projects of Common Interest (PCI), connecting two or more countries and involving national TSOs. Experience showed that smart grids operators, eligible to these funds as well, due to overly stringent and unfit requirements, so far they struggled to access them. Future evolution of the regulatory framework may enable local smart grids projects to access European funds, benefitting neighbouring countries by supporting renewables integration and solving electric network congestions.
Such a direction would be coherent with the approach recently taken by the European Institutions in a major recast of the legislation related to the electricity internal market, which recognizes the key role of DSOs as enablers of the transition towards a more digitized, decentralized and decarbonized energy system. The new European regulation will provide new tools to DSOs to integrate renewable energy sources efficiently, which should account for 32% of the total energy consumption in 2030.
In this evolving framework, we may see a wider wave of investments on energy infrastructures not based on copper and iron exclusively, but supported by the diffusion of Artificial Intelligence, IoT sensors, platforms and new business models, such as demand response. Nonetheless, these shall be supported by a solid governance: to lead the energy transition, it is essential to rely on a future-proof regulation and a solid cooperation among all the actors involved in the new energy ecosystem.
 IEA World Energy Outlook (2018)
 BNEF New Energy Outlook (2018).
 UN, World Population Prospects (2018)
 IEA, World Energy Investment (2019)
 See http://strategy2018.enel.com/en/
 Electricity Regulation and Directive are expected to be published in the Official Journal of the European Union (EU) in the upcoming weeks
 Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources