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Smart Grids and Smart Metering a key for a low carbon energy future Péter Kaderják Director Regional Centre for Energy Policy Research March 20, 2013.

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Presentation on theme: "Smart Grids and Smart Metering a key for a low carbon energy future Péter Kaderják Director Regional Centre for Energy Policy Research March 20, 2013."— Presentation transcript:

1 Smart Grids and Smart Metering a key for a low carbon energy future Péter Kaderják Director Regional Centre for Energy Policy Research March 20, 2013

2 2 Outline of the presentation 1.Traditional electricity networks 2.The vision of smart grids 3.What is smart metering? 4.Costs and benefits 5.Regulatory challenges 6.Basic market models 7.Appendix: pilot projects

3 1.Traditional electricity networks Characteristics Large, centralised electricity generation Uni-directional flow of electricity, information Passive customers Rare communication between system operator and system users 3

4 Challenges to traditional networks Customers become electricity producers The spread of Decentralized Generation Motivation: technology development (gas based microgeneration) and renwables penetration Reverse electricity flow in the network 4 Customers can provide electricity storage services Batteries of electric vehicles Development of electricity markets Hourly electricity price signals More flexible reaction to prices from customers becomes possible – can shift electricity use towards low cost periods Helps system management by reducing peak demand at low cost 21 st century IT development Fast and flexible communication of system operator and its users

5 2.The vision of smart grid infrastructure 5 Characteristics Decentralised generation Bi-directional flow of electricity & information Active customers Active communication of system operator and system users

6 Smart grids for a better energy sector The future grids (electric, gas, etc.) need to facilitate: 6 Energy efficiency: to change consumer behavior and fend off rebound effect Renewables and e-mobility: intermittent and distributed production and consumption The grids also need to be more cost-efficient and reliable. A transition towards smart grids, in which smart metering is to play an important role.

7 Main smart grid initiatives in the EU Smart grid priorities of the EC: 1.Developing common European standards 2.Addressing data privacy and security issues 3.Establishing a regulatory framework to provide incentives 4.Guaranteeing an open and competitive retail market 5.Continuous support for innovation and its adaptation 7 Smart Grid Task Force set up by the European Commission to outline expected services, functionalities and benefits of smart grids: direct interaction and communication among consumers, suppliers and market players direct control of consumption patterns; backbone of decarbonized power systems integration of RES and EV maintaining availability for conventional power generation and system adequacy new market in engineering, electronics and IT sectors can enhance worldwide competitiveness of EU companies etc.

8 Smart grids: EU tendencies Between , 5.5bn invested in about 300 smart grid projects in Europe (of which 300mn from EU budget) But, e.g., still only about 10% of households have smart meters, and most do not utilize their full capabilities 8 About ¾ of investments in smart meters; second largest category is investments in integrated systems Other main project categories: power storage, home applications, distribution automation, transmission automation Largest project in Europe: Italys smart meter roll-out A change in the composition of investments is expected: the EC forecasts that 15% will be spent on smart metering deployment and 85% to upgrade the rest of the system. Smart metering may not prove the most expensive part of the system, but it will be a precondition for the whole system to operate

9 3. What is smart metering (SM)? Smart metering is more than just smart meters: Electrical meters – instead of traditional electromechanical ones Related hardware equipment (e.g. home displays) Communications network Data management and control center 9 Smart meter(s) Utility / Service provider Computer / web interface / mobile / home display Building control center consumption data remote load controls / disconnection real-time information energy reporting, dynamic energy tariffs, energy analysis & advice heating, cooling, ventilation, electrical appliances A scheme of smart metering

10 What is smart metering (SM)? (contd) Although smart metering is most often envisaged as a part of a smart grid (or smart homes), it can also contribute to a greener, more efficient and more stable energy sector in itself by: showing data to the consumer to induce more energy consciousness allowing time-of-use tariffs for demand-side management and peak- demand shaving allowing continuous diagnostics of the grid and observing electricity theft But smart meters alone cannot do the job: a complex solution including the hardware and software, and also an appropriate selection of tariffs and services (e.g. data analytics and advisory for customers) is needed. 10

11 Requirements for smart metering Interval meter data: Load profile measurement for intra-hour intervals Remote meter reading and data processing Remote meter management: Power reduction, disconnection, demand management Measurement of consumption and generation by distributed units Ability to manage multiple tariffs Remote message transfer from market players to consumers and generators (e.g. price signals) Information display for consumption statistics Power quality measurement Continuity of supply and voltage quality Bidirectional communication (via PLC, GSM, GPRS, etc.) Not just for electricity: also for gas, water, district heating, appliances. 11

12 Privacy and security issues 12 Privacy of consumers: ensuring that consumers are not subjected to unwanted targeting, profiling and marketing activity Data safety for competing suppliers: ensuring the security of sensitive business data multi-utility systems are especially exposed to this problem Data security: protection against hackers (and stealing consumers) EU recommendations: standardization is needed distinguishing personal and non-personal data the Netherlands: roll-out delayed due to privacy issues EU recommendations: standardization is needed distinguishing personal and non-personal data the Netherlands: roll-out delayed due to privacy issues

13 4.Potential benefits of smart metering 13 Consumers Savings on bills Quicker and easier supplier switching Increased competition among retailers More accurate billing Prepayment options Increased level of services Savings on bills Quicker and easier supplier switching Increased competition among retailers More accurate billing Prepayment options Increased level of services DSOs Remote connections and disconnections Faster fault location and reconnection after outages More accurate calculation of network losses and reactive power More accurate monitoring of continuity of supply and voltage quality Remote connections and disconnections Faster fault location and reconnection after outages More accurate calculation of network losses and reactive power More accurate monitoring of continuity of supply and voltage quality Cost savings by avoiding manual meter reading More accurate data Cost savings by avoiding manual meter reading More accurate data Metering companies Government / society Overall energy savings More cost-efficient energy sector Support of distributed generation and the integration of renewables Overall energy savings More cost-efficient energy sector Support of distributed generation and the integration of renewables Energy retailers Better input data for designing pricing options and energy management services Reduction in costs of managing queries regarding bills Reduced theft Reduced bad debt costs by allowing remote disconnection and prepayment options Cost savings on the administration of supplier switching Better planning for balancing Better input data for designing pricing options and energy management services Reduction in costs of managing queries regarding bills Reduced theft Reduced bad debt costs by allowing remote disconnection and prepayment options Cost savings on the administration of supplier switching Better planning for balancing

14 Costs of smart meters Costs can arise from a variety of sources: Largest part is usually the initial cost of installation Some variable costs can increase: e.g. maintenance and data management costs New cost item: the variable cost of communication Smart metering devices likely consume more power than traditional metering Costs arising from security and safeguarding data privacy 14 A multi-utility system can result in savings compared to parallel individual systems common optimization of meter reading and maintenance costs, e.g. by shared communication system and display

15 5. Regulatory challenges Smart grid deployment is a regulation-driven process Regulatory support in remunerating investments is crucial. 15 Commonly a separate metering charge is included in energy bills: 1. Smoothed charge: for long-term cost recovery 2. Annually varying charge: reflects the relation of costs and benefits for each year 3. Upfront charge, followed by a lower regular charge: upfront charge for investments, regular charge for operation An important question: what share of the costs can or should be passed on to consumers?

16 6. Basic models of smart metering Three basic models of smart metering can be differentiated: 1.Distributor (DSO) model 2.Trading company (retailer) model 3.Independent metering company model 16 Generator TSO DSO Smart metering device Wholesaler Trader Data center Consumer Energy chain Financial link Information flow

17 Summary Smart metering must be a complex solution involving smart services and tariffs – ideally pointing towards a smart grid with renewables integration, energy efficiency and increased security of supply Deployment of smart metering solutions always boils down to a question of costs and benefits A major challenge for regulators is the remuneration of investments as costs often emerge at different actors than most benefits Privacy and data security is crucial. So is the protection of vulnerable households For different markets, different solutions: pilot projects are necessary before widespread roll-out 17

18 THANK YOU FOR YOUR ATTENTION!

19 Appendix 19

20 Pilot projects Before large-scale deployment, usually pilot projects – regional or nationwide – are carried out in most countries. The aims of pilot projects are usually threefold: 20 Research of technology Analyzing consumer behavior Testing cooperation among utilities all three in a context of a cost-benefit analysis Three examples: the United States, Italy and Ireland

21 Pilots: United States By May 2012 already 36mn meters installed, 65mn expected by late Stimulus Bill gives a significant tax advantage for installing smart meters and grids Financing: utilities typically seeking guaranteed cost-recovery with distribution-based surcharge A key question is rate decoupling: removing utilities incentives of selling as much energy as they can In California, a USD 1.7bn undertaking by PG&E since 2006 As a result of state-wide policy, but remote meter reading, remote disconnections and outage management were also important factors Pilot results show that most consumers have very low demand elasticity and do not change their consumption patterns much – but all of them pay for the program Most utilities can report economies of scale when installing smart meters for both electricity and gas with a common communication system 21

22 Pilots: United States (contd) In standalone gas smart meter deployments a very low NPV and no significant demand response was reported consumer protection group Ratepayer Advocate filed protest, seeking least-cost alternatives to smart meters Questions remain about the impact on low-income consumers: potential effects depend strongly on different climates, price zones and customer demographics (e.g. peak-time air conditioner usage among the elderly is not everywhere a problem) The role of smart tariffs deemed important: There is no point in having smart meters if youre still going to have dumb rates. (a representative of the Washington, D.C. Public Service Commission) Cost savings in smart metering operations remain ambiguous Regulatory challenge of default service policies: in case of volatile intraday end-user electricity prices, how will essential electricity services remain affordable? 22

23 Pilots: Italy Smart metering deployment in electricity by Enel since 1999 – an evolution into a smart grid envisaged between Uniquely large-scale project: 33mn meters have been installed Return of investments estimated in 5 years after deployment 23 73% smart meters & data concentrators 20% installation 7% system Cost structure: Largest cost savings in field operations and logistics: Reduced failures of meters, outage & quality of supply monitoring, practically no on-site reading (99% less), much lower logistics costs due to standardization of meters Substantial savings in energy losses: More accurate fraud detection: up to 50% more theft detected Moderate savings due to less bad loans

24 Pilots: Ireland National pilot project in electricity and gas, nationwide deployment to take place between Overarching objective: measurable change in consumer behavior to reduce peak demand and overall energy usage when smart metering is coupled by DSM In electricity: time-of-use tariffs together with detailed feedback to the consumer in their bills Main results so far: a reduction of 2.5% in electricity consumption and 8.8% in peak demand 91% of consumers reported they found home displays effective in helping them reduce their peak loads Fuel poor households behavior matched that of the average consumer In gas: Bi-monthly changing tariffs led to a 2.9% reduction in overall gas usage Most smart metering options considered exhibit an investment with a positive NPV 24


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