Commission ponders regulatory action on smart grids
By Dafydd ab Iago | Monday 11 April 2011
The European Commission will, on 12 April, set out its ideas on how to push smart grids forward. A communication, to be presented by Energy Commissioner Günther Oettinger, focuses on developing European technical standards and ensuring data protection for consumers. It also calls for establishing a regulatory framework to provide incentives for smart grid development. The EU promises to work towards an open and competitive retail market in the interests of consumers. Finally, officials talk of continued support for innovation of smart grid technology and systems.
Turning to the development of common European smart grid standards, the Commission admits that its softly-softly voluntary approach has run up delays. European standards organisations were tasked, via a Commission mandate in March 2009, with establishing European standards for both smart meters but also communication protocols and additional functionalities. However, the deliverables on communication protocols and additional functionalities, essential for smart grids, are over one year late. If all goes well, they will be delivered by the end of 2012. The urgency of common standards, essential if Europe is to construct a smart grid, was even underlined by the EU’s leaders at the European Council, on 4 February.
The Commission is thus promising to monitor more closely implementation. If progress in the course of 2011 is not sufficient, the Commission will “intervene” to ensure that the deadline (end of 2012) is met and the necessary standards are set. This could be effectuated by defining a network code. The Commission also promises to examine the development of standards or other appropriate action to ensure that appliances are smart grid ready. Additionally, the Commission will follow the development of ICT standards at European and international level so as to facilitate smart grids’ implementation.
RESPECTING CONSUMER PRIVACY
Officials also seek to develop legal and regulatory regimes so as to ensure that consumer privacy is respected. Here, the Commission is to monitor the provision of national sectoral legislation that might apply to take into account the data protection specificities of smart grids. European standards organisations will have to develop technical standards for smart grids taking a so-called ‘privacy by design’ approach. On top of this, the Commission will bring together energy and ICT communities in an expert group so as to assess the network and information security and resilience of smart grids as well as to support related international cooperation.
The Commission is calling for regulatory incentives that encourage network operators to earn revenue in ways that are not entirely linked to additional sales but are rather based on efficiency gains and lower peak investment needs. Effectively this means moving away from a volume-based to a quality or efficiency-based business model. Official thus call for regulatory incentives for the deployment of smart grids, including adaptation of Directive 2006/32/EC on energy services as well as development of a network code on tariffs. On top of this, the EU executive will establish guidelines defining a methodology for smart meter implementation plans to be drawn up by member states as well as their (possible) cost-benefit analyses. The Commission is also going to request that member states produce action plans with targets for smart grid implementation as well as promote greater coordination at regional and EU level.
An additional worry for the Commission is the competitive advantage that smart grids should throw up for distribution system operators (DSOs). DSOs, say officials, would have access to detailed information about consumers’ consumption patterns. The Commission therefore intends to introduce, also through a revision of the 2006 Energy Services Directive, minimum requirements for the format and content of information provision for customers as well as for access to information services and demand management (eg in-house control of consumption). The Commission further intends to monitor implementation of legal requirements set in the 2009 third energy liberalisation package. These aim at creating a transparent and competitive retail market. If the 2009 energy package requirements are not met then the Commission may, once again, seek redress by proposing a modification of the Energy Services Directive.
MORE RESEARCH AND INNOVATION
The executive goes on to promise continued support for innovation and uptake of smart grid technology. Officials note that they have forked out around €300 million on smart grid R&D over the past decade. This has mainly been through the so-called research framework programmes (FP5, FP6 and FP7). The sum is, of course, very little when compared to the total of around €5.5 billion spent on some 300 smart grid projects in the last decade.
In June 2010, a European Electricity Grids Initiative (EEGI) was established under the EU’s Strategic Energy Technology (SET) plan. The EEGI talks of smart grid research financing needs of around €2 billion in 2010-2018. How much of this money will come from the EU is unclear. However, officials are considering the possibility of using other EU funding instruments, such as the Structural Funds, to offer “tailored” financing solutions, including grants and loans, to support smart grid technologies. During 2011, the EU executive should further propose additional new large-scale demonstration initiatives for smart grid deployment. There will, too, be proposals on leveraging finance. A further push for smart grids, believe officials, will be the launch of the EU’s Smart Cities and Communities initiative in 2011.
Smart grids are commonly defined as electricity networks that can efficiently integrate the behavior and actions of generators and consumers. Intelligent metering and monitoring is an inherent part of a smart grid. Aimed at an economically efficient and sustainable power system, smart grids achieve lower power losses as well as higher quality and greater safety and increased security of supply. The Commission considers that smart grids could help reduce EU energy consumption by almost 9% by 2020. Other studies point to CO
2 reduction of 9% to 15%. Smart grids are also expected to generate new jobs and bring additional economic growth. They are seen as essential in integrating increasing shares of energy from ‘intermittent’ renewables, such as solar and wind.