Harvesting the Smart Grid Opportunity in Europe From Promising Concept to Successful Pilots

Transcription

1 Marc De Witte, Vice President Research and Innovation, GDF Suez, France Benito Vera, Director of Strategic Analysis, Iberdrola, Spain Harvesting the Smart Grid Opportunity in Europe From Promising Concept to Successful Pilots Global and European Smart Grid Developments The session was opened in the context of the need to accelerate and scale up smart grid projects around the world. It was felt that a lot of knowledge existed among the individual participants that were part of the workshop, but not enough pooling of knowledge occurred. One purpose of this exercise would be pool individual knowledge into a collective knowledge base that could then be used to accelerate and scale smart grid projects around the world. In the experience of the moderator, there are five key issues that have emerged on the basis of research done thus far and that ought to be explored through workshops such as this one. They are: What is the underlying business case for smart grids? What regulations ought to exist to both foster and manage smart grids? Are costs and benefits accruing to the same party? How should smart grids be promoted through a push model or through consumer pull? What is the role of the consumer in accelerating and scaling up smart grids? The initial part of the workshop focused on getting a clearer overview of the current state of the art on where the world stands on smart grids. The first firestarter from a large European utility felt that there ought to be sharing of common challenges and problems among all players developing and fostering smart grids around the world. Currently, a 20th century grid is being used to accelerate and develop a 21st century technology. The development of smart grids is then likely to be evolutionary as opposed to revolutionary in nature. There needs to be evolution in the communications and management to develop smart grids. This is particularly important since the end consumer will see the most change and impact from smart grid implementation. All of this points to the fact that a large facet of smart grid development will be demand-side management, which becomes important as renewable and distributed generation is integrated into the national grids in response to carbon reduction targets. Smart grids will be the platform to achieve lowcarbon targets, but this requires an open framework for collaboration and innovation among consumers, retailers and suppliers. As things stand now, consumers need to be engaged, as consumers are, traditionally, resistant to change. Smart meter pilots have led to clients being charged high bills and hence led to initial resistance to change and misinformation. This situation needs to be rectified. From the perspective of a Japanese utility that uses a mixed smart grid system, the experience has been quite good. The Japanese system can control demand fairly easily and, to further this end, various assets have been added, such as new nuclear reactors and replacement of old power plants. There have also been major distribution upgrades such as remote monitoring, and control systems have been added in the Japanese systems. 1

2 All this resulted in very short power outages. The interruption of the grid has been reduced to 0.12 of a day per household on an annual basis. Thus far, smart meters have not been installed in houses. However, integration of the distributed generation system is still lacking in Japan and, as these are being added, the integration of them into the Japanese grid is quite important through the use of high speed communication networks. From the perspective of the EU regulators, the basis for implementation of smart grids is based on achieving the targets as opposed to improving grid reliability. The reliability of the grid network in Europe is quite high and does not need to be augmented. To achieve the EU framework that is to push the targets forward, the following needs to happen: Demo projects Large-scale demo projects are required where there is a compiling of the stateof-the-art and an integration of transmission and distribution. Standardization of smart meters would also be an important facet. Coordination and dissemination of lessons learnt on pilot projects There are plans to spend up to million on smart grids. The dissemination of experience acquired, however, should respect IPR. Support of legislation and regulation to foster smart grids It is important to determine what policies and coordination activities are required across Europe. Standardization is quite important at the EU level, not only for research and development but also for consumers and others. What about data privacy of customers? Manuel Sánchez Jiménez, Policy Officer, European Commission Directorate-General for Energy, Brussels Tsuyoshi Otani, Director and General Manager, Tokyo Electric Power, Japan; and Dieter Volkommer, Head of Strategic Projects Energy, Siemens, Germany What Makes a Successful Smart Grid Pilot in Europe? This session focused on how learnings from various smart grid projects around the world might be shared. In the Boulder, Colorado, case in the US, the focus was on integrating new distribution systems with the existing legacy grid. It was not apparent that smart grids created value in Boulder. Some 25,000 homes were tested with smart meters and the experience showed that smart meters did not make up the investment costs. In Boulder, each transformer was equipped with sensors that reported unusual events. A network management system was put in place to interface with the various equipments. Based on the diagnostic of the performance indicators, control decisions were made on some of the equipment integrated into the system. As a result of network management, consumer complaints were eliminated. Total load was reduced by 6% and overall reliability of the grid was improved to 99.5% after implementation of the system. It was felt that a similar system could be efficient all around the world, particularly in countries with lower development and theft issues. The experience of a Spanish utility was very different from its counterparts across the Atlantic. It had implemented 100,000 home trials and was quite successful as a result of a standard-based meter costing US$ in Europe as opposed to US$ in the US. This substantial cost difference was as a result of the use of standard-based meters. 2

3 Mark Spelman, Global Head of Strategy, Accenture, United Kingdom; Global Agenda Council on Strategic Foresight In the experience of a large global equipment manufacturer, service, consumer and regulatory issues need to be looked at in large pilot projects. Smart grids are beneficial from a technical perspective and implementation is a year process. In the case of Maui, the primary driver was the integration of renewable energies. It was necessary to set certain timelines, isolate the situation and look at a city. In the case of Maui, there was creation of 900-1,000 green jobs. In Kentucky, the focus was on the home. In this case it was necessary to isolate the consumers and focus on them. It was important to realize that different regulatory requirements applied between homes, grids and generation facilities. It was important not to mix them together. In the case of a German utility, the discussion focused on small-scale pilot projects implemented under the Minimum Emission Regions programme. It involved 2,000 test consumers and the focus was on the simulation of a full-blown smart grid market. The market situation is more important on account of very high grid security in Germany. The pilot explored questions regarding the elasticity of demand based on pricing. The Hawthorne effect was acknowledged and it was felt that as a result of it, elasticity might be reduced. Additional complexity will be added on the various projects through electric vehicles, storage, etc. Load shift potential will be explored. Load shift potential is expected from electric vehicles and heat pumps. Currently, the middle class owns electric vehicles and heat pumps, and hence the middle class will be less receptive as a result of the cross-subsidization potential. Smart Grid and E-mobility Interest surrounding e-mobility has been steadily increasing. The advent of smart grids has brought the possibility of large-scale use of electric vehicles (e-vehicles) to reality and car manufacturers are conscious that they must look to the future. Is a smart grid a prerequisite to the e-vehicle? A smart grid is a pre-requisite to the large-scale roll-out of e-vehicles. The EU Commission projects that, if everyone used e-vehicles in Europe, then generation capacity would have to increase by 15-20% overall. If e-vehicles are to be created to address the GHG emissions emitted by the automotive industry, then they must be fuelled by a renewable source. A smart grid will be required to enable the integration of large-scale renewables and micro-generation into the electricity network. Consumers also need to know where and for how long they can travel with electricity as a fuel source. If recharging points become the norm for recharging e-vehicles, they will likely be supported by a smart grid. The two main issues challenging the roll-out of e-vehicles are charging and cost. The automotive industry has traditionally focused on motor efficiency. Now, to produce low-carbon transportation, they are looking for the most effective storage or generation components to fuel cars with renewable energy. Next steps and opportunities Governments may be able to provide subsidies to help the e-vehicle industry. New ownership models could be created to reduce the cost to the consumer through leasing structures. 3

4 Car manufacturers must understand their consumers in order to create the right consumer pull for e-vehicles. Recharging points may be set up in homes and the Internet could provide greater transparency of charging locations and costs to charge throughout the day. There is a need to build partnerships between car manufacturers, utilities and other new entrants to the value chain to build the charging and communication infrastructure required to make e-vehicles a success. The New Energy Consumer Today, there is a growing acceptance that utilities will need to become more consumer-focused to make smart grids and reductions in energy demand a success. Many consumers tend to be resistant to change and recent complications with new smart meter roll-outs that resulted in much higher bills for the consumer have solidified this resistance. There is a need to create the right value proposition to the consumer. Currently, the low-cost bill message is confusing. A large percentage of energy bills are just for connecting to the grid. In addition, there is the continual rise of energy costs. In the end, the actual efficiency saving will be very small and this will need to be translated into a benefit for the consumer. It is important to understand what consumers want. Consumers do not buy electricity; they buy services that require electricity. Some consumers care about their environmental impact all consumers care about reducing their bills. To engage the consumer, it is essential to first offer: Increased visibility and awareness awareness of energy consumption will lead to energy efficient behaviour Control consumers need to have automatic control options to optimize consumption; both residential and commercial consumers are wary of big brother and a lack of control Utilities have a multitude of strategic choices to make regarding the consumer that will fundamentally affect the technology and business models used in developing smart grids. These decisions need to be made before launching smart grid pilots. Much regarding a smart grid has nothing to do with the consumer, but a smart grid will not be successful without the acceptance of the consumer. Understanding Consumer Preferences in Energy Efficiency Summary of Findings Recently, Accenture conducted two consumer surveys to gain better insight to consumers attitudes and opinions of current and future energy challenges, and consumer preferences in energy efficiency. Both surveys involved over 9,000 participants in countries globally. Below are the key findings from the second survey. 1. There is a significant contradiction between consumer perceptions and their actual knowledge of energy efficiency Utilities/electricity providers need to actively promote education programmes to eliminate the contradiction between consumer perceptions and their actual knowledge of energy efficiency. 2. Consumers first instinct is to contact utility/electricity providers for energyefficiency activities; however, providers still need to build trust and credibility Interestingly, the consumers living in countries with deregulated markets have the least trust in utility/electricity providers. There is an overall impression by consumers that all the money being saved through reductions in energy consumption is being used as profit by the utility/energy providers. 3. While price remains a key factor to adoption, the extent of the utility/electricity providers control over energy use has emerged as a potential barrier There seems to be a huge disconnect between consumer attitude and actual response. The reduction of the carbon footprint is a huge driver to the consumer, but consumers do not want to change their consumption behaviour. Many consumers, however, are willing to trade a reduction on the bill with the control. 4

5 4. Channels and contact points for utility/ electricity providers to communicate with consumers are diverse Consumers place a lot of value on the faceto-face channel of communication when trying to understand tailored energy management programmes and services. 5. Adoption of electricity management programmes is influenced by fragmented and non-traditional consumer preferences Consumers want more supply-side effort and government intervention in terms of reducing carbon footprints. Smart Grids Understanding the Societal Value Proposition The societal value offered by a smart grid is clear through accelerating newer, renewable forms of energy delivered in a more efficient way, through engaging energy users as prosumers with enhanced control and insight over their consumption. Despite the clear societal value of smart grids, new value cases that look beyond the direct operational benefits and take into account broader benefits still need to be developed. The session participants observed that current European utility regulatory frameworks were generally set in the 1990s and are no longer reflective of today s societal needs they tend to focus purely on operational efficiency and productivity savings rather than on the breadth of challenges today s energy system faces nominally, cost management and security of supply and delivery of a low-carbon economy. The danger is that the pilots designed within the constraints of this regime do not demonstrate the full suite of benefits. There is a risk of designing pilots that lack the data that will justify long-term regulatory changes. It is clear that with more renewable energies in the portfolio, a proliferation of e-vehicles and other energy efficient technologies will contribute to greater societal value. Since societal benefit is changing, policy and in turn regulatory objectives need to be expanded to include reliability to the consumer, low-carbon goals and larger 2020 objectives. Currently, there are no incentives for the private sector to consider these goals within the regulatory framework. Essentially, incentives must be in place to encourage the rates of return necessary for private infrastructure investment. A participant pointed out that focus should be on smart energy and smart environment, not just smart grids. To achieve a carbon free world by 2050, it will need to be a more electrical world, which implies putting in place appropriate market mechanisms, with a global perspective and based on rewarding desirable outcomes. Some of the key outcomes of the group discussions include: Make sure not to penalize companies that are integrating new technologies that might result in small decreases in performance in the short term approach pilots as a learning experience The right benchmarking criteria must be in place to truly cover the performance Performance indexes will also need to be aligned with regional goals Policies and Partnerships There is a variety of political and regulatory conditions required to support investments in pilot projects. The discussion focused on the principles and best practices that can be applied. Given these principles and best practices, a new vision for public-private partnership will need to be articulated. The business model has started to change. New players need to be involved before regulators and public authorities are brought into the discussion. These players include energy management service providers, financial service providers and NGOs. A participant shared his experience from Germany where six pilots have been established based on new ICT capabilities. Each pilot is a public-private partnership, with 10 million from public and private sources. Research institutes and ICT companies are involved in the pilots. There is a challenge regarding common standards industry has not agreed on any common standards for the smart meters that will need to be installed. The current drivers are installation at the lowest 5

6 possible costs and with limited consideration for future requirements. A smart meter roll-out runs the risk of exhausting financing sources, leading to a decrease in demand for smart grids. It was also pointed out that the regional factor counts and it would be beneficial to identify the appropriate regions for roll-outs of pilots with significant amounts of early adopters. A regionallyrelevant value proposition must also be articulated. Green funds and venture funds should be incorporated into public-private partnership financing models. It will be necessary to look at innovative ways to finance the full societal value of smart meters and smart grids which comes, for example, in the form of reduced carbon emissions, particulate emissions and enhanced consumer flexibility to access low-carbon product and service offerings. Like all partnerships, it will be necessary to demonstrate the value to all partners. Allocation of rewards to all value chain members must be commensurate with the risks they are undertaking. Results must also be viewed across multiple time horizons. From an innovation perspective, the question is how to get the smart grid ecosystems to flourish. The smart grid innovation drivers will need to encompass both innovation best practices and public-private partnership best practices. This new value might come in the form of articulating societal benefits such as green jobs. For further information, please contact: Roberto Bocca Senior Director, Head of Energy Industries Tel: roberto.bocca@weforum.org 6