Clear legislation needed for smart grids in Europe

Published: Mon 19 Aug 2013
A blog entry by Annemarie Roodbol

Contributed by:

Annemarie Roodbol
Senior Communications Manager

Annemarie Roodbol's Blog

Exclusive interview with Andreas Umbach, President and CEO, Landis+Gyr, Switzerland. Landis+Gyr is Platinum sponsor of European Utility Week 2013 in October in Amsterdam.

Smart grid developments are happening at quite a pace within Europe and the European market is establishing itself as a center of preeminence for renewables generation and integration. Clearly, however, there are some significant problems on the horizon: regulation, international cooperation, data management and coordination. Are there any specific ‘bottlenecks’ which you feel could potentially derail the path towards an integrated European smart grid T&D network?
First off, I would question the premise that smart grid developments are “happening at quite a pace within Europe”. There is a lot of discussion about smart grids at the EU level, in the member states and even in the regions and cities, but we are not seeing broad investments taking place yet.

At Landis+Gyr, we agree with the European Commission that smart metering is “an essential first step” towards the development of smart grids. Despite some fairly clear language on the introduction of smart metering in the 3rd Energy Package (pending a possible economic analysis in the member states, 80% of European households should be equipped with smart meters by 2020), we see that deployments are being delayed, and in some member states the political discussion has not even started. If we are not on track to meet the smart metering target in Europe by 2020, how are we possibly going to have smart grid technology in place to facilitate the integration of large amounts of renewables, enablement of demand response and the up-take of microgeneration?

The bottlenecks are not technological – we have technology ready to be deployed – and standardization is not a major issue either. The problems are rather political and regulatory. Smart metering and smart grid technologies provide benefits across the value chain from the end consumer to the distribution network operator to the TSO, generation and even society as a whole. The costs, however, are usually concentrated with the DSO, which is a regulated monopoly. This problem of “split incentives” – one party pays for the investment, while others benefit – has to be solved. Despite a European energy policy that favors smart metering and smart grids, these discussions usually take place on the national or local level between the DSO and the regulator. There is tension between the DSO, which must use the income from regulated grid use tariffs to invest in smart technologies, and the regulator, who wants to keep those tariffs for the end consumer as low as possible. What we need is clear, concise and forceful legislation and regulation, and a wise regulator who knows how to “divide the cost pie” to allow the DSO to invest in smart metering and smart grids. I’m fully aware of the difficult economic situation throughout Europe and can understand that certain investments have been slowed down, but this should not prevent politicians from defining the regulatory guidelines.

Much of the emphasis for European Utility Week 2013 is on what comes next where smart meters are concerned. With the smart meter technology installed, what exciting customer offerings are we likely to see emerging other than a simple representation of household energy consumption?
You are right, allowing consumers to see their household energy consumption is a very basic use case for smart metering, but as I mentioned earlier, in many countries in Europe, we are not even there yet. To think about what come next, we can build on what can be done with the data from smart metering, and later from home automation and demand response. Based on the consumer’s consumption data, a retailer could then make product offerings specifically tailored to that customer.

The next step would be home automation and demand response, where energy consumption could either be regulated automatically based on price fluctuations, or handled by a company offering energy management services. Many households could be bundled into virtual power plants to decrease load rather than increase generation when capacity is tight. Likewise, microgeneration and small scale renewables could be controlled and used more optimally.

Beyond that, we will move into the realm of smart cities and smart communities, where the entire social infrastructure will be interconnected. 

In short, what we’ll see is a progression from smart metering providing information to the consumer, to allowing control by the consumer to an ever increasing circle of automated load and generation control.

Andreas Umbach will be presenting at the Panel Session: Developing the tools to help define the right business model, on Tuesday 15 October (16.20-17.20)