Executive Summary
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December 2009 (PDF, 0.7 MB)
EU mandates, such as the required energy mix for the year 2020, are significantly shaping the electrical energy market. The consequences are supposed to be mostly affecting the distribution level. Within the distribution system, two main perspectives need to be distinguished: the customer’s and the utility’s perspective.
The customer’s perspective has mostly to do with the market diffusion of smart meters. While the process itself is definitely supposed to happen, the real role of smart metering is still under definition. Two main factors will influence this process: customer acceptance of an active role in energy management and standards for communication and data management.
As far as the utility perspective is concerned, some changes regarding network operation and services are very likely to happen, mostly under the enforcement of political pressure. If the 20-20-20 percentage goals of European Commission (for renewables, energy efficiency and CO2 mitigation) remain unaltered, the need for more active control of the distribution system by the utilities may become a reality.
This advanced control would enable a more open energy market in the EU and would force utilities to significantly adapt their business models.
This is a final report of a Sectoral e-Business Watch study about the enabling role of metering and measurement facilities for smart electricity grids in Europe. The main study objective is to better understand the current situation in the deployment of the measurement and metering infrastructure. The main idea behind this analysis is that a smart grid, even if smart meters are widely implemented, cannot operate without an adequate measurement system, i.e. with sufficiently complete and correct data. High quality and completeness of the measurement information is a prerequisite for accurate control and protection of the grid. In other words, the development of the measurement infrastructure defines the upper limit of which advanced features and functionalities of smart grids are possible to implement. Furthermore, it facilitates achieving the European Commission’s climate goals and fixes the best-case scenario of the new possible businesses enabled by smart grids. These include, for instance, reselling and bundling of distributed generation as well as plug-in hybrid electric vehicles.
The analysis in this report is based on desk research, expert opinions, and two case studies.
The report focuses only on the measurement and metering infrastructure for the electrical grid, albeit similar situations and comments could in principle also be applied to other types of network technologies, such as the natural gas grid.
Within the framework of the electricity system, the report focuses only on the distribution level, without tackling the transmission level. That means, not the system that brings electricity from power plants over long distances closer to the end user is covered, but the system that connects users in one area to the transmission system. The reasons for this choice are multiple. First of all, the transmission system is already significantly smart and the evolution in that area is expected to be less distinct and affecting specific, limited markets, i.e. the group of transmission system operators (TSOs). In contrast, the distribution level is supposed to face a revolutionary phase in the close future that is going to change the way the electrical energy markets are operated.
Those changes are mostly related to the expected growing presence of distributed generation. The impact of distributed generation is even more significant with regard to the increasing usage of renewable energy sources. Renewables are often intermittent in nature and force a more active approach to the manage-ment of the energy market balance.
The impact of the measurement infrastructure on the evolution of the smart electricity grid can be studied from at least two different perspectives: the user’s perspective and the utility’s perspective.
Some of the features of the measurement infrastructure have an impact on the relationship between customer and utility, while other elements are only of interest for the utility or the customer, respectively.
The main difference between these two perspectives is that the utility is driven by the pressure of competition and the possibility to safely operate the network, while acceptance and interaction possibilities are most important from the customer’s perspective.
From the technical standpoint these two different perspectives are also reflected in the two different levels of voltage in the system: medium voltage versus low voltage. The low voltage level represents that part of the distribution network which the end consumer is a component of, while the medium voltage level is the link between high voltage transmission network and low voltage distribution network.
The two levels correspond also to two different solutions for the measurement process.
The low voltage level (less than 1 kV) is the one directly involving the customers. Speaking of measurement infrastructure at this level means to analyse the current situation in the deployment and use of the so-called smart meters.
While, according to EU regulations, it is easy to project a massive deployment of smart meters across Europe, it is not so easy to predict the whole set of functionalities that smart meters will have.
Currently, smart meters are mostly used for remote metering and the provision of flexible tariffs. Still, many scenarios see them as an important element in support of demand-side management (DSM) of energy.
DSM could be used for supporting functionalities, such as peak-load shaving in case of network critical conditions, when network capacity is on the verge of exceeding its limit. This type of conditions does not occur on a daily basis and, therefore, the pressure to implement required functionality for DSM deployment has not been strong enough in the past. A growing presence of renewables could significantly change the scenario.
In any case, at the moment two main elements are blocking significant on-field implementation of customer-based DSM: customers’ acceptance and standards. First of all, there are serious concerns of service providers like utilities about the customers’ acceptance of such an approach. Customer acceptance could be driven by the way DSM is implemented, which could reduce their energy consumption and bill, but still there is a lack of confidence that the users are ready for such a change. Consumers tend to consider energy as a fact and they are not ready to see their usage affected by complicated processes. Surveys have shown that monetary incentives, i.e. reduced energy prices at certain times, can be insufficient to move the majority of the customers towards changing their behaviour. Furthermore, consumers fear that utilities will only increase prices and will not let them share the benefits in the long run. This general mistrust in the direction of the utilities does not help the DSM transition.
A second difficulty is the lack of open standards concerning interoperability in the area with which the implementation cost could be reduced significantly. While many activities in establishing open standards are on the way, the process is still far from being completed.
The medium voltage level (up to 50 kV) is significantly different from low voltage. First of all, medium voltage involves the utilities and only indirectly the customers (apart from large industrial consumers).
Traditionally, the medium voltage system has quite a simple architecture in terms of “wire arrangement” and is operated with very limited direct control by utilities. Distributed generation will force to completely redefine this part of the power system. A first consequence will be the redefinition of all protection systems, i.e. relays and current breakers, but also the whole process of energy balancing which quantifies the energy usage and generation, is likely to become much more complex.
Measurements play a significant role in this energy supply and demand balancing process at the medium voltage level. Anyhow, currently the medium voltage system is very sparsely instrumented to collect sufficient measurements. The change then requires a significant investment on the utility side to extend the measuring structure and capability at this voltage level.
While distributed generation could force this process as necessary in the close future, at the moment there is little motivation for the utilities to start the process due to possible large-scale investments and the lack of clearly defined technology standards.
At the end of the day, an intelligent distribution network with more instruments could significantly change the business scenario.
A much more open market is foreseen in different studies where many different and new players can start working in parallel to traditional operators. These new players could offer services to the utilities, such as Virtual Power Plant or Virtual Spinning Reserve as local decentralised power management systems, in addition to the centralised control centre of the utilities. This could help the operation under the uncertainty of large shares of renewables.
On the other hand, these new players could be seen as new competitors that could take over a substantial part of the energy market. However, the market is still dominated by large utilities and this situation is expected to prevail in the near future.
In this respect, it is possible to imagine a future of the distribution system being widely open for new players even from other industry sectors, giving the electrical energy system a future in some sense very similar to the presence of the communication arena as a merge of diverse industry sectors. Under this scenario, traditional utilities would be forced to completely redefine their business model within a more competitive market.
As mentioned before, all this is only possible with an agreement on common standards. Large organisations, like the European Union, would have to step up to filter and speed up the process. Beyond this, the business case for utilities is still lacking. Due to the great benefits for the environment and society, political pressure would be needed to foster the necessary changes in the system.
