ERGEG publishes conclusions on smart grids

On 10 June 2010 ERGEG published its conclusions paper on smart grids, which are expected to play a key role in meeting the EU energy objectives for the year 2020.  Its paper presents ERGEG’s consideration and analysis of responses to its consultation aimed at assisting regulators in understanding how smart grids can benefit network users and other stakeholders.  ERGEG aims to use the conclusions drawn from this consultation to inform its advice to the European Commission in developing the future European policy framework for smart grids.

Key points arising from consultation

1. Definition of smart grids

The meaning of the term ‘smart grid’ has not yet been fully defined and ERGEG has decided to continue with the use of its own user-centric, output-focused definition until a single widely-accepted definition is established:

An electricity network that cost efficiently can integrate the behaviour and actions of all users connected to it - generators, consumers and those that do both - in order to ensure a sustainable power system with low losses and high levels of quality, security of supply and safety.

ERGEG highlighted that smart grids should not be confused with smart meters, as it is possible to develop a smart grid independently from the rollout of smart meters, though one of the challenges of network companies is to find ways of linking the two programmes.

2. Network challenges

The responses to the consultation illustrated that network companies face significant challenges in meeting their obligations in relation to the low-carbon transition, and the way networks are planned, operated and maintained will change as a result.  Future development of the power system will need to be approached in a more holistic way.  In addition, network operators’ profits will need to be decoupled from volumes of energy delivered, so there is no financial reason for such operators not to implement energy efficiency measures.  It was emphasised that network companies would require appropriate rewards for investing in smart grids and taking on the risks that this involves.

3. Co-operation

Co-operation between stakeholders will be very important and clarity about the role of each stakeholder in developing and implementing smart solutions is essential.  For instance, energy suppliers and service companies will need to be actively involved in deploying smart grid solutions, as they will increasingly involve customers directly.  As part of this co-operation, the results of demonstration projects should be widely disseminated between network companies, regulators and others, so all stakeholders can benefit from these lessons.

4. Regulation

Responses highlighted three main priorities for regulation: focusing on the outputs of network companies; encouraging co-operation among stakeholders; and encouraging innovation while protecting consumers’ interests.  In addition, some input regulation will continue to be required, through grid codes and guidelines, with oversight by the Agency for the Cooperation of Energy Regulators (“ACER”).

Recommendations

ERGEG makes a number of recommendations arising from the consultation, including:

• Ensuring a long-term stable regulatory framework is put in place and a reasonable rate of return is provided for grid investments;
  
  
• Considering decoupling between grid operators’ profits and volumes of electricity they deliver;
  
  
• Regulating outputs and investigating ways of measuring the most important output effects and benefits at a national level;
  
  
• Incentivising network companies to pursue innovative solutions; and
  
  
• Co-operating actively with European and national standardisation organisations to ensure interoperability of smart grid devices

To view the conclusions paper, please click here