Christophe Dromacque, Jessica Stromback VaasaETT, Global Energy Think Tank Finland

1. ADEME-WEC Workshop on Energy Efficiency Policies London 17-18 June 2010 Evaluation of smart meters and demand response programmes Christophe Dromacque, Jessica Stromback VaasaETT, Global Energy Think Tank Finland

2. Presentation Content1) Introduction to Smart Meters & Policy “Success” 2) Smart Meter enabled program potential3) Smart Meter Policy in 5 National Markets4) Conclusions

3. Smart Meters: do not improve energy efficiency do not lower household energy bills They enable energy efficiency programs IF regulatory policy make this: probable, possible, profitable

4. “Smart” Meter requirements changing definitions - Past 1. Provide automatic meter reading (AMR)

5. TODAY: “Minimum” Functionalities

6. Smart Meters Potentially Central Place in the Smart Grid of the future Source: EPRI

7. Programs enabled by Smart Meters dependent on policy Feedback Demand Response Integration of micro generation Improved integration of Electric Cars

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9. International Survey on Drivers and Barriers of Smart Meter enabled Demand Response Findings basis: - 27 Interviews with utility managers - 86 Survey Responses

10. Regulation and SM Demand Response

11. Expected benefit of Smart Meters? • improve consumers’ ability to monitor and control their electricity use, potentially allowing for cheaper and more efficient energy use • reduce the cost to industry of planning and managing power supply, potentially leading to lower retail prices for consumers • increase retail competition through new services, potentially resulting in a greater choice of suppliers for consumers.

12. National smart metering policies • South Korea • Brazil • California • Sweden • Victoria

13. Market Overview

14. Status of Smart Meter

15. Roll-out Timeline 2003 7 / 2009 2012 2005 California 12 / 2013 2007 Victoria 2020 3 / 2010 2021 ??

16. Brazil Consumers Security of supply(16.5hr loss) Cross subsidies theft Low purchasing power Full coverage Cross subsidies peak Cross subsidies distribution losses • Utilities • Electricity Theft 20% or US $2.7 billion per year • Peak consumption • Resource reliability • Purchasing risk • Regulated prices • 97% coverage • Moist climate for tech • 13% distribution losses • Government • Resource diversification (85% hydro) • Security of supply • 13 million low income consumers • Supply all consumers • Cross subsidies for theft • Regulation financial market structure (Pool) Market Challenges

17. Brazil • Regulator considering 63 million SM by 2021 • No complete cost/benefit analysis made • Special Considerations • Climate considerations- meter life expectancy • $2.7 Billion (US) per year in losses to utilities/public through theft • 3.2 million electronic meters replaced per year now • Government stimulate local industry. Use local manufacturers • Establish local SM standards • 13 million low income families • Who should pay for the meters? • Cost of meters against low residential consumption 1,780 kWh Cost/Benefit of Smart Meters

18. Brazil Current Smart Meter Legislation High Voltage Customers now have AMR meters Approximately 4 million installed Some residential consumers have electronic meters – rollout is ongoing. The remainder have electro-mechanical meters.

19. South Korea Market Challenges • Utilities • Low regulated residential prices • No outside grid connection (island) • Peak consumption • Will bear the cost of deployment • Government • Policies focused on • I&C customers • Residential consumption14% of national consumption • Policies for residential customers focused on efficient appliances • Cross subsidies • Consumers • Low consumption level • Cross subsidies • Single rate residential tariffs

20. South Korea Cost / Benefit of Smart Meters • Kepco plans to roll out 24 million Smart Meters by 2020 • No complete cost/benefit analysis made • New development in Kepco’s strategy • Acquire know-how for a promising export market

21. South Korea Current Smart Meter Legislation • Largest I&C users have remotely ready meters • 300,000 remotely read meters installed • Largest I&C customers have to take part in demand • reduction programs during peak periods

22. Sweden Sweden did not mandate SM – Only monthly meter readings Smart Meter Policy • Policy background: • 2001 - 63 Amp and above monthly remote readings • Residential consumers manual yearly readings settlement 13 months. (could extend to 2 years between readings) • Large shock settlement payments (1-2 years) • DNO had 30 days to provide the meter data during switch • Supplier Switching caused data handling problems • 7% of switches mismanaged (lost data, incorrect readings, lost customers) • Bad industry image

23. Sweden Legislation “In order to facilitate supplier changes and give electricity customers a more direct connection between consumption and billing, the government has passed a decision to introduce monthly metering of electricity usage among all electricity customers by 1 July 2009. Within the given timeframe, the network companies are free to decide the pace of implementation. The cost of the reform is estimated at around SEK 10 billion (1.1 billion€) and will be paid for by the end consumers".(proposition 2002/03:85),

26. Sweden Policy influence as of June 2010 Consumers: Shock high winter bills No feedback information No dynamic pricing No extra services Easier switching procedures €200 cost added to network fee Accurate monthly invoices Network Companies: Improved back office functionalities Better overview of outages Lowered cost to serve Improved image Improved data-handling Review possibility to upgrade DR Pilots 15% meters not Smart Expensive early rollout Monthly meter readings Government: Concern over lack of service and interoperability Backlash high winter bills Investigation into cost of upgrades No environmental benefits so far

27. California Smart Meter Policy Smart Meters mandated as a method for providing: Demand Response for Commercial and Residential Consumers and improved energy efficiency. Part of positive business case Increasing security of supply Policy background: • Energy crisis of 2001 led to a realisation that demand side • management could be key to system stability • Strict legislation on building new fossil fuel generation • & CO2 emissions reductions lead to a strong across the board • efficiency policy. • SM just one small part.

28. California Varying actual cost of Meter Rollout Coordination, Economies of Scale and Functionality decisive Payback time Sweden ? Italy 4-5 years (?) California 20 years Australia 20 years

30. California Programs Implemented Residential and Commercial: CPP, TOU, Automated A/C, CPR Expected Load Shifting Results Challenges: Customer Acceptance, Marketing, Replicating Pilot Results

31. Victoria Australia Roll out SM for critical peak clipping and feedback 2007-2013 meter Smart Meter Policy Policy Background Weather related needle peaks: 20% capacity used less than 10% a year 13%customers heating and 70% A/C = all pay 200$ Au per year for cross subsidies Capacity issues = blackout risks Current billing: Mechanical Meters read quarterly Pay day night and according to peak Those using 50% more than average 75$. 100% more 100$

32. Victoria Australia SM Policy Meters be rolled out by DNO, in 5 years Minimal requirements: * Remotely measure half-hourly consumption every 24 hours * Controlled load or dedicated circuit management (storage hot water) * Remote connect and disconnect of customer’s entire load at meter * Remote time clock synchronisation * Remotely measure separate exports and imports of energy * Remote setting of times for controlled load switching * Remote firmware upgrades * Supply capacity control for entire customer’s load * Measure power factor * Meter loss-of-supply and outage detection * Recording of meter settings, status indicators, events * “Open” ZigBee interface to home area network * Control of “other load” (eg air conditioner at time of summer peak) * Tamper detection Advanced Metering Infrastructure Minimum AMU Functionality Specification (Victoria), October 2007, Department of Primary Industries.

33. Victoria Australia Cost Benefit according to market segment 6%-12% benefits from CPP and TOU pricing peak clipping

34. Victoria Australia Policy influence & challenges • March 2010: • TOU and Dynamic Pricing has had to be stopped • Unfair on poor customers, those at home, the disabled • Meter rollout will continue • Feedback = enabled but IHD not included. • Websites and mobile applications developing

35. Conclusions 11) Energy efficiency enabled by smart meter programs depend on the amount of load consumed. Cost/Benefit decreases as load decrease = SM may not be a cost/effective means of increasing energy efficiency for residential consumers. 2) In all models costs are past on to end consumers – SM policy should ensure and protect consumer benefits. If not SM will benefit largely network companies3) Smart Meter rollout will cause disruptions and technical complications. It may be a mistake for regulators to insist new pricing tariffs are introduced simultaneously – may cause public backlash4) “Success” is a moving target and depends on goals. These goals often do not include energy efficiency. In these cases SM does not bring environmental benefits

36. Conclusions 25 Lack of knowledge on the part of policy markers about the programs Smart Meters enabled. Difficulty in regulating for them6 Smart Meters ½ the required technology. Data handling and granular data available essential for programs7 Pricing structures must be flexible before Smart Meters can be fully incorporated toward energy efficiency 8 Smart Meters are not necessarily appropriate for developing and low consumption market. The meters and the data handling are prohibitive expensive

37. THANK YOU! • Jessica Stromback • VaasaETT Global Energy Think Tank • +358 40 72 56 023 • jessica.stromback@vaasaett.com

38. Market Preparedness for Regional DR Application Point System Key: Point levels:

40. Demand Response Barriers

41. Demand Response Drivers

42. Feedback Types = Efficiency Not Just Based on Numbers and Graphs Ambient ‘One-Glance’Feedback Mass Customizable & Personizable Absolute Simplicity: Service proposition clear and attractive in one sentence Predictable Benefits (Subscription Based / Guaranteed Minimum Benefit or Refund)

43. Feedback – Energy Efficiency Starting place for Europe % of consumption Reductions Average Reductions

44. Cut Peak Consumption = lower costs, lower CO2 emissions

45. Comparison of pricing pilots with and without automation Average Reductions