« Smart Grids » : the backbone of a future decarbonised power system ?

1. « Smart Grids » : the backbone of a future decarbonised power system ? Dr. Joëlle de Sépibus Visiting Professor College of Europe

2. Outline • From monopoly to competition in the European electricity markets: • The climate challenge: • The decarbonisation of power production • The deployment of « Smart Grids »: the backbone of a future decarbonised power system ? 

3. The ‘traditional’ monopoly structure of the electricity industry • Alternative current is at the root of the current structure of the power industry: • A system which generates electricity in large power stations at remote sites and carries it over long networks to distant users • Management by a vertically integrated company: • Power generation • Transmission (high voltage networks) • Distribution • Supply of electricity (billing, metering)

4. Progressive Liberalisation of the European Electricity Market • Shortcomings of the monopoly system: • Large scale investment and lack of competition • Those who planned, managed, and operated the system did not carry any of the risk and did not suffer if they erred • Difficult introduction of small-scale electricity production • Response of the European Union: • Progressive introduction of competition for generation and supply of electricity under the influence of the neo-liberal ideology

5. The Legislative Electricity Framework of the EU • The first legislative initiative • The ‘first’ Electricity Directive (1996) • The second legislative package • The ‘second’ Electricity Directive (2003) • The Cross-Border Regulation (2003) • The Security of Supply Directive (2005) • The third legislative package • The ‘third’ Electricity Directive (2009) • The Second Cross-Border Regulation (2009) • The Regulation establishing an Agency for the Cooperation of Energy Regulators (ACER) (2009)

6. Liberalising the European Electricity Markets • Main principles: • Competition in the generation and supply of electricity and freedom of choice for customers • The networks remain a monopoly • Non-discriminatory third party access (TPA) to networks • Unbundling’ rules for vertically integrated companies (accounting, legal, ownership unbundling) • Designation of national energy regulators • Creation of an Agency for the Cooperation of Energy Regulators

7. The EU „climate and energy package“ - 2007 • New commitments by the EU for 2020: • Pledge to reduce the EU GHG by 20% (1990) • Increase the share of renewable energy (20%) • Increase of energy efficiency by 20% • Legislative framework: • Package of measures (2009) • Amendment of the Emission Trading Scheme (2013-2020) • New Directive for Renewable Energies • The Directive on Carbon Capture and Storage (CCS) • Strategic Energy Technology Plan (the ‘SET-Plan’)

8. Climate related challenges for the liberalised electricity markets • Reduction of CO2 emissions • Low carbon generation of electricity (switch from coal to gas, equipment of fossil fuel power stations with CCS) • Increase of renewable energy sources (RES) • Small-scale production (solar, onshore wind, geothermal, biomass) – „distributed generation“ • Large offshore wind production • Increase of energy efficiency

9. The effects of liberalisation for a decarbonised power sector • For a thorough appraisal see, in particular: Joëlle de Sépibus, The Liberalisation of the Power Industry in the European Union and its Impact on Climate Change A Legal Analysis of the Internal Market in Electricity, WTIWorking Paper No 2008/10

10. Network-related barriers for RES • ‘Traditional’ networks: • Largely « passive » management of networks (coal, nuclear, gas) • Principal barriers for the introduction of small-scale RES • Despite « unbundling » and regulated TPA still bias againt small distributed generation (highly concentrated market) • ‘Unfair’ network tariffs (high connection charges) • Insufficient « intelligence » of aging networks • Principal barriers for the introduction of large-scale RES, especially wind offshore • Insufficient transmission capacities and interconnection capacity between Member States

11. The Response of the EU….the Deployment of « Smart Grids » Smart Grids: “upgraded electricity networks to which two-way digital communication between supplier and consumer, intelligent metering and monitoring systems have been added“

12. What is a Smart Grid? Like blinded men with an elephant

13. Smart Grid • Modernised electricity delivery system which monitors, protects and automatically optimizes the operation of its interconnected elements • The Smart Grid sits at the intersection of Energy, IT and Telecommunication Technologies

14. Smart Grid – „when power meets intelligence“ • . SmartDistribution and Transmission SmartGeneration Communication between system components SmartConsumption SmartStorage Interdisciplinary technologies:Data collection, processing and recombination Market Grid Operation

15. Principal goals of the „Smart Grid“ • to integrate national networks into a market-based, truly pan-European network • to guarantee a high-quality of electricity supply to all customers and to engage them as active participants in energy efficiency  • to anticipate new developments such as the electrification of transport • to substantially reduce capital and operational expenditure for the operation of the networks, while maintaining the security of the system

16. Principal goals of the „Smart Grid“ • Backbone of the future decarbonised power system: • to transmit and distribute up to 35% of electricity from renewable sources by 2020 and a completely decarbonized electricity production by 2050, in particular through the integration of vast amounts of both on-shore and off-shore renewable energy • Strong incentives for efficient energy use, combined in particular with time-dependent electricity prices („peak-shaving“)

17. Roadmap for a competitive low-carbon economy in 2050 • Communication from the Commission (2011) 112: • “Smart Grids are a key enabler for a future low-carbon electricity system, facilitating demand-side efficiency, increasing the shares of renewables and distributed generation, and enabling electrification of transport”

18. EU legal framework for „Smart Grids“ • Electricity Directive (2009/72/EC): • Obliges Member States to define an implementaiton plan for the roll-out of intelligent metering systems • Energy End-Use Efficiency and Energy Services Directive (2006/32/EC): • Regulatory incentives should encourage that a network operator to earn revenues that are not linked to additional sales, but based on efficiency gains • European Council (2011): • Invitation of MS to liaise with European standardisation bodies ‘to accelerate work with a view to adopting technical standards for electric vehicle charging systems and for smart grids and meters‘

19. EU support for the deployment of „Smart grids“ • Technology push • RTD&D projects since 2003, more than €300 Million EU support • European Smartgrid Technology Platform (launched 2006) (www.smartgrids.eu) • European Energy Infrastructure Package, 2010 and 2011: http://ec.europa.eu/energy/infrastructure/index_en.htm • SET- Plan – European Electricity Grid Initiative (launched 2010 (https://www.entsoe.eu/rd/eegi/)

20. EU support for the deployment of „Smart grids“ • Coordination activities: • Task Force for Smart Grids, launched in 2009 • Invitation by the Commission of all relevant institutional actors and market stakeholders „to make regulatiory recommendations to ensure EU-wide consistent, cost-effective, efficient and fair implementation of Smart Grids http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm • Communication of the European Commission on Smart Grids, COM(2011)202 - 12 April 2011

21. Communication of the European Commission on Smart Grids • Identified challenges: • Consumer engagement at all levels • Protection, handling and security of data • Standardisation and interoperability • Regulatory framework and incentivesfor infrastructure investments and roll out

22. Communication of the European Commission on Smart Grids • Standardisation and interoperability: • Diverse mandates for standardisation given to CEN, CENELEC and ESO by the Commission in 2010 • Regulatory framework and incentives • If evaluation of the Energy Services Directive shows that progress is insufficient, the Commission will consider the establishment of a Network Code on Tariffs

23. The road to a Smart Grid is still long and its success uncertain….. Dr. Joëlle de Sépibus Joelle.desepibus@wti.org