Upgrade, evolution or revolution: Europe's perspective
In many European countries, smart investments are seen as infrastructure upgrades. However, there is a diverse picture of smart meter and smart grid implementation to date, with some countries (such as Sweden, Italy, Denmark and Finland) leaning toward evolutionary change. This difference is partly due to generally more favorable market and regulatory conditions, early action from policy-makers, and customer demands for more accurate billing.
With little government guidance and a lack of standardization across the EU, most power and utilities companies are left struggling to extract potential business opportunities from smart meter and grid technology investments. Meanwhile, consumers are inadequately informed and fail to reconcile the financial and environmental benefits of smart.
Looking ahead, stronger government mandates for more consistent standards across all European countries will be needed for Europe to take a more evolutionary path toward smart. At a national level, much more needs to be done to raise public awareness of what smart means and its potential benefits. In addition, corporates need to develop and communicate their vision of the value that smart grid technologies can add.
Smart's impact on P&U
How smart metering and the smart grid infrastructure will impact European power and utilities companies largely depends on where they sit in the P&U value chain.
For generation companies, the increased amount of real-time data from the smart grid provides an opportunity to better forecast loads and make investment decisions based on much more robust information about demand. Renewable energy generators in particular may benefit from the smart grid's ability to adapt promptly to short-term fluctuations in the production of electricity.
Transmission and distribution companies will face a tremendous need for improved data management capabilities. And while networks need to be built out at significant scale to incorporate decentralized generation and enable increased data exchange, smart grid technologies offer some potential to reduce the need to build peak load capacity.
To deliver new smarter services, energy supply companies will need to improve operational efficiencies, anticipate change management needs and build stronger customer relationship management capabilities, a particular area of weakness for most European utilities. Ultimately, smart metering and smart grids can pave the way to even stronger competition in European retail energy markets, as new entrants may be much faster at developing smart products and services than incumbent utilities.
The legislative drive is expected to continue, given the uneven distribution of expected benefits from smart grid technologies that often discourages large-scale investments.
A 2009 European Union (EU) directive mandated the installation of smart meters by 2020. Leading installers are Sweden and Italy, which have completed smart meter rollouts. However, differing national regulations mean there are substantial differences between meter functionalities and specifications across the continent.
What is driving smart?
Energy conservation — Across Europe, legislation to improve energy efficiency, integrate renewable energies and improve operational efficiency is driving the development of smart metering. Few countries (compared to other geographies) have dedicated smart grid projects to date.
This legislative drive is expected to continue, given the uneven distribution of expected benefits from smart grid technologies that often discourages large-scale investments.
How smart is Europe?
Many companies are considering aspects of smart — such as smart meters, electric vehicles, or distributed generation — in isolation rather than taking a more holistic view.
Most companies' activities have been triggered by the EU's third internal market directive (EC Directive 2009/72/EC), which stipulated that 80% of all meters need to be smart by 2020.
Mandatory rollouts have happened, are in progress, or are at least on the agenda in most countries. Sweden and Italy are leading the way. Denmark, Finland, France, Germany, Iceland, Norway, Spain, the Netherlands and the UK all have rollouts under way or detailed plans in place.
Status of smart meter rollouts
Due to differing national regulations, there are substantial differences between meter functionalities and specifications across the continent.
In some markets, meters are only required to enable monthly meter reads (e.g., Sweden). In other markets, such as Spain, smart meters also need to have data storage and remote disconnection capabilities. Clearly these differences will impact utilities' opportunities for developing European-wide products and services.
Beyond smart meter rollouts, there are numerous cross-industry research and development projects under way, for example with technology companies, meter manufacturers and telecommunication businesses.
Key smart projects under way include:
- France issued a smart meter decree in September 2010 that mandates the installation of 95% of smart meters by 2016. Data collection frequency will be daily with consumers having the right to share data with authorized third parties.
- From January 2010, German law stipulates the installation of smart meters in new buildings, reconstructions or on customer request. A number of pilot projects are being carried out, especially by the bigger and financially robust players. At present there are close to 100 smart metering pilots underway, compared to about 60 pilots in 2008.
- In Finland, more than 1 million remotely readable meters had been installed by the end of 2009. Full rollout of smart meters (to replace the country's existing total of 3.1 million meters) must be completed by 2014. These meters must, as a minimum, be able to support time-of-use tariffs.
- Denmark has never had formal regulation mandating smart meters. However, DSOs have begun to roll out remotely readable meters, and almost 50% (1.4 million meters) of meters can now be remotely read.
- In the UK, the government has given the mandate to the retailers for rolling out gas and electricity Smart Meters between 2012 and 2020. Some retailers have started the roll-out early and at their own financial risk. To allow for interoperability between the six energy suppliers, an independent central communication will be implemented to provide two-way communications between suppliers and smart meters.