There is strong global agreement that we are about to see significant changes in how we use and generate electricity. Innovations in areas like renewable and micro-generation, heating, and the mass commercial development of electric vehicles will put new requirements on electricity transmission and distribution networks. Large scale investment will be needed to make the networks more intelligent, efficient and secure. In time these investments will be replicated around the world. The term used to describe these new networks is smart grid.
There is strong consensus in the UK and internationally about the long term need to move to smart grid, but less clarity about how to make this happen, or how quickly. To make progress on these issues, we need a better understanding of smart grid’s potential benefits.
The economic case
SmartGrid GB commissioned this report to help understand the full economic case for smart grid. It provides the broadest assessment yet of its potential benefits for the British economy. As well as looking at the core benefits from investing in a more efficient network, it tries to understand the wider benefits for the industrial supply chain, and the important downstream economic activities resulting from smart grid.
The report has two major findings:
- The initial investment case for moving ahead with smart grid development sooner rather than later seems very strong. The report’s figures show that the benefits of moving quickly far outweigh the risks.
- The timely creation of a smart grid can unlock significant benefits in other industries, boosting growth, jobs and exports, and if Britain can take a global leadership position here, its benefits will be even greater. Britain needs to be ambitious, and prioritise laying ground work. There is a need for some fresh thinking by government, regulators and industry to enable this.
Direct benefits for networks
The report shows that:
- To upgrade the distribution network an incremental £23 billion net present value (NPV) investment is needed between now and 2050.
- This is much cheaper than a conventional investment strategy in grids. The work of the DECC/Ofgem Smart Grid Forum shows that following a smarter grid investment strategy could deliver up to £19 billion in savings.
- The savings from smart grids are expected to be as high as £10 billion even if only low levels of decarbonisation and electrification occur.
- The projected benefits far outweigh the potential downside of moving early.
- Some of the benefits smart meters have promised to deliver could be at risk without smart grid development.
These figures show smart grid solutions will be cheaper in the long run than conventional network upgrades, and that benefits of deployment outweigh the risks.
Benefits across the supply chain
We have quantified the benefits of smart grid expenditure across the supply chain, and the results are positive.
- Between now and 2050 smart grid expenditure will lead to around £13 billion of gross value added (GVA).
- Jobs will be boosted by an average of about 8,000 in the 2020s, rising to 9,000 in the 2030s.
- Between now and 2050 exports arising from smart grid could be worth £5 billion to Britain, with possible benefits also arising from intellectual property and foreign direct investment.
Benefits across the supply chain.
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Benefits from secondary industries
The report shows that smart grid will play an important role in the growth of a variety of ‘secondary’ industries including electric vehicles, heat, renewables and distributed generation:
- Using electrics vehicles as an example, analysis of the potential impact on the British economy suggests that the total GVA for the EV sector in Britain could be £17 billion in 2030 and £52 billion in 2050.
Maximising wider opportunities
Timely deployment of smart grid will be important to build Britain’s advantage so it can maximise domestic share of smart grid and secondary industry spend, export goods, services and intellectual property potential.
Costs and risks of inaction
If smart grid is not deployed quickly, industries along the smart grid supply chain may not be able to benefit from emerging industry opportunities, and any ‘first mover’ potential could be lost to British industry. A smart grid will also play an important role in developing the cleantech industries needed to help Britain reach challenging carbon targets.
The complexity of the smart grid debate means more preparatory work is needed. We need a measured, progressive approach, not an aggressive plan or a ‘wait and see’ approach.
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