Smart move for Germany

Tailoring the smart meter rollout

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A tailored approach could see Germany’s smart-meter implementation become Europe’s best. Helmut Edelmann and Alain Bollack report on the EY cost-benefit analysis guiding the proposed rollout, which we conducted on behalf of Germany's Federal Ministry of Economy and Technology.

Germany is restructuring its energy mix, and plans to triple its share of renewables to 80% consumption by 2050. Smart meters will play an important part in this Energiewende, or energy transformation.

But the rollout of these metering systems to consumers has been unclear. Now, a new economic assessment by EY has determined a way forward that considers the Energiewende while keeping consumer energy costs as low as possible.

Selective rollout is key to savings

A 2009 EU directive recommended member states roll out smart meters to 80% of consumers by 2020. Our analysis, however, shows that most German households would be unable to save enough energy to recoup the costs of installing and operating smart meters.

We found a better option would be a tailored rollout to four distinct groups:

Consumer group 1: The 15% of consumers that use more than 6,000kW of energy per year

Recommendation: Roll out smart meters – if not already in place

Why?: These consumers use the most energy – about 75% of Germany’s energy consumption. Smart meters will see them save energy costs while helping the country meet its low carbon targets.

Consumer group 2: The 5% of consumers that produce combined heat and power (CHP) and solar and wind renewable energy

Recommendation: Roll out smart meters

Why?: We recommend using metering to limit renewable energy producers to 5% of their annual energy capacity during times of grid congestion, thus mitigating the need for costly grid expansion.

Consumer group 3: The 10% of consumers in new and renovated buildings

Recommendation: Roll out smart meters

Why?: It is easier to install smart meters when these systems are considered during the building process. Rolling out the approximately 500,000 smart meters per year required to this group adds security to investors and ensures these consumers will save energy.

Consumer group 4: The majority (70%) of consumers, including smaller businesses and households, whose energy consumption is less than 6,000kW per year

Recommendation: Roll out intelligent meters

Why?: Intelligent meters show consumers their actual energy usage via an in-home display, but unlike smart meters, they don’t communicate this to the utility company. Intelligent meters encourage energy efficiency, help low-usage consumers save costs, and enable load shifting. They are easily upgradable to smart meters.

This mixed rollout will:

  • Help all consumers save power and money
  • Increase economies of scale
  • Allow market participants, such as device manufacturers and meter operators, to plan ahead with more certainty and less risk

A question of timing

This rollout strategy sees consumer groups 1, 2 and 3 (30% of the market) fitted with smart meters by 2022. The rollout of intelligent meters to consumer group 4 would follow Germany’s usual meter calibration cycle of 16 years.

The cost of this mixed rollout of smart metering systems and intelligent meters would be significantly less than implementing the EU target while delivering greater energy benefits from the outset. Our modeling shows that this scenario would see Germany lead Europe in meter rollouts by 2029.

Managing the rollout

Germany’s smart-meter rollout brings both opportunities and challenges for utilities. Opportunities abound in developing new business models to allow for the integrated, streamlined implementation of meters by the country’s more than 1,000 distribution network companies (DNOs), although competition will be fierce from both traditional players and new market participants.

Challenges will lie in reviewing and updating business models and ensuring that proposed rollout plans are in line with our recommended strategy. And, while smart meters offer opportunities in data management and value-added services, utilities will need to be vigilant in managing the associated privacy and data security risks.

Partnerships with technology firms, other utilities or third-party advisers may be a wise and cost-effective approach.

Next steps

If the Government proceeds with this rollout – a decision is expected by the end of 2013 – the German smart-meter strategy has the potential to reap real benefits for consumers, offer new opportunities for utilities and other businesses, and help achieve Germany’s energy transformation.

How we can help

Our teams understand the global impact of smart technology, as well as specific issues in Germany and other national markets. We have the experience and capabilities to help utilities throughout their entire smart-metering journey, from assessing readiness, developing and implementing implementation programs, and ensuring business processes are ready for life with smart meters.

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