Governments Can Play Big Role In Expansion Of Smart Grid

Renew Grid, Friday May 04, 2012 - 00:00:00

Smart grids are increasingly contributing to governments' strategies to achieve larger goals related to energy security and low-carbon economic growth, according to a recent report by the Global Smart Grid Federation (GSGF), a collaboration among national and regional smart grid associations. However, challenges to greater smart grid deployments remain.

The report investigates key smart grid challenges and highlights leading projects from around the world, and is based on research from current GSGF member markets in Australia, Canada, continental Europe, Great Britain, Ireland, South Korea, Japan and the U.S.

The economic benefits of the smart grid are clear, the report states. For some countries, improving the grid can help manage the long-term cost increases of electricity. The U.K. government, for example, believes that electricity-sector reform will actually reduce the price of power for the country and that adding more domestic renewable energy to the supply mix will be cheaper in the long run.

The smart grid opens up a whole new industry, which presents governments with an opportunity to invest and support initiatives that foster innovation (both technological and intellectual) and economic development through skills development and jobs growth, while addressing its energy security needs.

Some governments - like those of the U.S., South Korea and Japan - are approaching the smart grid as the next big opportunity for their economies to become global leaders in the new energy technology sector.

Projects and challenges

The various projects profiled in this report provide evidence that smart grids are possible. Complex projects in Miyako-Island and Hachinohe, Japan, and Jeju Island, South Korea, are operational. Similar projects are under way elsewhere. There are a number of jurisdictions that have implemented smart metering and electric vehicle (EV) infrastructure.

Utility-level and consumer-level energy-storage systems are operational and integrated into the power systems in Great Britain, Japan and South Korea. Modular energy management systems for homes and buildings are under development, and different utilities are implementing centralized and decentralized network control systems.

Still, there are challenges to smart grid development. Technological developments are outpacing standards development and regulatory frameworks, creating the risk that those new technologies may not meet evolving standards or regulation. Conversely, any regulations or standards risk losing relevancy if outpaced by technological development.

A stable regulatory environment is critical to attracting investment in the smart grid space. Clear standards - for example, for interoperability - could encourage investment while promoting competition that, theoretically, increases choice and reduces costs for consumers.

Arguably, the risk of a disconnect forming between technological and standards development and regulatory evolution is low because of the high level of collaboration and consultation between relevant stakeholders in the electricity sector. The ongoing work of groups such as the International Energy Association and various standards associations to promote information-sharing and collaboration across projects and countries is critical to the smart grid's development and success.

The role of utilities

Power systems all over the world are changing because of government initiatives and, in some cases, consumer demand. To further goals of greater energy independence, efficiency and decarbonization, governments in most the countries profiled in this report have enacted some type of feed-in-tariff program that establishes a premium price for renewable energy. They have also implemented advanced metering infrastructure (AMI) in some subset of their populations with a view to promoting changes in consumption patterns and greater consumer participation in the power system.

In Japan, the 2011 earthquake pushed power system reform to the forefront of popular debate, making consumer empowerment and the restoration of consumer trust in the power system high-profile issues with the populace and top priorities for policymakers in the country.

In the U.S., Canada and Europe, consumer interest in independent power generation and EVs has grown. Electricity consumption is expected to increase with the electrification of transportation, ultimately displacing at least some of the transportation sector's demand for oil.

These changes have altered utilities' operating landscape. They are no longer responsible solely for the inexpensive delivery of reliable power, but are now seen as agents of economic growth and environmental policy. Many utilities in the developed world are operating with aging infrastructure, and many have undertaken infrastructure improvements to address these new mandates.

By using new tools to analyze data collected in real time from smart devices, utilities can lengthen the useful life of assets, according to the report. Canada's Manitoba Hydro, for example, was able to avoid increasing its planned transmission capacity because of a dynamic line-rating project.

Consumer engagement

Consumer engagement is critical to the smart grid's success because consumers are the ones who ultimately pay for this technology. For consumers to be engaged, they must be motivated and enabled. Voluntary engagement preferable, particularly given that smart grids can only exist with government support, and governments depend on popular support.

Because motivation is not always organic, external stimulus is sometimes necessary. Of the countries profiled in this report, most have already introduced or intend to introduce some form of time-of-use (TOU) pricing, which is meant to induce the desired behavioral changes. Project teams have seen reductions in energy usage ranging from 2.5% to 15% by introducing smart meters, in-home-display units (IHDs) and, in some cases, TOU billing.

To enable participation in the power system, consumers must have the information they need to make decisions. Together with IHDs and customer Web portals, AMI communicates information about customer energy consumption, price signals (including TOU pricing information), and improved energy diagnostics from more detailed load profiles.

These solutions act as an intermediary between the power system and the consumer, and they are being implemented in nearly all of the projects profiled in this report. Outfitting consumers with energy management systems (including energy-storage solutions) and distributed generation resources further empowers them to become more independent, and even active, as vendors in the electricity market, the report states.

Unfortunately, there have been some negative consumer reactions - and even resistance - to projects incorporating versions of TOU pricing and demand-response technologies. In the Netherlands, for example, a smart metering implementation was halted in response to consumer protests based on privacy concerns. It eventually resumed, albeit in a modified form that allowed customers to refuse smart meter installations.

Role of government

Significant government investment enabled nearly all of the AMI and smart grid initiatives profiled for this report, taking the form of cash expenditures, regulatory reforms and/or rate recovery intended to enable smart grid investments. In all of the countries profiled, the electricity industry is typically dominated by monopoly providers and is highly regulated.

Government determines who the industry participants are and exercises significant price controls through regulating bodies. In short, governments have set the smart grid agenda for their respective electricity sectors and are financing its development.

Because governments control so many of the factors the smart grid depends on, they bear significant responsibility for the smart grid's success or failure, the report explains. In addition, it is incumbent on governments to provide a stable and transparent environment to encourage investment and facilitate cooperation between regulatory authorities and industry.

For these reasons, the government - in collaboration with the industry - is arguably in the best position to tackle what may be the most difficult yet critical factor for success: consumer support. Governments have adopted AMI and the smart grid as key tools to further policy objectives, which are ultimately important to the individual but the pressing need for which is not necessarily felt at the individual level.

Smart grid project teams are trying to convince consumers of the importance of these objectives and the benefits of the smart grid, and have had mixed results. In some cases, consumers appear to have pitted themselves against utilities in response to rising prices and pressures that they attribute to utilities. For the smart grid to succeed, governments need to play a leading role in mediating this relationship, better communicating with consumers, and protecting and advocating consumer interests in smart grid development.

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