Smart Grids Roadmap - Smart Grid Sherpa

Table of contentsForeword 1Table of Contents 2Acknowledgements 4Key Findings 5Introduction 6What are smart grids? 6Rationale for smart grid technology 6Purpose, process and structure of the roadmap 8Electricity System Needs for Today and the Future 10Future demand and supply 10Electricity system considerations 13Electricity reliability 14Smart Grid Deployment 17Smart grid technologies 17Smart grid demonstration and deployment efforts 20Tailoring smart grids to developing countries and emerging economies 22Status of electricity system markets and regulation 23Vision for Smart Grid Deployment to 2050 24Regional analysis and impacts for deployment 24Quantification of peak demand and the impact of smart grids 24Regional scenarios for deployment to 2050 26Smart grid CO 2emissions reduction estimates to 2050 27Estimating smart grid investment costs and operating savings 27Technology Development: Actions and Milestones 30Development and demonstration 30Standards 31Policy and Regulatory Framework: Actions and Milestones 34Generation, transmission and distribution 34Smart grid, smart consumer policies 36Building consensus on smart grid deployment 40International Collaboration 41Expand existing international collaboration efforts 41Create new collaborations with other electricity system technology areas 41Smart grid collaboration and developing countries 42Conclusion: Near-term Roadmap Actions for Stakeholders 43Summary of actions led by stakeholders 43Glossary 45References 47List of Relevant Websites 482 Technology Roadmaps Smart grids© OECD/IEA, 2010

List of Figures1. Smarter electricity systems 62. Smart grids can link electricity system stakeholder objectives 83. Electricity consumption growth 2007-50 (ETP BLUE Map Scenario) 104. Portion of variable generation of electricity by region (ETP BLUE Map Scenario) 115. Deployment of electric vehicles and plug-in hybrid electric vehicles 126. Example of a 24-hour electricity system demand curve on several dates over the year 147. Transmission links between Nordic countries 158. Smart grid technology areas 179. Example of developing country rural electrification pathway 2210. Vertically integrated and unbundled electricity markets 2311. Regional smart grids analysis structure 2412. OECD North America EV deployment impact on peak demand 2513. Regional CO 2emissions reduction from smart grid deployment 2814. Smart grid product providers 33List of Tables1. Characteristics of smart grids 72. Workshop contributions to the Smart Grids Roadmap 83. Smart grid technologies 194. Maturity levels and development trends of smart grid technologies 205. Select national smart grid deployment efforts 216. Modelling scenarios for SG MINand SG MAX257. Increase in electricity demand over 2010 values for SG MINand SG MAXscenarios 268. Increase in peak demand over 2010 values for SG MINand SG MAXscenarios 269. Electricity sector focus for ECG IA's 42List of Boxes1. Energy Technology Perspectives scenario descriptions 102. Electricity system flexibility 153. Smart communities 22Table of contents3© OECD/IEA, 2010

AcknowledgementsThis publication was prepared by the InternationalEnergy Agency’s Energy Technology PolicyDivision. Bo Diczfalusy, Director of the Directorateof Sustainable Energy Policy and Technology, andPeter Taylor, Head of the Energy Technology PolicyDivision, provided important guidance and input.Tom Kerr, co-ordinator of the Energy TechnologyRoadmaps project, provided invaluable leadershipand inspiration throughout the development ofthe roadmap. David Elzinga was the lead authorfor this roadmap. Steve Heinen also providedsignificant input and support. Many other IEAcolleagues have provided important contributions,in particular Seul-Ki Kim (with the support of theKorean Ministry of Knowledge and Economy),Yuichi Ikeda, Grayson Heffner, Hugo Chandler,Marilyn Smith, Uwe Remme, Lew Fulton, HiroyukiKaneko, Stefanie Held, Mary Harries Magnussonand Catherine Smith.The volunteers of the smart grids roadmapsadvisory committee have provided guidance overthe course of its development: Guido Bartelsof IBM; David Mohler of Duke Energy and themembers of the e8 technology group on smartgrids; Joris Knigge of Enexis; Laurent Schmitt ofAlstom Power; Michele de Nigris of Ricerca sulSistema Energetico and the Electricity NetworksAnalysis and R&D IEA Implementing Agreement;Hans Nilsson of the Demand Side Management IEAImplementing Agreement; Henriette Nesheim ofthe Norwegian Ministry of Petroleum and Energy;Eric Lightner of the US Department of Energy;and Bartosz Wojszczyk of General Electric. DavidBeauvais of Natural Resources Canada contributedto the development of the smart grid technologiessections and George Arnold of the National Instituteof Standards and Technology (NIST) contributedto the section on standards. The roadmap wasedited by Andrew Johnston of Language Aid. MurielCustodio and Bertrand Sadin of the IEA providedlayout and graphical design support.This work was guided by the IEA Committee onEnergy Research and Technology. Its membershosted one of the roadmap workshops andprovided important reviews and comments thathelped to improve the document. A number of IEAImplementing Agreement members, as part of theElectricity Co-ordination Group, provided valuablecomments and suggestions. We want to thankthe Norwegian Ministry of Petroleum and Energyand the Japanese Ministry of Economy, Trade andIndustry for support and guidance to the roadmap.Finally, this roadmap would not be effectivewithout all of the comments and supportreceived from the industry, government and nongovernmentexperts who attended meetings,reviewed and commented on drafts, and providedoverall guidance and support. The authors wish tothank all of those who commented who cannot benamed individually.For more information on this document, contact:David Elzinga, IEA SecretariatTel. +33 1 40 57 66 93Email: david.elzinga@iea.orgSteve Heinen, IEA SecretariatTel. +33 1 40 57 66 82Email: steve.heinen@iea.org4 Technology Roadmaps Smart grids© OECD/IEA, 2010

Key findings• The development of smart grids is essential ifthe global community is to achieve shared goalsfor energy security, economic developmentand climate change mitigation. Smart gridsenable increased demand response andenergy efficiency, integration of variablerenewable energy resources and electric vehiclerecharging services, while reducing peakdemand and stabilising the electricity system.• The physical and institutional complexity ofelectricity systems makes it unlikely that themarket alone will implement smart grids on thescale that is needed. Governments, the privatesector, and consumer and environmentaladvocacy groups must work together to defineelectricity system needs and determine smartgrid solutions.• Rapid expansion of smart grids is hinderedby a tendency on the part of governmentsto shy away from taking ownership ofand responsibility for actively evolving ordeveloping new electricity system regulations,policy and technology. These trends have led toa diffusion of roles and responsibilities amonggovernment and industry actors, and havereduced overall expenditure on technologydevelopment and demonstration, and policydevelopment. The result has been slowprogress on a number of regional smart gridpilot projects that are needed.• The “smartening” of grids is already happening;it is not a one-time event. However, large-scale,system-wide demonstrations are urgentlyneeded to determine solutions that can bedeployed at full scale, integrating the full set ofsmart grid technologies with existing electricityinfrastructure.• Large-scale pilot projects are urgentlyneeded in all world regions to test variousbusiness models and then adapt them to thelocal circumstances. Countries and regionswill use smart grids for different purposes;emerging economies may leapfrog directly tosmart electricity infrastructure, while OECDcountries are already investing in incrementalimprovements to existing grids and small-scalepilot projects.• Current regulatory and market systems canhinder demonstration and deployment of smartgrids. Regulatory and market models – suchas those addressing system investment, pricesand customer participation – must evolveas technologies offer new options over thecourse of long-term, incremental smart griddeployment.• Regulators and consumer advocates needto engage in system demonstration anddeployment to ensure that customers benefitfrom smart grids. Building awareness andseeking consensus on the value of smartgrids must be a priority, with energy utilitiesand regulators having a key role in justifyinginvestments.• Greater international collaboration is neededto share experiences with pilot programmes,to leverage national investments in technologydevelopment, and to develop common smartgrid technology standards that optimiseand accelerate technology developmentand deployment while reducing costs for allstakeholders.• Peak demand will increase between 2010 and2050 in all regions. Smart grids deploymentcould reduce projected peak demand increasesby 13% to 24% over this frame for the fourregions analysed in this roadmap.• Smart grids can provide significant benefitsto developing countries. Capacity building,targeted analysis and roadmaps – createdcollaboratively with developed and developingcountries – are required to determine specificneeds and solutions in technology andregulation.Key findings5© OECD/IEA, 2010

IntroductionThere is a pressing need to accelerate thedevelopment of low-carbon energy technologiesin order to address the global challenges ofenergy security, climate change and economicgrowth. Smart grids are particularly importantas they enable several other low-carbon energytechnologies, including electric vehicles, variablerenewable energy sources and demand response.This roadmap provides a consensus view on thecurrent status of smart grid technologies, and mapsout a global path for expanded use of smart grids,together with milestones and recommendations foraction for technology and policy development.What are smart grids?A smart grid is an electricity network that usesdigital and other advanced technologies tomonitor and manage the transport of electricityfrom all generation sources to meet the varyingelectricity demands of end-users. Smart gridsco-ordinate the needs and capabilities of allgenerators, grid operators, end-users andelectricity market stakeholders to operate all partsof the system as efficiently as possible, minimisingcosts and environmental impacts while maximisingsystem reliability, resilience and stability.For the purposes of this roadmap, smart gridsinclude electricity networks (transmissionand distribution systems) and interfaces withgeneration, storage and end-users. 1 Whilemany regions have already begun to “smarten”their electricity system, all regions will requiresignificant additional investment and planningto achieve a smarter grid. Smart grids are anevolving set of technologies that will be deployedat different rates in a variety of settings aroundthe world, depending on local commercialattractiveness, compatibility with existingtechnologies, regulatory developments andinvestment frameworks. Figure 1 demonstrates theevolutionary character of smart grids.Rationale for smart gridtechnologyThe world’s electricity systems face a numberof challenges, including ageing infrastructure,continued growth in demand, the integration ofincreasing numbers of variable renewable energysources and electric vehicles, the need to improvethe security of supply and the need to lower carbonemissions. Smart grid technologies offer ways notjust to meet these challenges but also to develop acleaner energy supply that is more energy efficient,more affordable and more sustainable.1 Smart grid concepts can be applied to a range of commodityinfrastructures, including water, gas, electricity and hydrogen.This roadmap focuses solely on electricity system concepts.Figure 1. Smarter electricity systemsPast Present FutureSystemoperatorIndustrialcustomerTransmissioncontrol centreDistributioncontrol centreIndustrialcustomerTransmissioncontrol centreDistributioncontrol centreEnergyserviceproviderElectricvehiclesIndustrialcustomerEnergySubstation Substation CommercialSubstation Substation Commercial storage SubstationSubstationcustomercustomerHigh-temperaturesuperconductorStorageCommercialcustomerResidentialcustomerResidentialcustomerResidentialcustomerElectrical infrastructureCommunicationsSource: Unless otherwise indicated, all material derives from IEA data and analysis.KEY POINT: The “smartening” of the electricity system is an evolutionary process, not a one-time event.6 Technology Roadmaps Smart grids© OECD/IEA, 2010

These challenges must also be addressed withregard to each region’s unique technical, financialand commercial regulatory environment. Given thehighly regulated nature of the electricity system,proponents of smart grids must ensure that theyengage with all stakeholders, including equipmentmanufacturers, system operators, consumeradvocates and consumers, to develop tailoredtechnical, financial and regulatory solutions thatenable the potential of smart grids (Figure 2).The main characteristics of smart grids areexplained in Table 1.Table 1. Characteristics of smart gridsCharacteristicDescriptionEnables informedparticipation bycustomersConsumers help balance supply and demand, and ensure reliability by modifyingthe way they use and purchase electricity. These modifications come as a result ofconsumers having choices that motivate different purchasing patterns and behaviour.These choices involve new technologies, new information about their electricity use, andnew forms of electricity pricing and incentives.Accommodates allgeneration andstorage optionsA smart grid accommodates not only large, centralised power plants, but also thegrowing array of customer-sited distributed energy resources. Integration of theseresources – including renewables, small-scale combined heat and power, and energystorage – will increase rapidly all along the value chain, from suppliers to marketers tocustomers.Enables newproducts, servicesand marketsCorrectly designed and operated markets efficiently create an opportunity forconsumers to choose among competing services. Some of the independent gridvariables that must be explicitly managed are energy, capacity, location, time, rate ofchange and quality. Markets can play a major role in the management of these variables.Regulators, owners/operators and consumers need the flexibility to modify the rules ofbusiness to suit operating and market conditions.Provides the powerquality for the rangeof needsNot all commercial enterprises, and certainly not all residential customers, need thesame quality of power. A smart grid supplies varying grades (and prices) of power.The cost of premium power-quality features can be included in the electrical servicecontract. Advanced control methods monitor essential components, enabling rapiddiagnosis and solutions to events that impact power quality, such as lightning,switching surges, line faults and harmonic sources.Optimises assetutilisation andoperating efficiencyA smart grid applies the latest technologies to optimise the use of its assets. Forexample, optimised capacity can be attainable with dynamic ratings, which allowassets to be used at greater loads by continuously sensing and rating their capacities.Maintenance efficiency can be optimised with condition-based maintenance, whichsignals the need for equipment maintenance at precisely the right time. System-controldevices can be adjusted to reduce losses and eliminate congestion. Operating efficiencyincreases when selecting the least-cost energy-delivery system available through thesetypes of system-control devices.Provides resiliency todisturbances, attacksand natural disastersResiliency refers to the ability of a system to react to unexpected events by isolatingproblematic elements while the rest of the system is restored to normal operation. Theseself-healing actions result in reduced interruption of service to consumers and helpservice providers better manage the delivery infrastructure.Source: Adapted from DOE, 2009.Introduction7© OECD/IEA, 2010

Figure 2. Smart grids can linkelectricity system stakeholderobjectivesSocietalFinancialRegulatoryand policyTechnologyKEY POINT: Smart grids providean opportunity to link societal, financial,technology and regulatory and policy objectives.Purpose, process andstructure of the roadmapTo provide guidance to government and industrystakeholders on the technology pathways neededto achieve energy security, economic growth andenvironmental goals, the IEA is developing a seriesof global low-carbon energy roadmaps covering arange of technologies. The roadmaps are guidedby the IEA Energy Technology Perspectives BLUE MapScenario, which aims to achieve a 50% reductionin energy-related CO 2emissions by 2050. Eachroadmap represents international consensus onmilestones for technology development, legal andregulatory needs, investment requirements, publicengagement and outreach, and internationalcollaboration.The Smart Grid Roadmap aims to:zzzzzzIncrease understanding among a range ofstakeholders of the nature, function, costs andbenefits of smart grids.Identify the most important actions required todevelop smart grid technologies and policies thathelp to attain global energy and climate goals.Develop pathways to follow and milestones totarget based on regional conditions.The roadmap was compiled with the help ofcontributions from a wide range of interestedparties, including electricity utilities, regulators,technology and solution providers, consumerTable 2. Workshop contributions to the Smart Grids RoadmapDate Location Event Workshop topic28 April 2010 Paris ENARD/IEA Joint Workshop20-21 May 2010 ParisJoint GIVAR/Smart GridRoadmap Workshop8-9 June 2010 Paris CERT MeetingElectricity Networks: A Key Enabler ofSustainable Energy PolicyDefining Smart Grid Technologies andRD&D needsRole of Government and Private Sectorin Smart Grid RD&D23-24 September 2010 Washington, DC GridWise Global Forum Smart Grid – Smart Customer Policy28-29 September 2010 Madrid ENARD/IEA Joint Workshop Financing the Smart Grid8-9 November 2010Jeju Island,KoreaKorea Smart Grid WeekDeveloping Country and EmergingEconomy Smart Grid PerspectivesNotes: ENARD refers to the IEA implementing agreement on Electricity Networks Analysis, R&D, (www.iea-enard.org). The ENARD/IEAworkshops are part of the implementing agreement work plan and, although highly complementary, not directly tied to the smart gridroadmap initiative.The IEA Grid Integration of Variable Renewables (GIVAR) project is a multi-year initiative that is assessing and quantifying approachesto large-scale deployment of variable renewable generation technologies.CERT refers to the IEA Committee on Energy Research and Technology.8 Technology Roadmaps Smart grids© OECD/IEA, 2010

advocates, finance experts and governmentinstitutions. In parallel with its analysis andmodelling, the Smart Grid Roadmap teamhas hosted and participated in several expertworkshops (Table 2).This roadmap does not attempt to cover everyaspect of smart grids and should be regarded as awork in progress. As global analysis improves, newdata will provide the basis for updated scenarios andassumptions. More important, as the technology,market and regulatory environments evolve,additional tasks will come to light. The broad natureof smart grids requires significant collaborationwith other technology areas, including transportelectrification, energy storage, generation andend-use. The roadmap provides links to furtherbackground information and reading.The roadmap is organised into seven sections.The first looks at the challenges facing grids todayand the benefits that smart grids offer, includingelectricity reliability. The second describes thecurrent deployment status of smart grids, alongwith smart grid costs and savings and marketand regulatory considerations. The third sectionoutlines a vision for smart grid deployment to2050 based on the Energy Technology Perspectives2010 (ETP 2010) BLUE Map Scenario, including ananalysis of regional needs. The fourth and fifthsections examine smart grid technologies andpolicies, and propose actions and milestones fortheir development and implementation. The sixthsection discusses current and future internationalcollaboration, while the seventh section presentsan action plan and identifies the next steps thatneed to be taken.Introduction9© OECD/IEA, 2010

Electricity system needs for today and the futureBox 1: Energy Technology Perspectivesscenario descriptionsThe ETP BLUE Map Scenario aims to ensurethat global energy-related CO 2emissions arereduced to half their current levels by 2050.This scenario examines ways in which theintroduction of existing and new low-carbontechnologies might achieve this at leastcost, while also bringing energy securitybenefits in terms of reduced dependenceon oil and gas, and health benefits as airpollutant emissions are reduced. The BLUEMap Scenario is consistent with a long-termglobal rise in temperatures of 2 o C to 3 o C,but only if the reduction in energy-relatedCO 2emissions is combined with deep cutsin other greenhouse-gas emissions. TheBaseline Scenario considers the business-asusualcase, not reducing emission levels toany predetermined goal by 2050. The BLUEMap and Baseline Scenarios are based onthe same macroeconomic assumptions.Over the last few decades, generation and networktechnology deployment, market and regulatorystructures, and the volume and use of electricityhave changed significantly. This transformationhas largely been managed successfully, but ageinginfrastructures mean that further changes couldaffect system stability, reliability and security.Smart grid technologies provide a range ofsolutions that can be tailored to the specific needsof each region. The primary global system trendsand the role of smart grids are illustrated in thefollowing sections using the Energy TechnologyPerspectives (ETP) Baseline and BLUE Map Scenariosdeveloped by the IEA to estimate future technologydeployment and demand (Box 1).Future demand and supplyIncreased consumptionof electricityElectricity is the fastest-growing component of totalglobal energy demand, with consumption expectedto increase by over 150% under the ETP 2010Baseline Scenario and over 115% between 2007and 2050 under the BLUE Map Scenario (IEA, 2010).Figure 3. Electricity consumption growth 2007-50 (BLUE Map Scenario)600%500%400%300%200%100%0%OECD NorthAmericaOECDEuropeOECDPacificTransitioneconomiesChina India Other Africadeveloping AsiaCentral and MiddleSouth America EastGlobalaverageSource: IEA, 2010.KEY POINT: Emerging economies will need to use smart grids to efficiently meet rapidly growingelectricity demand.10 Technology Roadmaps Smart grids© OECD/IEA, 2010

Growth in demand is expected to vary betweenregions as OECD member countries experiencemuch more modest increases than emergingeconomies and developing countries (Figure 3). InOECD countries, where modest growth rates arebased on high levels of current demand, smart gridtechnologies can provide considerable benefitsby reducing transmission and distribution losses,and optimising the use of existing infrastructure.In developing regions with high growth, smartgrid technologies can be incorporated in newinfrastructure, offering better market-functioncapabilities and more efficient operation. In allregions, smart grid technologies could increasethe efficiency of the supply system and helpreduce demand by providing consumers with theinformation they need to use less energy or use itmore efficiently.Deployment of variablegeneration technologyEfforts to reduce CO 2emissions related toelectricity generation, and to reduce fuel imports,have led to a significant increase in the deploymentof variable generation technology. 2 This increaseis expected to accelerate in the future, with allregions incorporating greater amounts of variablegeneration into their electricity systems (Figure4). As penetration rates of variable generationincrease over levels of 15% to 20%, and dependingon the electricity system in question, it canbecome increasingly difficult to ensure the reliableand stable management of electricity systemsrelying solely on conventional grid architecturesand limited flexibility. Smart grids will supportgreater deployment of variable generationtechnologies by providing operators with realtimesystem information that enables them tomanage generation, demand and power quality,thus increasing system flexibility and maintainingstability and balance.There are some good examples of successfulapproaches to integrating variable resources.Ireland’s transmission system operator, EirGrid, isdeploying smart grid technologies, including hightemperature,low-sag conductors and dynamic2 Variable generation technologies produce electricity that isdependent on climatic or other conditions, meaning there is noguarantee that it can be dispatched as needed. This includeselectricity generation from wind, photovoltaic, run-of-riverhydro, combined heat and power, and tidal technologies.Figure 4. Portion of variable generation of electricityby region (BLUE Map Scenario)30%25%2010205020%15%10%5%0%OECD NorthAmericaOECDEuropeOECDPacificTransitioneconomiesChina India Otherdeveloping AsiaAfricaCentral andSouth AmericaMiddleEastSource: IEA, 2010.KEY POINT: All regions will need smart grids to enable the effective integration of significantlyhigher amounts of variable resources to their electricity grids.Electricity system needs for today and the future11© OECD/IEA, 2010

line rating special protection schemes, to managethe high proportion of wind energy on its systemand maximise infrastructure effectiveness. Theoperation of the system is being improved throughstate-of-the-art modelling and decision supporttools that provide real-time system stability analysis,wind farm dispatch capability and improved windforecasting, and contingency analysis. Systemflexibility and smart grid approaches are estimatedto facilitate real-time penetrations of wind up to75% by 2020 (EirGrid, 2010).In Spain, Red Eléctrica has established a ControlCentre of Renewable Energies (CECRE), aworldwide pioneering initiative to monitor andcontrol these variable renewable energy resources.CECRE allows the maximum amount of productionfrom renewable energy sources, especially windenergy, to be integrated into the power systemunder secure conditions and is an operationunit integrated into the Power Control Centre.With CECRE, Spain has become the first countryworldwide to have a control centre for all windfarms over 10 MW.Electrification of transportThe BLUE Map Scenario estimates that thetransport sector will make up 10% of overallelectricity consumption by 2050 because of asignificant increase in electric vehicles (EV) andplug-in hybrid electric vehicles (PHEV) (Figure 5).If vehicle charging is not managed intelligently,it could increase peak loading on the electricityinfrastructure, adding to current peak demandsfound in the residential and service sectors, andrequiring major infrastructure investment to avoidsupply failure. Smart grid technology can enablecharging to be carried out more strategically,when demand is low, making use of both low-costgeneration and extra system capacity, or whenthe production of electricity from renewablesources is high. Over the long term, smart gridtechnology could also enable electric vehicles tofeed electricity stored in their batteries back intothe system when needed. 3In the Netherlands, the collaborative MobileSmart Grid project lead by the distribution utilityEnexis is establishing a network of electric carrecharging sites and is using smart informartionand communication technology (ICT) applications3 The ownership strategy of the vehicle battery will have asignificant impact on whether using vehicle batteries for gridstorage is realistic, as this may reduce the life/reliability of vehiclebatteries for not much financial return for the vehicle owner.Battery switching technology and leasing models may facilitatethe use of vehicle batteries for grid storage.Figure 5. Deployment of electric vehicles and plug-in hybrid electric vehiclesPassenger LDV sales (millions per year)12010080604020PLDV sales (millions per year)765432102010201120122013201420152016201720182019202002010 2015 2020 2025 2030 2035 2040 2045 2050EVsPHEVsAll otherIndiaChinaOECD PacificOECD EuropeOECDNorth AmericaAll otherIndiaChinaOECD PacificOECD EuropeOECDNorth AmericaSource: IEA, 2009.KEY POINT: Major economies with large personal vehicle sales will need smart grids to enable the effectiveintegration of electric vehicles to their electricity grids.12 Technology Roadmaps Smart grids© OECD/IEA, 2010

to enable the existing power network to deal withthe additional power demand. Working togetherwith other network operators, energy companies,software and hardware providers, universitiesand other research institutes, the project shouldresult in simple solutions for charging and payingautomatically (Boots et al., 2010). 4Electricity systemconsiderationswhich is operating with very high reliability levels,and is now focusing on its distribution networks.One example is in Yokahama City, where a largescaleenergy management project is using bothnew and existing houses in urban areas to assessthe effects of energy consumption on distributioninfrastructure. 5 In the United States, as part of abroad range of smart grid investments, significanteffort is being devoted to deploying phasormeasurement units on the transmission system,providing increased information for more reliableoperation of ageing infrastructure. 6Ageing infrastructurePeak demandThe electrification of developed countries hasoccurred over the last 100 years; continuedinvestment is needed to maintain reliability andquality of power. As demand grows and changes(e.g. through deployment of electric vehicles), anddistributed generation becomes more widespread,ageing distribution and transmission infrastructurewill need to be replaced and updated, andnew technologies will need to be deployed.Unfortunately, in many regions, the necessarytechnology investment is hindered by existingmarket and regulatory structures, which oftenhave long approval processes and do not capturethe benefits of new, innovative technologies.Smart grid technologies provide an opportunity tomaximise the use of existing infrastructure throughbetter monitoring and management, while newinfrastructure can be more strategically deployed.Rapidly growing economies like China havedifferent smart grid infrastructure needs fromthose of OECD countries. China’s response toits high growth in demand will give it newerdistribution and transmission infrastructure thanthe other three regions examined in detail in thisroadmap (OECD Europe, OECD North Americaand OECD Pacific). In the Pacific region, recentinvestments in transmission have resulted innewer infrastructure than that in Europe andNorth America. OECD Europe has the highestproportion of ageing transmission and distributionlines, but North America has the largest numberof lines and the largest number that are ageing– especially at the transmission level. This is animportant consideration given the changes ingeneration and consumption in the IEA scenariosup to 2050, and the need to deploy smart gridsstrategically. In recent years Japan has investedsignificantly in its transmission infrastructure,4 www.mobilesmartgrid.euDemand for electricity varies throughout the dayand across seasons (Figure 6). Electricity systeminfrastructure is designed to meet the highestlevel of demand, so during non-peak times thesystem is typically underutilised. Building thesystem to satisfy occasional peak demand requiresinvestments in capacity that would not be neededif the demand curve were flatter. Smart grids canreduce peak demand by providing information andincentives to consumers to enable them to shiftconsumption away from periods of peak demand.Demand response in the electricity system – themechanism by which end-users (at the industrial,service or residential sector level) alter consumptionin response to price or other signals – can bothreduce peak demand, but also provide systemflexibility, enabling the deployment of variablegeneration technologies. Reducing peak demandis likely to be the first priority, because demand ata system level is relatively predictable and rampsup and down slowly compared with variablegeneration. As demand response technologydevelops and human interactions are betterunderstood, the availability, volume and responsetime of the demand-side resource will providethe flexibility necessary to respond to both peakdemand and variable generation needs.The management of peak demand can enablebetter system planning throughout the entireelectricity system, increasing options for new loadssuch as electric vehicles, for storage deploymentand for generation technologies. These benefits areessential for new systems where demand growthis very high, and for existing and ageing systemsthat need to maintain existing and integrate newtechnologies.5 www.meti.go.jp/english/press/data/20100811_01.html6 www.naspi.org/Electricity system needs for today and the future13© OECD/IEA, 2010

Figure 6. Example of a 24-hour electricity system demand curveon several dates over the year30 00025 00020 00015 00010 00008 Jul. 1008 Jan. 1008 Apr. 1008 Oct. 105 000MW00 4 8 12 16 20 24Time of daySource: Data from Independent Electricity System Operator, Ontario, Canada. 7KEY POINT: The demand for electricity varies throughout the day and across seasons; smart grids canreduce these peaks and optimise system operation.PowerCentsDC was an advanced meter pilot 7programme in Washington DC for 850 residentialcustomers that ran over two summers and onewinter from July 2008 to October 2009. Theprogramme analysis found that customer responseto three different residential pricing optionscontributed to reducing peak demand, rangingfrom 4% to 34% in the summer and 2% to 13%in the winter. These results indicate that differentprice structures enabled by smart grids can reducepeak demand. 8Electricity reliabilityGrowing electricity consumption and recent systemfailures have focused attention on the role that smartgrids can play in increasing electricity reliability –especially by increasing system flexibility. The NorthAmerican Electric Reliability Corporation (NERC) 97 www.ieso.ca/imoweb/marketdata/marketSummary.asp8 www.powercentsdc.org/9 NERC’s mission is to improve the reliability and security of the bulkpower system in the United States, Canada and part of Mexico.The organisation aims to do that not only by enforcing compliancewith mandatory Reliability Standards, but also by acting as a“force for good” – a catalyst for positive change whose roleincludes shedding light on system weaknesses, helping industryparticipants operate and plan to the highest possible level, andcommunicating Examples of Excellence throughout the industry.defines the reliability of the interconnected bulkpower system in terms of two basic and functionalaspects: adequacy and security.Adequacy is seen by NERC as the ability of the bulkpower system to supply the aggregate electricaldemand and energy requirements of its customersat all times, taking into account scheduled andreasonably expected unscheduled outages ofsystem elements. System operators are expectedto take “controlled” actions or procedures tomaintain a continual balance between supply anddemand within a balancing area. Actions include:14 Technology Roadmaps Smart gridszzzzPublic appeals to reduce demand.Interruptible demand – customer demand that,in accordance with contractual arrangements,can be interrupted by direct control of thesystem operator or by action of the customer atthe direct request of the system operator.zzVoltage reductions – sometimes as much as 5.zzRotating blackouts.Security, in NERC’s definition, includes all othersystem disturbances that result in the unplannedand/or uncontrolled interruption of customerdemand, regardless of cause. When theseinterruptions are contained within a localised area,they are considered unplanned interruptions or© OECD/IEA, 2010

disturbances. When they spread over a wide areaof the grid, they are referred to as “cascadingblackouts” – the uncontrolled successive loss ofsystem elements triggered by an incident at anylocation. Cascading results in widespread electricservice interruption that cannot be preventedfrom spreading sequentially beyond an areapredetermined by studies. 10System adequacysolar power systems, will increase the amount ofgeneration capability on the system. Smart gridsenable improved, lower-cost integration of theseand other variable technologies that may requiredifferent electricity system operation protocols.Figure 7. Transmission links betweenNordic countriesThe considerations for meeting the needs ofelectricity consumers are significantly differentfrom those for other energy commodities. First,large-scale electricity storage is available onlyin a few regions that have significant reservoirhydro resources. Second, electricity is tradedon a regional rather than on a global basis. It isin this context that electricity production andconsumption must be continually monitoredand controlled. Smart grid technologies can helpto improve system adequacy by enabling moreefficient system operation and the addition ofregional energy resources to the electricity mix.The increased amounts of data gathered from asmart grid can show where operational efficiencycan be improved and increased automation canimprove control of various parts of the system,enabling fast response to changes in demand.The introduction of regional energy resources,including variable generation such as solar, wind,small-scale hydro, and combined heat and power,as well as dispatchable generation such as biomass,reservoir-based hydropower and concentratingSource: Norwegian Ministry of Petroleum and Energy.KEY POINT: The Nordic electricity systemsuccessfully integrates large amounts ofvariable renewable energy in a regionalgrid by making use of interconnections.10 www.nerc.com/page.php?cid=1|15|123Box 2. Electricity system flexibilityFlexibility is the capability of a power system to maintain reliable supply by modifying productionor consumption in the face of rapid and large imbalances, such as unpredictable fluctuations indemand or in variable generation. It is measured in terms of megawatts (MW) available for rampingup and down, over time.The term flexibility is used here to include power system electricity generation, transport,storage, trading and end-use consumption. Smart grids can optimise the operation of a range offlexibility mechanisms in three contexts: the power market, system operation and the use of gridhardware. Resources that contribute to flexibility include dispatchable power plants, demand-sidemanagement and response, energy storage facilities and interconnection with adjacent markets.Source: IEA,2011.Electricity system needs for today and the future15© OECD/IEA, 2010

Adequacy concerns introduced by the deploymentof variable generation technology can beaddressed by a number of flexibility mechanisms,such as direct trading of electricity betweenregions. One of the best examples of suchtrading is the Nordic electricity system, wheresignificant interconnection and well functioningmarkets between regions allow for high levels ofwind energy deployment (Figure 7). Smart gridtechnology can address the complex power flowproblems that result from wide-area wholesaletrading by allowing them to be managed withincreased efficiency and reliability.System securityAlthough a number of OECD countries haverecently experienced large-scale blackouts, theirelectricity systems are regarded as generallysecure, according to industry-specific indices thatmeasure the number and duration of outages.Smart grid technologies can maintain and improvesystem security in the face of challenges such asageing infrastructure, rising demand, variablegeneration and electric vehicle deployment. Byusing sensor technology across the electricitysystem, smart grids can monitor and anticipatesystem faults before they happen and takecorrective action. If outages do occur, smart gridscan reduce the spread of the outages and respondmore quickly through automated equipment.Cyber securitySmart grids can improve electricity systemreliability and efficiency, but their use of new ICTscan also introduce vulnerabilities that jeopardisereliability, including the potential for cyber attacks.Cyber security is currently being addressed byseveral international collaborative organisations.One recent US study summarised the followingresults (GAO, 2011):zzzzAspects of the electricity system regulatoryenvironment may make it difficult to ensurethe cyber security of smart grid systems.Utilities are focusing on regulatory complianceinstead of comprehensive security.zzzzzzzzConsumers are not adequately informed aboutthe benefits, costs and risks associated withsmart grid systems.Insufficient security features are being builtinto certain smart grid systems.The electricity industry does not have aneffective mechanism for sharing informationon cyber security.The electricity industry does not have metricsfor evaluating cyber security.These findings confirm that cyber security mustbe considered as part of a larger smart griddeployment strategy. Lessons can be learnedfrom other industries that have addressed thesechallenges, such as banking, mobile phonesand retail, but in the context of infrastructurerelatedsystems, dedicated focus is needed.For example, the Joint Research Council of theEuropean Commission has initiated the Europeannetwork for the Security of Control and Real-TimeSystems (ESCoRTS). 11 ESCoRTS is a joint projectamong European Union industries, utilities,equipment manufacturers and research institutes,under the lead of the European Committeefor Standardisation (Comité européen denormalisation, or CEN), to foster progress towardscyber security of control and communicationequipment in Europe. The adoption of such modelsthat work to develop solutions for cyber security,while allowing data to be used for acceptablepurposes, is required for successful deployment ofsmart grid technologies.11 www.escortsproject.eu/16 Technology Roadmaps Smart grids© OECD/IEA, 2010

Smart grid deploymentSmart grid technologiesThe many smart grid technology areas – eachconsisting of sets of individual technologies –span the entire grid, from generation throughtransmission and distribution to various types ofelectricity consumers. Some of the technologiesare actively being deployed and are consideredmature in both their development and application,while others require further development anddemonstration. A fully optimised electricity systemwill deploy all the technology areas in Figure 8.However, not all technology areas need to beinstalled to increase the “smartness” of the grid.Wide-area monitoringand controlReal-time monitoring and display of powersystemcomponents and performance, acrossinterconnections and over large geographic areas,help system operators to understand and optimisepower system components, behaviour andperformance. Advanced system operation toolsavoid blackouts and facilitate the integration ofvariable renewable energy resources. Monitoringand control technologies along with advancedsystem analytics – including wide-area situationalawareness (WASA), wide-area monitoring systems(WAMS), and wide-area adaptive protection,control and automation (WAAPCA) – generate datato inform decision making, mitigate wide-areadisturbances, and improve transmission capacityand reliability.Information and communicationstechnology integrationUnderlying communications infrastructure,whether using private utility communicationnetworks (radio networks, meter mesh networks)or public carriers and networks (Internet, cellular,Figure 8. Smart grid technology areasGeneration Transmission Distribution Industrial Service ResidentialTransmission linesDistribution linesPadmounttransformerTransmissionsubstationDistributionsubstationWide-area monitoring and controlInformation and communications technology (ICT) integrationInformation and communications technology integration (ICT)Transmissionenhancement applicationsRenewable and distributed generation integrationDistribution gridmanagementAdvanced metering infrastructure (AMI)EV charging infrastructureCustomer-side systems (CS)Source: Technology categories and descriptions adapted from NETL, 2010 and NIST, 2010.KEY POINT: Smart grids encompass a variety of technologies that span the electricity system.Smart grid deployment17© OECD/IEA, 2010

cable or telephone), support data transmissionfor deferred and real-time operation, and duringoutages. Along with communication devices,significant computing, system control softwareand enterprise resource planning software supportthe two-way exchange of information betweenstakeholders, and enable more efficient use andmanagement of the grid.Renewable and distributedgeneration integrationIntegration of renewable and distributedenergy resources – encompassing large scaleat the transmission level, medium scale at thedistribution level and small scale on commercialor residential building – can present chalengesfor the dispatchability and controllability of theseresources and for operation of the electricitysystem. Energy storage systems, both electricallyand for themally based, can alleviate suchproblems by decoupling the production anddelivery of energy. Smart grids can help throughautomation of control of generation and demand(in addition to other forms of demand response) toensure balancing of supply and demand.Transmission enhancementapplicationsThere are a number of technologies andapplications for the transmission system. FlexibleAC transmission systems (FACTS) are used toenhance the controllability of transmissionnetworks and maximise power transfer capability.The deployment of this technology on existinglines can improve efficiency and defer the need ofadditional investment. High voltage DC (HVDC)technologies are used to connect offshorewind and solar farms to large power areas, withdecreased system losses and enhanced systemcontrollability, allowing efficient use of energysources remote from load centres. Dynamic linerating (DLR), which uses sensors to identify thecurrent carrying capability of a section of networkin real time, can optimise utilisation of existingtransmission assets, without the risk of causingoverloads. High-temperature superconductors(HTS) can significantly reduce transmission lossesand enable economical fault-current limiting withhigher performance, though there is a debate overthe market readiness of the technology.Distribution grid managementDistribution and sub-station sensing andautomation can reduce outage and repairtime, maintain voltage level and improve assetmanagement. Advanced distribution automationprocesses real-time information from sensorsand meters for fault location, automaticreconfiguration of feeders, voltage and reactivepower optimisation, or to control distributedgeneration. Sensor technologies can enablecondition- and performance-based maintenanceof network components, optimising equipmentperformance and hence effective utilisationof assets.Advanced metering infrastructureAdvanced metering infrastructure (AMI) involvesthe deployment of a number of technologies – inaddition to advanced or smart meters 12 that enabletwo-way flow of information, providing customersand utilities with data on electricity price andconsumption, including the time and amount ofelectricity consumed. AMI will provide a widerange of functionalities:18 Technology Roadmaps Smart gridszzzzzzzzzzzzzzRemote consumer price signals, which canprovide time-of-use pricing information.Ability to collect, store and report customerenergy consumption data for any requiredtime intervals or near real time.Improved energy diagnostics from moredetailed load profiles.Ability to identify location and extent ofoutages remotely via a metering function thatsends a signal when the meter goes out andwhen power is restored.Remote connection and disconnection.Losses and theft detection.Ability for a retail energy service provider tomanage its revenues through more effectivecash collection and debt management.Electric vehicle charginginfrastructureElectric vehicle charging infrastructure handlesbilling, scheduling and other intelligent featuresfor smart charging (grid-to-vehicle) during lowenergy demand. In the long run, it is envisioned12 The European Smart Meters Industry Group (ESMIG) defines fourminimum functionalities of a smart meter: remote reading, twowaycommunication, support for advanced tariff and paymentsystems, and remote disablement and enablement of supply.© OECD/IEA, 2010

that large charging installation will provide powersystem ancillary services such as capacity reserve,peak load shaving and vehicle-to-grid regulation.This will include interaction with both AMI andcustomer-side systems.Customer-side systemsCustomer-side systems, which are used to helpmanage electricity consumption at the industrial,service and residential levels, include energymanagement systems, energy storage devices,smart appliances and distributed generation. 13Energy efficiency gains and peak demand reductioncan be accelerated with in-home displays/energydashboards, smart appliances and local storage.Demand response includes both manual customerresponse and automated, price-responsiveappliances and thermostats that are connected toan energy management system or controlled with asignal from the utility or system operator.13 Residential small-scale generation equipment on customerpremises falls under both categories of consumer-side systemsand renewable and distributed energy systems.Table 3. Smart grid technologiesTechnology area Hardware Systems and softwareWide-area monitoringand controlInformationand communicationtechnology integrationPhasor measurement units (PMU)and other sensor equipmentCommunication equipment (Powerline carrier, WIMAX, LTE, RF meshnetwork, cellular), routers, relays,switches, gateway, computers(servers)Supervisory control and data acquisition(SCADA), wide-area monitoring systems(WAMS), wide-area adaptive protection,control and automation (WAAPCA), wideareasituational awareness (WASA)Enterprise resource planning software(ERP), customer information system (CIS)Renewable and distributedgeneration integrationPower conditioning equipmentfor bulk power and grid support,communication and control hardwarefor generation and enabling storagetechnologyEnergy management system (EMS),distribution management system (DMS),SCADA, geographic Informationsystem (GIS)Transmission enhancement Superconductors, FACTS, HVDC Network stability analysis, automaticrecovery systemsDistribution gridmanagementAdvanced meteringinfrastructureElectric vehicle charginginfrastructureAutomated re-closers, switchesand capacitors, remote controlleddistributed generation and storage,transformer sensors, wire and cablesensorsSmart meter, in-home displays,servers, relaysCharging infrastructure,batteries, invertersGeographic information system (GIS),distribution management system (DMS),outage management system (OMS),workforce management system (WMS)Meter data management system (MDMS)Energy billing, smart grid-to-vehiclecharging (G2V) and dischargingvehicle-to-grid (V2G) methodologiesCustomer-side systemsSmart appliances, routers, in-homedisplay, building automation systems,thermal accumulators,smart thermostatEnergy dashboards, energy managementsystems, energy applications for smartphones and tabletsSmart grid deployment19© OECD/IEA, 2010

Table 3 highlights a number of hardware andsystems and software associated with eachtechnology area.Within the smart grid technology landscape, abroad range of hardware, software, applicationand communication technologies are at variouslevels of maturity. Some technologies have proventhemselves over time, but many – even if mature– have yet to be demonstrated or deployed on alarge scale. Existing projects give an indicationof the maturity levels and development trends ofsmart grid technologies (Table 4).Table 4. Maturity levels and development trends of smart grid technologiesTechnology area Maturity level Development trendWide-area monitoring and control Developing FastInformation and communications technology integration MatureFastRenewable and distributed generation integration* Developing FastTransmission enhancement applications** Mature ModerateDistribution management Developing ModerateAdvanced metering infrastructure Mature FastElectric vehicle charging infrastructure Developing FastCustomer-side systems Developing Fast* Battery storage technologies are less mature than other distributed energy technologies.** High Temperature Superconducting technology is still in the developing stage of maturity.Smart grid demonstrationand deployment effortsThere has been a marked acceleration in thedeployment of smart grid pilot and demonstrationprojects globally, due in part to the recentgovernment stimulus investment initiatives in2009 and 2010 (Table 5). Investments around theworld have enabled hundreds of projects entirelyor partly focused on smart grid technologies; theabove table provides only a small sample.Most current smart grid pilot projects focuson network enhancement efforts such as localbalancing, demand-side management (throughsmart meters) and distributed generation.Demonstration projects have so far beenundertaken on a restricted scale and have beenhindered by limited customer participation anda lack of a credible aggregator business model.Data (and security) challenges are likely to increaseas existing pilots expand to larger-scale projects.Non-network solutions such as ICTs are beingused in a growing number of smart grid projects,bringing a greater dependence on IT and datamanagement systems to enable network operation(Boots et al., 2010).these issues. The project installed 33 million smartmeters (including system hardware and softwarearchitecture) and automated 100 000 distributionsubstations, while also improving managementof the operating workforce and optimising assetmanagement policies and network investments.The project has resulted in fewer serviceinterruptions, and its EUR 2.1 billion investmenthas led to actual cost savings of more than EUR 500million per year. ENEL is continually enhancing thesystem by introducing new features, technologiesand flexibility. The project clearly demonstrates thevalue of a large-scale, integrated deployment ofsmart grid technologies to solve existing problemsand plan for future needs.Although significant effort and financial resourcesare already being invested in smart grids, the scaleof demonstration and deployment co-ordinationneeds to be increased. Several organisations havecreated, are creating or are calling for the creationof an inventory or database of detailed case studiesto gather the lessons learned from such projects,particularly in the areas of policy, standardsand regulation, finance and business models,technology development, consumer engagementand workforce training. 14The Telegestore project, launched in 2001 byENEL Distribuzione S.p.A. (i.e. prior to the currentsmart grids stimulus funding) addresses many of14 These include the international Smart Grid Action Network, Asia-Pacific Economic co-operation, European Union Set Plan, as wellas a number of national initiatives.20 Technology Roadmaps Smart grids© OECD/IEA, 2010

Table 5. Select national smart grid demonstration and deployment effortsCountryChinaUnited StatesJapanSouth KoreaSpainGermanyAustraliaNational smart grid initiativesThe Chinese government has developed a large, long-term stimulus plan to invest in watersystems, rural infrastructures and power grids, including a substantial investment in smart grids.Smart grids are seen as a way to reduce energy consumption, increase the efficiency of theelectricity network and manage electricity generation from renewable technologies. China’sState Grid Corporation outlined plans in 2010 for a pilot smart grid programme that maps outdeployment to 2030. Smart grids investments will reach at least USD 96 billion by 2020.USD 4.5 billion was allocated to grid modernisation under the American Recovery ReinvestmentAct of 2009, including:• USD 3.48 billion for the quick integration of proven technologies into existing electric gridinfrastructure.• USD 435 million for regional smart grid demonstrations.• USD 185 million for energy storage and demonstrations.The Federation of Electric Power Companies of Japan is developing a smart grid that incorporatessolar power generation by 2020 with government investment of over USD 100 million.The Japanese government has announced a national smart metering initiative and large utilitieshave announced smart grid programmes.The Korean government has launched a USD 65 million pilot programme on Jeju Island inpartnership with industry. The pilot consists of a fully integrated smart grid system for 6 000households, wind farms and four distribution lines. Korea has announced plans to implementsmart grids nationwide by 2030.In 2008, the government mandated distribution companies to replace existing meters with newsmart meters; this must be done at no additional cost to the customer.The utility Endesa aims to deploy automated meter management to more than 13 millioncustomers on the low voltage network from 2010 to 2015, building on past efforts by the Italianutility ENEL. The communication protocol used will be open.The utility Iberdrola will replace 10 million meters.The government’s E-Energy funding programme has several projects focusing on ICTs for theenergy system.The Australian government announced the AUD 100 million “Smart Grid, Smart City” initiativein 2009 to deliver a commercial-scale smart grid demonstration project. Additional efforts in thearea of renewable energy deployments are resulting in further study on smart grids.United Kingdom The energy regulator OFGEM has an initiative called the Registered Power Zone that willencourage distributors to develop and implement innovative solutions to connect distributedgenerators to the network. OFGEM has set up a Low Carbon Networks fund that will allowup to GPB 500m support to distribution network operator projects that test new technology,operating and commercial arrangements.FranceThe electricity distribution operator ERDF is deploying 300 000 smart meters in a pilot projectbased on an advanced communication protocol named Linky. If the pilot is deemed a success,ERDF will replace all of its 35 million meters with Linky smart meters from 2012 to 2016.BrazilAPTEL, a utility association, has been working with the Brazilian government on narrowbandpower line carrier trials with a social and educational focus.Several utilities are also managing smart grid pilots, including Ampla, a power distributor in Riode Janeiro State owned by the Spanish utility Endesa, which has been deploying smart meters andsecure networks to reduce losses from illegal connections. AES Eletropaulo, a distributor in SãoPaulo State, has developed a smart grid business plan using the existing fibre-optic backbone.The utility CEMIG has started a smart grid project based on system architecture developed bythe IntelliGrid Consortium, an initiative of the California-based Electric Power Research Institute.Source: Updated from MEF 2009 using feedback from country experts. Projects are listed in order of largest to smallest amount of investment.Smart grid deployment 21© OECD/IEA, 2010

Box 3. Smart communitiesSeveral concepts are emerging that extend the reach of the smart grids from electricity systems tobroader energy and societal contexts. One of these is the smart community or smart city. A smartcommunity integrates several energy supply and use systems within a given region in an attemptto optimise operation and allow for maximum integration of renewable energy resources – fromlarge-scale wind farm deployments to micro-scale rooftop photovoltaics and residential energymanagement systems.This concept includes existing infrastructure systems, such as electricity, water, transportation, gas,waste and heat, as well as future systems like hydrogen and electric vehicle charging. The goals ofsuch integration through the use of ICT include increased sustainability, security and reliability, aswell as societal benefits such as job creation and better services and reduced capital investment.Smart communities are a logical extension of smart grids from electricity systems to other types ofinfrastructure systems, which are ultimately expected to evolve in this direction.Tailoring smart grids todeveloping countries andemerging economiesWhile advanced countries have well-developedmodern grids, many others have grids that do notoperate consistently over a 24-hour period, andstill others have no electricity infrastructure at all.Developing countries and emerging economiesare often categorised by high growth in electricitydemand, high commercial and technical lossesin a context of rapid economic growth anddevelopment, dense urban populations anddispersed rural populations. These aspects presentboth significant challenges and opportunities.Smart grids can play an important role in thedeployment of new electricity infrastructure indeveloping countries and emerging economiesby enabling more efficient operation and lowercosts. Small “remote” systems – not connected toa centralised electricity infrastructure and initiallyemployed as a cost-effective approach to ruralelectrification – could later be connected easily toa national or regional infrastructure.As a means to access to electricity in sparselypopulated areas, smart grids could enable atransition from simple, one-off approaches toelectrification (e.g. battery- or solar PV-basedhousehold electrification) to community grids thatcan then connect to national and regional grids(Figure 9).Figure 9. Example of developingcountry rural electrificationpathwayBattery based and singlehousehold electrificationMicro/mini-grid, stand-alone gridNational gridRegional interconnectionsKEY POINT: Developing and emergingeconomies can use smart grids to build fromhousehold electrification to communityand regional systems.The deployment stages in Figure 9 requirestandardisation and interoperability to be scaledup to the next level with higher amounts of supplyand demand. Each successive step can increasereliability and the amount of power available ifmanaged in a way that allows a seamless transitionfor the community. Roadmaps and targetedanalysis focusing on developing countries andemerging economies should assess what lessonscan be learned from smart grid demonstrationsand deployments in developed countries.Ultimately, the end point of smart grid deploymentis expected to be similar across the world, but theroutes and time it takes to get there could be quitedifferent (Bazilian, 2011).22 Technology Roadmaps Smart grids© OECD/IEA, 2010

Status of electricity systemmarkets and regulationCurrent regulatory and market systems, both at theretail and wholesale levels, can present obstaclesto demonstration and deployment of smart grids.It is vital that regulatory and market models – suchas those addressing system investment, prices andcustomer participation – evolve as technologiesoffer new options.Some markets allow vertically integrated utilities,which own and operate infrastructure assets acrossthe generation, distribution and transmissionsectors. This ensures that costs and benefits fromthe deployment of technology are shared andmanaged efficiently across the various sectors.Vertically integrated structures also allow the mostappropriate and fully integrated investment anddevelopment for the power system as a whole,rather than just evaluating costs and benefits inone part of the electricity system. It can be difficultfor competitors to enter such markets and competewith incumbent players, which could hinderinnovation and increase prices for consumers.However, the climate for competitiveness dependslargely on whether the market is governed byappropriate regulatory structures.“Unbundling” of the electricity system, whichis intended to allow increased competition,has required entities that operated across theentire system to divide into market-based andregulated units, either functionally by creatingseparated operating teams within companies orlegally by selling companies or creating new onesto separate activities. Market-based activitiestypically include the generation sector and theretail sector (Figure 10). In the generation sector,markets have developed in which generatorssell electricity within a structure defining prices,time frames and other rules. In the retail sector,sometimes the distribution system operator stillretails the electricity to consumers and sometimesnew participants enter the market that sell onlyelectricity services.The introduction of market-based activities throughunbundling has brought many benefits to theelectricity sector, primarily a continued downwardpressure on prices, but such objectives can alsobe met in vertically integrated markets. Varyingdegrees of unbundling exist around the world.Unbundling also makes it difficult to captureboth costs and benefits of various technologydeployments on a system-wide basis – especiallywith respect to smart grids. Smart grid investmentsare likely to be deployed more rapidly in verticallyintegrated utilities where the business case canmore easily be made. In the many areas where this isnot possible, more strategic co-operation betweendistribution system operators and transmissionsystem operators is needed.Figure 10. Vertically integrated and unbundled electricity marketsVertically integratedelectric utilityUnbundled electricity marketGenerationMarket activitiesG1G2GnTransmissionTransmissionRegulated activitiesDistributionDistributionRetailMarket activitiesR1R2RnSource: Enexis, 2010.KEY POINT: The unbundling of electricity markets has introduced benefits and complexityto the electricity sector.Smart grid deployment23© OECD/IEA, 2010

Vision for smart grid deployment to 2050Smart grids are complex systems that incorporate anumber of technologies, consumer interactions anddecision points. This complexity makes it difficultto define detailed development and deploymentscenarios. Smart grid technologies are beingdeveloped worldwide, so much of the research,development and demonstration (RD&D) can bediscussed in a global context. But deploymentneeds to be discussed at the regional level, whereimportant factors such as the age of infrastructure,demand growth, generation make-up, andregulatory and market structures vary significantly.Regional analysis andimpacts for deploymentMotivated by economic, security or environmentalfactors, countries will choose their own prioritieswhen adopting smart grid technologies. Wherepossible, the costs and benefits of differentapproaches must be quantified to assess theimpacts of potential smart grid deployment. Thefollowing regional characteristics need to be takeninto account in any regional assessment:zzzzzzzzzzzzCurrent and planned mix of supply, includingfossil, nuclear and renewable generation.Current and future demand, and sectoralmake-up of demand, such as manufacturingindustry, residential load prevalence or thedeployment of electric vehicles.Status of existing and planned newtransmission and distribution networks.Ability to interconnect with neighbouringregions.Regulatory and market structure.Climatic conditions and resource availability.vision for four regions: OECD North America,OECD Europe, OECD Pacific and China. Data in theanalysis includes: 16zzzzzzzzzzAnnual demand.Electric vehicle (EV) deployment and peakdemand as a function of EV deployment.Demand response potential.Future potential electricity use in buildings.Deployment of advanced meteringinfrastructure.The model focuses on the demand side of theelectricity system; variable renewable deploymentis considered in the discussion but not in theanalysis itself. 17 The scenarios modelled are shownin Figure 11. In the SG MAXscenario, there is strongregulatory and policy support for the developmentand deployment of smart grids, whereas theSG MINscenario assumes little policy support. Theamount of clean technology installed – such asheat pumps, variable renewable resources (varRE)and electric vehicles (EVs/PHEVs) – follows thedeployment pathways developed by the ETP 2010analysis in the Baseline and BLUE Map Scenarios.Figure 11. Regional smart gridsanalysis structureQuantification of peakdemand and the impact ofsmart grids 15The incentives, or drivers, behind smart griddeployment and the interactions between suchdrivers need to be understood in the context oflocal or regional electrical systems. This roadmaphas expanded upon the ETP 2010 scenarios todevelop a more detailed regional electricity system15 A detailed description has been developed as an IEA working paper.entitled: Impact of smart grid technologies on peak load to 2050.KEY POINT: Two scenarios – SG MAXand SG MIN–were conducted to assess smart grids impacton peaking demand under the ETP Baselineand BLUE Map Scenarios.16 Energy efficiency improvements in end-use sectors are modelledin the ETP BLUE Map and Baseline Scenarios.17 Although smart grids will play a role in all parts of systemoperation, this roadmap will examine the impact of smart gridson peak demand. By focusing on the demand portion of theelectricity system, this analysis is complementary and related to theIEA GIVAR study, which focuses on electricity system flexibility interms of variable renewable generation deployment. Both sets ofanalysis will be integrated at a later time.24 Technology Roadmaps Smart grids© OECD/IEA, 2010

Figure 12 shows the SG 0case with total peakdemand under the BLUE Map Scenario with nodemand response capability and deployment ofEVs/PHEVs to 2050. In this case, peak demandincreases faster than overall consumption – 29%over the 2010 value by 2050. When some levelof scheduling spreads out the charging of EVs/PHEVs over the course of the day, the increase inpeak demand is reduced to 19% over the 2010value. When both scheduled charging and V2G aredeployed, peak demand increases by only 12% by2050. With the addition of demand response, peakdemand could be held steady at 2010 values.Regional scenarios fordeployment to 2050This roadmap compares the impact of smartgrids on system operation among four regions,combining the ETP BLUE Map Scenario with theSG MAXand SG MINscenarios. In the SG MINBLUE MapScenario, deployments of clean energy technologysuch as VarRE and EVs/PHEVs are significant, butpolicy support for smart grids is modest. In theSG MAXBLUE Map Scenario, deployments of cleanenergy technology such as varRE and EVs/PHEVsare the same as in the SG MINcase, but the policysupport for smart grids is strong. Tables 7 and 8look at the increase in peak demand and overallelectricity demand compared with 2010 values forthe different regions.Table 7 shows that China will see more growthin electricity demand than the other regions willsee in 40 years on a net and percentage basis.The other regions will only see growth in therange of 22% to 32% from 2010 to 2050, andno net growth in the near future because of loweconomic growth and the deployment of energyefficiency technologies. Some minor reductions intransmission and distribution line losses have beenincluded in the analysis, but they have little impacton overall demand.Table 7. Increase in electricity demandover 2010 values for SG MINandSG MAXscenarios* (%)2020 2030 2040 2050China 53 90 122 170EuropeanUnionNorthAmerica0 10 26 27-3 1 16 22Pacific 0 6 17 32* Electricity generation was modeled using the same parameters forboth the SG MINand SG MAXscenarios.Table 8 shows that in all cases, the SG MAXscenariosees a significant decrease in peak demand,providing the opportunity to delay investmentsin and/or reduce stress on existing infrastructure,especially in the context of new loads such as EVs/PHEVs. The most interesting case is North America,where a 22% increase in overall electricity demandcan be seen, but only a 1% increase in peakdemand by 2050 in the SG MAXcase. China’s overalldemand growth has a dramatic effect on thecountry’s peak demand over 2010 levels and is thedominant driver for this increase in the analysis.In other regions, peak demand is increased bydeployment of EVs/PHEVs and greater use ofelectricity in buildings. All regions except Chinashow that the deployment of smart grids, even to aminimum level, can decrease the rate of peak loaddemand to a level below overall demand growth.Table 8. Increase in peak demandover 2010 values for SG MINand SG MAXscenarios (%)ChinaSG MIN56SG MAX552020 2030 2040 20509991140125200176EuropeanUnionSG MIN1SG MAX-413530183217NorthAmericaSG MIN-4SG MAX-100-9100151PacificSG MIN-2SG MAX-726 Technology Roadmaps Smart grids4-41222511© OECD/IEA, 2010

Interpreting results and furtheranalysisThe regional results provide guidance for the typesof pathways that each region might follow as theydevelop smart grids. China has the opportunityto deploy smart grid technologies to better planand design the new infrastructure that is beingbuilt, thereby reducing the negative impacts onpeak demand from the deployment of EVs/PHEVs.OECD Europe and OECD Pacific 18 demonstratesimilar trends with respect to all drivers, but OECDEurope shows the highest peak demand of theOECD regions considered. OECD Europe also mustmanage deployment within an older infrastructurebase and with higher deployments of variablegeneration technology. OECD North America canbenefit significantly from the deployment of smartgrids, given that it is the largest electricity marketin the world and has an ageing infrastructure,especially at the transmission level. A NorthAmerican smart grid pathway might thereforefocus on the benefits of demand response andtransmission system monitoring and management.This roadmap provides some insights into thebenefits and possible regional pathways for smartgrids deployment, but more analysis is needed,particularly of the generation side, to provide amore complete picture of system performance.Additional regional examination is also neededto consider specific system attributes. Majorcharacteristics of developing countries were notconsidered in this modelling, and should be addedto provide insights into developing regions.Smart grid CO 2emissionsreduction estimates to 2050Although electricity consumption only represents17% of final energy use today, it leads to 40% ofglobal CO 2emissions, largely because almost 70%of electricity is produced from fossil fuels (IEA,2010). In the ETP BLUE Map Scenario, as a result ofdecarbonisation, electricity generation contributesonly 21% of global CO 2emissions, representingan annual reduction of over 20 Gt of CO 2by 2050.Smart grid technologies will be needed to enablethese emissions reductions. Direct reductions willoccur through feedback on energy usage, lower linelosses, accelerated deployment of energy efficiencyprogrammes, continuous commissioning of servicesector load, and energy savings due to peak loadmanagement. Indirect benefits arise from smartgrid support for the wider introduction of electricvehicles and variable renewable generation.Taking these direct and indirect emissionsreductions into account, the ETP BLUE MapScenario estimates that smart grids offer thepotential to achieve net annual emissionsreductions of 0.7 Gt to 2.1 Gt of CO 2by 2050(Figure 13). 19 North America shows the highestpotential for CO 2emissions reduction in the OECD,while China has highest potential among non-OECD member countries.Estimating smart gridinvestment costs andoperating savingsA high-level cost/benefit analysis is vital for thedeployment of smart grids. Work carried out so farin the roadmap process is providing the foundationfor such an analysis, but more effort is needed asadditional data and modelling become available.The cost discussion needs to include the threemain electricity stakeholders: utilities, consumersand society.Utilities will experience both costs and savingsin the deployment of smart grids, in the areas ofoperating and capital expenditure. The deploymentof new generation (such as variable generation)and end-use technologies (such as electricvehicles) could increase the need for investmentin infrastructure, therefore raising capitalexpenditures; but smart grids have the potential toreduce peak demand, better manage generationfrom both variable and dispatchable sources,and therefore reduce the potential increases inconventional infrastructure costs. Operating savingscan come from decreased costs for maintenance,metering and billing, and fuel savings throughincreased efficiencies and other areas.Electricity production costs fluctuate accordingto basic supply and demand conditions in themarket, generation variability (such as unplannedoutages), system congestion and the prices of18 Although OECD Pacific is modelled as a single region, itscountries are not highly interconnected; further analysis must becarried out to determine how this will affect the areas of concerndemonstrated in the model.19 The methodology for calculating the emissions reductionbenefits requires further refinement but this provides anindication of the potential reductions.Vision for smart grid deployment to 205027© OECD/IEA, 2010

Figure 13. Regional CO 2emissions reduction from smart grid deploymentEconomies in transition0.400.300.400.20Gt CO per year20.10OECD North Amercia0.400.002015 2030 20500.30China0.300.200.20Middle East2015 2030 2050OECD Europe0.400.300.20Gt CO per year2Gt CO per year0.1020.000.40OECD Pacific0.100.302015 2030 20500.200.10Gt CO per year20.002015 2030 20500.000.10Gt CO per year2India0.400.400.300.000.302015 2030 2050Gt CO per yearDirect reductions: energy savings from peak load management,continuous commissioning of service sector loads, accelerateddeployment of energy efficiency programmes, reduced line lossesand direct feedback on energy usage28 Technology Roadmaps Smart grids0.200.20Gt CO per year220.10Central and South America0.100.000.400.002015 2030 20502015 2030 20500.30AfricaOther developing Asia0.200.400.40Gt CO per year20.100.300.300.000.20Gt CO per year0.20Gt CO per year2015 2030 2050220.100.100.000.002015 2030 20502015 2030 2050Enabled reductions: greater integration of renewablesand facilitation of EV and PHEV deploymentKEY POINT: Smart grid deployment enables significant CO 2emissions reductions.© OECD/IEA, 2010

commodities such as oil, gas, coal and nuclearfuel. In markets where consumers are billed usingpricing schemes that do not vary based on realproduction costs (flat-rate based pricing), there isno real- or near real-time link to production costsand consumption. Smart grids can help consumersmanage energy use – by taking advantage of loweroff-peak prices, for example – so that even if theprice of electricity is significantly higher duringpeak times, their monthly or annual bills wouldchange little. Technology that can accomplish thisvaries in industrial, service and consumer sectors;some of it is mature and has been deployed formany years, especially in the industrial sectors.Further study is required of the costs and benefitsand behavioural aspects of electricity usage inorder to identify solutions that enable consumersto manage electricity better and minimise costs.The environmental costs and security benefitsto society of the electricity system are notcompletely taken into account in currentregulatory frameworks for production, use andmarket arrangements. Companies typically investlarge amounts of capital to build electricitysystem assets and receive regulated rates ofreturn over a long time period – especially inthe transmission and distribution sectors. In thecurrent technologically mature market, this is alow-risk, low-reward model. Future grid regulation,however, will need to incorporate factors such asgreenhouse gas emission reductions and systemsecurity into operating costs. For smart griddeployment to become a reality, all stakeholdersmust bear their fair share of benefits, costs andrisks – especially end-users, who ultimately payfor the electricity service. This can only happenthrough clever market design and regulation, andsustained stakeholder engagement that will enablenew technology demonstration or deploymentat an acceptable level of risk, taking into accountthe existing status of the system as well asfuture needs. If this is accomplished, the costsand benefits can be rationalised and defended,ensuring the development of a clean, secure andeconomical electricity system.Vision for smart grid deployment to 205029© OECD/IEA, 2010

Technology development: actions and milestonesThis roadmap recommends the following actions:Build up commercial-scale demonstrations that operate across systemboundaries of generation, transmission, distribution and end-use andthat incorporate appropriate business models addressing key issuesincluding cost, security and sustainability.Enable increased levels of demand response for customers fromindustrial, service and residential sectors, co-ordinating collaborationand responsibilities among electricity system stakeholders.Develop and demonstrate consumer-based enabling technologiesincluding behavioural, policy and technical aspects.MilestonesConcentrated effort from 2011 to 2025Completed by 20202011 to 2020Development anddemonstrationThe need for commercial-scaledemonstrationThe existing smart grid technology landscape ishighly diverse. Some technology areas exhibit highlevels of maturity while others are still developingand not ready for deployment. Although continuedinvestments in research and development areneeded, it is even more important to increaseinvestments in demonstration projects thatcapture real-world data, integrated with regulatoryand business model structures, and to workacross segmented system boundaries – especiallyinteracting with end-use customers. While thisis happening currently as a result of stimulusfunding (Table 5), it is vital that it continue toexpand. Only through large-scale demonstrations– allowing for shared learning, reduction ofrisks and dissemination of best practices – canthe deployment of smart grids be accelerated.Current levels of political ambition appear to besufficient, but high quality analysis and positivedemonstration outcomes must be highlighted tosustain these levels.Demand response enabledby smart gridsDemand response (DR) is one of the keyapproaches enabled by smart grids. Changes inthe generation sector will include the increaseddeployment of variable generation to levels over20% of overall demand in many regions, withsome regions significantly surpassing this level.Increased consumption of electricity from bothexisting and new loads will continue to placestress on the electricity system and increasepeak demand. Variable generation resourcesand peak demand can be managed by a rangeof mechanisms – DR being one – where morepotential is ready to be exploited.Load management, in the form of direct loadcontrol, peak shaving, peak shifting and variousvoluntary load-management programmes, hasbeen implemented since the early 1980s. Withdemand response, the system operator will be ableto monitor and manage demand; the electricitygrid will thus move from load-following to loadshapingstrategies in which demand-side resourcesare managed to meet the available generation andthe grid’s power delivery capabilities at any giventime (Ipakchi and Albuyeh, 2009).Demand response cuts across several technologyareas highlighted earlier, including customersidesystems, advanced metering infrastructure,distribution management and automation, andsometimes stretching from generation to end-use.Additionally, there are three main customer groupswith different DR profiles: industrial, service andresidential. A relatively few industrial customerswith large electricity demands could have asignificant impact on the electricity system; maturetechnologies and market approaches exist forapplications in this end-use sector. A large numberof residential consumers would be needed to havea similar effect and the technology, behaviouraland market models are much less mature. Theservice sector falls somewhere in the middle.Demand response can significantly reduce peakdemand and – in the longer term – provide theflexibility needed, both in volumetric terms and inspeed of response, to support variable generationtechnologies. Given current technological andmarket design maturity levels, however, system30 Technology Roadmaps Smart grids© OECD/IEA, 2010

operators have made it clear that more work isneeded in the near term to understand the keyfactors that will enable DR in the residential andservice sectors. In addition to system operators,generation stakeholders who depend on systemflexibility, such as wind and solar farm operators,must actively support DR technology developmentand demonstration as a way to increase flexibilityand ensure increasing deployment levels intothe grid can be managed effectively. Other DRstakeholders, including aggregators, technologydevelopers and industrial, service and residentialcustomers, must also collaborate to ensure thattechnology development meets all parties’ needswith due consideration of regulatory and marketmechanisms.Development of consumer-basedenabling technologiesPilot projects have shown that certain so-calledenabling technologies enhance the ability of smartgrids consumers to adjust their consumptionand save on their electricity bills. These enablingtechnologies also improve the sustainability of enduserbehaviour change over time. Considerableinnovation is under way in this field and numerousenabling technologies have already been developedand piloted, including in-premise customer displaysor “energy dashboards”, programmable and priceresponsiveend-use controllers, and home or facilitywideautomation networks.Some research projects are looking into thebehavioural aspects of presenting feedbackon consumption, as well as opportunities forautomated end-use load control. As with manyemerging fields, the range of approaches is wideand early results vary considerably.Key enabling technology development questionsinclude:zzzzzzzzIs there an optimal mix of behaviouralmodification and automation technologies?How much customer education is required andwhat are the best approaches?What policies can governments adopt toencourage innovation without pickingtechnology winners?What is the impact of ICT choices (e.g. private/dedicated carriers vs. public-based carrierssuch as the Internet) on enabling technologydevelopment?StandardsThis roadmap recommends the following actions:Governments and industry should evaluate priorities and establish protocols,definitions and standards for equipment, data transport, interoperability andcyber security, and create plan for standards development to 2050.Expand collaboration in the development of international standards to reducecosts and accelerate innovation while developing globally accepted standards.MilestonesFrom 2011 to 2013Continue from 2011 to 2050Smart grid equipment and systems are providedby many industry sectors that historicallyhave not worked together, such as equipmentmanufacturers, ICT providers, the buildingindustry, consumer products and service suppliers.Control systems operated by utilities whosenetworks interconnect need to be able to exchangeinformation. Customer-owned smart appliances,energy management systems and electric vehiclesneed to communicate with the smart grid.Standards, definitions and protocols for transportof data are essential for this complex “systemof systems” to operate seamlessly and securely(Figure 14).Technology development : actions and milestones31© OECD/IEA, 2010

Figure 14. Smart gridproduct providersElectrical equipmentmanufacturers(Production, transformationand protection equipment)Smart gridproductsICT industry(Communication equipment,software and datamanagement, cyber security)zzzzzzzzzzzzPhasor measurement units and other sensorsthat increase wide-area situational awareness.Distribution grid automation and integrationof renewable resources.Interconnection of energy storage.Communication with electric vehicles tomanage charging.Data communication in the smart grid.Cyber security.Benefits of interoperabilitySource: Canmet Energy/Natural Resources Canada(not previously published)International perspective onstandardsVariations in equipment and systems to meetdiffering national standards add cost; thiseventually gets passed on to consumers.International standards are needed to promotesupplier competition and expand the range ofoptions available to utilities, resulting ultimately inlower costs for consumers. Connection of nationalelectric grids with those of adjacent countries – asin the Americas and in Europe, for example – willalso be facilitated by expanded internationalstandards. For all these reasons, it is in the interestof countries developing smart grids to collaborateon international standards.Smart grids will eventually require hundreds ofstandards to be completely specified. Some of thehighest priority areas include: 20zzzzBuilding industry(HVAC,energy managementsystems)Advanced metering infrastructure (AMI).Interfaces between the grid and the customerdomain to support demand response andenergy efficiency applications.20 Adapted from NIST, 2010.Consumer products(Electronics, appliances,automotive)KEY POINT: A broad range of product andservice providers who have not workedtogether in the past will have to collaboratein smart grids deployment.Interoperability refers to the ability of two ormore networks, systems, devices, applications orcomponents to communicate and operate togethereffectively, securely, and without significant userintervention. The evolution of telecommunicationnetworks and the Internet over the last 40 yearshas demonstrated the benefits of having robustinteroperability standards for large infrastructuresystems. Standards prevent prematureobsolescence, facilitate future upgrades and ensuresystems can be scaled up for larger deployments.Standards can also provide for backwardcompatibility, integrating new investmentswithexisting systems. Standards are neededto support the development of mass markets forsmart appliances and electric vehicles that cancommunicate with the grid regardless of locationor service provider. The introduction of informationtechnologies in the smart grid introduces new cybervulnerabilities that must be protected against bythe rigorous application of cyber security standards.Standards will also protect privacy while enablingcustomers to securely access information on theirown energy consumption.Highlights of ongoing activitiesAt the international level, technical standardsunderpinning the smart grid are being developedby several organisations. 21 Since the standardsall need to work together to support an overallsystem, co-ordination of efforts by theseorganisations is critically important.In the United States, the National Institute ofStandards and Technology (NIST) has beenleading a major co-ordination programme, whichhas developed and published the Release 1.021 Including International Electrotechnical Commission (IEC),International Institute of Electrical and Electronics Engineers(IEEE), International Organization for Standardization (ISO),International Telecommunications Union StandardizationSector (ITU-T), and many other.32 Technology Roadmaps Smart grids© OECD/IEA, 2010

Interoperability Framework for smart grids. NISThas co-operated with many other countries thatare working on smart grids to share work andfacilitate collaboration, and has also establisheda new independent organisation, the Smart GridInteroperability Panel. Nearly 600 companiesand organisations from around the world areparticipating in the panel, which is co-ordinatingthe work of over 20 standards developmentorganisations, including those listed above.In Europe, a European Joint Working Group forStandardisation of Smart Grids has recently beenestablished in which CEN, CENELEC, ETSI 22 andthe European Commission are participating.Japan has developed an initial standards roadmapfor smart grids and has also formed a SmartCommunity Alliance, which has extended theconcept of smart grids beyond the electric systemto encompass energy efficiency and efficientmanagement of other resources, such as water,gas and transportation. The government of Koreahas announced a plan to build a national smartgrid network and is beginning work on a standardsroadmap. In China, the State Grid Corporation hasdeveloped a draft Framework and Roadmap forStrong and Smart Grid Standards.The major economies are all contributing to thedevelopment of international standards uponwhich national standards can be based. Continuedcommunication and collaboration will createexcellent prospects for international harmonisationof many smart grid standards, especially thosedealing with the new information aspects of thegrid, while taking into account the diversity ofinfrastructure requirements around the world.22 European Committee for Standardization (CEN), EuropeanCommittee for Electrotechnical Standardization (CENELEC),European Telecommunications Standards Institute (ETSI).Technology development : actions and milestones33© OECD/IEA, 2010

Policy and regulatory framework:actions and milestonesCollaborating on a policy and regulatoryenvironment that supports smart grid investmentis perhaps the single most important task forall stakeholders in the electricity sector. 23 A lackof collaboration has already led to problems indemonstration and deployment projects. As withmost policy issues, the key is to find the rightbalance in sharing costs, benefits and risks. Theresponsibility for achieving this balance lies withregulators and, in some cases, legislators, but mustinclude input from all stakeholders. Key policyquestions that regulators must answer include:zzHow should smart grid investment costs berecovered? If shortfalls in benefits occur, howshould they be shared between utilities andconsumers?23 Many other issues associated with smart grid deployments needto be addressed such as: providing for utility cost recovery;encouraging volumetric decoupling; providing meteringcompatibility; implementing demand response; and movingtowards wholesale market integration. Although not directlyrelated to smart grid deployment, well-developed policies in theseareas can help accelerate the beneficial impacts of smart grids.zzzzzzzzzzzzHow can additional services (such asbalancing, demand response, energy retailing)be enabled by new regulations and smart gridtechnologies?Should electricity rate options be compulsoryor voluntary?Should vulnerable customers be protectedfrom the possibility of higher bills? If so, how?Should advanced technology investmentssuch as smart grids, which carry the extrarisk of technology obsolescence, be treateddifferently from other utility investments?Should some customer groups less able toparticipate in dynamic pricing be excused frombearing the extra costs of smart grids or beingsubject to new service conditions? If so, whatcan or should be done for these customers?What is the impact of differing tariff structuresbetween interconnected regions?Generation, transmission and distributionThis roadmap recommends the following actions:Cross-sectorDetermine approaches to address system-wide and cross-sector barriers to enablepractical sharing of smart grids costs and benefits.Address cyber security issues proactively through both regulation and application of bestpractice.GenerationDevelop an evolutionary approach to regulation for changing the generation landscapefrom existing and conventional assets to more variable and distributed approaches –including both large and small electricity generation.Develop regulatory mechanisms that encourage business models and markets to enablea wider range of flexibility mechanisms in the electricity system to support increasedvariable generation penetration.TransmissionContinue to deploy smart grids on the transmission system to increase visibilityof operation parameters and reliability.Assess the status of regional transmission systems and consequently future requirementsin smart grid technology applications to address existing problems and potentially delaynear- and medium-term investments.DistributionDetermine policy approaches that can use smart grids to leverage distribution systeminvestments strategically and optimise benefits.MilestonesCompleted by 2020Ongoing to 20502011 to 20302011 to 2030OngoingContinued 2011to 20202011 to 2020Promote adoption of real-time energy usage information and pricing that will allowfor optimum planning, design and operation of distribution system in co-operationwith customers.Focused effortfrom 2011 to 2020,ongoing to 205034 Technology Roadmaps Smart grids© OECD/IEA, 2010

Electricity system and market operation canbenefit from the deployment of smart grids, butregulatory changes are required to ensure that allstakeholders – especially consumers – share thecosts and the benefits. Many of these issues havenot yet been examined in detail yet, so as well asoffering solutions to certain issues, this section willindicate where more work is needed.Cross-sector considerationsUnbundling and liberalisation of the electricitysystem has increased the institutional and marketcomplexity associated with system planning,operations and services. Functional unbundlingand new operating entities have complicatedownership and operations, which are often underdifferent or dual regulatory jurisdictions, andhave added uncertainty as regards deliveringneeded investment. Under these conditions, thereare increased barriers to the demonstration anddeployment of smart grids, and an increased needto address these across all sectors, rather than onlyat the sectoral level. Smart grids costs and benefitscan be more easily shared if they are consideredacross all sectors.As discussed earlier, cyber security is a key issueas the deployment of increased ITCs introducesnew vulnerabilities to the system. These must beproactively addressed across all sectors of theelectricity system as opposed to simply meetingregulatory requirements. This will requireincreased effort for regulators, system operatorsand technology providers.Electricity generation sectorThe deployment of variable generation is expectedto increase to over 20% of overall supply in manyregions (with some regions significantly surpassingthis level), supported by government policy andregulation, at state, provincial and regional levels.Regulatory mechanisms need to be developedto encourage business models and markets thatenable sufficient flexibility required by variablegeneration deployment to ensure reliable systemoperation. Markets must be transparent to allowasset owners and third parties to enter and offerconventional as well as innovative solutions toprovide such flexibility. More effort is neededin demonstrating and verifying the interactionsbetween well-known and established approaches(such as peaking generation plants) and otherflexible approaches (including expandedDR applications), along with market designrefinements that enable continued innovation.A new factor in recent years in the electricitygeneration sector is the rise in the number ofelectricity consumers who produce small amountsof electricity at or near the place of consumption– often referred to as “prosumers”. Managementof this sort of distributed generation can bebetter enabled by smart grids, through increasedinformation, and creation of beneficial marketand regulatory structures. Many policies andregulations have been established globally tosupport this type of generation, such as feed-intariffs and accompanying grid interconnectionpolicy. But this will need continuing evaluation toensure the maximum amount of customer-sitedgeneration at lowest cost can be deployed, withconsideration to all electricity system stakeholders.The deployment of smart grids may have anegative impact on some types of generation. Asglobal electricity demand increases, smart gridsmay slow demand growth by enabling moreefficient system operation but are not likely tosignificantly decrease the use of existing assets tomeet power needs. On a regional basis, certainassets may become redundant as smart gridsare deployed, because of decreased electricitydemand, shifting demand profiles and newapproaches to increase system flexibility or provideancillary services. As smart grids will enableincreased DR and electricity storage that reducesthe need for peaking generation, identificationof possibly redundant assets should be carriedout at the earliest possible point in smart griddeployment to allow for appropriate planningand cost/benefit analysis. Regulatory treatment ofsuch stranded assets is well developed, however,and existing regulatory structures can be used tofacilitate loss recovery.Transmission networksInvestment in the smartening of transmissionnetworks is occurring around the world. Manytransmission systems already use some smart gridtechnologies and are operating robustly, allowingfor adequate competition among generatorsand therefore ensuring appropriate electricityprices. Other transmission systems are plagued bycongestion and concerns over ageing infrastructure.Policy and regulatory framework: actions and milestones35© OECD/IEA, 2010

Even as transmission systems are being smartened,new transmission capacity and interconnectionswith other electricity systems are also needed.Deploying new transmission is often complicated bythe unbundled and liberalised nature of electricitysystems and by lengthy approval processes.Some countries now investing in nationalscaletransmission systems (e.g. China), are notexperiencing these issues and have been able todeploy modern transmission systems very quickly,defining smart grids as “strong and smart grids”and making use of modern HVDC technologies.Other countries could benefit from greaterregional assessment of the current status andfuture requirements of transmission systems, toidentify technology applications and requirementsfor additional capacity and interconnection.Such assessments can lead to new technical andregulatory solutions that optimise the operationand planning of existing systems, enabling thedeferment of conventional investments that maybe hindered by long approval processes or localopposition. To enable efficient operation today aswell as accommodate future changes, governmentand regulatory policies must allow timely andadequate transmission system investment;inadequate investment brings risks of higher costsin the future and of system failures.Distribution networksThe smartening of distribution networks canbring significant benefits to operators andcustomers, but requires considerably moreeffort than smartening transmission networks.Distribution networks have many more nodes to beinstrumented and managed, and ICT requirementsare much higher. Distribution systems connect tonearly all electricity customers (excluding largeindustrial customers connected to the transmissionsystem), as well as distributed generation, variable/dispatchable resources and new loads such aselectric vehicles. Smart grid technology must bestrategically deployed in order to manage thiscomplexity, as well as the associated costs, to thebenefit of all stakeholders.increased interaction between DSO and customerthrough the provision of real-time energy usageinformation and pricing, which are importantnew tools for both DSOs and retailers. Experiencegained through pilots and demonstrations canbe applied to develop new business and marketmodels for DSO/retailer-customer engagement.The most important aspect in the development ofneeded regulatory, business and market modelsis that benefits and risks associated with thedeployment of smart grids must be shared withother stakeholders – upstream with other systemoperators and generators as well as downstreamwith end-users. Business models without sharedcosts and benefits will not be successful. Additionalpolicy and regulation will be needed for DSOs tomanage and utilise these relationships to meetsystem investment needs.Smart grid, smartconsumer policiesElectricity is consumed by a range of customers,including industrial, service/commercial andresidential. In industrial and sometimes thecommercial sectors, customer knowledge ofenergy management is high and technologies toenable demand response or energy efficiency arewell known, mature and driven by cost savings.However, this is not the case at the residential level,where there is a need to rapidly expand businessmodels, analysis and communication to enablemuch greater residential customer interaction withthe smart grid.Compared with customers in other industries, suchas telecommunications, travel and retail, electricityconsumers are typically not provided with eitherthe service options or pricing information needed tomanage their consumption. Providing these optionsand information can help costumers becomesmarter while delivering significant benefits to gridoperators, including reduced costs. Smart gridcustomer policies fall into three groups: consumerfeedback, pricing and customer protection.Market unbundling has changed the ownershipand operating arrangements of distributionnetworks and, in many countries, the role ofthe distribution system operator (DSO). Insome countries, an electricity retailer or energyservice provider entity is placed between thecustomer and the DSO. Smart grids enable36 Technology Roadmaps Smart grids© OECD/IEA, 2010

This roadmap recommends the following actions:Collect and codify best practice from smart grid and smart metering pilot projectsand increase study of consumer behaviour, use findings to improve pilot projects.Expand pilots on automated demand response especially in service andresidential sectors.Develop electricity usage tools and pricing practices that incentivise consumersto respond to changes in electricity markets and regulation.Develop new policies and protection mechanisms to control and regulateprivacy, ownership and security issues associated with detailed customer usagebehaviour information.Develop social safety nets for vulnerable customers who are less able to benefitfrom smart grid pricing structures and are susceptible to remote disconnectionfunctions made possible by smart grids.Milestones2011 to 2020Continue over 2011 to 2050Evolve approaches over time,largely completed by 2030From 2011 to 2020From 2011 to 2015Collect best practice on consumerfeedback and use it to improvepilot projectsThe principle behind consumer feedback policies isthat making energy more visible enables customersto better understand and modify their behaviour.Consumer feedback can be provided across acontinuum, from a monthly bill to instantaneousread-outs of consumption and prices, some ofwhich are quite costly. A balanced and effectiveconsumer feedback policy can be developed byconsidering: i) What information customers reallyneed to make rational energy decisions?;and ii) What is the best form and medium topresent this information?Current consumer feedback pilot projects haveonly been able to motivate and discern short-termbehaviour changes, because participants realisethat the technology and services provided aretemporary. Infrastructure changes, which deliverlarge and sustainable efficiency and demandresponse results, are obtained only from long-termor permanent programmes. This is one of manyreasons why consumer feedback pilot projectresults vary radically. The design of pilot projectsalso makes it difficult to discern adaptive andinfrastructure changes, resulting in overestimates orunderestimates of long-term results. More rigorousand methodical research and evaluation is neededto identify the optimal method to deliver feedbackand to understand better the interaction betweenconsumer feedback and pricing or incentives(financial or other) and the effect of enablingtechnologies (e.g. automation) on results. Theseimproved approaches can reduce other issuescreating variability in pilot project results, includingthe prior history of consumer feedback policies,variety in customer types and preferences, and thespecifics of the service options being piloted.Additional research in this area should have threeobjectives: i) identify lessons for policy‐makersfrom social science research on consumerfeedback by collecting and comparing the resultsof advanced metering, real-time pricing andconsumer feedback demonstration; ii) outlinetechnologies proven to mobilise sustainablechanges in energy consumer behaviour; and iii)establish a community of practice internationallyto develop standard methods and analytic toolsfor estimating the consumer behaviour changebenefits of smart grids.Automated demand responseMany analysts believe that the full potential ofsmart grids can only be realised by creating aseamless and automatic interconnection betweenthe network and the consumer installation –either by using some end-use devices that arepre-programmed by the consumer, or by usingautomated building management systems.Feedback with the customer would occurautomatically within consumer-set parameters, inan extension of the feedback policies discussedabove. There is a significant amount of researchbeing carried out on processing and automationtechnologies that enable homeowners, buildingmanagers and business operators to programmePolicy and regulatory framework: actions and milestones37© OECD/IEA, 2010

end-uses to automatically adjust consumption anddemand according to price or other signals. Thepotential for automated end-user demand andefficiency response are considerable and have beenalready proven in some situations. In California,several energy providers have collaborated withfactories and building owners to configure energymanagement systems to curtail discretionary loads(lighting, elevators, heating, ventilation and airconditioning)whenever hourly prices exceed presetlevels.Smart grid and smart metering pilot projects onautomated demand response and energy efficiencyoffer best-practice lessons that need to becollected and incorporated into pilot programmes.There is significant interest in extending successfulapproaches found in the industrial and servicesectors to the residential sector, but many aspectsneed to be investigated. Key research questionsinclude:zzzzzzIs there an optimal mix of consumer feedbackand automation technologies?What is the impact of ICT choices onautomated DR?Which types of automated DR designs aremost useful to different types of customers(households, businesses, industry)?Determine best practicepricing policiesA range of pricing options can reflect actualgeneration and delivery costs, from static (non-timedifferentiated) to real-time pricing. The capabilityto deliver dynamic rather than static pricing is animportant benefit of smart grids, but has raisedfundamental questions about energy prices,including whether they should reflect real costsin real time, provide customers with choice andeliminate cross-subsidies. Dozens of smart customerpilot projects around the world have shown thattime-differentiated pricing can reduce peak demandby an average of about 15%; adding technologyon the customer side of the meter can more thandouble these impacts (Faruqui, 2010). This researchshows a relationship between information andconsuming behaviour, with more detailed and morefrequent information yielding greater efficiencyimprovements and peak demand reductions.deployments. For example, the United Kingdom’snational smart meter rollout is expected to reducedomestic electricity consumption by 3% and peakdemand by another 5%, generating almost halfof the USD 22 billion annual estimated savings –providing benefits to both consumers and utilitystakeholders. Electricity providers in California andelsewhere estimate that demand response andenergy efficiency benefits made possible by smartcustomers will be one-third to one-half of totalbenefits from smart grid deployment 24With flat-rate pricing, common to most retailmarkets globally, customers are charged thesame price for electricity through out the dayand the evening. The result is that customers areovercharged for some electricity (typically at nonpeaktimes) and undercharged for some electricity(typically during peak times). Such pricing does notencourage customers to shift demand to differenttimes, thereby reducing stress on the infrastructurewhen needed, but does provide a simple coststructure. The other end of the spectrum is real-timepricing, in which electricity is priced based on actualcosts of generation, transmission and distribution.There is no overcharging or undercharging forelectricity, but consumers may not be able to reduceelectricity demand during peak times and thereforerisk incurring higher costs. A third option for retailcustomers falls between these two extremes. Timeof-use(TOU) pricing mechanisms take advantageof the general predictability of electricity costs on adaily and seasonal basis. TOU pricing also reducesthe risk for customers by providing certainty.In deciding pricing policies for smart griddeployments, regulators must consider not only thepricing programme, but also the approach takento communicate and deliver such changes to thecustomers. The following questions need to beconsidered:zzzzShould dynamic pricing be the default serviceor an optional service?Are there better alternatives to dynamicpricing that can yield equivalent demandresponse benefits, such as peak time rebatesor direct load control, which may be easier tounderstand and less controversial?The benefits to be delivered by smart customerswho respond to pricing signals make up alarge part of the business case for smart grid24 These are estimated benefits usually based on extrapolationof pilot projects to large-scale rollouts. They include a numberof assumptions on market penetration and capacity/energyimpacts of pricing and service options.38 Technology Roadmaps Smart grids© OECD/IEA, 2010

zzzzHow much time differentiation in prices isneeded to deliver demand-response benefits?What transitional policies are needed to helpovercome customer inertia and risk aversion?zzIn jurisdictions with retail choice, are measuresneeded to ensure competing electricityproviders have access to customer data on thesame terms as the incumbent utility?Transition strategies and policies are especiallyimportant considering opposition by someconsumer advocates to smart meteringdeployments and associated pricing changesMore research is needed to examine how timedifferentiatedpricing can best induce behaviourchangingeffects, taking account of such factorsas the rate difference needed and the optimumnumber of time zones for consumer communication.Transition strategies to be studied include consumercommunications schemes, shadow pricing, billprotection mechanisms and two-part rate designs.Develop and implement consumerprotection policiesThe main consumer protection issues associatedwith smart grid deployments include: i) privacy,ownership and security issues associated withthe availability of detailed customer energyconsumption data; ii) customer acceptance andsocial safety net issues associated with new typesof rates, especially dynamic pricing; and iii)consumer protection issues associated with remotedisconnection functions made possible by smartgrids. These consumer issues should be addressedwithin the overall context of smart grid designand deployment planning; otherwise there is avery real potential for some customers to reactadversely or even be harmed.Customer data privacy, ownership and securityissues are a leading concern of consumer andprivacy advocates. Smart grid and smart meterdeployments create large amounts of detailedcustomer-specific information, while energyproviders gain a new medium for customerinteraction. Policy questions needing attentioninclude:zzzzzzWho owns the customer’s data, and how isaccess to and use of this data regulated?Who guarantees privacy and security ofcustomer data (e.g. against risk of surveillanceor criminal activity)?Will sale or transfer of customer data beallowed, and under what terms and to whosebenefit?Many regions are beginning to address theseissues, as evidenced by rules relating toconsumer data recently proposed in Ohio 25 andby the European Commission’s expert group onregulatory recommendations for safety, handlingand protection of data (part of the EU’s Task Forceon Smart Grids), 26 among other projects. TheOffice of Gas and Electricity Markets (OFGEM) inGreat Britain is proposing to have an independentorganisation (Data Communications Company)to access and store consumer data, and todisseminate only the basic required data to therelevant parties for billing or usage purposes. Bestpractices are coming to light in these and otherproject, and work in this area must continue.Customer acceptance and socialsafety net issuesCustomer acceptance and social safety net issues areof key concern where consumer advocates warn ofrate increases and adverse consequences, especiallyfor vulnerable consumers or those who cannotadjust their usage patterns as a result of pricing.Additionally, smart grids could allow quickerdisconnection of service and negatively impactvulnerable consumers such as low-income groups,pensioners and the handicapped. These groupsmay be disadvantaged by dint of their consumptionlevel or inability to change behaviour, or theymay be subject to new rate burdens that are notcommensurate with their opportunity to benefit.The development of smart metering and dynamicpricing technology also introduces new pressuresand opportunities for rate regulation. Chargingcustomers the same electricity price all hours ofthe year when the true cost of electricity changesconstantly may not be good regulatory practice– if it is possible to deploy the technology in a costeffectiveway to reflect these variations.There is also some evidence that smaller customers,including low-income households, have beenpaying more than their fair share for electricity,while larger users with big, temperature-sensitiveloads may be driving up electricity costs for25 www.puco.ohio.gov/PUCO/Consumer/Information.cfm?id=1003226 http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/expert_group2.pdfPolicy and regulatory framework: actions and milestones39© OECD/IEA, 2010

everyone. From this viewpoint, smart meteringand dynamic pricing provide an opportunity toremove hidden rate subsidies that until now haveburdened smaller customers. Further, in many pilotprojects, including the PowerCents DC project inWashington, DC, lower-income customers havesigned up for the programme at higher rates thanothers, and have responded to price signals.Further research is needed to identify the fullrange of consumer protection policies and makerecommendations to governments on smart gridrelatedconsumer protection issues.Building consensus onsmart grid deploymentThis roadmap recommends the following actions:Accelerate education and improve understanding of electricity systemcustomers and stakeholders (including energy utilities, regulators andconsumer advocates) to increase acceptance for smart grid deployments.Develop technological solutions in parallel with institutional structureswithin the electricity system to optimise overall operations and costs.MilestonesFrom 2011 to 2020From 2011 to 2020 (withcontinued evolution to 2050)As smart grid technologies are deployed, electricitysystems will become more customer-focused, butcustomer behaviour is difficult to predict. A longtermprocess of customer education and improvedunderstanding of customer response is needed toconsolidate technology and user interactions acrossthe electricity system. Energy utilities, regulatorsand consumer advocates all have a role in buildingawareness. Ultimately all investments are paidfor by customers, so those deploying smart gridsshould be able to demonstrate clearly how costs willbe recovered and how investment will benefit thecustomer. Customers must be significantly engagedin the planning and deployment of smart grids, atdemonstration stage and at full-scale rollout. So far,customers have seldom been at the table during thesmart grid planning process.The demonstration and deployment of newtechnologies involves some level of risk. Therisk must be analysed and addressed jointlyby stakeholders; technology risks can be bestaddressed by the technology providers andsystem operators, while policy and market risksmust be considered with regulator and customerinvolvement. By phasing demonstration anddeployment carefully while considering andadapting policy, regulation and institutionalstructures, risks can be minimised and projectswill be more broadly accepted. It can be arguedthat risks associated with smart grid development,demonstration and deployment will be lower thanthe risk of not addressing the coming changes andneeded investment in the electricity system.A positive example of a good customerengagement strategy can be found in ENEL’sTelegestore project in Italy. During the rollout of33 million smart meters, ENEL dedicated time toeducating the public through town hall meetingsand discussions with consumer protection groupsthat had voiced concerns over the collectionof data about consumer energy habits. Whileassuaging people’s doubts, Enel was able toexplain that most customers’ bills would godown because of smart meters, helping increasecustomer loyalty. 2727 www.smartgridaustralia.com.au/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=277&cntnt01returnid=6940 Technology Roadmaps Smart grids© OECD/IEA, 2010

International collaborationThis roadmap recommends the following actions:Expand smart grid collaboration; particularly related to standards and sharingdemonstration findings in technology, policy, regulation and business modeldevelopment.Link with electricity system technology areas that are not exclusively focused onsmart grids.Expand capacity-building efforts in rapidly developing countries by creating smartgrid roadmaps and undertaking targeted analysis tailored to contexts such as ruralelectrification, island systems and alternative billing approaches.MilestonesTargeted effort from 2011to 2015. Ongoing to 2050From 2011Focused initiatives to 2030.Ongoing to 2050Expand existing internationalcollaboration effortsInternational collaboration enables the sharing ofrisks, rewards and progress, and the co-ordinationof priorities in areas such as technology, policy,regulation and business models. In order to reachthe goals set out in this roadmap, smart gridsneed to be rapidly developed, demonstrated anddeployed based on a range of drivers that varyacross regions globally. Many countries havemade significant efforts to develop smart grids,but the lessons learned are not being sharedin a co-ordinated fashion. Major internationalcollaboration is needed to expand RDD&Dinvestment in all areas of smart grids – butespecially in standards, policy, regulation andbusiness model development. These efforts willrequire the strengthening of existing institutionsand activities, as well as the creation of new jointinitiatives.Standards play a very important role in thedevelopment of technology. By providing commondesign protocols for equipment, they can increasecompetition, accelerate innovation and reducecosts. International collaboration on standards isvital to ensure that the needs of various regionsare included, and to reduce repetition andoverlap in the development of standards. Severalorganisations are already working to harmonisestandards; continued and increased efforts areneeded as discussed earlier in the section ontechnology development.There is an urgent need to develop a significantnumber of commercial-scale demonstrationprojects and share the results among electricitysystem stakeholders. Projects are being developedat a national or regional level, but the reportingof data, regulatory approaches, financialmechanisms, public engagement experiencesand other aspects need to be shared globally. TheInternational Smart Grid Action Network (ISGAN),which has been created to address this need, willserve an important role as a platform and forumfor compiling global efforts, performing analysisand developing tools for stakeholders. The GlobalSmart Grid Federation (GSGF), APEC Smart GridInitiative, the European Electric Grid Initiative(EEGI) and European Energy Research Alliance JointProgramme (EERA JP) on Smart Grids are examplesof global or regional initiatives that need to buildon and strengthen their collaboration as theymonitor the implementation of the actions andmilestones in this roadmap. 28Create new collaborationswith other electricity systemtechnology areasSmart grids include technology areas, such asrenewable energy resources and demand response,which are not exclusively associated with, but arerelated to, smart grids. Some of these technologyareas were being studied long before the termsmart grid was developed, and therefore mayoffer solutions to problems that smart grids hopeto address. Collaboration with these electricitysystem technology areas has the opportunity toaccelerate the useful deployment of smart gridsand avoid repeating past development work.An ideal way to collaborate across these electricitysystem technology areas is through the IEAImplementing Agreements (IAs). 29 Of the 43 IAs,11 focus on electricity system issues (Table 9); theseare co-ordinated under the Electricity Co-ordination28 Web addresses for these organisations can be found on p. 48.29 IEA Implementing Agreements are multilateral technologyinitiatives through which IEA member and non-membercountries, businesses, industries, international organisations andnon-government organisations share research on breakthroughtechnologies, fill existing research gaps, build pilot plants andcarry out deployment or demonstration programmes.International collaboration41© OECD/IEA, 2010

Group (ECG). These IAs develop and deliver broadknowledge about the electricity system as a wholealong the entire value chain on an internationallevel. The ECG enables those working underrelated IAs to learn what others are studying anddetermine ways to analyse aspects that cut acrossseveral technology areas; this is especially relevantfor smart grids. The need for an implementingagreement focus on smart grids is currently underconsideration.Table 9. Electricity sector focus for IEA ECG Implementing AgreementsSmart gridsGeneration Transmission Distribution End-userHybrid andElectric VehiclesElectricity Networks Analysis,Research & DevelopmentEnergy Conservation through Energy StorageOcean Energy SystemsIEA GHG R&D ProgrammeHigh-Temperature Superconductivityon the Electric Power SectorPhotovoltaic Power SystemsWind Energy SystemsRenewable Energy Technology DeploymentDemand-Side ManagementHybrid andElectric VehiclesEfficient ElectricalEnd-Use EquipmentNote: The diagram indicates the primary area of the electricity system where the IA focuses. Most IAs engage with sectors beyondthose indicated. Website addresses can be found on page 48.Smart grid collaborationand developing countriesSmart grids can provide significant benefits fordeveloping countries that are building up electricitysystem infrastructure. In some cases, the solutionsapplied in developed countries will be appropriate;in others, targeted approaches will be required.Collaboration between developing and developedcountries can provide the basis for identifyingproblems and solutions.Some countries have already started to pursuesmart grid activities and some of these effortsinclude international collaboration. However,other countries need to be more activelyengaged, through information-sharing effortsabout the benefits and best practices of smartgrids. Roadmaps tailored to a set of needscommon to many developing countries – suchas rural electrification and island-based systems– would provide much value. These roadmapscould identify the barriers to wider technologydeployment and the means to overcome them,including regulation, policy, finance, and targetedtechnology development and business models.Additionally, targeted energy system modelling,standards development, legislation precedentsand capacity building would help identify andprioritise developing country specific needsand advance technology deployment (Bazilian,2011). International platforms such as ISGAN andGSGF, as well as the United Nations IndustrialDevelopment Organisation and other organisationsfocusing on developing country needs, could beused to help capacity-building efforts and to sharelessons learned and experiences.42 Technology Roadmaps Smart grids© OECD/IEA, 2010

Conclusion: near-term roadmapactions for stakeholdersSmart grids are a foundational investment thatoffer the potential to substitute efficient use ofinformation for more conventional "steel-in-theground"investments in the electricity system,at considerable cost savings to consumers, asdemonstrated by early results of pilot projects.Smart grids will also change how power systemplanning is done, and how wholesale andretail electricity markets are co-ordinated. Theinformation collected through smart grids willnot only empower customers to manage theirelectricity consumption but will enable electricitysystem operators to better understand and meetusers’ needs.complexity of the electricity system (technologicallyand from a regulatory and market perspective),and its importance to society in general, increasethe necessity to understand who should performthe actions outlined in this roadmap. Neither thegovernment alone, nor the private sector alone, canaccomplish the goal of modernising the electricitysystem. Collaboration is vital.Below is a summary of the actions by key electricitysystem stakeholders, presented to indicate whoshould take the lead in such efforts. In most cases,a broad range of actors will need to participate ineach action.The roles of the government and the private sectorare often misunderstood, at times by themselvesand often by each other. The broadness andSummary of actions led by stakeholdersLead stakeholderElectricitygeneratorsActionUtilise flexibility and enhancements delivered by smart grids to increase use of variablegeneration to meet demand growth and decrease emissions.Transmissionand distributionsystem operatorsGovernment andregulatorsTechnologyand solutionprovidersDevelop business models along with government and regulators that ensure allstakeholders share risks, costs and benefits.Lead education in collaboration with other stakeholders on the value of smart grids,especially with respect to system reliability and security benefits.Promote adoption of real-time energy usage information and pricing to allow foroptimum planning, design and operation of distribution and transmission systems in aco-ordinated fashion.Demonstrate smart grids technology with business models that share risks, benefits andcosts with customers in order to gain regulatory approval and customer support.Collaborate with public and private sector stakeholders to determine regulatory andmarket solutions that can mobilise private sector investment in all electricity system sectors.Recognise that smart grid deployments should reflect regional needs and conditions– a “one-size-fits-all” does not apply to the deployment of smart grids.Plan for evolution in regulation along with technology development – new technologieswill both offer and need new regulatory options.Invest in research, development and demonstration (RD&D) that address system-wideand broad-range sectoral issues, and that provide insights into behavioural aspects ofelectricity use.Deliver full technology solutions to system operators through partnership with others inthe value chain to address concerns with technology system integration, long-term postinstallationsupport, and security and reliability.Create a strategy and develop standards in participation with industry and governmentstakeholders on an international level to ensure interoperability of system componentsand reduce risk of technology obsolescence.Conclusion: near-term roadmap actions for stakeholders43© OECD/IEA, 2010

Lead stakeholderConsumersand consumeradvocatesEnvironmentalgroupsActionDevelop understanding of electricity system reliability, quality, security and climatechange benefits of smart grids. Help develop regulatory and market solutions that shareinvestment risks, costs and benefits with all consumers.Actively engage in developing system demonstrations and deployments in order toensure consumer contribution to and benefit from future electricity systems and markets,while ensuring consumer protection.Support the development of smart grids necessary for a range of clean energytechnology deployments such as wind, solar and electric vehicles.InternationalgovernmentalorganisationsSupport the RD&D of smart grid solutions for developing countries through targetedanalysis, roadmapping exercises and capacity building.Support international collaboration on and dissemination of smart grid RD&D, includingbusiness and regulatory experiences.44 Technology Roadmaps Smart grids© OECD/IEA, 2010

GlossaryCritical peak pricing (CPP): A tariff structure inwhich time-of-use prices are in effect except forcertain peak days, when prices may reflect thecosts of generating and/or purchasing electricity atthe wholesale level.Cyber security: Effective strategies for protectingthe privacy of smart grid related data and forsecuring the computing and communicationnetworks that will be central to the performanceand availability of the envisioned electric powerinfrastructure.Demand response (DR): Changes in electricityusage by customers in response to alterations inthe price of electricity, or incentives designed toinduce lower electricity use when system reliabilityis jeopardised or to increase consumption whengeneration from renewable sources is high. Demandresponse can be performed manually by the enduseror automatically based on predefined settings.Time-of-use pricing (TOU): A tariff structure inwhich electricity prices are set for a specific timeperiod on an advance or forward basis, typicallynot changing more often than twice a year. Pricespaid for energy consumed during these periodsare pre-established and known to consumers inadvance, allowing them to vary their usage inresponse to such prices and manage their energycosts by shifting usage to a lower cost period orreducing their consumption overall.Transmission: The transfer of bulk energyproducts from where they are produced orgenerated to distribution lines that carry theenergy products to consumers.Variable renewables: Technologies such aswind, solar PV, run of river hydro and tidal whereproduction of electricity is based on climaticconditions and therefore cannot be dispatchedbased on a need for additional power alone.Distribution: The transfer of electricity from thetransmission system to the end-use customer.Electric utilities: Enterprises engaged in theproduction, transmission and/or distribution ofelectricity for use by the public, including investorownedelectric utility companies; cooperativelyowned electric utilities; and government-ownedelectric utilities.Flexibility: The capability of a power system tomaintain reliable supply by modifying productionor consumption in the face of rapid and largeimbalances, such as unpredictable fluctuations indemand or in variable generation. It is measured interms of megawatts (MW) available for ramping upand down, over time.Generation: The process of producing electricenergy or the amount of electric energy producedby transforming other forms of energy, commonlyexpressed in kilowatt hours (kWh) or megawatthours (MWh).Real-time pricing (RTP): A tariff structure inwhich electricity prices may change as often ashourly (exceptionally more often). A price signalis provided to the user on an advanced or forwardbasis, reflecting the utility’s cost of generating and/or purchasing electricity at the wholesale level.Renewables: Resources that derive energynatural processes that are replenished constantly.Renewable energy resources include biomass,hydro, geothermal, solar, wind, ocean thermal,wave action and tidal action.Regional definitionsAfricaAlgeria, Angola, Benin, Botswana, Burkina Faso,Burundi, Cameroon, Cape Verde, Central AfricanRepublic, Chad, Comoros, Congo, DemocraticRepublic of Congo,Côte d’Ivoire, Djibouti, Egypt,Equatorial Guinea, Eritrea, Ethiopia, Gabon,Gambia, Ghana, Guinea, Guinea-Bissau, Kenya,Lesotho, Liberia, Libya, Madagascar, Malawi, Mali,Mauritania, Mauritius, Morocco, Mozambique,Namibia, Niger, Nigeria, Réunion, Rwanda, SãoTomé and Principe, Senegal, Seychelles, SierraLeone, Somalia, South Africa, Sudan, Swaziland,the United Republic of Tanzania, Togo, Tunisia,Uganda, Zambia and Zimbabwe.Central and South America (CSA)Antigua and Barbuda, Argentina, Bahamas,Barbados, Belize, Bermuda, Bolivia, Brazil, Chile,Colombia, Costa Rica, Cuba, Dominica, DominicanRepublic, Ecuador, El Salvador, French Guiana,Grenada, Guadeloupe, Guatemala, Guyana, Haiti,Honduras, Jamaica, Martinique, the NetherlandsAntilles, Nicaragua, Panama, Paraguay, Peru, St.Kitts-Nevis-Anguilla, Saint Lucia, St. Vincent-Grenadines and Suriname, Trinidad and Tobago,Uruguay and Venezuela.Glossary45© OECD/IEA, 2010

ChinaChina refers to the People’s Republic of Chinaincluding Hong Kong.Middle East (MEA)Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon,Oman, Qatar, Saudi Arabia, Syria, the United ArabEmirates and Yemen. For oil and gas production,it includes the neutral zone between Saudi Arabiaand Iraq.Other developing AsiaAfghanistan, Bangladesh, Bhutan, Brunei, ChineseTaipei, Fiji, French Polynesia, Indonesia, Kiribati,Democratic People’s Republic of Korea, Malaysia,Maldives, Mongolia, Myanmar, Nepal, NewCaledonia, Pakistan, Papua New Guinea, thePhilippines, Samoa, Singapore, Solomon Islands,Sri Lanka, Thailand, Vietnam and Vanuatu.OECD EuropeAustria, Belgium, Czech Republic, Denmark,Finland, France, Germany, Greece, Hungary,Iceland, Ireland, Italy, Luxembourg, Netherlands,Norway, Poland, Portugal, Slovak Republic, Spain,Sweden, Switzerland, Turkey and United Kingdom.OECD North AmericaCanada, Mexico and United States.OECD PacificAustralia, Japan, Korea and New Zealand.Economies in transitionAlbania, Armenia, Azerbaijan, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Estonia, the FederalRepublic of Yugoslavia, the former YugoslavRepublic of Macedonia, Georgia, Kazakhstan,Kyrgyzstan, Latvia, Lithuania, Moldova, Romania,Russia, Slovenia, Tajikistan, Turkmenistan, Ukraineand Uzbekistan.46 Technology Roadmaps Smart grids© OECD/IEA, 2010

ReferencesBazilian, M. and Welsch, M. et. al (2011), Smartand Just Grids: Opportunities for Sub‐Saharan Africa,Imperial College London, London.Boots, M., Thielens, D., Verheij, F. (2010),International example developments in Smart Grids- Possibilities for application in the Netherlands(confidential report for the Dutch Government),KEMA Nederland B.V., Arnhem.Brattle (The Brattle Group) (2010), Pricing PolicyOptions for Smart Grid Development, San Francisco.DOE (U.S. Department of Energy) (2009), SmartGrid System Report.EdF (2010), Smart Grid – Smart CustomerDistribution System, Paris.EirGrid (2010), Smart Grids A TransmissionPerspective, Dublin.Enexis (2010), Smart Grids: Smart Grid – SmartCustomer Policy Workshop Presentation,'s-Hertogenbosch.Faruqui, A., (2010), Demand Response and EnergyEfficiency: The Long View, presentation to GoldmanSachs Tenth Annual Power and Utility Conference,The Brattle Group.Faruqui, A., Hledik, R., Newell, S., and PfeifenbergerH. (2007), The Power of 5 Percent, Elsevier Inc.,October 2007, Vol. 20, Issue 8, pp.68-77.IEA (International Energy Agency) (2009),Technology Roadmap: Electric and plug-in hybridelectric vehicles, OECD/IEA, Paris.IEA (2010), Energy Technology Perspectives 2010,OECD/IEA, Paris.IEA (2011) Harnessing Variable Renewables: a Guideto the Balancing Challenge, OECD/IEA, Paris.Ipakchi A., Albuyeh F. (2009), Grid of the Future, IEEEPower and Energy Mag., 1540-7977/09/, pp. 52-62.MEF (Major Economies Forum) (2009), TechnologyAction Plan: Smart Grids.www.majoreconomiesforum.org/the-globalpartnership/smart-grids.htmlMigden-Ostrander, J (2010), Smart Grid PolicyChallenges: A Residential Consumer Perspective,Office of the Ohio Consumers’ Counsel, Ohio.NETL (National Energy Technology Laboratory)(2010), Understanding the Benefits of Smart Grids,Pittsburgh.NIST (National Institute of Standards andTechnology) (2010), NIST Framework and Roadmapfor Smart Grid Interoperability Standards, Release 1.0,Office of the National co-ordinator for Smart GridInteroperability.GAO (United States Government AccountabilityOffice) (2011), Electricity Grid Modernisation: ProgressBeing Made on Cybersecurity Guidelines, but KeyChallenges Remain to be Addressed, GAO-11-117.References47© OECD/IEA, 2010

List of relevant websitesDepartment of Energy – Smart Grid:www.oe.energy.gov/smartgrid.htmEuropean network for the Security of Control andReal-Time Systems (ESCoRTS):www.escortsproject.eu/European Technology Platform (ETP) for Europe’sElectricity Networks of the Future:www.smartgrids.eu/Global Smart Grid Federation:www.globalsmartgridfederation.org/IEEE Smart Grid: smartgrid.ieee.org/International Electricity Infrastructure Assurance:www.ieiaforum.orgInternational Smart Grid Action Network (ISGAN):www.iea-isgan.orgJapan Smart Community Alliance:www.smart-japan.org/english/tabid/103/Default.aspxKorean Smart Grid Institute:www.smartgrid.or.kr/eng.htmNational Institute of Standards and Technology(NIST) Smart Grid: www.nist.gov/smartgrid/The NETL Smart Grid Implementation Strategy(SGIS): www.netl.doe.gov/smartgrid/Smart Grid Information Clearinghouse:www.sgiclearinghouse.org/IEA Electricity basedImplementing AgreementsDemand-Side Management (DSM):www.ieadsm.org/Electricity Networks Analysis, Research &Development (ENARD): www.iea-enard.org/High-Temperature Superconductivity on theElectric Power Sector (HTS):www.superconductivityIEA.orgEnergy Conservation through Energy Storage(ECES): www.energy-storage.orgHybrid and Electric Vehicles (HEV): www.ieahev.orgEfficient Electrical End-Use Equipment (4E’s):www.iea-4e.orgIEA GHG R&D Programme (GHG R&D):www.ieaghg.orgOcean Energy Systems (OES): www.iea-oceans.org/Photovoltaic Power Systems (PVPS):www.iea-pvps.orgWind Energy Systems (Wind): www.ieawind.orgRenewable Energy Technology Deployment (RETD):www.iea-retd.org48 Technology Roadmaps Smart grids© OECD/IEA, 2010

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