Smart Grids Roadmap - Smart Grid Sherpa

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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
Page 4 and 5: Table of contentsForeword 1Table of
Page 6 and 7: AcknowledgementsThis publication wa
Page 8 and 9: IntroductionThere is a pressing nee
Page 10 and 11: Figure 2. Smart grids can linkelect
Page 12 and 13: Electricity system needs for today
Page 14 and 15: line rating special protection sche
Page 16 and 17: Figure 6. Example of a 24-hour elec
Page 18 and 19: Adequacy concerns introduced by the
Page 20 and 21: cable or telephone), support data t
Page 22 and 23: Table 3 highlights a number of hard
Page 24 and 25: Box 3. Smart communitiesSeveral con
Page 26: Vision for smart grid deployment to
Page 29 and 30: Interpreting results and furtherana
Page 31 and 32: commodities such as oil, gas, coal
Page 33 and 34: operators have made it clear that m
Page 35: Interoperability Framework for smar
Page 39 and 40: This roadmap recommends the followi
Page 41 and 42: zzzzHow much time differentiation i
Page 43 and 44: International collaborationThis roa
Page 45 and 46: Conclusion: near-term roadmapaction
Page 47 and 48: GlossaryCritical peak pricing (CPP)
Page 49 and 50: ReferencesBazilian, M. and Welsch,
Page 52: Technology Roadmaps Smart Grids2015

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