Smart Grids Roadmap - Smart Grid Sherpa

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