Smart Grids Roadmap - Smart Grid Sherpa

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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
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 and 36: Interoperability Framework for smar
Page 37 and 38: Electricity system and market opera
Page 39: This roadmap recommends the followi
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

Smart Grids Roadmap - Smart Grid Sherpa

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