Smart Grids promise to become a significant part of the solution to Europe’s cleaner energy needs. They will deliver efficiency savings to households and businesses, and help industry to integrate greener technologies like electric vehicles and renewable power generators into the grid. They will empower consumers, boost competitiveness, generate jobs and increase economic growth.
So what are they? Smart Grids are upgraded electricity networks which incorporate two-way digital communications between the supplier and consumer, along with intelligent metering and monitoring systems. In Europe more than € 5.5bn has been invested in about 300 Smart Grid projects over the last decade, including € 400m from the EU budget.
Smart metering is a key component in the deployment of Smart Grids. By 2020 investment in smart metering is expected to total about €40bn. We are still in the early stages. Today only around one in ten of Europe’s households have some sort of smart meter, and most of these do not provide the full range of services to consumers. Some pilot projects suggest that energy savings from smart meters could become even higher than the current level of around 10%.
At the political level, the EU can become one of the main drivers encouraging member states and companies to deploy Smart Grids on a large scale. The Commission has already asked European standards organisations to develop pan-EU standards for Smart Grids by the end of next year, and is also assessing whether new data protection and security frameworks are needed to meet the specifics of this technology. Commission proposals for additional, large-scale demonstration initiatives will be made before the end of this year, and will include new ways and means of leveraging finance in line with the EU’s Energy Infrastructure Priorities.
The EU’s financial resources are limited, however. Structural Funds and Infrastructure Package Instruments can play a role, but it is unlikely that large-scale deployment can be done through one-shot, ad hoc financing. That is why the Commission is calling on national regulators to take action, by producing targeted plans to accelerate the implementation of Smart Grids, and reward distribution system operators for efficiency gains, time-of-use tariffs and demand response.
Last but not least, the Commission is emphasising the need to safeguard competition on retail markets. Smart meter technology allows companies that control them to monopolise access to consumption data, as well as digital feed-back from customers, potentially preventing competitors from operating efficiently. The Commission will monitor the implementation of the Third Package requirements needed to create a transparent and competitive retail market for the development of services (e.g. time-of-use pricing and demand response) based on Smart Grids and metering.