Smart metering. Position Paper. November, 2010

Transcription

1 Smart metering Position Paper November, 2010

2 Executive summary The decision to mandate a smart metering rollout is potentially hugely significant in terms of cost, impact on existing value chains, and impact on the relationship between customers and utilities. Any smart metering programme will involve numerous stakeholders (not just the DSO). They will have their own incentives and challenges which need to be taken into account. In our view, 5 dimensions need to be secured for a successful smart metering project The impact on Society and the overall Economic case need to be well understood and accepted by all The key enablers of Technology, Infrastructure and Rollout management need to be carefully considered and defined in the light of the expected costs and benefits of the programme In this respect, there are many lessons to be learned from existing programmes : In the Netherlands, stakeholder involvement and incentive scheme created major difficulties In France, lack of consensus on smart metering benefits and technological problems are hampering LINKY project In the UK, uncertainties on regulatory policy slowed down the project Based on our experience and on country case analysis, we were able to derive a number of key success factors that need to be secured when designing and later rolling-out a successful smart metering project, both at stakeholders level and at programme management level. 2

3 Ylios, Stratorg, Quintel & Frontier are all experienced consultancies in the European energy sector, with deep smart metering experience An executive and management consulting firm, of more then 15 senior staff, highly specialised in the energy sector Has a strong understanding of the smart-grid market and its evolution : participated in the European smartgrids think-tank Works with major European utilities firms : GDF-Suez, EDF, Public Power Corporation, Total, A 40 people strategy consultancy firm based in Paris Has a strong expertise in understanding markets and their underlying drivers (understanding the environment, identifying value, imagining future scenarios, ) Has an ability to identify innovative business models to capture value and ensure a sustainable position Builds a win-win relationship with all stakeholder of a project : Stratorg has developed a unique know-how based on its Trust methodology An economic consulting firm of more than 100 consultants specialised in strategy and economic consulting Recognized as one of the leading energy market, modelling and regulatory experts in Western Europe : Frontier has worked widely on the definition of energy and environmental policies Has a deep experience in smart metering : involved in projects in France, Netherlands, UK, Germany and Australia A strategy consulting firm with 40 consultants and an international network (USA and Europe) Has a strong experience of the Dutch smart-metering market Possesses an expertise in the roll-out process of the smart-metering market Has developed an Energy Transition Model to help governments define their energy policies 3

4 All smart metering projects involve numerous stakeholders : we have worked with many of them to better assess their expectations and specifics stakes Governments and regulators Reduce consumption and hence CO2 emissions Enable faster switching of supplier Improve market functioning and quality of service, based on more reliable data Enable more efficient development of new uses for power (e.g. EVs) End-users Reduce electricity bills Enable responsible and sustainable demand based on usage information Enhance lifestyle with new services Smart metering features Centralized metering system with distributed meters and management system Internet cos / Telcos Use smart metering comms to drive more network traffic Create new business models to derive value from existing customer base by moving into new services DSOs Reduce metering costs Optimise network operation and maintenance on basis of more data Better plan future network investments Interoperable utility meters and communications (water, gas, electricity, heat) Timely consumption information Automatic processing, transfer, management and use of metering data Energy efficiency services for consumer and energy system operators Energy service companies Use metering to enhance offer as a supplier of energy solutions for buildings and infrastructure Data companies Suppliers Reduce call centre costs Develop new tariffs and payment systems, on basis of enhanced customer data Develop more in home offers and build stronger customer relationship Equipment vendors Secure existing market share for incumbent players Identify and capture additional value in an emergent business area (hardware and adjacent services, ) Improve geographic coverage and capture more complete customer data Develop new offers 4

5 The right enablers Clear objectives In our view, there are 5 dimensions to secure the success of a smart metering project Society Change in behaviour to drive desired societal outcomes (e.g. environment) Enhance customer choice and value Protect vulnerable customers Ensure privacy concerns addressed Economic Sound cost benefit analysis Clarity on sources of benefit and cost sensitivities In-depth understanding of benefits across and between stakeholders Technology Choice of technology (functionality, evolution capacity) Fit with benefits capture (e.g. customer data visibility) Hardware, Data, Protocol standardization & openness Security of smart meter chain Infrastructure Systems to allow use of smart meter data & function to achieve benefits Change of IT and process infrastructure within DSOs, retailers, telcos, energy service cos, etc. Integration in broader value chains (e.g. green building, EV rollout, green district concepts) Appropriate incentives where companies are regulated Roll Out process management Organization of roll out process to ensure efficiency, customer engagement and wider benefits capture Integration of critical steps (installation, ) Communication towards stakeholders (clarity, transparency) Appropriate funding and incentives (efficiency and benefits) 5

6 Lessons learned in The Netherlands: Stakeholder involvement and incentive scheme created major difficulties Objectives Reduce energy consumption while maintaining same metering service price Reduce roll-out costs, supported by DSO Status Smart meter rollout was postponed in 2007 Today, it is still in trial phase but well on track with smart metering implementation Difficulties Privacy and security issues : Use of metering data for purposes other than billing is considered not compliant with European legislation Consumers were reluctant as lifestyle information can be revealed by analyzing the energy usage Examples of smart meter hacking arose Financial feasibility issue for DSO, even with government support: Rollout requires major investment, and assets have a short life cycle leading to high depreciation costs Remuneration for metering services is limited by legislation hampering innovation Lessons learnt Next steps If the utilities have to facilitate energy savings, the loss of income should be compensated Not involving interest groups at an early stage of the standardization process led to resistance Political timeframe is much shorter than industrial horizon, making companies cautious to commit Dutch market is too small to develop dedicated equipment; there are significant benefits to relying on developing international standards Standardization at European level Meter design will be changed for privacy reasons Project of a carbon tax on consumers to finance DSO investments A clear long term policy is yet to be defined by the authorities to reduce the regulatory/political risk for industrial partners 6

7 Lessons learned in France: Lack of consensus on smart metering benefits and technological problems hampers LINKY project Objectives Contribute to market opening Contribute to energy efficiency policy implementation Reduce DSO costs Status First step : trial with smart-meters developed by ERDF (Linky) in a few regions before their global implementation in France Difficulties From the customer point of view, DSO should support the development cost of smart metering. This position is not shared by other stakeholders. On the technical side, uncertainties put Linky project at risk The Linky smart meter has yet to demonstrate real energy savings for consumers: some problems for customers to see consumption data, GPRS communication issues limiting metering capabilities, Installation and maintenance costs assessment still pending and awaiting the results of the experiment currently taking place in a few regions Lessons learnt Clear cost benefit analysis must be performed to understand and create buy-in to benefits for stakeholders in the French context. Technology choice is critical, in terms of modularity, functionality and user-friendliness Installation is key in the roll out process and should not be underestimated Next steps ERDF, asked Elster to develop a modular prototype, able to evolve in terms of functionalities. Regulators and ERDF must convinced of the benefits of Linky. Based on a CBA, a strategy should be defined to involve the main stakeholders. New relationships with stakeholders should be assessed, in order to develop new attractive and sustainable business models for each of them. 7

8 Lessons learned in UK: uncertainties on regulatory policy and absence of distribution company involvement slowed down project Objectives Reduce energy consumption to meet carbon reduction targets In time, enable more Demand Side Management End estimated billing for customers Status Mandate to roll out meters has been approved and legislation enacted Government and Ofgem issued a joint Prospectus setting out options for detail of roll-out and are reviewing responses to this. Current timetable is for the roll-out to start in 2012 and complete in 2020, although Government pushing for an acceleration in this timetable. The roll-out is being led by suppliers rather than distribution companies Increases the complexity of the roll-out and the management of data flows once meters are in place Difficulties The process for setting up and regulating the Data and Communications entity still subject to much uncertainty Centralized model is required, thus creation of DCC entity Design, remit and legal status of this entity is still to be resolved Data privacy issues could limit use of half hourly data half hourly customer data can only be used if customers explicitly agree Lessons learnt As regulation scheme is key for clarity, all necessary legislative arrangements should be made prior of roll-out Distribution companies should be leader in the roll-out to limit complexity Next steps Finalise timetable Decide on detailed specification of meters and systems Design detailed roll-out programme 8

9 There are a number of key success factors that need to be secured at core stakeholders level Governments & Regulators Formulate legislation: political process of formulating legislation is unpredictable and changes greatly affect stakeholder involvement Cost benefit analysis: the sources of the benefits and the key cost sensitivities should drive technology and rollout design, and customer engagement models Citizen acceptance: concerns over data privacy are gaining momentum, impeding smart meter development Funding: the rollout of smart meters will represent a major financial investment; the funding arrangements for the utilities must be clear, and the recovery of costs must be efficient and equitable DSOs Project organization: due to the size of smart meter programmes the tendency exists to divide it in many autonomous projects, however it is important to guard the interdependencies First start-up phase: the complexity, together with unexpected delays, may put projects under high pressure to deliver as soon as possible, and this can undermine transfer of knowledge to line organisation New uses: new sources of data could change the way the DSO undertakes existing activities (e.g. maintenance planning, capital investment planning, theft identification) the benefits of changes in process need to be assessed and, where relevant, change implemented New services: smart metering may allow DSOs to offer new services which should be assessed Suppliers Understand business as usual impact: smart meter implementation will change processes and systems for meter data capture, and potentially drive customer enquiries this change must be managed effectively Update retail strategy: availability of smart meter data and new functionalities will allow updated customer segmentation and new energy retail product and tariff offers these need to be assessed and a strategy defined Broaden retail strategy: new functionalities will allow retailers to offer more in home services, either alone or in partnership with others opportunities and threats need to be assessed and a strategy defined 9

10 ...as well as at programme management level Dimension Key Issues Good practice SOCIETY Formulate legislation Gain citizen acceptance Legislator should involve stakeholders to improve policy efficiency and give visibility to all participants. Consider privacy aspects when drawing architecture Involve special interest groups to gain trust ECONOMIC Build sound business case New metering services Use and keep business case up-to-date Communicate early to customers the benefits for them TECHNOLOGY Standardize hardware Purchase efficiently Adhere and seek the development of international standards to help reduce product and investment costs Maximize collaboration / coordination among the different stakeholder organizations to ensure efficiency without impeding innovation Traditional purchasing relationship does not work in a development project, intensive collaboration is necessary to handle the unexpected INFRASTRUCTURE Flexibility of networks Ensure global system stability Regulatory authorities should grant the appropriate incentive to TSO and DSO for the development of new technologies that handle new generation sources, their distributed nature and bi-directional flows Develop strong coordination between transmission and distribution to ensure suitable contribution of local resources to global system security ROLL OUT PROCESS MANAGEMENT Project organization First start-up phase Use an integrated approach with top management involved Keep communicating goals to the separate projects Transfer of knowledge and extensive testing are necessary for smooth and controllable roll out - reserve time for this during the finalization phase 10

11 Our references Cost Based Analysis of case for smart metering Review of regulatory options Considered impact of smart meters on settlement of energy markets Net benefit of alternative smart meter roll out options Internal business case for smart metering A big national gas supply company An energy company Detailing long term smart meter strategy Prospective study on smart metering services Evaluated costs and benefits to DSOs in rollout of mart meters Analysis of implications of smart meters for customers A utility company Project management for developing a smart meter organization Strategic use of smart meters in retail business A grid company Project management development & integration of NTA smart meter Estimated retail costs of smart meter roll-out A grid company Study potential security improvements of smart meter chain Review of smart tariffs, energy saving products and services, and home automation A national regulator Organization of a think-tank on new entrants in the smart metering market Supported IBM negotiation for license to the technology for ENEL s smart metering solution Evaluation of opportunities for metering in Europe Advising on how to maximize the net benefits of a smart meter roll out in Western Australia 11