FROM SMART TECHNOLOGY TO SMART CONSUMERS: FOR A BETTER SYSTEM RELIABILITY AND IMPROVED MARKETS EFFICIENCY.

Claire BergaentzléUniversité Grenoble-Alpes PACTE-EDDEN, CNRS

32d USAEE/IAEE North American ConferenceJuly 28-31 2013, Anchorage, AK.

claire.bergaentzle@upmf-grenoble.fr

• Smart grids are always designed in response to the specific energy objectives faced by the countries. No unique model.

• The scope of regulators in setting the regulatory framework for smart grids investments will depend upon organizational structure issues.

• What is recognized as best regulatory mechanisms by the litterature is rarely adopted. This can lead to inefficiencies in the process of adopting the technology

1/ Four examples to illustrate four smart grids objectives

2/ Organizational issue and the scope of the regulator

3/ Confronting real world regultory mechanisms to best practices

Smart grid technology

Reliability

Peak load RES and DG

Market efficiency

Wholesale market

Retail market

1/ Four examples to illustrate four smart grids objectives : the drivers for SG investments

California IllinoisGermany UK

• Limited available capacities

• Loading order

• Grid upgrade

•Intermittency risk and cost.

•Network management and forecast due to DG feed-in

• Send the right pice signal (real time pricing)

• Unpaid bills

• windows of investment for grid upgrade

• Integration of wind farms

• Enhance retail competition

DSM

Remote control and monitoring DSM

Remote control and monitoring Smart

meters

Remote control and monitoring

DSM & Smart meters

Remote control and monitoring

2/ Organizational issue and the scope of the regulator

California

UKGermany

Illinois

Integrated distribution and retail supply activity

Supply & metering activities partially separated

Supply & metering activities fully separated

Integrated distribution and retail supply activity with open retail market

Smart grid technology

Reliability

California IllinoisGermany UK

• Limited available capacities

• Loading order.

• Grid upgrade

•Intermittency risk and cost.

•Network management and forecast due to DG feed-in.

• Send the right pice signal

• Unpaid bills.

• windows of investment for grid upgrade

• Integration of wind farms.

• Enhance retail competition

DSM

Remote control and monitoring DSM

Remote control and monitoring Smart

meters

Remote control and monitoring

DSM & Smart meters

Remote control and monitoring

2/ Organizational issue and the scope of the regulator

1: Classical roles of regulation :o Provide incentive for enhanced productive/innovative efficiency

o Extract part of the efficiency rent (limit the impact of information asymetry)o Enhance the quality of the utility.

2: Smart grids objectives-related regulation : coherence between the regulatory framework and the first drivers for SG investments

o Energy efficiency in California,o RES and DG integration in Gremanyo The adoption of smart meters for RTP in Illinoiso The elimination of DNOs forclosue and the stimulation of retail competition in

the UK

3/ Main elements characterizing a smart grids oriented regulation:

California Germany Illinois UK

Productive & innovative efficiency

• CoS + Revenue cap• Smart grids expenses recorded as capex.

• CoS + Revenue cap• Smart grid expenses recorded as non controlable costs.

•CoS + PBR• Ex ante decision about smart grids investments.

• Menu of contract + Revenue cap regulation.

Rent extraction • 10% of SG underspending redistributed to the utilities.• Progressive revenue sharing mechanism based on benchmark RoE.

• No mechanism.• But future implementation of yardstick mechanim when regulatory scheme is more mature.

• Symetrical revenue sharing mechanism based on benchmark RoE.

Equalizing incentive with symetrical sharing based on the menu of contracts.

Enhance the quality

• Performance-based indicators

• 3 indicaors reflecting the quality of the load.

•7 performance indicators with reward/penalty incentive that directly rely on AMI deployment.

• Consumer-based incentives.

Smart grid-specific regulatory features

• Revenue cap is recognized as « DSM friendly » + decoupling mechanisms• 19 SG metrics.

• Expansion factor for DG-related expenses (shallow method of integration)

• 60 SG metrics • Implementation of the Data Communication Company.•RIIO@20

Concluding remarks:

It is paramount to have a stable long term smart grid strategy and to keep a coherence between the stated objectives and what is implemented. Questions the role of politics over the different mandates.

Tradeoff between incentives to invest and incentives to reach a higher level of efficiency. With the multiplication of countries adopting SG technology, more stringent efficiency incentives should be implemented as regulators obtain feedbacks and learning effects.

Smart grids technology, independently from its first purpose of adoption is likely to enhance the performance and quality of the grid. This should in turn translate into strengthened performance-based financial incentives. Avoid too numerous and burdensome metrics.

The question of smart grid technology « behind the meter » has to be studied through its effects on new entrants, particularly on countries where the process of market opening is underway (California).

FROM SMART TECHNOLOGY TO SMART CONSUMERS: FOR A BETTER SYSTEM RELIABILITY AND IMPROVED MARKETS EFFICIENCY.

Claire BergaentzléUniversité Grenoble-Alpes PACTE-EDDEN, CNRS

32d USAEE/IAEE North American ConferenceJuly 28-31 2013, Anchorage, AK.

claire.bergaentzle@upmf-grenoble.fr