Ee Case Study Smart Meters

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    July 2010 - VaasaETT GETT

    Evaluation of residential smart meterpolicies

    WEC-ADEME Case studies

    on Energy Efficiency Measures and Policies

    Prepared by Jessica Stromback and Christophe Dromacque,

    VaasaETT Global Energy Think Tank

    July 2010

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    Table of Contents

    Executive Summary 3

    Synthesis Report ....................................................................................................... 5

    Victoria (Australia) ................................................................................................... 16

    South Korea ............................................................................................................. 32

    California (USA) ....................................................................................................... 40

    Sweden ..................................................................................................................... 55

    Brazil ......................................................................................................................... 62

    Glossary of Terms ................................................................................................... 71

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    Executive Summary

    This report studies Smart Meter Policy for residential consumers and its influence

    on the environmental benefits they can provide. Five example markets were used,placed in different geographical regions: California USA, Victoria Australia, SouthKorea, Brazil and Sweden. The study looks at challenges within the marketstructures causing an interest in Smart Meters, the problems they aim to solve, thepolicy framework put in place and the results. If a policy framework was notdesigned to bring environmental benefits, this was taken into consideration duringanalysis.

    Smart Meters do not necessarily bring environmental benefits. Like many newtechnologies, their rollout requires replacing an entire, fully functional, existingsystem. Their lifespan is expected to be short, at only 15 to 20 years (rather thanover 30 years for traditional meters) and they use electricity to run which requiresextra generation to supply. The overreaching conclusion of the study is that the

    policies governing smart meters, are decisive in limiting or maximizing the positiveimpacts of this technology.

    Smart Meters (AMI) are measuring devices which send consumption information tothe utility using communication technology at pre-programmed intervals. They willalso include more advanced features such as outage information, two-waycommunication capabilities, a remote on/off switch etc. A fully functional AMImeter, such as those being rolled out in Australia and California, will haveapproximately 30 separate functionalities. Most of these functionalities willprimarily benefit the utility unless expressly employed toward end-consumerprogrammes with the support of regulation and supportive market structures.

    Smart Meters are often marketed according to the programmes they can enable

    with sufficient investment and regulatory support rather than the functionalities theyactually bring on their own. This can sometimes cause confusion and mean thatthe meters alone are seen as an answer to a wide variety of efficiency challenges.This is not the case, Smart Meter infrastructure creates a platform on which avariety of highly effective energy efficiency programmes can be built but they onlyform one partof this infrastructure, the rest is made up of regulatory structures,financial market structures, enabling communication technology, marketing andactive consumer participation. The central required element is always supportivepolicy and regulation.

    Main Conclusions of the Report

    1) As a technology, (without appropriate regulation) smart meters providemore benefits to the utilities than to the end consumers.

    2) Smart Meters do not benefit the environment without proper regulation.

    3) Smart Meter enabled programmes can provide substantial, long termsocietal and environmental benefits if they are placed in their correctposition; namely as a platform for efficiency programmes supportedthrough appropriate regulation and market structures.

    4) There are basic conflicts of interest caused when a utility which earns offof electricity sales, is asked to lower those sales through helpingconsumers lower consumption. Regulation and polity can overcome this

    barrier if it takes it into consideration.

    5) If the correct structures are in place, and efficiency measures arerewarded, utilities and private companies tend to exceed the minimal

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    requirements set by regulators in their drive to maximize the benefits of thenew market structures.

    6) Smart Meters and the communication technology required for energyefficiency programmes are expensiveat least 200 per household. Theyare therefore not necessarily appropriate tools for developing nations, orthose were household consumption is low.

    7) Regulators should calculate the impact of smart meter rollout, dynamicpricing structures and new tariffs on vulnerable consumers.

    8) Regulators and utilities should take into account that an increase in costsfor consumers should be included only with a method for controlling thosecosts, through easily accessible feedback information. Accurate monthlybilling has not been found satisfactory enough by residential consumers orconsumer interest groups.

    The electricity market is highly regulated even when it is free. If regulatory

    requirements for a successful Smart Meter rollout include environmentalbenefits, such as increased systems efficiency and lowered consumption, thenSmart Meters can and will be used to create these benefits. If regulators andpolicy makers do not make this part of their definition of success and do notsupport it with constructive policy measures, Smart Meters will not bringsubstantial environmental benefits. Policy decides the uses to which this tool canbe put.

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    Synthesis Report

    Study content andmain findings

    This report studies Smart Meter Policy for residential consumers and its influenceon the societal and environmental benefits they can provide. Five examplemarkets were used, placed in different geographical regions: California USA,Victoria Australia, South Korea, Brazil and Sweden. South Korea and Brazil havediscussed national rollout but have not as yet finalized their plans. The study looksat challenges within the market structures causing an interest in smart meters, theproblems they aim to solve, the policy framework put in place and the results. If apolicy framework was not designed to use the meters to lower consumption orimprove systems efficiency, this was taken into consideration during analysis.

    The overreaching conclusion of the study is the policies governing smart meters,are decisive in limiting or maximizing the positive impacts of the new technology.Smart meters do not necessarily bring environmental benefits. Like many new

    technologies, their rollout requires replacing an entire, fully functional, existingsystem. Their lifespan is expected to be shorter at only 15 to 20 years (rather than30 +) and they use electricity to run which requires extra generation to supply.

    Smart Meters (AMI) are measuring devices which send consumption information tothe utility using communication technology at pre-programmed intervals, fromhourly to every 15 minutes. They will also include more advanced features suchas outage information, two-way communication capabilities, a remote on/off switchetc. A fully functional AMI meter, such as those being rolled out in Australia andCalifornia will have approximately 30 separate functionalities all of which willprimarily benefit the utility, unless expressly employed toward end-consumerprogrammes.

    Smart meters are often marketed according to the programmes they can enablewith sufficient investment and regulatory support rather than the functionalitiesthey actually bring on their own. This can sometimes cause confusion and meanthat the meters alone are seen as an answer to a wide variety of efficiencychallenges. This is not the case, Smart meter infrastructure creates a platform onwhich a variety of highly effective energy efficiency programmes can be built butthey only form one part of this infrastructure, the rest is made up of regulatorystructures, financial market structures, enabling communication technology,marketing and active consumer participation. The central required element isalways supportive policy and regulation.

    There is a basic conflict of interest for the utilities when increasing systemsefficiency and when helping end consumers to lower overall consumption. Utilities

    often earn money from the volume of electricity sold. To lower can be seen aslowering profits. Unless smart meter regulation therefore requires improvedefficiency measures, utilities will have only weak incentives to use their new smartmeter technologies to help lower consumption. Sweden provides a good examplehere. If regulation requires lowered consumption and rewards success, theeffect can be the opposite, utilities and private businesses will join forces tomaximize their benefits from the regulatory structure. The results will be that theutilities will sometimes exceed the minimal regulatory requirements for efficiency.In this best-case scenario the regulation has provided the protective umbrellaunder which private business and utilities can securely create environmentallybeneficial busine