« Smart Grids » : the backbone of a future decarbonised power system ? Dr. Joëlle de Sépibus Visiting Professor College of Europe

Outline From monopoly to competition in the European electricity markets: The climate challenge: –The decarbonisation of power production The deployment of « Smart Grids »: the backbone of a future decarbonised power system ?

The ‘traditional’ monopoly structure of the electricity industry Alternative current is at the root of the current structure of the power industry: –A system which generates electricity in large power stations at remote sites and carries it over long networks to distant users Management by a vertically integrated company: –Power generation –Transmission (high voltage networks) –Distribution –Supply of electricity (billing, metering)

Progressive Liberalisation of the European Electricity Market Shortcomings of the monopoly system: –Large scale investment and lack of competition –Those who planned, managed, and operated the system did not carry any of the risk and did not suffer if they erred –Difficult introduction of small-scale electricity production Response of the European Union: –Progressive introduction of competition for generation and supply of electricity under the influence of the neo-liberal ideology

The Legislative Electricity Framework of the EU The first legislative initiative –The ‘first’ Electricity Directive (1996) The second legislative package –The ‘second’ Electricity Directive (2003) –The Cross-Border Regulation (2003) –The Security of Supply Directive (2005) The third legislative package –The ‘third’ Electricity Directive (2009) –The Second Cross-Border Regulation (2009) –The Regulation establishing an Agency for the Cooperation of Energy Regulators (ACER) (2009)

Liberalising the European Electricity Markets Main principles: –Competition in the generation and supply of electricity and freedom of choice for customers –The networks remain a monopoly –Non-discriminatory third party access (TPA) to networks –Unbundling’ rules for vertically integrated companies (accounting, legal, ownership unbundling) –Designation of national energy regulators –Creation of an Agency for the Cooperation of Energy Regulators

The EU „climate and energy package“ New commitments by the EU for 2020: –Pledge to reduce the EU GHG by 20% (1990) –Increase the share of renewable energy (20%) –Increase of energy efficiency by 20% Legislative framework: –Package of measures (2009) Amendment of the Emission Trading Scheme ( ) New Directive for Renewable Energies The Directive on Carbon Capture and Storage (CCS) Strategic Energy Technology Plan (the ‘SET-Plan’)

Climate related challenges for the liberalised electricity markets Reduction of CO 2 emissions –Low carbon generation of electricity (switch from coal to gas, equipment of fossil fuel power stations with CCS) –Increase of renewable energy sources (RES) Small-scale production (solar, onshore wind, geothermal, biomass) – „distributed generation“ Large offshore wind production –Increase of energy efficiency

The effects of liberalisation for a decarbonised power sector For a thorough appraisal see, in particular: Joëlle de Sépibus, The Liberalisation of the Power Industry in the European Union and its Impact on Climate Change A Legal Analysis of the Internal Market in Electricity, WTI Working Paper No 2008/10

Network-related barriers for RES ‘Traditional’ networks: –Largely « passive » management of networks (coal, nuclear, gas) Principal barriers for the introduction of small-scale RES –Despite « unbundling » and regulated TPA still bias againt small distributed generation (highly concentrated market) –‘Unfair’ network tariffs (high connection charges) –Insufficient « intelligence » of aging networks Principal barriers for the introduction of large-scale RES, especially wind offshore –Insufficient transmission capacities and interconnection capacity between Member States

The Response of the EU….the Deployment of « Smart Grids » Smart Grids: “ upgraded electricity networks to which two-way digital communication between supplier and consumer, intelligent metering and monitoring systems have been added “

What is a Smart Grid? Like blinded men with an elephant

Smart Grid Modernised electricity delivery system which monitors, protects and automatically optimizes the operation of its interconnected elements The Smart Grid sits at the intersection of Energy, IT and Telecommunication Technologies

Smart Grid – „when power meets intelligence“. Communication between system components Interdisciplinary technologies: Data collection, processing and recombination MarketGrid Operation Smart Generation Smart Distribution and Transmission Smart Consumption Smart Storage

Principal goals of the „Smart Grid“ to integrate national networks into a market- based, truly pan-European network to guarantee a high-quality of electricity supply to all customers and to engage them as active participants in energy efficiency to anticipate new developments such as the electrification of transport to substantially reduce capital and operational expenditure for the operation of the networks, while maintaining the security of the system

Principal goals of the „Smart Grid“ Backbone of the future decarbonised power system: –to transmit and distribute up to 35% of electricity from renewable sources by 2020 and a completely decarbonized electricity production by 2050, in particular through the integration of vast amounts of both on-shore and off-shore renewable energy –Strong incentives for efficient energy use, combined in particular with time-dependent electricity prices („peak-shaving“)

Roadmap for a competitive low- carbon economy in 2050 Communication from the Commission (2011) 112: –“Smart Grids are a key enabler for a future low-carbon electricity system, facilitating demand-side efficiency, increasing the shares of renewables and distributed generation, and enabling electrification of transport”

EU legal framework for „Smart Grids“ Electricity Directive (2009/72/EC): –Obliges Member States to define an implementaiton plan for the roll-out of intelligent metering systems Energy End-Use Efficiency and Energy Services Directive (2006/32/EC): –Regulatory incentives should encourage that a network operator to earn revenues that are not linked to additional sales, but based on efficiency gains European Council (2011): –Invitation of MS to liaise with European standardisation bodies ‘to accelerate work with a view to adopting technical standards for electric vehicle charging systems and for smart grids and meters‘

EU support for the deployment of „Smart grids“ Technology push –RTD&D projects since 2003, more than €300 Million EU support –European Smartgrid Technology Platform (launched 2006) ( –European Energy Infrastructure Package, 2010 and 2011: m m –SET- Plan – European Electricity Grid Initiative (launched 2010 (

EU support for the deployment of „Smart grids“ Coordination activities: –Task Force for Smart Grids, launched in 2009 Invitation by the Commission of all relevant institutional actors and market stakeholders „to make regulatiory recommendations to ensure EU-wide consistent, cost- effective, efficient and fair implementation of Smart Grids e_en.htm e_en.htm –Communication of the European Commission on Smart Grids, COM(2011) April 2011

Communication of the European Commission on Smart Grids Identified challenges: –Consumer engagement at all levels –Protection, handling and security of data –Standardisation and interoperability –Regulatory framework and incentives for infrastructure investments and roll out

Communication of the European Commission on Smart Grids Standardisation and interoperability: –Diverse mandates for standardisation given to CEN, CENELEC and ESO by the Commission in 2010 Regulatory framework and incentives –If evaluation of the Energy Services Directive shows that progress is insufficient, the Commission will consider the establishment of a Network Code on Tariffs

The road to a Smart Grid is still long and its success uncertain….. Dr. Joëlle de Sépibus