1. RETHINKING THE ELECTRICITY GRID RETHINKING THE ELECTRICITY GRID 14 May 2012 Presented by: PATRICIA DE SUZZONI ADVISOR TO THE CHAIR OF CRE (French Energy Regulator) STRIKING A BALANCE IN THE MIDST OF CHANGE May 13-16, 2012 Québec City, Québec (Canada)

2. TODAY’S AGENDA ON SMART GRIDS  ICER report on the regulatory approaches to the implementation of smart meters  The French case: from smart meters to smart grids  Objectives and regulation in the European Union 

3. TODAY’S AGENDA ON SMART GRIDS  The French case: from smart meters to smart grids  Objectives and regulation in the European Union  ICER report on the regulatory approaches to the implementation of smart meters

4. ICER REPORT ON SMART METERING  ICER: a voluntary framework for cooperation  Implementation of smart meters so far has been a complex task, advice needed  A portfolio of case studies based on jurisdictions with direct experience

5. 6 MATURE MARKETS STUDIED  Electricity and gas (large-size markets):  France (35M electricity, 11M gas customers)  Italy  UK  Electricity (medium-size markets):  Canada-Ontario (4,8M customers)  Sweden (5,2M)  USA- Colorado (3M)

6. MAIN FINDING 1: LEADERSHIP IS NEEDED  A clear decision on which organisation is leading on smart metering policy is needed at an early stage  Government, NRA, commercial body  If commercial body, sound legal and regulatory framework is needed 

7. MAIN FINDING 2: MARKET DESIGN MUST BE CLEAR  Clear roles & responsibilities for market participants  Ownership of meters  Minimum functionalities of systems  Standards to ensure interoperability  How and when costs of implementation can be recovered  …

8. MAIN FINDING 3: SMART METERING PROJECTS SHOULD BE WELL PREPARED  Usefulness of pilot exercises before full implementation  Implementation may take years to be completed  An impact assessment to develop sound policy proposals  The proposed smart meter model should accommodate future developments in technology and market

9. MAIN FINDING 4: CUSTOMERS HAVE TO BE EMPOWERED  Engagement of consumers in the policy-making process  Specific customer protection measures, e.g. data privacy & cyber security  Customers’ need of simplicity with more complex tariff structure

10. TODAY’S AGENDA ON SMART GRIDS  ICER report on the regulatory approaches to the implementation of smart meters  The French case : from smart meters to smart grids  Objectives and regulation in the European Union

11. THE FRENCH CASE: A PROACTIVE REGULATOR  CRE created as an independent Authority in 2000  Engaged in smart grids since the beginning  A 2-step approach: Smart meteringSmart grid

12. SMART METERING AS A FIRST STEP TO SMART DISTRIBUTION GRIDS  Dialogue with stakeholders Consumer bodies, retailers, DSOs, TSO, Administration, equipment manufacturers, system integrators  Control of Linky Pilot and cost-benefit analysis  300 000 smart meters 2010/2011  Regulation of roll out  July 2011: roll out mandatory for 35 million customers  January 2012: minimum functionalities

13. THE THINK TANK APPROACH  In 2010, CRE organised a conference and as a follow up released « The electricity of the future: a worldwide challenge »  Permanent forum / quarterly workshops www.smartgrids-cre.fr

14. HOW TO REGULATE SMART GRIDS Three key objectives of Smart Grid regulation: Ensure a fair distribution of added value Develop / incentivise investment of general interest Have a leading / coordination role

15. TODAY’S AGENDA ON SMART GRIDS ICER report on the regulatory approaches to the implementation of smart meters The French case: from smart meters to smart grids Objectives and regulation in the European Union 

16. A TOOL TO MEET AMBITIOUS OBJECTIVES  EU energy policy’s 4 key objectives:  Smart grids are a mandatory tool to meet these objectives Well-functioning markets Security of Supply Energy efficiency and renewables Interconnection

17. HOW TO FINANCE  Major investment but estimates vary 450€/customer would lead to 115 B€ investment for EU distribution grids between 2013 and 2023  Business models / scope of regulation / grid tariffs

18. SMART GRIDS: FROM INNOVATION TO DEPLOYMENT  2011 EC communication  No regulation of smart grid infrastructure so far  2009: 80% target by 2020 for electricity smart meters 2012 EC recommendations to Member States on minimum functionalities and cost-benefit analyses  Standardisation in progress  Role of interconnection and market mechanisms

19. Thank you for your attention www.smartgrids-cre.fr The ICER Report on Smart Metering is available at www.icer-regulators.net

20. ANNEXES

21. THE EU 2020 AGENDA THE LEGAL FRAMEWORK  The Climate-Energy Package (2008) Increasing renewable energy supply to 20% of total demand Reducing consumption by 20% with respect to 1990 levels Reducing greenhouse gas emissions by 20% with respect to 1990 levels  The 3rd Energy Package (2009) 80% equipped with smart meters for electricity, cost-benefit analysis conducted by Member States by Sept 2012  The Energy Efficiency Directive revision under discussion (2012)

22. OVERVIEW OF SMART GRID INVESTMENT AND IMPLEMENTATION ACROSS THE EU Projects/category Total 277 implementation sites Investments/category Total3848.7 M€ Project investments (M€) 75 Investments (M€) / No. of project implementation sites per country Other Storage Transmission automation Home application Distribution automation Integrated systems Smart meters Source: JRC, IE Projects represented can span over more than one country and can include more than one category. Three projects are not represented in this picture: Kriegers Flak project, a supergrid between Germany and Denmark total investment of 507 M€; smart meter roll-out and AMI in UK, estimated investment of 11897M€; and smart meter roll-out in Sweden, spanning approximately 150 projects and amounting to a total investment of approximately 1500 M€.

23. APRIL 2011 EC COMMUNICATION SMART GRIDS FROM INNOVATION TO DEPLOYMENT  Developing common European standards  Adressing data privacy and security issues  Allowing regulatory incentives for deployment  Ensuring competitive services to customers  Supporting innovation and rapid application

24. CEER POSITION PAPER ON SMART GRIDS  Public consultation led to a consensus on 3 main priorities for regulation: To focus on the outputs of network companies To encourage cooperation among stakeholders to address the barrriers To encourage innovation while protecting customers