1. Smart Grids in Europe: The DSO Perspective Gunnar Lorenz Head of Unit - Networks CIRED, 07 June 2011

2. Gunnar Lorenz, CIRED 7 June 2011 At the forefront of the ELECTRICITY INDUSTRY:

3. Gunnar Lorenz, CIRED 7 June 2011 Representing the electricity industry at expert, strategic and policymaking levels. 33 FULL MEMBERS 9 EUROPEAN AFFILIATE MEMBERS 7 MEDITERRANEAN AFFILIATE MEMBERS 7 INTERNATIONAL AFFILIATE MEMBERS 9 EI ASSOCIATE MEMBERS 25 BUSINESS ASSOCIATE MEMBERS

4. Gunnar Lorenz, CIRED 7 June 2011 EURELECTRIC represents the EU electricity industry, across the whole electricity value chain ENERGY POLICY & GENERATION ENVIRONMENT & SUSTAINABLE DEVELOPMENT MARKETSDISTRIBUTION NETWORKS The voice of the European Electricity Industry in Brussels, the heart of Europe ENERGY POLICY & GENERATION MARKETS ENVIRONMENT & SUSTAINABLE DEVELOPMENT ENERGY POLICY & GENERATION MARKETSDISTRIBUTION NETWORKS ENVIRONMENT & SUSTAINABLE DEVELOPMENT DISTRIBUTION NETWORKSMARKETS ENVIRONMENT & SUSTAINABLE DEVELOPMENT DISTRIBUTION NETWORKS ENERGY POLICY & GENERATION MARKETS ENVIRONMENT & SUSTAINABLE DEVELOPMENT DISTRIBUTION NETWORKS

5. Gunnar Lorenz, CIRED 7 June 2011 EURELECTRIC’s Structure for DSOs EURELECTRIC Board of Directors Networks Council WGs TFs NEs Directors’ Gathering Annual Meeting of DSOs Annual Meeting of DSOs: Representatives of European DSOs DSO Directors’ Gathering: 20 Members elected by Annual Meeting Chairman: Jan Peters (Enexis, NL) Vice-Chairman: Livio Gallo (Enel Distribuzione, IT) Networks Council: National Representatives Chairman: Peter Birkner (RWE, DE) Vice-Chairman: Manuel Rodrigues da Costa (EdP, PT) Plus Working Groups, Networks of Experts, Task Forces etc.

6. Gunnar Lorenz, CIRED 7 June 2011 Current EURELECTRIC DSO Working Groups WG Distribution Regulation & Policy WG Customers & Operation WG Smart Grids WG Standardisation (plus sub groups) TF Electric Vehicles WG Transmission- Distribution Interface WG Transtec DSO Coordination for Smart Grids Deployment

7. Gunnar Lorenz, CIRED 7 June 2011 EURELECTRIC DSOs core messages 1.DSO are independent market facilitators 2.Ensuring security and reliability of supply by fair regulation 3.The technological shift in networks must be done in the right way 4.Electricity as a solution: Electricity drives cleaner!

8. Gunnar Lorenz, CIRED 7 June 2011 8 Highlights 1.DSOs have a new mission – EURELECTRIC survey shows that the current framework is often lacking right incentives 2.10 steps to smart grids: EURELECTRIC’s smart grids roadmap 3.Next steps

9. Gunnar Lorenz, CIRED 7 June 2011 9 Highlights 1.DSOs have a new mission – EURELECTRIC survey shows that the current framework is often lacking right incentives 2.10 steps to smart grids: EURELECTRIC’s smart grids roadmap 3.Next steps

10. Gunnar Lorenz, CIRED 7 June 2011 Tomorrow’s smart system will be characterised by large-scale integration of often intermittent decentralised generation and new types of loads connected by and large to the distribution grid

11. Gunnar Lorenz, CIRED 7 June 2011 11 The main traditional rationale behind regulation is to prevent the abuse of a monopoly position and will have to be extended… UtilityCustomer/ Network user Cost compensation Investment incentive Cover capital cost Low prices Quality

12. Gunnar Lorenz, CIRED 7 June 2011 12 …the climate package and the evolving retail market adds elements to the regulatory scope UtilityCustomer/ Network user Cost compensation Investment incentive Cover capital cost Low prices Quality New Mission (EU market and climate packages): SupplierSociety / Environment New products Processes (Customer switching) Reduce emissions Renewables integration Increase energy efficiency

13. Gunnar Lorenz, CIRED 7 June 2011 13 Regulatory framework must consider the new mission of DSOs Integrating environmental goals on distribution level Incentivising smart grids that enable the creation of a better functioning retail market place Removing barriers for investing in technological innovation

14. Gunnar Lorenz, CIRED 7 June 2011 Investments for smart grids might benefits several parties but are often only done by DSOs Example for illustration Source: EURELECTRIC, Regulation for Smart Grids

15. Gunnar Lorenz, CIRED 7 June 2011 Only 3 countries offer DSOs strong incentives to investments. Source: EURELECTRIC, Regulation for Smart Grids

16. Gunnar Lorenz, CIRED 7 June 2011 In most of the surveyed European countries the smart meter penetration is still relatively low. EU target: at least 80 % Source: EURELECTRIC, Regulation for Smart Grids

17. Gunnar Lorenz, CIRED 7 June 2011 A clear mandate and the possibility to recover associated costs are main drivers for the smart meter implementation. SE 75 % - 100 % FI 50 % - 75 % IT Source: EURELECTRIC, Regulation for Smart Grids

18. Gunnar Lorenz, CIRED 7 June 2011 18 Highlights 1.DSOs have a new mission – EURELECTRIC survey shows that the current framework is often lacking right incentives 2.10 steps to smart grids: EURELECTRIC’s smart grids roadmap 3.Next steps

19. Gunnar Lorenz, CIRED 7 June 2011 In Europe, over € 5.5 billion has been invested in about 300 Smart Grid projects during the last decade. Source: Smart Grids Communication 12 April 2011; European Commission

20. Gunnar Lorenz, CIRED 7 June 2011 Smart Grid Services & Functionalities

21. Gunnar Lorenz, CIRED 7 June 2011 DSOs WHO? DSOs as enablers & facilitators ”Building & Connecting” “Connecting & Managing”

22. Gunnar Lorenz, CIRED 7 June 2011 10 Steps to Smart Grids in 10 Years

23. Gunnar Lorenz, CIRED 7 June 2011 Facilitation at both national & EU level

24. Gunnar Lorenz, CIRED 7 June 2011 Deployment in the Member States With rising share of distributed RES generation, not only power, but also information to flow in both directions to enable DSOs to operate the grid safely

25. Gunnar Lorenz, CIRED 7 June 2011 Commercialisation in the Member States With the high penetration of EVs, customer participation in the market will become necessary Customers will actively control their consumption through display/feedback technologies and automated signals

26. Gunnar Lorenz, CIRED 7 June 2011 26 Highlights 1.DSOs have a new mission – EURELECTRIC survey shows that the current framework is often lacking right incentives 2.10 steps to smart grids: EURELECTRIC’s smart grids roadmap 3.Next steps

27. Gunnar Lorenz, CIRED 7 June 2011 The IEA estimates 500 bn EUR investments in the distribution grid over the next 25 years in the EU Source: World energy outlook 2010

28. Gunnar Lorenz, CIRED 7 June 2011 The European Commission COM (2011)202 intends to concentrate on five actions Actions 1. Developing Smart Grid standards 2. Addressing data privacy and security issues 3. Developing regulatory incentives for Smart Grids deployment 4. Guaranteeing competitive Smart Grids services to customers 5. Continuing support for innovation and its rapid application Source: European Commission COM (2011)202

29. Gunnar Lorenz, CIRED 7 June 2011 What? Characteristics/ Services of a Smart Grid Benefits (e.g. Reduced feeder losses worth $50 per MWh) Purposes (e.g. Reduces distribution losses; equipment Failures) Smart Grid Function(alitie)s (e.g. Automatic voltage and VAR control) Smart Grid Technologies – Assets - Systems Methodological approach to compares cost and performance of Demonstration projects before and after the introduction of Smart Grid Technologies & Systems Application of developed CBA Methodology What? Methodological approach to compares cost and performance of Demonstration projects before and after the introduction of Smart Grid Technologies & Systems EURELECTRIC is currently testing a cost benefit analysis methodology with the European Commission Source: EURELECTRIC

30. Gunnar Lorenz, CIRED 7 June 2011 EURELECTRIC Recommendations to regulators/Member States 1 > Rewarding and Incentivising Capital Expenditures (CAPEX) in Smart Grids 2 > Improving the evaluation of Operational Expenditures (OPEX) 3 > Incentivising innovation and R&D funding 4 > Clarifying roles and responsibilities 5 > Safeguarding regulatory stability

31. Gunnar Lorenz, CIRED 7 June 2011 A Smart Regulation… …puts a stronger focus on long term overall benefits of DSO investments rather than narrow, short term cost optimization …encourages innovation, R,D&D expenditures and the use of new technologies with a new risk-reward balance …encourages capital expenditure on Smart grids in the areas where this approach is preferable to a business as usual approach …is stable in terms of the principles that underlie it but is capable of adapting to changing circumstances

32. Gunnar Lorenz, CIRED 7 June 2011 The EURELECTRIC Report Regulation for Smart Grids has been published on 10 February and is now available on our website under www.eurelectric.org

33. Gunnar Lorenz, CIRED 7 June 2011 The EURELECTRIC “10 Steps to Smart Grids Roadmap” provides a common guidance to policy makers and the industry, as a sound basis for Member States action plans Available on our website: www.eurelectric.org/10StepsTo SmartGrids

34. Gunnar Lorenz, CIRED 7 June 2011 EURELECTRIC DSOs: upcoming Workshops 14 June (Stockholm) DSO session: EURELECTRIC Annual Convention & Conference 2011 29 June (Brussels) Grid for Vehicle (G4V) Project, final event 20-21 October (Brussels) Smart Grids – current status in the EU Details: www.eurelectric.org -> events

35. Gunnar Lorenz, CIRED 7 June 2011 Thank you for your attention ! glorenz@eurelectric.org http://www.eurelectric.org