A recent study by Capgemini into the status of Europe’s smart metering market found that. Europe remains some way off the vision of having a smart operational grid system.

Smart metering and smart grid initiatives are forcing a major transformation in the power utility industry. Many utilities are rethinking their business models and business processes as a result of the shift in the way energy is generated, delivered and consumed from keeping the electricity price as low as possible in a free and competitive market to reducing carbon emissions.

Two recent European Directives, one on energy end-use efficiency and energy services1 and another on measuring instruments2, stress the importance of installing metering and billing systems that allow consumers to regulate and manage their consumption.

The European Smart Metering Industry Group, which was established earlier this year, believes that the widespread deployment of smart metering is essential in helping the European Union (EU) meet its ambitious 20/20/20 goals by 2020 – i.e. to cut greenhouse gas emissions by 20 per cent from 1990 levels, increase renewable energy usage by 20 per cent, and cut energy consumption through improved energy efficiency by 20 per cent.

Based on current and future projects, Capgemini, a leading provider of consulting, technology and outsourcing services, estimates that by 2012 between 25–40 per cent of homes in Europe will be equipped with smart meters, compared to the current figure of six per cent.

One of the main challenges to the fast-track implementation of smart meters is the lack of standards for a common architecture and inter-operability of the various communication technologies. This has been compounded by the large deployment of proprietary technologies in several regions. But the landscape is changing fast. Currently there are more than 30 groups around the world working on the issues of standards and interoperability.

In Europe, Iberdrola, together with several metering vendors, is working on a set of open standards based around technology they have developed. EDF of France has a set of standards for interoperability and the Netherlands will release a set later this year. These different initiatives are promoting the transformation of the power grid into a smart grid complete, with the latest open standards technologies.

Across the EU, countries are actively moving toward advanced metering systems – both as they look for ways to reduce their costs, while increasing service quality and in response to various EU energy-related directives.

Capgemini recently conducted a study (between December 2008 and February 2009) investigating the status of Europe’s smart metering market. It looked at the regulatory standards and levels of implementation in 35 European countries and calculated how ‘friendly’ regulators were towards implementing smart metering and how close they were to achieving a 100 per cent rollout. The major findings of this study are presented below.

Mode of Analysis

Each of the 35 countries analyzed was plotted onto a four-quadrant matrix, after being measured against how ‘friendly’ the country’s government was towards regulatory compliance and how far along in the process of implementing smart meters they were.


Figure 1. Smart meters: regulation versus implementation. Source: Capgemini
Click here to enlarge image

The countries fell into four categories, as shown in Figure 1:

  • Regulatory Push: Regulatory organizations are very supportive of smart metering, but the market has not picked up yet, or the utilities are not seeing the value and are not willing to invest. Nothing Happening: Regulatory environment is not friendly and the utilities are not pushing.
  • Utility Push: Utilities are very active in implementation and deployment of smart metering without regulatory support.
  • Full Swing: Smart metering market is very active – regulation is pushing and the utilities are reacting and trying to comply with the regulation.

Smart meter deployment varies

Capgemini’s study reveals that Italy and Sweden are closest to achieving a 100 per cent penetration rate of smart meters, although at this stage these are only being used for monthly remote meter reading and not to deliver energy efficiency benefits. It also demonstrates that there are two driving forces behind extensive adoption: regulatory pressures and industry desire to innovate.

As illustrated in Figure 1, countries are at widely differing stages of smart metering deployment for residential electricity customers. Italy was the first to adopt the technology when ENEL deployed more than 27 million PLC (power line communication) meters in the first half of this decade. By 2011, all 36 million Italian electricity customers will be covered by smart metering.

ENEL was able to carry out this deployment without regulatory support because it could achieve significant cost savings by the ability to perform various functions remotely and respond more effectively to customers. ENEL estimates that it will make 6 million fewer field visits each year and respond to 98 per cent of customer requests within 24 hours. In addition, the system has provided improved network planning and load balancing, while increasing fraud detection.

Sweden will however, become the first county to achieve 100 per cent penetration in July 2009, when monthly collection meter values become mandatory. Currently 71 out of its 164 distribution network operators (DNOs) are reported to have completed the deployment. While the requirement is to deploy equipment for monthly reading, a few large DNOs are going beyond that – most of the Swedish meters can be read daily and provide hourly readings. Interestingly, Sweden’s mandate is accelerating the deployments in Denmark, Finland and Norway, where installations are steadily growing.

Energy conservation is driving similar reform in the Netherlands, which legislated smart metering deployment in mid-2007. Austria and Portugal – which have concluded that smart metering will increase profitability – are considering introducing smart metering systems throughout the country as well.

More recently the focus is shifting to France and Spain where EDF, Endesa and Iberdrola have announced massive projects covering more than 50 million metering points. In July 2008, ERDF, the French electricity network business of EDF, announced the first phase of a nationwide rollout of 33 million smart meters. Endesa and Iberdrola each plan to deploy 10 million smart meters to comply with new regulations in Spain.

At the other end of the scale, countries such as Bulgaria, Latvia and Cyprus are falling behind on both legislation and implementation. Cyprus is in the process of deregulating its electricity supplies in order to comply with European directives, and although it currently has no smart metering legislation it does, however, have plans to begin a smart metering pilot in the second quarter of this year. In Bulgaria and Latvia, there are no known plans for smart grid deployment; Bulgaria has a regulated quota for household consumers and small enterprises, while Latvia is currently undergoing the deregulation of its electricity supply.

This variation between countries reflects particular national factors such as climate, consumption patterns and deregulation paths affecting the scale and time of smart meter rollouts.

Even in the Nordic countries, where national electricity sectors are in many ways very similar and co-operate closely, there are quite different requirements and plans for implementation of smart metering. It is unlikely that these differences will diminish in the near future, considering that the Energy Services Directive does not provide concrete definitions and implementation requirements.

Those early adopters are now trying to figure out what other benefits they can squeeze out of this large investment. Gathering monthly billing information to create accurate bills is a good step forward but most meters can provide much more data that will allow utilities to analyze and forecast, and to monitor, manage and act on triggers, to improve energy efficiency and reduce cost, which in turn will benefit both end-users and the electricity companies themselves.

To a large extent the adoption of smart metering in Europe is driven by regulation. National concerns over the future energy situation and European initiatives such as EU Energy Efficiency have led several countries to define mandatory requirements for the deployment of smart metering within a set time-frame. But the reality is that the compliance-based industry in which utilities operate does not offer enough incentive for consumers, regulators or utilities to take the difficult steps necessary to make electrical energy markets operate efficiently.

Despite this fact, currently final dates for when smart metering should be in place had been set in France, Ireland, UK, Italy, the Netherlands, Norway, Denmark, Finland, Spain and Sweden.

Vision of a smart operation grid

One question that remains in the balance is what is the minimum functionality that will be required to support the energy efficiency initiatives and the carbon reduction goals? The equipment already deployed varies widely in capabilities, and the supporting communications infrastructure also varies widely.

Additional value may be driven by operational uses of the information, but that increases the functionality requirements and the need for greater communication bandwidth and low latency networks to move the data to a central location. If Europe is to meet its 20/20/20 targets, it must modernize and liberalize an ageing electricity grid, create economies of scale for renewable energy and promote consumer efficiency.

On average, the deployment of smart meters from initial tender to operation takes seven years so all stakeholders need to keep this in mind when considering time-lines for rolling out meters. A smart grid can take up to 20 years to rollout, and only one utility globally – Tokyo Electric Power of Japan – has completed a rollout of a smart grid.

The study concludes that if both of these efforts are important to national, European and global goals, we will need the support of governments, industry players and equipment vendors to ensure they are implemented correctly.

References

1. EU Directive on ‘Energy End-use Efficiency and Energy Services’ obligates the EU countries to make national energy efficiency action plans. The plans shall describe how the countries will realize a 9 per cent reduction in final energy consumption compared with business as usual until 2016.

2. The EU Directive on ‘Measuring Instruments’ (MID) is aimed at creating a single market for measuring instruments across the EU. The fundamental principle being that meters which receive a MID approval can be used in any other EU country, irrespective of where in the EU that approval was granted.