The  Smart  Grids   Debate  in  Europe     Essential  for  the  transformation  of   the  European  energy  system,   deserving  more  attention  and   transparency       SEFEP  working  paper   November  2012       Ruggero  Schleicher-­‐Tappeser               The  EU  Smart  Grids  Debate   2   Table  of  Contents     Executive  Summary  ...................................................................................................................  4   1   Introduction  .......................................................................................................................  6   2   Framing  the  issue:  Why  smart  grids  are  important  for  the  transformation  of  the  system  7   3   The  debate  has  reached  a  new  stage  –  the  evolution  of  the  smart  grid  concept  ..............  9   3.1   Different  roots  of  the  Smart  Grid  idea  .......................................................................  9   3.2   Conceiving  an  integrated  technical  system  of  a  new  kind  .......................................  11   3.3   A  new  phase  of  the  debate  –  it’s  more  than  technology  .........................................  12   4   The  EU  policy  arena  .........................................................................................................  13   4.1   Why  the  EU  level  matters  in  this  context  .................................................................  13   4.2   Main  activities  promoted  by  the  European  Commission  .........................................  13   4.3   Main  Stakeholders  present  in  the  debates  at  EU  level  ............................................  17   5   The  discussion  in  EU  member  states  ................................................................................  21   5.1   Large  differences  in  structures  and  awareness,  creative  diversity  ..........................  21   5.2   Example  1:  Denmark  ................................................................................................  22   5.3   Example  2:  Italy  ........................................................................................................  24   6   The  discussion  in  other  parts  of  the  globe  .......................................................................  25   6.1   United  States  ............................................................................................................  26   6.2   China  ........................................................................................................................  27   7   Key  issues  of  the  debate  at  the  EU  level  ..........................................................................  28   7.1   Role  and  management  of  the  distribution  grid  ........................................................  29   7.2   The  interface  to  the  consumer/prosumer  ................................................................  29   7.3   Room  to  manoeuvre  for  the  member  states  ...........................................................  30   7.4   Speed  and  transparency  of  the  process  ...................................................................  31   8   Conclusions  and  recommendations  .................................................................................  32   References  ...............................................................................................................................  34   Acknowledgements  .................................................................................................................  38     The  EU  Smart  Grids  Debate   3   About  the  Author     Ruggero  Schleicher-­‐Tappeser  is  independent  consultant  for  energy  policy  and  renewable   energies  in  Berlin.  Holding  a  diploma  in  physics,  he  started  in  1976  to  work  as  journalist  and   policy  consultant  for  energy  issues  in  Switzerland.  In  1986  he  shifted  to  research,  working  on   technology  policies  with  the  Institute  for  Ecological  Economics  IÖW,  in  Germany.  1989-­‐2004   he  was  founder  and  director  of  the  EURES  Institute  for  Regional  Studies  in  Europe,  Freiburg  i.   Br.  Then,  switching  to  a  diplomatic  role,  Acting  Secretary  General  of  the  Alpine  Convention.   Back  in  the  energy  debate  since  2008,  today  he  concentrates  on  sustainable  energy  strate-­‐ gies  for  governments,  foundations  and  industry.  www.sustainablestategies.eu     e-­‐mail:  ruggero@schleicher-­‐tappeser.eu               The  EU  Smart  Grids  Debate   4   Executive  Summary   New  information  and  control  technologies  (ICT)  are  about  to  fundamentally  transform  the   electricity  sector  after  having  profoundly  changed  so  many  other  industries.  The  introduc-­‐ tion  of  “smart  grids”  challenges  the  traditional  top-­‐down  control  logic.  It  stands  for  real-­‐time   transparency,  flexible  management  of  resources,  control  through  market  mechanisms,  and   multiple  interactions  of  a  wide  range  of  users  throughout  the  system.  Evidently,  this  raises   fundamental  new  questions  about  management  levels,  responsibilities,  control  rights,  data   access,  markets  and  market  roles,  as  well  as  regulation.     Originally  understood  as  a  merely  technical  upgrade  of  limited  impact,  the  idea  of  “smart   grids”  has  been  developed  from  different  sides  since  about  three  decades:     • automation  of  the  interface  between  the  grid  and  the  customer  –  smart  metering   and  demand  side  management   • distribution  automation  –  more  intelligence  in  the  traditionally  dumb  distribution   grids  for  improving  failure  detection  and  blackout  prevention   • dealing  with  increasing  shares  of  distributed  and  fluctuating  renewable  power,  re-­‐ quiring  to  actively  manage  bidirectional  flows  and  increased  flexibility  of  demand   • e-­‐mobility  –  managing  a  new  kind  of  high-­‐power  mobile  demand  and  storage   Making  grids  smarter  therefore  needs  to  be  considered  as  a  key  element  of  any  transition   strategy  towards  renewable  electricity.  For  the  interested  public,  however,  and  even  for   many  energy  policy  actors  involved,  the  issues  at  stake  are  not  very  clear  and  much  less  the   arenas  where  they  are  discussed.  Against  this  background  the  Smart  Energy  for  Europe  Plat-­‐ form  SEFEP  has  decided  to  have  a  closer  look  at  the  smart  grid  discussion  at  the  EU  level.     The  development  of  smart  grids  has  not  been  as  smooth  as  hoped  for  three  years  ago.  The   development  of  standards  is  behind  schedule,  investments  are  behind  expectations.  In-­‐ volved  actors  say  that  fundamental  decisions  concerning  future  structures  are  needed  for   going  ahead.  The  problem  is  not  a  technical  one  and  is  not  the  cost.  Roles  and  responsibili-­‐ ties  and  the  mechanisms  for  attributing  costs  and  revenues  need  to  be  revised.  However,   there  is  not  yet  a  shared  vision,  since  all  suggested  reforms  lead  to  considerable  shifts  in   technological,  commercial  and  political  power.  Moreover,  due  to  the  growing  complexity  of   the  issue,  positions  and  strategies  are  often  not  yet  clear.     In  the  last  two  decades  the  EU  has  increasingly  set  the  framework  for  the  development  of   the  European  energy  sector  pushing  for  liberalisation  and  renewable  energies.  A  range  of   motivations  have  been  at  the  origin  of  EU  smart  grid  activities:  competitive  energy  markets,   efficient  use  of  energy,  integration  of  fluctuating  renewables,  consumer  protection  and  data   safety,  industry  development,  research.  The  key  ongoing  activities  initiated  by  the  EU  com-­‐ mission  are:  The  Smart  Grid  Task  Force  SGTF,  the  definition  of  obligations  for  the  roll-­‐out  of   intelligent  metering  systems,  the  development  of  network  codes,  the  energy  efficiency  di-­‐ The  EU  Smart  Grids  Debate   5   rective,  as  well  as  coordinated  research  activities  (including  the  SmartGrids  European  Tech-­‐ nology  Platform  and  the  European  Electricity  Grid  Initiative).   Also  for  experienced  insiders  it  is  not  easy  to  understand  what  is  happening  and  where.  The   organisations  of  the  traditional  electricity  sector  are  well  represented.  The  equipment  manu-­‐ facturers  are  also  well  established  –  with  the  exception  of  the  weakly  represented  renewa-­‐ ble  energy  industries.  The  IT  and  telecom  industries  are  visibly  gaining  influence  while  con-­‐ sumer  and  environmental  organisations  are  not  very  present.  There  is  a  strong  risk  that  the   definition  of  standards  in  technical  committees  may  have  far-­‐reaching  consequences  for  the   overall  future  architecture  of  the  electricity  system  without  an  adequate  public  debate.     A  look  at  the  smart  grid  discussions  in  different  EU  countries  shows  that  priorities  of  the   member  states  involved  in  the  EU  debate  differ  considerably  –  corresponding  to  the  differ-­‐ ent  structures  of  the  electricity  sector  and  public  awareness  for  the  challenges  of  the  trans-­‐ formation  ahead.  For  example  Denmark  has  developed  most  advanced  technologies  and   visions,  calling  explicitly  for  the  establishment  of  local/regional  electricity  markets  with  new   roles,  while  others  follow  a  somewhat  more  centralised  vision.  The  big  push  for  smart  grids,   however,  may  come  from  outside  Europe:  Both  the  US  and  China  are  determined  to  play  a   leading  role  in  the  global  smart  grid  industry.     Overall,  there  are  three  areas  in  which  the  resolution  of  –  often  covert  –  conflicts  of  interest   is  essential  for  further  progress  of  the  transformation:     • the  shift  of  responsibilities  from  the  transmission  to  the  distribution  level  and  the  re-­‐ definition  of  roles     • the  definition  of  the  interface  between  the  public  grid  and  the  consumer/prosumer   • the  role  of  regulation  at  the  EU  level     Moreover,  an  important  overarching  question  is  how  the  need  for  rapid  decision  and  action   can  be  reconciled  with  the  need  for  openness  and  transparency  of  the  decision  process  in  a   rapidly  changing  environment.     Conclusions     The  importance  of  the  smart  grid  debate  is  being  heavily  underestimated.  Important  issues   concerning  the  future  European  energy  system  and  the  associated  commercial  and  political   power  structures  are  being  pre-­‐configured  in  small,  seemingly  technical  circles  dominated  by   large  industrial  interest  groups.  A  broader  debate  is  needed.  This  requires  to  improve  trans-­‐ parency,  to  explain  the  issues  at  stake,  to  translate  between  technological,  political  and   business  cultures.     Different  groups  of  stakeholders  have  different,  although  mostly  not  explicit,  visions  of  the   future  system.  Making  these  basic  ideas  more  explicit  could  help  to  clarify  the  debate.  While   many  are  still  thinking  in  terms  of  patches  to  the  old  top-­‐down  system,  new  flexible  struc-­‐ tures  are  growing  bottom-­‐up.  Formulating  a  publicly  understandable  vision  for  a  multi-­‐ layered  system  in  Europe,  conceived  in  the  spirit  of  bottom-­‐up  subsidiarity,  could  provide  a   useful  new  framework  for  understanding  suggestions  and  positions.       The  EU  Smart  Grids  Debate   6   1 Introduction   The  Smart  Energy  for  Europe  Platform  SEFEP  is  a  “European  non-­‐profit  organisation  commit-­‐ ted  to  the  goal  of  a  fully  de-­‐carbonised,  reliable  and  predominantly  renewable  power  supply   in  Europe  before  2050”1  funded  by  large  European  and  American  foundations  acting  with  a   long-­‐term  perspective.  In  recent  years  renewable  electricity  generation  technologies  har-­‐ vesting  sunshine  and  wind  have  made  such  progress  that  their  potential  to  generate  suffi-­‐ cient  power  at  reasonable  cost  is  no  fundamental  problem  anymore.  2  The  big  challenge  is   the  “integration”  of  fluctuating  and  to  a  large  extent  distributed  electricity  generation  with   high  upfront  and  no  marginal  costs  into  a  reliable  energy  system  and  energy  markets  –  made   even  more  difficult  by  the  accelerated  shift  of  the  transport  sector  to  electricity  (e-­‐mobility).   It  has  meanwhile  become  evident  that  this  “integration”  will  require  a  thorough  transfor-­‐ mation  of  technical  systems  and  markets.     In  this  context,  the  electrical  grids  and  the  coordinating  functions  associated  with  them  are   gaining  more  and  more  attention.  “Smart  grids”,  initially  understood  as  a  merely  technical   infrastructure,  are  increasingly  considered  to  be  a  complex  concept  involving  not  only  hard-­‐ ware  and  some  local  control  software,  but  also  system-­‐wide  control  logics,  system  concepts,   market  platforms,  and  even  the  role  of  market  actors  and  regulators.  While  over  the  last   decades  the  transmission  grids  and  the  coordination  of  large  power  plants  have  already  be-­‐ come  “smart”  with  the  help  of  modern  information  and  communication  technologies,  dis-­‐ tributed  generation  with  fluctuating  renewable  energy  now  requires  to  allow  for  a  more  ac-­‐ tive  management  also  at  the  lower  levels  of  the  system  where  “distribution”  grids  had  an   essentially  passive  role.       While  the  term  smart  grids  is  often  appearing  in  the  energy  discussion  and  in  the  media,  it   has  become  increasingly  difficult  to  understand  what  happens,  who  is  proposing  what,  and   where  decisions  are  being  taken.  On  this  background,  SEFEP  has  decided  to  have  a  look  at   the  complex  landscape  of  discussions  in  Europe.  The  present  paper  aims  at  giving  an  over-­‐ view  on  the  issues,  the  different  policy  threads  and  forums  as  well  as  the  active  stakeholders   in  the  discussion  on  smart  grids  at  the  EU  level,  and  to  show  how  this  level  relates  to  nation-­‐ al  debates.  A  complete  mapping  of  the  landscape  would  have  been  beyond  the  scope  of  this   initial  project.     I  am  thankful  to  all  the  interview  and  conversation  partners  who  have  helped  to  come  to  the   insights  summarised  in  this  paper.3                                                                                                                       1  www.sefep.eu     2  E.g.  (Schleicher-­‐Tappeser,  2010,  2012)   3  See  Annex   The  EU  Smart  Grids  Debate   7   2 Framing  the  issue:  Why  smart  grids  are  important  for  the   transformation  of  the  system     “Smart  grids”  –  a  complex,  evolving  concept  standing  for  a  paradigm  change   The  “Smart  Grid”  is  not  just  an  infrastructure  we  could  discuss,  plan,  agree  upon  and  imple-­‐ ment,  such  as,  for  example,  a  high  speed  railway  network.  It  is  a  complex,  evolving  concept   which  stands  for  the  increasing  use  of  new  electronic  information,  communication  and  con-­‐ trol  technologies  in  the  rather  traditional  electricity  business.  There  is  a  growing  consensus   that  the  use  of  these  new  technologies  –  in  one  form  or  the  other  –  is  essential  for  meeting   the  challenges  to  which  energy  and  especially  electricity  systems  are  confronted.  On  the   background  of  climate  change,  growing  energy  demand,  globalisation,  increasing  fossil  fuel   costs  and  a  new  awareness  for  the  risks  of  nuclear  power,  the  use  of  renewable  energies  has   been  supported  by  a  growing  range  of  stakeholders  and  is  now  gaining  such  a  momentum   that  it  requires  a  rethinking  of  the  architecture  of  the  whole  energy  system  and  of  energy   markets,  especially  in  the  field  of  electricity.  As  will  be  shown  below,  the  concept  of  “smart   grid”  has  a  range  of  different  roots.  Different  stakeholders  in  different  countries  with  differ-­‐ ent  structures  of  the  energy  sector  emphasise  different  aspects  and  priorities  –  and  all  are   involved  in  a  complex  learning  process  concerning  their  options,  their  interests,  their  vision   for  a  future  system  and  their  role  in  it.  In  discussing  the  issue  with  different  persons,  organi-­‐ sations  and  institutions,  it  is  therefore  difficult  to  disentangle  the  different  vested  interests,   the  different  backgrounds  and  the  different  awareness  of  the  coming  challenges.     ICT  to  deeply  transform  the  energy  system,  as  other  sectors  before   Dealing  on  one  hand  with  high  shares  of  fluctuating  and  to  a  large  extent  distributed  electric-­‐ ity  generation  and  on  the  other  hand  with  the  introduction  of  new  heavy  load  mobile  users   (electric  vehicles),  both  within  a  time  period  which  is  shorter  than  the  lifetime  of  conven-­‐ tional  energy  infrastructure  investments,  will  require  considerable  and  timely  efforts.  It  re-­‐ quires  ensuring  a  rapid  transition  towards  a  highly  flexible  multidimensional  and  multilevel   coordination  and  compensation,  without  compromising  the  reliability  of  the  system.  The   technical  concept  of  the  European  electricity  system  is  essentially  based  on  technologies   conceived  in  the  first  half  of  the  last  century:  centralised  generation  in  large  units,  top-­‐down   distribution  to  the  consumers  over  an  essentially  dumb  distribution  grid  with  unidirectional   flows,  adaptation  of  essentially  fuel-­‐based  generation  to  rather  well  predictable  load  curves   of  stationary  consumers.  As  in  other  industries  before,  the  demand  for  more  complex  coor-­‐ dination  and  flexibility  can  be  most  economically  achieved  through  an  extensive  use  of  in-­‐ formation  and  communication  technologies.  And  as  in  other  industries  this  does  not  only   imply  the  introduction  of  some  new  devices,  but  also  a  fundamental  rethinking  of  the  overall   system  design.  This  leads  to  new  conflicts:  While  the  incumbent  powers  of  the  electricity   sector  try  to  keep  stability  and  their  own  roles  by  maintaining  as  far  as  possible  the  system   logic  of  the  steam  engine  era,  the  ICT  industry  is  much  more  accustomed  to  conceive  highly   The  EU  Smart  Grids  Debate   8   flexible  multi-­‐layered  systems  with  a  multitude  of  feed-­‐backs  and  distributed  responsibili-­‐ ties,  allowing  for  different  organisational  configurations.     Big  challenges  for  a  sector  that  has  not  yet  digested  liberalisation   The  situation  is  complicated  by  the  fact  that  the  energy  sector  has  already  embarked  in  a  still   incomplete  organisational  transformation  process  which  was  initiated  before  the  challenges   of  fluctuating  renewable  energy  and  e-­‐mobility  became  evident  to  the  key  players  involved:   the  liberalisation  of  electricity  markets  with  the  unbundling  of  different  roles,  reduced  reach   of  the  traditional  monopolies  and  an  increasingly  differentiated  regulation.  Introducing   competitive  markets  has  increased  innovation  in  the  sector.  The  new  roles  and  markets,   however,  have  been  conceived  on  the  basis  of  the  old  technical  energy  system.  In  their  pre-­‐ sent  form  they  do  not  meet  the  new  challenges:  investments  into  “smart  grids”  –  whatever   might  specifically  be  meant  by  this  –  are  far  below  expectations,  investments  into  appropri-­‐ ate  capacities  for  balancing  fluctuating  renewable  generation  (demand  response,  storage,   highly  flexible  CHP  plants)  risk  to  be  too  low  for  coming  needs.  At  the  same  time,  “smart”   technologies  are  increasingly  used  for  ensuring  the  appropriate  communication  between  the   different  actors  and  for  coupling  the  increasingly  differentiated  markets  with  the  technical   energy  system.  In  order  to  speed  up  the  transformation,  key  regulatory  questions  have  to  be   solved.   More  organisational  and  regulatory  than  technical  challenges   Some  years  ago  the  discussion  about  “smart  grids”  may  have  seemed  to  be  an  issue  for  spe-­‐ cialised  technicians.  Today,  since  the  focus  of  the  debate  on  the  energy  transition  has  shifted   from  the  availability  and  cost  of  renewable  energy  sources  to  the  systemic  questions  of  how   to  deal  with  their  characteristics,  the  discussion  about  “smart  grids”  is  at  the  core  of  the  en-­‐ ergy  debate.  It  concerns  technical,  organisational,  and  political  issues.  The  cost  of  renewa-­‐ bles,  the  future  share  of  different  technologies,  the  architecture  of  markets,  the  role  of  the   different  actors,  the  speed  of  transformation  of  the  system  –  all  are  intrinsically  linked  with   the  question  of  how,  in  addition  to  copper  wires,  the  different  elements  and  actors  of  the   system  will  be  linked  by  “smart”  controls  and  communication.  For  many  actors  in  the  energy   debate  this  comprehensive  system  perspective  and  the  necessary  fundamental  change  in   the  system  logic  are  rather  new.  The  transition  towards  a  much  more  “smart”  system  can  be   considered  as  a  vast  learning,  discovery  and  negotiation  process  in  which  the  answers  to   many  questions  have  still  to  be  found.     The  next  big  issue  in  the  energy  and  climate  debate   Not  only  in  an  abstract  academic  conceptual  debate,  but  also  in  a  real  hands-­‐on  technologi-­‐ cal,  commercial  and  political  power-­‐game,  the  “smart  grid”  design  and  implementation  pro-­‐ cess  is  about  developing  a  fundamentally  new  system  logic  in  the  energy  sector,  a  new  as-­‐ signment  of  roles,  powers  and  revenues.  Introducing  “smart  grids”  means  that  software-­‐ controlled  new  technologies  are  substituting  hardwired  top-­‐down  control  mechanisms,  al-­‐ lowing  for  a  much  more  complex,  flexible  and  efficient  management.  In  principle,  this  opens   The  EU  Smart  Grids  Debate   9   opportunities  for  new  and  new  kinds  of  actors  at  all  levels  of  the  system.  However,  the  new   technologies  allow  for  a  wide  variety  of  system  configurations  –  including  much  more  so-­‐ phisticated  centralised  control.  Smart  grids  are  the  key  for  a  rapid  and  least  cost  transition   towards  energy  supply  with  large  shares  of  fluctuating  renewable  power  generation.  A  key   issue  of  the  energy  and  climate  debate  will  be  to  ensure  that  the  chance  of  a  fundamental   reconfiguration  of  the  energy  system  through  smart  grids  supports  this  transition  as  effec-­‐ tively  as  possible  and  is  not  hindered  or  misled  by  particular  interests  or  lack  of  understand-­‐ ing.     3 The  debate  has  reached  a  new  stage  –  the  evolution  of  the  smart   grid  concept   For  understanding  the  difficulties  and  the  incoherencies  of  the  present  discussion  on  smart   grids,  a  short  look  at  the  history  of  this  concept  is  useful.   3.1 Different  roots  of  the  Smart  Grid  idea     Long  before  the  discussion  on  the  integration  of  fluctuating  renewables  into  the  electricity   systems,  first  “smart  grid”  concepts  emerged  from  the  efforts  of  solving  specific  problems  by   substituting  traditional  electromechanical  devices  by  more  intelligent  electronic  ones.     Smart  Metering   After  the  hopes  had  vanished  that  electricity  would  become  “too  cheap  to  meter”4,  further   automation  of  metering  had  mainly  the  following  motives:  to  avoid  the  need  of  regular  visu-­‐ al  data  collection  by  utility  personnel,  to  gain  a  better  short-­‐term  control  over  electricity   losses  (including  theft  prevention),  to  support  customers  in  saving  energy,  to  facilitate  the   use  of  peak  and  off-­‐peak  tariffs,  and  to  manage  loads,  mainly  of  larger  consumers.  Already  in   1977,  the  first  fully  automated,  commercially  available  remote  meter  reading  and  load  man-­‐ agement  system  was  launched5.    Since  the  nineties  large  customers  with  differentiated  tar-­‐ iffs  have  to  a  large  extent  been  equipped  with  one  or  another  kind  of  smart  meters.  For  resi-­‐ dential  use,  smart  meters  have  increasingly  been  considered  as  a  support  for  raising  aware-­‐ ness  about  energy  consumption  behaviour  leading  to  energy  conservation  –  however  the   resulting  energy  consumption  reductions  in  pilot  projects  vary  widely  and  have  often  been   disappointing.  The  option  of  managing  the  time  of  use  of  appliances  has  only  gained  interest   in  the  last  years  with  the  increasing  share  of  renewable  electricity  generation.  The  up  to  date   largest  deployment  of  smart  meters  for  30  million  customers  has  been  undertaken  in  Italy   between  2000  and  2005.  Although  the  meters  show  advanced  features,  important  motives   seem  to  have  been  direct  control  over  peak  power  and  theft  prevention.6                                                                                                                     4  Lewis  Strauss,  chairman  of  the  US  Atomic  Energy  Commission,  1954   5  http://en.wikipedia.org/wiki/Automatic_meter_reading     6  See  case  study  and  http://www.businessweek.com/globalbiz/content/nov2009/gb20091116_319929.htm     The  EU  Smart  Grids  Debate   10   Distribution  automation  /  Active  distribution  networks   While  electricity  flows  on  transmission  grids  are  being  intensely  controlled  and  their  capacity   is  efficiently  managed,  distribution  grids  at  the  medium  and  low  voltage  level  traditionally   have  not  been  equipped  with  control  technologies.  However,  in  Europe  they  are  generously   dimensioned,  and  in  large  parts  redundant  and  meshed,  so  that  traditionally  their  operation   has  been  highly  reliable.  In  the  United  States,  where  grids  are  weaker  and  more  extended,   reliability  has  been  much  more  of  a  problem  and  has  led  earlier  to  considering  new  technol-­‐ ogies.  American  texts  on  the  smart  grid  often  start  with  the  big  blackouts  in  2003.7  Automat-­‐ ic  disconnection/  reconnection  of  parts  of  the  distribution  grid  can  more  effectively  prevent   local  breakdowns  to  spread  into  larger  parts  of  the  system.  Close  surveillance  of  frequency,   voltage  and  reactive  power  in  combination  with  new  means  to  compensate  variations  (solid   state  power  electronics)  can  considerably  increase  the  capacity  of  existing  dumb  distribution   grids.     This  has  become  particularly  important  with  the  increase  of  distributed  power  generation   which  may  cause  inversions  of  the  electricity  flow  and  requires  a  more  sophisticated  man-­‐ agement  of  grid  capacity.8  If  distributed  power  generation  is  explicitly  involved,  an  increas-­‐ ingly  used  term  is  “active  distribution  grids”.  The  smart  combination  of  different  distributed   generation  sources  (wind,  sun,  CHP)  in  so-­‐called  virtual  power  plants,  as  well  as  the  real-­‐time   management  of  demand  response  and  storage  are  becoming  important  in  this  context.    So-­‐ called  microgrids  can  temporarily  operate  independently  from  the  main  grid  and  increase   overall  stability  -­‐  interest  for  them  has  grown  especially  in  the  United  States.9  Many  smart   grid  pilot  projects  in  the  EU  involve  active  distribution  grids.  Some  of  them  also  have  tested   smart  pricing  concepts  allowing  for  an  effective  management  of  grid  capacities.10     Energy  management  in  buildings  and  facilities   Within  buildings  and  factories,  smart  energy  management  technologies  have  been  evolving   since  decades.  Often  their  main  focus  is  heating  and  cooling,  and  they  are  capable  of  manag-­‐ ing  complex  demand  systems.  Since  electricity  generation  by  the  consumers  themselves  is   emerging,  their  tasks  have  become  more  complex.  With  increasingly  cheaper  captive  PV   power  generation  the  incentive  for  shifting  consumption  into  sunshine  hours  increases,  and   may  lead  to  a  boost  of  investments  in  these  technologies  independently  from  public  grid   regulations.  This  will  increase  the  flexibility  of  the  demand  side  and  will  require  flexible  ad-­‐ aptation  of  public  grid  tariffs  (with  the  help  of  smart  grid  technologies)  in  order  to  make  sure   that  this  flexibility  contributes  to  the  reliability  of  the  main  grid  and  does  not  undermine  it.11                                                                                                                       7  E.g.  the  introduction  of  (Sioshansi,  2012)   8  See  also  (Klose  et  al.,  2010)   9  See  e.g.  (Chowdhury  et  al.,  2009;  Driesen  and  Katiraei,  2008;  Lasseter,  2002;  Platt  et  al.,  2012)   10  See  e.g.  (Brandstätt  et  al.,  2012)   11  See  (Schleicher-­‐Tappeser,  2012)   The  EU  Smart  Grids  Debate   11   E-­‐Mobility   The  last  strand  of  smart  grid  developments  is  the  establishment  of  a  charging  infrastructure   for  electric  vehicles  that  allows  for  interconnectivity  and  roaming.  The  mobility  of  these  new   loads,  the  high  currents  required  for  relatively  short  and  unpredictable  periods  as  well  as  the   need  for  ensuring  appropriate  accounting  and  payment,  poses  unprecedented  challenges  to   existing  grids  that  can  only  be  met  with  smart  grid  technologies.     3.2 Conceiving  an  integrated  technical  system  of  a  new  kind   As  the  technologies  and  the  application  fields  of  these  different  strands  leading  to  smart   grids  overlap,  they  have  gradually  been  integrated  into  more  comprehensive  technical  con-­‐ cepts  which  represent  a  real  paradigm  shift  compared  to  the  traditional  power  system.  Im-­‐ plementing  these  new  concepts  in  reality  is  expected  to  create  huge  business  opportunities.   Market  reports  forecast  hundreds  of  billions  of  turnover.  Traditional  power  sector  suppliers   have  developed  a  series  of  proprietary  solutions;  IT  companies  have  made  considerable  ef-­‐ forts  to  enter  the  markets.  Large  players  have  spent  huge  sums  to  buy  more  specialised   companies.  Different  consortia  are  struggling  for  technical  standards  that  would  ensure  in-­‐ teroperability.  The  different  approaches  put  the  focus  on  different  aspects.  And  it  is  increas-­‐ ingly  acknowledged  that  there  cannot  be  a  standard  approach  for  all  situations  and  coun-­‐ tries,  since  different  existing  structures  require  different  priorities.   Definitions  of  the  smart  grid  have  become  rather  comprehensive.  The  definition  used  for  the   technology  oriented  German  standardisation  roadmap,  for  example,  says:     „Smart  grid  is  a  holistic,  intelligent  energy  supply  system,  not  just  an  “intelligent  network”.  It   comprises  the  operation  of  active  power  distribution  and  power  transmission  networks  with  new,   ICT-­‐based  technologies  for  network  automation,  and  the  incorporation  of  centralised  and  dis-­‐ tributed  power  generation  and  storage  facilities  reaching  tight  up  to  consumers,  so  as  to  achieve   better  networking  and  control  of  the  system  as  a  whole”(DKE,  2010)   Pilot  projects  across  Europe  corresponding  to  such  a  broad  approach  have  shown  the  tech-­‐ nical  feasibility  of  a  wide  variety  of  systems  and  configurations.     However,  in  many  policy  initiatives  and  public  debates  the  focus  is  still  lying  on  the  deploy-­‐ ment  of  smart  meters  which  an  increasing  number  of  experts  are  considering  not  to  be  the   first  priority.12  Also  the  approach  of  the  Smart  Grid  Task  Force  of  the  European  Commission   following  the  Third  Energy  Package  seems  to  be  much  more  restricted  and  focuses  on  “ser-­‐ vices  and  functionalities”  to  be  delivered  by  smart  grids.  However,  the  approach  is  quickly   evolving.  Especially  the  report  of  Expert  Group  3  of  the  Smart  Grid  Task  Force  2009-­‐2011  has   shown  that  the  discussion  cannot  easily  be  confined  to  technical  issues  and  more  fundamen-­‐ tal  questions  need  to  be  tackled.13                                                                                                                       12  Result  of  most  interviews.  See  also  (Schwartz,  2010;  Schwartz  and  Sheaffer,  2010,  2011)   13  See  http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/expert_group3.pdf  and  the  section  on  the   SGTF  below     The  EU  Smart  Grids  Debate   12   3.3 A  new  phase  of  the  debate  –  it’s  more  than  technology   Compared  to  the  expectations  of  three  years  ago,  many  actors  say  to  be  deceived  by  the   effective  progress  in  smart  grids.  The  development  of  standards  is  behind  schedule,  invest-­‐ ments  are  behind  expectations,  and  enthusiasm  for  the  envisaged  smart-­‐meter  rollout  is   fading14.  Equipment  vendors,  distribution  grid  operators  and  electricity  retailers  are  com-­‐ plaining  that  business  cases  for  smart  grid  investments  are  still  difficult  to  be  identified  and   that  missing  standards  make  technical  choices  risky.  Increasingly  they  are  calling  for  a  clarifi-­‐ cation  or  revision  of  the  regulatory  framework.  Although  smaller  investments  which  lead   into  the  direction  of  smarter  grids  are  happening  everywhere,  it  seems  that  more  fundamen-­‐ tal  decisions  would  need  to  be  taken  for  going  ahead.     The  problem  is  not  a  technical  one  and  is  not  even  the  cost.  Tradeshows  present  a  wide  vari-­‐ ety  of  functioning  technical  solutions.  Even  new  high-­‐end  solid-­‐state  power  electronic  devic-­‐ es,  which  would  drastically  boost  the  capacity  of  existing  copper  wires,  could  quickly  come   down  to  much  lower  cost  if  they  were  mass-­‐produced.  It  also  does  not  seem  that  the  prob-­‐ lem  lies  in  finding  technical  and  procedural  compromises  between  different  interest  groups   which  take  their  time.     Across  all  stakeholders  there  seems  to  be  a  growing  acknowledgement  that  the  present  def-­‐ inition  of  roles  and  responsibilities  and  the  mechanisms  for  attributing  costs  and  revenues   are  being  fundamentally  challenged  by  the  need  to  change  the  logic  of  the  system.  The  at-­‐ tempts  to  reorganise  revenue  flows  which  would  help  to  fund  smart  grid  investments,  to   define  or  restructure  responsibilities  for  data  handling,  customer  contact  or  local  congestion   management,  easily  lead  to  considerable  shifts  in  technological,  commercial  and  political   power  between  the  players  involved.  There  is  not  yet  a  shared  vision  which  would  coordi-­‐ nate  the  endeavours  of  the  large  range  of  actors  in  deregulated  markets.   Old  and  new  groups  of  actors  in  the  energy  arena  are  trying  to  understand  the  upcoming   challenges  and  opportunities  and  to  secure  themselves  an  important  role  in  the  emerging   new  configuration.  However,  because  of  the  growing  complexity  of  the  issue,  the  high  inno-­‐ vation  speed  of  new  energy  technologies  and  the  large  numbers  of  new  entrants  in  the  de-­‐ bate,  positions,  strategies  and  possible  conflict  lines  among  different  interest  groups  are  not   yet  clear.                                                                                                                     14  Although  market  research  reports  forecasted  a  strong  growth  in  deployments  last  year   (http://www.fiercesmartgrid.com/press-­‐releases/smart-­‐grid-­‐become-­‐%E2%82%AC68-­‐billion-­‐industry-­‐europe-­‐ 2016-­‐according-­‐gtm-­‐research  )  on  the  basis  of  the  EU  requirements  for  an  accelerated  roll-­‐out.  The   cost/benefit  analyses  required  by  the  EU  are  progressing  slowly.  See  also   http://www.oracle.com/us/industries/utilities/emeasmartgridreadinessstudy-­‐182804.pdf,   http://www.frost.com/sublib/display-­‐market-­‐insight-­‐top.do?id=241350409,   http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/EPNG/PDFs/McK%20on%20smart%20gri ds/MoSG_Europe_VF.ashx     The  EU  Smart  Grids  Debate   13   4 The  EU  policy  arena   4.1 Why  the  EU  level  matters  in  this  context   For  several  reasons  the  discussion  on  smart  grids  at  the  EU  level  is  of  particular  interest  for   the  development  of  the  energy  sector  worldwide.     From  a  global  perspective,  the  EU  has  still  a  leading  role  in  the  transition  towards  a  predom-­‐ inantly  renewable  energy  supply.  Its  endeavour  to  integrate  very  high  shares  of  fluctuating   and  to  a  large  extent  distributed  renewable  electricity  generation  into  a  highly  reliable  and   affordable  power  system  is  being  observed  with  high  interest.  And  smart  grids  are  playing  a   key  role  in  this  effort.     From  the  perspective  of  EU  member  countries,  an  EU-­‐wide  approach  is  becoming  increasing-­‐ ly  important:     • for  many  European  countries  EU  initiatives  have  been  a  key  driver  for  starting  to  over-­‐ come  unsustainable  and  risky  energy  supply  patterns   •  an  intensified  European  electricity  exchange  can  help  to  balance  the  fluctuations  of  re-­‐ newable  power  production   • new  technologies  need  large  markets  for  bringing  the  costs  down   • a  joint  learning  process  helps  to  keep  up  with  the  challenges  of  an  accelerating  transfor-­‐ mation   • and  a  joint  approach  helps  European  industries  to  play  an  important  role  in  the  game.     Nevertheless  the  conditions  in  European  member  countries  are  rather  diverse,  and  diversity   also  helps  in  a  creative  joint  learning  process.     Due  to  their  short  history  and  given  their  wide  range  of  motives  and  origins,  the  discussions   concerning  smart  grids  at  the  EU  level  are  scattered  across  a  landscape  of  different  and  not   always  well-­‐coordinated  bodies.  To  understand  what  is  happening  seems  to  be  a  challenge   also  for  experienced  insiders.     4.2 Main  activities  promoted  by  the  European  Commission     Corresponding  to  the  complexity  of  the  evolving  smart  grid  concept,  the  initiatives  of  the  EU   Commission  and  of  EU-­‐related  bodies  are  being  pushed  from  different  sides.  The  endeavours   are  originating  from  different  motives  and  Commission  services:  competitive  energy  mar-­‐ kets,  efficient  use  of  energy,  integration  of  fluctuating  renewables15,  consumer  protection   and  data  safety,16  industry  development  (mainly  ICT,  electrical  equipment,  appliances),17                                                                                                                   15  All  three  in  DG  Energy,  see  more  below.   16  Task  Force  Smart  Grids,  http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/expert_group2.pdf,  DG   Connect,  ENISA:  http://ec.europa.eu/dgs/connect/mission/index_en.htm#DirH  ,  http://europa.eu/rapid/press-­‐ release_SPEECH-­‐12-­‐732_en.pdf,    https://www.thegrandconference.org,  http://www.enisa.europa.eu/     17  DG  Enterprise  &  Industry:   http://ec.europa.eu/enterprise/sectors/electrical/competitiveness/electra/index_en.htm,     http://ec.europa.eu/enterprise/magazine/articles/industrial-­‐policy/article_11038_en.htm,     The  EU  Smart  Grids  Debate   14   research18.  Important  activities  can  be  found  in  three  Directorates-­‐General:  DG  Energy  (Grid   activities),  DG  Information  and  Society  (SmartGrid  Activities),  DG  Research  and  Innovation.   Many  other  DGs  are  involved  in  specific  aspects  of  Smart  Grids  (e.g.  Transport,  Regional  Poli-­‐ cy,  Enterprise  and  Industry,  JRC  etc.).  In  the  last  two  years,  however,  there  have  been  con-­‐ siderable  efforts  for  improving  coordination.  The  most  important  ongoing  activities  of  regu-­‐ latory  relevance  are  shortly  presented  in  the  following  sections.     SGTF  Smart  Grid  Task  Force     Under  the  provision  of  the  Third  Energy  Package  DG  Energy  has  created  the  “Task  Force  for   the  implementation  of  the  smart  grid  into  the  European  internal  market”  in  200919.  Under   the  guidance  of  a  Steering  Committee  composed  by  representatives  from  Commission  ser-­‐ vices,  the  regulators,  a  wide  range  of  industries  and  the  consumers,  four  Expert  Groups  have   delivered  reports  in  2011.  While  the  mission  started  from  a  rather  narrow  focus  on  metering   and  directly  grid-­‐related  services  and  functions,  especially  Expert  group  3  on  “Roles  and  re-­‐ sponsibilities  of  actors  involved  in  the  Smart  Grids  deployment”  has  emphasised  the  necessi-­‐ ty  of  rethinking  the  whole  architecture  of  electricity  markets  and  roles20.  This  may  be  exem-­‐ plified  by  two  passages  in  the  report:   The  DSOs’  responsibility  in  the  future  electricity  market  with  massive  DG21  and  micro  DG  is  multi-­‐fold  and  re-­‐ sembles  that  of  the  TSOs  in  the  transmission  grid  of  today.  These  include  (i)  keeping  operational  security  and   quality  of  supply,  (ii)  enabling  the  new  operations  at  the  distribution  level  (including  non-­‐discriminatory  and   effective  real-­‐time  grid  capacity  monitoring  and  management  of  injections  /  withdrawals),  (iii)  market  based   congestion  management,  (iv)  support  energy  efficiency  and  integration  of  renewables  at  the  producer  side   by  setting  harmonized  and  non-­‐discriminatory  rules  and  codes.(p.11)   With  the  increase  in  distributed  generation,  new  energy  market  places  will  have  to  be    promoted,  contrib-­‐ uting  to  a  further  optimization  of  the  system.  These  market  places    might  require  additional  rules  than  the   ones  which  are  in  place  today  in  the  wholesale    market.  The  structures  in  the  markets  will  start  to  reflect   more  and  more  the  increasing    decentralized  character  of  the  power  system  and  balancing,  clearing  and  set-­‐ tlement  will    have  to  react  to  this  development  by  opening  to  smaller  participants.  It  can  be  expected    that   an  increasingly  flexible  formation  of  energy  prices  and  ancillary  services  (both  on  the    time  scale  and  in  the   spatial  extension)  as  well  as  increasingly  flexible  grid  tariffs  will    ultimately  be  required  to  deliver  the  full  po-­‐ tential  of  Smart  Grids.(p.30).         The  work  of  the  Task  Force  has  contributed  to  the  key  document  of  the  Commission’s  Smart   Grid  activities  published  in  May  2011:  “Smart  Grids:  from  innovation  to  deployment”22,   which  focuses  on  five  objectives:  (1)  developing  technical  standards;  (2)  ensuring  data  pro-­‐ tection  for  consumers;  (3)  establishing  a  regulatory  framework  to  provide  incentives  for   Smart  Grid  deployment;  (4)  guaranteeing  an  open  and  competitive  retail  market  in  the  in-­‐                                                                                                                 18  DG  Research  in  different  programmes:  Energy,  ERA,  Infrastructure,  ICT,  Social  Sciences…   19  First  mission:  http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/mission.pdf.  SGTF  website   http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm     20  http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/expert_group3.pdf     21  DG  =  distributed  generation   22  COM/2011/0202  final     The  EU  Smart  Grids  Debate   15   terest  of  consumers;  (5)  providing  continued  support  to  innovation  for  technology  and  sys-­‐ tems.   An  important  outcome  of  the  first  mandate  of  the  SGTF  are  ongoing  negotiations  on  stand-­‐ ards  framed  by  three  standardisation  mandates  of  the  Commission  to  the  European  Stand-­‐ ard  Organisations23  based  on  the  work  of  expert  group  1.24   In  2012  a  new  Steering  Committee  (with  twice  as  much  members  and  a  stronger  representa-­‐ tion  of  the  telecom  industry)  has  been  appointed  by  DG  Energy.25  The  updated  mandate   puts  a  stronger  emphasis  on  regulatory  issues  as  well  as  on  communication  and  data  han-­‐ dling.  The  challenges  of  distributed  and  fluctuating  renewable  energy  play  a  stronger  role.   Overall,  the  second  mandate  seems  to  acknowledge  more  than  the  first  one  that  the  devel-­‐ opment  of  smart  grids  and  increased  distributed  generation  involve  a  fundamental  rethink-­‐ ing  of  actor’s  roles,  the  logic  of  the  technical  system  and  market  architectures.   Cost-­‐benefit  analysis  and  roll-­‐out  of  intelligent  metering  systems   On  a  somehow  separate  track,  based  on  a  provision  in  the  Electricity  directive  (2009/72/EC)   which  requires  Member  States  to  massively  roll  out  positively  assessed  intelligent  metering   systems,  in  April  2012  the  Commission  has  adopted  a  recommendation,  defining  assessment   procedures  and  criteria  as  well  as  minimum  required  functionalities  for  smart  meters.26   Member  States  have  to  conclude  their  assessments  by  September  3,  2012,  and  to  roll  out   80%  of  the  positively  assessed  systems  by  2020.  The  coordination  of  this  activity  is  with  DG   Energy,  Assessment  criteria  and  required  functionalities  have  been  developed  in  cooperation   with  DG  INFSO  and  DG  JRC.  The  corresponding  JRC  report27  does  not  mention  an  involve-­‐ ment  of  the  SGTF.   Development  of  Network  Codes     Another  most  important  activity  concerning  Smart  Grids  following  the  Third  Energy  Pack-­‐ age28  is  the  development  of  Network  Codes29.  On  request  of  the  Commission  the  Agency  for   Cooperation  of  Energy  Regulators  ACER  elaborates  Framework  Guidelines.  Subsequently  the   European  Network  of  Transmission  System  Operators  for  Electricity  ENTSO-­‐E  (for  gas  EN-­‐ TSOG)  elaborates  the  network  codes.30  The  whole  process  is  supervised  by  the  commission   and  involves  public  consultation.  The  current  3-­‐year  work  programme    envisages  the  finalisa-­‐                                                                                                                 23  CEN,  CENELEC  and  ETSI,  see  mandates  on   http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm     24  See  also  the  regulation  guidelines  for  member  countries  issued  by  ERGEG  (ERGEG,  2011)   25  (European  Commission,  2012)   26  Commission  recommendation  on  preparations  for  the  roll-­‐out  of  smart  metering  systems  [C(2012)1342],   http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/20120309_smart_grids_recommendation_en.pdf     27   http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/2011_10_smart_meter_funtionalities_report_full.p df     28  http://ec.europa.eu/energy/gas_electricity/legislation/third_legislative_package_en.htm     29  http://ec.europa.eu/energy/gas_electricity/codes/codes_en.htm,  based  on  Regulation  (EC)  No  714/2009  on   conditions  for  access  to  the  network  for  cross-­‐border  exchanges  in  electricity,  32009R0714.     30  https://www.entsoe.eu/resources/network-­‐codes     The  EU  Smart  Grids  Debate   16   tion  of  framework  guidelines  on  “capacity  allocation  and  congestion  management”   (Q2/2011),  on  “grid  connection”  (Q2/2011),  on  “system  operation”  (Q4/2011),  on  “balanc-­‐ ing”  (Q3/2012)  and  on  “Third  Party  access”  (Q2/2013).  Corresponding  network  codes  are   supposed  to  be  ready  about  two  years  later.     This  means  that  highly  complex  rules  concerning  the  future  functioning  of  smart  grids  are   going  to  be  finalised  in  a  very  short  period  of  time.  Most,  but  no  all,  interlocutors  assume   that  these  codes  will  be  most  important  for  the  whole  architecture  of  future  grids.  While   these  codes  are  originally  intended  to  facilitate  cross-­‐border  exchanges,  they  effectively  tend   to  make  detailed  prescriptions  for  the  distribution  level.  Anecdotal  accounts  report  attempts   to  introduce  very  detailed  requirements  for  appliances  that  would  serve  specific  interests   and  would  not  be  based  on  a  widespread  consensus.  As  ENTSO-­‐E  represents  the  transmis-­‐ sion  system  operators,  transmission  grid  operators  interests  are  much  more  strongly  repre-­‐ sented  in  this  process  than  the  view  of  actors  at  the  distribution  level.   There  seems  to  be  no  systematic  coordination  between  this  development  of  codes  and  the   earlier  mentioned  development  of  smart  grid  standards  on  the  basis  of  the  SGTF  recom-­‐ mendations.   Energy  Efficiency  Directive     A  different  source  of  legislation  for  the  development  of  smart  grid  functionalities  will  be  the   Energy  Efficiency  Directive  on  which  the  EP,  the  Commission  and  the  Council  have  reached   an  agreement  in  June  2012.31  The  directive  due  for  final  vote  in  the  EP  in  September  2012,   after  having  been  watered  down  in  most  respects  during  negotiations,  contains  two  key  pro-­‐ visions  for  demand  response:  member  states  have  to  ensure  that  (1)  demand  response  be   allowed  to  participate  alongside  supply  in  electricity  markets  and  that  (2)  grid  operators   treat  demand  response  providers  in  a  non-­‐discriminatory  manner  when  providing  balancing   and  reserve  services.  This  is  a  considerable  step  forward,  since  a  series  of  hurdles  have  pre-­‐ vented  demand  response  measures  from  competing  with  the  electricity  generation.32     Research  activities   Another  important  forum  of  discussion  between  a  wide  range  of  stakeholders  is  the  Smart   Grids  European  Technology  Platform  (SmartGrids  ETP)  initiated  by  DG  Research.33  It  de-­‐ scribes  itself  as  the  “key  European  forum  for  the  crystallisation  of  policy  and  technology  re-­‐ search  and  development  of  pathways  for  the  smart  grids  sector,  as  well  as  the  linking  glue   between  EU-­‐level  related  initiatives”.  It  recently  released  its  “SmartGrids  Strategic  Research   Agenda  2035”    emphasizing  that  such  a  long  perspective  is  needed  for  envisaging  the  deep   transformations  required  by  high  shares  of  renewables,  highly  efficient  buildings  and  a                                                                                                                   31  Commission  Proposal  COM/2011/0370  final  -­‐  COD  2011/0172,  52011PC0370.  The  negotiation  agreement:   http://static.euractiv.com/sites/all/euractiv/files/EED.en12.doc     32  http://sedc-­‐coalition.eu/2012/07/13/press-­‐release-­‐energy-­‐efficiency-­‐directive-­‐a-­‐positive-­‐step-­‐for-­‐demand-­‐ response/     33  http://www.smartgrids.eu     The  EU  Smart  Grids  Debate   17   strong  role  of  storage  (European  Technology  Platform  SmartGrids,  2012).  Members  of  the   SmartGrids  ETP  represent  a  wide  range  of  stakeholders.34  Its  mission,  however,    includes   ensuring  that  the  Platform’s  strategy  remains  consistent  with  EU  policy.     The  SmartGrid  ETP  is  linked  to  the  overarching  European  Strategic  Energy  Technology  Plan   (SET  Plan).35     Under  this  umbrella  The  SmartGrids  ETP  has  initiated  the  European  Electricity  Grid  Initiative   (EEGI),  coordinated  by  ENTSO-­‐E  (TSOs)  and  EDSO4SG  (DSOs)(ENTSO-­‐E  and  EDSO-­‐SG,  2010).   The  EEGI  is  a  nine-­‐year  RD&D  programme  2010-­‐2018  focusing  on  smart  grid  system  issues.   The  estimated  cost  amounts  to  2  billion  EUR.  The  GRID+  project  supports  the  networking  of   the  EEGI  2012-­‐2014.36  The  European  Energy  Research  Alliance,  which  involves  also  activities   and  funds  of  the  member  states,  is  supporting  the  endeavours  of  the  SET  Plan  with  an  own   programme  on  smart  grids.37  A  more  general  initiative  of  the  SET  Plan  is  the  information  sys-­‐ tem  SETIS  which  has  an  interesting  section  on  electricity  grids.38     The  JRC  (Joint  Research  Centre)  of  the  EU  Commission  has  produced  a  catalogue  of  research,   demonstration  and  implementation  projects  on  Smart  grids  in  Europe,  listing  219  projects   (Giordano  et  al.,  2011).    It  reports  23  projects  in  the  EU  research  programme  FP7,  some   more  are  funded  by  other  programmes  such  as  the  ERDF  or  the  EU  Recovery  plan.  The  DG   Information  Society  (INFSO)  programme  “ICT  for  Sustainable  Growth”  coordinates  the  tech-­‐ nical  SG  research  projects  of  the  Commission,  currently  it  lists  11  projects.39  Moreover,  DG   INFSO  regularly  organises  EC-­‐Telecom-­‐Utility  workshops.     4.3 Main  Stakeholders  present  in  the  debates  at  EU  level   In  the  different  boards  and  committees  of  the  activities  discussed  in  the  previous  section  a   wide  range  of  stakeholders  are  represented.  The  most  important  ones  are  the  following.     Organisations  of  the  electricity  sector   EURELECTRIC  ,  the  Union  of  the  Electricity  Industry,  is  the  sector  association  representing   the  common  interests  of  the  electricity  industry  at  pan-­‐European  level.40  Its  members  are   the  national  associations  of  the  electricity  industry.  EURELECTRIC  is  a  large  organisation,  fac-­‐                                                                                                                 34  representatives  from:  TSOs,  DSOs,  Regulators,  Generation,  Renewables,  Users,  Electrotechnology  equipment   manufacturers,    Telecommunications,  Metering  manufacturers,    Research  and  development  within  the  electric-­‐ ity  companies,  Research  institutes   35  http://ec.europa.eu/energy/technology/set_plan/set_plan_en.htm     36  http://www.gridplus.eu     37    http://www.eera-­‐set.eu/index.php?index=21     38  http://setis.ec.europa.eu/technologies/Smart-­‐grids     39  http://ec.europa.eu/information_society/activities/sustainable_growth/funding/prj_grids/index_en.htm     40  http://www2.eurelectric.org,  Secretary  General:  Hans  ten  Berge   The  EU  Smart  Grids  Debate   18   ing  increasing  internal  discussions  following  the  growing  importance  of  DSOs  and  Distribu-­‐ tion  companies  in  the  transition  of  the  electricity  sector.41     Transmission  System  operators  are  represented  by  the  European  Network  of  Transmission   System  Operators  for  Electricity  ENTSO-­‐E.42  Members  are  41  TSOs  from  34  countries  cover-­‐ ing  their  complete  territories.  The  organisation  also  carries  out  semi-­‐official  tasks  for  the  EU,   such  as  the  development  of  grid  codes  or  the  semi-­‐official  Ten  Year  Network  Development   Plan  TYNDP.     Distribution  grids  and  distribution  companies  are  represented  by  three  somewhat  overlap-­‐ ping  organisations:     • CEDEC,  European  Federation  of  Local  Energy  Companies43,  founded  in  1992,  represents   predominantly  public  local  energy  companies  resp.  their  national  organisations  in  Ger-­‐ many  (VKU),  France,  Italy  (Federutility),  Belgium,  The  Netherlands…     • EDSO4SG,  European  Distribution  System  Operators  for  Smart  Grids,  a  relatively  new  or-­‐ ganisation,  consisting  mainly  of  the  distribution  branches  of  the  large  incumbent  electric-­‐ ity  companies,  but  also  some  smaller  private  companies.44    EDSO4SG  is  strongly  involved   in  the  EEGI  and  considers  that  balancing  at  the  local  level  will  become  necessary   (Granström,  2012).     • GEODE,  European  independent  distribution  companies  of  gas  and  electricity45,  founded   in  1991,  representing  more  than  600  companies  in  12  countries.  Strong  focus  on  legal  is-­‐ sues.   SEDC,  Smart  energy  demand  coalition,  represents  a  wide  variety  of  industries  dedicated  to   promoting  the  requirements  of  demand  side  programs  in  the  European  electricity  markets.46   It  is  an  active  organisations  specifically  addressing  SG  issues.       Independent  energy  providers  without  own  grids  do  not  have  a  separate  representation   such  as  the  BNE  in  Germany.  For  Renewables  and  Cogeneration  see  below.   Equipment  manufacturers   T&D  Europe,  the  European  Association  of  the  Electricity  Transmission  and  Distribution   Equipment  and  Services  Industry,  has  national  associations  as  its  members,  representing   companies  with  a  turnover  of  35  bn  €.  It  is  very  active  in  the  EU  Smart  Grid  debate  emphasis-­‐                                                                                                                 41  See  e.g.  http://www.eurelectric.org/Download/News/WN.asp?DocID=32479  and   http://www2.eurelectric.org/docsharenoframe/Common/GetFile.asp?PortalSource=4294&DocID=31910&Styp e=SaveAS&mfd=off&pdoc=1     42  https://www.entsoe.eu,  Sectretary  General:  Konstantin  Staschus     43  http://www.cedec.com    Secretary  General:  Gerd  De  Block   44  http://www.edsoforsmartgrids.eu,  Secretary  General:  Per-­‐Olof  Granström   45  http://www.geode-­‐eu.org/     46  http://sedc-­‐coalition.eu  ,  Secretary  General:  Jessica  Stromback   The  EU  Smart  Grids  Debate   19   ing  the  necessity  of  investments  in  smart  grids  and  transmission.  Its  positions  are  prudent   and  open  for  all  kinds  of  developments.47     ESMIG,  the  European  Smart  Metering  Industry  Group,  representing  37  companies,  aims  at   “the  pan-­‐European  introduction  and  roll  out  of  Smart  Metering  through  harmonisation  and   interoperability”,  (http://www.esmig.eu).       EREC,  the  European  Renewable  Energy  Council,  represents  the  renewable  energy  industry:   equipment  producers,  operators,  fuels,  research  (http://www.erec.org/).  It  has  a  low  profile   on  smart  grids,  more  active  are  the  member  associations  EPIA  (PV)  and    EWEA  (wind).  Over-­‐ all  the  presence  of  the  renewable  energy  industry  in  the  SG  discussion  is  remarkably  small.48     COGEN  Europe,  the  European  Association  for  the  Promotion  of  Cogeneration,  whose  mem-­‐ bership  consists  of  a  wide  range  of  associations  and  industry  companies  keeps  a  rather  low   profile  on  SG  (http://www.cogeneurope.eu).   EU.BAC,  European  Building  Automation  Controls  Association,  has  an  astonishingly  low  pro-­‐ file  and  interest  on  smart  grid  issues  (http://eubac.org).  Some  member  companies  are  much   more  actively  promoting  building  automation  or  smart  buildings  as  a  part  of  integrated   smart  grid  systems.     CECED,  European  Committee  of  Domestic  Equipment  Manufacturers,  is  an  active  participant   in  discussions  (http://www.ceced.eu).  Implementing  demand  response  would  require  new   equipment  functionalities  and  open  new  prospects  for  the  sector.  CECED  seems  to  prefer  a   high  degree  of  local  intelligence  protecting  autonomous  decision  making  and  privacy  of  cus-­‐ tomers.     ORGALIME,  European  Engineering  Industries  Association,  cooperates  with  T&D,  ESMIG,   CECED  on  this  issue.49     ESIA,  European  Semiconductor  Industry  Association,  http://www.eeca.eu/esia/     AIE,  European  Association  of  Electrical  Contractors,  Association  Européenne  de  l’Installation   Electique,    http://www.aie.eu/     IT  and  Telecom  industry   With  “smart  grids”  the  energy  sector  opens  for  the  logic  and  the  influence  of  information   and  communication  technologies  (ICT).  This  is  a  huge  growth  opportunity  for  the  corre-­‐ sponding  industries  offering  hardware,  software,  data  handling  and  communication.  Differ-­‐ ent  smart  grid  strategies  open  different  opportunities  for  the  various  subsectors  of  the  wide   range  of  ICT  industries.                                                                                                                   47    http://www.tdeurope.eu,  position  paper  on  infrastructure   http://www.tdeurope.eu/data/TD%20Europe%20position%20paper%20on%20Infrastructures%20and%20Smar t%20Grids%20010212.pdf     48  This  is  also  the  case  in  member  states,  e.g.  in  Germany   49  http://www.orgalime.org  ,  (ORGALIME,  2009)   The  EU  Smart  Grids  Debate   20   DIGITALEUROPE,  represents  the  digital  technology  industry  in  Europe  having  as  members   national  associations  and  large  companies.  DIGITALEUROPE  is  an  active  member  of  the  TFSG.   Strong  interest  in  smart  meters  and  standardization  of  the  “last  mile  to  consumers”  50     ETNO,  European  Telecom  Networks  Operators  Association,  represents  41  operators  in  35   countries  (http://www.etno.eu).   ECTA,  European  Competitive  Telecommunications  Association,  represents  “the  regulatory   and  commercial  interests  of  'challenger'  electronic  communication  service  providers  and   their  suppliers”  (http://www.ectaportal.com).     EUTC,  European  Utilities  Telecom  Council,  represents  the  telecommunications  and  infor-­‐ mation  technology  interests  of  Europe's  electric,  gas  and  water  utilities  and  other  critical   infrastructure  organisations  (http://www.eutc.org).   GSMA,  represents  the  interests  of  mobile  operators  worldwide  (http://www.gsma.com).     Consumer  and  environmental  organisations   BEUC,  the  European  Consumers  Organisation,  does  not  seem  to  be  very  active  on  this  issue,   but  is  represented  in  the  SGTF  (http://www.beuc.org).   Environmental  Organisations  –  which  play  a  strong  role  in  the  energy  debate  –  are  not  rep-­‐ resented  in  the  analysed  forums  on  smart  grids  and  have  not  yet  developed  strong  own  ac-­‐ tivities  on  this  issue.   Cities  and  Regions   While  cities  and  regions  have  developed  intensive  energy  and  climate  policy  activities  and   also  interesting  initiatives  on  smart  grids51,  they  are  not  represented  in  the  main  forums  and   discussions  listed  in  the  last  section.       This  overview  on  the  major  stakeholders  involved  shows  that  overall,  the  directly  interested   industry  is  very  well  represented  –  with  the  exception  of  the  renewable  energy  industry,   both  manufacturers  and  new  independent  operators.  Business  at  large,  also  including  the   industry  as  energy  consumer,  is  not  represented  separately.  Organisations  representing  pub-­‐ lic  interests,  e.g.  focusing  on  environmental  issues,  privacy  concerns,  consumer  interests  or   territorial  communities  are  heavily  under-­‐represented  considering  the  issues  at  stake.                                                                                                                       50  http://www.digitaleurope.org/  .  White  paper  on  SG:   http://www.digitaleurope.org/Portals/0/Documents/TRPG/DIGITALEUROPE_White_Paper_on_Smart_Grids_20 11-­‐09-­‐21.pdf  ,  Recommendations   http://www.digitaleurope.org/Portals/0/Documents/TRPG/DIGITALEUROPE_Recommendations_on_Smart_Gri ds_2011-­‐09-­‐21.pdf     51  See  e.g.  http://energy-­‐cities.eu/What-­‐are-­‐Smart-­‐Cities-­‐really-­‐all  ,  http://www.local-­‐renewables-­‐ conference.org/freiburg2012/,  http://setis.ec.europa.eu/about-­‐setis/technology-­‐roadmap/european-­‐initiative-­‐ on-­‐smart-­‐cities,  http://www.deenet.org/100-­‐EE-­‐Regionen.1023.0.html     The  EU  Smart  Grids  Debate   21   5 The  discussion  in  EU  member  states   5.1 Large  differences  in  structures  and  awareness,  creative  diversity   The  starting  conditions  and  the  efforts  for  developing  smart  grids  vary  considerably  between   European  countries.52  This  is  illustrated  by  the  number  of  smart  grid  projects  (R&D  as  well  as   deployment):  More  than  half  of  the  219  projects  listed  in  the  already  mentioned  JRC  project   catalogue  (Giordano  et  al.,  2011)  are  located  in  Denmark,  Germany,  Spain  and  the  UK.  While   Denmark  counts  22%  of  all  projects,  Poland  contributes  only  1,7%  and  Bulgaria  0,4%.  The   same  holds  for  the  investments:  While  Italy  invested  €  2150  million  (mostly  smart  meters),   Germany  228  (mainly  integrated  systems),  France  195  (mainly  smart  meters),  investments  in   Eastern  Europe  were  mostly  negligible,  with  €  3,7  million  in  Poland  and  0,7  million  in  Bulgar-­‐ ia.  The  UK  has  established  a  unique  500  million  low-­‐carbon  network  fund  for  innovative  pilot   projects.53  Forecasts  estimate  the  cumulative  European  smart  grid  technology  market  to   reach  €3.1  billion  in  2012,  and  €6.8  billion  in  2016.54     These  important  differences  in  interest  and  in  efforts  essentially  reflect  the  different  capaci-­‐ ties  for  innovation  in  the  respective  energy  sectors.  They  cannot  be  explained  by  the  differ-­‐ ences  in  the  existing  grid  structure,  since  weak  grids  may  even  open  opportunities  for  leap-­‐ frogging  heavy  wiring  efforts  by  expanding  capacities  with  smart  approaches,  such  as  the   examples  of  the  US  or  India  show  (see  below).  Powerful  incumbent  (ex-­‐)monopoly  utilities   linked  to  heavy  base-­‐load  generation  (coal  and  nuclear)  and  defying  the  growth  of  distribut-­‐ ed  generation  with  renewables,  seem  to  be  the  most  important  hindrance  to  more  flexible   approaches.  Countries  with  a  strong  growth  in  renewables,  such  as  Germany,  Italy,  Den-­‐ mark,  Spain  or  Austria  show  a  strong  interest  in  smart  grids,  as  well  as  those  with  innovative   regulators  looking  for  an  intensifications  of  competition,  such  as  in  the  UK,  in  the  Nether-­‐ lands,  or  in  Finland.  Evidently,  also  the  existence  of  an  innovative  industry  is  playing  an  im-­‐ portant  role.     Given  the  strong  differences  in  the  structures  of  the  electricity  sector  in  EU  member  coun-­‐ tries  (concerning  the  generation  mix;  the  ownership  structure  in  generation,  transmission   and  distribution;  the  existence  of  a  strategically  oriented  public  regulator  and/or  public   transmission  grid  operator…),  also  the  priorities  in  smart  grid  strategies  inevitably  differ.     While  France  has  a  strong  emphasis  on  a  conventional  centralised  approach  (dominating   nuclear,  very  little  distributed  generation)  and  a  traditional  interest  in  load  shedding  (im-­‐ portant  electric  heating  programmes  for  adjusting  to  the  large  share  of  base-­‐load  nuclear   generation),  there  is  a  strong  push  for  e-­‐mobility  coming  from  the  car  industry  combined   with  important  electric  network  equipment  and  ICT  industries  looking  for  global  markets.                                                                                                                   52  Interesting  overviews  on  the  endeavours  in  different  European  countries  are  given  by  (Hübner  and  Prüggler,   2011),  (Renner  et  al.,  2011),  (SEDC,  2011)  and  (Appelrath  et  al.,  2012).   53  http://www.ofgem.gov.uk/Networks/ElecDist/lcnf/Pages/lcnf.aspx     54  http://www.fiercesmartgrid.com/press-­‐releases/smart-­‐grid-­‐become-­‐%E2%82%AC68-­‐billion-­‐industry-­‐europe-­‐ 2016-­‐according-­‐gtm-­‐research     The  EU  Smart  Grids  Debate   22   Spain,  on  the  other  side,  is  making  considerable  efforts  to  integrate  its  important  wind  ca-­‐ pacities.  In  Germany,  a  strong  motivation  is  not  only  coming  from  the  strongly  increasing   share  of  renewables,  but  also  from  the  efforts  for  e-­‐moblitiy  (important  car  industry),  from   the  increasingly  powerful  municipal  utilities  as  well  as  from  the  important  electric  network   equipment  and  ICT  industries.     Such  differences  have  to  be  respected  when  designing  European  policies  in  this  regard.  As  in   all  European  policies,  it  is  a  challenging  task  to  find  a  balance  between  trend  accelerating   and  cost-­‐reducing  joint  endeavours  and  innovation-­‐friendly  diversity,  between  different  cul-­‐ tures  and  industry  interests,  between  technologically  advanced  members  and  those  fearing   to  be  left  behind.     To  analyse  the  different  conditions,  interests,  and  positions  in  EU  member  states  is  beyond   the  scope  of  this  report.  The  discussion  in  Germany  has  a  strong  influence  on  the  EU  discus-­‐ sion,  the  e-­‐Energy  programme  of  the  Ministry  for  Economy  55  has  produced  a  series  of  pilot   projects  which  have  attracted  international  interest.  However,  the  intense  German  discus-­‐ sion  on  future  energy  grids56  does  not  yet  seem  sufficiently  connected  to  the  discussions  at   the  EU  level.  A  parallel  report  for  SEFEP  deals  with  the  Smart  Grid  discussion  in  Germany.  Of   particular  interest  may  be  the  examples  of  Denmark  and  Italy  which  give  some  insight  in  dif-­‐ ferent  advanced  discussions  in  EU  member  states.     5.2 Example  1:  Denmark   Ambitious  targets  for  a  deep  transformation   Because  of  the  early  development  and  high  share  of  wind  energy,  and  because  of  an  overall   ambitious  climate  policy,  smart  grid  operation  has  been  an  issue  early  on.  In  2008  the  Danish   government  installed  a  Commission  on  Climate  Change  Policy  with  the  task  of  showing  how   Denmark  can  phase  out  fossil  fuels  by  2050    (Danish  Commission  on  Climate  Change  Policy,   2010).  The  new  government,  in  office  since  October  2011,  has  formulated  ambitious  mile-­‐ stones  for  its  energy  policy:  2020:  50%  of  electricity  consumption  covered  by  wind,  2035:   electricity  and  heat  supply  covered  by  renewable  energy,  2050:  all  energy  needs  covered  by   renewable  energy  (The  Danish  government,  2011).  An  energy  agreement  voted  in  Parlia-­‐ ment  with  a  vast  majority  has  confirmed  these  goals,  provided  financing,  announced  a  smart   grid  strategy  for  2012  and  stipulated  a  thorough  revision  of  electricity  market  regulation.57                                                                                                                   55  http://www.e-­‐energy.de/en/     56  See  e.g.:  (Appelrath  et  al.,  2012)  an  influential  study  with  scenarios  for  the  migration  toward  a  smart  grid;   (Bundesnetzagentur,  2011),  the  regulator  outlining  a  possible  definition  of  roles  at  the  distribution  level  (con-­‐ troversial  reactions);(Köhler-­‐Schute,  2012)  giving  a  good  overview,  especially  on  role  discussions;   (Energietechnische  Gesellschaft  im  VDE  (ETG),  2008),  proposing  a  framework  for  smart  distribution  and  virtual   power  plants;  (Energietechnische  Gesellschaft  im  VDE  (ETG),  2007)  on  decentralized  supply;  (BNE,  2011)  inde-­‐ pendent  electricity  suppliers  on  new  market  roles;     57  http://www.ens.dk/da-­‐DK/Politik/Dansk-­‐klima-­‐og-­‐energi-­‐ politik/politiskeaftaler/Documents/Accelerating%20green%20energy%20towards%202020.pdf     The  EU  Smart  Grids  Debate   23   The  Danish  state  is  in  a  good  position  to  organise  a  smooth  transition  since  it  owns  the  na-­‐ tional  TSO.   The  Danish  Energy  Association,  representing  the  energy  companies  (net  companies,  traders,   producers),  says  that  DSOs  need  to  actively  manage  their  network  and  will  have  a  similar   role  as  TSOs  today.  It  envisages  a  “dynamic  pricing  system  and  a  market  for  ‘using’  the  net-­‐ work  at  DSO-­‐level”,  where  the  “DSO  will  set  the  framework,  standards  and  rules  for  the   market”,  while  service  providers  will  ensure  the  contact  to  customers  (Stouge,  2012).   Using  the  heat  market  as  buffer     Coupling  the  electricity  market  with  the  heat  market  plays  a  central  role  in  the  agreed  transi-­‐ tion  strategy.  The  Danish  Commission  on  Climate  Change  Policy  envisaged  that  electricity   would  grow  from  20%  to  40-­‐70%  of  total  energy  use.  This  strategy  is  facilitated  by  the  fact   that  in  the  last  three  decades  small,  often  cooperative,  district  heating  systems  on  the  basis   of  CHP  have  been  installed  all  over  the  country  and  cover  a  large  share  of  the  heat  supply.   Increasingly,  heat  pumps  shall  now  provide  heat  to  these  systems  and  represent  a  highly   flexible  load  able  to  compensate  fluctuating  wind  power  generation.58  This  transition  is  also   facilitated  by  the  fact  that  large  parts  of  the  wind  energy  producers  are  directly  acting  on  the   electricity  markets  and  have  to  provide  or  contract  their  own  balancing  (Energinet  DK,  2007).   Expected  heavy  investment  requires  new  definition  of  roles   All  this  will  only  be  possible  with  heavy  investments  in  smartening  the  grids.  The  Danish  en-­‐ ergy  association  estimates  that  active  management  of  distribution  networks  can  increase  the   amount  of  distributed  generation  that  can  be  connected  to  existing  distribution  grids  by  a   factor  of  three  to  five  without  requiring  network  reinforcement.  According  to  a  study  of  the   Association  together  with  the  Danish  TSO,  instead  of  investing  DKK  7,7  billion  into  traditional   grid  expansion,  it  is  much  more  interesting  investing  DKK  9,8  billion  in  smart  grids  while   reaping  benefits  of  DKK  8,2  billion  (savings  in  regulating  power  and  reserves,  electricity  gen-­‐ eration,  costs  for  energy-­‐saving  initiatives)  leading  to  residual  costs  of  DKK  1,6  billion   (Stouge,  2012).  How  to  organise  that  these  benefits  contribute  to  the  return  on  the  initial   investment  is  still  an  open  challenge.  The  discussion  on  the  future  role  of  DSOs  as  market   facilitators  is  still  under  way.   Important  research  and  demonstration  projects   An  outstanding  number  of  research  and  demonstration  projects  in  Denmark  have  contribut-­‐ ed  to  this  vision  (Giordano  et  al.,  2011).  This  has  been  facilitated  by  the  fact  that  the  state-­‐ owned  TSO,  funded  by  its  customers,  is  directly  in  charge  of  research  in  this  field.    Important   orientation  was  given  by  the  ecogrid  project  (Lind,  2009;  Trong  et  al.,  2009).  New  approach-­‐ es  show  potential  for  considerable  simplifications:  e.g.  controlling  demand  response  at  the                                                                                                                   58  See  also   http://www.europeanenergyreview.eu/site/pagina.php?id=3417&toegang=cfcd208495d565ef66e7dff9f98764 da     The  EU  Smart  Grids  Debate   24   consumer’s  premises,  simply  on  the  basis  of  the  frequency  in  the  grid,  may  save  expensive   communication  and  maintain  privacy  and  autonomy  of  consumers59  .     5.3 Example  2:  Italy   The  situation  in  Italy  is  characterised  by     • a  dominant  role  in  generation,  distribution  and  sales  of  the  former  national  monopo-­‐ ly  ENEL  with  30  million  customers  in  Italy  and  30  million  abroad,  mainly  in  Spain   (Endesa)   • an  independent  national  TSO,  Terna  Spa.,  the  largest  grid  operator  in  Europe.     • a  dense  and  relatively  reliable  grid   • an  important  and  rapidly  growing  role  of  distributed  generation  with  wind  and  re-­‐ cently  also  solar  (2nd  largest  PV  market  globally  in  2011)   • a  relatively  flexible  mix  of  conventional  centralised  generation  with  an  important  role   of  hydroelectricity,  a  dominant  role  of  natural  gas  and  the  absence  of  nuclear  power   • high  electricity  prices   The  general  conditions  are  therefore  rather  favourable  to  a  sustained  growth  of  renewables   and  smart  grid  projects.  Effectively,  Italy  is  one  of  the  leading  countries  concerning  smart   grid  investments.   Smart  meters   Italy  has  been  a  pioneer  in  smartening  its  grids  and  especially  in  installing  smart  meters.60   Between  2001  and  2006,  Enel  deployed  smart  meters  (bi-­‐directional  communication,  power   measurement  and  management  capabilities,  software-­‐controllable  switch)  to  all  its  30  mil-­‐ lion  customers.  Obtaining  considerable  cost  savings,  Enel  achieved  the  return  on  invest-­‐ ments  (EUR  2,1  billion)  in  just  four  years.  Also  consumers  may  save  considerably,  adjusting   their  consumption  to  the  different  tariffs  in  three  time  bands.61  Smart  meters  are  managed   by  a  centralised  system  “Telegestore”  evolving  continuously  and  considered  to  be  one  of  the   largest  worldwide.62  Enel  has  partnered  with  Telecom  Italia  and  Electrolux  for  a  communica-­‐ tions  platform  for  a  home  area  network  that  will  allow  for  value-­‐added  services.     An  important  motivation  for  Enel  to  start  the  early  introduction  of  smart  meters  during  the   period  of  its  privatisation,63  seems  to  have  been  the  effort  to  better  control  peak  power  con-­‐ sumption  after  necessary  power  cuts  culminating  in  a  blackout  in  2003.  The  electronic  meter   used  by  Enel  allows  for  precise  control  of  the  peak  power  used.  Power  limitations  have  al-­‐ ways  existed;  maximum  power  for  most  private  households  is  traditionally  limited  to  3  kW.                                                                                                                   59  http://www.ea-­‐energianalyse.dk/projects-­‐ english/927_electricity_demand_as_frequency_controlled_reserve.html  ,  (Xu  et  al.,  2011),  (Douglass  et  al.   2012)   60  http://www.businessweek.com/globalbiz/content/nov2009/gb20091116_319929.htm     61  http://aretusa.ice.it/SchemaSite/images/UserImageDir/177/EN/Presentations/CFT_Smart%20grids.pdf     62  http://www.enel.com/it-­‐IT/innovation/smart_grids/smart_metering/telegestore/     63  For  the  privatisation  story  see  (Di  Nucci,  2004)   The  EU  Smart  Grids  Debate   25   While  the  tolerance  of  the  old  systems  seems  to  have  been  considerable  (up  to  4,5  kW),  the   new  meters  allow  to  limit  maximum  power  efficiently.64  While  Enel  voluntarily  started  to   introduce  smart  meters  when  it  was  still  in  a  monopoly  role,  the  national  regulatory  Authori-­‐ ty  ordered  the  mandatory  introduction  of  smart  meters  in  200665  in  view  of  the  liberalisation   of  the  market  for  private  households  in  mid  2007.   Distribution  automation   Supported  by  funds  from  the  European  structural  funds,  Enel  is  currently  upgrading  the  me-­‐ dium  voltage  grid  in  southern  Italy,  including  pilot  projects  for  active  grid  management  in   four  regions.  An  important  goal  is  the  improvement  of  the  integration  of  distributed  renew-­‐ able  electricity  generation.   Smart  grid  pilot  projects   Enel  is  involved  in  a  series  of  pilot  projects  concerning  more  advanced  smart  grid  features.  E-­‐ mobility  is  considered  to  be  an  important  element  of  future  systems.  Enel  distribuzione  co-­‐ ordinates  one  of  the  most  important  smart  grid  EU  project:  ADDRESS66,  with  25  partners.   Enel  distribuzione  seems  to  be  more  open  for  decentralised  solutions  than  its  French  coun-­‐ terpart.  However  its  vision  is  much  more  centralised  than  the  Danish  one.  In  the  model  pro-­‐ posed  by  ADDRESS,  the  DSO  has  a  commercial  and  a  technical  role  (Lombardi,  2011).   6 The  discussion  in  other  parts  of  the  globe   While  Europe  can  still  claim  to  be  leading  in  renewable  energy  development,  concerning   smart  grid  activities,  the  leadership  is  much  less  clear.  Independently  from  climate-­‐change   driven  policies  aiming  at  growing  shares  of  renewables,  a  smart  grid  approach  with  new   technologies  promises  to  save  costs  where  massive  investments  in  grid  infrastructure  and   generation  are  necessary.  Therefore,  the  United  States  –  where  decades  of  low  investment   into  the  grid  system  have  led  to  a  relatively  low  system  reliability  compared  to  Europe  –  as   well  as  China,  India  and  South  Korea  –  where  grid  development  has  difficulties  to  keep  up   with  high  growth  rates  of  the  economies  –  have  started  to  look  at  smart  grid  technologies   before  they  were  concerned  about  the  transition  towards  high  shares  of  renewables.  Fore-­‐ casts  concerning  smart  grid  investments  vary  widely  but  show  the  dimensions:  while  Europe   is  expected  to  invest  €  56  billion  by  2020      (Woods  and  Gohn,  2011),  equipping  all  grids  glob-­‐ ally  with  smart  girds  technologies  would  require  some  $  2  trillion  by  203067.                                                                                                                     64  http://www.asmpomigliano.it/news/attenti-­‐ai-­‐consumi-­‐di-­‐energia-­‐elettrica.aspx,     http://www.energia360.org/Contatore_Enel.html,  http://www.dreamsworld.it/emanuele/2007-­‐07-­‐01/hacking-­‐ contatore-­‐enel-­‐come-­‐aumentarne-­‐la-­‐potenza/  ;   http://it.answers.yahoo.com/question/index?qid=20110420052340AACT417;     65  delibera  292/06   66  http://www.addressfp7.org,  (Valtorta  et  al.,  2011)     67  http://memoori.com/smart-­‐grid-­‐2012     The  EU  Smart  Grids  Debate   26   Global  forums  for  discussing  smart  grid  policies  are  less  important  than  European  or  US-­‐ American  ones  since  there  is  no  explicit  global  policy  making.  However,  there  are  some  in-­‐ fluential  poles:   (1) The  International  Energy  Agency  IEA  has  issued  a  Smart  Grid  Technology  roadmap68  and     supports  two  Implementing  Agreements  dealing  with  smart  grids:   • IEA-­‐ISGAN  International  Smart  Grid  Action  Network  (http://www.iea-­‐isgan.org)     • IEA-­‐ENARD  Electricity  Networks  Analysis,  Research  and  Development   (http://www.iea-­‐enard.org)     (2) International  companies,  international  trade  fares  and  conferences  are  most  important   for  international  knowledge  and  experience  transfer   (3) Strongly  linked  to  industry  but  also  involving  a  range  of  other  stakeholders  is  the  Global   Smart  Grid  Federation69   (4) Not  to  be  underestimated  are  the  international  standardisation  organisations70:   •  IEC,  International  Electrotechnical  Commission,  Geneva,  composed  by  national   committees  71     • IEEE,  Institute  of  Electrical  and  Electronics  Engineers,  New  York,  composed  by  indi-­‐ vidual  members  in  150  countries,  strong  focus  on  the  US  72   6.1 United  States   The  regulatory  landscape  in  the  United  States  is  as  least  as  varied  as  in  the  EU.  Important   competencies  are  with  the  single  states.  Liberalised  markets,  state  monopolies,  different   kinds  of  market  systems  co-­‐exist.  The  federal  jurisdiction  only  concerns  interstate  exchange   but  is  gaining  importance.  Overall,  in  2011,  coal  made  up  for  42%,  natural  gas  for  25%,  nu-­‐ clear  for  19%  and  hydro  for  8%  of  electricity  generation.  Problems  with  fluctuating  renewa-­‐ bles  are  much  less  urging  than  in  Europe.  California  showing  the  highest  contribution  of  re-­‐ newables  still  has  a  much  lower  percentage  (2010:  solar  0,4%,  wind  3%)73  than  e.g.  Germany   (2010:  solar  2%,  wind  6%),  but  is  planning  to  catch  up  quickly.     Given  the  problems  with  grid  reliability  and  capacity,  since  many  years  distribution  system   automation,  peak  shaving  with  demand  side  management,  rapid  detection  and  isolation  of   grid  failures,  as  well  as  energy  conservation  have  been  key  concerns  driving  the  interest  in   smart  grid  technologies.  Meanwhile,  the  prospect  of  growing  distributed  power  generation   and  e-­‐mobility  are  strongly  contributing  to  this  interest.  Smart  Grid  development  in  the  US                                                                                                                   68  http://www.iea.org/publications/freepublications/publication/smartgrids_roadmap-­‐1.pdf     69  http://www.globalsmartgridfederation.org/     70  A  good  overview  on  international  standardisation  activities  is  given  by  (ITU  Telecommunication   Standardization  Bureau,  2011)  See  also  (Appelrath  et  al.,  2012)  and     http://www.smartgridnews.com/artman/publish/Key_Players_Associations/Standards_Organizations-­‐892.html     71  http://www.iec.ch/smartgrid/     72  http://smartgrid.ieee.org/     73  http://energyalmanac.ca.gov/electricity/total_system_power.html     The  EU  Smart  Grids  Debate   27   has  been  boosted  by  the  allocation  of  USD  4,5  billion  to  grid  modernisation  under  the  Amer-­‐ ican  Recovery  and  Reinvestment  Act  in  2009.     As  a  simultaneous  answer  to  grid  problems  and  distributed  generation,  microgrids,  which   can  –  but  must  not  –  operate  separately  from  the  main  grid,  are  encountering  more  interest   in  the  US  than  in  Europe  (Carson,  2012;  Chowdhury  et  al.,  2009;  Lasseter,  2002;  Marnay,   2011;  Platt  et  al.,  2012).  Especially  a  new  IEEE  standard  (IEEE  Standards  Organisation,  2011)   has  led  to  a  strong  increase  in  microgrid  projects  (Asmus  and  Lauderbaugh,  2012).  If  not   completely  independent  in  remote  areas,  microgrids  constitute  a  subsystem  of  the  utility   grid  which  can  operate  autonomously,  balancing  generation  and  consumption  in  its  own   circuit  and  can  exchange  electricity  with  the  main  grid  as  desired,  depending  on  regulatory   conditions  and  time-­‐dependent  tariffs.  Technically,  this  approach  reduces  the  complexity  of   the  management  of  a  large  grid  with  distributed  generation.  From  a  regulatory  point  of  view,   microgrids  are  no  problem  if  they  are  fully  owned  by  one  consumer,  but  unbundled  market   roles,  as  defined  today,  raise  problems  for  the  establishment  of  microgrids  within  a  public   grid.     Smart  meters  have  been  intensely  discussed  in  the  US.  An  increasing  number  of  utilities  see   advantages  in  deploying  them,  and  deployment  programs  are  quickly  progressing.  Nearly   one  third  of  US  households  are  now  equipped  with  smart  meters.74     The  US  are  estimated  to  invest  between  €  240  and  330  billion  into  smart  grids  by  2030   (Giordano  et  al.,  2011).  Market  forecasts  for  2012  estimate  that  the  US  market  will  be  three   times  as  large  ($  9,2  billion)  as  the  European  one  ($  3,1  billion).  Large  American  companies   aiming  at  this  market  and  pushing  for  its  development  include  traditional  equipment  manu-­‐ facturers,  ICT  companies  as  well  as  specialised  start-­‐ups.  According  to  GTM  research  more   than  ¾  of  the  top  150  vendors  on  the  US  and  European  smart  grid  markets  are  based  in  the   US.75     A  large  number  of  market  research  companies  and  newsletters  provide  detailed  information   about  developments  of  the  US  market  and  US  policies  in  thies  field.  Among  the  specialised   organisations,  the  GRIDWISE  Alliance  is  the  most  important  one.76   6.2 China   China  is  set  to  play  a  leading  role  in  the  global  smart  grid  industry.77  China’s  State  Grid  Cor-­‐ poration  has  decided  to  invest  $  250  billion  in  electric  power  infrastructure  upgrades  over   the  next  five  years;  another  240  billion  will  be  spent  between  2016  and  2020.  In  each  period   45  billion  are  earmarked  to  for  smart  grid  technologies  (Hart,  2011).  According  to  GTM  fore-­‐                                                                                                                 74  http://www.smartgridnews.com/artman/publish/Technologies_Metering/Nearly-­‐a-­‐third-­‐of-­‐U-­‐S-­‐households-­‐ have-­‐smart-­‐meters-­‐already-­‐new-­‐study-­‐reveals-­‐4799.html/?fpm     75  http://www.greentechmedia.com/research/report/the-­‐networked-­‐grid-­‐150/     76  http://www.gridwise.org     77   http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/EPNG/PDFs/McK%20on%20smart%20gri ds/MoSG_China_VF.ashx     The  EU  Smart  Grids  Debate   28   casts  for  201678,  the  smart  meter  market  will  account  for  §  8  billion  and  the  distribution  au-­‐ tomation  market  for  $  6  billion.  With  this  plan  the  State  Grid  Corporation  pursues  a  double   objective:  strengthening  the  own  grid  and  empowering  a  corresponding  Chinese  equipment   industry.     The  Chinese  grid  needs  upgrading  and  smartening  for  two  reasons:  The  first  one  is  that  elec-­‐ tricity  consumption  is  expected  to  double  over  the  next  decade,  while  supply  is  already   grappling  to  meet  demand,  also  due  to  coal  shortages.  The  dimension  is  huge;  in  2010  annu-­‐ al  utility  revenues  exceeded  $  300  billion.79  The  second  reason  is  that  fluctuating  renewables   and  electric  vehicles  are  going  to  play  an  important  role.  Total  wind  generating  capacity  is   expected  to  reach  100  GW  in  2016.  Moreover,  energy  supplies  (coal,  gas,  hydropower,  wind   farms)  are  more  abundant  in  the  west,  thousands  of  kilometres  apart  from  the  large  con-­‐ sumption  centres.     Smart  grid  development  is  being  considered  as  a  strategic  national  priority  (Hart,  2011).  In   order  to  grow  an  own  industry,  the  State  Grid  Corporation,  which  controls  transmission  and   distribution  and  has  important  subsidiaries  in  the  equipment  industry,  has  issued  proprietary   standards  in  2010.  However,  also  in  China,  there  are  critics  of  the  overwhelming  power  of   State  Grid  Corp.,  calling  for  more  competition.  In  this  context,  the  relatively  slow  develop-­‐ ment  of  international  standards  seems  to  favour  Chinese  companies  aiming  at  conquering   international  markets  starting  from  a  strong  and  large  home  base.     Compared  to  European  and  American  endeavours,  the  Chinese  efforts  seem  to  be  more   straightforward.  On  the  backdrop  of  the  success  of  Chinese  equipment  vendors  in  the  tele-­‐ com  and  the  renewable  energy  industry,  large  European,  American  and  Japanese  corpora-­‐ tions  who  acknowledge  the  strategic  role  of  smart  grid  technologies,  start  to  take  the  Chi-­‐ nese  competition  seriously.  A  number  of  important  recent  mergers  and  acquisitions  show   the  efforts  to  concentrate  forces.   At  the  present  point  in  time,  however,  the  main  emphasis  of  the  Chinese  “smart  and  strong   grid”  efforts  lie  on  transmission  and  storage  while  efforts  in  the  distribution  grid  have  still  to   grow.80   7 Key  issues  of  the  debate  at  the  EU  level   Looking  at  the  debate  across  the  different  forums,  there  seem  to  be  three  areas  in  which  the   resolution  of  –  often  covert  –  conflicts  of  interest  is  essential  for  further  progress  of  the   transformation:  (1)  the  shift  of  responsibilities  from  the  transmission  to  the  distribution  level   (2)  defining  the  interface  to  the  increasingly  responsible  consumer  (3)  the  role  of  regulation                                                                                                                   78  http://www.greentechmedia.com/research/report/smart-­‐grid-­‐in-­‐asia-­‐2012-­‐2016/,     79  http://www.greentechmedia.com/research/report/smart-­‐grid-­‐in-­‐asia-­‐2012-­‐2016/   80  http://www.smartgridnews.com/artman/publish/Business_Global/China-­‐and-­‐the-­‐smart-­‐grid-­‐Missing-­‐pieces-­‐ 5079.html#.UJdnK2fn-­‐Cx;  http://www.greentechmedia.com/articles/read/enter-­‐the-­‐dragon-­‐china-­‐and-­‐the-­‐ worlds-­‐greatest-­‐smart-­‐grid-­‐opportunity   The  EU  Smart  Grids  Debate   29   at  the  EU  level.  A  fourth  important  issue  is  how  to  organise  the  process  of  overcoming  the   obstacles  caused  by  these  open  question.     7.1 Role  and  management  of  the  distribution  grid   In  the  conventional  top-­‐down  electricity  system,  large  electricity  producers  and  the  owners   of  the  transmission  systems  had  control  of  the  system  and  were  responsible  for  its  reliability.   This  power  structure  has  only  to  a  certain  extent  been  changed  by  unbundling  the  roles  in  a   regulated  market.  The  emerging  new  paradigm,  however,  seems  to  call  for  a  much  more   distributed  responsibility  at  different  levels  of  the  system.  Transmission  grids  and  large  pow-­‐ er  units  –  the  top  level  of  the  old  system  –  are  already  managed  and  optimised  with  sophisti-­‐ cated  ICT.  The  concept  of  smart  grid  consists  in  introducing  similar  control  and  communica-­‐ tion  structures  also  at  lower  levels  of  the  system,  down  to  the  interface  with  consumers  and   even  in  their  own  premises,  and  to  intelligently  link  all  these  levels.  This  opens  the  door  for  a   wide  range  of  possible  configurations  which  might  involve  more  competencies,  responsibility   and  autonomy  for  public  and  private  distribution  system  operators  at  the  local  and  regional   level  as  well  as  for  different  kinds  of  service  providers  organising  the  commercial  link  be-­‐ tween  supply  and  demand  at  different  echelons.     Increasing  attention  for  an  efficient  management  of  lower  tiers  of  the  system  does  not  only   raise  the  question  of  the  relation  between  TSOs  and  DSOs  but  also  questions  concerning  the   future  role  of  different  (unbundled)  actors  at  the  lower  levels:  How  will  the  communication   between  energy  vendors  and  grid  operators  be  organised?  Who  will  have  access  to  real-­‐time   consumption  data  of  the  customers?  Will  there  be  distribution-­‐level  markets  for  optimally   managing  capacities,  including  the  capacities  of  distribution  grids?  Where  to  draw  the  line   between  regulated  and  competitive  areas  when  real-­‐time  management  of  grid  capacities   blurs  present  distinctions  between  grid  managers  and  grid  users?     It  is  evident  that  the  emerging  new  logic  of  the  system  threatens  the  influence  of  the  incum-­‐ bent  large  electricity  companies  which  until  now  have  dominated  the  debate  in  Brussels.   They  try  to  adapt  while  new  actors  are  emerging.  But  also  the  new  players,  which  are   stronger  in  some  countries  than  in  others,  have  different  interests  and  a  variety  of  options   which  are  not  yet  fully  understood.     7.2 The  interface  to  the  consumer/prosumer   At  the  bottom  of  the  system,  consumers  might  become  more  actively  involved  in  a  market-­‐ based  management  of  the  system.  However,  not  all  stakeholders  share  this  vision.  When   consumers  start  to  produce  their  own  electricity  and  start  to  shift  their  loads  so  as  to  maxim-­‐ ise  their  economic  advantage,  they  create  an  urgent  need  for  the  public  grid  to  adapt  frame   conditions  and  tariffs  so  as  to  use  this  new  flexibility  for  a  stabilisation  of  the  whole  sys-­‐ tem.81                                                                                                                     81  See  (Schleicher-­‐Tappeser,  2012)   The  EU  Smart  Grids  Debate   30   A  market-­‐based  approach  would  be  to  find  ways  to  offer  locally  adapted  time-­‐dependent   tariffs  that  would  incentivise  a  system-­‐supporting  behaviour  of  consumers  and  prosumers   alike.    Those  preferring  to  maintain  a  central  control  of  the  system  are  advocating  technical   and  regulatory  solutions  which  would  allow  grid  operators  or  retailers  (see  previous  section)   to  directly  intervene  in  the  operation  of  the  consumer’s  appliances.  Especially  when  applied   to  private  households,  the  two  alternatives  would  have  very  different  legal  and  technical   consequences.  A  centralised  approach  would  require  much  more  efforts  for  data  gathering,   data  handling,  data  security  and  discussions  on  data  privacy.  On  the  other  hand  it  might,  as   advocates  sustain,  allow  for  more  demand  response  reliability  and  shorter  reaction  times.   The  two  alternatives  might  converge  in  a  compromise  offering  consumers  attractive  auto-­‐ mation  options  while  preserving  the  freedom  of  choice  –  however,  this  would  not  avoid  the   need  for  differentiated  tariffs.  Across  the  large  range  of  different  stakeholders  different   models  are  being  proposed  and  discussed.  One  of  the  hottest  issues  is  who  will  handle  and   have  access  to  detailed  consumer  data.     Moreover,  in  a  perspective  where  consumption  and  production  of  energy  cannot  be  clearly   separated  anymore  since  increasing  numbers  of  (industrial,  commercial  and  private)   prosumers  manage  their  own  combination  of  consumption,  production  and  storage  of  ener-­‐ gy,  the  smart  grid  debate  merges  with  the  debate  on  renewable  energy  support  systems.   7.3 Room  to  manoeuvre  for  the  member  states   A  further  basic  issue  in  all  these  debates  is  how  far  the  EU  level  should  go  in  setting  binding   rules  for  member  states.  Considering  the  novelty  of  emerging  problems,  the  wide  range  of   possible  solutions  and  the  structural  differences  between  member  states,  there  are  good   arguments  for  limiting  binding  rules  to  essential  issues,  and  leaving  room  for  further  experi-­‐ mentation  with  different  approaches.  On  the  other  hand,  there  might  be  considerable  eco-­‐ nomic  advantages,  and  also  important  particular  economic  interests,  in  adopting  a  rather   uniform  approach.    Considering  the  global  context,  industrial  policy  aspects  of  the  smart  grid   discussion  cannot  be  neglected:  Europe  has  to  face  strong  international  competition.  Joining   forces,  creating  large  markets  and  speeding  up  the  setting  of  standards  might  be  important   for  maintaining  an  influence  not  only  of  European  industries  but  also  of  European  political   decision  making  concerning  future  energy  supply.   Setting  the  right  priorities  in  the  European  decision  making  process  therefore  seems  to  be   essential.  Good  decisions  in  such  a  complex  context  require  broad  discussions  and  therefore   time.  Decisions  scheduled  to  be  taken  in  the  next  months  might  risk  having  far-­‐reaching  con-­‐ sequences  for  the  structure  of  the  energy  industry  and  for  millions  of  consumers,  without   having  been  adequately  discussed  by  an  informed  public.     The  EU  Smart  Grids  Debate   31   Despite  the  existence  of  different  roadmaps82  there  seems  to  be  no  coherent  vision  concern-­‐ ing  the  appropriate  levels  and  time  scales  of  regulation.  Just  as  for  the  management  of  the   energy  system,  a  coherent  multi-­‐level  governance  approach  would  be  needed  concerning   regulation.83   7.4 Speed  and  transparency  of  the  process   Even  the  stakeholders  more  directly  involved  only  have  started  to  acknowledge  the  pro-­‐ found  transformation  of  the  energy  sector  required  by  the  transition  to  renewable  energies,   and  the  key  role  of  smart  grid  technologies  and  policies  in  this  transformation  process.  Also   among  specialists  at  the  EU  level,  the  discussion  is  to  a  disturbing  degree  at  the  same  time   an  open  learning  process  concerning  a  new  range  of  issues,  and  a  result-­‐oriented  negotiation   process  setting  rules  and  standards  for  many  years  to  come.  This  combined  process  seems  to   be  characterised  by:     • the  difficulty  of  fully  understanding  the  issues  at  stake  for  the  own  interest  group  or  for   society  as  a  whole,  by  the  broad  public  and  also  for  many  of  the  stakeholders  involved   • cultural  gaps  between  policy  and  market  specialists  on  one  side  and  technicians  on  the   other,  between  the  top-­‐down  approach  of  the  conventional  energy  industry  and  the   more  systemic  thinking  of  the  IT  industry  set  out  to  conquer  new  markets  in  this  sector   • efforts,  but  also  difficulties  to  ensure  communication  and  coordination  between  differ-­‐ ent  discussion  forums  and  policy  processes   • a  lack  of  transparency  concerning  the  different  initiatives  and  discussions,  of  the  stake-­‐ holders  involved  and,  most  important,  their  positions   • a  difficulty  to  understand  the  importance  and  the  implications  of  the  standards  and   codes  being  developed  in  a  range  of  procedures  as  well  as  for  many  stakeholders  the  cul-­‐ tural  reluctance  and  the  lack  of  resources  to  be  more  involved  in  these  detailed  issues   Not  all  stakeholders  are  unhappy  with  this  lack  of  transparency.  And  the  high  speed  of  set-­‐ ting  standards  and  rules  may  in  some  cases  help  the  incumbent  well-­‐equipped  interest   groups  to  maintain  their  influence  and  to  slow  down  change.     At  difference  to  many  environmental  problems  in  the  past,  climate  change  has  the  uncom-­‐ fortable  characteristic  that  it  requires  not  a  slowing  down  of  change  but  an  acceleration  of   deep  transformations  at  a  speed  which  might  jeopardize  a  broad  discussion  and  democratic   control.  In  the  case  of  smart  grids,  also  most  proponents  of  renewables  have  underestimat-­‐ ed  the  speed  at  which  these  will  raise  important  challenges  for  the  energy  system  and  socie-­‐ tal  questions  associated  to  it.  Considerably  slowing  down  the  decision  making  process  is   therefore  no  option.                                                                                                                   82  COM/2011/0202  ,  SET-­‐Plan,  SG-­‐ETP,  EEGI,  Standardisation  mandates  following  SGTF,  ENTSO-­‐E  grid  code   development,  as  well  as  national  roadmaps  such  as  the  German  standardisation  roadmap.     83  Multi-­‐level  governance  approaches  have  been  widely  discussed  in  a  wide  range  of  policy  fields  since  more   than  a  decade.  See  e.g.  (Schleicher-­‐Tappeser,  2000),  (OECD,  2010),  (OECD,  2011)   The  EU  Smart  Grids  Debate   32   The  difficult  solution  for  this  dilemma  lies  in  speeding  up  the  learning  process  by  increasing   transparency  of  the  processes  and  of  the  viewpoints  of  the  different  stakeholders  involved,   raising  awareness  for  the  issues  and  interests  at  stake,  facilitating  discussions  between  the   different  professional,  sectoral  and  national  perspectives  and  cultures,  improving  the  under-­‐ standing  for  the  paradigm  shift  under  way.     8 Conclusions  and  recommendations     The  main  result  of  this  overview  is  that  the  importance  of  the  smart  grid  debate  is  being   heavily  underestimated  by  political  actors,  the  large  public  and  also  the  renewable  energy   community.  Most  important  issues  concerning  the  future  European  energy  system  and  the   associated  commercial  and  political  power  structures  are  being  debated  and  pre-­‐configured   in  small,  seemingly  technical  circles  dominated  by  large  industrial  interest  groups.  This  needs   not  to  remain  so.  For  example  the  standardisation  procedures  offer  public  consultation  op-­‐ portunities.     Wrongly,  smart  grids  are  seen  as  a  mainly  technical  issue.84  Smart  grids  are  not  a  given  tech-­‐ nology  that  may  have  impacts  that  can  be  analysed.  Rather,  there  is  a  set  of  available  new   technologies  that  open  a  wide  range  of  opportunities  for  transforming  the  old  unsustainable   energy  supply  system  into  a  new  more  sustainable  socio-­‐technical  system  involving  much   more  actors.  For  making  best  use  of  these  opportunities  for  society  we  need  a  broader  de-­‐ bate.  This  requires  efforts:  for  improving  the  transparency,  for  explaining  the  issues  at  stake,   for  translating  between  technological,  political  and  business  cultures.     This  paper  has  tried  to  make  a  contribution  in  this  direction.  A  next  step,  deemed  to  be  use-­‐ ful  by  a  series  of  interlocutors,  could  be  a  more  detailed  mapping  of  activities,  stakeholders,   positions  and  suggestions.  A  key  difficulty  is  the  accessibility  of  technical  debates  for  non-­‐ technicians.  Especially  the  ongoing  standardisation  procedures  would  require  a  detailed   analysis  in  view  of  their  potential  to  predetermine  future  decisions  concerning  the  key  ques-­‐ tions  identified  above.  Among  the  wide  range  of  organisations  involved  in  promoting  a  sus-­‐ tainable  transformation  of  the  energy  system,  there  seems  to  be  none  engaged  in  a  system-­‐ atic  observation  of  smart  grid  issues  in  Europe.  This  may  be  partly  due  to  the  lack  of  a  shared   framework  for  discussing  these  issues.   An  important  contribution  to  the  European  debate  could  also  be  a  comparative  analysis  of   the  approaches  in  the  single  member  states.  Such  an  overview  would  also  shed  light  on  the   present  difficulties  to  organise  revenue  streams  for  financing  smart  grid  developments:  due   to  European  and  specifically  national  rules  and  role  definitions  potential  benefits  of  smart   grids  are  not  accessible  to  those  who  might  invest.                                                                                                                     84  This  is  also  true  if  one  adheres  to  a  narrow  definition  of  smart  grids  such  as  the  one  used  by  the  German   regulator  who  distinguishes  between  smart  grids  and  smart  markets:  the  functioning  logic  of  the  technical   infrastructure  is  intrinsically  linked  to  associated  commercial  and  institutional  structures.     The  EU  Smart  Grids  Debate   33   Different  groups  of  stakeholders  have  different,  although  mostly  not  explicit,  ideas  of  the   functioning  logic  of  the  future  system.  Making  these  basic  ideas  more  explicit  could  help  to   clarify  the  debate.  While  many  are  still  thinking  in  terms  of  patches  to  the  old  top-­‐down  sys-­‐ tem,  on  the  other  side  of  the  spectrum  new  flexible  structures  are  growing  bottom-­‐up  with   private  energy  management  or  even  microgrids  making  use  of  cheap  captive  power  genera-­‐ tion  with  photovoltaics.  Formulating  a  publicly  understandable  vision  for  a  multi-­‐layered   system  in  Europe,  conceived  in  the  spirit  of  bottom-­‐up  subsidiarity,  could  provide  a  useful   new  framework  for  understanding  suggestions  and  positions.  It  should  explain  guiding  prin-­‐ ciples  as  well  as  leeways  for  different  solutions  and  transition  paths,  and  could  thereby  also   help  to  clarify  the  role  of  regulation  at  the  EU  level.       The  EU  Smart  Grids  Debate   34   References   For  convenience,  web  references  and  EU  documents  are  given  as  web  links  in  the  footnotes.   Appelrath,  H.-­‐J.,  Kagermann,  H.,  Mayer,  C.  (Eds.),  2012.  Future 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 Parliament,  MEP     Other  interlocutors   Becht,  Günter;  Pfalzwerke   Carrasco,  Alicia;  E-­‐Meter  (Siemens),  EMEA  Regulatory  Director   Deprez,  Bertrand;  Schneider  Electric   Gottstein,  Meg;  RAP     Hérion,  Céline;  ceced,  European  Committee  of  Manufacturers  of  Domestic  Equipment,  Euro-­‐ pean  Affairs     Jahn,  Andreas;  RAP   Lewis,  Philip  E.,  vaasaETT,  Global  Energy  Think  Tank,  CEO   Lombardi,  Marina;  Enel  Distribuzione,  Infrastructure  and  Network  Division   Matamala,  Antonio;  Kisters  AG   Mecke,  Thomas;  lekker  Energie,  CEO   Schmitt,  Frieder;  MVV,  CTO   Stahl,  Oliver;  entelios  AG,  CEO   Stamatiou,  Andreas;  Nation-­‐E,  CFO   Toledano,  Miguel;  Cullen  International,  Program  Manager   Ward  Judith;  Sustainability  First,  Associate;  London   Weisshaupt,  Thomas;  Cinterion,  Business  Development;  München