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  Ià W  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  â€oesmart  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  â€oesmart  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  â€oeeuropean  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  â€oeintegration† 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  â€oeintegration† 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  â€oesmart  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  â€oesmart† 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  â€oedistribution† 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   â€oesmart  grids† † a  complex  evolving  concept  standing  for  a  paradigm  change  The  â€oesmart  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  â€oesmart  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  â€oesmart  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  â€oesmart† 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  â€oesmart  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  â€oesmart  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  â€oesmart† 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  â€oesmart† 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  â€oesmart  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  â€oesmart  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  â€oesmart  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  â€oetoo  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  â€oeactive  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 Â- † 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  (Brandstã¤tt  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  â€oeintelligent  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  â€oeser- †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- â€%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  †¢Â 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  â€oetask  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  â€oeroles  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  â€oesmart  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  â€oecapacity  allocation  and  congestion  management† Q2/2011  on  â€oegrid  connection† (Q2/2011  on  â€oesystem  operation† (Q4/2011  on  â€oebalanc- †ing† (Q3/2012  and  on  â€oethird  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  â€oekey  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  â€oesmartgrids  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 Â- † 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  â€oeict  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  Granstrã m  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  â  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  Granstrã m  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  â€oethe  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  Europã enne  de  l†Installation  Electique   http://www. aie. eu /  IT  and  Telecom  industry  With  â€oesmart  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  â€oelast  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  â€oethe  regulatory  and  commercial  interests  of Â'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  â  2150  million  (mostly  smart  meters  Germany  228  (mainly  integrated  systems  France  195  (mainly  smart  meters  investments  in  Eastern  Europe  were  mostly  negligible  with  â  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  â 3. 1  billion  in  2012  and  â 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- â€) 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  (Hà bner  and  Prã ggler  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- â€%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;(Kà hler- †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  â€oedynamic  pricing  system  and  a  market  for  †using† the  net- †work  at  DSO- †level† where  the  â€oedso  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  â€oetelegestore† 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  â  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  †¢Â 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  â  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    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   §Â 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  â€oesmart  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 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