Smart Grid Projects in Europe

J R C R E F E R E N C E R E P O R T S

Smart Grid projects in Europe: lessons learned and current developments

Vincenzo Giordano, Flavia Gangale, Gianluca Fulli (JRC-IE)Manuel Snchez Jimnez (DG ENER)

Other JRC-IE contributors: Ijeoma Onyeji, Alexandru Colta, Ioulia Papaioannou, Anna Mengolini,

Corina Alecu, Tauno Ojala, Isabella Maschio

EUR 24856 ENInstitute for Energy

The mission of the JRC-IE is to provide support to Community policies related to both nuclear and non-nuclear energy in order to ensure sustainable, secure and efficient energy production, distribution and use.

European CommissionJoint Research CentreInstitute for Energy

Contact informationGianluca Fulli EC, DG JRC, Institute for EnergyPO Box 2, NL-1755 ZG Petten, The [email protected]

http://ie.jrc.ec.europa.eu/http://www.jrc.ec.europa.eu/

This publication is a Reference Report by the Joint Research Centreof the European Commission.

The Smart Electricity Systems (SES) Action of the Energy Security Unit performs independent scientific research and acts as in-house scientific consultant for EU policy-making actors with particular focus on the on-going transformations of smart electricity systems. The SES Action also develops dedicated power system models and hardware / software simulation tools, as well as an energy security Geographic Information System for EU energy infrastructures. For more information on this report and our activities visit: http://ses.jrc.ec.europa.eu or scan this QR (Quick Response) code using a QR reader app on your phone (no typing required)

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JRC 65215 EUR 24856 ENISBN 978-92-79-20487-6ISSN 1831-9424 doi:10.2790/32946

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3JRC Reference Report

Contents

acKnoWledGementS

eXecutive SummarY

1 introduction

1.1 Definitions and Assumptions 1.1.1 Aim of the study 1.1.2 Boundaries of the Smart Grid catalogue

1.2 Data collection template1.2.1 Qualitative assessment1.2.2 Quantitative assessment

1.3 Reliability and completeness of data

1.4 Overview of Smart Grid landscape in Europe and beyond

2 inventorY oF collected projectS in WHicH direction iS europe movinG in tHe

Field oF Smart GridS?

2.1 Projects and budget distribution across countries and project categories

2.2 Project maturity and scale

2.3 Insight into some final applications and their level of maturity

2.4 Who is investing?

3 BuildinG tHe Smart Grid SYStem

3.1 System integration Smart Grid as a market platform3.1.1 Business models for a transactive grid 3.1.2 Case studies

3.2 What is in it for consumers?

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4 Smart Grid contriBution to policY GoalS

4.1.Sustainability4.1.1 Reduction of CO

2 emissions

4.1.2 Integration of DER

4.2 Competitiveness - Open and efficient market4.2.1 Increased market participation through aggregation4.2.2 Interregional markets

4.3 Security and quality of supply

4.4 Activated Smart Grid services and benefits

5 analYSiS oF data protection and SecuritY iSSueS

5.1 Customer security

5.2 A greater number of intelligent devices

5.3 The problem of physical security

5.4 The use of IP and commercial off-the-shelf hardware and software

5.5 More stakeholders

6 SummarY and Future StepS

6.1 Summary

6.2 Future work

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reFerenceS

aBBreviationS and acronYmS

countrY codeS

anneX i - data collection template

anneX ii Smart Grid ServiceS(Smart Grid taSK Force)

anneX iii - Smart Grid BeneFitS and KpiS (Smart Grid taSK Force)

anneX iv - project cataloGue

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acKnoWledGementS

We would like to thank Marcelo Masera (JRC-IE),Patrick Van Hove (DGRTD), Patricia Arsene (DGINFSO), Michal Spiechowicz (DGENTR), DanielHanekuyk(DGENTR)andStevenEisenreich(JRC)fortheircommentsandsuggestionsregardingthisre-port.WewouldalsoliketoexpressourgratitudetoIvanPearson(JRC-IE),PeterZeniewski(JRC-IE)andAngeloLAbbate(RSE)forscrutinisingthetext.OurthanksalsogotoallthestakeholdersoftheSmartGrid Task Force, the European Electricity Grid Ini-tiativeandtheFlorenceRegulatoryForumforElec-tricitywho commentedonandprovided feedbackcontributing to the improvement of intermediateversionsofthisreport.


eXecutive SummarY

Introduction

MeetingtheEUsclimatechangeandenergypolicyobjectivesfor2020andbeyondwillrequireamajortransformation of our electricity infrastructure.Strengthening and upgrading existing networksis of paramount importance to integrating anincreasingamountofrenewableenergygeneration,enhancing grid security, developing the internalenergy market and realising energy saving andefficiency. To achieve these goals it is not onlynecessary tobuildnew linesandsubstations,butitisessentialtomaketheoverallelectricitysystemsmarterthroughtheintegrationofInformationandCommunicationTechnologies(ICT).

SmartGridscanbedescribedasanupgradedelec-tricity network enabling two-way information andpower exchange between suppliers and consum-ers,thankstothepervasiveincorporationofintel-ligentcommunicationmonitoringandmanagementsystems.ForSmartGridstodelivertheirenvisagedbenefitshowever,therealisationofphysicalinfra-structuresalonewillnotbesufficientandmustbecomplementedbytheemergenceofnewbusinessmodelsandpractices,newregulations,aswellasmoreintangibleelementssuchaschangestocon-sumerbehaviourandsocialacceptance.Manydif-ferentstakeholdersareinvolvedinthisprocessanddifferentformsofcooperationarealreadyarising.

In the last few years, initiatives on Smart Grids,withdifferentaimsandresults,havebeengrowinginnumberandscopethroughoutEurope.Substan-tialpublicandprivateinvestmentshavebeenmadeinresearchanddevelopment(R&D),demonstrationanddeploymentactivities.Atthisstage,thereisaclear need to survey the implemented projects inorder tomonitor thedirectionEurope is taking, tobenchmark investments, and to tackle challengesandpossibledistortionsfromanearlystage.Shar-ingtheresultsoftheseprojectscanalsocontributeinincreasingthestockofknowledgeandacceleratetheinnovationprocess.

In this perspective, themain goal of this study istoprepareacomprehensiveinventoryofSmartGridprojectsinEuropeanduseprojectdatatosupportthe analysis of trends and developments. The re-port looksintoseveralaspectsoftheSmartGridslandscape todescribe thestateof theartof theirimplementation,theemerginghallmarksofthenewelectricity systemand some foreseeabledevelop-ments.

ThisreportresultsfromarequestfromDirectorate-GeneralforEnergy(DGENER)tostartadatacollec-tion effort to develop a catalogue of Smart Gridsprojects in Europe and to carry out a qualitativeanalysis of their results. The analysis we carriedoutcontributed to thedraftingof theCommissionCommunication Smart Grids: from innovation todeployment,adoptedinApril2011[24].

ThissurveyofSmartGridprojectsinEuropebringstogetherinputandfeedbackfromavarietyofstake-holders through a cooperative and transparentprocess.Theinterimversionofthisstudyhasbeenpresentedonmanyoccasionsatexpertmeetings,including the EU Task Force on Smart Grids1 andtheEuropeanElectricityGridInitiative2.Theircom-mentsandobservationshavebeencarefullytakenintoconsiderationand,wherepossible,integratedintotheanalysis.

Thiswork is intendedtobethe firstofaseriesofsnapshotsthattheJRCwillperiodicallyprepareonthe development status of Smart Grids in Europeto offer a basis for discussion among Smart Gridstakeholdersandpromotethesharingofknowledge,experiencesandbestpractices.

Methodology

To ensure that all projects could be compared ona fairbasisand tosupportsubsequentanalysis,adatacollectionformatwasdistributedtohundredsofstakeholdersattheendofNovember2010.Withinfive months, more than 300 project respondentsreplied to our survey. The responses were thenpassed through a filtering process to screen outprojects, which did not fall into the scope of ourstudyorthatdidnotprovideenoughinformationfortheanalysis.Presently,thefinalcatalogueincludes219projectsandrepresentsthemostupdatedandcomprehensive inventoryofSmartGridprojects inEuropetodate.

1 http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm

2 http://setis.ec.europa.eu/activities/implementationplans/Grid_EII_Implementation_plan_final.pdf/view



Data collected from the project respondents weredouble-checked to ensure their consistency. Allprojects web sites, where in place, and the website of the leading organisationwere examined tosupport the information we received. In the caseof discrepancies or of missing data, the leadingorganisation was contacted either via email ortelephone.

Thisdatacollectionandanalysiswascomplementedby a further investigation of a restricted numberof projects (around 30), shortlisted in such awayas to ensure a fair representation of differentproject sizes, categories, development stages andgeographicalareas.Theavailabilityofdatawasalsoamaincriterionfor theirselection.Theaimof thisfurtheranalysiswastogetacloserinsightintotheprojectsinordertohighlightthemainopportunitiesand obstacles in the development of SmartGrids.Tocarryout thisanalysis,wehave interactedwithproject coordinators, retrieved information fromprojectwebsitesandgonethroughrelatedreports,papersandpresentations.

Key messages

The analysis of the collected projects highlightedseveralkeyobservationsandlearningpoints.

Project investments and scaleThe total budget ofthecollectedprojects (over5billion)shows thatsignificant efforts have already been undertaken,but thatweare justat thebeginningof theSmartGridtransition.Toputtheinvestmentsinourcata-logueintocontext,conservativeestimatesquantifySmartGridinvestmentsby2020[47]at56billion.

Deploymentprojects(mainlysmartmeterroll-outs)coverthelionsshareofinvestmentcommitments-about56%ofthetotal-whileR&Danddemonstra-tion projects account for amuch smaller share ofthe total budget. Most R&D and demonstrationprojects are small to medium size (4.4 millionforR&Dprojectsandabout12millionfordemon-strationprojects),suggestingtheneedtoinvestinlargerscaledemonstrationprojectstogainabetterknowledgeofthefunctioningandimpactsofsomeinnovative solutions and to validate results to abroaderextent.

Geographical distribution Smart Grid projects arenot uniformly distributed across Europe. Most ofthe projects and investments are located in EU15countries,while EU12Member States still lag be-hind. The uneven distribution of projects and thedifferentpace,atwhichSmartGridsarebeingde-ployedacrossEurope,couldmaketradeandcoop-erationacrossnationalbordersmoredifficult andjeopardizethetimelyachievementoftheEUenergypolicygoals.

Multidisciplinary cooperation The increased com-plexity of the electricity system requiresmultidis-ciplinary consortia to share competencies and re-duce risks. Collected projects highlight the trendtowards a fruitful cooperation between differentorganisations, which brings together network op-erators, academia, research centres, manufactur-ersandITcompanies.TheimplementationofSmartGridsisalsoasignificantopportunityforEuropeanindustry to research,marketandexportnewtech-nologies,tocreatenewjobsandtomaintainglobaltechnologicalleadership.

System integration Most Smart Grid benefits aresystemic in nature as they arise from the combin-ation of technological, regulatory, economic andbehavioural changes. The survey indicates that inalmostallcountries,asignificantamountofinvest-mentshasbeendevotedtoprojects,whichaddresstheintegrationofdifferentSmartGridtechnologiesandapplications.Mosttechnologiesareknown,butthenewchallengethattheseprojectsarenowcon-frontingistheirintegration.

Role of regulation Data in the catalogue confirmthe leading role that Distribution SystemOpera-tors (DSOs) play in coordinating Smart Grid de-ployment across Europe. DSO-led projects rep-resent about 27% of all projects and about 67%of investment. Current regulation in EU MemberStatesgenerallyprovidesnetworkowners/opera-torswith the incentive to improvecostefficiencyby reducing operation costs rather than by up-gradinggridstowardsasmartersystem.Theregu-latoryincentivemodelshouldberevisedinordertoacceleratetheinvestmentpotentialofnetworkowners/operatorsandtoencouragethemtomovetoamoreservice-basedbusinessmodel.Regula-tionshouldalsoensureafairsharingofcostsandbenefits in the set-up of service-based marketplatforms.Networkowners/operatorsareexpect-edtosustainthemajorityofupfrontinvestmentswhereasseveralplayersmightgetbenefitswhenmarketplatformsbecomeoperational.


ConsumerawarenessandparticipationConsumersawarenessandparticipation is crucial for the suc-cessofSmartGridprojects.Mostprojectshighlighttheneed to involveconsumersat theearly stagesofprojectdevelopment,togiveconsumersthefree-dom to choose their level of involvement and toensuredataprivacyandprotection.Itisimperativetoensurethatconsumershavetrust inandunder-standing of thewhole Smart Grid process and re-ceive clear tangible benefits. To differing extents,consumerswillbeabletoreapnumerouspotentialbenefits:energysavings,thereductionofoutages,more transparentand frequentbilling information,participation in theelectricitymarket via aggrega-tors,andabetterbusinesscaseforthepurchaseofelectricvehicles,heatpumpsandsmartappliances.

Contribution to energy policy goals The results ofcollectedprojectsillustratethenumerouscontribu-tionsthatSmartGridscanmaketotheachievementofEUenergypolicygoals.ASmartGridcancontrib-utetosustainabilitybyfacilitatingthereductionofCO2 emissions, enabling the integration of large-scalerenewablesandincreasingenergyefficiencyinthepower sector. It supports competitivenessandopen and efficient markets by increasing marketparticipationthroughtheaggregationofdistributedprosumers(consumersalsoabletoproducepower)andthroughthestrengtheningofinterregionalmar-kets.Itcontributestosecurityandqualityofsupplybyintegratingtechnologies/mechanismstobalanceflexiblegenerationandbyincreasingtheobservabil-ityandcontrollabilityofthegridinordertoreduceoutagetimes.Allthesepotentialbenefitsneedtobemonitoredandverifiedtoadjusttheframeworkforbetterresults.

The roleof ICTAnopenand secure ICT infrastruc-tureisatthecoreofthesuccessfulimplementationoftheSmartGrid.Addressinginteroperability,dataprivacy and security is a priority requirement formakingtheICTinfrastructuretrulyopenandsecureand reducing transaction costs among Smart Gridusers. A scan of collected projects highlights theconvergence towardsprovenstandardsand indus-trybestpracticesusedforITsystems(e.g.InternetProtocol communication). However further coord-inated efforts are needed to fully tap Europeanpotential in this fieldandmoveto thedeploymentphase.Standardizationdevelopmentsareastepinthe right direction.Also, newprojects focusingondatahandlingwouldbeusefultoassesshowdatahandling principles fromother industries (e.g. thebankingindustry)couldbeappliedtoSmartGrids.

Data collection and knowledge sharing Finally, ef-fectiveknowledgesharingandthedisseminationofbestpracticesamongSmartGridstakeholdersarecrucial for thesuccessof theEuropeanSmartGridprogramme.Thedifficultiesencounteredduringthedata collection process of this study suggest theneedforimprovementsindatacollection/exchange,suchasthroughacommonstructurefordatacollec-tionintermsofdefinitions,terminology,categories,and benchmarks, etc. and coordinated project re-positoriesatthenationalandEuropeanlevels.

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JRC Reference Report


1 introduction

A shift in energy policy goals is at the heart ofcurrenttransformationsintheelectricitysector.Thesmooth integration of renewable energy sources,amore efficient and secure electricity supply, andan internal energy market with full inclusion ofconsumersarekeyprioritiesfortheEuropeanUnion[21,22,23].

To this end, it is necessary to strengthen theelectricity system that we have today by buildingnewlines,substationsandpowerplants.Inparallel,it isalsonecessary tomake theelectricity systemsmarter through the integration of ICT solutions.A smartelectricitygrid inplaceopens thedoor tonew applications with far reaching impacts: theadaptationofelectricitydemandtogridandmarketconditions, automatic grid reconfiguration topreventorrestoreoutages,andthesafeintegrationofdistributedgenerators,electricvehiclesandlargescalerenewables[7,19,20,55,56,62].

Smart Grids are electricity networks that canefficiently integrate the behaviour and actions ofallusersconnectedtoitgenerators,consumersand those that do both in order to ensure aneconomically efficient, sustainable power systemwith low losses and high quality and security ofsupplyandsafety[24].Inthisperspective,aSmartGrid can be considered as a Smart ElectricitySystem,whichencompassesboththegridandtheusers connected to it, and includesboth technicalandnon-technicalbuildingblocks.

Building a Smart Grid is therefore not only amatter of modernisation of the electricity grid orof deploying physical assets and technologies.A key role is played by new business modelsand practices, new regulations, as well as moreintangible elements like consumers behaviouralchanges and social acceptance [29, 57, 58, 59,].Steering this transition isachallenging, long-termtask.Itrequirescouplingapolicy-ledvisionwithamarket-drivendeployment,balancingenergypolicygoalsandmarketprofitability.

In the last few years, initiatives on Smart Gridshavebeengrowinginnumberandscope[37,63].AvarietyofprojectshavebeendeployedthroughoutEuropewithdifferentaimsandresults.Substantialpublicandprivate investmentshavebeenmade inresearch and development (R&D), demonstrationand deployment activities. At this stage, thereis a need to evaluate the outcome of Smart Gridprojects in order to monitor the direction Europeistaking,tobenchmarkinvestments,andtotackle

challenges and possible distortions from an earlystage.Particularly, there is theneed tounlock theinvestmentpotentialofthemarket.AclearbusinesscaseforinvestmentispresentlyamongthebiggestchallengesinSmartGridimplementation.

FollowingarequestfromDGENER,theJointResearchCentreInstituteforEnergystartedadatacollectionto assemble a catalogue of Smart Grids projectsinEuropeandtocarryoutaqualitativeanalysisofprojectresults.Inthisstudy,buildingontheworkoftheEuropeanSmartGridTaskForce[18,19,20],wehave collected and analyzed around 300 projects.Onthebasisoffeedbacksfromthefield,thisreportaddressesthefollowingspecificquestions:

InwhichdirectionisEuropemovinginthefield of Smart Grids? Who is investing?Whatarethemotivations?

How can system integration create busi-nessvalue?Whatisinitforconsumers?

HowdoSmartGrid projects contribute totheEUsmainpolicygoals?

1.1 Definitions and Assumptions

1.1.1 Aim of the study

Theaimof this study is to collect lessons learnedand assess current developments on Smart GridsinEurope.Inordertosupportouranalysis,wewilluse data and information collected from SmartGrid projects throughout Europe. To the best ofour knowledge, the collected Smart Grid projectsrepresent the most comprehensive and up-to-dateinventoryinEuropeatpresent.Anexhaustivemapping of Smart Grid projects in the differentMember States is not the primary scope of thisreport. Rather, this is an ongoing task. Furthercollected projects will be included in subsequentupdatesofthisstudy.

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1.1.2 Boundaries of the Smart Grid catalogue

In linewith thedefinitionof SmartGrids reportedabove,wehavefollowedthreemainscreeningrulesinassemblingourcatalogue:

1. Wehaveincludedprojectsfocusingonindividualnewenergytechnologiesandresources(e.g.newstorage devices, Electric vehicles, distributedrenewablegenerators),onlyiftheirintegrationin the grid was also part of the project.

2. Wehaveincludedprojectsaimingatmakingthegrid smarter (through new technologies andnewICTcapabilities).

3. We have not included projects aiming atmaking the grid stronger (e.g. through newlines, substations and power plants) usingconventionaldesignapproaches.

Around80projects(outofthe300wehavereceived)havebeenscreenedoutfromthecataloguebecauseeither theydidnotcomplywith thescreeningrulesorbecauseinsufficientdatahadbeenprovidedtobefairlyevaluated.Atthisstage,theseprojectshavenotbeentakenintoconsiderationintheanalysisbuttheywillbe included inanupdateof thisstudyassoonasmoredetailedinformationbecomesavailable.Thefinalcatalogueincludes219projects(seeANNEXIV).

It is worth stressing that projects intended to re-inforcethetransmissiongrid,asmuchastheyarecrucialtomodernizingtheEuropeanpowersystem(seee.g. [13]),havenotbeenincludedinourcata-logue. In fact, transmission operators are mainlyand heavily investing in what can be defined asstrengtheningratherthansmarteningthetransmis-siongrid,as the transmissionsystem isalreadyapartlysmartsystemcapableofmanagingandbal-ancingtheresources(currently)connectedtoit.

1.2 Data collection template

To ensure that all projects could be compared ona fair basis and to support later analysis, a datacollection template was prepared and distributedon the 5th of November 2010. The template hadtobe returnedby the25thofNovember.ThedatacollectionexercisewasoriginallyintendedtocollectpilotprojectsbutwasthenextendedtoSmartGridprojects across the innovation chain (fromR&D todemonstration/deployment),by further interactingwith national contact points, project coordinators

andother relevantstakeholders. Due to the largenumberof requestsbyproject coordinators for anextension of the deadline, projectswere acceptedthrough March 2011. In total, more than 300responseswerereceived.

Thedatacollectiontemplatehasbeenstructuredintwoparts:one forqualitativeassessmentandoneforquantitativeassessment(seeANNEXI).

1.2.1 Qualitative assessment

Thequalitativeassessmentsectionofthetemplateincluded a brief description of the project and asummaryofgoalsandoutcomes.Otherinformationrequestedincludedthelocationanddurationoftheproject,thebudget,theparticipatingorganisationsand their budget share and the EU contribution(whereapplicable).

Thequalitativeassessmentsectionofthetemplatealso included a specific request for informationonhow theprojectaddresseddataprotectionandsecurityissues.

In addition, we have asked project coordinatorsto classify their project according to the followingcategories:

1. Smart Meter and Advanced MeteringInfrastructure

2. GridAutomationTransmission

3. GridAutomationDistribution

4. IntegratedSystem

5. HomeapplicationCustomerBehaviour

6. SpecificStorageTechnologyDemonstration

7. Other

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Thisclassificationisinlinewiththemappingexerciseof Smart Grid projects that is currently ongoingin the US (Virginia Tech Clearinghouse)3 and isintendedtofacilitateinternationalsharingofSmartGridexperiences.InthecontextoftheEUUScouncil,theJRCiscollaboratingwiththeUSDepartmentofEnergy on common assessment methodologies ofSmartGrids.

The first category Smart Meter and AdvancedMetering Infrastructure includes projects whichspecifically address smart meter implementation.Thesecondand thirdcategoriesGridAutomationTransmission and Grid Automation Distributionrefertoprojectsdealingwithautomationupgradesoftheelectricitygrid(e.g.feederautomation,widearea monitoring etc.), at the transmission anddistributionlevelrespectively.

ThefourthcategoryIntegratedSystemfocusesontheintegrationofdifferentSmartGridtechnologiesand applications (e.g. Smart meter, DemandResponse, grid automation, distributed storage,renewables,etc.).

The fifth category Home application - CustomerBehaviour includes projects which address newapplicationsathomeordirectlyinvolveconsumers.Finally, the sixth category Specific StorageTechnologyDemonstrationincludesprojectswhichaddress the potentialities of storage technologiesbothnewandmoreconventionalones(e.g.hydro,chemical,andmechanical).

Asingleprojectcanspanoverdifferentcategories.In that case, project coordinators have expressedthe relevance of the applicable categories with anumberbetween0and1.

1.2.2 Quantitative assessment

Thequantitativeassessmentpartofthetemplatehasbeendividedinthreesections.

In the first section, we have asked participantswhohadalreadyperformedacost-benefitanalysistosharetheirresults.

The second section provided guidelines for thecollection of cost-benefit quantitative data fromthoseparticipantswhohadnotperformedastudythemselves. The respondents have been asked tochoose among the list of benefits and KPIs (KeyPerformance Indicators)definedbytheSmartGridTaskForce(seeAnnexIII).

Inthethirdsectionprojectcoordinatorswereaskedtofillintheservice/benefitmeritdeploymentmatrixdevelopedbytheSmartGridTaskForce[20].

1.3 Reliability and completeness of data

Data collected from the project respondents weredouble-checkedtoensuretheirconsistencythroughdifferent means. For all projects we checked theproject web site - where in place - and the websiteof the leadingorganisation tocorroborate theinformationwereceived.Incaseofdiscrepanciesorincasethetemplatewasnotclearenoughwealsocontactedtheleadingorganisationeitherviaemailorphone.

Forthemostrelevantinformationthereseemstobefairly reliabledata.The level of reliability of somedataparticularlythoseconcerningthebudget,theprojectdurationand results ishigher forprojectswhich have already been completed: 33% of theprojects in the cataloguewere completedbyApril2011, while the remaining projects have differentclosingdatesspanningupto2020.34%ofcollectedprojectsareexpected tobe completedby theendof2012.

Thecatalogueincludesarelativelysmallnumberofprojectswhichstartedin2011.Thiscircumstanceisstrictly relatedto thedeadlineset for filling in thequestionnaireandnottoadecreaseinthenumberofprojectsovertime.

ShortlistedprojectsThedatacollectionandanalysiswas complementedby a further investigation of arestrictednumberofprojects(about30),shortlistedinawaytoensureafairrepresentationofdifferentprojectsize,categories,stagesofdevelopmentandgeographicalareas.Theavailabilityofdatawasalsoamaincriterionfor theirselection.Theaimof thisfurtheranalysiswastogetacloserinsightintotheprojectsinordertohighlightthemainopportunitiesand obstacles in the development of SmartGrids.This supplementary scrutiny also allowed us tosurveyandtocomparetheprojectsexpectedresultsandtheircontributiontotheEUpolicygoals.Tocarryoutthisdeeperanalysiswehavecontactedprojectcoordinators either via phone or email, retrievedinformationfromprojectwebsitesandgonethroughreports,papersandpresentations.

3http://www.sgiclearinghouse.org/

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1.4 Overview of the Smart Grid landscape in Europe and beyond

Worldwide,theSmartGridlandscapeishighlydy-namicandrapidlychangingwithemergingecono-miesasmajorplayers inSmartGrid investments.The informationpresented in thissectionaimsatgivinganoverviewofthemainestimatesofoverallinvestments in the electrical system and a snap-shot of the investments already committed forSmartGriddevelopment(seetableI).Whereavail-able,wealsoreportedtheplansconcerningsmartmeterroll-outs.

EuropeanUnion A recent report by Pike Research[47] forecasts that during the period from2010 to2020,cumulativeEuropeaninvestmentinSmartGridtechnologieswillreach56.5billion,withtransmis-sioncountingfor37%ofthetotalamount.There-portalsosuggeststhatby2020almost240millionsmartmeterswillhavebeendeployedinEurope.

AccordingtotheInternationalEnergyAgency(IEA),Europe requires investments of 1.5 trillion over2007-2030torenewtheelectricalsystemfromgen-eration to transmission and distribution [30]. Thisfigure includes investments for Smart Grid imple-mentation and formaintaining and expanding thecurrentelectricitysystem.

UnitedStatesAccordingto[16],fullimplementationofSmartGrids intheUnitedStateswill require in-vestmentsbetween$338and$476billionoverthenext20years.Costsallocatedfortransmissionandsubstationsarebetween19and24%oftotalcosts,while costs allocated for distribution are between69 and 71% and costs for consumer systems arebetween7and10%.Thesecostsareinadditiontoinvestmentsneededtomaintaintheexistingsystemandmeetelectricloadgrowth.

Accordingto[5],$1.5(1.06)trillionisnecessarytoupdatethegridby2030(undercurrenttrendsandpolicies)ofwhich$560(395)billionisneededfornew and replacement generating plants and $900(635)billionfortransmissionanddistributionto-gether; the report adds that benefits from SmartGridscouldamountto$227(160)billionoverthenext40years[5].

In2009,TheRecoveryActprovidedadditionalfund-ing for$4 (2.8)billion incost-sharedSmartGridprojects.Intotal,thefundingwillenablemorethan$7 (4.9) billion worth of pilot projects deploy-ment.Attheendof2009,thenumberofSmartGridprojects intheUSexceeded130,spreadacross44Statesandtwoterritories[42].

Accordingtorecentestimates,morethaneightmil-lion smart meters have been deployed by UnitedStateselectricutilitieswith60millionexpectedtobeinuseby2020[50].

China The State Grid Corporation of China (SGCC)isthedrivingforcebehindChinasefforttobuildanationwideSmartGrid.SGCCplanstoinvestintheperiod2009-2020atotalof$601(423)billionintoanationwidetransmissionnetworkwith$101(71)billionofthesefundstobededicatedtodevelopingSmartGrid technology [65]. In2010ChinagrantedSmartGridStimulusinvestmentsofmorethan$7,3(5.1)billion[49].

Presently, Chinese Smart Grid efforts are focusingon the creation of a large capacity interconnectedtransmissionbackboneto transferbulkpowerandtoaccommodatefastgrowingelectricitydemand.

ThedistributiongridinChinaislessmaturethaninmost developed countries and the penetration ofsmall-scale renewables is limited at the moment.However, according to a report by Innovation Ob-servatory [31], China is set to roll-out 360millionsmart meters by 2030 and is investing heavily inmoreefficientdistributiontransformers.

SouthKoreaTheSouthKoreanGovernmenthaslaidoutplanstoestablishanationalSmartGrid.Accord-ingto[39],SouthKoreaplanstospend$24(16.8)billion over the next two decades on Smart Gridsto make electricity distributionmore efficient, cutgreenhousegasemissionsandsave$26(18.2)bil-lioninenergyimports.In2010SouthKoreainvested$824(580)million instimulusfundingforSmartGrids[49].

State-runelectricitymonopolyKoreaElectricPowerCorp(KEPCO)planstoinstall500,000smartmetersin 2010, 750,000 in 2011 and complete roll-out by2020withatotalof24millionsmartmetersinstalled.Thecompanyisexpectedtocoverallmeteringcostsandretrievethemthroughregularpowerbills[51].

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AustraliaIn2010AustraliainvestedUS$360(253)millioninstimulusfundingforSmartGrids[49].Aus-tralianutilitieshaveamandate for the installationofsmartmeters.Under theSmartGrid,SmartCityinitiativetheAustralianGovernmenthascommittedAUS$74.6(52.5)milliontodevelop,inpartnershipwiththeenergysector,aSmartGriddemonstrationproject which will provide cost-benefit analysis ofSmartGridtechnology[2].TheStateofVictoriahasplanned a State-wide roll-out of 2.4million smartmetersby2013.

India According to the Ministry of Power, Indiastransmission and distribution losses are amongthe highest in the world, averaging 26% of totalelectricityproduction,withsomeStatesashighas62%.Whennontechnicallossessuchasenergytheftareincludedinthetotal,averagelossesareashighas 50%. The need to decrease losses and energytheft,togetherwiththenewtrendtowardsincreasingenergy efficiency and the share of renewables inelectricity generation, are all important drivers forthe development of a smarter grid [64]. A recentreport by Innovation Observatory [31] ranks Indiathird among the top ten countries for Smart Gridinvestment and reports that India has announcedmassivesmartmeterroll-outprojectswithaplanformorethan130millionsmartmetersby2020.

BrazilIn2010Brazilinvested$240(143.6)millioninstimulusfundingforSmartGrids[49].WhileBrazilhasmovedslowlytosetguidelinesforitssmartmetermandates,itcouldseesomemassdeploymentsasearlyas2012,andcouldbecomeoneofthebiggestsmartmetermarketsoftheworldbythesecondhalfofthedecade.Brazilhasannouncedmassivesmartmeterroll-outprojectsandisplanningtoreplace63millionelectricitymeterswithsmartmetersby2021.AsoneofthefirstSouthAmericancountriestoplannationwidesmartmetering,Brazilcouldalsobeanimportant testing ground for deployments in therestofthecontinent.Aswithemergingeconomies,suchasIndia,stoppingpowertheftandfixingtoo-frequentpoweroutagesarekeyfunctionsthatLatinAmerican utilities want out of their smart meternetworks.

JapanIn2010Japaninvested$849(143.6)millioninstimulusfundingforSmartGrids[49].Accordingto recent news, Japan is planning to increaserenewableenergysourcesinitsnewenergyplanandis considering the use of Smart Grid technologiesinestablishinganewenergysystem following thenuclearcrisisofFukushima[48].

15


Country / Region

Forecast Smart Grid investments (/$)

Funding for Smart Grid development (/$)

Number of smart meters deployed and/or planned

European Union

56billionby2020[47]*

(estimated Smart Grid investments)

184million(FP6andFP7EuropeanfundingforprojectsintheJRC

catalogue)About200millionfromEuropeanRecoveryFund,

ERDF,EERA.Nationalfunding:n/a

45millionalreadyinstalled(JRCcatalogue,2011)

240millionby2020[47]

USA $338(238)to476(334)billion

by2030[16](estimated investments

for implementation of fully functional

Smart Grid)

$7(4.9)billionin2009[49]

8millionin2011[50]60millionby2020[50]

China $101(71)billion[65](Smart Grid technology

development)

$7.3billionin2009(5.1)[49]

360millionby2030[31]

South Korea

$24(16.8)billionby2030[40]]

(estimatedSmartGridinvestments)

$824(580)millionin2009[49]

500,000in2010,750,000in2011and24millionby2020

Australia n/a

n/a

n/a

n/a n/a

n/a

$204(143.6)millionin2009

[49]

63millionby2020[31]

$360(253)millionin2009[49]

2.4millionby2013inStateofVictoria

India 130millionby2020[31]

Brazil

Japan $849(143.6)millionsin2009

[49]

* Otherestimates(http://setis.ec.europa.eu/newsroom-items-folder/electricity-grids,June2011),referringtotheupgradeof

transmissionanddistributiongrids(notonlySmartGrids)forecastarequiredinvestmentof500billionby2030,wheredistri-butionaccountsfor75%andtransmissionfor25%.

Table I Smart Grid investments in Europe and beyond

16



2. inventorY oF collected projectS in WHicH direction iS europe movinG in tHe Field oF Smart GridS?

The main goal of our study is to collect a wideinventory of Smart Grid projects in Europe anduseprojectdata tosupportanalysisof trendsanddevelopments.Inthischapterwewillusetheresultsof our analysis to describe what is happening inthe field of Smart Grids in Europe from differentperspectives. In the firstparagraphwewill lookatthe projects to examine their distribution acrosscountries and project categories and survey thebudget allocated by each country to Smart Griddevelopment. In the second paragraph we willhaveacloserlookattheprojectstodeterminehowthey distribute along the stages of the innovationprocessandhowthisdistributionhaschangedwithtime. In the thirdparagraphwewillgetan insighton selected Smart Grid applications, namely theintegration of distributed energy resources (DER),DemandResponse(DR)andthesafeintegrationoflarge-scale renewables (RES). We will survey thedevelopment trendof theseapplicationsand theirlevelofmaturity.Finally,inthefourthparagraphwewill focuson theactors involved in the innovationprocesstoseewheretheyareinvestingandwhy.

2.1 Projects and budget distribution across countries and project categories

Geographical distribution of projects andinvestmentsProjectsarenotuniformlydistributedacrossEurope.ThemajorityofthemarelocatedinEU15MemberStates,whilemostof theEU12 stilllagbehind.Figure1showsthelocationofprojectsandtheirdistributionbetweentheEU15andEU12.For demonstration and deployment projects, theproject was assigned to the country where thedemonstration or roll-out actually took place,whileinthecaseofR&Dprojects,theprojectwascounted towards all the participating countries.Most of the projects are concentrated in a fewcountries; Denmark, Germany, Spain and the UKtogetheraccountforabouthalfofthetotalnumberofprojects.

Figure 1. Distribution of projects between EU15 and EU12 Countries

EU15 countries

As for investments, Figure 2 shows the allocationof budget across different countries and projectcategories. In the case of demonstration anddeployment projects, the budgetwas allocated tothe country or countrieswhere the project had atleastoneimplementationsite.Whenaprojecthadseveral implementation sites located in differentcountries, the project budget was shared evenlyamongthem.IncaseofR&Dprojects,whenbudgetshareswere not available, the budget was evenlyspreadacrosstheparticipatingorganizations.

A few countries stand out in terms of spending.Withabudgetofover2billion,Italyaccountsforalmosthalfof thetotalspending inourcatalogue.The great majority of this budget is howeverattributable to only one project, the Telegestoreproject,which consisted in thenational roll-outofsmartmetersinItaly.Duetographicalconstraints,thecorrespondingbarinFigure2hadtobecutdowntoallow its representationwithoutovershadowingtheothercountries.Ingeneral,EU12countriesshow

BG

0.4

%C

Y 0

.4 %

CZ

1.7

%

EE 0

.2 %

HU

1.1

%LT

0.4

%LV

0.7

%M

T 0

.4 %

PL

1.7

%

RO

0.6

%

SI 3

.1 %

SK

0.7

%

UK6.8 %

Others11.3 %

AT6.1 %

BE4.2 %

DE11.1 %

DK22.0 %

EL2.0 %

FI1.5 %

FR4.2 %

IE2.4 %

IT5.5 %

NL6.8 %

SE5.0 %

PT2.4 %

ES8.7 %

17


Other90

Project investments (M)

StorageTransmission automationHome applicationDistribution automation

Smart metersintegrated systems

16.7

171.4

FR

195.2

157.98

ES

PT

18.81

BE

NL

59.65

6.96

CH

NO

12.75

139.62

DK

DE

IT

SE

113.2

220.51

0.23EE

LV

LT

SK

CZ

AT

2.55

1.85

PL

3.74

5.99HU

SI

RO

1.64

BG

GRMT

86.8

2153.17

2.74

CY

0.70

9.3

41.15

7.39

29.06

128.3

FI

228.68

113.9

IE

UK

Investments/categoryTotal 3939 M

amuchlowerlevelofinvestmentscomparedtoEU15countries(seeFigure3),circumstancewhichismainlyexplicable with the lower number of projects andgenerallytoalaterstartinSmartGriddevelopment.AremarkableexceptionisMalta,whichisinvestingover80millionforthedeploymentofsmartmetersand the implementation of a remotemanagementsystem.

ThedifferentpaceatwhichSmartGridsaredeployedacross Europe could make trade and cooperationacross national borders more difficult andjeopardizetheachievementoftheEUenergypolicygoals. Knowledge sharing and the disseminationof lessons learned in other countries can help tobridgethegapinthefuture.

4ThisfiguredoesnotincludethetotalbudgetoftheSwedish

smartmeterprogramme(estimatedbudget1.5billion),asnotenoughdetailsweremadeavailableatthisstage.

Figure 2. Geographical distribution of investments and project categories4

18



Figure 3. Distribution of investments between EU15 and EU12 countries

ProjectdistributionacrossprojectcategoriesFigure2showsremarkabledifferences in thedistributionof project categories in Europe. Generally speak-ing, the investmentpatternandproject categoriescoverage in different countries is strongly influ-enced by different starting points in the adoptionofthevariousSmartGridsolutionsandbynationalcircumstances. Investments depend crucially onregulation,generationandconsumptionstructuresin each country. For example, countrieswith largepenetration of RESmay favour developments thatincrease hosting capacity (i.e. Transmission Auto-mation,IntegratedSystem,Storage),whereascoun-trieswithahighshareofflexibleelectricityuse(e.g.space andwater heating)may favour investmentsthat promote Demand Response (i.e. DistributionAutomation, IntegratedSystem,HomeApplication,SmartMeters).

Inourcatalogue,themostrepresentedprojectcate-gories,whichalsoattractthehighestlevelofinvest-ments, are Smart Meters and Integrated Systems(Figure2).

About27%oftheprojectscollectedinthecataloguefallintheSmartMeterscategory;aswewillseebetterlater(seeBox.1)theseprojectsinvolvetheinstalla-tionofabout40milliondevicesforatotalinvestmentofaround3billion.Thesefiguresarequitesignifi-cant, but a lotmoreof investments are needed inthisfield,assmartmetersareakeyenablerformanySmart Grid applications. Estimates forecast about240millionsmartmeterstobeinstalledby2020[47].

ThecountryleadinginvestmentsinsmartmetersisItaly,whereanationalroll-out(Telegestoreproject)has already been achieved. In two other coun-tries,FranceandFinland, thegreatmajorityof thebudgetisalsoattributabletosmartmeterprojects.InFrancethedemonstrationprojectPilot Linkyac-counts for about75%of the total spending,whileinFinlandtheSmart Meters roll-outprojectbyFor-tumaccountsforover80%ofthewholebudget.ItisworthstressingthattheSwedishsmartmeterroll-outislargelyunderrepresentedinourcatalogueatthemoment.WehavereceivedcommunicationfromtheSwedishregulatorthatthefullsmartmeterroll-out program consisted of 150 projects for a totalestimated amount of 1.5 billion. However, so farwehavereceivedandincludedinouranalysisdatafromonlythreeprojects, involvingthedeploymentofabout1.2millionsmartmeters.

AsfortheIntegratedSystemcategory,Figure2showsthatinalmostallcountries,asignificantamountofinvestments has been devoted to projects, whichaddress the integration of different Smart Gridtechnologies and applications. Integrated Systemprojects represent about 34% of the projects andabout15%ofthetotalbudget.Mostofthetechnolo-giesareknown,buttheirintegrationisthenewchal-lenge. This result highlights the need to considertheSmartGridasasystemratherthansimplyacol-lection of different technologies and applications.Foramoredetaileddiscussion, refer toChapter3.

***

Combiningtheoverallinvestmentfromthecatalogue(around4billion)withtheinvestmentcostsoftheSwedishsmartmeterroll-out(around1.5billion),we can estimate the investments in Smart Gridprojects inEurope tobeabout5.5billion so far.

NL PT

SE

UK

Other

AT

BE

BG, CY

CZ

EEHU, LT, LV

MT

PL, RO

SI

SK

DE

DK

ELES

FIFR

IT

IE

19


These figuresshowthat importanteffortshaveal-readybeenundertaken,butwearejustatthebegin-ningoftheSmartGridtransition.Toputtheinvest-ments in our catalogue into context, conservativeestimatesquantifySmartGridinvestmentsby2020[47]at56billion(seeChapter1).

BOX 1. SMART METERING

The introductionofsmartmeteringsystems inEu-ropehasreceivedanimportantregulatorypushbythe EuropeanUnions Third Energy Package provi-sionsandespeciallyAnnexI.2oftheElectricityDi-rective.TheAnnexexplicitlyasksMemberStatestoassess the roll-outof intelligentmeteringsystemsasakeysteptowardstheimplementationofSmartGridsand to rollout80%of those thathavebeenpositivelyassessed.

ManyMember States have already started imple-mentingprovisions intheir legislation,whilesomeothersarestilllaggingbehind.

Independently of the legislative and regulatoryframework, in some Member States utilities havestarted to introduce smart meters as a means tomodernisethegridsandtobringaboutoperationalchanges,i.e.reducenontechnicallosses,introduceremotereadingandswitchingorsimplifythebillingprocedures.

Inourcatalogue,asetofMemberStatesisleadingtheinvestmentsinthedeploymentofsmartmeters.

ITALY started a national roll-out already in 2001(Telegestoreproject).Bytheendof2006about30millionmetershadalreadybeeninstalled.Pursuantto Regulatory Order No. 292/06 of 18 December2006, automatic metering infrastructure is nowmandatory.ThefocusoftheItalianmeteringsystemisonreductionofnontechnicallossesmorethanonenergysavings[1].

SWEDEN Already in 2003, Sweden mandatedmonthlyautomaticmeter reading forallelectricitymeters by July 2009. Within the given timeframeDSOswerefreetodecidethepaceofimplementation.Thanks to the new legislation, investments inSmartMeteringdeveloped fast and the roll-out atnationallevelwasachievedintime.Giventhehighnumber of DSOs in the country, since 2003 therehasbeena correspondinglyhighnumberof smartmeter roll-outs. Overall, the national deployment

ofsmartmeterswascarriedoutbymeansofabout150projects,amountingtoaround1.5billionandinvolvingtheinstallationofapproximately5millionsmartmeters.Inouranalysiswehaveincludedthreeoftheseprojects,accountingfortheinstallationofabout1.2millionsmartmeters.FRANCEThedemonstrationproject Pilot Linkystart-edin2007andinvolvedtheinstallationof300,000smartmeters. Building on the results of the pilotphase,anationalroll-outisinpreparation.Theroll-outphaseenvisages thedeploymentof35millionsmartmeters,withanexpectedinvestmentofabout4billion.Thegoal isfromJanuary2012to installonlyelectronicmetersandtohave95%coveragebytheendof2016.Theregulatordefinedsomeguide-linesandminimumfunctionalrequirementsforelec-tricitymeters.Acost-benefitanalysiswithapositiveresultwaspresentedin2007.

MALTA The deployment of smart meters startedinMalta in 2008 with a 5 year pilot phase whichprovidesfortheinstallationof250,000meters.ThepilotprojectusestheEneltechnologyanditisaimedat identifying any problems ahead of the plannedreplacement of all electricity andwatermeters. In2010Enemalta launcheda roll-outplan to replaceallelectricityandwatermetersbytheendof2012.

FINLANDThesmartmeterroll-outiswellonitswayinFinland.Thenewelectricitymarketact(66/2009Actonelectricitysupplyreportingandmetering)re-quiredallconnectionpointsover63Amperetohaveremotelyreadablehourlymeteringby2011.By2014the Act demands for full smart meter penetrationwithnomore than20%exception.TheMinistryofEmployment and Economy has estimated roughlythat thecostofa full roll-out is565940million(for2.2millioncustomerswhodonotyethaveAMRAutomatedMeterReading).

20



UKThe SmartMeter National Roll-out Program intheUKisplannedtostartin2012andbecompletedin2020,withanestimatedinvestmentofmorethan11billion.

HighlightsfromcollectedprojectsMostofthesmartmeteringprojectsaredemonstrationprojects(59%),followed by deployment (32%) and R&D projects(9%). All the smart metering projects togetheraccount for about 75% of the catalogues totalbudget,butaconsiderableshareofthisfigure(71%)isattributable toasingleproject, thesmartmeterroll-out in Italy. Although a substantial amount ofmoneyhasalreadybeeninvestedinthisfield,thereisstillneedforconsiderableinvestments.

Estimatesforecast51billioninvestmentsinsmartmetersby2020[27].Theprojects inthecataloguewillresultintheinstallationofmorethan40millionsmartmeters,ofwhich32millioninItaly.

BusinesscaseforinvestmentsInvestmentinsmartmeters iscurrentlymainly justifiedonthebasisoftheexpectedreductionofDSOsoperationalexpen-ditures, typically resulting from the elimination ofmeter reading costs, reduction of power theft, re-mote activation and deactivation of service, fasterdetectionofpoweroutages,andimprovedmanage-mentofbad-payers.Thisinvestmentisalsolikelytoyieldadditionalbenefitsarisingfromtheprovisionof dynamic pricing for consumers. These benefitsareusuallynotconsideredinthebusinesscasefordeploymentofsmartmeters,astheydependonthedevelopment of future functionalities and applica-tions(i.e.in-homedisplays,smartappliances).

Examplesofoperationalbenefits recordedbyDSOfromsmartmeterdeployment

With the Telegestore project, Enel has gainedapproximately 500 million in yearly savings,witha5yearpaybackperiod,anda16%internalrateofreturn.

Theperiodforsettlementofbalancepowerwasreduced from 13 to 2 months after the deliverymonth(Storstad Smart Metering project).

Contribution to a decrease in the SAIDI index(SystemAverageInterruptionDurationIndex)from128minto49min,andaconsequentdecreaseofcashcost/customerfrom80to48from2001to2009(Telegestore).

With the Telegestore Project, Enel managed3,027,000badpayersin2008(Telegestore).

Lead time for exporting meter readings tosupplierswasshortened from30days to5days(ProjectAMR).

Overatwoyearperiod,thenumberofcallsforboth meter-reading and invoice related issuesdropped by 56% (Storstad Smart Metering project).

21


2.2 Project maturity and scale

Projectswereclassifiedaccordingtotheirstage inthe innovation chain. To identify R&D projects weusedthedefinitionlaidoutintheFrascatiManual,accordingtowhichR&Dprojectscomprisecreative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications[43]. The term R&D covers three activities: basicresearch, applied research and experimentaldevelopment.

For demonstration projects we referred to theconceptualisation largely used in the literature,which defines a demonstration project as a finiteinitiativetotestatechnologyaccordingtotheprojectobjectives. A technology couldbe everything froma base technology to a complete system concept[33]. The project starts with a conceptual designand ends when the technology is implementedand the results are evaluated and communicated[11].Demonstrationprojectscan thereforebeseenasapreviewphasewhentheinteractionbetweenusersandsupportsystemsandemergentproductsistested.Theconceptincludesprojectsdesignedtotesttheperformanceofthetechnologyindifferentoperational environments, through to full markettrials inwhich the technology isused in customerinstallations[3].Theseprojectsaimatexposingthetechnologytorealisticuserenvironmentstotestitssuitabilityformoreextensivediffusion.

Finally, deployment projects refer to theimplementation of a technology, application orsystem as a default solution within the projectgeographical boundaries. Some deploymentprojectsarenationwide;someothersarelimitedtoamorerestrictedgeographicalarea.

Someprojectsinthecatalogueincludetwodifferentstages, typicallyR&Danddemonstration. In thesecases,forthesakeofsimplicity,wehaveassignedthe project to the stage that seemed to bestcharacterize the project and towhichmost of thetimeandbudgetwereallocated.

***

! "# $ %& ( ) "* + % ", $ + "- . - / 0 %- 1& 2 + *

3 4- . # + 5 & * + 3 # & * - / + 5 & ". .- 6 3 + "- . 2 5 3 ".

! "# $ %& ' ( ' ) "* + % ", $ + "- . ' - / '". 0 & * + 1 & . + * ' 2 3- . # ' + 4 & ' * + 2 # & * '

- / ' + 4 & ' ". .- 0 2 + "- . ' 5 4 2 ". Thecollectedprojectsspanacrossallthestagesoftheinnovationprocess,butthemajorityofthemareconcentratedintheR&Danddemonstrationphases(Figure4).Only7%oftheprojectsareinthedeploy-mentphase.

When wemove our attention from the number ofprojectstothecorrespondinginvestments,thepic-turechangesconsiderably(Figure5).Asexpected,deployment covers the lions share of investmentcommitments; 7% of the projects account for al-most60%of the investments. An important shareoftheseinvestmentshoweverisattributabletoonlyoneproject,themassiveroll-outofsmartmetersinItaly(Telegestoreproject,2,106million).R&Danddemonstrationprojectsaccountforamuchsmallerportionofthetotalbudget.Mostoftheseprojectsaresmalltomediumsize,withanaveragebudgetof4.4millionforR&Dprojectsandabout12millionfordemonstrationprojects.Inthefuturetheremightbetheneedforlargerscaledemonstrationprojectsto improve our knowledge of the functioning andimpactsof some innovativesolutionsata realisticscaleandtovalidateresultstoawiderextent.

Figure 4. Distribution of projects along the stages of the innovation chain

Figure 5. Distribution of investments along the stages of the innovation chain

22



R&Danddemonstrationprojectscanbefoundinal-most all the countries in the catalogue (Figure 6),whiledeploymentprojectsareconcentratedonlyina few countries.Given that almost all of themaresmartmeteringprojects, themain reason for theirconcentrationmightlieinthefavourablelegislativeandregulatoryenvironment.

DenmarkstandsoutintermsofthenumberofR&Danddemonstrationprojects..Thisispartlyexplainedby the fact that Denmark has already achieved averyhighpenetrationofrenewablesanddistributedgenerationandthereforeneedstoupdate itselec-tricitysystem.Moreover,theDanishTSOischargedwith supportingR&D and demonstration activitiesin the electricity sector, activities which are thenfinancedthroughaPublicServiceObligation(PSO)tariff5. This system also implies the traceability oftheprojectswhichcanthenbeeasilymonitoredandcommunicated, favouring the assessment of their

Figure 6. Stages of development and participating countries across collected projects

resultsandknowledgesharing.Thisisnotthecaseformanyothercountries,whereretrievinginforma-tionaboutSmartGridprojectsprovedtobeamoredifficulttask.

Figure6showsaveryhighnumberofR&Dprojects,whichmightgive the impressionofahighersharethanpresentedinFigure4.Inreality,thisisexplainedby the fact thatabout25%ofR&Dprojects inourcatalogueinvolvetheparticipationofseveralcoun-tries,andtheyhavethereforebeencountedtowardseachoneof them.All of theseprojectshavebeenco-fundedby the EuropeanUnion,mainly throughtheFP6andFP7programmesandtheyrepresentanimportantmeansofenhancinginternationalcooper-ation,knowledgesharingandthedisseminationoflessonslearned.

5 UnderthePSOProgrammeForskEL,theDanishTSOadmin-istersPSOfundingof130millionDKKayearwhich,throughacallprocess,isgrantedtoresearch,developmentanddemonstrationprojectswithinselectedandprioritizedfocusareas.TheForskELprogramhasrunsince1998.

23


Figure 7. Investments in collected Smart Grids (SG) R&D projects per country

Asfortheinvestments,Figure7focusesonR&Dac-tivities,groupingcountriesaccordingtotheirlevelof investments in R&D projects. Relevant differ-encescanbenotedbetweencountries;asstatedin1.1.2however,theinvestmentswereportedinourcatalogueareonlythosewhichfallintothescopeofouranalysis.R&Dprojects inourcataloguerangefrom network assessment and planning tools totheinvestigationofnewmarketsolutionsandcon-sumersbehaviour.

24



Finally, Figures8 and9 show the trendof thedif-ferent maturity stages over time. The number ofR&Danddemonstrationprojectsgrowsconstantlywhilethenumberofdeploymentprojectshasnotin-creaseddramaticallysincethefirstprojectin2001.The constant growth of demonstration projects isparticularlyimportantasitshowsanincreasingcon-fidenceintheviabilityofSmartGridprojects.

Figure 8. Share of R&D, demonstration and deployment over time

Figure 9. Project status and stage of development

25


2.3 Insight into some final applications and their level of maturity

Asaptlystatedby[17],SmartGridsarenotanendinitselfbutameanstoanend.Theprojectcategoriesin Figure 2 can be seen as the key technologicalareas addressed by the projects to achieve SmartGridsolutions.Buildingonthecategorisationeffortcarried out by project respondents and throughan in-depth analysis of the project elements, weidentified three main final applications pursuedby the projects in the catalogue, namely thesafe integration of Distributed Energy Resources(DistributedGeneration, Storage, EVs, see Box 2),thepossibility for consumers to respond toprices(DemandResponseanddynamicpricing,seeBox3),and thesafe integrationof large-scale renewables(seeBox4).

In this section we will analyse these threeapplications and their level of maturity in thecontext of the general results of the survey togain an insight into the current developments inthe Smart Grid landscape. Since smart metersareakey technologicalenabler formanyof thesedevelopments, we have included them in theanalysisaswell.

BOX 2. Integration of Distributed Energy Resources

The deployment of Distributed Energy Resources(DER) is useful to (1) offer alternatives to largecentralized plants facing permit problems andconstructionuncertainties,(2)exploitthepotentialof dispersed Renewable Energy Sources (RES),and (3) include prosumers in the electricitymarket. Decentralization supports scalability androbustness, i.e. the capability to integrate newcomponentsor copewith component failures.Thetrend toward decentralization is also encouragedby consumers push for more control over energyconsumption.

The integration of large quantities of DER isextremely challenging both from a physical andmarket point of view. The goal of projects in thisarea istheonlinecoordinationofelectricvehicles,distributed generators and/or storage devices toadjusttogridandmarketconditions,guaranteeinggrid stability, optimization of energy resources,easier access to the electricity market for smallplayers.DifferentmethodsareimplementedacrossprojectstoexplorethecapabilitiesofDERunitstoprovide ancillary services through an aggregatedDERportfolio.

Scanning through the projects, we observe that,whilesomemakeuseoftheconceptofdiversificationbycombiningavarietyoftypesofmicro-generationunits,othersfocusonjustonesingletypeofenergysourcebycompensatingforthevariabilityofpowerflowsthroughmeansofstorageand/ormodificationof load profiles (instantaneous modification ofelectricityconsumptionlevels).

26



BOX 3. Demand Response

DemandResponse(DR)isoneofthecentralthemesin the catalogue. Its target is to enable activeparticipation of commercial/domestic consumersinthemarketthroughtheprovisionofconsumptionflexibilityservicestodifferentplayersinthepowersystem.Thisisachievedbyaggregatingconsumersreduced load into larger amounts forparticipationinmarketsales(e.g.toselltonetworkcompanies,balancing responsible parties, owners of non-controllable generation, etc.). Aggregators are thekeyplayerstomediatebetweenconsumersandthemarket.

Particularly challenging is the integration ofdomestic consumers who, as opposed to DG andlarge industrial consumers, are less motivatedby purely economic concerns (minimal gains).Furthermore domestic consumers are generallyunabletomakeprecisepredictionsontheiravailableloadflexibilities;thereforeitisdifficultforthemtooffer services in the classical sense. Rather, theideaisfortheirservicestobemadeavailableatthemarketsrequest,i.e.throughpriceand/orvolumesignalmechanisms,andfortheprovisionofservicestobeonavoluntaryandcontractualbasis.

BOX 4. Large-scale integration of renewable energy

More and more variable renewable energygeneration, for the time being mainly based onwind and in future also expected to include othertechnologies (e.g. concentrated solar power), isgrouped in large-sized plants often installed farfromexistingpowerinfrastructure(e.g.offshoreorinremoteareas).

This large-scale renewable generation posesa number of challenges on the power systemarchitectureandoperation:

It requiresadequateconnection to theexistinginfrastructure and appropriate internal gridreinforcements in order to wheel the renewablepower to the demand centres (often far from theconnectionpoint);

Due to a more marked time-variability andweather-dependence of its energy output (com-pared to other generation technologies), the bal-ancing task of power system operators becomeshardertocarryout;asamatteroffact,sinceelec-tricityisnotstoredonamassivescaletodate,thepowerproducedmustatalltimesequalthepowerconsumed(andlost).

As the current power grids do not generallyappear adequate to reliably cope with large-scale penetration of such intermittent renewablegenerating plants, network operators are gettingtogetherwithresearchcentres,academiaandotherpartnerstostudyanddemonstratehowtoovercomethebarriersofgridaccessandsystemintegrationfor large-scale renewables; as a consequence,largeinvestmentsarebeingcommittedtoupgradethe existing grids and to demonstrate/implementmeasures such as reserve capacity increase,balancing area expansion, redesigned marketmechanisms,loadshiftingandstorageintegrationtocopewithrenewableenergyvariability.

27


Figure10showsthenumberandthestartingyearofprojectsfocusingontheintegrationofDistributedEnergy Resources (DER), on Demand Response(DR) and on the safe integration of large-scaleRES. Figure 11 shows the investments associatedtotheseprojects.Forsakeofsimplicity,theentireprojectbudgetwasallocated to the startingyear.Figure12reportstheclassificationoftheprojectsinthesethreeareasaccordingtoR&D,demonstrationanddeploymentstages.

Projectsfocusingonthe integrationofdistributedenergyresourcesaresteadilygrowing.MostoftheworkisstillfocusingontheR&Danddemonstrationstages to test aggregation concepts (e.g. VirtualPower Plant, Vehicle2Grid). None of the collectedprojects has moved these concepts to thedeploymentstage.

Demand Response projects testing dynamicpricingandconsumerparticipation,aregrowinginnumber.Theyarebenefiting fromthedeploymentof smart meters, which are key enablers for theincrease of Demand Response initiatives. Moreandmore Demand Response projects aremovingfrom R&D applications to demonstrations to testactual consumer engagement. Gaining consumerstrust and participation is the main challenge inthis field. Potentially, consumers benefits aresignificant.Theyrangefromenergysavings(upto10-15%,seee.g.GADproject)toamorefavourablebusiness case for the purchase of home energyresources (heatpumps,EVs,CHPsetc.) throughadirectparticipationintheelectricitymarket(sellingpowerand/orloadflexibility).However,inordertocapturemost of these benefits thewhole system(infrastructure+market)needstobeinplace.

Thereisanincreaseinthenumberofprojectsandbudgetavailable for the integrationof large-scaleRESwithtime,butatalowerlevelcomparedtootherapplications.However,weremarkthatthemajorityofinvestmentsinthisareaareconcentratedingridreinforcementandtheydonotappearinouranalysisaswehaveonlyfocusedonSmartGridprojects.

Figure 10. Trend in the number of projects focusing on integration of Distributed Energy Resources, De-mand Response and large-scale Renewable Energy Sources over time

28



Figure 11. Budget allocated to projects focusing on the integration of Distributed Energy Resources, Demand Response and large-scale Renewable Energy Sources over time

Figure 12. Level of maturity of projects focusing on the integration of Distributed Energy Resources, Demand Response and large-scale Renewable Energy Sources

29


Finally, Figure 13 shows the maturity level ofsmart meters, a key enabler of many Smart Gridapplications. Over 30% of smart meter projectsareinthedeploymentphase,whiletheR&Dstagecomprises a very limited number of projects (e.g.see projects OpenNode, OpenMeter, SyM2). Thedemonstration and deployment of smart metershas made R&D and demonstration activities inotherSmartGridareaspossible.Inparticular,manydemonstrationprojectscombinethe installationofsmartmeterswithDemandResponseprogrammes(e.g. see projects MeRegio, ESB Smart Meter,E-telligence).

Figures12and13alsoconfirmwhatwehavealreadyobserved in the previous paragraphs. R&D anddemonstration projects are smaller in size andthey have a wider portfolio of technologies andapplications.

Figure 13. Level of maturity of projects focusing on smart meters

2.4 Who is investing?

A wide variety of respondent organisations areinvestingintheSmartGridprojectsofthecatalogue.Takingstockoftheworkpresentedby[17],wehavegrouped the leading organisations of the projectsinthefollowingcategories:

1. EnergyCompanies(e.g.EDF)

2. DistributionSystemOperators(e.g.EnelDistri-bution)

3. TransmissionSystemOperators

4. ServiceProviders(manufacturers,aggregators,retailers,ITcompaniesetc.)

5. Universities, Research Centres, Public Organi-sations

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Figure14showstheprogressionofinvestmentsbyleadingorganisationsovertime.Thehighfigurefor2001isduetothenationalsmartmeterroll-outrunbyEnelinItaly(Telegestore project).Thedecreaseininvestmentsin2011isduetothefactthatmanyprojectsplannedtostartthisyearhavenotansweredtooursurveyyet.

Figure 14. Starting time across budget ( million) and leading organisations

Theplayersleadingandparticipatingintheprojectsin the catalogue are diverse, as the increasedcomplexity of the electricity system requiresmultidisciplinary consortia. Network operatorsare establishing fruitful cooperation with diversepartner organisations, ranging fromacademia andresearch centres to manufacturers and serviceproviders, particularly IT companies. As a whole,the implementationofSmartGrids is a significantopportunity for theEuropean industry to research,marketandexportnewtechnologies,tocreatenewjobs,tokeepglobaltechnologicalleadershipandtocontribute to achieving the environmental targetstheEUhasset(seealso[10]).

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Figure 15. Investment distribution across leading organizations

Figure 15 shows the cumulated investmentsof different leading organisations across ourcatalogue. Thedata seems to confirm the leadingroleDSOsplayinpromotingSmartGriddevelopmentinEurope.Current total investment inprojects ledbyDSOsamountstoover3billion.

To leverage further investments for the rapiddevelopment of Smart Grids and ensure thenecessary involvement of risk-averse networkoperators, it isnecessary to find the rightbalancein sharing costs, benefits and risks. The mainresponsibility for achieving this balance lies withregulators.

The high number of DSO-led projects in ourcatalogue allowed us to get an insight into thesource of financing of these projects. Generallyspeaking,investmentcostsofDSO-ledprojectsaremainly covered either through tariffs or throughfunding made available at European or nationallevel. Inmanycasescostswerecoveredthroughacombinationofboth.

ThemajorityofDSO-ledprojectsinourcataloguearefinancedbyDSOsthemselves,i.e.throughrevenuesreceived from tariffs charged to the end user fordistribution of electricity in the Low Voltage grid.

Otherexamplesoftariff-basedfundingareregulatoryincentivesfundedthroughtariffs,suchastheUKsInnovationFundingIncentiveintroducedin2005bytheregulatorOFGEM,allowingupto0.5%ofannualrevenuetobespentoninnovation.In2010,OFGEMestablished the LowCarbonNetwork Fund (LCNF),whichallowsupto500(577)millionspecificallyin support of DSO-sponsored projects testingoperating and commercial arrangements, andnewtechnology. In fact, all DSO-led projects from theUKincludedinourcataloguearesupportedbytheLCNF, enabling a total investment of118million.

Another best-practice scheme, though not partof our catalogue, is implemented by the Italianenergy regulator AEEG who recently launched acompetition-based procedure providing specificincentives for Smart Grid demonstration projectsrelated to the active distribution network. Themotivation for DSOs to invest is that they areguaranteed an extra 2% return on capital ondistribution network related investments for aperiodof12years[38].

In terms of public financing for Smart Gridinvestments, the European Commission funds awhole series of projects dealing with differentissues concerning the implementation of Smart

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Gridtechnologies.TheECscontributiontowardtheprojects considered in our catalogue amounts toabout184million,25%ofwhichwenttoDSO-ledprojects(Figure16).

Figure 16. Distribution of EC Funding across Leading Organisations

The majority of EC funded projects in the cata-loguearesupportedeitherbythe6thorthe7thEUFramework Programme for Research and Techno-logicalDevelopment(FP6orFP7,respectively,seeBox5).However,projectfundingwasalsoreceivedfromtheEuropeanRegionalDevelopmentFundaswellastheEURecoveryPlan.Inall,9%ofDSO-ledprojectsaresupportedwithfundingbytheEC.

Box 5. FP6 and FP7 projects in the catalogue

8 projects financed by FP6 frameworkfundingtotalfinancing38million

23 projects financed by FP7 frameworkfundingtotalfinancing146million

About 10%ofDSO-ledprojectsare co-financedbynational funding schemes, such as the AustrianClimate and Energy Fund KLIEN, which fundsAustrian projects included in the catalogue worth33.5 million. The fund was set up in 2007 bythe Federal Ministry of Transport, Innovation andTechnologyinsupportofsustainableenergysupplyandthereductionofGHGemissions.

Otherexamplesofnationalco-fundingrepresentedin the catalogue include financial support fromthe Portuguese National Strategic ReferenceFramework(QREN),theSpanishMinistryofScienceand Innovations Centre for Industrial TechnologyDevelopment (CDTI) and the German FederalMinistry for Economics and Technologys fundingprogramE-Energy.

Figure17reportsthenumberofDSO-ledprojectsandthecorrespondinginvestmentsinkeytechnologicalapplications: Advanced Metering Infrastructure,Integration of DERs and Demand Response. DSO-led projects are concentrated on smart meteringwhose business case is mainly based on savingsinareaslikerevenueprotection(e.g.energytheft),logistics,fieldoperations(e.g.readings,activation/deactivation)andcustomerservice(e.g.bad-payers,invoicing), resulting in the reduction of operationcosts(seeBox1formoredetails).

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Figure 17. Investments in DSO-led projects by application

Budget(million)NumberofProjects

Forotherdeployments,suchasthatoftheelectricvehicles (EV) charging infrastructure, thebusinesscaseofDSOsisstillunclear(seeBox6).Themainproblem is the uncertainty regarding the demandside. Whether a pay-per-use model (consumerspay per kWh charged) or a subscription model(consumerspayanannualormonthlysubscriptionfee) is applied, expected utilisation rates as wellas the expected number of charging stations percararecurrentlystillunclear.Inourcatalogue11%of DSO-led projects, about 50% of DER projects,studyconsumersEVchargingbehaviourindicatingquitesomeinteresttowardstheuptakeofcharginginfrastructureamongEuropeannetworkoperators.

3000 30

2500 25

2000 20

1500 15

1000 10

500 5

0 0AMI DER DR

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BOX 6. EV Charging infrastructure

Whetherornotthecharginginfrastructureistobearegulatedassetisstillamuchdebatedissue, whichmakes the business case forDSOs ambiguous. It can be consideredas an extension of the distribution grid,much like a telephone booth in thephone infrastructure. In this case directgovernmental intervention would allowDSOs to socialize the costs. Rather thanoperating them, DSOs could generaterevenue by selling charging equipment aswellasrelatedconsultingservicestopublicor private entities. Alternatively, charginginfrastructure can be regarded as a post-sale service comparable to a fuelling gasstation, in which case private companiesareentirelyresponsibleforitsprovisionaswellasoperation

The MiniE-Berlin project (50 customersand 100 recharging stations 50 publicstations and 50 home stations) pursuesan open access approach. Customers canbuy specific electricity product of theirdedicated electricity provider. Contrary toaroamingapproach,acustomercouldonlybuytheelectricityproduct fromtheownerofthechargingspot.

In the e-Mobility project (100 customersand 400 recharging stations - 300 publicstations and 100 home stations) thecharging infrastructure is built by a DSO(Enel Distribuzione) and is likely to beconsidered a regulated asset. The sameopen access approach of theMiniE-Berlinprojectispursued.

Caution in performing charging spots roll-outsisanindicationofthelackofastrongbusiness case, which is largely due touncertaintiesregardingfuturedemand.

At the transmission level, projects are exploringnewtechnologies(e.g.HighVoltageDirectCurrent-HVDC,FlexibleACTransmissionSystems-FACTS)andnewtoolstoincreasetransfercapacity,enhancecooperative and flexible operation and cope withpermit limitations and high costs of new gridinfrastructures. The amount of investment alreadycommitted/mobilised for transmission projects inour catalogue is around 45 million for researchand95million for demonstrations. According to[12], required R&D investments for transmissionprojects amount to270million for research and290million fordemonstrationsover thenext tenyears.

Thegapbetweentheinvestmentsalreadymobilisedandthoserequiredcanbepartlyexplainedbythefactthattransmissionoperatorsaremainlyandheavilyinvesting inwhat canbedefinedas strengtheningratherthansmarteningthetransmissiongrid,asonecan claim that the transmission system is alreadypartly a smart system capable of managing andbalancingtheresources(currently)connectedtoit.Theseinvestmentsdonotappearinthecatalogue,whichonlyfocusesonSmartGridprojects.

Furthermore, considering that the demonstrationprojects at the transmission level are particularlycapital intensive,TSOsneed tocarefullyplanR&Dprojectsandmovetothedemonstrationphasewithveywelltestedsolutions.Inthisperspective,TSOsare increasingly teamingupwithresearchcentres,universities and industrial partners. Also, anotherstep in the right direction is the set-up of jointprojects by different TSOs (e.g. projectsTwenties,Optimate).ThecoordinationofR&DeffortsreducesR&D and demonstration costs and facilitates acommonEuropeannetworkoperation.

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3 BuildinG tHe Smart Grid SYStem

Successful Smart Grid deployment requires asystemic perspective, as most of Smart Gridbenefits are systemic in nature. As aptly stated in[32] In a major infrastructural shift, technologies do not replace technologies, rather systems replace systems. Individual technologies should not beconsidered just an add-on feature to be fit in established existing electricity systems, otherwise their disruptive impact cannot be captured and their business case is negatively biased[59].Inthecurrentplayingfield,eachindividualnewtechnologyfacessignificantbarriersforitswidespreadmarketadoption against established business practices,consumers habits and regulation. Market forcesalone can take many years to fit new Smart Gridapplicationsintotheexistingelectricitysystem.

ThemajorityofbenefitsarisingfromSmartGridsarerevealedinthelong-termandcanonlybecapturedwhen the whole system is in place. However, theSmart Grid needs to be built brick by brick. Thechallenge is to ensure that at every step of theway intermediate benefits or the clear prospectsof finalbenefitscansupport thebusinesscase forinvestments.

KeyelementstobuildtheSmartGridare:

Systemintegrationtoenhancethebusinesscaseof individual Smart Grid technologies and tofairlysharecostsandbenefitsamongplayers.

Full engagement of consumers through cleartangiblebenefits,understandingandtrust.

In this perspective, using data from collectedprojects,themainquestionswewanttoaddressinthischapterare:

How can system integration create businessvalue?

Whatisinitforconsumers?

3.1 System integration Smart Grid as a market platform

ICT integration is transforming the power systemfromamerelyphysicalplatformforone-waytrans-actionsofelectricitysupply forpassiveconsumersintoamarketplatformforthetransactionsofelec-tricitysupplyandservicesamongseveralheteroge-neousanddistributedgridusers(seee.g.[58]).Asstatedin [35],a Smart Grid is a rich transactional environment, a market platform, a network con-necting producers and consumers who contract and negotiate their mutual exchange of value (product, service) for value (payment). A Smart Grid is a trans-active grid.

Thisconceptiswidelyrepresentedinthecatalogue.Several projects focus on the set-up of marketplatforms for the transactions of a wide range ofelectricity services: ancillary services, DemandResponse,aggregationofDERsandV2G6services.IntheWeb2energy project,alargenumberofsmallpowerproducers (PV,CHP,windetc.), storageandcontrollableloads(industry)areconnectedthroughRemoteTerminalUnitswithaControlCenter,whichcoordinates the exchange of power and energyservices among the producers and consumers(Virtual power plant)7. The platform componentsinclude 11 MW of intermittent power (wind, PV)and 300 MW of controllable power (controllableloads,CHP,storage,gasturbineetc.).Throughtheinstallation of smart meters, domestic consumersare also connected with the Control Center andhaveaccesstovariabletariffsmainlytoreducetheirconsumptionduringpeakhours.Theircontrollableloadismainlythermalstorageheating.

IntheLastbeg project,aplatformissetupforthecoordinationof200MWRES(wind-based),apumpedstoragepowerplant (PSPP) facility andaDemandResponse aggregated output of 5,000 customersendowedwithsmartmeters.Theinteractionamongtheplatformparticipantsenablespredictivepowerbalancing and amore efficient and reliable powersupply.

6 Vehicle-to-grid(V2G)describesasysteminwhichplug-inelectricvehicles,suchaselectriccars(BEVs)andplug-inhybrids(PHEVs),communicatewiththepowergridtoselldemandresponseservicesbyeitherdeliveringelectricityintothegridorbythrottlingtheirchargingrate.

7 Avirtualpowerplantisaclusterofdistributedgenerationinstallations(suchasCHP,windturbines,smallhydroetc.)whicharecollectivelyrunbyacentralcontrolentity.

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Theseexamplessuggesthowtheset-upofmarketplatforms for the transactionofelectricityservicescancreatesystemicbenefitsfromtheinteractionsofdifferentgridusers.

Theset-upofsuchplatformsrequirestheintegrationintoacoherentsystemof:

1. a physical layer (i.e. optimal and secureinfrastructure for power/data flows amongproducersandconsumers);

2. a market layer (i.e. efficient mechanismsfor coordinated transactions among systemoperators,prosumers,aggregatorsetc.).

Mostofthescannedprojects,inonewayoranother,are contributing to either the physical or marketlayerorboth.

Fromanengineeringperspective,scannedprojectsfocus on digital communication and controlcapabilities to enable a two way power andinformation flows across thewhole grid. The goalis toaccommodateawholenewsetofdistributedtechnological applications, optimize overall gridmanagement, increase reliability and self-healingcapabilities.

From a functional perspective, projects focus oncoordinationmechanismstosettransactionsamonganetworkofdistributedgridusers.

Physical layer System operators are the maininvestors in the set-up of the physical layer ofthe Smart Grid. At the transmission level, sincebuildingorupgradingconventionaloverheadlinesto increase the transmission capacity is becomingprogressivelymoredifficult,alternativetechnologiesareeitherbeingdeployedorareunderdevelopment.HighVoltageDirectCurrent(HVDC)systems,alreadymatureforlongdistanceandunderseatransmission(also suitable for connecting offshorewind farms)maycontributetoregulatethecurrentflowthroughthe network. Flexible AC Transmission Systems(FACTS), gradually more deployed, are powerelectronics-based devices aiming to increase thecontrol over voltages and power flows in the grid(seee.g.projects TWENTIES, ICOEUR, 220 kV SSSC device for power flow control).

Advancednetworksensingandcontrolcapabilities(e.g.wideareamonitoringsystems)areemployedto improve the observability of the transmissiongrid, increase safety margins and facilitates thesafe integration of renewables (e.g. projects Cell Controller, PEGASE).A lotofwork is alsodevotedto improve tools to analyze expansion optionsand to assess system vulnerability (e.g. projectsALMACENA, REALISEGRID).Atthedistributionlevel,aspartlyshowninChapter2,investmentspresentlyconcentrateonsmartmeters,networkautomation,and physical integration of DERs (including EVcharginginfrastructure).

A key component of the physical layer is an ICTinfrastructuretoshareinformation,priceandcontrolsignals among distributed users and producers(see e.g. projects E-telligence, Web2Energy, Cell Controller, Virtual Power Plant). The set-up ofan ICT infrastructure is a precondition to createa distributed collaborative market, and allow theintegrationof new technological applications (e.g.EVs, DER) and the participation of new energyplayers (aggregators, prosumers, RES producersetc.). Energymanagement devices (see Box 7) forconsumers (e.g. Energy boxes -ADDRESS project,Energiebutler-Model City Manheim project)orDERmanagement systems (Fenix Box Fenix project,DEMS Virtual Power Plant project) and smartmeters represent grid users gateways to the ICTinfrastructure.

Market layer With the physical layer in place,consumers, producers and prosumers areinterconnectedwithtwowaypowerandinformationflows. Transactions of a wide range of electricityservicesamongthemthenbecomepossible.

Electric vehicles are used as storage devices toprovide ancillary services in presence of a highlevel of renewables (Mini E Berlin project). Theoutputs of distributed generators are monitoredandcoordinatedtocontrolvoltagelevelsinspecificportionsofthegrid(ISOLVES, DG Demonetprojects)or aggregated to provide the required amount ofreactivepower(Cell Controllerproject).

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The concept of aggregation is central in thiscontext (seeBox8 formoredetails). Forexample,on behalf of consumers, aggregators can buy andsellloadflexibilitiesontheelectricitymarkets(seee.g. ADDRESS project) or provide V2G services tooptimize EV use (see e.g. Charging infrastructure project). Aggregated demand can be controlled toreducepeaks,tohelpDSOstodispatchthesystemor to reduce risk exposure of retailers (ADDRESSproject).

Through aggregation, Distributed Generatorscan provide ancillary services and contribute todispatchingtasksofDSOs.Forinstance,thegoaloftheE-telligenceprojectistousethereactivepowerofCHPtoactivelycontrolthevoltagegradientsonthemediumvoltagelines.TheEDISONprojectistestinganEVchargingsystem thatoptimizesEVchargingbasedonEVandgridconditions.The From wind to heat pumpsprojectlinksaggregationofDERonthesupplyandonthedemandsidebyinvestigatingtheuseofheatpumpsasheatstoragedevicesofwindpower.

Finally, as advanced ICT capabilities make itpossible to measure electricity attributes (powerquality, generation source, real-time price etc.)and consumers profiles, energy players are ableto bundle value-added services to the electricitycommodityandoffertailoredproductstoconsumersaccording to specific preferences and to real-timegrid conditions. For example, the Smart Wattsproject aims at implementing solutions to informcustomersaboutwhereandhowtheelectricitywasproduced, how it was transported and howmuchthe power currently costs. The Smart Chargingproject is setting up a charging infrastructure forelectric vehicles that explicitly introduces theconcept of mobility service for EVs. The chargingcostsofEVscanbemeasuredintermsofKilometresratherthankWhs.Theassociationofbusinessvalueto electricity services rather than kWhs makes itpossible to includeefficiencyandsustainabilityaspartoftheelectricityservice(seee.g.[29]).

BOX 7. Energy Management Devices

An energy management device is the consumersinterface with the external world. It can be thehub for smart home energy services and can beused to automatically reshape the energy profileof the house by reacting to aggregators signals.It connects consumers with aggregators andautomatically controls electric appliances (loads)in response to price signals, requests from theaggregator and consumers energy preferences.(e.g.theEnergyButlerintheModel city Mannheimproject). It facilitates customers individual energymanagement as well as the implementation ofdynamic pricing and active demand mechanisms.For example, customers will have the option ofswitching electric power consumption to off-peak times or switching appliances off when theelectricitydoesnotcomefromarenewablesource.The MeRegio project provides another examplewhere household appliances are interlinked viacommunicationdevicesandconnectedtoanenergymanagement system. The electric vehicle batteryis automatically charged whenever the mini-CHPinstalled in households generates more electricpowerthanthegridrequires.Viceversa,electricityfromthebatterycanbefedintothegridwhenevertheneedarises.

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3.1.1 Business models for a transactive grid

Withthephysicalandmarketlayersinplace,systemicbenefitsarise fromthecollectiveparticipationandinteractionofthedifferentgridusers.InaDemandResponse application, for example, aggregatorsmediate interactions among different grid users,likecollectingdemandflexibilitiesfromconsumersand selling them to retailers andDSOs. Themoremembers of one party join the platform (e.g.consumers),themoremembersoftheotherpartieshaveanincentivetojoin(e.g.retailers,DSOs,SmartAppliancemanufacturers).

In related literature, these market structures arecalled multi-sided platforms (MSP). According to[26], A Multi-Sided platform provides goods or services to two or more distinct groups of customers who need each other in some way and who rely on the platform to intermediate transactions between them.BusinessmodelsbasedonMSPshavegainedprominenteconomicimportancewiththeadventofInternet because they represent an efficient wayof creating business value out of the interactionsamongdifferentconsumergroups([58]).

The costs of establishing market platforms fortransactionofelectricityservices(bysettingupitsphysical andmarket layers) require facingupfrontcosts and investment risks before the platformcanpayback.However,onceinplace,theplatformcan provide systemic benefits to its participantsand provide a business case for investments toplayers thatmaynotenter themarket individually(aggregators, prosumers, EV producers etc.). Inthe context of Smart Grids, the costs of buildingthe physical layer of the platform are typicallyincurred by DSOs, whereas a key role in the set-upofthemarketlayeroftheplatformisplayedbyaggregators.

Undercurrentregulation,DSOsmightnothavethebusiness case to sustain the investments to buildthe physical layer,

Smart Grid Projects in Europe

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