The View from Europe: Smart Grid Efforts Share Common Goal with U.S.

By Antonio Pires Santos and Michael Valocchi, IBM Energy & Utilities Industry

Smart grid initiatives continue to gain momentum in the European Union. Increasing the level of intelligence and integration of information and communication technology into every aspect of the electricity system represents the overarching goal of EU smart grid initiatives. Several key forces have driven the market to the acceptance of a smart grid, including:

  • Increased import dependency,
  • Lack of interoperability of the European electricity networks,
  • Continued electricity market liberalization,
  • Increased demand for distributed power,
  • Aging network infrastructure, and
  • Heightened interest in more environmentally friendly electricity sources.

While many of these forces look familiar to the U.S. reader, there are several key differences. First, the demand for distributed generation (including renewables) represents a much bigger force in the European electricity market. Driven by an increasingly competitive situation, many of the major European markets include a number of distributed generating sources. The need to integrate these into the network represents a short-term market challenge for many European countries. In addition, the European market is much more dependent on outside commodity sources than the U.S. Currently, outside commodity sources drive 50 percent of the generating portfolio with that number potentially increasing to 70 percent over the next few decades, making security of supply an even greater issue in Europe than it is in the U.S. Finally, European market liberalization is driving the need for an interoperable wholesale electricity market and customer demand visibility, in large part, to improve interconnections between each European country’s national grid. One could surmise that these key differences provide an even greater reason to adopt a smart grid in the EU.

Based on these forces, the EU has set out a research agenda to drive smart grid adoption. This comprehensive agenda has the potential to transform the grid and drive an unparalleled competitive regional market, resulting in a flexible, reliable and economically sound network that includes:

  • Smart distribution infrastructure, including technology architecture and distributed generation in system planning;
  • Smart operations and energy flows, including information, communications and customer driven systems;
  • Smart grid assets and asset management, including the transmission system of the future and advanced modeling of asset utilization;
  • European interoperability of smart grids, including ancillary services, advanced forecasting and seamless integration of suppliers; and,
  • Smart grid cost-cutting issues and catalysts, including standards, regulatory barriers and underpinning technologies for innovation.

In addition to this agenda, other positive steps are under way in Europe. Smart metering continues to move toward large-scale adoption, with countries such as Italy, Sweden, Norway, Finland and Denmark being among the first movers. While this list is impressive, it only represents a small portion of the 244 million electric meters in Europe. Both EU and individual country policies will drive the next level of adoption. At the EU level, certain measures mandate consumer awareness of energy consumption and its related costs. Utilities must comply with these mandates by May 2008. Clearly, smart metering satisfies these. In addition, emerging policies in the UK, Ireland, and the Netherlands will likely drive smart metering adoption. While this represents progress, key questions of costs and ownership structure need to be addressed before wide-scale adoption begins.

The vision, challenges and paths forward for the intelligent utility network in Europe and the U.S. contain many similarities, leading to the conclusion that significant synergies can exist in the various efforts in the U.S. and the EU. Sharing strategies and tactics across country borders provides policy makers, regulators and individual utility companies the opportunity to drive change at a more rapid pace, compared to pursuing these efforts on an individual basis. It is this type of global collaboration that will accelerate the transformation to an intelligent grid-both in Europe and in the U.S.

Antonio Pires Santos is the Southwest European Leader for IBM’s Energy & Utilities Industry.

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Michael Valocchi is the Global Leader for IBM’s Energy & Utilities Global Business Services, which provides strategic consulting to clients regarding technology, process and regulatory issues.

IBM is a member of the GridWise Alliance, a broad industry coalition committed to advocating changes discussed in this column. For more information, visit: www.gridwise.org.

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