Building a Smarter Planet. A Smarter Planet Blog.

By Ricardo Klatovsky, Vice President Energy & Utilities Europe IOT, IBM

In January 2008 the European Commission announced the “20-20-20” plan, a pledge to cut energy consumption by 20 percent by 2020. To help drive this initiative, they also set a mandate for all participating countries to upgrade 100 percent of electric meters to smart meters by 2022 (80% by 2020).

Yes, this plan sparked excitement and many European countries saw this as an opportunity to finally reduce energy demand and drive economic growth. Now that the initial excitement has died down slightly, we can clearly see the hurdles and are now realizing that there are many factors for success.

Talking to many of our clients, colleagues and competitors, and looking back to the plans and enthusiasm we saw back in 2008 and 2009 regarding the Smart Grid…… the reality is that the pace has been generally slower than originally envisaged.

Why? Is this pervasive? Is it a trend? Is it going to change?

There is no debate around the hard facts and overall aspiration of creating a smarter energy infrastructure: the future role and challenges of electricity grids and the reality of Smart Grid technologies will undoubtedly change how consumers and the industry views energy consumption. But when it comes to the next phase, there are a number of questions that continue to loom:

• What is the real business case?
• Is a full roll-out of smart meters, countrywide, the logical way forward?
• How much should we consider electric vehicles in our planning scenarios when penetration forecasts are still so vague?

The answers to these questions are very dependant on the financial and political situation of the individual European countries. The decision of certain European Governments to phase-out Nuclear Power is going to require exceptional financial resources that were not foreseen four years ago. And the severe impact of austerity measures in several European economics makes it almost politically and socially impossible to increase energy prices as needed.

What we have learned during the “stand by period” of the last two years is that the industry needs to become even smarter. We know that the business case for smart metering in Israel is totally different than the one in Norway. For example, in Germany there are millions of prosumers, these are basically consumers that not only consume but also produce their own power, mostly via rooftop solar panels – energy that is fed back into the power grid. This in-of-itself poses a different challenge and opportunity to the Smart Grid. Therefore, not every case can be treated the same.

So, in order to create a more intelligent energy landscape in Europe, and accelerate the transformation, we have to create a strategy that has a stronger focus on shorter-term results. We will have to seriously address smart meter roll-outs at city level, or at customer segment level.

Looking at successful smart grids examples, Ausgrid (the former EnergyAustralia) embarked on 10-year journey to become the world’s first utility to build and operate a two-way communication network.  They kicked off the program by addressing the fundamental issues first – they improved power supply and grid performance with one of the goals to reduce the “minutes of power loss” for consumers during outages. For Ausgrid, this was the first action item before they could even consider a residential smart meter roll-out.  While in Malta, Enemalta Corporation (EMC) and Water Services Corporation (WSC) implemented electricity and water smart meters together and today share all the back-office processes, as an innovative way to optimize the business case. This project approach has allowed both utilities to implement a complete end-to-end Meter to Cash transformation at a cost of less than 100€ per meter.

Based on IBM’s experience across 150 Smart Grid projects, it is recommended that countries address smart meter roll-outs based on a “benefits harvesting timetable”. Basically, they must focus on customer segments and geographies that will promise a return on investment in less than 5 years. Additionally, they must keep an overall technology vision and principles while also accepting that technologies will change during and after any smart grid transformation. By having a flexible Smart Grid strategy in place, utilities can better adapt to new circumstances such as increasing populations, geographical and economic changes as well as infrastructure requirements.

I think we will come out of the “slow pace” or stand-by mode we have seen in the last 2-3 years. “Stand-by” doesn’t mean that European Utilities haven’t been active. I am not aware of any utility who has not been involved in pilots, or even small scale projects (beyond countries that already led the way in 2003 – 2008). In the last months we have seen the UK and France making clear movements towards a full countrywide roll-out of digital electric and gas meters. We have seen smaller countries such as Israel, Serbia or Cyprus embarking on smart metering pilots while countries like Denmark, Belgium, Italy or Finland continue to address the optimization of the Distribution Network through the use of innovative Smart Grid technologies.

Right now the gears are in motion and we will see significant advancements in the years to come. What is the saying? Slow and steady wins the race.

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