December 2009

Issue: December 2009

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Feature
- Smart Grids and Smart Regulation

Events
-  CEER official side event on smart grids at COP-15, Copenhagen (9 Dec. 2009)
-  ERGEG Smart Metering Workshop (14 Dec. 2009)
- CRE workshop on smart grids (27 Jan. 2010)

Publications
-  Individual country reports 2009

Public Consultations
-  Integration of wind  in EU electricity markets
-  Gas Capacity Allocation
- 10-year Electricity Network Development Plan
- Smart Grids


Press Release/FactSheet:
-  FactSheet on Smart Grids and Smart Regulation

Region in the Spotlight
- Quarterly update of all regions

Editorial
For the first time, energy regulators were represented (by CEER and our US counterparts, NARUC) at the United Nations climate change convention (COP-15, Copenhagen) highlighting the key role that regulators play in climate change.
 
Our road to Copenhagen began with the G8+ Energy Regulators Statement at the G8 Ministerial meeting in Rome (May 2009) and the creation of the International Confederation of Energy Regulators (ICER) in Athens (Oct.) through which more than 200 regulators  have jointly committed to play their role in overseeing efficient and climate responsible markets. 

ICER’s first output, agreed by 11 regional associations of regulators in advance of Copenhagen, is the World Energy Regulators’ Statement on Climate Change, a statement which commits regulators worldwide to 8 concrete actions on climate change (see International Activity).  The European Energy Review critiqued it, highlighting the important role of regulators in providing needed clarity and certainty for investors.  Quoting our  point on the need for investor clarity and certainty, it stated “This statement bears remembering. It should be widely distributed and frequently cited as it is possible that it will be overlooked by some zealous politicians and climate change action advocates.”

ERGEG launched 4 public consultations; on the integration of wind  in EU electricity markets; on developing the EU-wide 10-year electricity network development plan; on framework guidelines for gas capacity allocation; and on Smart Grids.  Smart Grids (which is our feature article) was also the theme of our official side event at  COP-15 in Copenhagen (with interesting presentation from the EU, Californian regulator and WWF, China). 

In terms of regional energy markets, there is a quarterly update on all  regions of the ERGEG Regional Initiatives.  Finally, the annual individual country reports (used as input for the European Commission's benchmarking report on progress towards an EU energy market) are published.

Smart Grids and Smart Regulation help meet climate change goals

Role of Smart Grids and Climate Change
Today’s electricity grids must evolve into Smart Grids.  Smart grids not only provide power but also information and intelligence. Smart Grids are key to reducing carbon emissions and improving energy efficiency by:
• directly reducing network losses (thus energy consumption);
• facilitating more renewables (e.g. wind) and distributed generation (e.g. small windmill or micro-CHP plant)
• helping consumers better participate in the market not only by using their energy more efficiently (e.g. through smart metering) but also by allowing consumers to act also as producers selling back their excess electricity (e.g. CHP or plug-in electricity vehicles).  

Electrical cars, smarter consumption and storage
Electrical cars are an interesting example of making smart grids meaningful for consumers. They not only have zero local emission but also offer potential for distribution storage and leveraging consumption. Consumers can sell electricity back to the grid (e.g. at peak demand time) when car is not being used. But, smart regulation is also needed to ensure avoid increases in peak demand. Rental of electrical car is already a reality in several cities such as Copenhagen, Oslo  or Vorarlberg (Austria).

Unbundling of Network Operators should help deploy smart grid solutions
Otherwise vertically integrated network operators face perverse incentives not to invest (e.g. in needed grid extensions to connect new generation) or in smart grid technologies e.g. low-losses network elements or energy efficiency measures (since energy efficiency reduces sales, hence profits).

Energy Regulator’s role in Smart Grids and Climate Change
For today’s grids to evolve into smart grids, network operators must reinvent how they manage the network using innovative and smart technologies. The regulator controls the network operator’s revenue streams and can set them targets to be met. Regulators act as key facilitators of smart grids, encouraging an adequate level and scope of smarter solutions to meet network users’ needs.  Regulators can drive energy efficiency – encouraging network companies to focus more on performance, and suppliers to sell less (not more) energy. Regulators can also change basic market rules (e.g. to better support renewables)

Regulators have stepped up to the smart grids/climate challenges at EU level (through CEER/ERGEG) e.g. working with EU standards bodies to enable interoperability of smart utility meters, and through various public consultations, reports, FactSheets and workshops. See the Smart Grids FactSheet for a simple explanation of what smart grids are (and are not); how they relate to smart metering; and how (when combined with smart regulation) they can help meet the EU’s climate change objectives (including examples).

ERGEG’s new public consultation  on Smart Grids explores the drivers and opportunities for ‘smarter’ networks from the users’ perspective and discusses the regulatory challenges and priorities of smart grids. At the ERGEG workshop on smart metering (14th December) discussion focused on:
• implications of 3rd Package
• the findings of the ERGEG status report of smart meter roll-out in European countries, and of the different cost-benefits analysis conducted in France, Norway and Italy.
• the need to define minimum functionalities at least at a national (possibly EU) level.
• the work being done by the European Standards bodies to enable interoperability of utility meters and the important clarification that standardisation in this context does not mean imposing identical solutions on all projects in all Member States.
• the fact that standards are important pre-requisite for interoperability but standards on their own will not ensure interoperability.
• of the importance of smart regulation (e.g. demand response measures) to help consumers change behaviour and reduce energy consumption and empowers them to be more active in the market
• the work being done via the European Commission's new task force for implementing smart grids

Smart grids and smart metering, coupled with smart regulation, will transform grids, generation, consumer participation in the market in a way we haven’t before imagined.

CEER/ERGEG Publications

Events

See all dates of Regional Initiatives meetings (RCC, IG, SG) on the ERGEG online Calendar.  

Regional Initiatives Update

Region in the Spotlight - quarterly update on all regions

In the Baltic electricity region a  Congestion Management Implementation Group has been established and market based congestion management rules are expected by 2011. This will mean harmonised congestion management and capacity allocation methods between the Baltic countries including a common method towards Russian and Belorussian TSOs.

In the Central-East electricity region progress has been made by implementing the first European flow-based capacity calculation which is expected to enter into force on 10th March 2010.

In the France-UK-Ireland electricity region a new capacity management system has been introduced in October 2009 to allow centralised capacity booking. Explicit auctions allocate long-term capacity yearly, monthly, quarterly as well as for seasonal periods and weekends. Long-term capacity is now subject to UIOSI (use-it-or-sell-it) and netting.

In the Northern electricity region market coupling activities on the interconnectors between Denmark and Germany was resumed on 9 November after a temporary suspension in October 2008 (due to price differences and associated operational problems).

In the Central-West electricity region regulators came to a common position on a regional intraday trade model based on continuous trading with implicit allocation of capacity, obligatory use and the use of netted residual capacity available after the day-ahead market closure.  Regulators have asked TSOs to develop a common regional cross-border capacity management model. 

Regulators in the South-West electricity region issued a press release supporting the initiative of the “Price Coupling of Regions”, which will test the concept of possible future pan-European price coupling model.

The Central-South electricity region a working group was set up to overcome the possible operational constraints in the pilot project for implementing a market coupling on the Italian-Slovenian border. A testing phase is being performed by the PXs and the implementation of the market coupling for day-ahead capacity allocation is planned for the second quarter of 2010.

For the Gas Regional Initiative, the North-West gas region work continued on improving the regional investment climate. Preliminary conclusions of the Virtual Test Case on Investment (of a simulation of a regional gas pipeline from Germany via the Netherlands and Belgium to France of a size up to 20 bc) have been discussed at a workshop in September and the Investment Manual has been finalized. The project will also draft a policy advice on how to improve regional investment climate in light of the 3rd Package.

In the South gas region there were two coordinated Open Seasons to assess market needs for new interconnection capacity and allocate this new capacity between France and Spain.

In the South-South East region security of gas supply is a key issue. After providing information on regional coordination and alignment of emergency plans the Commission requested additional information on the assessment of the national emergency plans, their harmonization and the possibility of a “Regional Emergency Plan”.

International Activities

CEER held an official side event (9 Dec.) at the United Nation’s Climate Change Conference (COP-15) in Copenhagen to raise awareness of the importance of Smart Grids (and smart regulation) as tools in meeting climate change goals and to raise the profile of the new International Confederation of Energy Regulators (ICER). 

CEER, along with US regulators, advocated the eight concrete commitments by 200 regulators worldwide in ICER's World Energy Regulators’ Statement on Climate Change. These include inter alia (a) fostering stronger network cooperation and compatability of regulatory framework (b) a report on climate change examining the integration of renewable and distributed generation into the overall energy supply and their effect on the grid and competition (c) a report on regulatory best practices to promote energy efficiency (to be presented to the next G8 Energy Ministers meeting).

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