Cost-efficient smart metering, a dynamic model for optimization of costs and benefits of smart...

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Dynamic model for optimization of costs and benefits of smart metering
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Transcript of Cost-efficient smart metering, a dynamic model for optimization of costs and benefits of smart...

  • Dynamic model for optimization of costs and benefits of smart metering

  • Backgrounds for dynamic modelling of smart meter deploymentIntroduction to the model

  • Split incentive: investments by metering operator provides benefits reaped by consumersProjected capital and operational expenses exceed the remuneration for metering services in most cases (emphasis on cost reduction of smart metering)Most calculations are based on now or never and all or nothing scenarios

    Calculations are based on snapshot whereas implementation and deployment take place in dynamic environment

  • Current models are based on Incremental innovation Technical developments enable semi-radical innovation

    Identical business modelChanged business modelIdentical technologyIncremental innovationSemi-radical innovationChanged technologySemi-radical innovationRadical innovation

  • Include strategic fit adjusted to local parameters and legal framework (including remuneration for regulated services)Including semi-radical innovation based on a technology roadmap with 10 year horizonInclude appropriateness of communication technologies (Quality of service and costs)Include external costs (i.e. CO2 reduction)

  • Regulatory framework determines boundaries of strategic fitStrategic fit itself includes:Future proofInteroperabilityNumber of suppliersStandardsGeographical applicabilityWeights assigned to the various factors determine the strategic fit.

  • - 20102010 - 20132013 - 2020Distributed generation

    Domestic energy savingsPlug in vehicles

    Distribution automationFlexible tariffsReal-time pricingFraud detectionImproved billingSecurity of supplySustainabilityImproved competitionSelected functionality determines quality of service for communication technologyTiming of deployment determines cost for communication

  • *

    Legend

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    Mobitex (1G)GPRS (2,5G)UMTS (3G)LTE (4G)WiMAX (4G)SMSMeshed RF20092010201120122013201420152016201720182019

  • Average CO2 per dwelling in EU is about 3 tons annually (with significant variations accross EU)Based on EUR 17 / ton this represents a value of over EUR 50,- annuallyWith projected CO2 reduction of 20 % the benefits add up to over EUR 10,- annually per dwellingHow can smart meters contribute to reaping these potential benefits?

  • CO2 abatement at the demand side is cost effective providing opportunities for smart meteringDiagram used with kind permission of McKinsey and company

  • Direct savings to consumer (reduced energy bill due to savings)CO2 benefits to enabling technology (smart meters)Meter operators should be allocated tradable CO2 certificates for abatement facilitated by them

  • Hans Vrinds ([email protected])Bart Droppers ([email protected])

    Odd but true: most business cases predict negative results and still smart meters are rolled out. As one representative from a utility regulator stated: I you decide to have a new kitchen installed you dont calculate a business case for it, do you?

    Most cost benefit analyses that have positive results are influenced by single variable: energy savings by domestic consumers. The fact whether a business case has a positive or negative value can be manipulated by increasing or decreasing the projected energy savings. The energy savings however are not beneficial to the companies that invest in the facilitation of the savings.*Sometime back (when working for Kema) I was involved in number of cost/benefit analyses. One was conducted for the Min of Economic Affairs in the Netherlands. During the process it turned out that the four major grid operators could not come to consensus on the way to calculate costs and benefits. The final report presented average values whereas significant variations in costs and benefits were reported by the grid operators. It turned out that a single model for costs and benefits could not be applied for these companies.*Differentiate in selection of functionality and timing of deployment (departure from now or never scenario)**