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understanding both sides of the meter business models and customer benefits in the smart world ISSUE 1: SMART GRIDS
2. P AGE 2 | | Editorialfrom the editor Dear Readers, Welcome to pathway, our new customer magazine. We are living through a time of revolutionary change in the way we generate and distribute energy. In this first issue of pathway, we take a closer look at what this means for our customers in the energy industry and for the consumers they serve. We explore business models and customer benefits of the smart world and evaluate the progress of different countries in the EMEA region. At Landis+Gyr, we believe that the introduction of smart metering and the development of smart grids represent more than just an energy policy development or a phenomenon particular to the energy industry. Its the foundation for the sustainable world of the future. To build a sustainable world, we have to start looking at smart metering and the smart grid as building blocks for Smart Communities, i.e. comprehensive urban systems able to maintain and increase the level of comfort for its inhabitants while significantly cutting energy consumption. This year, Landis+Gyr became part of the Toshiba Group. Our new parent company has devoted an entire division to Smart Communities. With our wealth of knowledge and experience when it comes to smart metering and smart grids, we will become an important platform within the Toshiba Group. With Toshiba behind us, we are set to become even more effective at completing our mission: helping the world anagem energy better. Jon Stretch Executive Vice President EMEA, Landis+Gyr 3. contentsManagement and Societylarge-scale projects more than just logistical challenges18Reportsregulation vs. the market: two nordic tales 6a blueprint for change16power with brains 24Strategysmart business models 10customers taking control14interview: rules for the grid 151,800.000.0Facts & Figures00.000,00 smart figures 41,800,000,000,0 smart grids in a nutshell 26 4. 1.8P AGE 4 | | F ACTS & F IGURES EURELECTRIC (Union of the Electricity Industry) estimates: the sector needs to invest 1.8 trillion between now and 2030 to replace aging plants, develop smart grids, meet surging demand and deliver on environmental targets. 1,800,000,0Pike Research says: almost 3.5% of the worlds approximately 1.3 billion electricity meters canbe considered smart, and this number is set to grow to over 18% by 2015 SAP predicts: smartgrids will require the storage and processing in real-time of up to 100 times the volume of data compa-red with todays electricity systems The European Commission reports: where smartmeters have been installed, consumers have reduced their energy consumption by as much as 10%.The deployment of information and communication technology could achieve efficiency gains of up to40% in electricity generation. Pike Research estimates: by 2015, annual worldwide smart meter 5. 8000 00,000.00revenues will increase to over 2.8 billion The European Commission informs: up to now the low-carbon energy industry has produced 1.4 million jobs, and this figure could double by 2020 if Europe makesthe necessary investment decisions Pike Research forecasts: shipments of over 200 million smartmeters between 2009 and 2015 European Commission Predicts: demand for electricity will grow by38% through 2030 Eurelectric (Union of the Electricity Industry) ESTIMATES: the sectorneeds to invest 1.8 trillion between now and 2030 to replace aging plants, develop smart grids, meet surgingdemand and deliver on environmental targets. 6. P AGE 6 || ReportSmart meters in remote areas: just imagine running a monthly reading by a meter man. 7. regulation vs. the market:two nordic talesThe Scandinavian countries are among the European early adopters of smart metering and smart gridtechnology. What can the rest of the region learn from the Scandinavian experience?The factors driving the deployment of smart technologyduring the final 18 months of the period betweendiffer from country to country. A feature common to 2003 and 2009.most is the need to integrate energy from renewablesources, but some variations remain due to ifferencesd Challenging vendorsin generation structure.DSOs proceeded cautiously and allowed themselves Sweden became EuropesAccordingly, there is no such thing as a omogenoush ample time to plan the projects. For vendors likefirst country to achieve 100%Scandinavian experience. The countries in the regionLandis+Gyr, this strategy translated into a considerable penetration for smart meters.are as diverse in terms of suppliers, markets and regu- challenge: the deployment of a large number of smartlation as the rest of Europe: a closer look at Sweden meters to a tight deadline. In one example, Landis+Gyr,and Denmark highlights this.the undisputed market leader in Scandinavia, wasthe partner of choice for E.ON Elnt Sverige to installThe regulation-driven rollout 39 0,000 eters in remote rural areas. The catch the mjob had to be completed within a year. (See specialSweden started liberalizing its energy market in thereport on page 9.)1990s, and together with Norway created the com-mon Nordic power market area in 1996. The electricity Sweden, among the top users of electric energyindustry of Scandinavias largest and most populous in urope, became the first European country toEcountry consists of local, national and international achieve 100 percent penetration for smart electricityplayers. The majority of the countrys 158 electricitymeters. According to schedule, the last legacy devicesdistribution system operators are local businesses. were replaced in June 2009. The Swedish story is anThe three big players E.ON Sverige, Fortum andexample of a successful regulation-driven rollout understate-owned Vattenfall operate distribution networksfully liberalized market conditions.alongside a high number of local energy companies,which mostly belong to municipalities. E.ON, Fortum The Danish Energy marketand Vattenfall serve very diverse supply areas inSweden. More than 60% of E.ONs 1 million networkDenmark took longer to implement the EU irectivesdcustomers are concentrated in the southern part ofon the liberalization of the energy market. FullSweden. implementation took effect in 2003, when all lectricityecustomers became eligible to choose their own sup-In 2003, the Swedish government announced thatpliers. Denmark was also the last Nordic country tomonthly readings of all electricity meters would be join the Nord Pool power exchange in 2000. Mostrequired by 2009. Although there were some earlyDanish utilities are multi-utilities, supplying gas, heat,adopters, most Distribution System Operators (DSOs) water, and electricity.waited as long as possible to upgrade their meters. Atthe beginning of 2008 only 1.5 million of the countrys There are nearly 100 electricity DSOs in Denmark,approximately 5.1 million residential meters had been operating at the local or regional level. Denmarkreplaced. About 70% of the new meters were installed is different from the rest of Europe because the 8. P AGE 8 || Report DSOs are predominantly cooperatives owned by themarket legislation in Denmark now prevents DSOs customers. The exception to the rule is state-owned from recouping their costs for new metering through DONG Energy, which is also the largest with 970,000 higher network fees. In this respect, Denmark does customers, i.e. a market share of almost 30%. provide an interesting lesson for the rest of Europe, proving that there is a solid business case for rolling The Winds of Change out of smart technology without regulatory pressure. According to figures from consultancy Berg Insight, Unlike other Scandinavian countries, Denmark doesntpresently 1,650,000 smart meters have been deployed have a lot of hydroelectric power. However, it does in Scandinavias second-largest country. This equates have access to offshore deposits of gas and oil in theto almost half the 3.3 million electricity customers in North Sea. DONG exploits these resources. Denmark Denmark. is also one of the worlds most advanced developers Scandinavia beautiful, picturesque, and a of wind power technology, which already accounts forObviously, there is a compelling argument in favor ofhotspot for smart metering (above). almost 20% of Danish power consumption.smart technology for DSOs who want to improve ef- ficiency and customer service. Nevertheless, Finland One of the most remarkable differences betweenand Norway have chosen a regulation-driven rollout, Denmark and its neighbours is the fact that Danishand will require smart meters for all electricity custom- power consumption per household is considerably ers by 2014 and 2016 respectively. lower than in the rest of the region. Danish households consume on average 3,400 kWh, less than half of the Each to his own average consumption of a Swedish household. Part of the reason for this discrepancy can be attributed to The two tales from the North, different as they are, Danish energy taxes, the highest in the EU, accountingsend one strong message: there is no one-size-fits-all for over 50% of the retail price.approach when it comes to the deployment of smart technology. The Danish example shows that there The market-driven rollout is a business case for full-scale rollouts by DSOs, provided they are the customers default etering m Another marked difference between Denmark and operator. However, like Sweden, most of Europe has the rest of Europe is the fact that the countrys regu- chosen to go down the path of regulation. The Danish lators rejected a mandatory rollout of smart meters.and Swedish experiences show that a smart business The government decided against a regulation-drivencase can be enough, but regulation-driven rollouts are roll out for smart meters in March 2001, stating that effective and the more common choice in Europe. the expected cost of around 200 per household was unjustifiable. Going a step further, new energy 9. P AGE 9 | | Reportcase study: e.on elnt sverigeGrantrskliden, Sweden 32 degrees below zero. A snowmobile is moving slowly through the white landscape, heading towards a hugelake, completely covered by ice so thick it seems black. A man gets out of the snowmobile, the bright red of his arctic gear reminiscent of anoversized drop of blood in the snow . His face covered by a mask, carrying a black attach case, he walks onto the ice to board the hovercraftwhich has been waiting for him. The hovercrafts engine is fired up, the lights go on and the final part of the trip is underway.What sounds like a scene from a James Bond movie,January 2008 we had 45 weeks to install the meters,was just a normal working day for one of the 250 if you discount holidays and so forth. That means wespecialists who installed smart meters for Landis+Gyrhad to install an average of 8,900 meters a week, orin Sweden. E.ON contracted Landis+Gyr to install and 1,800 a day. Our top score was a week in which wemanage 390,000 smart meters. The contract included installed 12,000 meters, says Hans Alesund.some of the logistically most challenging areas ofSweden. From 1 July, 2009, new legislation obliged all 250 specialists worked full time for a year, a fleet ofSwedish utilities to read their meters monthly and bill90 cars and some snowmobiles were purchasedtheir customers on real consumption. It is impossibleand, yes, they did use hovercrafts, too. There is anto use meter men to do this, especially in the north archipelago on which some of E.ON customer live. Itsof Sweden where the population density is very low.not connected to the mainland by roads or bridges. Normally, you get there by boat, but the ice madeWhen the going gets toughthis impossible in winter. So we hired a hovercraft, E.ON had a very clear idea complete with crew, to install our meters.of what they wanted: it wasWhen we got the contract, I knew it would be tough.important to them to useBut I also knew that we could do it and I was right,Getting the job done products with a proven tracksays a proud Hans Alesund, CEO Landis+Gyr weden. Srecord, they wanted field-testedLandis+Gyr won the 100 million contract in JuneTimely installation of the meters was just half themeters, expert installation and2007 and used the rest of the year to run intensivebattle, however. The IT side of things was no small cutting edge software from onetests for the final rollout. That left just one year for challenge, either, explains Alesund. Imagine a supplier. They also wanted adeploying almost 400,000 meters, some of them in a distributed network with almost 400,000 units in the company with a strong localregion where the preferred means of transportation isfield that have to send their information to a centralpresence.a snowmobile. I think the figures say it all starting indatabase. Its a long way between the meter and your Hans Alesund, bill, believe me, jokes Alesund. In the end all units did CEO Landis+Gyr Sweden communicate with the central IT system running on Landis+Gyrs Gridstream AIM. The Gridstream AIM is a fully integrated Advanced Metering Management software. With the end of the installation process, our collaboration with E.ON hasnt ended by any means. We have a contract to provide meter reading services until at least 2013. Hans Alesund and his team got the job done, met the deadline and delivered the complete solution to E.ON at the agreed time. The integrated solution that Landis+Gyr handed over to their customer was vast in its scope, comprehensive in its technology offering, and thorough in its testing. I want to stress how helpful everybody at E.ON has been: we couldnt have done it without them, Alesund adds. It was really more than just the usual relationship between customer and supplier. Its a relationship that will continue forLandis+Gyr does whatever it takes to install the smart meters at the a while yet. customers home even if it means hiring a hovercraft. 10. P AGE 1 0 | | S t r at e g y 11. smart business modelsSmart metering and the smart grid are the future of energy management. Driven by environmentaland political concerns, the energy-turnaround creates exciting new business opportunities andbenefits, for providers, customers and network operators alike.Its time to smarten up the business model, to make The information provided by an advanced metering sure that being in the energy business of tomorrow is system can improve customer service and will eventu-lucrative as well as sustainable. A report prepared byally lead to a broader range of tariffs. Its the equiva-the consultancy Accenture for the World Economiclent of your PC talking to your printer, or several PCsForum sums it up like this: Utilities should considertalking back to one server to listen to your iTunes,strategies for transitioning from commodity service Steve Cunningham, CEO Landis+Gyr UK and Ireland,provision to a broader set of consumer value-addedsaid in an interview with Bloomberg. In the future,services early in the planning process.all your devices will know how to talk to the meter toknow when the best tariff is available.BENEFITS For Retailers and SuppliersA wealth of informationThere are numerous examples on how transparency All of this is just the beginning of a fundamental changeUtilities should considerand information create improved services and enhancein the way energy providers and energy customers strategies for transitioning fromcustomer relationships. E.ON Germany, for example,interact with each other. Smart meters will play a commodity service provisionhas gone live with the Energie Navi, a service whichcrucial role in building customer intimacy. The idea to a broader set of consumerallows customers to check their energy consumptionbehind this concept is to create a virtuous cycle, invalue-added services early in thein real time. Customers who choose the service arewhich the supplier gets to know the end-customer planning process.provided with a smart meter and can access the in-and is able to offer an optimal solution that goesformation via smartphones or online. This premium beyond the current one-size-fits-all approach. In theAccenture report for the Worldservice comes with a slightly higher price tag than the Business-To-Business market this has been standard Economic Forumconventional offering.for years and we will now see a similar developmentin the Business-To-Consumer market.British Gas in the UK has taken a different approach.The company has introduced EnergySmart. While Another promising development is the advance ofallowing customers to track their energy consumptionprepaid metering. Similar to prepaid mobile telephony,with an energy monitor, and providing an online portalprepaid metering allows more people access to theas well, Energy Smart is still based on conventionalgrid and guarantees revenue for suppliers at themetering. Customers must submit their monthly meter same time. The deployment of smart meters able toreading online. Energy Smart uses a different pric- switch between credit and prepayment is especiallying strategy and is 4% cheaper than the standard promising, since it minimizes site visits and offers atariff. Energy Smart is obviously a way to preparevariety of ways for customers to add credit to theircustomers for the advent of truly smart technology. meter (see special report on prepaid metering onThe British government and British Gas as one of thepage 14).leading provider in the UK have made it clear that theyare firmly committed to the deployment of smart me- From turbine to toasterters. The Department of Energy and Climate Change One of the key drivers for the deployment of smartannounced in March 2011 that the country aims togrids is the growing need to integrate intermittent re-roll out 53 million smart meters in the UKs 30 million newables. There is potential to turn this into a win-winhomes and businesses by 2020. British Gas will installproposition for energy providers and customers; byover 1 million of Landis+Gyrs dual fuel electricityoffering clean energy to progressively more consciousand gas smart meters in the UKs first large-scaleconsumers at premium rates they simultaneously fulfillrollout. The project is already under way and 20,000their responsibility towards society. A smart grid willmeters will be in place by January 2012.allow a turbine to toaster delivery of energy on 12. P AGE 1 2 | | S t r at e g ya broad scale. The smart grid allows full control of Climate and environmental concerns have arrived inthe energy flow, from generation to delivery into thethe mainstream: the use of solar panels and otherend customers home, i.e. from turbine to toaster.forms of microgeneration are well on their way toUsing smart grids, providers can create a premiumbecoming a mass market. The benefit of becoming asegment of energy and guarantee that it is generated prosumer is twofold: people can save money on theirby renewable sources.energy bills while making a contribution to building a sustainable society.BENEFITS For Customers Talking to the gridImagine the following scenario: you get your monthly Conscious consumers, aware that energy is no longerphone bill, but it isnt based on the calls you actually the cheap and abundant commodity it once was, mightmade. Rather, its based on an educated guess on eventually be willing to delegate a level of control overthe part of your provider. Maybe its more, maybe its their smart homes to their energy providers.less youll find out by the end of the year. That maynot sound attractive, but its the way in which energy The success of the HAN, (Home Area Network),customers have been billed ever since the electrifica- i ncorporating any number of smart appliancestion of households.c ontrolled by a smart grid, depends on consumer acceptance. According to the Pike Report, the juryDeployment of smart technology means fundamental is still out on the HAN. At the moment, a number ofchange. For the first time, customers will receive bills pilot projects are underway in Europe and the Unitedbased on actual rather than estimated consumption. States to gauge consumer response.A recent report by consultancy Berg Insight has thisto say about the topic: In the new competitive energy Integrating the prosumermarket environment where customer retention is a top An intelligent distribution network is essential for thepriority, there will hardly be room for estimated billsintegration of prosumers. This expression, a port-in the longer run.manteau word combining the terms consumer and producer, refers to customers who will also feedThe consumers awakening electricity into the grid.This, of course, is just the beginning of what ar eport by the consultancy Pike Research calls the Obvious examples of prosumers are institutions orconsumers awakening. Consumers will be emindividuals generating electricity with rooftop solarpowered in a number of ways: they will be considerably panels. Energy providers can act as retailers for themore aware of their energy spending and consump- necessary hardware and as consultants for consumerstion, they will ask for more choice and tailor-madeinterested in becoming prosumers. A comprehensivetariffs and they will start relating differently to energy smart grid will also allow providers to manage energysuppliers and retailers. more efficiently through enhanced demand response. Conscious energy customers will be empowered toAt the moment, contact between retailers and shift their use away from peak times, or move it tocustomers is almost exclusively limited to movingtimes when energy from renewables is available.house and complaints about bills. Under the newframework, customers will start looking to suppliers BENEFITS For Network Operatorsand retailers as partners and consultants to help themoptimize their use of energy.Active network management is a popular topic among network operators. A number of pilot projects haveAnother interesting option for both individual shown that the use of smart technology improves gridand institutional customers such as schools andreliability, minimizes losses and allows for better loaduniversities is the possibility of becoming prosumers. forecast and planning. 13. Hydropower: large-scale and sustainable.On the way to becoming a prosumer...To give a more concrete example: a smart grid isHowever, simply looking at the conventional businessable to measure wind intensity and air temperature. case provides too limited a perspective. Governments,Strong wind and low temperatures can act as a natural businesses and citizens will need to find their rolescooling mechanism for instance, allowing a higher loadas participants of the smart revolution.to be sent through the line. Based on this information,it can make a decision to increase or decrease theThe Accenture report offers the following recom-load of a particular part of the grid. This way, the grid mendation: It is recommended that utilities adopt acan be used more efficiently and material failure can more holistic approach to business case building. Bybe avoided, reducing the operators costs.widening this value proposition, they will build theirregulatory case and demonstrate to their consumersThe large-scale deployment of smart grid tech-the broader benefits cases, which will be realizednology will boost the networks asset value over time.and llow network operators to shift their main-atenance strategy. Presently, network operatorsAligning incentivesare ostly forced to employ a run to failure strategy.m Adopting a more holistic business model is asiereR unning to failure to fix a dumb grid means thesaid than done, however. The onus is on govern-network operator, alerted by a customer calling toments and regulators to create more compre-report a problem, responds to the alert by sendinghensive frameworks and align incentives for eachout a repair crew. Smart grids would allow them top articipant in the energy value chain. One ossibilitypshift to preventive maintenance strategies. might be implementing a regime similar to thes uccessful emissions trading scheme that enalizes pExperts assert that a smart grid will also providewasteful, conventional energy management andhigher quality power. Outages and power quality delivery while rewarding smart, modernized ways ofissues cost suppliers and retailers millions of Euros doing it.every year smart grids guarantee more stable power,reduce downtime and put an end to such high losses. Another important part of the social return will bethe creation of secure, well-paid and highly skilledMaximizing efficiency jobs in the energy sector. This is of special interestThe state of the grid differs greatly from countryto DSOs, vendors and technology companies in theto country, but investment in maintenance is adeveloped world who are currently at the forefront ofnecessity everywhere. Investment in the smart gridthe development. They will set benchmarks and haveallows operators to get the most out of their nvestment,i the chance to export their hardware and expertise toby efficiently utilizing the existing infrastructures. In the rest of the world.the words of the consultants from Berg Insight: Har-monizing local distribution with interregional energy Every region and country will have to find an indi-flows and transmission traffic improves the use ofvidual solution, which balances these two key inter-existing grid assets and reduces grid congestion andests: sustainable, affordable and efficient energy forbottlenecks. customers and a viable business model for providersand network operators.The Social ReturnComprehensive deployment of smart grid tech-nologies means competitive advantages for the re-gions and even nations that move first. Demanding,environmentally conscious consumers will put pressureon businesses to invest in places that can guaranteea sustainable, efficient use of energy. 14. P AGE 1 4 || S t r at e g ypay-as-you-go:customers aking controltAn exciting market to watch out for is prepaid metering. Traditionally a solution for customers of smallmeans, there is a good chance that this is about to change with large-scale rollouts of smart meters. In the recent report from Berg Insight, the authors African continent, for example, prepaid has been the conclude that: Another possibility with smart me- technology of choice for the electrification of house- tering is to offer prepaid energy services, which has holds. While prepayment metering is offered to a proven to be popular not only among customers broad spectrum of consumers, many customers living of small means, but also in the significant group ofin remote, rural places might not have stable incomes consumers who generally feel more comfortable with or even a postal address to send the electricity bill to. paying in advance.There are a number of factors driving this development. Most importantly, many The prepayment solution allows them to purchase customers have become used to pay-as-you-go prepayment tokens within their budget and only pay mobile phone credit and regard it as an efficient way for what they use, explains Dave Tarr, Marketing & of cost control. Another reason is related to the shift Product Manager for Landis+Gyr in South Africa. of employment patterns more and more jobs are Prepaid metering connects them to the grid while pro- becoming globalized and project-based.tecting the revenue of retailers and suppliers. In SouthModern consumers have a different perspectiveAfrica, Landis+Gyr pioneered the Split Prepayment on pay-as-you-go No red tape just powerMeter solution, with a keypad to add credit inside the customers home and the actual meters installed For the modern, nomadic employee, who needs to outside. This gives providers access for mainte- spend two months in one country and three monthsnance and reduces the likelihood of energy theft and in another, long-term contracts are cumbersome andtampering with the meter, Tarr comments. impractical. Prepaid solutions, especially ones basedIt makes senseon smart metering technology, are the ideal solution. A broader trend if we are talking about The same is true for student housing and any kind ofcustomer awareness and environment in which tenants change frequently. Smart The current split prepayment meters used in Southcontrol, there is nothing like meters with communication capacities make buying Africa arent fully-fledged smart meters, but in or- seeing how much credit youelectricity as easy as topping up mobile phone credit. der to provide flexibility to the energy provider, the have left on your meter Eventually, you will be able to buy electricity creditmeters supplied by Landis+Gyr in Africa already have using the ATM, just like you do it for your mobile, says the capacity to switch between prepaid and credit- Steve Cunningham, Steve Cunningham, CEO Landis+Gyr UK and Ireland. metering mode. In addition, Landis+Gyr equipped themCEO Landis+Gyr UK and Ireland with remote access capabilities. Utilities can make All the 30 million meters to be deployed in Britain use of two-way communication with the prepayment by 2020 will have the capacity to switch betweenmeter, they can monitor the condition of the meter, be prepaid and credit-metering. The UK is currently alerted to tampering and fraud and look at consumption the only European country in which prepaid meter- patterns, for example, says Tarr. ing, based on conventional metering infrastructure, is already widespread, with an estimated 13% of While being crucial to the electrification of households, electricity customers making use of the service. Cus- prepaid metering in South Africa is experiencing the tomer associations in the UK estimate that with smart same trends towards broadening the target group. technology, the prepaid segment will see some Tarr puts it like this: There is no doubt that the in- significant growth and we might be looking at 40% creased awareness of what they are consuming and rather than 13% in the medium term. It makes sense the isibility of their remaining energy on the In-housev if we are talking about customer awareness and display creates a more energy-conscious consumer. control, theres nothing like seeing how much credit ustomers from all segments like to have control. They C you have left on your meter, Cunningham points out. dont want to receive estimated bills for times when they were on holiday, to give just one example. With Electrifying everybodysmart meters, prepaid metering becomes a win-win proposition. It secures the revenue of suppliers and Outside Europe, prepaid metering has been retailers while giving customers full cost control and implemented for a different set of reasons. On theeasy access to the grid. 15. P AGE 1 5 || Interviewrules for the gridnetwork operators be able to recover via in- examination of smart metering has to look atcreased grid-use fees, i.e. rollover to the endit as a comprehensive whole.consumers. Some say that they should be ableto cover the entire cost of the rollout, including Where is public policy in regard to smartthe preceding pilot projects, but the consumer metering and smart grids heading beyond thegroups say that the network operators will also3rd Energy Package?derive benefits from smart metering invest- Interview with John Harris,ments, so the consumers should not have to One of the flaws in the 3 rd Energy Package VP, Head of Governmental pay for the whole thing. was that it never defined smart metering, or intelligent metering systems as the legal Affairs and CommunicationsHow do you assess the situation? text calls it. In the meantime, the focus of EMEA, Landis+Gyrpolicy-making has shifted from smart meter- Landis+Gyr has been saying all along that ing to smart grids and to the energy fficiency ethe beauty of smart metering lies in the facta spects. Member States could implementthat the benefits are distributed all along thewhatever they wanted and call it smartJohn, as Head of Governmental affairs, youvalue chain: from the end consumers, who get m etering. The smart metering tandardizationsare often in Brussels and in close contact with accurate bills and detailed information on work among the European Standardizationpolicy makers and regulators. Can you bring energy consumption and costs to theOrganizations, CEN, CENELEC, and ETSI hasus up to speed on where we are regarding adistribution system operator, who finally candone much to alleviate this by their listing ofcomprehensive regulatory framework for thesee into the last blind mile between the sub-additional functionalities for smart metering.rollout of smart metering technology? station and the point of consumption, therebyFurthermore, the smart grids communicationoptimizing network operation and investmentfrom the EU I mentioned earlier, as well as theThe 3rd Energy Package provides a good basisdecisions. The transmission system operatorproposal for a new Energy Efficiency Directivefor a European Union policy framework onbenefits by increased information from the the Commission published in June, make itsmart metering. It foresees a ten-year roll-distribution grid and even generation is helpedclear that a smart metering system must haveout of smart metering in the Member States especially as we move to increased renewa- two-way communication and should facilitatewith 80% of households being equipped with bles and microgeneration. And, of course,energy efficiency within the home. This as-smart meters by 2020 contingent uponsociety as a whole benefits through a more pect will become even more important as wean economic assessment in the individualmodern and efficient energy supply system. move beyond smart metering to developingMember States, should they choose to conductThe problem is that the benefits are longer term smart grids.one. The Member States are in the courseand distributed, whereas the costs are usuallyof transposing those directives into national short term and concentrated. Therefore, there What do you mean when you saylaw, and conducting their economic analyses.should be a fair distribution of costs, which will beyond smart metering?Some are moving faster, such as Finland,probably include grid-use fees.which mandated that 80% of end consumersWe are moving toward a dynamic energybe equipped with smart meters by the end of Besides the question of how the investmentssupply system, with multi-direction energy2013, and others are moving more cautiously.will be paid for, what other contentious issuesand information flowsa smart grid. ThereNonetheless, in its Communication on Smartare there? is going to be increased need for informa-Grids, published in April of this year, the Euro-tion and control in the distribution network.pean Commission recognizes that under the Sometimes I think the public debate is too The transmission system operators are notcurrent regulatory regime, investments in smart narrowly focused: what is the energy savings going to be able to do all the things demandedmetering and smart grids technologies are not potential for the final consumer or what willof them politically without some sort ofbeing made quickly enough, and there may be be the cost-benefit-analysis for the distri- congestion management at the distributiona need for adjustments in the existing regula-bution system operator? The discretionarylevel. That implies knowing what is happeningtory framework. consumption of the final consumer will varyat the point of consumption. This is wherefrom place to place, and the French regulator, smart metering really shines, its where theWhat are the main regulatory challenges for CRE, has said that any economic assess-smart grid meets the end consumer and thesmart metering and smart grids investments? ment of smart metering that focuses exclu- smart home. The European regulators aresively on the distribution system operator willalready giving some thought to this issue andNot surprisingly, there are different views whenbe distorted. All of the actors in the value looking at the take-off of a demand responseit comes to who should pay for what. In other chain and society as a whole have to be tak- market with smart metering.words, how much of the investment shoulden into consideration. As I said earlier, any 16. P AGE 1 6 ||Reportbritish gas: a blueprint for changeWith the decision for a regulation-driven rollout of smart meters in the whole country by 2019, the UKhas become one of the European hotspots for smart metering. British Gas, the largest retailer in theUK, has chosen Landis+Gyr to deploy over a million dual fuel electricity and gas smart meters. Thisearly move will serve as a blueprint for subsequent rollouts. The British Market in Brief The British government is taking a proactive stance on combating climate change and regards smart metering as an important part of its policy. The The foundation phase rollout happens in the environment of theofficial position is neatly summarized on the website of the Department most competitive energy market in Europe. Six major players and of Energy and Climate Change: Smart meters will play an important many smaller ones compete in the electricity and gas supply markets role in our transition to a low-carbon economy. They will help us meet that have a combined value of more than 29 billion. British Gas, asome of the long-term challenges we face in ensuring Great Britain has subsidiary of Centrica is the market leader in both segments. Britain an affordable, secure and sustainable energy supply. was the first European country to liberalize its energy markets in the 1990s. Unlike in most other European countries, the domestic energy The cooperation between British Gas and Landis+Gyr is of particular metering market in the UK has been opened interest, because it will precede the massive effort necessary to install up for competition. 53 million smart meters for 30 million homes and businesses by the end of this decade. As part of the development, Landis+Gyr will share detailsSupplier changes are very common in of its smart metering system, allowing UK businesses a fast track to the Britain, happening at a rate of about 100,000 creation of new and innovative solutions aimed at consumers, suppliers a week. Thats certainly a significant number,and utilities alike. but it still takes 28 days to change supplier in a conventional metering environment. Pioneering standards This time will come down significantly in the smart world.Together with our customer British Gas, we are part of what is called Steve Cunningham, CEO Landis+Gyr UK and Ireland the foundation phase. The experiences of this phase will inform the way in 17. which full-scale deployment will be handled. We will pioneer the technical means that the 1 million meters will be deployed all over the country,and practical standards that we hope will see every home and businessexposing the technology to tough, real-life conditions. Another challengein the country switch to smart metering within the next decade, explainsLandis+Gyr has mastered is the integration of products and services fromSteve Cunningham, CEO Landis+Gyr UK and Ireland. a variety of providers such as SAP and Vodafone into a comprehensive package. You can imagine it like going to the supermarket because youAnother reason for British Gas and Landis+Gyr to choose an openwant to bake a cake. Buying the ingredients is no problem, baking thedevelopment is the ambition to integrate existing standards wherever cake is the tricky part, is the analogy Cunningham uses.possible. The intention is to encourage the faster development of arange of smart household appliances, from intelligent dishwashers to With their cooperation on the first commercial-scale deployment ofself-regulating heating controls.smart metering technology and their commitment to creating an open, practical blueprint for even larger-scale deployment in Europes thirdBaking the cakelargest economy, UK market leader British Gas and global industry leader Landis+Gyr are making an important contribution to building theLandis+Gyr started installing the first devices in August 2011. Wesustainable world of tomorrow.are excited because it really is a high-end package that we are de-livering. The equipments level of functionality is cutting-edge andtogether with our touchscreen In-home displays will make for a wholenew customer experience, says Cunningham. The energy efficiencyproject could save consumers more than 223 million in energy bills.The British Gas project aims to be a real test for the technology, which 18. P AGE 1 8 | | Management and Society large-scale projects more than just logistical challenges The green revolution, the energy turnaround, the second industrial revo- lution: whatever you want to call it, its certainly a large-scale project. Renewable energy and the smart grid are its crucial components.How to handle a project of such dimensions success-fully - thats the million dollar question. Its a questionthat has no single answer. There is no blueprint, nofive-year plan to relieve the uncertainty. A look backto the past doesnt provide a stable point of reference,because the technological progress of the last twocenturies has no precedent. The speed of innovationis not slowing down. On the contrary, individuals,companies and societies have to adjust themselvesto lifelong learning and constant innovation.The first industrial revolution was asynchronous, thecurrent, second one isnt. Its happening everywhereand its happening now. Its certainly not happening atthe same speed, but every country is facing the sameproblem and in principle has access to the same levelof technology.The real challenges will have According to a study by consultancy Energynautics, to be faced in the emerging6,000 kilometers of new transmission lines have to beeconomies, with their ever- deployed in Europe and 10,000 kilometers of existinggrowing demand for powertransmission and distribution lines will have to beequipped with smart technology. But neither Europenor the United States constitute the real challenge. Thereal challenges will have to be faced in the emergingeconomies, with their ever-growing demand for power.The distance to the moonSmart meters in the hundreds of millions will haveto be installed in China and India, for example. TheChinese power grid is currently made up of 1.18 mil-lion kilometers of old transmission lines that carryaround 3 million gigawatts of electricity throughout the 19. c ountry.To put things in perspective: the distance frommake-up of the human psyche. This is an importantthe earth to the moon is less than 500,000 kilometers. fact to keep in mind underneath all the lofty rhetoric of combating climate change and ensuring the survivalPower plants are the tireless hearts of industrial of the species. Self-interest lies at the heart of hu-societies, transmission and distribution lines are the man motivation. More than a century of evolutionaryveins and arteries and electrical energy is the life-blood biology and modern psychology prove this beyondof modern civilization. Mastering the challenge aheadreasonable doubt. In the best of all possible worlds, wewill take the best of human effort and ingenuity, its the can hope for the enlightened version of self-interest,infrastructural equivalent to an open-heart transplant.but it would be unwise to rely on it.The implications of this challenge are momentous andthe risks and opportunities that come with it are on This is true for all stakeholders, but especially importantthe same scale.for consumers and businesses. On the corporate side, the 21st century has seen the rise of corporate socialMore than smart logisticsresponsibility (CSR). Despite all criticism it has drawn CSR is a hopeful development. The forward-thinkingIts not enough, however, to focus on the logistical mission statements of the early adopters among theside of the problem. The challenge is formidable,energy providers are more than mere lip service.but it can be mastered. Companies like Landis+GyrThey are a case of enlightened self-interest, since anprove that every day. Meticulous planning, inclusion uninhabitable world is a bad place to do business.of all stakeholders in the decision-making process,working with the smartest people and using cutting Clever rules for a Smart Gridedge technology, are all part of the answer when itcomes to handling truly large-scale projects.Its up to the politicians and the regulators they appoint to create a framework which givesNevertheless, the time to face the really tough, e nergy companies an incentive to do their partthe social and political questions will come. Is a to make the vision a reality. The European Com-sustainable future compatible with the current mission is keenly aware of the problem andparadigm of economic growth? How can the goals ofstates in its latest report: At present, there is aeconomic growth for every society and prosperity for considerable gap between current and optimal invest-every household be framed in the light of sustainability?ment in Europe, which can only partly be explainedOn a more concrete level: how will it be possible to by the current economic downturn. Grid operatorsaccommodate the justified desire of people in Chinaand suppliers are expected to carry the main invest-and India to drive cars and use electrical appliancesment burden. However, unless a fair cost-sharingwithout accelerating climate change? model is developed and the right balance is struck between short-term investment costs and long-termThe human factor profits, the willingness of grid operators to under- take any substantial investment might be limited.In the midst of all this uncertainty and change there is Consumers, for their part, need to become moreone constant to hold on to: human nature, the basicconscious of the cost of energy and the way they 20. P AGE 2 0 | | Management and SocietyIn Europe more than 6,000 kilometers of new power lines have to be deployed. 21. P AGE 2 2 | | Management and Societyuse it. It is essential to educate consumers in an effec- power. I was not looking for something ecological,tive way that inspires them to take action. Behavioralworthy and a bit self-sacrificial: far from it, I wantedeconomics, pioneered by Danny Kahnemann and to create something exotic and desirable. SomethingAmos Tversky, provides some important insights. that would turn heads and challenge stereotypes heExperiments show that people are more interested in added. According to the companys website, Nemesisavoiding losses than in additional gains, for example.is faster than a V12 Ferrari, has done 0100mph in8.5 seconds and can reach 170mph.Meet NemesisTest-driving the futureSaving money and ukewarml The problem with spreading the message about goodwill wont be enough unwieldy topics like smart grids is that they are hard to One of the promising in developments in 2011 is the to ncentivize the significanti imagine, they provide little tangible, concrete rewards fact that manufacturers are rolling out enough electric changes in purchasing andto stimulate human desire. Sure, its nice to help thevehicles odels to be visible. In the US, GM, Nissan,m consumption patterns the smart e nvironment and save some money on the power bills,Mitsubishi, and Tesla are the most well known, butrevolution depends on but this is hardly the stuff dreams are made of. Saving there are more than 30 EV manufacturers worldwide.money and lukewarm goodwill wont be enough toincentivize the significant changes in purchasing and Just as important, a variety of recharging optionsconsumption patterns the smart revolution depends on. are reaching actual city streets. More consumersseem to be interested in giving EVs a road test thanCars, on the other hand, are the stuff that dreamsare interested in being test drivers of home energyare made of, especially in the developing world, butmanagement systems that may help them save moneynot only there. With electric vehicles, smart grids are but otherwise offer no personal payoff. Showing offfinally starting to speak the language that people un-the latest electric car in public has a more powerfulderstand: the language of cars. The kind of incentive appeal than optimizing the way we use energy at home.that prompts the necessary change might look morelike Nemesis, an electric supercar, than any number There is no single approach and no plan equally validof well-meaning brochures, educational videos and for a diverse, multi-polar, rapidly changing world. Anclimate initiatives.open, creative mind, and a willingness to listen to andto understand consumer behavior are the qualitiesDale Vince, the inventor of Nemesis, said in an interview needed to handle a project on the scale of the secondwith the BBC that he wanted to prove electric cars canindustrial revolution.be quick, beautiful, cheap and run entirely on wind 22. P AGE 2 4 || RE P ORT gridstream suite:power with brainsIn a time of revolutionary change for the utility industry, Landis+Gyr offers an intelligent solution thatc overs all the bases and sets a benchmark for the competition.The Gridstream Suite is a comprehensive, end- financial risk and allow the utilities to focus on theirto-end solution that comes in a modular format. core competencies.The combination of cutting-edge software andcommunication technology, underpinned by theOur solutions in actionproven, field-tested quality hardware of Landis+Gyrmeters, makes one stop shopping possible. The A number of Gridstream solutions are already inGridstream Suite is Landis+Gyrs contribution tocommercial use. In Sweden, E.ONs rollout of smartmake the global vision of smart grids a reality. At the meters in rural areas was realized by Landis+Gyr. Thesame time, it takes customer concerns seriously. I Gridstream software plays a crucial role in processingwant to emphasize that we have taken the greatest and managing the large amounts of data the meterscare to make Gridstream a future-safe investmentaccumulate. An example for a comprehensive, turnkeyFelipe de Montagut, Head of Solution Product Management EMEA,that enables smart grid explains Head of Solutionsolution is the contract with Finnish utility Kuopion Landis+Gyr Product Management Felipe de Montagut.Energia. Landis+Gyr will enable the migration ofK uopios entire customer base to smart metering byThe software is developed in an open architecture 2013. The deal comprises the delivery of 50,000 smartand can be easily upgraded. Gridstream customerselectricity meters, the smart metering softwarecan choose from the entire range of communication Gridstream AIM, as well as installation and projecttechnologies, i.e. GPRS, Ethernet, PLC and PSTN. management. The turnkey delivery includes a meterThe solution is interoperable both on the system andreading service agreement alid for a period of tenvdevice level. years. Landis+Gyr will rovide daily and hourly con- psumption data for the customer. Furthermore, theAn End-to-END solutionutility will receive regular reports on electricity qualityand network statusThe Gridstream solution is especially interesting forDNOs (Distribution Network Operators), who are look-READY TO MOVE FORWARDing for a fast and low-risk way to deploy smart gridtechnology, without having to deviate from their ownThe deployment of smart grid technology is a complexcompetencies. Big players have the financial resourcesissue which involves a large number of stakeholdersand the manpower to find individual solutions for thissays Felipe de Montagut. There are still of lot ofchallenge, but smaller players need a comprehensive challenges which need to be met, for example ansolution that is easy to implement. incentive scheme for the utilities and a robust regu-latory framework. At Landis+Gyr, we have done ourCustomers who choose Gridstream often operate homework and are ready to move forward and enablein competitive, deregulated markets. Gridstream smart grids with the Gridstream Suite.offers one-stop and turnkey solutions, which minimize 23. P AGE 2 6 || Fa c t s & F i g u r e ssmart grids in a nutshellwhat is a smart grid? A smart grid is an electricity network that can intelligently integrate the actions of all users connected to it generators, consumers and those that do both in order to efficiently deliver sustainable, economic and secure electricity supplies. A smart grid employs inno- vative products and services together with intelligent monitoring, control, communication, and self-healing technologies to: better facilitate the connection and operation of generators of all sizes and technologies Source*: European Technology allow consumers to play a part in optimizing the operation of the systemPlatform SmartGrids provide consumers with greater information and choice of supply Strategic DeploymentDocument (SDD) significantly reduce the environmental impact of the whole electricity supply systemfor Europes ElectricityNetworks of the Future deliver enhanced levels of reliability and security of supplywww.smartgrids.eu *Spelling partially modified Smart grids deployment must include not only technology, market and commercial c onsiderations, environmental impact, regulatory framework, standardization usage, ICT (Information & Communication Technology) and migration strategy but also societal r equirements and governmental edicts. the key challenges for smart grids Strengthening the grid ensuring that there is sufficient transmission capacityto interconnect energy resources, especially renewable resources, across Europe Moving offshore developing the most efficient connections for offshore wind farmsand for other marine technologies Developing decentralized architectures enabling smaller scale electricity supply systemsto operate harmoniously with the total system Communications delivering the communications infrastructure to allow potentiallymillions of parties to operate and trade in the single market Active demand side enabling all consumers, with or without their own generation, toplay an active role in the operation of the system Integrating intermittent generation finding the best ways of integrating intermittentgeneration including residential microgeneration Enhanced intelligence of generation, demand and most notably in the grid Capturing the benefits of distributed generation and storage Preparing for electric vehicles whereas smart grids must accommodate the needsof all consumers, electric vehicles are particularly emphasized due to their obile and mhighly dispersed character and possible massive deployment in the next years, whatwould yield a major challenge for the future electricity network 24. We welcome your feedback and comment:[email protected] is published by Landis+Gyr (Europe) AGTheilerstrasse 1, 6301 Zug, [email protected]:iStock.com; Graffizone (Cover, p.18)iStock.com; Kuzma (p.9)iStock.com; Catheline Yeulet (p.14)iStock.com; stockcam (p.16)fotolia.de; Antony McAulay (p.8)fotolia.de; Yauhen Suslo (p.22)photocase.de; phunk (p.3, p.20/21)photocase.de; daniel.schoenen (p.3, p.6)Ecotricity.co.uk; Nemesis (p.22)Additional Photos by Landis+GyrEditorial and Layout:Seidl PR & Marketing GmbH, 45239 Essen, Germany 25. Landis+Gyr (Europe) AGTheilerstrasse 1, 6301 Zug, [email protected]
