Smart Grids Deployment: A Regulatory Challanges and Opportunities Mariusz Swora (Ph.D.) The President of the Energy Regulatory Office in Poland gy g y ERRA Chairmen Meeting Tirana, Albania, October 7÷8 , 2010 Smart Grids Deployment: A Regulatory Challanges and Opportunities Ch ll d O ii Content (1): European Union’s objectives for 2020 and 2050 E U i ’ bj i f 2020 d 2050 / g ERGEG definition of Smart Grid/Metering The smart grid/metering environment Driving smarter grids: regulatory challenges Effects/benefits of smartness and potential output measures identified by ERGEG 2 Smart Grid Deployment: A Regulatory Challanges and Opportunities Ch ll d O ii Content (2): Outputbased regulation p p g Example of output incentive based regulation: reduction of distribution losses in Portugal RIIO : A new Ofgem approach to regulation Smart grid/metering deployment: Initiatives of the President of the ERO g y g Regulatory agreement – new idea in Poland 3 European Union’s important objectives for 2020 and 2050 European Union’s climate changes objectives for 2020 : European Union s climate changes objectives for 2020 : 20 % Reduction 20 % 20 % Reduction 20 % 20 % Savings in Greenhouse Renewables in Consumption i C i Gas Emissions Gas Emissions Share by Increase EnergyEfficiecy More ambitious objectives for 2050 More ambitious objectives for 2050 : Sustainability Security Competitivenes of Supply of Supply of To obtain all these objectives we need smarter grids/metering in the very near future. i h f 4 ERGEG s ERGEG’s1 definition of Smart Grids Smart Grid is an electricity network that can cost ffi i l integrate the b h i costefficiently i h behaviour and d actions of all users connected to it – generators, consumers and those that do both – in order to ensure economically efficient, sustainable power system with low losses and high levels of safety. quality and security of supply and safety. 2 Source: European Regulators Group for Electricity and Gas (ERGEG) , Source: European Regulators Group for Electricity and Gas (ERGEG) ”Position Paper on Smart Grids – ”Position Paper on Smart Grids – An ERGEG Public Consultation Paper” Ref. : E09EQS3004 Regulators should take the initiative to play a very important role as a key facilitators of smart grids/metering deployment. deployment 5 The smart grid/metering The smart grid/metering environment1 Source: P. Nabuurs, KEMA, presentation at CEER 1 Source: P Nabuurs KEMA presentation at CEER Workshop on Smart Grids 29th June 2009. 6 Driving smarter grids: key regulatory challenges k l h ll appriopriate balance between the scope of innovations, costefficient evolution of the network and customer interests facilitating evolution into the smarter grid directly b k l d d i i i i by market rules and determination minimum requirements and by efficient finacial rewards and penalties appropriate balance between position of all stakeholders and benefits of all grid users 7 Effects/benefits of smartness and Effects/benefits of smartness and potetial output measures identified by ERGEG2 (1) Eight classes of effects/benefits of smartness were identified by European Regulators Group for Electricity and Gas (ERGEG). for Electricity and Gas (ERGEG) Potential performance indicators and output measures for each effects/benefits were also listed by ERGEG. Source: ”PositionPaper on Smart Grids – ” ii id 2 Source: ”PositionPaper on Smart Grids – An ERGEG Public Consultation Paper” Ref. : E09EQS3004 8 Effects/benefits of smartness Effects/benefits of smartness and potetial output measures identified by ERGEG2 (2) Source: ”PositionPaper on Smart Grids – ” ii id 2 Source: ”PositionPaper on Smart Grids – An ERGEG Public Consultation Paper” Ref. : E09EQS3004 9 Effects/benefits of smartness Effects/benefits of smartness and potetial output measures identified by ERGEG2 (3) Source: ”PositionPaper on Smart Grids – ” ii id 2 Source: ”PositionPaper on Smart Grids – An ERGEG Public Consultation Paper” Ref. : E09EQS3004 10 Output p g Outputbased regulation A key principle is to concentrate on outputs and not on inputs of a given activity or service of the regulated company. Outputbased regulation can be realized by : O t tb d l ti b li d b direct regulation on a basis of minimum requirements for the determined set of parameters and/or outputbased incentive regulation providing financial rewards and penalties related to determined set of parameters benchmarking and comparative publication f ifi t t lt of company specific output results 11 Example of out Example of outbased incentive regulation: reduction of distribution losses in Portugal3 Source: R. Vailatti, CEER/ERGEG presentation 3 Source: R Vailatti CEER/ERGEG presentation at Florence Forum, Florence, 11th June 2010 12 RIIO: A new Ofgem approach to regulation Constraint on revenue set up front to ensure: • timely and efficient delivery • network companies remain financeable Revenue • balance costs paid by current and future consumers Deliver outputs efficiently over time with: = • transparency and predictability • focus on longer term, including with eight year control periods • rewards and penalties for output delivery performance and penalties for output Incentives • symmetric upfront efficiency incentive rate for all costs • use uncertainty mechanisms where add value for consumer + Technical and commercial innovation encouraged through: • core incentives in price control package • option of giving responsibility for delivery to third parties of giving for delivery to third parties Innovation • innovation stimulus gives support and ‘rewards’ for commercial innovation, building on LCN Fund + Outputs set out in licence Consumers know what they are paying for Outputs Incentives on network companies to deliver Outputs reflect enhanced engagement with stakeholders 13 Smart Grid/Metering Deployment : I ii i f h P id Initiatives of the President of the ERO Declaration concerning the introduction of smart metering into the Polish power system was signed in Warsaw on 3rd June 2009 by Presidents / Chairmen of: o 3 Ju e 009 by es de ts / C a e o Energy Regulatory Office, Consumers’ Federation, Polish Consumers’ Association,, The Polish National Energy Conservation Agency Consumers’ Forum for Electricity and Gas y ( , ) Many other bodies (administrative, academic and business) send access will. The Roadmap, conferences Smart grid/metering promotion – The Roadmap conferences and meetings Smart Metering Information Platform – information about events and conferences concerning smart grid/metering www.piio.pl www piio pl 14 Regulatory agreement: id i P l d new idea in Poland Act concerning smart metering deployment in some A t i t t i d l t i infrastructural sectors and prosument activity (outline of assumptions) were presented by the ( li f i ) d b h President of Energy Regulatory Office in Polish li b Parliament on 2 September, 2010. According to this act the smart metering deployment will be supported by the special regulatory agreement between the President of the ERO and the regulated entity. It i d th t th diti f thi l t It is assumed that the conditions of this regulatory agreement will be set in the transparent way. 15 g y g Regulatory agreement: outline of assumptions assurance of the project realization targets, including customer benefits basis for including the project in the entity development plan and tariff framework transparency by the public consultations of the regulatory agreement content rewards/penalty scheme for implementing entity monitoring by public administration obligation of sign up of regulation agreement to 2012 and obligation of full rollout of smart meters to 2018 16 Next steps in Poland Condition Justification Time frame The introduction of intelligent The implementation of smart metering should lead 8 years metering system, including the to the ‘smart grid ready’ status. In particular, the participation of all interested objectives of the project should the following: stakeholders, in particular all 1. Promotion of competition (to facilitate switching, p ( g consumers consumers. new tariff instruments), 2. Improvement of energy efficiency (Demand Side Management, reduction of transmission losses, etc.) 3. Improvement of safety and quality of electricity 3 Impro ement of safet and q alit of electricit supply. Improvement of energy The public sector should play a leading role in 2015 y p efficiency of the public sector. g gy y j ensuring energy efficiency. This objective should be achieved by introducing intelligent metering systems and equipment, where it is technically and economically viable, and equipping public buildings with their own source of energy. Municipal policy should aim at implementing the concept of the should aim at implementing the concept of the smart city in accordance with the principle of sustainable development. Establishing the funding ceiling The report of IEA has identified a financial gap 2011 – 2020. for cooperation between science between the funds which should be spent on R&D for cooperation between science between the funds which should be spent on R&D and industry with particular in the Smart Grid and the actual funds currently emphasis on the smart grid assigned for this purpose. The government should system. spend 100 million zlotys annually on cooperation in this area. The State policy should be directed d i h i i l f i i towards promoting the principles of cooperation in the form of science and industry consortium. 17 Thank you for your attention Th k f i Questions ? Problems ?