Everyone wins: the environment, utility companies and consumers

Dr. Carlo Velten, analyst at the Experton Group, talks about the importance of Smart Metering and Smart Grid.

Great growth opportunities

The roll-out of nationwide, intelligent energy meters in households and companies as well as the development of intelligent power supply networks benefit all market participants. Smart metering and Smart Grids make power supply more efficient, decrease costs for users and create growth opportunities in several sectors.

A large new market is undisputedly emerging for ICT service providers. The energy industry needs more transparency in order to manage power generation and distribution more efficiently. However, the existing power supply networks have hitherto only fulfilled the function of distributing energy. The energy companies do not have information about how much power a household or region actually uses. Added to this is the fact that the increasing number of local producers makes it difficult to manage the power supply networks. However, there are no real-time data that show how much power is being fed into the networks by wind power plants and photovoltaic plants.

Investing in intelligence

In view of the above, the energy industry needs to modernize and equip itself in order to adapt production and the power supply networks to the changed situation. To a great extent, the required investments encompass ICT technologies and services that infuse the networks with a degree of intelligence. Utility companies possess sufficient financial potential for this capital expenditure because they have invested little money into their networks in past years. In addition, customers are in part helping pay for the investment through new services. It is thus foreseeable that the necessary infrastructure for Smart Grid and for Smart Metering will be expanded successively.

The energy industry in Germany is still treating the topic of Smart Metering and Grids with a bit of reserve. But model calculations show that process costs improve with Smart Metering and Smart Grids. For example, no one would have to go from house to house reading meters and customer retention would improve as well.

A peak at other European countries reveals that their equipment with Smart Meters is better although the legislation – since it is European – is similar to that in Germany. However, there are more incentive structures for change in those countries.

Power generation is also becoming more efficient and adapting more and more to the new energy mix. With renewable energies it is no longer so easy to adjust production to demand at the central power plants. If too much energy is produced, it must be rereleased on the free market for below the generation costs. Smart Grids, on the other hand, would be able to adjust power generation to actual demand at the power plants.

Making saving energy simple

Ultimately, households benefit from intelligent meters and networks. Smart Meters make usage profiles transparent and change people’s energy use behavior. This makes it easy to identify power guzzlers. Those who can see in black and white what that ancient freezer in the basement really costs will be more willing to get rid of it.

Various studies assume a savings potential of around 10%. This appears to be a lot upon first glance. But when one considers that a family of four pays about EUR 90.00 in energy costs per months, the absolute savings effect at today’s energy prices is still too low. The willingness to pay for such services is then a maximum of EUR 8.00 per month – or even less. The topic of energy costs is therefore not yet firmly entrenched in the user’s consciousness; there is no pull market yet. Thus, success depends to a certain extent on the development of energy prices.

In any case, ultimately the biggest winner when it comes to Smart Metering and Smart Grids will be the environment: Users will be more aware of how they use energy, utility companies will improve their production processes and the share of renewable energies will increase.