European regulators’ views on regulating smart distribution networks

1. Authors - Gareth Evans (Ofgem), Riccardo Vailati(AEEG), Karstein Brekke(NVE), Werner Friedl(E-Control), Hugo Schotman(EnergiekamerNMa), Matthias Steiner(E-Control), Math Bollen(EI), Tahir Kapetanovic(E-Control), Ferruccio Villa(AEEG) Presented by Gareth Evans, Head of Profession - Engineering, Ofgem European regulators’ views on regulating smart distribution networks

2. Presentation – Key Issues • Consultation objectives • Role of the Regulator • Regulatory priorities • Conclusions and recommendations • Further work Gareth Evans – GB – Session 6 – Paper ID 0978

3. Consultation objectives • Collect the views of all stakeholders to assist regulators in understanding how smart grids can benefit network users • Explore ways in which smart grids deployment, where cost effective, can be encouraged ERGEG “Position Paper on Smart Grids” published 10 June 2010 Gareth Evans – GB – Session 6 – Paper ID 0978

4. Role of the Regulator • Technology neutral • Smart grids are a means to an end not an end in themselves • Better value for customers, including indirect benefits • Key facilitator, identifying and removing barriers – finding solutions that balance all stakeholders’ positions Gareth Evans – GB – Session 6 – Paper ID 0978

5. Regulatory priorities Three main priorities identified • Focus on the performance of network companies in terms of the outputs delivered; • Encourage innovation while protecting consumers’ interests; and • Encourage co-operation amongst stakeholders, with special care to standardisation and to identify possible barriers to smart grid deployment. Gareth Evans – GB – Session 6 – Paper ID 0978

6. Conclusions from the Position Paper* • Significant challenge • Better understanding of smart grids needed • Clarity of stakeholder roles/responsibilities • Significant number of stakeholders want a step change in activity • Attention to encouragement of innovation • Focus on regulation of outputs/performance • Development of cost/benefit analysis vital • Stakeholders co-operate to address barriers *Summarised text

7. Recommendations* (1) R-1: Ensure regulatory stability and reasonable rate of return for grid investments R-2: Consider decoupling between grid operators’ profits and volumes of electricity they deliver R-3: Pursue regulation of outputs as a mechanism to ensure value for money paid by network users R-4: Promote improved awareness of consumers about their electricity use and market opportunities and an improved engagement of network operators with their network users R-5: Encourage deployment of smart grid solutions, where they are cost-efficient and find ways of incentivisinginnovative network solutions where beneficial *Summarised text

8. Recommendations* (2) R-6: Evaluate costs and benefits of demonstration projects and to take decisions/provide advice based on societal cost-benefit assessment R-7: Ensure public dissemination of results/lessons learned from demonstration projects (co-)financed by grid tariffs or from public funds R-8: Participate in ‘smart grids’ discussions and cooperation activities among stakeholders and especially to achieve interoperability of smart grid devices and systems R-9: Clarify the difference between regulated grid activities and market opportunities for new services under a competitive regime R-10: NRAs to continue to exchange expertise at European level, in order to learn as soon as possible from best regulatory practices. *Summarised text

9. Furtherwork • Work is currently underway to collect more detailed views and information from Regulators relating to smart grids • A report summarising this process is planned to be published later this year. Gareth Evans – GB – Session 6 – Paper ID 0978

10. Thank you for your attention Gareth Evans – GB – Session 6 – Paper ID 0978