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SMART GRID REGULATION

7 th International Congress and Exhibition for South-East Europe April 2011. SMART GRID REGULATION. Kenneth Lefkowitz Managing Partner New Europe Corporate Advisory Ltd. www.necadvisory.com. Smart Grid Regulation. Behavior modification. Smart Grid Regulation.

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SMART GRID REGULATION

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  1. 7thInternational Congress and Exhibition for South-East Europe April 2011 SMART GRID REGULATION Kenneth Lefkowitz Managing Partner New Europe Corporate Advisory Ltd. www.necadvisory.com

  2. Smart Grid Regulation Behavior modification

  3. Smart Grid Regulation Oil prices and fuel efficiency • Today the US economy uses about the same amount of oil as it did in the late 1970s, but the economy is 125% larger; • Despite the seven-fold increase in the real price of oil from 1960 to today, consumers spend about 25% less of their income on energy Source: Seeking Alpha

  4. Smart Grid Regulation Effective communication of incentives Information overload Distributed decision-making VS • Market price and consumption information must be broadly accessible • Incentive framework must be stable for long-term effectiveness

  5. Smart Grid Regulation Benefits from energy efficiency The total reduction of 18% in the USA does not include THEFTS. In Bulgaria for example, estimated commercial losses (thefts and bad debts) are 10-11% Source: US Department of energy, Cornivus University

  6. Smart Grid Regulation Creating the right incentives • Liberalized and liquid electricity market • Investment is rewarded • 3) Dynamic pricing: • Retail • Wholesale • System services Source: GTM Research

  7. Smart Grid Regulation Regulation Source :Eurelectric, Energy Agency Of The Republic Of Serbia, Energo, ERRA, NordPool Consulting, Eurostat, Herbert Smith Retail prices of electricity are for 2010, household band C

  8. Smart Grid Regulation From cost-based regulation to incentive regulation Cost-plus regulation Revenue cap Source : KEMA Consulting, Webinar Training on Regulation 2009

  9. Smart Grid Regulation Liberalization of cross-border trade Implied auction Candidates Preparing for implied auction Explicit auction Source :NordPool Consulting

  10. Smart Grid Regulation Costs and benefits Investment Payback Users • More expensive “smart” appliances; • Share consumption data; • Interruptibility; • Reduced usage and lower bills; • Produce and sell own electricity; • Comprehensive energy management Distribution firms • Drastic change in business model – from selling a commodity to providing a service. • Lower sales • Cost – additional investments for upgrading the traditional grid. • Less thefts; • Improved efficiency of the grid and less investments on expanding capacity; • Remote reading of monitors • Better security and outage detection; • Predictability of energy demand • Intelligence on consumer habits Producers • Lower overall demand; • Demand shifted away from peak hours when price is the highest; • Improved grid access for renewables; • Greater dispatch efficiency for base-load and mid-load plants

  11. Smart Grid Regulation Conclusion • In conclusion: • A price shock will be instrumental to spur efficiency; • With a clear and stable framework, investment in smart grids will take place, bringing net benefits for the whole value chain. • The way forward: • Remove populism from price regulation; • Regional DAM and hourly market and regional exchanges; • Improved cross-border trade; • Dynamic retail pricing; • Incentive-based regulation of natural monopolies.

  12. Smart Grid Regulation Thank you for your attention! Questions? Kenneth LefkowitzManaging Partner New Europe Corporate Advisory Ltd. mob: + 359 888 637-053e-mail: kenneth.lefkowitz@necadvisory.com

  13. Smart Grid Regulation Smart grids in Europe Status Regulatory support World leader in smart meters, with 85% of homes equipped. In 2006 Enel completed the connection of +30mn users. One of the reasons for the whirlwind rollout – rampant thefts of electricity. Italy • Digital smart meters are mandatory since 2006. Government’s vision is 95% of customers of the 100 utility firms to be on smart meters by 2011. RO First smart grid in Eastern Europe – a pilot project in Brasov launched in Dec 2010 with Electrica Sud Distribution. New energy strategy expected to include an action plan for smart grid development SR 100% penetration of smart meters in transmission and 1% penetration in distribution Smart metering roll-out plan until 2013. Budget of €75mn with loans from EBRD and EIB. Regulator agreed to approve costs. GR The distribution company has deployed only small-scale pilot projects so far, but is considering a smart grid alliance. Smart metering roll-out plan until 2013. Budget of €75mn with loans from EBRD and EIB. Regulator agreed to approve costs. BG No elements of smart grids available yet, apart from a demonstration of EV plug-in sockets in Sofia Draft of the National Energy Strategy until 2020 plans revenues from carbon sales to be used for smart grid implementation

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