This interview with John Harris, ESMIG's Vice-President and Chair of the Regulatory and Policy Working Group, has been published in the Energy World Magazine March-April 2017, available here.
In majority of the markets regulatory framework support “traditional” network investments rather than smart technologies, because there is a greater emphasis on capital expenditures. Smart technologies have low capex compared to the operating expenditures. So, if we have regulatory regime that places more emphasis on total expenditure and looks at the benefits that smart metering brings across the value chain, we could get better distribution of smart meters cost pie. The European Commission is now doing something about this - says John Harris, Vice-President of ESMIG and Chairman of the ESMIG Regulation and Policy Group.
Q: Who is to blame for failure of EU's 80 percent target for smart meters?
I don’t think it is appropriate to really place “blame” on anyone. The EU’s 3rd Energy Package set the target of 80% coverage of EU households with smart meters by 2020 – but with certain provisions. For example, the Member States could – there is no requirement to do so – conduct a Cost-Benefit-Analysis (CBA) on “which form of intelligent metering is economically reasonable and cost-effective and which timeframe is feasible for their distribution.” In its analysis accompanying the so-called, “Clean Energy Package”, the Commission says that “many Member States have made wide use of caveats on technical feasibility and financial reasonableness/proportionality to make broad exceptions to the requirement to roll out smart metering.”
It is true, that we have seen rollouts that have come later and with lower numbers of meters than the industry would have liked. As in many other issues the point of contention was money – how should the “cost pie” be divided up.
Q: On 30 November 2016, the European Commission published a Proposal for a Directive of the European Parliament and of the Council on common rules for the internal market in electricity. What changes does it bring for smart meters?
There are a number of proposed additions to the smart metering provisions from the 3rd Energy package, and generally we see them as positive. Right now, we are still in the “opinion-building” process in ESMIG, but at first glance there are a number of issues that we could support. For instance, we welcome the fact that the smart metering provisions have been moved from an annex in the 3rd Energy Package’s electricity directive to the main body of legislative text in this proposal. Also, the Commission proposes definitions for smart metering and interoperability which were missing previously and addresses the issue of meter data management for the first time.
Q: Proposal entitles every consumer to request a smart meter equipped with a minimum set of functionalities. How do you comment this?
Of course, every European consumer who wants a smart meter should be able to get one, regardless of whether the Member State in which he or she lives had a positive CBA or not.. The proposal says that where smart metering is negatively assessed in the CBA, or not systematically rolled out, for example in cases of a selective rollout, like Germany, consumers are still entitled to a smart meter. The smart meter that the consumer can get has to meet certain functionality and interoperability requirements. All in all, it is a very reasonable proposal.
Q: How important are smart meters for consumers?
Incredibly important! We see smart metering as the greatest consumer empowerment tool to come to the energy industry in the last 100 years! What other product does a consumer buy whose volume and cost are not known until the end of the year? But it is about more than just getting accurate information to the consumer on consumption and costs. Smart Metering opens up many new possibilities in the area of demand response, home automation, self-generation and consumption. That is why the Commission has devoted so much attention to making sure that the smart metering systems installed are interoperable with these other technologies. Moreover, there is a considerable body of research that shows that consumers can save a considerable amount of money on their electricity bill through direct feed-back of their energy consumption and costs.
Q: There are concerns about data protection regarding smart meters. Are consumers data safe?
Yes – consumer data is safe in smart metering. When a Member State decides to rollout smart metering, data protection and security are always part of the specifications. EU guidelines specify a “security by design” approach and ESMIG is developing its own security approach to assist and advise those Member States that have yet to rollout. There are also other legal requirements at the EU level on data protection that smart metering systems and their operators – in most cases the DSOs fall under that require them to show what data is collected and how it is protected.
Q: The cost of installing a smart meter in the EU is on average between 200 and 250 euro. Who is paying this?
First of all, I would question your premise that the costs of having a smart meter are that high. There are a number of variables that go into calculating the cost of smart metering systems as the Commission’s benchmarking report from 2014 showed – this report is due to be up-dated this year. Much depends on the functionalities of the meters, how often the meters are read and type of communication technology used, just to name a few aspects. As I said earlier, the major discussions at the Member State level have been exactly what you are asking – who pays for what.
The Council of European Energy Regulators (CEER) has given much thought to the type of regulatory regime that would support investments in smart technologies – of all sorts – not just smart metering. One of the hurdles to be overcome is that most current regulatory environments support “traditional” network investments, i.e. copper and steel rather than smart technologies, because there is a greater emphasis on capital expenditures in the regulatory regimes. With smart technologies, including smart metering, the capex is relatively low compared to the operating expenditures. Therefore, moving to a regulatory regime that places more emphasis on total expenditure and looks at the benefits that smart metering brings across the value chain, might be a more equitable way of distributing the cost burden. The Commission addresses this issue in the Clean Energy Package when they propose that consumers contribute to the costs of smart meter rollouts in a fair and transparent manner.