Transforming generation markets, smart meter roll-outs by utilities are under way in the US, the UK, Ireland, and France, and are complete in several Nordic countries. While increasing renewables in the mix is often cited as the reason for the smart meters, it’s up to utilities and governments to use them in a way that increases renewables’ share beyond current levels.

Smart meters may be used to collect near-instant data on supply and demand levels. With this data, utilities can combine day-ahead power markets with real-time markets, allowing more accurate billing of energy from intermittent sources — for example, distributed renewables. Utilities can also start buying and selling distributed power, stored power and contracted load-shedding opportunities during peaks.

Peak demand has soared with increasing use of electronic devices, and could reach new seasonal highs with the introduction of electric heating and electric cars.

Smart meters offer a two-pronged approach to solving the utility’s problem of needing to finance peaking capacity, often gas fired power plants that generate for peaks but don’t profit much the rest of the time, as regulated renewable generation targets eat away at demand for baseload plants. 

Peaking plants are expensive for utilities to operate in renewables-heavy markets, as German utility RWE’s decision to idle gas power plants in Germany shows. A smart grid can potentially allow charging higher dynamic or “Time of Use” (TOU) pricing to finance running these pricey fast-start plants, and some claim it can remove the need to build new one altogether.  

While smart meters allow utilities to finance peak capacity through new kinds of pricing and contracts, they can also potentially “shave” peak demand. In other words, they can use smart meters to shed peak loads through appliance timing, consumer switch-offs, price rises to persuade consumer shut-offs, and use of distributed renewables as peak demand reduction assets.

So far, much of smart meters’ load-shedding, renewables-contracting capability is not used, and they are used mainly for billing. In Italy, smart meters have been used to switch off electricity for clients with unpaid bills. In the UK, half-hourly meters and TOU billing have for decades been used for billing commercial and industrial businesses.

While generally consolidating the market, smart meters by themselves do not give utilities sufficient incentive to boost renewables’ generation share — although utilities may be amenable to regulations requiring they contract power from distributed sources. 

Enabling utilities to start buying and selling distributed renewable power on the real-time market, assign it flexible generation profiles allocated credit rather than pay from tariffs, smart meters could not only open a new market but also circumvent the challenge of distributed energy producers competing with the utility, some distributed generators argue. 

On the other hand, utilities can realize fuel efficiency savings if they use the real-time market to sell distributed gas-fired power, biomass-fired power or renewable heat. 

There is potential that — with the right regulations — smart meters could increase the use of renewable power in new niche markets; for example, with wide-scale introduction of consumer-side energy storage devices, peak demand reduction, powering car batteries, or powering appliances. In the future, smart-grid-operated appliances and battery storage could switch on to absorb wasted or ‘spilled’ wind power at night.  

Balancing wind

EcoGrid EU is an ongoing, EU co-funded smart grid project¹ launched in 2011 on the Danish island of Bornholm. Bornholm’s generation mix features heavy wind (30 per cent) and also includes solar PV, biogas, coal power, oil-fired power as well as energy imported from Sweden via cable. (Bornholm’s utilities decided that importing energy from Sweden was an expensive way to supply peaking capacity in a system with heavy wind power, so they set up a new kind of electricity market that operates within the existing market, Nordic Operation Information System, or “NOIS,” which includes bids from Danish, Norwegian, Swedish, and Finnish generators.

The project plans to increase the renewable share further through greater generation from more wind, solar and potentially biomass-fired combined-heat-and-power (CHP), with the goal of achieving up to 76 per cent penetration by 2025. EcoGrid’s system has been posited as a way to keep peaking costs down in EU countries required to meet EU’s 20-20-20 decarbonisation targets, aiming for 20 percent renewable generation across the union by 2020.

On the island, wireless Landis Gyr smart meters were installed for 1,900 residential customers. These record energy use every five minutes so that power generators can react quickly to supply and demand imbalances. When smart meters, together with EcoGrid’s control system, record that supply is exceeding demand, transformers cut off from distributed generation sources — or the surplus is used to charge electric cars. If demand exceeds supply, prices are increased over the day-ahead price as reserve capacity starts up.

Energy prices are generated without bids based on NOIS prices and a dynamic pricing tariff that reflects demand levels recorded by smart meters. Prices from Nord Spot, the international spot market, are also used in day ahead price forecasting.

Consumers can switch off to reduce demand during peaks and receive credit towards bills. They also can use a smartphone application to make scheduled purchases of renewable power for electric car batteries.

However, no increase in distributed energy sources is expected in Bornholm, as the type of contract offered to distributed generators for peak generation is an electricity bill discount, and does not specifically endorse renewable generation.

Existing subsidies and fees for renewables are also not impacted by the trial: the share of distributed solar in Bornholm increased by 2 megawatts, but this was unrelated to the smart grid.

As Kim Behnke, Energinet.dk’s head of research and environment, explains: “The main purpose of EcoGrid is not to increase the penetration of renewable energy sources, but the concept will reduce the costs of integrating higher shares of renewable energy, thus improving the overall business case for sources such as wind power.”

As smart meters have had no impact on renewable energy penetration, the success of the contract models based on real-time pricing will decide the attractiveness of the business case for renewable energy sources in the future.

Part II of Brooks’ report compares grid and energy storage issues in California, Sweden and Canada.