Session II: Reaching the Customer
from regional wholesale to seamless retail markets
Rupa Devi Singh, CEO of Power Exchange India Limited, opened session 2. Ms. Devi Singh highlighted the complexity of the Indian power sector: It is one of the largest interconnected networks in the world with 3 layers of transmission system operators (at National, Regional and State level) and a generation capacity of 160GW (but still with a deficit of nearly 12% compared to demand). In the transition to an open market, independent power producers started emerging in the early 90s. The ground breaking Electricity Act of 2003 introduced mandatory unbundling of utilities and universal open access to transmission networks for consumers over 1MW. Between 2006 and 2008, the Day-ahead spot market was established based on the NordPool model and since then it has been functioning smoothly and growing in participation. According to Ms. Devi Singh, the Indian experience shows how, despite numerous complexities and resistance, the development of a competitive wholesale and retail market is possible. However, she reminded the audience that compared to the EU, India has the advantage to have a single central government, a single regulatory authority and a single grid code.
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European Commission Director General for Energy Philip Lowe referred to the various existing projects which are aimed at developing regional markets across the EU. The regulators’ driven regional initiatives (known as ERGEG regional initiatives) have brought a valuable contribution to the process in particular in the field of transparency and cross-border capacity allocation. Being essentially of a voluntary nature, these initiatives have also shown their limits and the time has now come to define a more comprehensive approach to regional markets based on the Third Energy Package. This is all the more important as the integration of renewables will bring new challenges and properly functioning markets are a guarantee that renewables will be deployed at the least cost for society. “The Third Energy Package provides a firm basis for actions”, underlined Philip Lowe, hinting at the specific provisions that empower the Commission to take harmonisation measures in the field of retail markets. Philip Lowe pointed to the Commission’s current efforts in forming a strategy on regional markets which should result in the adoption of a Communication on regional initiatives by the autumn of this year. He also mentioned the importance of interplay between wholesale and retail market.
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Jon C. Arnold, Managing Director of Microsoft Worldwide Power and Utilities told the audience that in order to make a success out of smart homes and reap energy savings, the home automation services offered to customers should not only be “easy” and “seamless” but should also “be integrated in the digital lifestyle”. Indeed, the various elements of the home area network need to be automated and integrated within the whole system so that e.g. “when the window is open, the radiator shuts down automatically”. Mr Arnold underlined that, for this to happen, “the electricity industry has to communicate the opportunities of Smart Grids” to their customers. In addition, he pointed out that he saw “social consciousness” as one of the most powerful drivers for smarter energy use. For example, technology already enabled him to compare the energy efficiency of his house with the one of Bill Gates.
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Speaking on behalf of ERDF, France’s largest DSO, Marc Boillot – senior advisor to the ERDF President- emphasised that “Smart Grids is already a reality for many DSOs”. He went on explaining that ERDF’s recent investments in information technology systems had allowed them to pilot their network more efficiently, for example, by restoring power after black outs or power failures. Later on, Mr Boillot underlined that the recent boom in wind turbines and in photovoltaic installations was causing new challenges to DSOs in finding a local balance between generation and usages, controlling voltage and limiting harmonics. DSOs will respond to these challenges in an innovative way by taking the lead and consulting with all involved stakeholders. Turning to the financing of Smart Grids, Marc Boillot stressed that it was essential to “define how European DSO companies would be financially rewarded” for their Smart Grids investments given that they will not be the only beneficiaries of smarter networks.
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Panel Debate
During the panel discussion, keynote speakers were joined by Vice President of ENTSO-E Jukka Ruusunen, President of Landis + Gyr AG Andreas Umbach, Deputy Chairman of Mercados consulting company Alberto Pototschnig, Chairman of EURELECTRIC Markets Committee Gunnar Lundberg and Chairman of EURELECTRIC Networks Committee Peter Birkner.
On the question of who should be in the lead to bring forward European electricity market integration and coordinate the work of European regional initiatives, Alberto Pototschnig expressed a strong view that not only the European Commission, but also all the major stakeholders should be involved in managing this process. The involvement of Member States is also very important to achieve faster and smoother progress, he added.
Gunnar Lundberg recalled that market integration together with large scale grid investments is indispensible for the integration of RES. He also stressed that recent agreement on target models reached among the major stakeholders within the Project Coordination Group should serve as a good basis for progressing towards an integrated European electricity market. He proposed a so-called “oil-spread” approach for the target models’ implementation that would imply Nordic-Central West inter-regional integration as a first step to be followed by other regions. He also shared the view with the earlier speakers that all stakeholders’ involvement is crucial for succeeding in implementing market integration and he expressed his view that the work of the Ad-Hoc Advisory Group should be continued after ACER will be in place in March 2011.
Mr Ruusunen gave his full support for broad stakeholder involvement, stressing the need for the more active role of electricity customers in the on-going market integration debates. He also stressed that the two primary tasks for the TSOs are to ensure optimal usage of the existing grids and develop grid infrastructure necessary to integrate renewable.
Turning to the discussion on Smarter Grids, Peter Birkner reminded the audience that without a business model there will be no investments in Smart Meters or Smarter Grids. As much of the benefits of Smart Meters will be for the society it is a public issue to create the right financing conditions. This is one of the reasons why customers must be taken on board. "If we cannot create public acceptance and make stakeholders out of customers”, said Mr Birkner, “we will not be able to roll-out Smart Meters". Following on Mr Boillot’s statement on the need to balance renewable generation with customer usage, Mr Birkner told the audience that “in former times, it was the customer who needed the DSO, now it is the DSO who needs the customer”.
Andreas Umbach, President and COO of Landis+Gyr, urged DSOs not to wait for standardisation to be completed but instead asked them to “use their purchasing power to incentivize smart metering manufacturers to cooperate as this is the quickest way to reach interoperability”. Mr Umbach mentioned the Swedish experience with Smart Meters as an example that a full roll out of Smart Meters can happen in 4 to 5 years. At the same time he affirmed that it was also a wasted opportunity because minimising costs was the main goal and meters installed had no interface for internal communication. For additional functionality additional investments will be needed.