Costs and Benefits of the Smart Grid. Hans de Heer 10 October 2012

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1 Hans de Heer

2 The DNV Group DNV Group DNV KEMA Energy & Sustainability DNV Maritime Oil & Gas DNV Business Assurance 300 offices 100 countries 10,400 employees 2

3 DNV KEMA Energy & Sustainability DNV KEMA Energy & Sustainability offers innovative solutions to customers across the energy value chain, ensuring reliable, efficient and sustainable energy supply, now and in the future. 2,300+ experts across all continents KEMA and DNV combined: a heritage of nearly 150 years Headquartered in Arnhem, the Netherlands Offices and agents in over 30 countries around the globe 3

4 Case study: The Netherlands A closer look at the methodology Where is the smart grid? 6

Main prerequisites The smart grid concept is primarily regarded as a set of technologies and market rules, to facilitate load management / demand response.

5 Case study: Societal smart grid CBA for the Netherlands Setting By order of the Dutch Ministry of Economic Affairs, Agriculture and Innovation. Study performed in cooperation with CE Delft Objective of study Is the large-scale introduction of smart grids in the Netherlands viable/feasible from a societal point of view? Main prerequisites The smart grid concept is primarily regarded as a set of technologies and market rules, to facilitate load management / demand response. The study compares the installation and deployment of a smart grid ( reference alternative ) to the situation where no or limited demand response is applied ( zero alternative ), for several scenario s. Time horizon for this study is In this study, a gradual penetration of smart grids is assumed, starting in 2015 and reaching 100% in

Scope of the Dutch Smart Grid SCBA Control &

Local Control & Monitoring Central Data System Smart

Installations Local Energy Management System Service

6 Scope of the Dutch Smart Grid SCBA Control & Monitoring Smart Grid Central Systems Central Unit Local Control & Monitoring Central Data System Smart Meter Distributed Generation Appliances, Installations Local Energy Management System Service Provider, Grid Company Dwelling, Public Utility Building, Industrial Building

7 Approach Standard recognized approach for societal cost benefit analyses. In this case study three scenario s have been examined 9

Overview of main costs and benefits Main Costs Sensors for registering the actual status of grid connected appliances and installations Actuators for controlling grid connected appliances and

ICT software (smart grid central intelligence) Installation, operation and maintenance Main Benefits Avoided grid investments Avoided grid losses Avoided investments in central production units

8 Overview of main costs and benefits Main Costs Sensors for registering the actual status of grid connected appliances and installations Actuators for controlling grid connected appliances and installations or giving direct feed back to users Communication devices and use of existing communication infrastructures ICT hardware for control schemes, load prediction software, data handling etc. ICT software (smart grid central intelligence) Installation, operation and maintenance Main Benefits Avoided grid investments Avoided grid losses Avoided investments in central production units Avoided investments in storage (Renewable & Gas scenario) More efficient use of central production units Energy conservation related to demand response schemes and direct feedback Contribution to reducing system imbalance 10

Time of Use and Critical Peak Pricing (assessment from

9 Robust positive results for the Netherlands Savings and shift in consumption as percentage of peak capacity at Time of Use and Critical Peak Pricing (assessment from literature review) Cost and benefits of the three scenarios 11

10 Costs and benefits are unevenly spread Distribution effects of smart grid costs & benefits Segment / scenario Business as Usual Renewables & Gas Coal-CCS & Nuclear Costs Benefits Costs Benefits Costs Benefits Dwellings ( 2,4) 0,2 ( 2,4) 0,4 ( 2,4) 0,2 Utility (small) ( 0,1) 0,2 ( 0,1) 0,3 ( 0,1) 0,1 Utility (large) ( 0,3) 0,1 ( 0,3) 0,2 ( 0,3) 0,1 Industry ( 1,2) 0,2 ( 1,2) 0,5 ( 1,2) 0,2 Grid Company ( 0,1) 2,8 ( 0,1) 5,1 ( 0,1) 6,4 Energy Company 0,0 2,6 0,0 5,2 0,0 6,2 Society 0,0 0,6 0,0 0,0 0,0 0,1 Total ( 4,2) 6,7 ( 4,2) 11,7 ( 4,2) 13,4 12

11 Case study: The Netherlands A closer look at the methodology Where is the smart grid? 13

12 Approach towards the SCBA Basically the approach of the Dutch SCBA complies with the steps recommended by the European Union (JRC Guidelines, 2011) The JRC Guidelines provides more detail for identifying assets, functionalities and benefits The CE-Delft/DNV KEMA approach focuses more on quantifying the benefits on a system level. Project definition & scope Define scenario s & alternatives Define assets & functionality Identify effects Reporting Attribution, sensitivity analysis Monetize costs & effects Quantify effects 14

13 Value of flexibility: system level approach Long term Short term Generation Transmission/ distribution Deferred/avoided investments in generating capacity Deferred/avoided investments in grid capacity Optimal unit dispatch Ancillary services (e.g. imbalance compensation) 15

14 Realizing the value of flexibility Ultimately the value of flexibility is generated on top level / system level but... this value is realized on bottom level / customer level DNV KEMA Smart Grid model by... offering services to consumers to change their energy consumption behavior resulting in... a change in (average) load patterns. 16

15 Construction of the model Time dependent profiles, partly based on actual weather conditions (whole year modeling, hourly interval). scenario s # dwellings, utility buildings, penetration EV, HP, micro CHP etc. Simplified grid model based on limited number of user segments. Quantification Simplified merit order model based on limited number of central production unit types.

16 Model hierarchy and input parameters Power per production unit Efficiencies (H & E) Investments Fuel cost Grid loss parameters Volume per user segment Dimensioning and efficiency of storage Deterministic profiles (EV s, conventional use) Meteorological impacted profiles (solar-pv, wind turbines, heat pumps) Profiles based on control schemes Central Production Network User Segments Profiles

17 Power [MW] Vermogen [MW] Example of effect of demand response indicator met DR dal KU4 top KU4 Load without Demand Response Load without DR Load with Load with DR Demand Response Load shifting Tijd (uur) Time [hours]

18 Case study: The Netherlands A closer look at the methodology Where is the smart grid? 20

dwellings Penetration degree of intermittent and distributed

of costs and benefits System optimization that may jeopardize status

local generation (Inter) national policies on (wholesale) market

19 So why isn t it happening yet? TECHNOLOGY POLICY MARKET Penetration degree of flexible load in dwellings Penetration degree of intermittent and distributed resources Interoperability issues Practical restraints Distribution of costs and benefits System optimization that may jeopardize status quo Central vs. local generation (Inter) national policies on (wholesale) market design and technical codes Customer involvement Adaptation of wholesale markets Local (capacity) markets Increasing fuel costs Privacy and security No one size fits all 21

Thank you Visit us at our booth #1.A71 or at www.dnvkema.

20 Thank you Visit us at our booth #1.A71 or at Hans de Heer Service Line Leader DNV KEMA Energy & Sustainability Tel

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