Sweden. Smart Meter Policy and Application. National Energy market context

Transcription

1 Sweden Smart Meter Policy and Application National Energy market context The population of Sweden is 9.3 million and the number of households 4.9 million while there are 5.07 million connected electricity customers. The average household electricity consumption is 9,000 kwh a year, making it the second highest in Europe after Norway and well over double the average European household consumption. Electricity costs are a concern for the population especially during the winter months. The Swedish electricity market has several bodies to regulate and supervise the market, each with a specific mandate. Energimyndigheten (the Swedish Energy Agency) is the central administrative authority - market regulator - for the supply and use of energy. It is responsible for implementing the energy policy programmes set out by the Swedish Parliament, with the objective of creating an ecologically sustainable and economically viable energy system. The smart metering regulation which resulted in the meter rollout did not originate with the Energimyndigheten, but with the Swedish Parliament. The Competition Authority has the responsibility for applying the competition rules between utilities. It has been debated whether the parameters by which this authority has the mandate to judge utilities (again a mandate provided by the government) are stringent enough to ensure fair competition. In all markets in Europe, including the Swedish Electricity market, utilities are now deregulated to varying degrees, however the various parts, retail, transmission/distribution, generation can be owned by one parent company. In certain instances, the interests of the individual part and the interests of the parent company - clash. In Sweden as in other deregulated markets, the real level of deregulation within utilities is relevant to smart metering regulation and particularly the programmes that they enable in two ways. First, the level of real utility unbundling will directly impact the types of energy efficiency and demand response programmes which any part of the utility is likely to pursue. For example, the retailer section of a utility may have reason to be interested in demand response as a method for lowering electricity purchasing risk during peak consumption hours, however this will not be the case if, in fact, the overall utility (parent company) earns most from peak load generation, which the demand response programmes aim to lower. In this case it will be the partner with the greatest financial pull which wins out. As most energy efficiency and systems efficiency programmes penalize generation, the part of the utility with the greatest financial pull, this can sometimes explain the reluctance of the industry to enable these programmes. It also puts the impetus on the regulatory bodies and policy makers to create market structures and regulation which take these factors into account and actively support smart meter enabled, environmentally friendly programmes when mandating rollout. Second, market unbundling and meter ownership complicate the decision making process surrounding what capabilities to include in the meters. Capabilities which enable feedback and pricing programmes the environmentally friendly programmes, cost extra money. However in Sweden, and in most of Europe, it is usually the network companies which own and pay for the meter rollout and the retailers which carry out most of end-consumer oriented programmes. The interests of the network company are therefore to only include capabilities which will improve their own back office processes and systems reliability while the retailer will want frequent and granular data for pricing programmes and

2 communication capabilities into the home. If the regulator does not provide clear requirements for smart meter capabilities, it is possible that the network companies will not include basic and necessary capabilities in the meters required for energy efficiency related programmes as it will not be they who will run them or benefit from them. This factor was not taken into account by Swedish policy makers. The result being that many of the Swedish meters are not capable of supporting energy efficiency programmes, nor is the national data handling and communication system capable of handling the necessary levels of data required for the most effective pricing programmes. The government has ordered an investigation into the cost of upgrading the system so that these programmes can be implemented. The results will be available in the autumn of Objectives of national policy The objectives of the Swedish Smart Meter Policy were: * To improve data handling during customer switches between electricity Retailers and the Distribution Network Operator * To provide all consumers with accurate monthly invoices rather than estimated invoices * To further competition within the electricity market by supplying all end consumers with accurate monthly invoices rather than estimated bills in the hopes that this would increase awareness of electricity costs and encourage consumers to take the trouble to switch away from expensive Retailers. * To give electricity customers a more direct connection between consumption and billing in order to encourage behavioural change and increased energy efficiency. In order to accomplish these goals smart meters per say were not mandated; only monthly meter readings. The legislation ran: In order to facilitate supplier changes and give electricity customers a more direct connection between consumption and billing, the government has passed a decision to introduce monthly metering of electricity usage among all electricity customers by 1 July Within the given timeframe, the network companies are free to decide the pace of implementation. The cost of the reform is estimated at around SEK 10 billion ( 1.1 billion) and will be paid for by the end consumers." The government also considered that a more direct understanding of the consumption and costs would heighten general awareness about the electricity market and thereby increase competition. The new regulation requirements: July 1, 2009 Sweden moved to monthly billing based on actual consumption. The meter reading must have a time stamp day 1 every month and have a status mark first-rate (prima) If a meter reading is missing, extrapolation is not allowed (forward estimation) but interpolate (a later meter reading must exist) The meter reading will get the status calculated and can be used for invoicing and settlement Time to correct the billing and settlement will be shortened from 13 months to 2 months. Lead time for exporting meter readings to retailers is shortened from 30 days to 5 days. Message handling is changed from MSCONS and DELFOR to UTILTS. Yearly consumption must be estimated based on actual consumption over the last 12 calendar months. A message of prognosis for the coming 12 months must be sent to the energy supplier at the start of delivery (customer shift and supplier switch) and is based on the latest 12 month period. 2

3 For new connections, an equivalent prognosis must be decided based on calculated consumption for the installation. Consumption statistics must be given to the energy user, at latest on the invoice and cover the last 13 months. It can also be given through the web (My Pages) or customer invoice. While DNO s handle their internal communication systems, the communication system between the network operators and the retailers is EDIEL and is standardized. Scope of policy goals The scope of the above policy is limited to monthly readings. It does not develop a cost/benefit analysis, or include overt energy efficiency goals other than accurate monthly invoices to encourage energy savings. In pilot studies informative billing has helped to decrease consumption be approximately 4% so this may have an impact on Swedish consumption levels. Feedback capabilities into the home, Dynamic Pricings and Home Automation capabilities which smart meters can include were not considered. Possible CO 2 reductions were also not considered. Regional influence The Smart Meter directive fulfils the European Commission Directive 2006/32/EC Article 13 Member States shall ensure that, where appropriate, billing performed by energy distributors, distribution system operators and retail energy sales companies is based on actual energy consumption, and is presented in clear and understandable terms Billing on the basis of actual consumption shall be performed frequently enough to enable customers to regulate their own energy consumption According to some interpretations of the Directive monthly bills provides consumers with consumption information often enough for them to act upon it. Policy description Main characteristics Policy In 2003 the Swedish government passed legislation (proposition 2002/03:85), which required accurate monthly invoices based upon actual meter readings for all residential customers beginning July 1 st, The legislation was in response to widespread dissatisfaction among residential consumers due to inaccurate invoices and data errors during switching. Meter reading regulation prior to smart meter rollout was similar to many other countries in Europe; large consumers, those with fuses of 63 Amps and above, had to have hourly interval meters and were billed on a monthly basis. Residential meters were read once a year with the settlement period stretching to 13 months. Between readings, the provisional invoices were based upon estimated consumption and averaged out slightly over the year so that residential customers with electric heating were protected from high monthly electricity bills during the cold winter months. Considering that for some homes up to 80% of their electrical costs are from electric heating, this process of evening out expenses throughout the year had a real impact on their understanding of how much their electric heating was actually costing them. The provisional monthly settlement was estimated forward. This meant that the provisional allocation of electricity to retailers in, for example, September were estimated and reported by August 15 th. Since these were estimated in advance, there was no load profile available for the actual month; therefore, the Distribution Network Operator s (DNO) profile from the previous year was used. This introduced errors into the system when household composition changed or other factors came into play. 3

4 When a customer decided to switch Retailers, the new Retailer was required to notify the DNO of the switch. The DNO then checked the customers data and sent a notification of the switch to the previous retailer. The DNO was also to inform both retailers of the customer s meter reading at the time of the switch. Previously in Sweden switches took place the first of the month and the DNO had 30 days to provide the meter data. As switching levels increased this system became unreliable. There were no incentives to perform well and mistakes were made. A study found that 7% of retailer switches were completed later than expected usually either because information about the customer was missing, or the retailer and the DNO had different information about the customer. In some cases the customer was never informed the switch had successfully taken place and never received an invoice from the new retailer. On top of this, the DNO was required to read the meter only once a year, but if this proved difficult it could be postponed for two years. The long settlement period of 13 months or 26 months meant that some customers received large invoices which were difficult to pay, further damaging the reputation of the electricity industry. Therefore, when the Swedish legislature passed proposition 2002/03:85 the focus was not on preparing the market for future development nor on the technological requirements involved but on being publicly seen to address the issues causing the public dissatisfaction with the electricity industry. In 2003, the Big Three were more unpopular than the tax office and customs. The only group which was close to being as unpopular were the police and even they scored higher than Fortum and E.ON. As accurate monthly invoices were considered an improvement in service over and above what residential customers had hither to received, it was decided it would be appropriate to have end consumers pay for them directly through an extra network tariff. It was also decided that accurate billing alone was a sufficient improvement in service to justify the 1.1 billion or the 200 per customer they would be charged. This stands out in sharp contrast to most other mandated smart meter rollouts both in the USA, Australia and Europe where either the network company is supposed to pay for the meters and/or the level of service eventually provided to residential customers should be higher and include in house feedback capabilities, dynamic pricing etc. Though installing new meters was not a requirement in the original legislation, only accurate monthly meter readings, the network companies decided that meters which could be read remotely would be the most cost effective means of fulfilling the requirements of the new legislation. During the actual rollout the first utilities calculated that smart meters would in fact be more beneficial than simple automatic meter reading meters (AMR) and therefore upgraded their systems as they went. This was particularly true for utilities such as Vattenfall who began rollout in 2003 (Figure 1). During rollout, metering costs as compared to functionalities improved dramatically a reflection of the development of the technology. As the end users were to pay for accurate monthly invoices, no public cost/benefit analysis was made. Accompanying energy efficiency measures The government is committed to upholding the 2020 objectives set by the European Commission. This has included a wide range of goals from improving building practices to increasing the percentage of wind generation. These have not directly dealt with residential or commercial electricity consumption however and this sector is under represented when it comes to efficiency programmes and regulation. 4

5 Market Drivers Current market level of SM rollout Meter price The budget per meter was 200, however some investments may well have been made to increase functionality by the actual Network companies Prevalent meter types (if available) Many different types of meters were used during rollout this was partially due to the lack of regulatory requirements Current frequency of meter readings Monthly Number of SM in place 5.1 million Content of Functionality requirements SM One monthly meter reading. Impact/evaluation Positive / negative cost / benefit for members of the value chain Generation Companies No benefits Network companies Network companies have benefited from improved back-office efficiency which has lowered their own costs and lowered the cost of serving end consumers. Figure 14 depicts Vattenfall s progress as functionality and benefits increased for the Network company while costs for the meters fell. This benefit may eventually be passed on to end consumers if the network tariffs are lowered. However, so far this has not occurred. Figure 14: AMR Market development Source: Vattenfall AB 5

6 Retailers Retailers have benefitted from improved access to data as they now receive accurate data on a monthly basis and 5 days after a customer request to switch between retailers. This has improved billing practices and eased handling customer switching processes. The accurate monthly bills have also lowered the number of customer complaints and therefore the Retailers/Networks companies cost for their call centres. Figure 15 shows E.ON s calculation of these benefits. They calculated that meter reading enquiries have fallen by 70% and invoice complaints by 60% 8 months after rollout was completed. As call centres are a major cost for Retailers this represents significant saving. Again this benefit could theoretically be passed on to end consumers if prices were lowered in reflection of these savings. Due to the varying costs in raw materials, water levels, etc all influencing electricity prices, it is difficult to calculate whether this has take place or not. Figure 15: E.ON s internal benefits - Customer service Source: E.On Sverige End-consumer The big three utilities are developing websites where customers will be able to view their consumption information either from the previous month or perhaps the previous day. As of the time of researching this report this service is not yet widely available. The current advantages for end- consumers are a better oversight of their energy consumption due to accurate monthly invoices and improved switching times and data handling processes. The accurate invoices and increased awareness that this brings may encourage them to lower their consumption levels. The disadvantages are that they have paid more than other residential customers with smart meters for a comparatively low level of service improvement. The accurate monthly bills are also in some ways a burden for consumers as well as a benefit. Prior to smart meter rollout electricity costs were averaged out over the course of the year. This lowered consumer awareness of how their actions influenced their costs but it also protected them from extremely high bills during the cold winter months. On top of this, no information of feedback displays have been provided to help consumers control these costs, resulting in shock electricity bills for some on electric heating. This is particularly difficult for low income families and those who live on fixed budgets. In this way smart metering has directly penalized the most vulnerable members of society who also had to pay the 200 Euros to have the meters installed. 6

7 It points to the need: 1. For protective regulation during rollout 2. For mandated feedback and education requirements as an integral part of any smart meter policy and regulatory package. Environment Benefits None so far. Though it may be that the shock winter electricity bills will encourage an improvement in energy efficiency among residential consumers. This has not as yet been calculated. During pilot tests accurate monthly billing has increased awareness and encouraged savings of approximately 4%. The situation may improve further if the major utilities introduce dynamic pricing and improved feedback capabilities. It is therefore too early to judge at this stage the final results of this rollout. Costs Mechanical meters can last up to years. The life expectancy of Smart Meters is years and this is not yet proven. Smart meters also draw current and the data-handling processes also require electricity. Therefore the rollout of 5.1 million Smart Meters comes at an environmental cost. At this stage it is not possible to calculate whether the Swedish Smart Meter rollout will provide more environmental costs or benefits. Market reaction Due to protests at the high electricity bills during the winter , the government has launched an investigation into the cost of upgrading the smart metering system and data handling capabilities in order to enable In House Displays for residential consumers and dynamic pricing programmes. The results will be provided in the Autumn of 2010 Challenges/ Solutions A low level of systems capabilities and a lack of regulation Discussion Swedish smart metering policy has been a success in that it solved the problem it set out to solve namely badly handled switches and data handling practices between retailers and network companies. It also is meeting its second goal, to provide accurate monthly invoices to all consumers. However from the point of view of this report analysing the impact of smart meter regulation on environmental programmes and customer services, the regulation has underperformed. From this point of view, Sweden is a prime example of the importance of smart meter regulation which takes into account not only one immediate political challenge, such as public discontent due to badly handled switching, but also long term energy efficiency and systems efficiency goals. These can be reached through customer feedback programmes and dynamic pricing and both require substantial data handling infrastructure and meter functionality. Customer services and protection of vulnerable customers should also be carefully considered. Without all of the above smart meters do not bring environmental benefits (over and above the potential benefits of accurate monthly bills) and they do not necessarily improve customer service to any substantial degree. 7

8 References EEE Limited, Henney Alex, Nordics-SM-2009, Respond 2010 Kristina Engström Smart Metering-operational Challenges from E.ON Elnät Sweden Metering Scandinavia Lars Garpetun Smart Meteringin the future; Experiences from operations after a full-scale Smart Metering rollout. Vattenfall Distribution Nordic 8