Economic potential of smart metering in Germany

Transcription

1 Economic potential of smart metering in Germany David Bothe, Jens Perner, Christoph Riechmann 9 October 21

2 Our analysis Goal Approach Exemplary implementation of cost-benefit-analysis for the economic potential of smart metering in Germany Modelling of annual net benefit from Smart Meters in German households for 21 / 215 / 22 Focus on electricity smart meter for households Informs the political debate on a mandatory rollout for SM in old buildings Critical question Which organisational model for Smart Metering realises the highest net utilitygains? How can the differentiated characteristics of households be considered within the CBA? Which benefits by diversity of technologies? Net benefit = sum of macroeconomic cost reductions through energy savings, load shifting and simplified customer handling less the additional costs for installation of SM But: No consideration of rollout effects on market penetration over time Parameterising a best guess scenario based on data from secondary studies, cross-checked with available figures from initial smart metering experiences in Germany 2 Frontier Economics

3 1 2 3 Overview over results Mandated rollout for all households not profitable, since smart meters will not pay off for many premises Freedom of technology choice and installation options for households imply highest costeffectiveness Current market dynamics indicate a significant option value of postponing any binding decision Saving and shifting potential of household depend (among others) on pattern of consumption Hence possible cost savings via smart metering are often below the additional costs, e.g. for small households Adapting the SM system to customer requirements increases net benefit Cost reduction (e.g. synergies via use of existing broadband) Increasing benefit (e.g. integration into heat pump) This forecloses an uniform, coordinated proceeding Future benefits of SM not guaranteed, given various uncertain trends Lock-in through early mandatation may therefore be inefficient Nevertheless a value from an early standardisation might exist 4 No economic justification for an immediate fully mandated rollout Market-based organization / competition promises more efficient solution for households Some role for the regulator is still possible regarding minimum standardisations 3 Frontier Economics

4 1 Comprehensive rollout not profitable For a lot of households smart metering is not profitable... Net benefit per household at full coordinated rollout of smart metering Netbenefits (in m ) % 1% 2% Net effect per year: Mio Total investments required: 5.6 Mio 3% 4% 5% 6% 7% 8% 9% Net benefit = annual savings through reduction and shifting of consumption as well as reduced customer handling costs less annualized costs for the smart meter Scenario: Installation of uniform smart meter (with the best cost-benefit-ratio) and accounting for economies of scale... since consumption patterns vary widely Advantages of smart metering depend primarily on the patterns of consumption of households How high is the existing potential for energy savings / efficiency improvements? To which extent can the load be shifted from peak to off-peak? A B Especially for smaller households with lower consumption, smart meters are not profitable in any scenario 4 Frontier Economics

5 1 A Energy savings depend on average consumption Saving potential through smart metering Results from international studies vary: Latest studies within a regulatory environment indicate 3-5% of total household consumption Decreasing effect of smart meters over time through habituation in the long run Competing actions Factual saving benefits of SM might be impaired by competing efficiency increasing actions Aim of the core IEKP (Germany s Integrated Energy and Climate Package ) measure (without smart metering) alone: -12% until 22 kwh p.a. Optimistic assumption of 5% saving potential through SM in the long run Hence, absolute saving potential depends on size and consumption of household Our analysis is based on a distribution of consumption among German households based on a number of persons, living space and usage of electric heating (night heating storage and heat pump) Derived distribution of annual consumption per household 21 1% 2% 3% 4% 5% 6% 7% 8% 9% HH with night storage heating HH with heat pump HH without electric heating 5 Frontier Economics

6 1 B Low potential of load shifting for households Potential varies between different households ca. 1% fraction of average consumption Direct load shifting through automation Indirect load shifting via tariff incentives Load shifting not realistic Night heating storage Heat pump Boiler Fridge and freezer Washing machine Dishwasher Dryer Lighting Cooking TV I&C technology Not taken into consideration, since realization not tied to smart metering Only relevant potential for CBA Not relevant for the potential analysis Feasible net potential is further narrowed Advantage of stochastic smoothing of demand is lost by coordinating load Catch-up effect limits the use of load shifting Assumption: 6% of total demand shiftable *) *) Different figures apply to heating households 6 Frontier Economics

7 2 Freedom of choice increases benefit - Not one size fits all Exemplary advantages of technology choice Synergies in communication Voluntary adaption of smart meters may allow for usage of available broadband connection Integration into other devices Other devices may provide the metering function without additional hardware (e.g. heat pump or control unit of local generation plants) Coordination of time of installation Combination of SM-installation with other operations In coordination with regular change costs e.g. -5% in comp. to powerline e.g. -45% if integrated into heat pump e.g. -3% d. combination benefits *) Might be achieved without SM Consideration of specific customer preferences Increases in benefits can be achieved when preferences for certain technologies exist (e.g. internet tools or apps of different providers) *) This potential would not be realised in case of a coordinated uniform rollout But: Counter-balancing effects of economies of scale through standardisation need to be considered 7 Frontier Economics *) No quantitative incorporation into the analysis

8 3 Looking forward: Competing trends and high uncertainty Effect on net benefit Demographics Decrease of population / increase in the number of households in Germany Smaller size of households with increasing living space Basic trends (Based on government energy outlook) Generation costs Patterns of consumption Wholesale prices increases only slightly until 22 up to 55 /MWh (Base) Declining Base/Peak spread lessens the attractiveness of load shifting based on tariffs Integration of REN might require short-time load management via automation The need for electricity heating slightly decreases, heatpumps will not compensate the extinction of NSH Trends with high amount of uncertainty Meter technology E-Mobility Expansion of local generation Cost reductions for meters due to learning curve effects Accounted for in quantitative analysis Additional qualitative effects Available communication infrastructure Quantification not feasible due to uncertainty, which suggests an option value of postponing any binding decision on smart metering *) Possible feedback effects through optionally occuring price effects by smart metering as well as special effects caused by the change in generating capacities are not incorporated. 8 Frontier Economics

9 4 Optimal rollout scenarios for our analysis Without system-competition (no choice of technology by the consumer) With system-competition (full choice Point2Point-Kosten of technology by the consumer) Completely mandated 1 Szenario coordinated rollout Cost reduction through coordination Uniform technology 1% rollout Coordination 2 Szenario compulsory choice Free choice of technology 1% rollout 1a Scenario EDL-21 (basic meter) 2a Limited to a sub-group (e.g. based on threshold) Freedom of choice by the consumer Consideration of EDL-21 version (Basic meter) Synergies are isolated considered in an additional scenario 3 3a mandated Szenario freedom of choice Free choice of meter (dump or smart) SM chosen by 5% of customers with positive net benefits Synergies 9 Frontier Economics

10 4 Results of the analysis - Summary 1 1 Coordinated rollout with optimal standard meter 5 1a Mandated rollout of basic meter (EDL-21) Annual net benefit over all households Netbenefits in m (in 29 prices) a 2 3 3a 2a 2 2a 3 Compulsory choice, mandated rollout with system-competition Compulsory choice for all households exceeding 5 kwh Freedom of choice with 5% penetration for smart meters a Freedom of choice (3) with additional synergies Conclusions Mandating smart metering for all households always leads to dead-weight losses, since in any scenario there are numerous households with negative net benefit If nevertheless a full rollout is considered, focus should be on cost optimization by economies of scale Free choice of technology enables the households to use the most efficient technological options Therefore, system-competition is the preferred organisational form A potential lack of market take-up may be overcome by a partial mandate for certain types of households with (expected) positive net benefit 1 Frontier Economics

11 4 Results Details (for 21) mandatory rollout partial rollout Net benefit The benefits of a mandatory rollout are always negative, and positive for a partial rollout Net benefits (in m ) a 2 3 3a 2a Capital employed The necessary capital investments for all mandated rollout scenarios is more than 2 billion higher than with a partial rollout Percentage of smart households In all scenarios with a partial rollout, less than 2%. Even with an optimal market penetration less than 3% would install a smart meter. frozen capital (in m ) 6, 5, 4, 3, 2, 1, smart households (in %) 1% 8% 6% 4% 2% % 5,648 2,824 4, a 2 3 3a 2a 1% 1% 1% 4 14% 14% 18% 1 1a 2 3 3a 2a Attractive Highest social social rate of rate of return return smarte households (in million) Average benefit of a smart meter for each smart meter household The customers in scenario 2a who installed a smart meter have on average benefit of 7.2. Average benefit per household a 2 3 3a 2a 11 Frontier Economics

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