More complex definition of smart metering was developed during the preparation of Implementation Study of Smart Metering in Poland issued by the Institute of Power Engineering and Ernst & Young Warsaw.
The study defines smart metering in its two aspects: a technical and a functional one. This definition is illustrated by the drawing below.
The estimated total costs of AMI implementation are significant and vary in the analysis conducted in different countries from above EUR 102 to as much as EUR 162 per e ach metering device (for details please refer to page 20 of this Report). The differences in CAPEX result mainly from different assumptions regarding chosen meter functionalities, number of substations and IT systems’ cost.
As a consequence of high investment costs it is necessary to prepare deep cost-benefit analysis, which would take into consideration not only long-term costs of the AMI implementation, but would also cover such specific aspects of each CSE’s country energy market as:
- the size and structure of the market,
- average energy consumption and its price constituting the potential for consumer behavior change,
- level of network losses,
- other market factors such as share of RES and actual electricity delivery quality.
These factors are crucial for the analysis of each market’s potential regarding the implementation of AMI and potential benefits attributed to it, and are further discussed in this executive summary and the Report.
CSE markets’ potential for AMI implementation
Based on the described market features criteria of the analysed CSE countries, a ranking of their potential regarding AMI implementation has been prepared. Every criteria has been assigned a weight:
- market size (2 points),
- average electricity consumption (2 points),
- average electricity bill (5 points),
- network losses reduction potential (3 points),
- quality of supply (4 points),
- planned share of RES in electricity production in 2030 (5 points),
- implementation complexity level – based on the number of DSOs (1 point).
A country could obtain a maximum of 308 points. The results of the assessment of the potential for AMI implementation in each CSE country are summarized in the graph below
The ranking suggests that Greece has the highest potential for AMI implementation, while Lithuania is least likely to implement smart metering. The countries with the second highest AMI implementation potential are Romania, Cyprus, Slovenia and Hungary with a similar number of points.
In the case of Greece, it is the market size, the electricity consumption, and the average annual cost of electricity for residential customers, as well as the future share of RES in electricity production, which have the greatest influence on the country’s high score in the ranking.
What matters most in the case of Romania is the market size, significant distribution network losses, low quality of energy supply, and high future share of RES in electricity production. Cyprus, Slovenia and Hungary are countries, where the average electricity bill and consumption build the AMI potential.
Lithuania is the country with one of the lowest average annual electricity price for residential customers, consumption per household and, in the same time average level of network losses and quality of supply metrics. That is why we assess Lithuania’s potential for AMI implementation as low. For the other countries not commented above, different drivers affect AMI implementation potential.
The size and structure of the market
The size and structure of the market – mainly the number of consumers – drive the level of necessary CAPEX per metering device. It can be assumed that the higher the number of customers, the stronger is the economy of scale, therefore the lower CAPEX per metering device.
The following chart presents the size of selected CSE countries’ energy markets – the overall number of electricity consumers. In the CSE countries households constitute over 80% of customers and this group is mostly considered when analysing AMI benefits.
As far as the size and the structure of the energy market are concerned, it is clear that the biggest potential lies in Turkey and Poland. As a consequence, it may be expected that these countries may mostly benefit from the economy of scale during massive AMI roll-out.
Potential consumer benefits associated with the average energy consumption level
According to most analyses performed by CSE countries, the AMI feature will enable residential consumers to constantly monitor their energy consumption, and as a result to decrease their energy bill as the most important consumer benefit. Hence, it may be assumed that the countries that both have the highest average electricity consumpiton and the highest price of electricity, will have the highest potential to benefit from AMI implementation. The following chart summarizes these relations.
As presented above, the highest average electricity consumption in the household sector of the energy market is in Cyprus and Slovenia, with respectively an average of 4.2 MWh and 4.0 MWh consumption of electricity per household per year. When it comes to the electricity price (without distribution charges and VAT), the highest can be observed in Malta and Cyprus - approx. 219 EUR/MWh and 145 EUR/MWh respectively.
As a consequence, the highest average electricity bills in 2010, thus the highest potential of electricity bill reduction, were observed in Cyprus (approx. 605 EUR/household/year) and in Malt a (approximate 440 EUR/household/year). Romania, Lithuania and Turkey have the lowest AMI potential when potential for electricity bill reduction is considered.
Potential DSO benefits associated with the average network losses level
If electricity bill reduction is the biggest benefit for electricity consumers, the decrease in the level of network losses would be the highest benefit for distribution system operators. Network losses can be split into two groups: commercial and technical. Commercial losses are defined as losses related to energy that was delivered but not metered, billed or paid for and can be split into the following categories: theft, meter reading fraud, meter tampering, inaccurate metering. Technical losses are losses, which are the result of physical phenomena accompanying the energy flow in the grid. Smart metering implementation will mainly enable DSOs to constantly monitor electricity consumption, thus will enable them to be informed of any unauthorized connection or of meter tampering, which is the main source of commercial network losses. On the other hand, constant network flow monitoring may enable DSOs to reduce technical network losses. a percentage of electricity input to the grid.
As far as the potential to reduce network losses is concerned, the highest level of losses in 2010 could be observed in Malta, Turkey and Romania at the level of 19%, 15% and 13% respectively. On the other hand Cyprus, Slovenia and Slovakia have the lowest potential to reduce network losses.
Other factors that influence country’s potential regarding AMI implementation
The analysis also covers other aspects of CSE countries’ electricity markets that may be the source of potential benefits or additional costs such as:
- quality of electricity supply – the level of unplanned interruptions of electricity supply and their length, which may be avoided thanks to the implementation of AMI and Smart Grid functionalities,
- Renewable Energy Sources (RES) share in the “fuel-mix” – the rapid development of RES will trigger faster development of AMI as the first step towards Smart Grid implementation,
- complexity of AMI implementation – it may be assumed that higher costs of smart metering deployment will have to be borne by countries with a high level of market complexity understood as a high number of entities (DSOs) involved, which may cause additional costs regarding i.e. IT systems.
Status of AMI implementation in CSE countries compared to their potential
Greece, Romania, Hungary, Cyprus and Slovenia have the highest potential for AMI implementation among the CSE countries; therefore, in theory, these countries should be the leaders in the deployment of smart meters in the CSE region.
Gathered information regarding Smart Metering diffusion in the CSE region indicates, however, that quite different countries (except for Slovenia where big scale implementation covering nearly 50% of metering points is confirmed) are the most ambitious players in the market. While Malta is the undisputed leader of AMI implementation due to the almost finished country-wide roll-out, it is followed by Estonia where utilities themselves started a roll-out that should cover most of the electricity consumers in the next five years.
The other significant players in the field of SM are Bulgaria, Poland and Slovakia, where the DSOs carry out some big scale pilot projects and implementations. For instance, there is a country-wide roll-out planned in Poland.
Status of AMI implementation in the CSE countries
The following drawing presents the status of AMI implementation in analysed CSE countries divided into four groups.
CBAs’ results and regulatory approach towards AMI implementation
Hungary is the only country, which has so far conducted a country-wide CBA. Its results proved the economic viability of AMI implementation. On the other hand, it is very likely that another CBA study will be conducted, which will verify the outcomes of the first one and may have significant impact on Hungarian plans regarding AMI implementation.
Among the rest of the CSE countries three have already started carrying out CBAs: Cyprus, where the results of the analysis are to be published by July 2012, the Czech Republic, where the country-wide analysis is to be finalized by September 2012, and Lithuania, where the CBA is being developed by Ernst & Young. In addition, Romania and Slovakia are planning to carry out a CBA.
The remaining eight countries are not planning to carry out CBAs that fulfil the requirements of the Directive 2009/72/EC. However, in four of them (Malta, Poland, Slovenia, and Turkey) some other types of cost-effectiveness studies have been performed, as well as in Slovakia. Usually those studies have been carried out by DSOs interested in installing smart meters in selected customer groups. According to available data most of those studies gave positive macroeconomic results.
Despite the fact that only one country conducted CBA to date, some countries have already adopted some legal provisions towards implementation of AMI and these include: the Czech Republic, Estonia, Greece, and Turkey.
Additionally, five other CSE countries are planning to adopt some regulations regarding AMI: Bulgaria, Hungary (at this stage only for pilot projects), Poland, Romania, and Slovakia.
When it comes to the question whether the implementation of AMI is going to be mandatory or optional, only in seven CSE countries the roll-out will be mandatory (for all customers or only for some groups of consumers – eg. in case of Turkey). These are seven out of the nine countries where there already exist regulations regarding SM or some legal provisions are on their way.
The Czech Republic and Slovakia, the remaining two countries from the group of those that already have legal provisions regarding AMI or that have plans to adopt such provisions soon decided to make AMI implementation optional (the Czech Republic - however, after EU approval of SM implementation plans, the implementation will become mandatory) or postponed the decision until the results of the CBA are revealed (Slovakia).
Other CSE countries lacking regulatory provisions make AMI implementation optional. Pilot SM projects are realized voluntarily by energy companies or distribution system operators. The adoption of smart metering technology and services is therefore dependent solely on the activity of the utilities.
Electricity market in Romania
The electricity market in Romania is the third largest among the CSE countries discussed in this Report. According to the Romanian DSOs, currently there are 8.06 million electricity customers in the entire country. In Romania the residential consumers completely dominate – they constitute 99% of all electricity customers. The share of non-residential consumers (such as industry and SMEs) is 1%.
In 2010, total electricity consumption in Romania was 41 317 GWh, of which residential consumers used 11 329 GWh. Since there were 8 million residential customers in 2010, the average annual energy consumption of a household was 1.4 MWh. This is low compared to the average annual energy consumption of all analysed CSE countries, which equals 2.0 MWh/household.
According to the Eurostat report on electricity price systems in 2010, the a verage energy price (without distribution charges and VAT) for residential customers in Romania is 33 EUR/MWh, which is the lowest price in the CSE region and which is less than half of the average price for all analyzed CSE countries: 76 EUR/MWh.
Based on the hous ehold average annual energy consumption and the average electricity price (without distribution charges and VAT), the average electricity bill can be estimated to amount to 46 EUR/ household/year.
Electricity distribution system and share of RES in energy production
There are four distribution system operators in Romania:
- Electrica S.A. – with 37% market share (3 million customers),
- Enel – with 32% market share (2.6 million customers),
- CEZ – with 17% market share (1.4 million customers),
- E.ON – with 14% market share (1.1 million customers).
The infrastructure of the distribution system is inefficient – as much as 13% of energy input is lost (in 2010 the network losses amounted to 7 058 GWh), whereas the average network losses in the entire EU amount to 6% of total electricity input.
The quality of energy supply in Romania is very low. According to CEER, in 2010, the number of interruptions per year (SAIFI) was 6.4 and the total duration of interruptions (SAIDI) was 635 minutes (10.5 hours). At the same time in the ranking regarding the quality of electricity supply prepared by the World Economic Forum, Romania ranked 78th among 133 analyzed countries (and 12th among the CSE countries, after the Czech Republic, Cyprus, Slovakia, Slovenia, Estonia, Lithuania, Poland, Latvia, Hungary, Malta, and Greece).
Today in Romania already 36% of generated electricity comes from renewable energy sources (mostly hydroelectric power plants). Hence, Romania is not planning to significantly increase the share of RES in the fuel-mix by 2030 (the use of RES should rise to 37.8%).
Potential for AMI implementation
In the ranking of CSE countries regarding the potential for AMI implementation Romania ranked 2nd among the 14 countries. The key factors that increase Romania’s potential for SM deployment are large market size, high distribution network losses, low quality of electricity supply, and intensively growing share of RES in electricity production.
On the other hand, the factors that could potentially impede SM diffusion are low energy consumption, very low electricity prices and, as a result, the lowest energy bills for residential consumers in the CSE region, as well as quite high level of complexity of SM implementation due to the high number of DSOs present on the market.
Regulatory approach to AMI and key stakeholders approach
In Romania neither legislation regarding the implementation of smart metering has been adopted, nor has the official cost-benefit analysis of AMI as required by Directive 2009/72/EC been carried out. In November 2010 a SM roadmap was approved as a part of “Action Plan for implementation in the national power system of the Smart Grid concept”, but until now it has not been followed appropriately.
However, there is a chance that the SM landscape in Romania will soon change, since a decision on a massive deployment of intelligent metering systems is expected in 2012.
The Ministry of Economy, Trade and Business Environment is currently working on transposition of Directives 2009/72/EC and 2009/73/EC to Romanian law. The drafted document has a chapter dedicated to the implementation of SM system, in which the following schedule is defined:
- first step – the Romanian Electricity, Heat and Gas Regulatory Authority (ANRE) has to evaluate the effects of implementation of smart metering systems on the electricity and natural gas market (cost benefit analyses) – third quarter of 2012,
- second step – if the results of the cost-benefit analyses are positive, ANRE will propose a schedule for smart metering implementation, taking into consideration the best practices, latest technology, appropriate standards and the importance of the electricity and natural gas market development.
Implementation of AMI in Romania has a strong support of the DSOs, the TSO, the government, and the regulatory office – ANRE. The DSOs are hoping that the implementation of intelligent network solutions will help increase the efficiency and quality of energy supply.
For the TSO the implementation of online monitoring and diagnosis systems for high voltage stations is a chance to reduce the maintenance costs.
According to ANRE „Smart Grids are required in order to ensure the coexistence of centralized production with centralized distribution, promoting efficient technologies, with low carbon emissions, cost optimization and improved tariffing, and, lastly, the integration of end consumers in energy trading, ensuring bi-directional communication and availability of information on different levels”.
The other key stakeholders – the retailers and the customers – do not express their opinion on the topic.
AMI pilot projects and country-wide roll-out plans
So far only one pilot project has been conducted in Romania. The project, carried out by Electrica, was to install 59 000 smart meters in several regions of the country.
No official schedule on the country-wide roll-out has been announced yet, but as stated above, a decision is expected in 2012.
The main objective of future implementation of SM in Romania is reduction of electricity consumption.