Smart Grid Market

An Expert's View about Energy in Italy

Posted on: 12 Nov 2012

Summary

While the growing production of electricity from renewable sources alleviates Italy from its heavy dependence on foreign energy sources, its low predictability causes imbalances and management challenges for the country’s electrical network. Therefore, it is crucial to foster the evolution of the country's network so that it allows the integration of the actions of all the users connected to it, in order to improve efficiency, sustainability and security. Looking at the requirements and incentives towards the adoption of various smart solutions as defined by the Italian authorities, we can notice an imbalance towards the stages of transmission and distribution, as opposed to generation and consumption, as well as the presence of measures that promote adoption of specific solutions such as smart meters, but without the necessary holistic approach. Many smart grid technologies are commercially available in Italy but, except for advanced metering systems and for automation, control and sensor systems, they are not very widespread. A study carried out by the Politecnico University in Milan estimated a very large potential market (between $19.5 and $78.2 billion) for smart grid technologies in the 2012 – 2020 time span. The most significant part of the above market potential concerns solutions for the distribution phase (between $11.7 and $19.5 billion), because that is the one currently most affected by the diffusion of non-programmable renewable sources and shows a level of "intelligence" which is considerably lower than that of the transmission phase.

Market Demand

The impressive growth in the production of electricity from renewable sources, which was generously promoted and encouraged in Italy through the adoption of the EU's 20-20-20 strategy, implies important consequences and challenges for the Italian electrical network. While production of electricity from renewable sources alleviates Italy from its heavy dependence on foreign energy sources, which still cover 85% of Italy's primary energy needs, its low predictability causes imbalance and management challenges for a network that had been engineered and implemented according to the characteristics and requirements of a centralized generation model. Therefore, it is crucial to foster the evolution of the country's network so that it allows the integration of the actions of all the users connected to it, in order to improve efficiency, sustainability and security. According to a study carried out by Milan's renowned Politecnico University, all three main phases of Italy's electrical network should adopt "smart" functionalities in order for the country to have a "smart grid" and namely:

- Generation - It is necessary to optimize the operations of the various power sources, basing them on grid conditions and demand characteristics (smart generation functionality);

- Transmission and distribution - Reliability, quality and network security must be ensured through actionreaction mechanisms (smart network functionality);

- Consumption and use – The consumer has to assume an active role in the system, through forms of monitoring and interaction with other actors in the network (smart metering and active demand functionality);

The adoption of smart technologies would enable the above functionalities and make the grid "smarter", allowing renewable energy production on a larger scale.

Legislation and Incentives

Despite the fact that starting in 1999 the Italian electrical network has been liberalized with regards to the activities of energy production and sale, its evolution is still heavily influenced by the regulator, i.e. the Authority for Electricity and Gas (AEEG), especially for the phases which are not subject to liberalization, i.e. power transmission and distribution. Also, laws currently in place can steer the path of the energy production and sale phases towards a greater "intelligence" of the network. Therefore, AEEG plays a key role in the transition towards a smart grid. Its activity is mainly inspired by guidelines defined at European level and particularly by the Agency for the Cooperation of Energy Regulators, which AEEG has pioneered in implementing. However, Italy is still lacking quantitative indicators for the evaluation of the performance of the electricity generation and consumption phases. The above indicators would empower producers and users, making them aware of their impact on the management of the network.

Looking at the requirements and incentives towards the adoption of various smart solutions as defined by the AEEG, we can notice an imbalance towards the stages of transmission and distribution, as opposed to generation and consumption, as well as the presence of measures that promote adoption of specific solutions such as smart meters, but without the necessary holistic approach. Steps forward towards smart grid development have been made through Resolution ARG /elt 39/10, which introduces a form of extra return on capital invested in pilot projects that include smart solutions. AEEG has gathered information from these pilot projects and drafted an "output based" incentive scheme, which is based on the actual performance improvement that can be achieved through the investment. It should also be noted that AEEG has shown greater sensitivity towards to the need for a greater involvement of consumers, through the introduction of a bi-hourly rate, which has the goal to encourage consumers to use energy more responsibly. Despite these efforts, there is still a lack of more incisive actions to stimulate the consumer to become an active player in the electrical network

Smart Inverters

Smart inverters currently have almost no penetration in the Italian market, as opposed to other countries. This happens because currently in Italy investments in smart inverters cannot be justified financially and they are being adopted only by owners of plants powered by renewable sources in low tension and only because a specific regulation (CEI 0-21) mandates that they do so. However, the studies conducted by Politecnico show that even in the least favorable scenario smart inverters have a considerable potential and are destined to play an important role in the Italian Smart Grid.

Read the full market research report


Posted: 12 November 2012

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