GREAT GOOD PRACTICE GUIDELINES series
issue four of five
SMART GRID MARKET
OPPORTUNITIES,
BARRIERS AND
GOOD PRACTICE.
Growing Renewable Energy Applications and Technologies: Good Practice Guidelines Series
Introduction
In light of the European Union’s objectives to develop a sustainable,
reliable and efficient electricity market, renewable and distributed
generation technologies are being deployed, together with smart
grid technologies which allow their active participation in the
electricity market.
However, these technologies are still facing technical, economic and
regulatory barriers. Current Market conditions were assessed,
engagement with SMEs took place, resources were developed to help
SMEs progress to market and a Good Practice Guide to Market
Opportunities was produced. As the market is immature,
recommendations for Development Agencies were also produced.
GREAT, supported by Interreg, aims at accelerating the deployment
of smart grid benefits in North West Europe by means of encouraging
communities and small to medium size enterprises to develop technological
solutions for smart grids, renewable energy and distributed generation.
Growing Renewable Energy Applications and Technologies: Good Practice Guidelines Series
Approach to determine Smart Grid Market
Opportunities, Barriers and Good Practice.
1. Smart Grid Overview to define and determine the scope
of the sector/markets, within the context of the GREAT
project and including Regional Summaries.
2. A Regional analysis of the Smart Grid Markets outlines
the policies in relation to smart grid in each region,
identifies the challenges and opportunities provided in
the Smart Grid Market in each region and highlights the
Barriers to Entry for SMEs into the sector.
3. The SME engagement process provided knowledge to
SMEs on Developing Technology, demonstration projects
and gathered feedback on SME requirements.
4. The Resource Development focused on developing training opportunities for SMEs, both online and offline and the
development of an online Tender aggregating site.
5. The Good Practice Recommendations evolved from the
research and development work to provide good practice
guidelines for SMEs and Regional Development Agencies
and highlight policy and regulation issues.
Our aim is to provide SMEs and Regional Development
Agencies with an overview of the market, identify the opportunities and challenges for SMEs, and provide developmental
and practical resources for SMEs to engage with Smart Grid
Markets.
Project Outputs
• Smart Grid Overview and Regional Analysis of
Smart Grid Markets
• Report - The Smart Grid and SMEs – Market
Opportunities, Barriers to Entry and How to
Overcome the Barriers
• SME Engagement
• 5 Technology Watch Events
• Showcase Workshops in Contracting
• Resource Development
• Tender Aggregation Web – www.greatproject.eu.com
• Training Aggregation Web – www.greatproject.eu.com
• Good Practice Recommendations
• Good Practice Guide
Growing
GREAT
GOOD
Renewable
PRACTICE Energy
GUIDELINES:
Applications
Smart Grid
and
Market
Technologies:
Opportunities,
Good Practice
BarriersGuidelines
and Good Practice.
Series
Recommendations
The Smart Grid Market is in an embryonic
stage of development in North West Europe.
This is a major factor for SMEs as it indicates
a high risk factor in developing a product
or service for the industry.
Using the National System of Innovation
Classification system (Fig 1), the Supply Side
consists of actors that are involved in the
physical production of technology, the demand
side includes end users and the Intermediary
Structure consists of institutions and organizations aiming at improving the interface
and knowledge flow between the Supply and
Demand side.
GOVERNMENT POLICIES AND REGULATIONS
SUPPLY
SIDE
inTERMEDIARY
STRUCTURE
deMAND
SIDE
kNOWLEDGE & TECHNOLOGICAL INFRASTRUCTURE
Growing Renewable Energy Applications and Technologies: Good Practice Guidelines Series
Market Challenges /
Opportunities
The following Challenges are being
addressed (primarily using pilot projects) in
the North West European area and provide
SMEs with the appropriate technologies/
services with potential Opportunities to
develop new markets;
Supply Side Opportunities
The market in this sector is primarily in working with TSO
(Transmission Systems Operators) & DSOs (Distributor
Systems Operators). Or the larger Utility Companies.
The main subsectors that are being researched / developed
by Pilot Projects in North West Europe are:
Intermediate Infrastructure
This market is characterized by collaborations between
Research institutes, Development Agencies and SMEs.
It is generally accessible to SMEs who are innovative and
engaged in research activities.
Each Region is developing a number of specific areas of
expertise, but there is a significant collation between
activities in each region.
The following is an overview of the key characteristics of
the sector in North West Europe:
• Regional Expertise related to Regional Assets
and Demonstration Systems
• Transmission Systems Conventional & Advanced
• Strong Ecosystem to engage with SMEs in early
stage Innovation
• Energy Storage
• Strong emphasis on Innovation Support for SMEs
• Increased use of Photo Voltaic Technology
• Opportunities to engage with R & D projects
• Micro grids
• Focus on ICT based solutions, test projects and
heat efficiency
• Smart Grids
• Network Optimization
Demand Side Opportunities
The market in this sector is characterized by Pilot
Projects and consumer adoption of Smart Technologies
to control and reduce energy cost and usage. Projects
that are being deployed in North West Europe include:
Projects to Empower the Consumer
• Development of Smart Energy Cities
• Smart Technologies for End User
• Electric Vehicle Integration Projects
• Metering Infrastructure
SME Learning
• The most accessible market is the intermediate
infrastructure. This is generally characterized by
a collaboration between an SME and a Research Institute.
• Contact you local Research Institute or Research
Intermediary to get involved in Research Projects and
access to funding stream such as Horizon 2020.
Development Agency Recommendation
• Generate closer links with other Regional Development
Agencies to promote SME opportunities.
• Encourage Supply Side Actors and Demand Side Actors
to disseminate information about projects to SMEs
before the start of the tendering process on projects via
Technology Watch Events and/or Meet the Buyer events.
Growing Renewable Energy Applications and Technologies: Good Practice Guidelines Series
Barriers to Entry
There are a number of barriers to entry into
the marketplace which has a negative effect
on the development of the Smart Grid Market.
These have Regional Variations, but in general
are a generic European issue. The main barriers can be categorized under four headings :
Economic Barriers
The following Economic Barriers were common to all regions and affect the development of the SME sector within
the market:
Technical Barriers
The transition from fossil fuel based energy production
systems to renewable energy production systems and the
impact across the Electricity Value Chain provides many
technical challenges.
The challenges vary from Region to Region as the
Renewable Energy Production Assets in each region are
based on different mix of technologies within the regions.
However a number of common technical challenges have
been identified :
• Reconciliation of Generation, Demand and
Network Constraints
• Distribution of Costs and Benefits to Stakeholders
• New Business Models for Energy Suppliers
• Transmission and Distribution Networks Investment
• Variability in Renewable Energy Electricity Production
• Uncertainty in relation to financial frameworks for
Distributed Energy Resources
• Lack of Inoperability between different Smart
Grid elements
• Current Low Energy Prices and the Low Value of Emission
Allowances in the Emissions Trade Systems
• Meshing of Power Engineering and ICT Industrial Sectors
• High Cost for Grid Investment Programmes
• Rate of Development of enabling technologies.
• Some Economic Barriers were specific to particular
regions such as :
Regulatory Barriers
• Access to Funding
Regulatory Barriers were identified in each region as being
one of the most important problems to be addressed. The
complex array of regulations across the Smart Grid acts as
a significant Barrier to Entry. The most common Regulatory
Issues identified are :
• Financial Return on Investments
• Multinational Dominance of Market
• Lack of Clear and Secure Routes to Markets
• Perception of an Immature Market
Social Barriers
The main Social Barriers identified were regional specific
but have the following Common Themes:
• Low Interest in Energy Saving Behaviors amongst
the Consumer
• Lack of Information for Industrial Consumers on the
related to the development of smart grids.
• Lack of awareness and in some cases fears
(data privacy) in relation to Smart Meters.
• Not Invented Here Syndrome – All DSOs inventing
their own technological systems and the lack of
International Standardization.
• Mistrust between Actors
• Understanding the concept of Smart Grid.
SME Learning
There are many barriers to this emerging
marketplace, therefore SMEs should carefully
research the potential market for their product or
service or ideally partner with a larger utility, pilot
project or Research Institute in the early stage
of new product/service development.
• The current Regulatory Frameworks deliver uncertainty
in relation to roles and responsibilities and the sharing of
costs in the Smart Grid Sector.
• Regulations imposing minimum requirements for service
for qualification for participation in Wholesale Markets
• Discouraging the development of Small Power Grids
• Regulatory Uncertainty with many actors involved
• Securing Optimum Regulation to ensure optimum balance
between cost and benefits.
Development Agency Recommendations
• A high level of financial support will be needed to
enable SMEs develop in this sector as the market
is very immature and the risk associated with developing a new product or service is high for the SME.
• Significant progress on reducing the Barriers
to Entry to the Marketplace could provide
European SMEs with First Mover advantage in
the World Market.
• The Development of a European Smart Grid
Operability Standard(s) and optimization of
the Regulatory Frameworks could strongly
accelerate innovation in the sector (for which
SMEs could become major agents)
• Communication to Industry of the opportunities
Smart Grid provides.
Growing Renewable Energy Applications and Technologies: Good Practice Guidelines Series
Good Practice
Recommendations
All regions have developed a number of
projects in Smart Grid to demonstrate
technologies, establish networks or acquire
knowledge. Most projects involving SMEs
ranged from €1.5 million to €5 million and
are often subsidized. SME involvement is
often restricted to installers or in some
cases hardware and ICT services.
Some regions has more emphasis on research than others,
whilst some regions are more focused on developing SMEs in
the sector. The key trends evolving from the Good Practice in
Developing New Market Opportunities are :
Supply Side
• Functioning Smart Grids on a small scale
• Electrical benefit from PV
• Applied Technologies in Grid Monitoring/Repair
Intermediate Infrastructure
• Collaboration between Research and Private Sector
• Funding Support Mechanisms
• Smart Communication / Control Technologies
Demand Side
SME Learning
• There are a number of mechanisms and opportunities
to develop new products / services, but most are in a
collaborations with research / knowledge organizations.
• There are developing segments on the Demand Side for
products / services that offer value to the consumer.
Development Agency
• A strong Ecosystem to support SME development, including product testing enables SMEs to develop innovations.
• Development of Funding Streams (including access to
existing streams) leads to the development of new innovations / solutions and SME development.
Policy
The development of any market is a function of policies being
pursued at Regional, National and International Levels. An
overview of the policies being pursued in the regions indicated
that each region had a positive development policy for Smart
Grid (e.g. Fig 2 – UK Smart Grid Roadmap).
However a number of key trends were also identified :
• High Grid Investment required to enable the energy transition
• Possibility of the creation of a significant number of jobs
• Emphasis on Cost Effective Solutions
• Smart Metre Deployment Plans
• Electric Vehicle Integration
• Development of Prosumers
• Smart Homes / Consumer Products
There were some regional specific concerns such as Public
Acceptance of Grid Development, Interaction between Actors,
Grid Constraint etc.
• Smart Energy / Metering Solutions
Critical Developments
Rapid expansion of inflexible / less flexible generation (intermittent renewables and then nuclear)
in conjunction with retirement of flexible coal generation
Expansion of demand response
Localised electrification of heating and transport
Localised penetration of distributed generation
Potential inclusion storage
Widespread electrification of heating and transport
Potential widespread penetration of DER (distributed energy resources - includes distrubed energy
resources - includes distributed generation, demand response and storage)
Increasing penetration of vehicle to grid
2010-2020
2020-2030
2030-40
2040-2050