Regulatory Action Needed To Accelerate Smart Grid Investment

 

A joint report issued by Accenture and the World Economic Forum has concluded that policy-makers need to transform regulatory incentives in order to accelerate smart grid investment. Accenture and the World Economic Forum also warn that the benefits of smart grids are unlikely to be fully realized without utilities improving their engagement with consumers. The report, "What Makes a Successful Smart Grid Pilot?" assessed 90 smart grid pilots and engaged 60 industry stakeholders. The report identified two key challenges facing smart grid pilots : Utilities are struggling to create smart grid business cases, and regulatory incentives are failing to reflect the low-carbon agenda. The fragmentation of deregulated energy markets, in particular, is holding back investment by complicating the allocation of risk and reward. Some consumers have shown resistance to smart grids, with examples of pilots being halted by regulators due to the lack of clear consumer benefits. Data privacy and security concerns continue to threaten consumer acceptance. The report concludes that the combination of clear and stable regulation and proactive consumer engagement will help create the profitable business models for the utility, information technology, telecommunications and other industries involved in creating smart grids. “There is a risk of lowest-common-denominator smart grid rollouts, with basic functionality and limited consumer response,” says David M. Rouls, managing director of Accenture Smart Grid Services. “Regulatory conditions must be changed to reward investors for the risks they face and to encourage utilities to integrate multiple low-carbon technologies to demonstrate the art of the possible for smart grids. And if utilities want to improve the success rate of smart grid pilots, they will need to set clearer objectives and improve consumer engagement.” Accenture and the World Economic Forum have defined a new Smart Grid Pilot Framework to address these challenges. The report makes the following key recommendations to improve smart grid pilot success: Use pilots to improve regulatory incentives. Utilities should help change regulations by sharing continuous pilot evaluation data with regulators, enabling them to include a broader range of outcomes in the regulatory framework. Policy-makers should allow utilities higher rewards for the risks associated with implementing immature technologies. This is critical where funding for pilots comes from bodies other than regulators. Regulators should also align desired low-carbon outcomes to investment incentives. Apply analytical rigor in the scoping phase. Pilots must have clear parameters and objectives, and the implementation of technologies should be separated from the introduction of new price tariffs to better understand which is causing consumer responses. Utilities must distinguish between smart grid capabilities that rely on consumer behavioral change and those that are focused on network performance. Improve consumer insight and engagement. Utilities must deploy more advanced behavioral segmentation techniques and begin pilots by targeting small to medium-sized enterprises, which are likely to be the most responsive early adopters. Utilities must also address data privacy and security concerns, and future grants should be conditional on local regulatory compliance. SOURCES: Accenture, World Economic Forum