Consumers are key players in lowering carbon emissions from the electricity system. We are all consumers, so we must ask ourselves how we can contribute to smart energy usage and how this will affect our daily lives. Utilities are in for a radical change.

1. services smart energy
Smart energy – How
to become smart consumers
Consumers are key players in lowering carbon emissions from the electricity system. We are all
consumers, so we must ask ourselves how we can contribute to smart energy usage and how this
will affect our daily lives. Utilities are in for a radical change.
▶ GLOBAL WARMING and the need to decar- limited, and that everyone has to pitch in
bonize operations top today’s business to make it happen. But he is neither a tech-
agenda. This article presents a vision of nology freak nor interested in investing a
how this may affect the individual con- lot of time in managing his own and his
sumer, and also of the transformation fac- family’s energy consumption.
ing the utility industry. Therefore, he was happy when his
Salvatore is sitting at the airport waiting energy service provider offered him a best
for his flight when he receives an e-mail peak rate for the electricity supply to his
alert on his smartphone from his energy house that includes a remote control
service provider. The alert informs him option for his air-conditioning system, in
that back home in Italy critical peak pric- return for a reduced price during critical
ing for electricity will come into effect in peak demand times. During peak demand,
four hours. his provider manages his air-conditioning
It is summer . European utility- system remotely to reduce its energy con-
market liberalization has created fierce sumption. This typically results in a tem-
competition among energy service provid- perature increase of –C in Salvatore’s
ers. Regulators have increased the pressure home, which his family finds acceptable.
on energy companies to achieve substan- Consumers have the option of overriding
tial changes in the consumption behavior the remote air-conditioning control, but
for both residential and commercial cus- this is expensive, and everyone in the fam-
tomers. The target for electricity genera- ily understands and accepts the fact.
tion from renewable energy sources has Back to the airport. While Salvatore is
been raised to  percent by . The reading e-mails on his smartphone, he
opening of the European utility market has decides to take a look at the electricity
resulted in further consolidation, with a microgeneration unit at his summer house
number of pan-European players in the in Sicily. By clicking an icon on his mobile’s
segments of electricity generation, distri- touch screen, he opens a web page show-
Consumption distribution Germany bution, and retail. Electricity distribution ing that his solar panels are delivering kW
networks are undergoing a fundamental of electricity into the network. A quick
22% Private transformation into an integrated “Euro- check of the current market price for
households pean Smart Grid.” microgenerated electricity reveals that he
What does all this mean for Salvatore? might come out of the critical peak price
19% Motivated to make a personal contribution with a bit of extra revenue.
Commercial
25% Industrial
to global sustainability (and of course The scenario with Salvatore might, of
driven by financial incentives), Salvatore course, not be typical in , but it is
has recently signed a new contract provid- becoming obvious that all of us as consum-
ing a “best peak rate” for his house in the ers will have to play an active role in the
greater Rome area. reduction of greenhouse gases.
Electricity consumption has risen sub- This means, first, that we need to under-
stantially in Southern and Western Europe stand how we consume energy today. Sec-
during July and August, primarily due to ond, we need to learn how to use energy
13% Raw materials industry
7% Export
6% Generators
4% Losses (network)
3% Transport
1% Pumpenergy
air-conditioning systems and plug-in more efficiently, and how to change our
hybrid electric vehicles. Energy service consumption so that our interests balance
providers across Europe have introduced with the needs of a low-carbon energy sys-
penergy
tariffs with sharply higher prices during tem. Achieving this requires incentives for
peak-demand hours and incentives for good behavior and punishment for wrong
customers who are willing to reduce con- behavior. It will take some of our valuable
sumption during those times. time; it will add complexity to our life; and
Salvatore is a businessman and a father it might mean some loss of comfort. But it
with two small children. He understands has to happen.
Source: Elektrische Energieversorgung 2020, VDE 2005
and accepts that global warming must be Technology will help. Whatever future
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2. smart energy services
applications look like, they must be based some extent. The consequence of these
on precise measurements of consumption, mechanisms is an increasing volatility in
real-time communication, and smart tools the electricity system, with a correspond-
in order to help all of us – including the ing risk of blackouts.
non-technical – become responsible In order to address these challenges, the
energy citizens. electricity networks will have to become
more internet-like. The internet has been
S MART ELECTRICITY NETWORKS built as a robust network with distributed
Smart consumers cannot save the planet if resources and intelligence, and different
they cannot interact with a smart electric- options for routing information from
ity network. Therefore, a key element is source to destination. The Smart Grid idea
the transformation of today’s electricity applies the same concepts to electricity
networks into smart grids. The large-scale networks, such as virtual power plants or
integration of electricity generation from microgrids. Virtual power plants consist of
renewable energy sources (and other geographically distributed generators
developments such as the need to support managed as one power plant. Microgrids
electric vehicles) will dramatically change are parts of the electricity network that can
the operating conditions for electricity be isolated and supply enough energy for
networks. the consumers connected to the microgrid.
A substantial amount of electricity will Such setups will secure the robustness of
be generated at remote locations all over future electricity networks and avoid
the network such as Salvatore’s photo- blackouts.
voltaic-powered summer house, rather
than at central power plants. Also, the S MART COMMUNICATIONS
energy Salvatore saves by participating in The best internet-like concepts and dis-
his provider’s peak pricing program can be tributed intelligence do not help if network
seen as “virtual generation” in this context. nodes cannot communicate with each
Distributed generation will, however, other and with control centers. Communi-
affect the direction of electricity flow in cation networks connecting all electricity
the network, allowing it to flow back and network nodes playing an active role in the
forth. As well, the supply from many Smart Grid will be the nerve systems of
renewable energy sources is unsteady; for our future electricity networks.
example, varying with weather conditions. But demands on the communication
Because no large-scale storage systems networks will be high. The networks will
presently exist, electricity generated from have to handle diverse types of traffic,
wind also needs to be sold when the wind from control signals that must travel long
is blowing. Demand-side management not distances in virtually no time (e.g., to iso-
only means reduced peak demand, but also late line faults) to broadband connectivity
ensures that demand follows generation to providing video surveillance of mission-
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3. services smart energy
critical assets. The communication net- models, new ways of working, and new
works must not fail under any circum- approaches to consumers. New partici-
stance; otherwise the electricity network pants will enter the markets, consumers
will fail. Redundancy and security aspects among them.
are crucial. Also, these networks must The decarbonization of the electricity
partly operate under harsh conditions and system will have to be reflected in market
must not, for example, be affected by elec- models. For example, the need to balance
tromagnetic interferences. Utilities under- consumer and energy-system interests will
taking such substantial investments might require a mediator role to collect requests
also consider offering Salvatore broadband from different players in the electricity sys-
services to his summer house, to leverage tem, and gather the contribution offers
their investments. from consumers to balance the system.
Salvatore, his family, and his electrical Dedicated communication and automation
appliances are active participants in the services must be provided, and tightly inte-
Smart Grid, implying that communication grated electricity and communication net-
with him, his family, and the devices they works must be operated.
use is an integral part of the grid’s nerve Which role will today’s energy service
system. providers take? They already have the rela-
Central to this integration is smart tionship with consumers; they hold both
metering. Digital meters will provide the the carrot (in terms of financial and other
data needed for Salvatore and his family to incentives) and the stick (e.g., peak pricing)
understand how they consume energy and to influence our behavior. Will they also
how they can change their behavior. Again, offer us advanced communication, infor-
real-time communication solutions will mation, and automation services related to
give him feedback and relevant informa- energy consumption and generation (and
tion through appropriate applications, possibly even beyond) in order to help us
using the media and devices he and his manage the complexity of our future
family prefer, or which are available in a energy life? Will new players enter the
specific situation. Most suitable for Salva- scene?
tore might be his smartphone, while his Which role will distribution system
children might prefer to use their gaming operators take? They will, of course, con-
console, and his parents would only look at tinue to provide the electricity logistics,
a stylish display in an oak housing that connecting generators with consumers in
matches their furniture. Whatever applica- the new smart-energy world. But will they
tions, media, and devices are best, they also operate the tightly integrated electric-
need to communicate in real time with the ity and communication networks of the
energy meter and other equipment such as future? Many operators have already iden-
electrical appliances or microgenerators to tified the operation of their telecommuni-
collect data for a meaningful feedback cation networks as mission-critical but not
loop. as core business, and consequently have
Smart meters will be a key sensor for the outsourced these operations to reduce
Smart Grid, collecting valuable measure- costs.
ment data about the “health status” of the Which role will telecommunication net-
electricity network (e.g., short interrup- work operators play? Will they provide
tions, and over or under voltages), thereby communication services for smart grids?
enhancing network operations. Collecting Will they provide the communication serv-
all this critical data is of no use if it cannot ices used by energy service providers to
be communicated in real time, reliably, influence our energy consumption?
securely, and independently from the sta- New market models are on the verge of
tus of the electricity network. evolving, and it is still early to predict how
the utility markets will develop in light of
S MART MARKETS AND NEW PLAYERS liberalization and decarbonization. The
What does all this mean for the utility situation creates as many uncertainties and
markets and their stakeholders? threats as it hold opportunities – for exist-
Utility market models, with their estab- ing and new players.
lished players and contractual relation-
ships, will change. Experience from the tel- I NVESTMENT OPPORTUNITIES
ecommunication markets has shown that Investment in smart grids is expected to be
market liberalization changes the game in the range of up to  percent of utility
board. While creating challenges for estab- company turnovers, which could add-up to
lished market players, it also unlocks eur  billion by  in Europe alone.
impressive creativity to find new business However, it can only take place if regula-
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4. smart energy services
European monitoring and control market for power grids
Market value (Bn €)
35
30
25
20
15
10
5
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Growth perspectives Percent of hardware,
(2007–2020 annual rate) software and services, 2007
9,9 Hard 18,1%
5,6 Serv Soft 15,9%
66,0%
Total M&C Power grids
Source: EC DGINFSO – SMART 2007/047
tion creates clarity on harmonized Euro- segments (such as telecommunications),
pean business models and market rules, and potential new players (perhaps in the
which is not yet the case. Also, the busi- area of value-added services) to under-
ness case for such investment is compli- stand their desired positions, to develop
cated and difficult to address, as it only strategies, and to start pilot programs to
holds if benefits for both utilities and soci- build experience.
ety are factored into the equation. The From a consumer perspective, we all
benefits for utilities expand across the have to contribute to decarbonizing the
value chain, but are not distributed in the way we consume energy. We can succeed if
same way as the investment needed. These provided with suitable support from the
challenges must be resolved to facilitate utility markets and its technologies – and
the investment needed to decarbonize the have fun doing it, too!
electricity system.
Back to Salvatore. His way of living with AUTHOR
electricity changed significantly between ▶ JENS ERLER is responsible
 and . It is much more compli- for Global Business and Port-
cated, because the days when he just folio Development – Utility
plugged in his appliances and ignored the Industry Specific Solutions at
energy they consumed are long gone. In Ericsson’s Business Unit Glo-
, he is an “energy citizen,” consuming bal Services. He joined Ericsson in 1993 after receiv-
and generating electricity, balancing his ing his MSc in Telecommunication Engineering from
own interest with the interest of the sys- the Technical University of Darmstadt, Germany.
tem. Yes, it involves a loss of comfort, but While based in Düsseldorf, Germany, and Stockholm,
he finds it manageable with the help of Sweden, Jens held positions in global field support,
automation, enhanced applications, and sales support, product and portfolio management,
communications. And his carbon footprint and sales and business development, focusing on
looks much better in  than it did in mobile enterprise solutions and industry-specific so-
, also thanks to sophisticated commu- lutions for healthcare and utilities.
nication networks operating in the back- (jens.erler@ericsson.com)
ground, tightly integrated with electricity
networks.
Market liberalization and new market
models can represent a threat to existing
market players but represent opportunities
as well. It is now time for those existing
players, the players from related industry
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