Smart metering and market development
Colin Sausman
Partner, Retail Markets & Research, Ofgem
Metering, Billing/CRM Europe
October 2012
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Ofgem
• Our role in general:
– Independent regulator of gas and electricity markets in GB
– Protect the interests of current and future consumers
• Our role on smart meters:
– Nurture smarter energy markets from the platform of smart
metering by:
• Advising Government on rollout regulatory design
• Taking on new regulatory functions
• Identifying and progressing consequent reforms
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Key design features of GB rollout 1. Energy retailers are responsible and accountable for rolling out smart
meters to all customers (by 2019)
2. All domestic customers must also get a display device
3. Monopoly central provider of data and communications (DCC)
– Independent from both retailers and its service providers
– Regulated by Ofgem, licence awarded competitively
4. Open, non-proprietary standards for elements of mandated metering system in the home, including in-home display (IHD)
5. Consumers control the use of their data
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GB smart meter rollout – an overview
Other devices
HAN
IHD
Gas
Elec
WAN module
Retailers
Network operators
Other authorised
parties
Data
function WAN
Data
function WAN
Gate
way
Regulatory obligations on
energy suppliers to roll out in-
home equipment by 2019
Data and communications managed by new
regulated monopoly Data & Communications
Company (DCC)
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What does smart metering enable?
Smart meter rollout
Measure
energy use in very small time blocks
Information A more
active demand
side New types of
tariff for energy use
Contracts for firm changes in energy use
Smart meter rollout
Measure
energy use in very small time blocks in near real-
time
Enables smarter central ‘back office’ functions - Settlement
- Registration - Switching
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Ofgem’s smarter markets strategy
Wholesale settlement
More accurate settlement for all meter points
Change of supplier
Switching which is much faster and reliable
DSR market frameworks
Commercial and regulatory arrangements that work well
across the supply chain
Consumer empowerment
Regulation that helps consumer engage and navigate, and protects
Smarter Markets
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Wholesale settlement
A typical pattern of
cost-reflective wholesale spot prices
Smart metering enables us to create a link between these prices and customer bills in a way that can reward
behaviour
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Reforming change of supplier
Stepping through this process without smart data is slow and prone to error
Source: Elexon
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Market arrangements for DSR
•Complex interactions (value, coordination, information)
•Regulation affects whether this value can be realised
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Consumer engagement is critical
Centralised
• Role for central body, but
(a) Scope?
(b) Funding?
(c) Regulation?
• Mandated provision of display device
• Learnings from consumer-funded trials, e.g. Low Carbon Networks Fund (LCNF)
• Evolving regulation
Decentralised
• Installation visit
• New tariffs
• New services/technology
• Advertising
• New entry
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...but starting position is not great
Permanently disengaged
20-30%
Disengaged 20-30%
Passive 20-30%
Reactive 5-10%
Proactive 5-10%
Source: Ofgem Retail Market Review 2011
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Data access regime is also critical because...
Privacy
• Trust acceptance
• Acceptance engagement
• Acceptance also affects costs
• Rules can build (and lose) trust
Competition
• Data from smart meters are commercially valuable
• Rules on access therefore involve value transfers
• Differential access rules are likely to skew competition
• Non-discriminatory access on reasonable terms – seen as essential for transmission and distribution. Maybe data too?