OECD. The smart grid is revolutionizing electricity production and consumption. However, strategic use of ICTs and the Internet in energy innovation requires clarifying the roles of partners coming from distinct industries. And it begs for greater coordination of government departments and stakeholder communities that so far had unrelated competencies. This report outlines opportunities, challenges and public policy implications from shifts to ICT-enabled, "smart" electricity grids.
This report discusses “smart” applications of information and communication technologies (ICTs) for more sustainable energy production, management and consumption. The “smart grid” is a particular application area expected to help tackle a number of structural challenges global energy supply and demand are facing. The challenges include:
The direct impact of energy supply industries on climate change and other environmental impact categories.
Explosion of energy demand worldwide over the past decades.
Wider uptake of renewable energy sources in national “energy mixes”, which holds specific challenges.
Accelerating diffusion of electric vehicles, which will impact volumes and patterns of electricity demand.
Provision of reliable and secure national electricity infrastructures.
Electricity provision to unserved parts of the population in developing countries.
This report discusses these challenges in greater detail and links them to innovative applications of ICTs. These linkages provide the basis for what is termed the “smart grid”, i.e. electricity networks with enhanced capacities for information and communication. In concluding, this report outlines policy implications for government ministries dealing with telecommunications regulation, ICT sector and innovation promotion, consumer and competition issues.
The electricity sector is inextricably linked with global energy challenges and climate change since over two-thirds of global electricity is generated from the combustion of fossil fuels.
The smart grid has great potential for driving innovation in the ways electricity is produced, managed and consumed. Applications of information and communication technologies (ICTs) and especially the opportunities provided by the Internet can help sustain electricity supply while limiting environmental impacts. ICTs are seen as promoting a wider integration of renewable energy sources, promoting low-carbon transport options including electric vehicles and inducting structural shifts in electricity consumption.
Innovative applications for final consumers clearly revolve around the smart meter. More than a hardware device, it has the potential to balance traditional information asymmetries between electricity producers and consumers and to stimulate informed energy conservation choices; over 10% of an individual household's electricity consumption can be cut by simply providing better information (or providing information in better ways). Reductions in "peak demand" can directly contribute to lowering greenhouse gas emissions.
There is also significant innovation in the "back-end" of electricity sector operations. Improved monitoring and networked IT systems can help limit losses of electricity along the way and thereby improve capacity utilisation and avoid pollution; such losses represent on average 8% of production worldwide but over 15% in individual countries.
Integrated information and communication systems spur the emergence of new value chain entrants and business models. A prominent example are electricity supply aggregators operating "virtual power plants". Specialised IT services and infrastructure providers develop targeted solutions for the electricity sector. Moreover, "smart" operations in the ICT sector itself can contribute to limiting environmental impacts with cloud computing holding potential for effectively tackling peak electricity demand.
However, overarching policy issues need to be addressed to improve co-ordination and flows of information between smart grid stakeholders, to explore sustainable financing options for smart grids and to ensure acceptance by and engagement of consumers and society at large.
ICT-specific policy implications involve converging energy and telecommunications services, changing connectivity requirements, evolving roles for ICT companies as electricity sector partners and the resulting skills needs for IT professionals. Policy makers can facilitate innovation and co-ordination across IT and energy sectors. But they also have an important role to play in ensuring interoperability and openness of smart grids while at the same time securing critical infrastructures, safeguarding individual privacy and developing sound principles for the commercial use of personal data.
OECD (2012), “ICT Applications for the Smart Grid: Opportunities and Policy Implications”, OECD Digital Economy Papers, No. 190, OECD Publishing.