Smart grids: paid by consumers or by large energy suppliers?

In the energy sector it is hard to match the supply and demand of energy. Based on experience over the years calculations are made how much energy a large power plant needs to create in particular hours during the day, week or year. This is done in order to avoid peak loads on the electricity grid. An extra problem that is foreseen the coming years is the renewable electricity that is created by consumers or other small business. This electricity is generated by solar panels on top of houses, windmills on private property etc. When these devices generates electricity it should be added to the electricity grid, but this may cause power surges or too much electricity in the electricity grid.

In order to prevent the here fore mentioned problems, energy companies in The Netherlands are delivering smart meters to Dutch households and small business (there is expected that in the year of 2013 400.000 meters will be installed). By doing this the major energy companies are creating a so called Smart Grid. A smart grid isn’t a new electricity grid that is created, but by adding several new network components, the existing grid will be upgraded to a Smart Grid. By doing this the 40 year old electricity grid in The Netherlands, can be used as well for the upcoming decennia. A smart grid uses intelligent monitoring, control mechanisms, communications and self-healing and controlling technologies. By using these technologies, several new probabilities arises:

  • Connect and control all kinds of electricity generators;
  • Inform consumers better about the amount of energy they are using;
  • Increase the reliability of the network.

Besides the above mentioned possibilities one key possibility isn’t heard a lot nowadays. By connecting datacenters to the smart grid, it is possible to do the data processing in a place where the renewable energy is created. In this way data processing will become cheaper and more efficient as the energy usage can be adjusted accordingly.

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The question is now, why should we as consumers pay (direct when buying a smart meter, or indirect by taxes) for these smart meters. The most important energy suppliers of The Netherlands are offering these meters at prices between 60 and 150 euro’s. Based on the information which is gained by the large energy firms, they are able to match the supply with the demand. Within this perspective the energy suppliers are able to purchase energy at lower costs as they now know every 15 minutes what amount of energy a household uses. When combining this data with all other households, the energy suppliers know exactly how much energy should be purchased on the energy markets. When having all these data energy suppliers are able to purchase energy as efficient as possible, and thus the energy companies are able to make a lot of profit using the smart meters.

Besides this buying and selling process, the energy companies are now able to create new business models. When using the electricity network to do the data processing for large institutions as the Erasmus University or other data processing organizations, the energy companies are able to charge the data processing institutions with fees. Another example of a potential new business model is when we use the theory of the two-sided markets. The energy companies are able to create a platform on the smart grid. When a third party wants to provide new features on the smart grids, the energy suppliers can either charge the delivering companies, or the consumers that uses the new services. With these examples energy companies are able to extend their business and make more money, and thus more profit with these new possibilities of the smart grid.

Off course the smart meters could be considered as an advantage for consumers, as energy companies are now able to target their marketing a lot better. The energy supplier gathers a lot of information about the energy that is used by each household. When performing some smart business intelligence on this information several new products and new contracts can be targeted at a specific household. Off course this is an advantage as well for the consumer as they are better informed, and can make the best deal possible. On the other side consumers are able to use functions as, turning on or off the heat when travelling. But are these features enough to let the customer pay a lot of money for the smart meters? Or should the energy suppliers install these meters for free and let the the consumers benefit from the usage of their information?

Sources
http://www.ictoffice.nl/Files/TER/Routekaart_ICT_2030.pdf
http://www.eneco.nl
http://www.nuon.nl

This blog post is also posted in the wordpress blog for the course Information Strategy, which I attend for my Master’s program in Business Information Management.

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