SMART GRID ROUNDUP Assessing The Potential For Smart Grid In Emerging Markets By Ben Gardner, Northeast Group Briefly put: Smart Grid investment in emerging markets will outpace that of developed countries, yet smart grid readiness and benefits still vary from country to country. Currently, Latin America, Central and Eastern Europe; and the Middle East and North African regions represent the largest near-term opportunities. Over the next decade, emerging market countries will invest nearly $275 billion in smart grid infrastructure, outpacing developed countries. This significant capital investment will result in equally significant benefits for these countries and their electricity customers. The largest 45 emerging market countries currently lose $47 billion annually due to electricity theft and unbilled consumption. Many of these countries also suffer from significant reliability problems with their electric infrastructure. There is also the daunting challenge of integrating intermittent renewable energy resources into their grids. Smart grid infrastructure will address these challenges. However, the scale of smart grid investment will vary by country and therefore a framework is required to evaluate and prioritize countries. In its recent study Emerging Markets Smart Grid: Outlook 2014, Northeast Group analyzed 45 emerging market countries to determine those with the most potential for smart grid. There were three levels to this analysis: • Level 1: compiling a Smart Grid Regulatory Country Index; • Level 2: scoring countries according to their potential benefits from smart grid; • Level 3: assessing countries’ market size. Figure 1: Northeast Group Smart Grid Regulatory Country Index METERING INTERNATIONAL ISSUE - 2 | 2014 Each of these levels of analysis is further described below, along with the results. Level 1: Compiling A Smart Grid Regulatory Country Index The Smart Grid Regulatory Country Index is based on 10 metrics that each individual country is scored against. These metrics were: • Smart meter target; • Pilot projects; • Financing mechanisms; • Technical standards; • Deployment plan/roadmap; • Major infrastructure plans; • CO 2 target; • Distributed generation incentives (FiT, net metering, etc); • Electric vehicle incentives; • Customer outreach/education programs. The 45 countries’ scores varied widely in the Smart Grid Regulatory Country Index. Even looking solely at the BRICS countries (Brazil, Russia, India, China and South Africa), a wide range of scores was found. China – with strong regulatory momentum for smart grid – led the BRICS, followed by Brazil, India, South Africa and Russia. Each country’s score is shown in Figure 1 below, along with its relative positioning among all 45 emerging market countries included as part of the larger study. Level 2: Scoring Countries According To Their Potential Benefits From Smart Grid The first level of analysis focused on how advanced countries are with their smart grid regulatory frameworks. This addressed whether regulators and policy makers in each country are driving smart grid market development. The second level of analysis focused specifically on the concrete benefits of implementing smart grid infrastructure. This analysis sought to identify those countries where there was a strong business case for smart grid. The benefits considered in this analysis included the potential for a reduction in non-technical losses, demand response potential and a modifier based on electricity prices. Non-technical loss reduction is a benefit unique for many emerging markets when compared with their developed peers and therefore this was weighted higher in the model. In some cases, reducing non-technical losses alone can pay back the cost of a smart meter in just a few years. The most striking takeaway from this level of analysis was how China scored near the bottom of the list of countries. For all of the publicity of smart grid in China, the country actually scored rather low for potential benefits. Low non-technical losses and low Figure 2: Northeast Group Smart Grid Potential Benefit Country Index 45