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AMI & SMART METERING To smart meter or not to smart meter is that the question? What is the real story behind the German cost benefit analysis on smart metering, and what does this mean for the future of smart metering in Germany? been relying on the proposed rollout of smart meters across the approximately 48 million meter points in Germany, would be forced to retrench staff and delay or cancel expansion plans. The eyes of the metering world have been on the German market in the last part of the year when the results of a cost benefit analysis for smart metering in Europe’s largest electricity market was due to be released. Metering International spoke to some of the players involved in the development of the report, and the market, and provides some insights into the recommendations and next steps. In 2009, the European Union issued directive 2009/72/EC, which required the implementation of intelligent metering systems to be in place for 80% of consumers by the end of 2020. In a communication from the BMI, Germany’s Ministry of Economics and Technology, the ministry spokesperson told Metering International: “EU’s member states are expected to either equip 80 % of all households with smart electricity meter systems by 2022, or to alternatively undertake a cost-benefit analysis and use this to launch their own strategy. In the light of this, the Economics Ministry commissioned a study from Ernst & Young [now EY - Ed] which has concluded that the aforementioned EU scenario is not to be recommended for Germany and that Germany should rather design its roll-out of smart metering systems in a targeted fashion which meets the needs of our energy reforms. “The study shows that the costs of a smart metering system clearly exceed the average potential savings for final consumers with low annual consumption levels. It would therefore be disproportionate and economically unreasonable to require all consumers to install such meters. Instead, the study recommends that the current approach as stated in the German Energy Industry Act (EnWG) which prescribes a roll-out for energy-intensive end consumers, CHP-plants, certain renewable energy plants and new and renovated buildings should be further developed.” Market layout Germany’s electricity market is one of the largest in Europe. The market is highly fragmented with more than 900 distribution companies who have metering responsibility. However, there is also a liberalised metering market which means that while metering is still dominated by regulated network companies – 97% of the metering points are operated by the distribution companies – 3% are operated by non-regulated or competitive metering companies. That makes it difficult to find the right approach to a mandatory smart metering rollout on the one hand, and on the other hand, to improve business competition in the metering business. In addition, in contrast to the US, there are no vertically integrated utilities: the various steps of the value chain are separated and have to operate separately. Says State Secretary Stephan Kapferer: “The findings show that we in Germany need to design our roll-out of smart metering systems in a targeted fashion which meets the needs of our energy reforms; generalised approaches are unsuitable. We are now reviewing whether the study’s recommendations can be implemented. We have set up a working group with the Federal Network Agency on the financing mechanism to clarify the possibility of building them into our system. The main principle here is to keep energy affordable for the consumer.” “On an average, household customers can choose among 147 electricity suppliers per network area.” With more than a thousand market participants overall, this fully liberalised market has been the source of much speculation around the role of smart meters in Europe. The announcement in August 2013 that Germany had decided against a mass smart meter rollout was met with dismay and concern that companies, which had 26 Speaking to Helmut Edelmann, Director of Utilities, EY, Metering International got some additional insights into the recommendations and the implications on Germany’s smart metering future: “Germany took the option to perform a cost benefit analysis but has not decided not to roll out a smart metering system. We must be aware that the cost benefit analysis was prepared for the government and the next step is that government undertakes a number of hearings with various stakeholder groups to understand which of the finding and recommendations they want to take over into legislation. We are currently in the phase of discussing the recommendations across the value chain, but we recommend a full scale rollout in the long run, but we do not recommend a full scale rollout in the short term as it’s too expensive from our perspective. METERING INTERNATIONAL ISSUE - 4 | 2013