Brattle principals Ahmad Faruqui and Dan Harris and senior associate Ryan Hledik authored an article on the potential savings from the deployment of smart meters in the EU that has been published in the October issue of Energy Policy.
In the article, “Unlocking the €53 Billion Savings from Smart Meters in the EU: How increasing the adoption of dynamic tariffs could make or break the EU’s smart grid investment,” the authors discuss how EU policy-makers could potentially save an additional €53 billion over the next twenty years through the increased deployment of smart meters. The increase in savings depends on the ability of policy-makers to boost the adoption of tariffs to encourage consumers to reduce their demand at times when power is expensive (so-called “dynamic pricing”). Dynamic pricing creates savings by reducing the capacity of plants that are required to serve peak load. International experience has shown that customer adoption rates for dynamic tariffs can range from a low of 20 percent to a high of 80 percent depending on program design. The authors estimate that if 80 percent of customers reduce their demand at peak hours due to dynamic pricing, the reduction in associated capacity and transmission costs would be €67 billion. However, if the uptake of dynamic tariffs is only 20 percent, then savings are only €14 billion. The €53 billion difference is the reward that awaits policy-makers if they can persuade customers to sign on to dynamic tariffs in greater numbers.
The Energy Policy article is based on a discussion paper published by Brattle in October 2009, which is available for download below.