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Key economic factors influencing the adoption of the ADDRESS Smart Grids architecture

P. Linares

The degree of adoption of Active Demand (AD) programs will be largely influenced by their costs and benefits, and more particularly, by the costs and benefits that accrue to each agent in the power system. For example, saving money is cited as the most important reason for engaging in AD programs in Spain (although in the Brittany Islands in France other reasons such as security of supply and protection of the environment appear to be as important as money savings due to the particular situation of the islands). Regulators will (or should) be driven mostly by the results of social cost-benefit analyses. Here the key elements seem to be the long-term investments (of which the largest seem to be the communication costs) and benefits (regarding mostly avoided investments in networks and power plants). Distributor System Operators (DSOs), as the parties typically responsible for deploying Medium and Low Voltage network infrastructure, will be mainly concerned by the costs, particularly by those that may be more difficult to transfer to consumers, that is, communication and control and network automation costs. Aggregators, in turn, will be motivated by the business opportunity that appears whenever there are significant savings (benefits) to be shared with the consumer. In particular, given the structure of most electricity markets, the most relevant benefits here will be those related to the generation markets (daily, intradaily or balancing). However, for all these costs and benefits to take place, the keystone is the consumer. What are the key economic factors that may influence the adoption of AD programs by consumers? Again, the consumers, if reasonably rational, will also conduct their own cost-benefit analysis (not precluding of course the inclusion of other non-economic factors, such as the desire to save energy or protect the climate, among others). The benefits will come basically from changes in the budget devoted to electricity consumption, that is, there will be benefits if the expense in electricity decreases. The cost, in turn, will have two parts. Firstly, the direct cost to be paid by the consumers (typically, the adaptation of appliances and plugs in their homes). Secondly, the cost that is passed-on by DSOs and aggregators in return for the infrastructure to be deployed (smart meters, telecommunication services, among others). The goal of this report is to present a review of both previous estimates of the costs and benefits of AD programs, and of the major results obtained within the ADDRESS project, in order to identify the key economic factors that may drive the adoption of the ADDRESS architecture, both from the system and from the individual stakeholder point of view. […]


Funding entity: Comisión Europea. FP7 - Cooperation / Energy



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