Brussels, Belgium --- (METERING.COM) --- December 18, 2009 - The deployment of new smart grid technologies must be a means to an end and not an end in itself, with investment providing better value and direct benefits for all grid users, as well as indirect benefits such as greater diversity both for the electricity supply system and society as a whole.

This is the “technology neutral” view of the European Regulators’ Group for Electricity and Gas (ERGEG) in a new position paper on smart grids.

With a growing consensus that smarter networks will be required to meet the 2020 targets, it is vital that regulatory mechanisms stimulate such developments directly, e.g. by market and technical rules, and by efficient regulatory incentives, the paper continues, adding that regulators therefore act as key facilitators in this process, by identifying and removing possible barriers and by finding solutions that provide an appropriate balance between all the stakeholders’ positions.

The aim of the paper is to assist the European regulators in understanding how smart grids can benefit network users and, assuming that cost effective benefits can be identified, to explore ways in which the development of smart grids can be encouraged.

Based on the two main drivers of smart grids identified as legislation for carbon reduction and energy efficiency, and the specific needs of customers that will result from this legislation, the paper says the regulatory challenges also fall into two similar categories.

The overarching of these is to find ways to incentivize network companies to be more innovative. The second challenge is to enable the network companies to identify and prioritize specific smart grid solutions that can more efficiently meet network users’ needs and incentivize them to be deployed.

The paper suggests that a good regulatory model that could be used as the basis for a regulatory approach to smart grids is the incentive regulation mechanisms adopted to promote other aspects of network business, such as quality of supply in electricity distribution. An alternative or complementary option is the use of direct regulation by minimum requirements, or eventually a hybrid solution relying on both approaches.

In addition a second priority for regulators should be to have an active role in favoring cooperation among stakeholders, to achieve national and European targets by the various smart grid concepts, innovations and solutions.

Finally, regulators have a legal obligation to identify and address any barriers that could prevent cost effective solutions from being adopted which would benefit network users, taking particular account of environmental issues.

The paper is now open for comment and will be finalized in the second quarter of 2010.