A draft framework for the evaluation of smart grid investment opportunities in the UK has been released as the first output of the national Smart Grid Forum.
The proposal was prepared by Frontier Economics and EA Technology is aimed at enabling the cost-benefit of smart grids.
The proposed model consists of 3 elements:
Distribution network model, which assesses the costs of upgrading the distribution networks to accommodate changes on the supply and demand side.
Wider electricity sector model, which will calculate the cost, and the emissions implications, of meeting demand over the course of each year.
Real options cost-benefit analysis model, which will combine the outputs of these models to calculate net present values and option values for each of the investment strategies.
The most important developments likely to affect the net benefits that smart grids could provide, were identified as the electrification of heat and transport, increase in distributed generation, and increase in intermittent and inflexible generation.
The model also takes account of demand side response, with simple assumptions regarding the responsiveness of demand forming an input.
Two smart grid strategies are intended – one in which smart grid is deployed in a “top down” manner, and the other in which it is deployed incrementally on a more reactive basis.
According to the developers, the model is intended to be “simple and transparent,” to enable users to see what is driving the results and the impact of adjusting the key assumptions. When completed, it will be placed in the public domain.
The model framework is the first output from the Smart Grids Forum Work Stream (WS) 2, which is being led by Ofgem, and is open to consultation to December 16. In the second and third stages, the model will be built and validated, and then used to draw initial conclusions about the benefits of different investment strategies.
WS2 is one of five work streams of the Smart Grid Forum. The other work streams are focused on establishing smart grid assumptions and scenarios for business plans (WS1), assessing the network impacts on these assumptions and scenarios (WS3), identifying risks to smart grid development (WS4), and identifying how to communicate effectively with stakeholders (WS5).
All the work streams are due to report their findings by April 2012. At that point, there will also be a consultation on the continuation of the Forum and if so, the content of its work program.