COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Smart Grids: from innovation to deployment
Date: 2011-04-12
Institutions: European Commission
Subjects: EU policy, approximation of laws, data protection, electrical energy, innovation, technology

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EUROPEAN COMMISSION 

Brussels, 12.4.2011 
COM(2011) 202 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Smart Grids: from innovation to deployment 

{SEC(2011) 463 final} 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Smart Grids: from innovation to deployment 

1. 

INTRODUCTION 

The  EU2020  agenda  comes  across  with  a  clear  message  for  Europe.  The  EU’s  future 
economic  growth  and  jobs  will  increasingly  have  to  come  from  innovation  in  products  and 
services for Europe’s citizens and businesses. Innovation will also contribute to tackling one 
of  the  most  critical  challenges  Europe  is  facing  today,  namely  ensuring  the  efficient  and 
sustainable use of natural resources. The development of our future energy infrastructure must 
reflect  this  thinking.  Without  serious  upgrading  of  existing  grids  and  metering,  renewable 
energy  generation  will  be  put  on  hold,  security  of  the  networks  will  be  compromised, 
opportunities for energy saving and energy efficiency will be missed, and the internal energy 
market will develop at a much slower pace. 

Smart Grids1 could be described as an upgraded electricity network to which two-way digital 
communication between supplier and consumer, intelligent metering and monitoring systems 
have been added. Intelligent metering is usually an inherent part of Smart Grids. To advise on 
policy  and  regulatory  directions  for  the  deployment  of  Smart  Grids  in  Europe,  the 
Commission  has  set  up  a  Smart  Grids  Task  Force,  which  has  issued  a  report  outlining 
expected  services,  functionalities  and  benefits.  These  are  largely  agreed  by  industry2/3/4, 
public  authorities5  and  consumer  organisations6  and  are  described  in  the  attached  Staff 
Working Paper.  

The  benefits  of  Smart  Grids  are  widely  acknowledged.  Smart  Grids  can  manage  direct 
interaction and communication among consumers, households or companies, other grid users 
and energy suppliers. It opens up unprecedented possibilities for consumers to directly control 
and  manage  their  individual  consumption  patterns,  providing,  in  turn,  strong  incentives  for 
efficient energy  use if combined with  time-dependent  electricity prices. Improved and more 
targeted  management  of  the  grid  translates  into  a  grid  that  is  more  secure  and  cheaper  to 
operate. Smart Grids will be the backbone of the future decarbonised power system. They will 
enable the integration of vast amounts of both on-shore and off-shore renewable energy and 
electric vehicles while maintaining availability for conventional power generation and power 
system adequacy. Moreover, the deployment of Smart Grids provides an opportunity to boost 
the  future  competitiveness  and  worldwide  technological  leadership  of  EU  technology 

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The European Smart Grid Task Force defines Smart Grids as electricity networks that can efficiently 
integrate the behaviour and actions of all users connected to it — generators, consumers and those that 
do both — in order to ensure an economically efficient, sustainable power system with low losses and 
high quality and security of supply and 
safety.http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/expert_group1.pdf. 
Eurelectric, May 2009,www.eurelectric.org/Download/Download.aspx?DocumentID=26620. 
ORGALIME, July 2010, at http://www.orgalime.org/positions/positions.asp?id=358. 
GEODE, October 2010, at http://www.geode-eu.org/. 
ERGEG,  position  paper  on  Smart  Grids.  Ref.  No.  E10-EQS-38-05. 10  June  2010  http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_ERGEG_PAPERS/Electr
icity/2010/E10-EQS-38-05_SmartGrids_Conclusions_10-Jun-2010_Corrige.pdf. 
Joint BEUC and ANEC, (http://www.anec.org/attachments/ANEC-PT-2010-AHSMG-005final.pdf). 

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providers  such  as  the  electrical  and  electronic  engineering  industry,  consisting  mostly  of 
SMEs.7  Finally,  Smart  Grids  provide  a  platform  for  traditional  energy  companies  or  new 
market entrants such as ICT companies, including SMEs, to develop new, innovative energy 
services  while  taking  due  account  of  data  protection  and  cyber-security  challenges.  That 
dynamic  should  enhance  competition  in  the  retail  market,  incentivise  reductions  in 
greenhouse gas emissions and provide an opportunity for economic growth.  

As  such,  Smart  Grids  can  make  an  important  contribution  to  the  new  strategy  for  smart, 
sustainable  and  inclusive  growth,  including  the  objectives  proposed  under  the  flagship 
initiative for a resource-efficient Europe and Europe’s energy and climate goals, which are at 
the  heart  of  the  internal  market  for  energy.  The  Third  Package  provisions  and  especially 
Annex I.2 of the Electricity Directive (2009/72/EC) explicitly oblige Member States to assess8 
the roll-out of intelligent metering systems as a key step towards the implementation of Smart 
Grids and to roll out 80 % of those that have been positively assessed. Smart Grids are also 
identified as a way for Member States to meet their obligations to promote energy efficiency9. 
In addition, the Energy End-Use Efficiency and Energy Services Directive (2006/32/EC), for 
which the Commission is currently analysing the need for revision10, calls for metering that 
accurately reflects the final customer’s actual energy consumption and provides information 
on actual time of use. The European Council of February 2011 recognised the important role 
of  Smart  Grids  and  invited  Member  States,  in  liaison  with  European  standardisation  bodies 
and  industry,  ‘to  accelerate  work  with  a  view  to  adopting  technical  standards  for  electric 
vehicle charging systems by mid-2011 and for smart grids and meters by the end of 2012’.11 
Over  the  long  term,  the  Commission’s  Communication  on  a  Roadmap  for  moving  to  a 
competitive  low-carbon  economy  in  205012  identifies  Smart  Grids  as  a  key  enabler  for  a 
future low-carbon electricity system, facilitating demand-side efficiency, increasing the shares 
of renewables and distributed generation, and enabling electrification of transport. 

 5.5 billion13 has been invested in about 300 Smart Grid projects during the 
In Europe, over €
 300 million has come from the 
last decade. An overview is presented in Picture 1. Around €
EU  budget.  The  EU  is  still  in  the  early  stages  of  the  actual  deployment  of  Smart  Grids.14 
Today, only around 10 % of EU households have some sort of smart meter installed, although 
most  do  not  necessarily  provide  the  full  scale  of  services  to  consumers.  Nonetheless,  those 
consumers with smart meters have reduced their energy consumption by as much as 10 %.15 

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‘ELECTRA’, COM(2009) 594 final. 
Where  no  economic  assessment  is  made,  at  least  80 %  of  all  consumers  have  to  be  equipped  with 
intelligent metering by 2020. 
Article 3(11) Directive 2009/72/EC. 
Energy Efficiency Plan 2011, COM(2011) 109 final. 
Conclusions of the European Council of 4 February 2011, available at: 

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11 
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/119175.pdf. 
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COM(2011) 112/4. 
European  Commission,  A  view  on  Smart  Grids  from  Pilot  Projects:  Lessons  learned  and  current 
developments. JRC, to be issued in June 2011. 
For comparison, the US government has launched a 100 Smart Grid Investment Grant Programme with 
funding  totalling  $ 3.4  billion;  this  programme  builds  on  $ 4.7  billion  in  commitments  from  private 
industry,  cities  and  other  partners.  The  Chinese  government  is  also  investing  in  Smart  Grids  projects 
and has so far earmarked $ 7.3 billion for stimulus loans and grants in 2011. Australia and New Zealand 
are  opening  their  energy  markets  to  competition  in  order  to  attract  private  capital  for  Smart  Grid 
transformation. 
Vincenzo  Cannatelli,  ENEL  Telegestore  Project  IS  ON  TRACK,  page  4.  Available  at: 
http://www.greey.ca/RelatedFiles/1/ENEL%20Telegestore%20Project%20IS%20ON%20TRACK.pdf. 

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Some  pilot  projects  suggest  that  actual  energy  savings  can  be  even  higher.16  Other  pilot 
projects  have  indicated  that  Smart  Grids  can  make  a  major  contribution  to  CO2-emission 
reduction. The Smart 202017 study, measuring the global impact of Smart Grids, estimates a 
15 % reduction in CO2-emissions, while the EPRI study18 reports a reduction of nearly 9 % in 
the total domestic carbon emissions generated by the US power sector in 2006. The European 
Bio Intelligence study19
 concludes that Smart Grids could reduce the annual primary energy 
consumption  of  the  EU  energy  sector  by  almost  9 %  by  2020.  Smart  Grids  are  expected  to 
generate new jobs and bring additional economic growth.20 The smart household appliances 
market is projected to grow globally from $ 3.06 billion in 2011 to $ 15.12 billion in 2015.21 It 
is  further  estimated22  that  expected  investments  are  roughly  15 %  for  smart  metering 
deployment and 85 % to upgrade the rest of the system. 

At  present,  there  is  a  considerable  gap  between  current  and  optimal  investment  in  Europe, 
which  can  only  partly  be  explained  by  the  current  economic  downturn.  Grid  operators  and 
suppliers  are  expected  to  carry  the  main  investment  burden.  However,  unless  a  fair  cost 
sharing  model  is  developed  and  the  right  balance  is  struck  between  short-term  investment 
costs  and  long-term  profits,  the  willingness  of  grid  operators  to  undertake  any  substantial 
investment might be limited.  

Investors are still struggling to find the optimal model for sharing costs and benefits along the 
value  chain.  Neither  is  there  clarity  on  how  to  integrate  the  complex  Smart  Grids  systems, 
how  to  choose  cost-effective  technologies,  which  technical  standards  should  apply  to  Smart 
Grids in the future, and whether consumers will embrace the new technology. 

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In the UK, the AlertMe project allows customers to turn off appliances by web interface or mobile; in 8 
months, residents have saved roughly 40 % electricity. In Spain, the forecasts by the GAD project show 
that  a  normal  consumer  could  save  15 %  of  total  energy  consumption.  In  the  US,  Smart  Grid  City,  a 
pilot  project  to  understand  the  potential  impacts  of  a  range  of  ‘smart  grid’  technologies,  including 
OpenGrid software allowing two-way communications on the grid, led to a 90 % reduction in voltage 
problems, which in turn reduced overall power requirements by 3-5 % in a city of 100 000 people. 
GeSI SMART 2020, http://www.gesi.org/LinkClick.aspx?fileticket=tbp5WRTHUoY%3D&tabid. 
EPRI2008.  Electric  Power  Research  Institute  (EPRI).  The  green  grid:  Energy  savings  and  carbon 
smart  grid.  Palo  Alto,  California,  United  States.
emissions 
http://www.smartgridnews.com/artman/uploads/1/SGNR_2009_EPRI_Green_Grid_June_2008

reductions  enabled  by  a 

.pdf. 
Bio  Intelligence  Service.  Impacts  of  Information  and  Communication  Technologies  on  Energy 
Efficiency,  Final  Report.  September  2008.  ftp://ftp.cordis.europa.eu/pub/fp7/ict/docs/sustainable-
growth/ict4ee-final-report_en.pdf. 
The low-carbon energy industry has to date generated 1.4 million jobs in Europe. Research in the USA 
has  indicated  that  that  up  to  280 000  new  direct  jobs  could  be  created  in  the  USA  by  Smart  Grids 
deployment, with more than 140 000 direct jobs retained beyond the deployment phase. 

http://www.zpryme.com/SmartGridInsights/2010_Smart_Appliance_Report_Zpryme_Smart_G

rid_Insights.pdf. 
ESMIG,  at  http://www.scribd.com/doc/35826660/LandisGyr-Whitepaper-IDIS  and  SAP,  Smart  Grids 
for Europe at: http://www.scribd.com/doc/47461006/12036-NM-Smart-Grids-for-Europe-En. 

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Investments/category 
Total 3848.7 M€ 

Projects/category 
Total 277 implementation sites

Project investments (M€)

75 

Investments  (M€)  /  No.  of  project 
implementation sites per country 
Other 

Storage 

Transmission automation 

Home application 

Distribution automation 

Integrated systems 

Smart meters 

Picture 1: Overview of Smart Grid investment and implementation across the EU (source: JRC, IE). 
Projects represented can span over more than one country and can include more than one category. 
Three  projects  are  not  represented  in  this  Picture:  Kriegers  Flak  project,  a  Super  Grid  between 
Germany and Denmark, total investment of 507 M€; Smart Meter Roll-out and AMI in UK, estimated 
investment of 11897 M€; and  Smart Meter Roll-out in Sweden, spanning in approx. 150 projects and 
amounting a total investment of approx.1500 M€. 

These  challenges  need  to  be  tackled  as  soon  as  possible  in  order  to  accelerate  Smart  Grid 
deployment. The Commission proposes to focus on: 

(1) 

(2) 

(3) 

(4) 

(5) 

developing technical standards; 

ensuring data protection for consumers; 

establishing a regulatory framework to provide incentives for Smart Grid deployment; 

guaranteeing an open and competitive retail market in the interest of consumers; 

providing continued support to innovation for technology and systems 

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2. 

ADDRESSING  CHALLENGES  —  POLICY  INITIATIVES  ENABLING  SMART  GRID 
DEPLOYMENT IN EUROPE  

2.1. Developing common European Smart Grids standards  

The  conclusions  of  the  European  Council  of  4  February  2011  confirm  the  urgent  need  to 
adopt European standards for Smart Grids.  

The work already started in March 2009, when, based on the Measuring Instruments Directive 
(2004/22/EC)  and  the  Energy  Service  Directive,  the  Commission  issued  a  mandate23  to  the 
European  standardisation  organisations  CEN,  CENELEC  and  ETSI  (ESOs)  to  establish 
European standards for the interoperability of smart utility meters (electricity, gas, water and 
heat),  involving  communication  protocols  and  additional  functionalities,  such  as  assuring 
interoperability between systems to provide secure communication with consumer's interfaces 
and improve the consumer's awareness to adapt its actual consumption. The ESOSs were to 
provide  European  standards  for  communication  in  March  2010  and  complete  harmonised 
solutions  for  additional  functions  by  December  2011,  but  the  deliverables  are  accumulating 
almost  one  year  of  delay.  The  Commission  has  since  intervened  to  clarify  the  scope  of  the 
mandate in line with intermediate findings by the Smart Grid Task Force and to avoid further 
delays. The first deliverables for European standards for smart meters are expected by the end 
of 2012. 

In June 2010, the Commission issued a mandate24 to ESOs to review existing standards and 
develop  new  standards  so  that  a  European  harmonised  approach  could  be  adopted  in  18 
months  for  the  interoperability  of  chargers  for  electric  vehicles  with  all  types  of  electric 
vehicles  and  with  electricity  supply  points.  This  harmonisation  will  allow  users  to  use  the 
same charger for a range of electric vehicles and ensure that such chargers can be connected 
and operated throughout the EU. There is a wide consensus that Europe urgently needs such 
standards. 

On 1 March 2011, the Commission issued  a mandate to ESOs for Smart Grids25 to develop 
standards facilitating the implementation of high-level Smart Grid services and functionalities 
by the end of 2012. As the mandate builds on the consensus achieved among the stakeholders 
participating in the Task Force and the ESO Joint Working Group on Smart Grids, this should 
ensure a smooth and fast process. 

To  ensure  that  the  2012  deadline  set  by  the  European  Council  of  February  2011  is  met,  a 
monitoring  system  will  be  set  up.  If  progress  in  the  course  of  2011  is  not  sufficient,  the 
Commission will intervene to ensure that the deadline is met and the necessary standards are 
set, for example by defining a network code. 

Furthermore,  the  Commission  will  continue  reviewing  European  standardisation  policy  by 
following  up  its  White  Paper  ‘Modernising  ICT  standardisation  in  the  EU  —  The  way 
forward’26 as well as the global standardisation developments. 

1. 

Actions on Smart Grids standards 

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25 
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M441 on 12 March 2009, http://www.cen.eu/cen/Sectors/Sectors/Measurement/Pages/default.aspx. 
M468 on 29 June 2010, http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm. 
M490 on 1 March 2011, http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm. 
Modernising ICT Standardisation in the EU — The Way Forward — COM(2009) 324. 

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– 

– 

With the help of the Task Force, the Commission will monitor the implementation of 
the  work  programme  established  in  the  mandate  with  a  view  to  ensuring  timely 
adoption  of  the  standards.  If  progress  in  the  course  of  2011  is  not  sufficient,  the 
Commission  will  intervene  to  ensure  that  the  deadline  is  met  and  the  necessary 
standards are set, for example by defining a network code. 

The Commission will also follow the development of ICT standards at the European 
and international level to facilitate the implementation of Smart Grids. 

2.2. Addressing data privacy and security issues  

Developing  legal  and  regulatory  regimes  that  respect  consumer  privacy  in  cooperation  with 
the  data  protection  authorities,  in  particular  with  the  European  Data  Protection  Supervisor, 
and  facilitating  consumer  access  to  and  control  over  their  energy  data  processed  by  third 
parties  is  essential  for  the  broad  acceptance  of  Smart  Grids  by  consumers.27  Any  data 
exchange must also protect the sensitive business data of grid operators and other players, and 
enable companies to share Smart Grids data in a secure way. 

Directive  95/46/EC  on  the  protection  of  personal  data28  constitutes  the  core  legislation 
governing  the  processing  of  personal  data.  The  Directive  is  technology-neutral  and  the  data 
processing  principles  apply  to  the  processing  of  personal  data  in  any  sector,  so  also  cover 
some  Smart  Grids  aspects.  The  definition  of  personal  data29  is  particularly  relevant,  as  the 
distinction between personal and non-personal data is of outmost importance for further Smart 
Grids  deployment.  If  the  data  processed  are  technical  and  do  not  relate  to  an  identified  or 
identifiable natural person, then Distributed System Operators (DSOs), smart meter operators 
and energy service companies could process such data without needing to seek prior consent 
from grid users. While the European data framework is appropriate and does not need to be 
extended,  some  adaptations  might  be  needed  in  the  specific  national  legal  frameworks  in 
order to accommodate some Smart Grids foreseen functionalities. With the wide deployment 
of Smart Grids, the obligation to notify national data protection authorities of the processing 
of  personal  data  is  naturally  likely  to  increase.  Member  States  will  have  to  ensure,  when 
setting  up  Smart  Grids  and  more  particularly  when  deciding  on  the  division  of  roles  and 
responsibilities  regarding  ownership,  possession  and  access  to  data,  that  this  is  done  in  full 
compliance with the EU and national data protection legislation.30 

The Smart Grids Task Force has agreed that a ‘privacy by design’ approach31 is needed. This 
will be integrated in the standards being developed by the ESOs. 

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30 

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http://www.beuc.org/Content/default.asp?pageId=1120&searchString=smart%20grids. 
Directive  95/46/EC  of  24  October  1995  of  the  European  Parliament  and  of  the  Council  on  the 
protection of  individuals  with  regard  to  the  processing of  personal  data and on  the free  movement  of 
such data, OJ L 281, 23.11.1995, p. 31. 
Article 2(a) of Directive 95/46/EC. 
The Article 29 Working Party on the protection of individuals with regard to the processing of personal 
data (set up under Article 29 of Directive 95/46/EC to advise the Commission) is currently working on 
an opinion to highlight the relevant data protection issues for smart grids and make recommendations 
for solutions. 
Privacy  by  Design  is  an  approach  whereby  privacy  and  data  protection  compliance  is  designed  into 
systems holding information right from the start, rather than being bolted on afterwards or ignored, as 
has too often been the case. See http://www.ipc.on.ca/images/Resources/7foundationalprinciples.pdf. 

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Finally, developing and maintaining a secure network is essential for continuity of resources 
and  the  safety  of  consumers.  It  is  important  to  ensure  the  security  and  resilience  of  the 
infrastructures  supporting  Smart  Grids  deployment  in  Europe.  To  this  end,  the  Commission 
has launched a multi-stakeholder  group for high-level discussions on the security, including 
cyber security, and resilience challenges of Smart Grids. 

2. 

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Actions on data privacy and security of data in Smart Grids 

The  Commission  will  monitor  the  provisions  of  national  sectoral  legislation  that 
might apply to take into account the data protection specificities of Smart Grids.  

The  ESOs  will  develop  technical  standards  for  Smart  Grids  taking  the  ‘privacy  by 
design’ approach.  

The  Commission  will  continue  bringing  together  the  energy  and  ICT  communities 
within an expert group to assess the network and information security and resilience 
of Smart Grids as well as to support related international cooperation. 

2.3. Regulatory incentives for Smart Grids deployment 

Smart  Grids  deployment  should  first  and  foremost  be  market-driven.  Network  operators  are 
key beneficiaries of  Smart Grids  deployment  and  will likely be the main investors in Smart 
Grids. Natural drivers for investment are the possibilities to enhance network efficiency and 
improve  overall  system  operation  through  better  demand  response32  mechanisms  and  cost 
savings  (remote  operation  of  meters,  lower  reading  costs,  avoiding  investment  in  peak 
generation,  etc.).  Households  and  companies  should  have  simple  access  to  consumption 
information  so  they  can  keep  their  energy  costs  down.  In  addition,  for  energy  suppliers, 
service  companies  and  ICT  providers  (or  combinations  of  these),  the  use  of  ICT  solutions 
associated with Smart Grids allows the large-scale integration of variable renewables within 
networks while maintaining the overall reliability of the system. A precondition for this is that 
such  solutions  remain  open,  business-model  neutral  and  inclusive,  and  also  allow  SMEs  to 
participate  fully.  Above  all,  Smart  Grids  are  a  necessary  enabler  for  providing  added-value 
services to customers. 

There  is  wide  agreement  among  investors  that  the  regulatory  framework  needs  to  be 
conducive  to  investment  in  Smart  Grids.  The  Electricity  Directive  and  the  Energy  Services 
Directive  provide  a  mix  of  obligations  and  incentives  to  Member  States  to  establish  such  a 
framework.  Regulatory  incentives  should  encourage  a  network  operator  to  earn  revenue  in 
ways that are not linked to additional sales, but are rather based on efficiency gains and lower 
peak investment needs, i.e. moving from a ‘volume-based’ business model to a quality- and 
efficiency-based model. Article 10(1) of the Energy Services Directive obliges Member States 
to remove such volume-based incentives. If evaluation of the implementation of the Directive 
shows that this provision is insufficient or inadequate, the Commission will consider whether 
to amend it in the upcoming revision of the Directive or to complement it by a Network Code 
on Tariffs, to be drafted as part of the Third Package. 

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Demand  response  mechanisms  manage  customer  consumption  in  response  to  supply  conditions,  for 
example by inducing end-users to consume less electricity at times of high wholesale market prices or 
when system reliability is jeopardised. 

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Annex  I.2  of  the  Electricity  Directive  requires  Member  States  to  define,  no  later  than  3 
September  2012,  an  implementation  plan  and  timetable  for  the  roll-out  of  smart  metering 
systems. Given the relationship between Smart Grids and smart meters, such implementation 
plans would also need the development of Smart Grids, and should thus address the required 
regulatory incentives for the implementation of Smart Grids. The European Commission will 
actively  monitor  Member  States’  progress,  and  provide  guidelines  on  key  performance 
indicators by the end of 2011. If insufficient progress is being made in the course of 2012, the 
Commission  will  consider  introducing  stricter  regulation  for  the  implementation  of  Smart 
Grids. 

In designing national incentive regimes, it is important to ensure that they do not diverge to an 
extent  where  trade  and  cooperation  across  national  borders  becomes  difficult.  For  the  same 
reasons, Smart Grids deployment in the Member States should also proceed at a similar pace. 
Large  differences  between  national  energy  infrastructures  would  prevent  businesses  and 
consumers  from  reaping  the  full  benefits  of  Smart  Grids.  Permitting  procedures  for  the 
construction and renewal of energy grids have to be streamlined and optimised, and regional 
regulatory  barriers  and  resistances  must  be  tackled.  In  this  context,  the  EU-wide  ten-year 
network development plans33 (TYNDP) as well as the Regional Initiatives34 (RI) can play a 
major role. 

3. 

– 

– 

– 

– 

Actions to adjust the existing regulatory framework for Smart Grids 

The  Commission  will  develop  regulatory  incentives  for  the  deployment  of  Smart 
Grids, for example in the application and revision of the Energy Services Directive 
and/or through the development of a network code or implementing act on tariffs. 

The  Commission  will  establish  guidelines  to  define  a  methodology  for  the  smart 
meter  implementation  plans  of  Member  States,  as  well  as  for  their  (possible)  cost-
benefit analyses.  

Beyond  the  targets  for  smart  meters  in  the  Third  Package,  the  Commission  will 
request Member States to produce action plans with targets for the implementation of 
Smart Grids.  

Through  its  role  in  the  Regional  Initiatives  and  its  involvement  in  ENTSO-E,  the 
Commission will encourage and promote coordinated action towards the deployment 
of Smart Grids at European and regional level.  

2.4. 

Smart Grids in a competitive retail market in the interest of consumers  

The  Electricity  Directive  requires  Member  States  to  create  well-functioning  and  transparent 
retail markets (Article 41) and to facilitate access for new entrants, including energy service 
companies and ICT providers that can provide services to consumers allowing them to change 
their  behaviour  to  their  benefit.  Furthermore,  the  Electricity  Directive’s  obligations  on 
Member  States  to  facilitate  switching  within  strict  deadlines  as  well  as  to  ensure  consumer 
access  to  consumption  and  billing  information  are  conducive  to  Smart  Grids  deployment. 
Their correct transposition in national legislation will be closely monitored. Promoting direct 

33 
34 

See Article 22 of the Directive 2009/72/EC and Article 6 of the Regulation 714/2009. 
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0721:FIN:EN:PDF. 

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feedback  to  consumers  using,  for  example,  in-home  displays  or  other  means  can  also  be 
important.  The  upcoming  review  of  the  Energy  Services  Directive  aims  to  further  facilitate 
the  development  of  a  market  for  energy  services  through,  among  other  things,  support  for 
advanced metering. 

Developing Smart Grids in a competitive retail market should encourage consumers to change 
behaviour, become more active and adapt to new ‘smart’ energy consumption patterns. This is 
a  crucial  precondition  for  the  successful  transition  towards  the  efficiency-based  business 
model described above. Demand response is at the core of the new model. It requires (almost 
‘real-time’) interaction between utilities and consumers’ energy management and much wider 
use of time-differentiated electricity prices to ensure that consumers have a genuine incentive 
to adapt their consumption patterns. 

With  the  introduction  of  Smart  Grid  technology,  DSOs  would  obtain  access  to  detailed 
information about consumers’ consumption patterns, which could give DSOs a considerable 
competitive advantage over other market actors in offering tailor-made services to consumers. 
The  regulatory  setting  will  need  to  ensure  that  these  risks  are  properly  addressed.  If 
transposition of the Third Package and the development of technical standards do not address 
this sufficiently, the Commission will consider further legislative action. 

4. 

– 

– 

Actions to guarantee competitive Smart Grids services to customers  

The Commission will introduce, through revision of the Energy Services Directive, 
minimum  requirements  for  the  format  and  content  of  information  provision  for 
customers, and for access to information services and demand management (e.g. in-
house control of consumption). 

The Commission will monitor the implementation of the Third Package requirements 
needed to create a transparent and competitive retail market for the development of 
services  (e.g.  time-of-use  pricing  and  demand  response)  based  on  Smart  Grids  and 
metering. If the requirements are not implemented or not effective, the Commission 
may take further action, possibly in its review of the Energy Services Directive. 

2.5. 

Continuous support for innovation and its rapid application 

The  Commission  has  launched  several  initiatives  for  the  modernisation  of  energy  networks. 
These  have  shaped  the  Smart  Grids  vision,  established  the  needs  for  technology  R&D  and 
prompted small-scale pilot projects to verify and demonstrate the functioning and benefits of 
Smart  Grids.  Over  the  last  decade,  about  €
 300  million  has  been  spent  on  these  projects, 
financed mainly through Framework Programmes 5, 6 and 7.35 In May 2005 the Commission 
launched the European Technology Platform for Smart Grids36 with the aim of creating a joint 
EU vision and research agenda for Smart Grids.37 A continued R&D effort towards advanced 
electricity network technology is necessary, and the Platform is expected to provide inputs for 
its agenda. Last June, the European Electricity Grids Initiative (EEGI) was established under 
the  SET  Plan  to  accelerate  the  deployment  of  smart  grids  technologies  in  view  of  the  2020 

35 

36 
37 

http://www.smartgrids.eu/?q=node/162, http://intra.infso.cec.eu.int/ or 
http://cordis.europa.eu/fp7/energy/. 
European Technology Platform for the Networks of the Future, http://www.smartgrids.eu/. 
http://ec.europa.eu/research/energy/pdf/smartgrids_en.pdf. 

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targets.  Its  main  emphasis  is  on  innovation  at  system  level,  and  it  will  clarify  technology 
integration  and  business  cases  through  large-scale  demonstrations  and  R&D  projects  for 
Smart Grids. It also aims to prevent duplication of efforts through a wide-ranging knowledge 
sharing  approach.  In  May  2010,  the  EEGI  adopted  a  detailed  implementation  plan,  setting 
 2 billion.38 The 
priorities for the period 2010-2018 and indicating financing needs of about €
plan identifies the need for major upgrades to networks, particularly at distribution level, and 
the need for tight collaboration between distribution and transmission operators to ensure end-
to-end delivery of electricity. This work is complemented by the necessary R&D investment 
in new ICT components, systems and services supported by public-private partnerships.39 

In parallel to this industry-driven initiative, action has been taken at regional and local level in 
the form of the Covenant of Mayors initiative40 and the upcoming SET Plan initiative Smart 
Cities and Communities.41 The EEGI will contribute its results on Smart Grids to the Smart 
Cities  and  Communities  initiative,  which  will  focus  on  the  integration  of  various  energy 
supplies and uses (electricity, gas, heat and transport) to maximise energy efficiency.  

These  EU  initiatives  are  expected  to  accelerate  the  deployment  of  Smart  Grids  in  Europe, 
starting  from  a  modest  level.  Government-level  support  for  deployment  has  so  far  been 
limited,  even  when  compared  with  other  parts  of  the  world.  The  SET  Plan  complements 
research  actions  with  deployment-oriented  actions,  fully  in  line  with  the  Energy  2020 
strategy. Projects and investments must now aim for ‘real life’ demonstration and validation, 
solving  system  integration  issues  and  demonstrating  the  business  cases.  They  must  also 
demonstrate  how  consumers  can  benefit  most  from  the  introduction  of  these  systems.  The 
EEGI and Smart Cities and Communities initiatives are a step in the right direction. 

The  roll-out  of  smart  grid  technologies  is  identified  as  a  European  infrastructure  priority 
requiring particular attention in the Energy Infrastructure Package42. It outlines the necessary 
toolbox  for  the  planning  and  delivery  of  the  energy  infrastructure,  including  through  an 
instrument  for  EU  financial  support  to  leverage  private  and  public  funds.  The  Commission 
will also examine the possible use of other EU funding instruments, including the Structural 
Funds,  to  offer  tailored  financing  solutions  involving  both  grant  support  and  repayable 
assistance43,  such  as  loans  and  guarantees,  as  well  as  support  to  innovative  actions  and 
technologies. 

5. 

– 

38 
39 

40 
41

42 
43 

Actions to support innovation and rapid application  

During 2011, the Commission will propose additional new large-scale demonstration 
initiatives for rapid Smart Grids deployment, taking into account the needs identified 
in  the  EEGI.  They  will  include  new  ways  and  means  to  leverage  financing,  in  line 

http://www.smartgrids.eu/documents/EEGI/EEGI_Implementation_plan_May%202010.pdf. 
For example, in 2011–13 the Commission will be supporting six public-private partnerships for ICT in 
FP7 with a total funding of €
http://www.eumayors.eu/home_en.htm. 

 1 billion and leveraging around €

 2 billion of private spending. 

http://ec.europa.eu/energy/technology/set_plan/doc/2009_comm_investing_development_low_

carbon_technologies_roadmap.pdf. 
See e.g. section 5.4.2. in COM(2010) 677 final, adopted on 17th November 2010. 
For example, within the current Cohesion Policy framework, urban development funds (established 
under the JESSICA initiative) are providing repayable assistance for sustainable urban infrastructure 
development: http://ec.europa.eu/regional_policy/funds/2007/jjj/jessica_en.htm. 

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with the Energy Infrastructure Package and as requested by the European Council of 
4 February 2011 

– 

The  Commission  will  also  launch  the  initiative  Smart  Cities  and  Communities  in 
2011. 

3. 

THE WAY FORWARD 

The Commission intends to promote a faster and wider deployment of Smart Grids in Europe 
through  the  above-mentioned  actions.  Based  on  the  views  expressed  by  the  institutions  and 
stakeholders  on  this  Communication,  the  Commission  intends  to  develop  appropriate 
initiatives  in  the  course  of  2011.  These  initiatives  will  address  the  regulatory  aspects 
identified  in  this  Communication,  in  particular  in  the  context  of  the  Third  Internal  Energy 
Market  Package,  the  forthcoming  revision  of  the  Energy  Services  Directive,  the  Energy 
Infrastructure  Package  and  the  mainstreaming  of  energy  policy  priorities  in  different  EU 
funding programmes. 

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