Manila Bulletin
(Special Feature)
By Myrna M. Velasco
Published: April 28, 2013
Industry players are trumpeting the Philippine electricity sector’s plunge into the ‘technologically-forward’ ethos of smart grid.
Imagine a future when your house becomes a showcase of the smart grid architecture. From how things are presented, it does not only tell you what is happening in your electric meters, it will also marry the technology choices and solutions that consumers have long been yearning for when it comes to managing electricity usage – and hopefully, cutting down electric bills.
So does that make investment plans tread along the path of least resistance? Not really. Smart grid remains in the ‘dream world’ until these major concerns are fleshed out: what are the policies and how regulatory nuances are being shaped for investments?
Ultimately too, consumers must understand such mystic concept as something that will be beneficial to them, not punitive in their electric bills.
Writing the rules
Despite the steady drumbeat by investors and other stakeholders at the conference convened by the International Electric Research Exchange (IERE) early this year, both the Department of Energy (DOE) and Energy Regulatory Commission (ERC) were non-committal on how investment returns will eventually be warranted for smart grid-related ventures.
As culled from the investment plans of power utilities, chiefly the Manila Electric Company (Meralco), the chain of smart grid infrastructure they want to bring into consumers doorsteps would range from the installation of intelligent meters; modernization of the power grid to underpin the envisioned mass deployment of electric vehicles (EVs) and plug-in hybrids as well as the integration of renewables; and the introduction of innovative service offers such as prepaid electricity, among others.
But the path forward won’t be easy, according to Meralco senior vice president Alfredo S. Panlilio, reiterating that regulation on investment recoveries must first be established.
Energy Secretary Carlos Jericho Petilla was less clear when it comes to his department’s policy on smart grid investments -- that, as he admitted that rules have yet to be written for this direction of infrastructure rollout in the energy sector.
“We admit that there is much to be done locally in terms of this development, However, we are now slowly crafting a roadmap to develop our smart grid policies to enhance our competitiveness holistically and globally,” Mr. Petilla has enthused.
He added that the planned policy will have to be aligned with the overall goal of achieving energy sustainability as well as improving the information and communication technology (ICT) that shall serve as the convergence point to smart grid.
The ERC, for its part, “is still trying to fully understand and internalize the concept of smart grid,” according to its executive director Francis Saturnino Juan.
Their starting point, he said, was to understand that “there is no single definition of the term, but a variety of description of what it is about.”
Mr. Juan acknowledged though that power grid modernization ventures will entail costs, hence, “you can expect the ERC to come out with the appropriate regulations.” Still, he has this statement qualifier: “as to what the mechanism and the underlying principles will be, it might be too early for me to even speculate.”
Handling “big data” and “privacy of information” relative to the ICT component of smart grids would be added task for regulators to weigh on; as well as prospective cross-regulation that may come with technology convergence (i.e. with the telecommunications sector) as to the introduction of prepaid electricity service.
Other market’s regulatory pathway
In some European jurisdictions, the rate of return for smart grid investments has been integrated and clearly defined as “added incentive” in their performance-based rate setting (PBR) scheme.
In Italy, for example, regulators allotted an extra 2.0-percent in their weighted average cost of capital (WACC) for electric vehicle-related investments.
UK Professor Stephen Littlechild, who was the known innovator of the PBR scheme of regulation, has acknowledged that “the advances in technology are consequently triggering modifications in incentive regulation for electricity grids.”
With the smart grid and the integration of renewables into the power system, he stressed that the basis of computation of allowable revenues for power utilities had also been shifting into what European regulators refer to as the RIIO formula – or the one which factors in incentives plus innovations and outputs.
While the Philippine smart grid path is still considerably on theoretical blueprint, many markets have already advanced on this sphere – including some Asian countries, such as China and South Korea; plus the more advanced markets of North America and Europe.
China, in particular, has anchored smart grid capital outlay unto its “green grid’ goal – or aptly, by integrating massive renewable investments into its power grid.
For Korea Electric Power Corporation (Kepco), it will be investing a total of US$8.2 billion until 2030 to complete the loop of its smart grid ambition – that will command an investment of $400 million a year for the utility. The initial phase was a $240 million smart grid test-bed project in Jeju island.
In the South Korean power firm’s case, company executives have noted that “big capital has been invested to smart grid-related products, such as less loss materials, electric vehicle, smart appliances as well as into R&D (research and development) activities.”
Initial outcomes for Kepco portend reduction in electricity consumption because of relatively effective “demand-response.” This is partly due to the fact that consumers are also shifting behaviors when it comes to patronage of “smart appliances”, which if it will continue, may further pare Korea’s electricity usage in the foreseeable future.
The consumer education phase is another tricky part. Smart grid-leaning power markets noted that they had to educate the public in stages -- from the easy things to the complicated concepts about smart grid, often with the help of tri-media as well as cartoons and brochures to bring their messages closer to the consumers’ heart.
One size doesn’t fit all
Industry players agree that the definition of “smart grid” could vary across jurisdictions or depending on the need of a particular electric system.
Stakeholders albeit reckoned that the major benefit consumers can draw from smart grid would be on widening the base of information or data that they can access to help them manage their electricity consumption.
For instance, in the rollout of ‘intelligent’ electricity meters, “these would be able to communicate and send data practically in real time” and as regularly as possible to the consumers – on matters relating to their electricity consumption or even on power outages.
American firm GE enthused that smart grid does not thrive on “one-size-fits-all” architecture. Instead, each system can be customized into the needs of particular country or market.
In the US and in many bigger-scale electricity markets including those in Europe, it was emphasized that the integration of renewable energy has been their primary focus. For those with net metering infrastructure (i.e. for solar), smart grid system has been their technology ally in throwing back stored renewable energy from a consumers’ panel back to the grid.
“Smart grid has different definitions and drivers per country, per region, per continent. In many places, it is done differently for each country,” Dr. Bartoz Wojszczyk, GE managing director for digital energy global growth has noted.
In Meralco’s case, the planned take-off point for its P40 billion smart grid aspiration will be the introduction of prepaid electricity service (starting with its pilot areas in Antipolo) and an eventual venture into electric vehicles.
GE which will be the provider of its prepaid meters, has emphasized, that it will be customizing the technology according to Meralco’s needs. “With Meralco, the goal is a smart grid investment by 2021, through a 10-year plan. It will not be a one-time investment. It is a process and the first steps are being done,” GE Philippines chief executive Jocot de Dios said.
Mr. Panlilio has averred that the technical pilot for their prepaid electric service will wind up middle of this year and to be followed by a commercial trial. While traversing these experimental phases, he stressed that “policy matters are also being discussed extensively with government, the regulators and other relevant stakeholders.”
The inherently-linked smart grid business plan for Meralco “will be the mass-scale deployment of electric vehicles.” Charging station prototypes are currently being perfected by the utility firm while simultaneously addressing concerns on the possibility of localizing the production of e-vehicles.
“There are people who are interested in manufacturing e-vehicles locally, so we will be looking at their business case and if we can convince them to do cost-effective production of e-vehicles,” Mr. Panlilio said.
For the Philippines, its ‘super grid path’ may still be long and winding. Yet it is hoped that the little steps being undertaken by its power service providers will result in cost benefits or will at least render reduction in consumers’ electric bills – as compared to paying Asia’s highest electricity rate at present.
As some market observers recommend, aside from the prepaid electric meters, the distribution utilities may also need to consider setting in the front-line the more advance technologies that could help rein in perennial problem of high system losses; and to brace also for the proper method of connecting renewable energy (especially the intermittent technologies) into the power grid. (MMV) source
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