In December 2016 CEER, the Council of European Energy Regulators, updated its overview about data management models in Europe (see here). The report summarizes how some member states facilitate the management of data from smart metering.
CEER refers to data management as “[…] the technical model through which data is sourced, validated, stored, protected and processed, and through which it can be accessed” (CEER, 2016, p.9).
We apply this terminology accordingly. As a background to this report we want to provide you with a brief overview about the general models discussed for data management in Europe and North America. In addition, we will briefly discuss the pros and cons of these models from an institutional perspective with respect to five different criteria that we introduce later on.
Data Management as an integrated task of the network operators
Lets us first look at the 'DSO as market facilitator' model. Here, the responsibility for data management, including collection of data and construction of the necessary information infrastructure, is allocated to the distribution system (network) operators (DSOs). Thereby, the DSO is responsible for the electricity network as well as the information infrastructure, storage of data and management of the exchange of data. This model is discussed quite extensively in Europe, as the DSOs had the responsibility for data collection before the smart meter roll out and they are executing the smart meter roll out in most member states as well. Currently, several countries, like Italy, Spain and the Netherlands apply different versions of the 'DSO as market facilitator' model.
Importantly, the 'DSO as market facilitator' is taken into consideration for the European context, which means that we are facing legally unbundled DSOs. Legal unbundling requires that the network operator, the DSO, is a separated legal entity from other parts of the electricity supply chain. In practice this means that the DSO is one company within a larger holding group that owns not only the network, but retail and generation businesses as well. About 90-95% of all networks in Europe are owned by legally unbundled DSOs. However, there are still many smaller DSOs who are excluded from legal unbundling (the so called de-minimis exception) but are fully integrated with retail and generation departments. As these smaller DSOs only constitute a limited market share, the discussion about the 'DSO as market facilitator' model focuses on the legally unbundled DSOs. Still, we should keep in mind that these constitute not the whole network market in Europe.
Due to the described shortcomings, we propose to introduce the US model of 'energy service utilities' for those DSOs that are integrated with the retail and generation business. The major advantage of this model is that it does not mix up the discussion about the different data management models with the unbundling of network operators (which is a much bigger discussion than data management, at least from an institutional perspective).
In the US context the main task of the energy service utility is “to provide lowest-cost energy services to its costumers […]. I it responsible for supplying all retail generation costumers demand within high reliability. It can own the generations that provide supply […].” (Fox-Penner, 2010, p.189).
We can see from this definition that the energy service utility’s tasks are comparable to those described for the DSO in the “DSO as market facilitator” model. However, what is special about the energy service utility is that it owns not only the electricity and information network, but generation capacities as well. This is why we propose to apply this term to the small DSOs in Europe that are part of the deminimis- exception and not legally unbundled.
Separated approaches: Information management as an unregluated task within the responsibility of the network operators
In contrast to integrated solutions like the “DSO as market facilitator”, the second category of governance models for data management focuses on separated solutions. In this context the term separated means that data management is a task for the network operators, but separated from their regulated business.
The first concept in this category is from the US and was labeled “smart integrator”.
Fox-Penner (2010) defined this entity as “a utility that operates the power grid and its information and control system but does not actually own or sell the power delivered by the grid.” (Fox-Penner, 2010, 175)
Therefore, we can think of the smart integrator as being an ownership unbundled DSO. While the smart integrator is not responsible for the generation of electricity, it does take responsibility for balancing the system and to send price signals to the end-costumer. The smart integrator can be understood as an evolution of an unbundled DSO. This evolution is triggered by the increasing need to integrate small and widely distributed generation facilities into the grid; a task which differs from the traditional ones to merely secure one-directional power flows. In addition, the smart integrator should establish an open platform for information and data exchange, which needs to be capable to transmit and store huge amounts of data from different sources and allow all eligible parties to access this information.
The second concept, which proposes a separated solution for data management in smart grids, is based on the Independent System Operator (ISO) concept. This approach requires that one specific entity takes responsibility for operational activities (system operation) in the network and is independent of transmission asset ownership. With an ISO, the network ownership can stay with an integrated firm, which might also own generation assets. The separation of ownership from the network structure then is the main difference to the smart integrator model described above. As it is, the ISO concept has only been applied to the operation of electricity grids. Nevertheless, the ISO’s competences could be extended by making it responsible for data management and its necessary infrastructure as well. This concept has been applied in Canada in case of the Independent Electricity System Operator (IESO), which is the network operator for Ontario. Besides its task to operate the grid, the IESO has the responsibility to manage the data from 4.7 million smart meters.
The third party approach: a centralized monopoly vs decentralized Competition
Another popular approach proposes to delegate the responsibility for data management to third parties. The term third party here primarily addresses a party that is new to the electricity sector and is only responsible for data management. However, we can think of incumbents being third parties as well, if these incumbents become active in a market or region where they have not yet been active.
One approach based on third parties proposes to establish an independent and neutral third party market facilitator with central data storage. This independent central data hub (CDH) will only be responsible for the data management in smart grids and not be active in any other area of the electricity supply chain. It is an independent third party which should build up the necessary infrastructure for data management and establish centralized data storage. The CDH takes responsibility for the reliability of the system, under the supervision of the regulator. The national regulatory agency supervision shall ensure that it fulfills its tasks to provide data on a non-discriminatory basis to the eligible parties in the smart system. In other words, the CDH is a regulated monopoly for data management in smart grids. This approach is currently applied in the UK with the data and communications company, DCC.
In contrast to the CDH, the second model based on third parties proposes a decentralized storage solution. This concept focuses on a competitive market for data management and recommends establishing independent and unregulated service providers which can be chosen by each consumer. These service providers are labeled Data-Access Point Managers (DAM). Each DAM offers to build up the necessary information infrastructure for the consumer. Importantly, the DAM does not store the data centrally. Storage remains decentralized with the users. Thereby, the consumer has full control over his data. The DAM only acts as an interface, which allows each consumer to decide which commercial party can access his data. The DAM-approach is currently applied in Germany. In Germany, the Gate-Way-Administrator is responsible to secure that only those entities with permission can access the data stored on the smart meters.
To sum up, the current discussion about data management models for smart meter data focus on three main models in Europe. Some countries already apply one specific model, e.g. Belgium is currently installing a central data hub operated by the distribution grid operators. We will see which models will be applied in the different countries in Europe. We will discuss the different models in our next post in more detail. Then, we will present an institutional analysis and a multi-criteria analysis.