Bdi initiative io_e_us-ide-broschuere_tcm27-45653

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Bdi initiative io_e_us-ide-broschuere_tcm27-45653

  1. 1. Internet of EnergyICT for Energy Markets of the FutureThe Energy Industryon the Way to the Internet Age
  2. 2. 1BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureContentsExecutive Summary 21 Introduction 42 Radical Changes in Energy SupplyInevitability and Historic Opportunity 62.1 Climate Change, Energy Consumption, and Natural Resources 62.2 Current Regulatory Environment 82.3 Economic and Technological Pressure to Change 102.4 Backlog of Investments 112.5 Historic Opportunity 123 Networked Components and Integrated ICTBuilding Blocks for the “Internet of Energy” 133.1 Building Automation and Smart Homes 143.2 Centralized and Decentralized Energy and Grid Management 163.3 Smart Metering 193.4 Integration Technology 203.5 Economic Applications and New Business Models 223.6 Transition Process to the Internet of Energy 244 Scenarios for the “Internet of Energy”Developments and Opportunities in a Networked Energy Economy 264.1 Scenario I – Electromobility 264.2 Scenario II – Decentralized Energy Generation 264.3 Scenario III – Energy Trade and New Services 275 Designing the Transition ProcessConcrete Recommendations 285.1 Standardization 285.2 Incentives, Regulatory and Legal Framework 295.3 Research Promotion 315.4 Funding Methodology and Reorganization 325.5 Continuing Education and Training 335.6 Public Relations Work 33E-Energy: Germany Working towards an “Internet of Energy” 34The six E-Energy Model Regions at a Glance 37Appendix 41Figures 41Abbreviations 42Literature Sources 44Catalog of Demands 47Imprint 48
  3. 3. 2 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureAt present, we can identify three major factors that havean impact on the energy sector. They underpin why thisentire sector needs to be restructured and turned into anintelligent and efficient supply system. New integral systemsolutions are called for, in which information and commu-nication technology (ICT) will play a key role in providingthe necessary information networks and intelligencesystems.The first factor is the depletion of global fossil fuel re-sources: Fossil fuel supplies are finite and are alreadyexperiencing major price increases today. In addition, theatmosphere cannot absorb any more CO2 without facingthe threat of a climate disaster, and hence, concertedefforts must be undertaken in terms of active climate pro-tection. In the face of impending strains on and shortcom-ings of the energy system coupled with the concurrentlygrowing global demand for energy, we urgently need tomake significant improvements to achieve greater efficiencyin energy usage.The second factor is the fact that the changed regulatoryenvironment is placing greater demands on the energysystem’s data networks. Following the decoupling ofpower generation, transmission, and distribution, differentplayers along the value chain must now communicate andinteract using shared interfaces. Furthermore, new ruleson standardization, metering, and consumer transparencygenerate large amounts of data, which require intelligent,automated processes.The third factor is that as a result of technical develop-ments and rising energy prices, more power from renew-able energy sources will have to be fed into the power gridin the future, both from an increasingly decentralized sup-ply structure and from a central supply structure that willcontinue to exist in tandem. This calls for a much greaterdegree of flexibility in the areas of voltage maintenanceand efficient load flow control than the present system isdesigned to handle.These three driving factors are occurring at a time wheninvestments into the German and European energy supplysystem are urgently needed. Almost half of the installedpower plant capacity in Germany must be replaced ormodernized in the upcoming years, along with a massiveexpansion of the energy grids. At the same time, a signifi-cant number of residential households will require renova-tions. Due to rising energy prices, new energy-saving tech-nology and communication end devices will be increasing-ly used during the necessary overhaul.Executive SummaryIn light of this investment potential, we have a uniqueopportunity to promote a transition from the current ener-gy system to an Internet of Energy, which will generateoptimal energy efficiency from scarce energy resourcesthrough intelligent coordination from generation toconsumption. Most of the necessary technologies for theintelligent and efficient renewal of the energy system arealready available today.However, we are still a long way off from harnessing thefull potential offered by combining and integrating theavailable systems to optimize energy systems. It is thereforecrucial for the industries involved and for the governmentto work together and provide the direction and supportneeded to make this a reality. They need to agree onactions as well as on technical standards in order toactively and systematically devise the necessary transfor-mation processes.Information and communication technologies will play akey role in the development of a future-oriented energysupply. They form the basis for realizing a future Internetof Energy, i.e., the intelligent electronic networking of allcomponents of an energy system. Thanks to this increasednetworking, generator plants, network components, usagedevices, and energy system users will be able to exchangeinformation among each other and align and optimizetheir processes on their own. Thus, the current energy gridwith its passive, uninformative components and predomi-nantly unidirectional communication will evolve into amarket-oriented, service-based, and decentralized integrat-ed system providing potential for interactive optimizationand the creation of new energy services. Increased usageof power supply systems that are optimized through homeautomation and smart metering will give residential cus-tomers, public agencies, as well as small and medium-sized enterprises the chance to reduce their energy con-sumption or avoid using energy during peak load times,thus preventing bottleneck situations from arising.Improved energy management systems on the transmissionand distribution levels will enable the optimal use ofdecentralized generation and renewable energy sources ona large scale, without affecting the stability and quality ofthe system. Yet, the biggest challenge will be to create alevel of integration between management applications andthe physical grid that will enable complex IT componentsdistributed across heterogeneous grids and companyborders to communicate with each other.The transition from the current energy system to anInternet of Energy will present a good opportunity for amultitude of new business models to be created. In the
  4. 4. 3BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futurefuture, power grid operators will be able to increasinglyevolve into information service providers; new services,such as energy management at the customer’s premises,will emerge. New players will enter the market, such asoperators of virtual power plants for balancing energy. Byintegrating (hybrid) electric vehicles adapted to the energysupply, it will also be possible for the transportation sectorto be actively involved in optimizing the energy networks.As far as concrete recommendations for developing newbusiness areas and realizing a future-oriented intelligentenergy system are concerned, we suggest taking measureson several levels. On the technical level, there must be astrong focus on coordinating standardization in theinformation, communication, and energy technologies.This standardization is, in particular, designed to supportcontinuous bi-directional communication between energygeneration and end users. In addition to promoting basicresearch as well as education and training in the relevanttechnical and business management disciplines, initiativesfor applied research and piloting of the Internet of Energyare also particularly necessary in order to test conceptsand introduce lessons learned from research into theongoing transformation process of the energy business.If we want to ensure that innovative concepts of an intelli-gent and efficient energy supply will actually be used, wemust create long-term innovation incentives especially forthe network providers. In this area, appropriate regula-tions must be passed. Finally, suitable public relationswork is required in order to let all relevant players knowhow they can contribute to transforming the Internet ofEnergy concept into reality.Acting on the recommendations we have identified canmake a major contribution to transforming the currentenergy system into a more efficient, future-oriented energysupply infrastructure. This will simultaneously have theadded advantage of consolidating and extending the globalmarket leadership of German companies and researchinstitutions in the area of intelligent and integrated energytechnologies.
  5. 5. 4 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureThe long-term safeguarding of our energy supply and thereduction of greenhouse gas emissions have become keyissues in our times, as evidenced by discussions heldacross all sections of society about energy efficiency,sustainability, and climate change in the wake of the pub-lication of the latest UN World Climate Report and themeasures passed in response.The pressure to act does not only stem from the problemsregarding the climate, but also from highly volatile resourceprices and limited resources of fossil fuels. As far asGermany is concerned, the 20/20/20 energy targets of theEU (Hope and Stevenson 2008) passed under Germanleadership in April 2007 as well as the 14-point energy andclimate program of the German government approved inDecember 2007 are particularly important.However, the measures taken to date by government andbusiness to reduce energy consumption are inadequate.While fossil fuels continue to become increasingly scarce,demand for these resources shows no sign of let-up. Toillustrate this point: In 2005, approx. 18,235 TWh of elec-tricity were consumed worldwide. According to variousestimates, this demand is expected to double (The Econo-mist 2008) to quadruple (EU 2007) by 2050. According toa rough calculation using a power plant’s currentlystandard output of approx. 850 MW as a basis, by 2050,approx. 3,500 additional power plants of the same sizewould have to be built worldwide. In addition, thoseplants that reach the end of their technical lifetimes duringthis period will have to be replaced by new power plantoutput.1 IntroductionThese figures demonstrate that we need to develop moreefficient generation technologies and that these new, alter-native forms of electricity and heat generation systemsmust be integrated into the market rapidly. Furthermore,the energy at our disposal will have to be used much moreeconomically and intelligently in the future, since ulti-mately, conserving energy is the largest available sourceof energy.In Germany, there is currently a historically unique oppor-tunity to move swiftly and decisively to meet these majorchallenges. Integral components of the current energyinfrastructure will soon have to be replaced with newgeneration, transmission, and user components. Withinthe next ten years, power plants generating almost 50percent of the output installed in Germany will reach theend of their technical lifetimes. During the same period,extensive renovations will have to be undertaken in almostone third of German households (StatBA 2006).One of the major challenges faced by future energy trans-mission grids is the issue of how to integrate volatilerenewable energy generation. In addition, the currentinfrastructure for electricity, gas, and water meters must bealmost completely replaced by a new generation of meterswithin the next few years. In order to be able to complywith the requirements for monthly energy bills for residen-tial households – which will be legally mandated in thefuture – in an economically feasible way, the mechanicalmeters will have to be replaced by meters that can be readremotely.The goal is to make the best possible use of this invest-ment potential and to develop and implement an inte-grated overall concept that is coordinated on the political,technical, and economic levels. On the one hand, a future-oriented energy system is a prerequisite for the economy toflourish in Germany; on the other hand, it is imperative toconsolidating and extending the global market leadershipof German companies and research institutions in the areaof intelligent energy technologies.
  6. 6. BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Future5One critical factor for the success of the future-orientedenergy system will be an integrated information and com-munication infrastructure modeled and based on theInternet. This will allow simple, standardized, cost-efficient, and near-real-time access to energy information,since both centralized and decentralized energy providersneed up-to-date, accurate information at all times regard-ing the expected energy demands in order to be able toensure optimal operation. Consumers will also benefitfrom such an infrastructure, since it is the pre-conditionfor the development of intelligent end device technologies,which will enable customers to observe their actual energyconsumption in real time and operate their devices in away that minimizes consumption, thereby reducing costs.Only by combining intelligent users, providers, and inter-mediaries in an Internet of Energy will we be able toachieve maximum gains in efficiency in future dealingswith energy, while simultaneously adhering to climate pro-tection goals.The working group “BDI initiative Internet of Energy” hasmade it one of its goals to devise concepts for Germany inclose cooperation between business and science that pro-vide a roadmap for the transition from our current energylandscape to an Internet of Energy. In addition, one candeduce concrete recommendations directed at the govern-ment, policy makers, and business leaders in Germanywhich can lead to rapid changes that are socially, econom-ically, and ecologically feasible and technically realizable.What the Internet of Energy might look like in practicehas been tested in six German model regions since the endof 2008 in the context of the beacon project “E-Energy:ICT-based Energy System of the Future”. E-Energy is atechnology support program of the Federal Ministry ofEconomics and Technology (BMWi). In inter-departmentalcooperation with the Federal Ministry for the Environment,Nature Conservation and Nuclear Safety (BMU), BMWi isproviding EUR 60 million in funding for R&D activities ofthe technology partnerships. The partners will investanother EUR 80 million on their part, so that a total ofapprox. EUR 140 million will be available for the E-Energymodel projects. In addition, BMWi and BMU are jointlycreating a new R&D support focus “ICT for Electro-mobility”, which will closely tie into E-Energy.More information about E-Energy and the six modelregions can be found in the article “E-Energy: Germanyworking towards an Internet of Energy”, page 34 ff.
  7. 7. 6 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Future2 Radical Changes in Energy SupplyInevitability and Historic OpportunityClimate change, depleting global fossil fuel resources, dependency onimports, changes to the regulatory environment, economic and technologi-cal pressures, and lack of investment are all factors that will have a signifi-cant impact on our energy landscape and lead to major changes. However,when taken together, these factors also offer a historically unique opportu-nity to rapidly implement far-reaching measures.2.1 Climate Change, Energy Consumption, and NaturalResourcesSome of the most pressing and most widely discussedproblems and challenges of our times are those related tolong-term energy supply. The IEA World Energy Outlook(IEA 2008) and the current Climate Report of IPCC (IPCC2007) clearly illustrate the enormous challenges faced byfuture energy and climate policies. The world populationis forecast to grow by 30 percent to more than eight billionpeople by 2030. Assuming that the global economy willcontinue to evolve and be structured as expected, primaryenergy consumption will increase by more than 50 percentworldwide by 2030, while global electricity consumptionmight even quadruple by 2050, according to estimatespublished by the EU (EU 2007). The concentration of CO2in the atmosphere has risen by almost 40 percent since thestart of the industrial revolution; a temperature increase of3-6° C by the year 2100 seems probable (Cox, Betts et al.2000). If we are serious about avoiding the prospect ofeven greater climate changes, we must limit man-madeCO2 emissions as rapidly and comprehensively as possible.One way of reducing CO2 emissions is to introducesequestration processes (Carbon Capture and Storage –CCS). In fossil fuel-fired power plants and in industrialprocesses, this technology is used to separate the CO2from the volume flow and to store it long-term in suitablestorage repositories. Currently, CCS technology along withthe required infrastructure is still in the testing phase; infact, individual pilot facilities and geological test areas forCO2 repositories already exist. With 10-12 major pilotplants, the EU technology platform for CCS is paving theway for commercialization from around 2020. Currentlyongoing research projects are mainly aimed at minimizingthe loss of efficiency caused by separation and deep injec-tion. At the same time, issues regarding large-scale ship-ment of CO2 for permanent storage as well as transporta-tion issues have yet to be fully resolved (Martinsen,Linssen et al. 2006; Schlissel, Johnston et al. 2008).Following Germany’s nuclear power phase-out, whichwill be concluded by 2021, the capacity of the remainingpower plants will not be sufficient to deliver all necessarybase loads. However, CCS technology will not be suffi-ciently mature at that time to close the supply gap.In order to be able to adhere to German and European cli-mate protection goals nonetheless, the main focus shouldtherefore be on reducing energy consumption and increas-ing energy efficiency. According to the BMWi (2006), thenear-real-time display of electricity consumption alone willresult in a savings potential of approx. 9.5 TWh per yearfor residential households. In its energy efficiency actionplan, the European Commission estimates the Europe-wide energy-saving potential in industry, commerce, andtrade to be 20 percent, and even significantly higher inresidential households and in transportation. Figure 1shows a potential assessment carried out by the Global-e-Sustainability Initiative, according to which up to3.71 billion tons of CO2 or almost 15 percent of the totalemissions can be saved worldwide by the year 2020 simplyby using ICT in the areas of Smart Grids and SmartBuildings1.However, change is not only driven by CO2 emissionsfrom burning fossil fuels, but also by the future availabilityof natural resources and the development of naturalresource prices. There has been a strong increase in crudeoil prices in recent years. This is due not only to high con-sumption and an ever-increasing demand (especially inAsia), but also to a lack of capacity reserves, the weak USdollar, low outputs (e.g., supply interruptions in Nigeria,Venezuela, Norway, Iraq, and Texas) as well as speculativeinvestments on the natural resource markets (IEA 2008).1 On the other hand, 830 million tons of CO2 were emitted due to theoperation of ICT in the year 2007. This corresponds to approx. 2 percent ofthe total amount of CO2 emitted in 2007.
  8. 8. 7BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureDue to political constraints and a lack of investment,current and future projects aimed at exploiting further oildeposits and expanding output capacity are unlikely to besufficient to cover the expected increase in demand ofapprox. 1 percent per year (Jesse and van der Linde 2008;Stevens 2008). Thus, peak oil output will inevitably beachieved during the next few years. In addition, “thepotential for political conflict” is inherent in “the concen-tration of conventional crude oil reserves as well asnatural gas reserves within the so-called ‘StrategicEllipse’, which extends from the Middle East via theCaspian region all the way into Russia’s Far North”(BGR 2008).Overall there ought to be enough fossil fuels available inthe next few decades to cover the worlds growing demandfor energy. However, the costs associated with exploiting,transporting, and converting these reserves and resourcesare set to increase, inevitably along with energy end-useprices. This trend will increase the need to research anddevelop alternative methods for electricity and heatgeneration, and to investigate ways to efficiently integrateproducers and consumers. It will also make these areasmore economically attractive. Figure 2 illustrates thesedevelopments on a timeline.Smart Buildings: 1.68Source: The Climate Group (2008)Smart Logistics: 1.52Smart Motors &Industrial Processes: 0.97Smart Grid: 2.03Others: 0.66Video Conferences: 0.14Teleworking: 0.22Transport Optimization: 0.6Total:7.8 billion tonsFigure 1: Annual global CO2 savings potentialthrough the use of ICT (in billion tons)2009 2010 2011 2012 2013 2014 2015 2016July 2008All-time highoil priceUSD 148/barrel crude oilSeptember 2008World CO2 emissionsrise four times fasterthan before 200020150.5 million plug-inelectricvehicles (PEV)2015Wind energy:25,000 MWinstalled capacity20150.5 million plug-inhybrid electricvehicles (PHEV) 20201 million PHEV/PEV2020Biogas, biomass inside buildings:6,000 MWel installed capacityPhotovoltaics on buildings:17,000 MWp installed capacity2012Power fromphotovoltaicsis economicallyfeasible (grid parity)22 Sep 2008Highest single-day jumpin history:USD 25/barrel201450% householdcoveragewithsmart meters2015CHPinside buildings2,500 MWinstalledcapacity2030Doubling ofdemand fornatural gas2050Doubling toquadrupling ofglobalpower demand2020Distributed EnergyResources (DER)contributemore than 25%to overall generation2015Germanlignite coalbecomes competitiveagainLegend: Anticipated date of occurrence Definite dateFigure 2: Prognoses and trends – availability of fossil energy sources and renewablesSource: BDI initiative Internet of Energy (2008)
  9. 9. 8 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futureactivities in the electricity and gas industries by amendingthe EnWG. When the change came into effect on 9 Sep-tember 2008, metering itself was also liberalized, in addi-tion to the operation of metering points. As of 1 January2010, all metering point operators will be obliged to installmetering devices in new buildings and fully renovated oldbuildings that display real-time energy consumption aswell as usage time (Bundestag 2008). Furthermore, existingmetering devices must also be reconfigured at the custom-ers request.End customers will have the right to receive a monthly,quarterly, or semi-annual electricity bill from their providerupon demand (sec. 40 EnWG). Providing greater con-sumption transparency is intended to result in increasedenergy awareness and ultimately in more economical ener-gy consumption by the end customer. Concurrently, energysupply companies will be obligated to offer customersmore flexible electricity rates that provide an incentive forconserving energy or controlling energy consumption thelatest by 30 December 2010 (EU 2006; Bundesrat 2007).The liberalization of metering enables customers to freelychoose not only their energy provider, but also their meter-ing point operator and their metering service provider.Figure 3: Regulatory and political environment – regulatory measures in the energy sector2001 2002 2003 2004 2005 2006 2007 2009 2010 20112002CHP ActLegend: Anticipated date of occurrence Definite date2003Greenhouse gas emissionallowance trading scheme(2003/87/EC)2006Unified Protocolsfor standardmarket communicationprocesses implemented(BNetzA)April 2007EU 20/20/20energy targets2007Energy-usingProducts Act (EuPA)2000Decision onnuclear powerphase-out by202120041stamendment toRenewable EnergyResources Act(EEG)September 2008Liberalization ofmetering(MessZV, GeLi Gas,GaBi Gas)2008Monthly or quarterlyconsumption billingmust beoffered (EnWG sec. 40)2002EnergySavingOrdinance(EnEV)2005Liberalizationin metering(EnWG, §21b)2008Eco-DesignDirective2008Direct marketingof wind energy2007Decisionto phase-outcoal subsidizationby 20202000Renewable EnergyResources Act(EEG)2004Greenhouse GasEmissions TradingAct (TEHG)2010Installation ofsmart metersupon customer request2021Nuclear powerphase-out30 Dec 2010Introduction of load-variableand variable time-basedrates (energysaving incentives)2008Amendment toCHP Act2007Incentive RegulationOrdinance (ARegV)2020Phase-out ofcoal miningsubsidies1 Jan 2010Installation ofsmart metersmandatoryin new buildings(Directive2002/91/EC)Source: BDI initiative Internet of Energy (2008)2.2 Current Regulatory EnvironmentThe future development of the European and nationalenergy supply will be determined to a large extent by theregulatory environment. The liberalization of the electricityand gas industry, for example, is based on EU guidelinesfor the European domestic electricity and gas markets.Their implementation entails major structural, organiza-tional, and contractual changes. The business divisionsalong the value chain must be unbundled. As a conse-quence, new market rules continue to be formulated in theform of laws, guidelines, and regulations to ensure theinteraction of new and established market players. Figure 3illustrates the timeline of these regulatory measures. Thediagram also shows that the liberalization process is farfrom complete, but continues to be promoted and drivenforward.The German government already passed an amendment tothe Energy Industry Act (EnWG) as far back as July 2005to establish new meter technologies. Sec. 21b describes theliberalization of metering for the installation, operation,and maintenance of metering devices for the electricityand gas supplied via cable and pipeline. In addition, inJuly 2008 the Bundesrat (the upper house of the Germanparliament) resolved to completely liberalize metering
  10. 10. 9BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureHowever, this unbundling will result in a very complexmarket structure, as depicted in Figure 4. To ensure thatnew and established market players interact smoothly insuch a liberalized energy and metering market, there mustbe guarantees that the business and ICT processes to besupported are automated. This requires unambiguousdefinitions of the minimum technical standards, communi-cation processes, and data formats. This has only beenpartially realized to date.For example, in the past, the manual processing time andexpense for customer transfer processes and the lack ofbinding specifications for the process management made itvery difficult for new competitors to enter the market. TheFederal Network Agency has attempted to solve thisproblem by laying down uniform rules and standards forhandling market communication processes (BNetzA 2006).These form the basis for communication between theproviders and the network operators involved in a cus-tomer transfer.However, the goal of a fully automated communicationsystem between the market partners in the context of cus-tomer transfer and network usage management processesas well as in metering has not been achieved yet.Loopholes in definitions and incomplete standardizationof the process chains mean that all market players continueto incur high costs. These costs mainly result from manualrework and additional coordination communication. Theycan only be reduced if, in addition to automated marketcommunication, the processes in the core applications canalso be handled automatically in the medium term. Thisincludes, in particular, the process of electronic billing.Figure 4: Multitude of players and contractual relationships on the liberalized electricity and metering marketSource: BDI initiative Internet of Energy (2008)TSO (control area) Balancing group coordinatorGeneration Trade (balancing group coordinator)Sales and distributionDistribution grid operatorParty connected to grid(owner, landlord)Electricity consumer(end user, tenant)Metering point operatorMetering service providerSubscriberagreementSuppliersframeworkagreement(network usage)Networkusage contractBalancing groupcontractAllocationauthorizationFramework agreementPower supplycontractRental contractPower supply contractb) Network connection usage contractMPO-MSP agreementMetering service agreementFramework agreement for metering pointsFramework agreement for meteringMeteringpointagreementa)Networkconnectionusagecontract
  11. 11. 10 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futureplan, approve, and build a new high-voltage line, it is clearthat immediate action is needed.New requirements are also emerging on the level of lower-voltage networks. Medium- and low-voltage networks, inwhich network automation has so far been eschewed to alarge extent, can no longer cope with the requirementsposed by the increased integration of decentralized genera-tion facilities. In addition, the continual increase in thedemand for power will push the well-developed distribu-tion networks to the limit of their load capacity. Althoughthe networks can undoubtedly absorb additional loads inthe medium term, those peak loads that depend on thetime of day are creating problems not only for the powergeneration companies. Optimizing the daily load flow canhelp to avoid expensive investments that are needed onlyfor a few hours each day. Therefore, in the future weshould implement more measures that make it possible toshift demand in accordance with economical grid opera-tion criteria. In the future, efficient load management ofthe power grid will thus also have to take into account therequirements of the distribution networks and involve allmarket players, down to private customers.The same applies to decentralized generation. Today, themedium- and low-voltage distribution networks are usuallystill capable of absorbing decentrally generated powerwithout any quality problems. The strong increase indecentralized energy feed-in we are witnessing has beenpromoted on a massive scale by the Renewable EnergyResources Act (EEG). In order to achieve further growth,the grid operators must, however, make major investmentsin order to safeguard supply reliability and power qualityin the future. Within a few years, distribution networkswill no longer be able to absorb at all times power pro-duced from the fluctuating energy sources (specifically sunand wind).This complexity is further increased if current heatingsystems are replaced on a large scale with devices thatgenerate power in addition to heat. Small cogeneration(combined heat and power, CHP or μ-CHP) units arealready available on the market, operating with varioustechniques such as gas diesel engines, stirling engines, orfuel cells. The concurrent use of primary energy for heat-ing purposes and power generation makes such CHP unitsparticularly interesting from the perspective of energyconservation, which is the reason why their use ought tobe promoted further (BMU 2008). However, for the distri-bution network operators, this represents a paradigm shiftfrom pure power distribution to an actively controlledenergy grid. The accompanying changes to the electricity2.3 Economic and Technological Pressure to ChangeThe “traditional” integrated planning of electricity genera-tion and transmission has become obsolete as a result ofliberalization and the unbundling of the electricity genera-tion and electricity distribution structure stipulated by it.New providers with generation capacities of their owncontinue to enter the market, resulting in increased com-petition. However, since new power plants – as far as canbe determined – are not all being built in the same loca-tions as existing power plants, the topology of the powergrid is changing. In addition, the BDEW estimates that bythe year 2020, smaller decentralized facilities and powerplants based on renewable energy (below 20 MW) with atotal capacity of 12,000 MW will commence operating.Approximately half of the large power plant projects – i.e.,generation capacities of approx. 15,000 MW – are plannedby market players who are currently not or only barelyactive in power production (e.g., Allianz 2006).Due to the fundamental changes in constraints, it is thusessential to maintain the functionality of the power grids.This will require, for example, that the transmission gridshave a much higher degree of flexibility in the area ofvoltage maintenance and efficient load flow control thanhas been the case to date. The fact that the – partly contra-dictory – requirements are becoming increasingly and evermore complex means that we must strive for integrated,system-wide innovations to the power supply system.Since mutual effects need to be considered in the contextof the system, system research and development workmust be coordinated. Optimizing single components alonein terms of their individual economic and technical inno-vation potential is no longer beneficial. However, thecurrent market regulation (incentive regulation) in theenergy sector in Germany does not yet provide enoughincentives for investments, which is why further develop-ment is necessary in this area.A well-developed power grid plays a key role in a liberal-ized energy economy. Through increased power tradingand the use of renewable energies, the requirements, espe-cially in relation to supergrids, have already changedconsiderably today. Whereas these were formerly operatedusing interconnections spaced far apart, mainly to increasesystem stability, they now increasingly serve to transportloads across long distances. If wind energy continues to bedeveloped further in the north of Germany and if conven-tional power plants are erected in new locations far awayfrom actual consumption, this trend will continue to gath-er force. Major restructuring measures and new operatingconcepts will thus become indispensible (dena 2005).Considering that it takes an average of twelve years to
  12. 12. 11BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureIn the area of electric energy, smart energy end userdevices and appliances that are capable of reacting toprice signals automatically, for example, are becomingmore and more common. The introduction of mandatorylabeling for durable appliances according to energy effi-ciency classes alone has not yet resulted in these appli-ances being used in a cost- and consumption-optimizedmanner. A significant improvement in terms of consciousenergy conservation can only be expected to occur onceall major points of power consumption are able to com-municate their consumption profiles via standardizedinterfaces, which are then aggregated, packaged, anddisplayed in a technical center located at the consumer’spremises. New controlling options for energy producersand consumers will only be created on the basis of thisreal-time energy consumption information accurately dis-played by devices, which will ultimately lead to optimizingthe load profile and to minimizing consumption andreducing costs.grids as well as in the gas networks can only be met byusing actively controlled so-called “Smart Grids”.Intelligent load management on the basis of variable time-based price rates is thus becoming an important option foroptimizing generation and consumption and thus allowingmore economical energy management. In the future, cus-tomers will be alerted to price signals which will enablethem to shift their consumption of energy to low loadtimes and thus enjoy the lower rates.2.4 Backlog of InvestmentsThe energy sector in Germany has undergone majorchanges in recent years and has experienced a slump ininvestment for a variety of reasons. Companies in this sec-tor gave top priority to consolidating their finances andproviding high yields to their shareholders. As a conse-quence, existing facilities were used as intensively and foras long as possible. This was exacerbated by the fact that,due to the partial or complete lack of framework condi-tions, the government also failed to create a climate thatwould have promoted investment in the energy sector onthe necessary scale. For these reasons, the existing facili-ties were sometimes operated until the very limit of theirlifespans. An investment boost in future supply infrastruc-tures is thus expected within the next few years.In Germany alone it is estimated that a total of approx.50 GW of power plant output – i.e., almost half of thetotal amount – will have to be replaced by 2020. This ismainly due to the age of the facilities, the targets ofclimate protection, and the expectations regarding thedevelopment of emissions trading along with the concur-rent nuclear power phase-out. The use of energy sourcesand generation technologies with less CO2 is a decisivecompetitive edge in this respect (Brinker 2007).Similar developments are also expected as regards residen-tial households, where new framework conditions havebeen created ever since energy efficiency became animportant issue. This should lead to major investmentactivities in the future. Examples include the regulationson the replacement of older boilers or the introduction ofthe energy performance certificate for buildings, which willtrigger corresponding investments into new solutions forgreater energy efficiency. In addition, approx. one third ofall German households will need to undergo renovationswithin the next few years (StatBA 2006). In light of thesharp increase in energy prices, we can expect that newenergy-saving technologies will be used for this scheduledoverhaul work, by both producers and consumers alike.
  13. 13. 12 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Future2.5 Historic OpportunityIn this chapter, a multitude of factors have been addressedthat highlight the need for modernizing the current energyinfrastructure. They will also accelerate modernization.Climate protection, air pollution control, and resourceconservation are major ecological drivers of this changeon the energy markets. The development of a Europeandomestic energy market, the legal separation of powergeneration and distribution, rising prices for naturalresources and energy, as well as new regulatory require-ments are placing increased economic pressure on theenergy providers. These factors, along with the fact thatthere are a growing number of co-competitors that increas-ingly come from other sectors, are the major economicdrivers of this change on the energy markets. An ever-growing number of decentralized power generation com-panies with volatile generation profiles, high-volumeenergy transmissions via transmission points, transnationalintegrated networks, and bi-directional energy flows indistribution networks are major challenges that, from thetechnological point of view, call for modernizing theenergy grids.In Germany, these key factors are at play at a time whenalmost 50 percent of the power plant capacities will haveto be replaced or modernized within the next few years,and when almost one third of the German households arein need of renovation. This convergence of factors pro-vides a historically unique opportunity to devise a wellthought-out transformation process. Information and com-munication technology plays a key role in a well-plannedoverall concept in terms of a more intelligent and energy-efficient energy supply system. Maximum synergy effectscan only be achieved if all economic, regulatory, and (IT)technical innovations are well coordinated. We shouldstrategically exploit this unparalleled opportunity!
  14. 14. 13BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureMany of the building blocks for a future Internet of Energy have alreadybeen developed and are available today. However, these components andtechnologies have hardly been networked with each other to date.Maximum gains in efficiency can only be achieved if information andcommunication technology is integrated intelligently with energy systems.At first glance, the technical energy grid of the future willnot appear to be very different from today’s infrastructure.Figure 5 shows this schematically – just like today, therewill be large-scale power plants (1) that transport energyto the consumers (3) via transmission grids (6) and distri-bution grids (7). In order to make greater use of regenera-tive energy sources, an even larger number of decentral-ized generators (2) will be installed than currently existtoday, which – just like the large-scale power plants – willcontribute to meeting the demand for energy. Since energyfeed-in will be increasingly decentralized and consumerswill react more flexibly and intelligently (4), more situa-tions will occur in which load flows (8) in sub-grids willbe reversed. If this dynamic infrastructure is to be operatedand coordinated efficiently, all individual componentsmust be integrated (10) into a uniform communicationinfrastructure – the Internet of Energy (9) –, which willserve to map all producers and consumers of the energygrid onto one virtual level. This is the only way to enablenear-real-time communication, thereby ensuring efficientcoordination of the grid despite the continually increasing3 Networked Components and Integrated ICTBuilding Blocks for the “Internet of Energy”number of dynamic consumers and decentralized, fluctuat-ing generators.Parts of the infrastructure for an Internet of Energy alreadyexist today, whereas other technologies are available inprinciple, but are not being extensively used yet:Technologies for home automation and decentralizedenergy generationIntelligent grid management systems on the trans-mission and distribution levelsInstalled smart metering technologyICT as a link between the Internet of Energy and thetechnical infrastructureApplications and services implementing the coordina-tion of the energy grid on the economic level54321Figure 5: Internet of EnergySource: BDI initiative Internet of Energy (2008)(1) Large-scale power plants(3) Consumer (traditional)(4) Consumer (intelligent)(5) Grid control(6) Transmission grid(7) Distribution grid(8) Load flows(9) Internet of Energy(10) Integration technology(2) Renewable energy (fluctuating)
  15. 15. These are described in greater detail in the sections below,and the current state-of-the-practice technology is explor-ed for each item. In addition, the issue of where furtheraction is required in the respective areas on the way to theInternet of Energy of the future is also addressed.14 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Future3.1 Building Automation and Smart HomesIn contrast to commercial buildings, the automation ofresidential buildings is still largely in its infancy today. Ingeneral, residential households are neither equipped withnetworked devices nor with control equipment. In addi-tion to energy consuming devices such as refrigerators,washers, dryers, home entertainment devices, and lighting,these buildings usually only have one heating system,which generates heat for heating both rooms and water.Most of the available appliances and devices are con-trolled manually or semi-automatically. Some do havebuilt-in automatic controls (e.g., washer, heating system),but this merely allows them to optimize their own per-formance in accordance with the requisite manufacturer-specific target parameters.In principle, it is already possible today to equip residen-tial buildings with networked building utilities and build-ing automation. However, this mainly applies to newlyconstructed buildings where the main focus is on prestigeand convenience rather than on cost or energy optimiza-tion. Well-established applications include those forcontrolling individual components such as heating,ventilation, and air conditioning, electricity distributionfacilities, lighting, shading, or telephone and securitysystems. Yet, there is no integrated control of these areas,particularly in terms of energy optimization.The vision of an intelligent residential building ultimatelygeared at maximizing convenience will become less impor-tant. Instead, intelligence in residential buildings willincreasingly be found in decentralized energy managementsystems (DEMS), which will be installed with the objectiveFigure 6: Smart Home – use of ICT for energy optimization in residential households2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Legend: Anticipated date of occurrence Definite date2016DSMintroducedon large scale2016OLEDs ready formarket launchfor generallightingtechnology2012Pilot projectsfor integratedhome automationand DSM, capable ofcross-energymanagement2012Roll-out ofaffordableintegratedhome automationand DSM2012LEDshave a marketshare of 10%in general lighting(Philips)2011Pilot projects witha 10% proven increasein energy efficiencydue to“IT for Green”2011White goods thatcan be interconnected2008Research pilot projects forintegrated AAL andhome automationwith preparation for DSM2007Pilot projects onsmart metering inprivate householdsSource: BDI initiative Internet of Energy (2008)
  16. 16. 15BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futureof reducing energy consumption. However, at the sametime, they will also be capable of providing other services,such as “Ambient Assisted Living” (AAL). Thus, the intro-duction of these technologies will not only be driven by anexpected increase in the value of comfort and conven-ience, but also by a reduction in energy consumption inlight of rising energy prices. In Germany, for example, heatconsumption in residential households accounts for al-most 22 percent of the total end-user energy consumption.A graphical illustration in Figure 6 shows the predictedavailability of the Smart Home technologies required forthe introduction of DEMS.Operating future building automation systems optimallyand energy-efficiently while keeping costs down will bejust as challenging for residential households as it will befor the energy providers. In addition to providing a controlsystem inside a building, DEMS can also serve as an inte-gration point for the energy provider’s central grid control(cf. also Sections 3.2 and 3.3). So far, the energy sector’scommunications infrastructure has been organized mainlyin a hierarchical fashion. This hierarchy must be replacedby a system that is able to communicate with a large num-ber of decentralized generators, storage units, and loads.This calls for an integrative concept that enables bi-direc-tional exchange of data with the grid control and gridmanagement based on the basic data of the generator andthe storage units as well as the loads. To date, however, amultitude of different standards and protocols have madeit difficult to establish such a system. On the grid sidealone, more than 360 different technical standards exist.In terms of the building itself, there are even more systemsand communication protocols, such as ZigBee, LON,EIB/KNX, or BACnet – which also means greater com-plexity. However, in order to optimally manage the energyinside a building, all available sensors and actuators needto be integrated in a uniform building information chain:air conditioning and ventilation control, lighting andshading facilities, building security systems, energymeasurement devices, as well as energy generation andconsumption devices. The first pilot projects for suchkinds of integrated systems are slated to be realized byapprox. 2012. Wide-scale introduction of these technolo-gies to the market is expected within the next ten years(cf. Figure 6).Current plug&play solutions for home automation cannotfulfill these requirements, since they are all based on pro-prietary protocols and thus cannot be used in heteroge-neous environments with devices and components fromdifferent manufacturers, or can only be integrated at con-siderable cost and effort. Section 3.4 describes a technicalintegration platform intended to bridge these communica-tion gaps using an integrated approach from the individualend device all the way to the producer.The benefits of this kind of home automation and theadvantages offered by seamless integration of decentral-ized energy generators are obvious. For the first time, endusers will be able to observe almost in real time (e.g., viahome displays or from anywhere via the Internet) howcertain appliances/devices and consumption habits influ-ence their use of energy and thus their energy costs. Asmentioned above, estimates by the BMWi put the resultingenergy savings potential at more than 9.5 TWh per year.Currently, when consumers buy energy-efficient techno-logy, they can only see how much they save when theyreceive their final bill at the end of the year. Once they canactually look at their energy consumption and the ensuingcosts in near-real time, less time will elapse between suchpurchases and the resulting savings. Since the cost-benefitrelationship will become transparent, consumers will findit easier to make an investment such as buying LED orOLED technology if these additional expenses can bedirectly linked to the resulting daily energy savings (Darby2006).
  17. 17. 16 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Future3.2 Centralized and Decentralized Energy and GridManagementThe intelligence of the future power supply infrastructurewill be characterized to a large extent by the use of elec-tronics as well as communication and control componentsand systems. Figure 7 shows the fundamental shift in para-digms that is required for the development of a SmartGrid. Today’s static infrastructure design and its usage “asbuilt” will turn into a dynamically adapting, “living” infra-structure with proactive operation.3.2.1 Energy Management Systems on the Transfer Level(High Voltage and Maximum Voltage)The increase in cross-border power trading and feed-infrom wind energy plants (WEP) – especially in low-con-sumption regions – is causing a significant increase in thenumber of bottlenecks in the German and European trans-mission grids. In addition, there is also a growing risk ofpotential oscillation and voltage problems due to concen-trated wind power feed-in in the grids’ border regions. Incombination with the high basic load of the transmissionlines, the demand for quickly adjustable elements that canbe used to control the active and reactive power flows isalso growing rapidly.These special strains on the grid ensuing from incalculableshifts of the load flows, such as those that can be causedby WEP feed-in or power trading, for example, becomecontrollable if flexible alternating current transmission sys-tems or high-voltage direct current transmission (HVDC)are used. The combined use of intelligent inverters (IGBTtechnology) with technologies such as HVDC and FACTS(Flexible Alternating Current Transmission System), whichare based on power electronic components, offers greatadvantages in terms of system technology compared toconventional three-phase technology.In many cases it is advantageous if direct current transmis-sion and flexible alternating current transmission systems(FACTS) complement each other. Whereas HVDC con-nections serve to transport power across larger distancesor to couple asynchronous grids via HVDC close coupling,FACTS regulate the voltage and the load flow in the grid.In the future, modern network control technology willhave to capture more information and package it for theoperators for fast processing, unlike in the systems of thepast, which were planned “top down”. The goal is to makerelevant operating data available in real time in order toavoid critical operating conditions. This information mustbe accessible system-wide, even in a supply system withseveral system operators. So-called wide area monitoringsystems (protection and control technology) for safely andefficiently operating grids and managing large integratedgrids are thus becoming increasingly important (bothnationally and Europe-wide).Wide area monitoring serves to establish an early warningsystem regarding grid instabilities through dynamic moni-toring on the basis of online information. In the event of aof system fault, such a system is able to provide faster andmore accurate information than is presently the case,thereby ensuring stable system operation even in case ofFigure 7: Large-scale generation, distribution and storage of energy – paradigm shift in grid technology2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20202015Systematic useof fluctuatinggeneratorsfor dynamicequalization ofpower demand2013Temporaryoccurrence ofload flow reversal2013Enhanced protectivefunction in placein order topreventlarge-scaleblackouts2015Problem managementfor networks largelyautomated2008Power generationas per demand2020Coal phase-out2008Manualswitching operationsand manualproblem solving2008Mainlycentralizedgeneration anddistributed loads2020CO2 captureand sequestration (CCS)available commercially2008Load flow withouteffective monitoring2014FACTS introducedon wide scale2019UCTE couplingpoints strengthened2008Fixed protective functionsfor protecting peopleand equipment2014Load flow controlmainly viapower electronics2021Nuclear power phase-outLegend: Anticipated date of occurrence Anticipated end Definite dateSource: BDI initiative Internet of Energy (2008)
  18. 18. 17BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futuremalfunctions or bottleneck situations. Early detection ofpossible instabilities due to voltage or frequency devia-tions, or thermal overload, can help to avoid far-reachingsecondary damage caused by large-scale power failures.Today, the regional responsibility structure for the opera-tion of the grids and the economic allocation of the fol-low-up costs of large-scale grid malfunctions still remaina barrier to investment in such innovative solutions. Thebest way to prove that the expected functionality will actu-ally work would be to implement a complex German orEuropean model project.3.2.2 Decentralized Energy Management in Distribution Grids(Medium and Low Voltage)For the distribution grid operators, providing a reliablepower supply and adhering to the relevant voltage qualitycriteria (voltage band, flicker, harmonics) means that theyhave to fulfill stringent requirements. The changed con-straints have made it necessary to automate the distribu-tion grid processes. If automation is available, then evendefective equipment can be turned off quickly and auto-matically, and medium voltage rings can be reconfiguredremotely. Thus, it is possible, for instance, to resume thesupply within minutes after a cable or an overhead linefails, whereas the repairs will only be done at a later time.In its “Action Plan for Energy Efficiency”, the EU Commis-sion has quantified the annual costs for not tapping thefull energy savings potentials in Europe at EUR 100 billion(EU Commission 2006). In order to tap this potential, oneFigure 8: Decentralized energy generation and storage2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20202010Pilot projects on smalland micro CHP plants(power-generatingheating)August 2008Continental AG startsproduction oflithium ion batteriesfor cars2011“White goods”as controllableloads and storagedevices(power shedding)2017Pilot projects forvirtual power plantsfrom micro-grid networks2015Small ormicro CHP plantswith cross-energymanagement(roll-out)2020Roll-out forvirtualpower plants2013Firstmicro-gridpilot projects2007Google Inc.starts researchon renewableenergies2007More virtualpower plantpilot projects2006Unna virtualpower plantpilot project2019Decentralized powerand heat storage deviceswidely available2012First use ofelectric andhybrid-electric vehiclesas storage devices2015DEMSintroducedon wide scaleLegend: Anticipated date of occurrence Definite dateSource: BDI initiative Internet of Energy (2008)of the key priorities of the EU action plan is to intensifythe expansion of decentralized capacities for trigenerationbelow the 20-MW threshold. Today, only 13 percent of thetotal power consumed is produced in a cogenerationprocess. Promoting local generation, in particular, basedon these technologies can lead to an increase in overallenergy efficiency and a reduction of transmission losseswithin the power grid.In the context of a “virtual balancing group”, decentralizedenergy management not only includes typical decentral-ized generation plants such as cogeneration plants (on thebasis of renewable and conventional resources) in thebasic load operation, but also fluctuating generation tech-nologies (wind, photovoltaics). Power is acquired anddelivered beyond the boundaries of the balancing group.If all parameters are assessed – including those loads thatcan be influenced and those that cannot – a transfer pro-file to the surrounding grid can be developed. The “intelli-gence” of the decentralized energy management system ismanifested in mastering the complex technical require-ments due to the facts that generation plants can be influ-enced in various ways and that power consumption isoptimized.The objective is to avoid inefficient load and generationpeaks. This means that appropriate reserve loads must bemaintained in the supply system, which can be achievedthrough internal balancing within the virtual balancinggroups. Initial field trials such as the Unna Virtual PowerPlant (Henning 2006) primarily refer to “smoothing” the
  19. 19. 18 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futuredemand lines through additional feed-in at peak load times.There are virtually no reports of consumers smoothing thedemand curve, for example as a result of dynamic priceincentives during the course of a day.Individual pilot projects with this objective will be realizedin the course of a four-year field trial of the project “E-Energy: ICT-based Energy System of the Future”, which isset to run until the end of 2012. The project is supportedand funded by the Federal Ministry of Economics andTechnology (BMWi) in an inter-departmental partnershipwith the Federal Ministry for the Environment, NatureConservation and Nuclear Safety (BMU). Six modelregions are testing the everyday usability of a wide varietyof elements of an Internet of Energy. E-Energy, which aimsat harnessing the potential for optimization of communi-cation technologies to complement power grids, has hugeeconomic potential for the producers of electricity, for thenetwork operators, and for both residential and commer-cial consumers. All E-Energy consortia are pursuing anintegral system approach at all levels of the value chain.This approach includes energy-relevant activities on thetechnical operation level as well as on the level of innova-tive markets. E-Energy is a basis for future-oriented, new,cross-sector areas of activity and growth impulses, andunderscores the need for greater liberalization and decen-tralization of the energy supply system, and, last but notleast, for the development of electromobility.E-Energy is a complex innovation program and encom-passes far more than mere technical progress. Importantgoals of this program include the build-up of transferableFigure 9: ICT infrastructure with smart metering2007 2008 2009 2010 2011 2012 2013 2014 20152010Smart meteringroll-out2014First servicemashups2008Multi-utility &smart meteringfield tests2014Real-timemeter readingand monthly billingestablishedDecember 2012Completion of thesix BMWi E-Energyprojects2010Firsthousehold devicesequipped with DSM2009Standardizedsmart metercommerciallyavailable2007Hot topics“Green IT” and“IT for Green”Legend: Anticipated date of occurrence Definite date2009Evaluationof home automationwith integrated DSM2009Europeanstandard forsmart meteringprotocol(CEN TC 294,WG2)2007Google Inc. startsenergy initiativesRE<C andRecharge IT2008Six E-Energypilot projectslaunched2009Six “ICT forE-Mobility”pilot projectslaunchedSource: BDI initiative Internet of Energy (2008)knowledge, the formation of networks enabling rapidexchange of the new E-Energy know-how, and the estab-lishment of effective, integrated cooperation structures forresolving important cross-sectional issues. For this pur-pose, BMWi has commissioned “ancillary research”.A consortium that is continually evaluating the progressmade in the model regions ensures that the solutions areinteroperable, and organizes the exchange of knowledge.However, it will be necessary to quickly realize additionallarge pilot projects that provide evidence of the potentialand reliability of virtual balancing groups in order to rollout this technology on a wide scale by 2021 – that is, bythe time the planned nuclear power phase-out is sched-uled to be concluded. As alluded to in the recommenda-tions for action in Section 5, this requires systematic fund-ing and support. Research in this area must be ongoingand must include ancillary research activities beyond suchresearch conduction in the initiated projects.
  20. 20. BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Future193.3 Smart MeteringThe metering technology in use in Germany today can bedivided into two categories. For residential customers,mechanical or electromechanical metering technology ismainly used for measurement. For commercial and indus-trial customers over the load profile threshold2, electronicmeters with a communication component are in use. Thetwo recording systems are described in greater detailbelow.3.3.1 Consumption Measurement: Residential CustomersTo record how much electricity and water is supplied tothe approx. 36 million German residential households,approx. 44 million electricity meters, 13 million gas meters,18 million water meters, and 0.3 million heat meters areused. What is being measured is not the individual demandover time, but rather just the total consumption during thebilling period. Since the existing meters are not equippedfor communication, they are read once a year by theoperator of the metering point or by the metering serviceprovider (electricity and gas), as well as by the utility com-pany (water and heat), or even by the customer.3.3.2 Consumption Measurement: Commercial and IndustrialCustomersLarge commercial and industrial customers whose annualenergy consumption is above the load profile limit areentitled to time-based measurement of their energy con-sumption. In accordance with the German Electricity Net-work Access Ordinance (Strom NZV) and Gas NetworkAccess Ordinance (GasNZV), the energy consumption ofthis customer group must be recorded by means of “regis-tering load profile measurement”. This means that theamount of electricity consumed is recorded every quarterof an hour, while gas consumption is recorded hourly. Themeter data are read via remote meter reading systems andmust be made available to the supplier on a daily basis. Inthe categories water and heat, measurement devices notequipped with communication technology are normallyused. Here, the consumption data are read on a monthlybasis without any correlation to time.3.3.3 Necessary Changes in MeteringIn contrast to the commercial and industrial customerssegment, where all requirements for individual, time-basedmetering have already been fulfilled to date, further actionis still needed as regards the household customer segment.The mechanical meters used there have become outdatedand have no future in a digital age. The replacement of theentire meter infrastructure will thus have to be initiatedwithin the next two years. Due to the high investmentcosts, it is not possible to directly transfer industrial meter-ing technology to the residential customer segment; rather,special tailor-made residential customer meters will haveto be designed and developed for this purpose. First large-scale trials with such devices are currently underway inseveral European countries. In addition to remote meterreading, other functions such as remote connection anddisconnection of consumers, power limitation, rate regis-ters, and failure detection are also being tested.Bi-directional communication between metering pointoperators and connected electronic residential meters, inparticular, will gain special importance in the future. Byusing smart metering, valuable information about the con-dition of the distribution grid can be obtained and adher-ence to the permissible voltage levels can be monitored.In addition, smart metering can also be used as a gatewayto gain direct influence on decentralized power generatorsor loads. This communication thus constitutes the basisfor actively managing generation and consumption indistribution grids.Different communication channels can be used for datatransmission. The E-Energy scenario envisages the use ofradio modules, the use of cell phone networks, or infor-mation transmission via the power line itself. Criticalissues that have yet to be resolved in this context includethe question of how to design smart metering in such away that it meets privacy requirements. In addition, clearrules have yet to be formulated regarding read and controlrights to smart meters by grid operators, metering pointoperators, power companies, and other potential serviceproviders.Currently available reading systems are either category-specific or manufacturer-specific, and only have a shortlifespan on the market. Smart metering, however, is onlyfeasible economically– especially for multi-utility compa-nies – if a standardized device technology is used thatspans all categories and manufacturers. In other words,the technology for remote reading and control of bothcommercial and industrial customers and residential cus-tomers is available in principle. However, the basic uni-form standards for ensuring mutual interoperability of thedevices do not exist yet.2 The load profile limit is 100,000 kWh/a (StromNVZ), respectively1,500,000 kWh/a (GasNVZ).
  21. 21. 20 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureThe development of a German smart metering standard iscurrently being pursued jointly by the two working groupsFigawa3 and ZVEI4, comprising the German meter anddevice manufacturers. Completion of this standard isexpected at the beginning of 2009. However, additionalfollow-up activities will be needed to achieve a Europeanstandard for smart metering systems.Therefore, concurrent efforts regarding the developmentof a Europe-wide metering standard are also underway onthe European level: by KEMA5 on behalf of the Dutchregulators and by ESMIG6 as the association of Europeanmeter manufacturers. These parallel and uncoordinatedactivities are proving to be ineffective. Therefore, theseactivities should be pooled as rapidly as possible – as alsodescribed in greater detail in Section 5.1 – in order toachieve a uniform European standard. The EU Commissionis planning to award a respective mandate to a task forceconsisting of Cenelec7, WELMEC8, and ETSI9. Under theleadership of Cenelec, a European standard for smartmetering is to be defined. This standardization approachought to be supported by the German Federal Government.3.4 Integration TechnologyIn addition to the energy technology layer for the genera-tion, transmission, distribution, and usage of energy, thefuture Internet of Energy will also contain a communica-tion layer, which will enable the flow of information alongthe value chain and will map the corresponding businessprocesses. In order to achieve greater overall energy effi-ciency, improving this flow of information from the pro-ducer to the end user will be of vital importance.As far as implementing this in ICT solutions with IT com-ponents is concerned, an integration level must be createdbetween economic applications and the physical grid. Suchan ICT platform must enable “end-to-end” integration ofall components, beyond heterogeneous grids and companyboundaries: from data-supplying end devices and smart me-ters via different communication channels right up to dataprovision for a multitude of different users, and from theend customer via the grid operator to the energy supplier.Integration infrastructure and communication lines posethe biggest challenge in realizing such an integration plat-form. Conceptually, a precise, albeit application-neutraltechnical definition of the core functionality of such aplatform is necessary. It will form the basis on which bothnew and existing components can be integrated accordingto a uniform scheme, independent of the respective imple-mentation.In terms of technology, concepts from the area of service-oriented architectures (SOA) are particularly suitable forachieving flexible coupling and decoupling of individualcomponents. Figure 10 shows an overview of sectors thatmust be integrated into an Internet of Energy platform. Itmust be possible to make the core functionalities of eachof these sectors available via open standard interfaces,independent of the concrete implementation, and to inte-grate them into a joint, cross-domain Enterprise ServiceBus (ESB). In this context, stringent message exchangeprotocols, standardized data formats, and secure datastorage, usage, and transfer are very important.One important benefit of a uniform SOA architecture isthat point-to-point interfaces between single applicationsare avoided. Instead, each application only needs toimplement one single interface to the integration platform,which can subsequently be used to address and dynami-cally use all other applications.The unique feature of the approach described here is theextension of the service-oriented integration of individualcomponents to intelligent end devices (Intelligent Grid3 http://www.figawa.de/4 http://www.zvei.de/5 http://www.kema.com/6 http://www.esmig.ei/7 http://www.cenelec.eu/8 http://www.welmec.org/9 http://www.etsi.org/
  22. 22. 21BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureDevices – IGD), which makes the overall system highlyflexible and scalable. This approach is often referred to as“Extended SOA” (Keen, Chin et al. 2006).Two areas of the interface architecture of such a platformare particularly critical: (i) the integration point for localgrids in the IGD bridge or in smart meters and (ii) theintelligent gateways in the apartment, in the building, orin transformer stations. Only real-time integration at thesepoints makes the information provided by the IGD, theindependent remote reading systems, and the intelligentgateways directly available on the overall platform.Although realizing such fast data availability requires a lotof effort, it is necessary, especially if a large number ofheterogeneous systems must be integrated while keepingthe overall platform controllable at the same time.One important element of such an integration platform issetting up central directory and search services listing therespective available functions (applications and devices)and making them accessible. This is the prerequisite forflexible usage. The necessary technical basis for setting upsuch services already exists today. In addition, many pro-viders of economic software have integrated SOA inter-faces into their own applications, so that, in principle,numerous applications would already be available todayon such a platform.The situation is similar with regard to the integration ofelectronic meters, which have undergone intensive devel-opment over the last few years (cf. Section 3.3), makingthe SOA-based integration of these devices technicallypossible even on a large scale in the context of so-calledAdvanced Metering Infrastructures (AMI) (Heimann 2008).New business models and services such as those describedin Section 3.5 not only require fast availability of con-sumption information from smart metering devices, butincreasingly also demand possibilities for active interven-tion and control. Thus, the integration of complex energymanagement solutions will constitute a major part of theintegration work, beyond mere smart metering. Not onlyconsumption information from the intelligent end devices(generally aggregated by smart meters) will be transmittedto the components in the network (such as residentialmeters, decentralized generation facilities, consumptiondevices, cooling units), but so will price signals, rate infor-mation, and similar things. This data will also be providedto the service suppliers for dynamic usage.One unresolved problem relates to the semantics of thedata exchange. The SOA interfaces of meter infrastructuresand information systems normally only provide a syntacticstructure, and the content of the messages exchanged viathese interfaces must still be specified in more detail. AnInternet of Energy can only be realized if, in addition toFigure 10: Requirements domains for the Internet of EnergySource: BDI initiative Internet of Energy (2008)Real-time-capableintegration of IGDs,bridges, and gatewaysBusinessapplicationsand portalsIntelligentgatewaysCentral unitin householdor concentratorin networkMobiledevicesIntelligentgrid devices(IGD) Application andprocess integrationSystem managementValue-added services for intelligent grid devicesInstallationIGDbridgesProtocol convertersExamples:smart meters,decentralizedgeneration units,white goods, etc.LocalnetworksData security and privacyWide areanetworksDevelopment tools
  23. 23. 22 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futureopen interface definitions, the semantic structures of themessages to be exchanged have also been standardized.Here, legislation must be enacted to support the efforts ofthe German industry regarding the introduction of suchstandards and especially to support and promote theseefforts on the European level as well.The regulatory measures already mentioned in Section 2.2have resulted in profound changes to the ICT landscapeof the German energy sector during the past 12 months.The processes, for example, were fundamentally changedwhen ownership unbundling of grid operation and distri-bution became a requirement. For instance, originally, thetransmission of a provider’s meter data to its grid units wasmapped as an internal process. The same was true for newlines or customer cancellations. In the future, however,these processes will have to be mapped across companies,which will lead to a more complex market structure (cf.Figure 4).With the increasing liberalization of the energy markets,the requirements will continue to increase as regardsensuring greater flexibility of ICT infrastructures. Overall,the existing (individual) applications must therefore be fur-ther developed in order to merge them together into onelarge common platform – analogous to the Internet. Onthis aggregation level and with defined open interfaces anddata exchange formats, it will become interesting to createnew combinations of the functionalities offered by produc-ers, transmission operators, and consumers, to developinnovative business models, and to thus realize furtherpotentials for efficiency in a liberalized energy market.3.5 Economic Applications and New Business ModelsIn addition to the energy technology infrastructures for theproduction, distribution, and usage of energy flows, thereis another level, namely that of economic programs andapplications. A multitude of applications is used to managemaster data (e.g., data about business partners and theirfacilities), organize customer relationships (e.g., contracts,bills, and complaints), operate plants and equipment,organize manpower planning for employees, or processeconomically relevant energy data. In addition to theseindustry-specific functions, standard applications such asfinancial accounting, personnel management, or supplyprocurement naturally also play an important role.The ICT solutions commonly used today are primarilyintended to support “traditional” business models of theenergy industry. A business model describes the respectivevalue added, the performance architecture needed toachieve it, and the revenue model (Stähler 2001). In thetraditional model, a vertically integrated utility companysupplies energy to a large number of customers and billsthis energy periodically – for private end consumers, thisis typically done on an annual basis. Its sales revenues aremainly generated from selling energy to customers. Ascomprehensively illustrated in Chapter 2, this traditionalbusiness model will be increasingly rendered moot in thefuture. The implementation of energy conservation meas-ures as well as increased competition are leading to adecrease in the revenues obtained from electricity sales.Thus, in order to meet future challenges, it will be of deci-sive importance for a company’s competitiveness to findnew business models that take into account the changingframework conditions. New technologies such as smartmetering and bi-directionally communicating end deviceswill create a totally new kind of market transparency aswell as new opportunities. These will make a significantcontribution to the development of such innovative busi-ness models, which can then be realized both by compa-nies established in the sector and by new players alike.With regard to the components of the Internet of Energy,appropriate business applications that are capable of map-ping new business models quickly and flexibly also needto be made available and further developed. Defined openinterfaces will be needed in this respect that make theseapplications interoperable in the Internet of Energy, there-by ensuring that the new possibilities can be implementedin an economically viable and efficient manner. Figure 11shows an approximate timeframe for the different businessmodels briefly described in the following sections.3.5.1 New Business Models for Energy ProducersLewiner (2002) describes a scenario in which energyproducers, driven by massive political efforts to dissolvevertically integrated utility companies, will increasinglyreclaim their original core business, namely, the generationof energy. However, in parallel to this, new technologiesand thus new business areas such as biogas feed-in orelectromobility are also on the verge of their large-scalelaunch into the market and offer enormous potential. Theincreasing decentralization of energy generation also leadsto new business areas. Contracting, for instance, mightbecome even more attractive for energy producers in thefuture. In this business model, an energy utility companyinstalls and operates, among other things, cogenerationplants, micro gas turbines, or fuel cell heating systems at acustomer’s premises. Such models are attractive from anenergy suppliers perspective, since (i) operating numeroussmaller plants entails lower investment risks than operat-ing one large plant, (ii) controlled decentralized generation
  24. 24. 23BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the Futureenables better control of the grid load in transmission anddistribution grids, (iii) a new form of providing balancingenergy might become possible under certain conditions ifthese technologies are used on a large scale, and (iv) byoperating the facilities on site, it is possible to achievelong-term contractual customer retention. From the per-spective of the customer and the economy in general, thebenefits of such a business model include (i) the elimina-tion of initial investments, (ii) better energy recovery of theresources used, and (iii) a resultant reduction in energycosts. There are already suppliers that offer large-scaleheat and CHP contracting for small and medium-sizeenterprises. As a result of increased funding for smallCHP plants that has been approved in the meantime, thisbusiness model will also become attractive for residentialcustomers in the future.3.5.2 New Business Models for Grid Owners andGrid OperatorsThe impact of liberalization is currently most evident inthe area of grid infrastructure. Transmission and distribu-tion grids will, by and large, continue to be operated bynatural monopolists in the future, who will continue togenerate their revenues primarily from billing the actualenergy consumption. The issue of ownership of thesenatural monopolists is currently being intensively debated.A Europe-wide consensus seems to be in the offing,according to which energy utility companies will have tospin off their grid-operating companies and run these aseconomically independent enterprises, which will provideboth their parent company and other energy providerswith non-discriminatory access to their sub-grid, albeitsubject to a fee. In the future, this separation as well as thenew communication requirements in the Internet of Energywill increasingly turn grid operators into informationservice providers that can supply the market not only withenergy transmission services, but also with generation andsales data. It is conceivable that a grid operator will offerindividually customized information packages and willcharge for these according to expenditure and complexity.3.5.3 Business Models resulting from Energy Trade andMarketplacesExisting marketplace operators such as the EuropeanEnergy Exchange (EEX) in Leipzig, the Amsterdam PowerExchange (APX), or Powernext in Paris, will certainlycontinue to be a force on the market in the future withtheir current business models. The trend of the last fewyears is expected to continue and the trade volumes andrevenues of such marketplaces are set to continue toincrease. In the future, institutionalized energy trading,which is currently still limited to a small number of marketplayers, is likely to be gradually made accessible all theway to the end users. Operators of the trading platformsrequired for this purpose might be companies from outsidethe sector (e.g., stock exchanges). However, the estab-lished energy providers have experience with energy trad-ing in its current form and are most familiar with sector-specific characteristics that have to be taken into account.Thus, based on these fundamentals, they would also besuitable as marketplace operators.Figure 11: Trade and services – developments on the liberalized energy market2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20202020GlobalEmissionAllowanceTrading Scheme2020Dynamicallyconfigurableservice mashups(e.g., DSM + AAL)establishedon market2015Export of GermanE-Energy servicesand technologies(> EUR 10 billion)Legend: Anticipated date of occurrence Definite date2008Monthly billingis offered2010Prototypeapplication:grid maturity model2018Real-timeenergy tradingplatforms available toend customers2014Grid maturitymodel becomesstandard2017Intermediariesmanageaggregate demandof end users2006Allianz AGenterswind powerbusiness2015Approaches forestablishingdecentralizedenergy markets2000EEXLeipzig2012Monthly billingestablished2005EuropeanEmissionTrading Schemeestablished2006Unified Protocolsfor standardcustomer transferprocessesimplemented (BNetzA)2013Energy businessbecomes part of theEuropeanEmissionTrading Scheme2011Fines in the eventof blackouts2015Firstenergy brokersSource: BDI initiative Internet of Energy (2008)
  25. 25. 24 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureOn the demand side, it might become attractive in thefuture for wholesale traders to use the newly emergingmarkets as (multi-utility) distributors in order to buy differ-ent energy resources and then resell customized productsto retailers or large end customers (e.g., municipal utilitycompanies). It would thus become very easy for customersto obtain the precise mix of energy that they require, with-out having to deal with the complexity of market-basedprocurement needed for this purpose. Furthermore, thedevelopment of a market for secondary products, such asinsurance against failure/outage risks, price fluctuations,uncertain prognoses, or weather influences, is to beexpected. Here, appropriate specialized providers fromother sectors could also become active.3.5.4 New Business Models for Service Providers and RetailersThis is the segment that is expected to undergo the biggestchanges in the future. Pioneers in this area are spin-offs ofexisting companies (e.g., the electricity and gas providerYello Strom GmbH as a subsidiary of EnBW AG, E wieEinfach of E.ON AG), which will soon be joined byservice providers from outside the energy sector (e.g.,TelDaFax AG, Allianz AG, Google Inc.) and by start-ups.In addition to the classical supply of energy, products indi-vidually customized to specific customer groups will alsoappear on the market (e.g., electricity, gas, and water froma single source), and a portfolio of third-party products(e.g., credit cards, cross-sector bonus programs) mightround off the service offer.Additionally, this might provide an opportunity to tap intocompletely new market segments with new services, suchas optimization of a customer’s energy consumption. Itwould also be conceivable for customers to enter intomaster agreements with specialized service providers,which would enable the latter to access and controldecentralized generation capacities (e.g., cogenerationplants, parked electric vehicles) at short notice. Thiswould thus enable a service provider to set up a virtualpower plant for balancing energy, whose output couldonce again be offered in wholesale energy trading. Sucha business model could also be combined with the con-tracting model.Another important area is the dynamization of trade itself.Whereas static rate contracts are still standard for residen-tial customers, this may fundamentally change followingprojects such as “Price Signal at the Power Outlet” (Frey2007) as well as the introduction of price-variable rates,which were enacted into law by the Bundesrat (upperhouse of the Germany parliament) in July 2008. In theaforementioned project, customers receive real-time infor-mation about the development of energy prices over thenext few hours and can then – initially manually, but laterwith the aid of home automation technology – optimizetheir energy consumption profile in terms of price. Severalstudies have shown that this makes it possible to reducepeak loads by approx. 6-20 percent (Lieberman andTholin 2004; Valocchi, Schurr et al. 2007).All new business models described here can only be real-ized with the use of modern ICT and consistent standardi-zation of the communication protocols. In addition to theapplications available today, it will become necessary todevelop novel applications that complement existing soft-ware solutions or possibly replace them, and that can beintegrated into an overall platform – as described inSection 3.4.3.6 Transition Process to the Internet of EnergyA schematic drawing in Figure 12 shows the transitionfrom the conventional energy grid to the Internet ofEnergy.Basically, more customers will also assume the role ofenergy producers. The distribution grids and the centralproducers must be adapted to the resulting requirementsin order to continue to ensure the stability of the grid andthe quality of power. This will only succeed if an ICT net-work that can be used in real time is established in parallelto supply all stakeholders with data on offers and con-sumption and to transmit control and price signals.It is obvious that the majority of the participants in thisnetwork (from residential households to commercialproducers) can only interact effectively and efficiently ifstandardized interfaces and data exchange formats as wellas highly automated business processes are available. Interms of the resulting transparency, and in light of thesusceptibility of this infrastructure to new security attacks,security and user privacy must head the list of prioritiesthat have to be realized. Access authorization and privacyregulations are thus core elements of the Internet ofEnergy, which are just as important as interfaces and dataformats.
  26. 26. 25BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureFigure 12: Transition process to the Internet of EnergySource: BDI initiative Internet of Energy (2008)1) Large-scale power plantsToday: A few large-scale producers serve many consumers2015: Consumers become producers2020: Coordination of all players through the Internet of Energy3) Consumer (traditional)4) Consumer (intelligent)5) Grid control6) Transmission grid7) Distribution grid8) Load flows9) Internet of Energy10) Integration technology2) Renewable energy (fluctuating)
  27. 27. 26 BDI initiative Internet of Energy Internet of EnergyICT for Energy Markets of the FutureThe drive towards realizing an Internet of Energy contains complex inter-relationships and mutually dependent milestones. Based on the three sce-narios “Electromobility”, “Decentralized Generation”, and “Energy Tradeand New Services”, the interrelationships between possible developmentstogether with their mutual dependencies, possible timeframes, and poten-tials can be understood.4 Scenarios for the “Internet of Energy”Developments and Opportunities in a Networked Energy Economy4.1 Scenario IElectromobilityThe climate debate is one of the reasons why the issue ofelectromobility, i.e., the use of hybrid or purely electricallyoperated vehicles, has achieved widespread publicity. TheGerman government is currently in the process of develop-ing a “National Electromobility Development Plan”, whichis intended to make Germany the market leader in thisarea within the next decade. According to this plan, by theyear 2020, at least 1 million vehicles that can be chargedfrom the electric grid (so-called plug-in electric and hybridvehicles) are expected to be in use throughout Germany.As soon as the proportion of plug-in (hybrid) electric vehi-cles (PHEVs) available in the future fleet of vehicles reach-es a significant level, their storage devices will be able tobe used systematically as buffers for capturing surplus sup-plies and for optimizing the load profiles. A significantlyhigher performance density of batteries and super-capaci-tors than today would give this development a significantboost. From a technical perspective, the pilot operation isnot expected to start until 2013 at the earliest, the com-mencement date being subject to further development ofthe energy management systems inside the vehicle linkedto a communication infrastructure between vehicle andprovider. A further prerequisite is the making of concreteoffers by utility companies that provide sufficient incen-tives for owners of plug-in electric vehicles to make thebuffer service available to the providers and to guaranteepurchase. Making electricity produced by photovoltaicscheaper until grid parity is achieved would provide furtherimpetus to this trend, since this would lead to decentral-ized private producers investing more in photovoltaics.As a result, these private producers could either feed theirsurplus supply of energy into the grid or store it in theirown vehicles.For this scenario, see:Figure 2: Prognoses and trends – availability of fossilenergy sources and renewables;Figure 8: Decentralized energy generation and storage.4.2 Scenario IIDecentralized Energy GenerationDecentralized energy generation is one of the keys toreducing CO2 emissions. The generation of heat and elec-tricity in close proximity to where the load occurs reducesthe primary energy demand by 60 percent compared to thecentralized generation structure currently in use. In addi-tion, decentralized energy generators in a network couldhelp to make balancing energy available and to reduce thefurther extension of centralized supply. Overall, the intro-duction of small-scale cogeneration is still largely in itsinfancy today, despite the German CHP Act (KWKG, 2002,amended in 2008). On the distribution grid level and onthe medium voltage level, several pilot projects are alreadyunder way, operated mainly by smaller energy providers(Stadtwerke Unna, Stadtwerke Karlsruhe), as are the firstindividual commercial projects that attempt to providebalancing energy by combining different decentralizedcogeneration plants (e.g., Evonik 400 MW). All ongoingprojects and applications are individual solutions thatcannot be extended without substantial investment intechnology and manpower. The first scalable solutionspermitting the establishment and extension of a micro-gridare not expected until 2013 or later, because integratedICT solutions are needed that can be used to combineand control different generation plants in one area, andbecause the local heat networks that transport the heatoutput of these plants to the end customers still need to bere-structured.Furthermore, it will be necessary to also install microgeneration facilities in residential buildings. Power-gener-ating heating systems will be the main focus here initiallyand will establish themselves independent of the develop-ments on the distribution grid level. Major pilot projectsare slated to commence in 2010. In the long term, thedemand for heat in the residential sector will becomesecondary due to improved heat insulation, while thedemand for electricity is set to increase. Concurrent to thisdevelopment, the focus will shift to power-operated micro

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