Ernst & Young - Smart Grid: a race worth winning?
A report on the economic benefits of smart grid
Introduction
Around the world there is strong consensus that we are about to see significant changes in the way we use and generate electricity. Innovations in areas such as renewable and micro-generation, heating and the mass commercial development of electric vehicles (EV) will place new requirements on the networks that transmit and distribute electricity. Meeting these requirements will necessitate large scale investment in these networks to make them more intelligent, efficient and secure. In time these investments will be replicated in every country around the world. The term used to describe these new networks is smart grid.
The transition to smart grid will cost billions of pounds. However, the result will be a more efficient and flexible grid that can meet the needs of business, consumers and governments in a secure and affordable way for generations to come.
There is strong consensus in the UK and internationally about the long term need to move to smart grid and a number of countries have quantified its benefits and stand ready to take advantage of the growth it might deliver. However, there is currently less clarity in the UK about how to make it happen, or the speed at which the transition needs to take place.
To make progress on these issues, it is first necessary to get a deeper understanding of the quantum and breadth of the potential benefits that smart grid might deliver and how those benefits relate to the costs. Understanding the full economic case for smart grid is therefore vital and it is the reason why the members of SmartGrid GB commissioned Ernst & Young to develop this report.
The report provides the most detailed assessment yet of the potential benefits that might accrue to the British economy as a result of the development of smart grid. As well as looking at the core benefits that will be realised from investing in a more efficient network, the report also seeks to understand and quantify the wider benefits that will accrue across the industrial supply chain, and the important downstream economic activities that will be enabled as a result of smart grid. The report also explores the export potential that could be realised if UK companies were to become global leaders in the development of smart grid technologies and services.
Conclusions in brief
The report has two broad, major findings. The first is that the initial investment case for moving ahead with smart grid development sooner rather than later appears very strong: for example, the report’s figures indicate that the benefits of moving in a timely fashion far outweigh the risks and appear robust across a number of different scenarios. The second is that the timely creation of a smart grid can unlock significant benefits in other industries, providing a welcome boost to growth, jobs and exports.
What is clear from the report is that if Britain is willing to take a global leadership position in smart grid development, its benefits will be larger and wider. We can draw from this that if Britain wants to continue to be a serious competitor in the global race to smart grid, it needs to be ambitious in its smart grid plans and it needs to prioritise laying the relevant ground work in order for its accelerated development to take place.
The report also explores some of the challenges that need to be overcome, as well as possible solutions to these challenges. The report’s recommendations are that there is a need for some fresh thinking by government, regulator and industry, and a number of constructive suggestions are offered as to how this can be achieved.
This report has been commissioned by 23 leading companies, all with different expertise, and often with competing interests. However, they are united in the belief that accelerating the development of smart grid will be of long term benefit to Britain.