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Challenges for Business Development in the Field of Smart Grids

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Broadband Networks, Smart Grids and Climate Change

Abstract

Smart Grids—communication networks connecting electricity system components—are a promising solution to balance the fluctuating production of renewable energy sources with consumption in low voltage grids. In this respect, electricity storage and smart metering are important technologies. However, due to a lack of working business models, diffusion is low. We analyze the effect of positive externalities on this low diffusion using expert interviews. We identify related stakeholders and their potential costs and benefits from smart grid investments. Our findings provide numerous avenues for business development and strategy definition in the field of smart grids and show that smart meters and decentralized electricity storages are widely seen as beneficial to society. Private benefits are numerous but widely distributed among distinct players. Thus, we argue that investments desired by society are omitted due to positive externalities. In addition, we identify and discuss measures to foster diffusion of the two studied smart grid key components. In this analysis, we find that even experts from industries directly benefiting from direct interventions argue against subsidies as being not suitable for accelerating the implementation of smart grids. Instead, they prefer clearly defined and well-designed regulatory and legal frameworks, which are free of contradictions.

This is an adapted version of our original publication in the journal Energy Policy, entitled “The role of smart metering and decentralized electricity storage for smart grids: The importance of positive externalities”.

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Notes

  1. 1.

    Centralized storage power plants have power outputs over 100 MW. The usually applied technology is pumped hydro. In rare cases, other technologies, like compressed air or hydrogen, are in use as well.

  2. 2.

    Decentralized huge battery systems have power outputs of one to 100 MW. Usually applied technologies are lead acid, nickel cadmium, sodium-sulfur, and redox-flow.

  3. 3.

    Short-time storages can have a wide range of power outputs in the magnitude of W to MW, but all of them have only small capacities (kWh). Usually applied technologies are flywheels and double layer capacitors.

  4. 4.

    A prosumer can be, for example, a household with an installed photovoltaic system on the rooftop.

  5. 5.

    Investments for smart meters will presumably appear on end-users’ or electricity retailers’ accounts.

  6. 6.

    This benefit hast to be weighed against energy losses from the limited electricity storage efficiency.

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Author information

Authors and Affiliations

  1. Center for Digital Technology and Management, Munich, Germany

    Benedikt Römer

  2. Ludwig-Maximilians-University, Munich, Germany

    Philipp Reichhart & Arnold Picot

  3. Georg-August-Universität Goettingen, Platz der Goettinger Sieben 5, 37073, Goettingen, Germany

    Johann J. Kranz

Authors
  1. Benedikt Römer
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  2. Philipp Reichhart
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  3. Johann J. Kranz
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  4. Arnold Picot
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Corresponding author

Correspondence to Benedikt Römer .

Editor information

Editors and Affiliations

  1. Columbia Business School, Columbia Institute for Tele-Information, Broadway 3022, New York, 10027, New York, USA

    Eli M. Noam

  2. Telecom Italia, Corso d'Italia 41, Roma, 00198, Italy

    Lorenzo Maria Pupillo

  3. Georg-August University Goettingen, Goettingen, 37075, Germany

    Johann J. Kranz

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Römer, B., Reichhart, P., Kranz, J.J., Picot, A. (2013). Challenges for Business Development in the Field of Smart Grids. In: Noam, E., Pupillo, L., Kranz, J. (eds) Broadband Networks, Smart Grids and Climate Change. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-5266-9_12

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