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Unlocking the [euro]53 billion savings from smart meters in the EU: How increasing the adoption of dynamic tariffs could make or break the EU's smart grid investment

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  • Faruqui, Ahmad
  • Harris, Dan
  • Hledik, Ryan

Abstract

We estimate the cost of installing smart meters in the EU to be [euro]51 billion, and that operational savings will be worth between [euro]26 and 41 billion, leaving a gap of [euro]10-25 billion between benefits and costs. Smart meters can fill this gap because they enable the provision of dynamic pricing, which reduces peak demand and lowers the need for building and running expensive peaking power plants. The present value of savings in peaking infrastructure could be as high as [euro]67 billion for the EU if policy-makers can overcome barriers to consumers adopting dynamic tariffs, but only [euro]14 billion otherwise. We outline a number of ways to increase the adoption of dynamic tariffs.

Suggested Citation

  • Faruqui, Ahmad & Harris, Dan & Hledik, Ryan, 2010. "Unlocking the [euro]53 billion savings from smart meters in the EU: How increasing the adoption of dynamic tariffs could make or break the EU's smart grid investment," Energy Policy, Elsevier, vol. 38(10), pages 6222-6231, October.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:10:p:6222-6231
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    References listed on IDEAS

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    1. Faruqui, Ahmad & Hledik, Ryan & Newell, Sam & Pfeifenberger, Hannes, 2007. "The Power of 5 Percent," The Electricity Journal, Elsevier, vol. 20(8), pages 68-77, October.
    2. Faruqui, Ahmad & Hledik, Ryan & Tsoukalis, John, 2009. "The Power of Dynamic Pricing," The Electricity Journal, Elsevier, vol. 22(3), pages 42-56, April.
    3. Brophy Haney, A. & Jamasb, T. & Pollitt, M.G., 2009. "Smart Metering and Electricity Demand: Technology, Economics and International Experience," Cambridge Working Papers in Economics 0905, Faculty of Economics, University of Cambridge.
    4. Faruqui, Ahmad & Sergici, Sanem & Sharif, Ahmed, 2010. "The impact of informational feedback on energy consumption—A survey of the experimental evidence," Energy, Elsevier, vol. 35(4), pages 1598-1608.
    5. Faruqui, Ahmad & George, Stephen, 2005. "Quantifying Customer Response to Dynamic Pricing," The Electricity Journal, Elsevier, vol. 18(4), pages 53-63, May.
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