A SUCCESS STORY ON EUROPEAN SMART METERS, DEVELOPED AND PRODUCED IN CHINABy Alex Bouw, Jan Oost and Stephan Gibiino Schiphol airport, The Netherlands, December 2010: Netbeheer Nederland working group DSMR launches its newest release of the Dutch Smart Meter Requirements (DSMR). Two Dutch IBMers are in the meeting room together with 37 other smart meter vendors to witness the occasion with enthusiasm and curiosity and see what this development could bring for their innovation agenda and for IBM´s global strategy to build a smarter planet. IBM, is that Big Blue working on mainframes, computers and software…? Well not only that. With a strong belief that more and more of our world will be equipped with smart sensors, interconnected with systems and made intelligent – IBM brings innovation power to the table. As a result, in mid-2011, IBM together with a strong Chinese development and manufacturing partner, Shenzhen Kaifa Technology Co., Ltd., were selected as one of the suppliers for the development and delivery of the latest generation electricity meters that meet DSMR. This means that for the first phase rollout and on behalf of all Dutch distribution grid operators (DSOs), IBM will deliver meters as one of the four preferred suppliers (together with Landis+Gyr, Itron and Elster; Landis+Gyr and Itron for both electricity and gas meters, IBM and Elster respectively for electricity and gas meters only). The product development, contract negotiations with Netbeheer Nederland and pricing were started soon after. IBM qualified for this project due to – among other factors – the development and product capabilities of Shenzhen Kaifa Technology Ltd, a large and renowned original equipment manufacturer in all kind of electronics, including metering systems for electricity, gas and water. And YES, this Chinese Dragon, with its European partner, can dance. IBM´s cooperation with Kaifa had already existed for over 15 years with a history in manufacturing for hard disc drives. For the past 8 years, IBM has also had a strong collaboration in the area of smart meter developments and mass metering deliveries. Now, with this latest success story for The Netherlands, Kaifa has been able to develop a private owned branded meter product for the European market, whereas in the past the company acted as an OEM with a third party owning and reselling the intellectual property. This quite unique and new position of Kaifa´s brand in Europe was enabled by the resumed model of cooperation with IBM. Now, as of July 2013, IBM and Kaifa are the first smart meter vendor to fully comply with DSMR4 (version 4 of DSMR) requirements with an accepted single phase and polyphase electricity meter product and an audited and released production process since July 2013. BACKGROUNDSmart metering in The Netherlands is like that for the majority of European countries, originating in European legislation that was initially driven by the necessity to change the European energymarket model. This changing energy market, as it was argued, requires a modernization of the European energy infrastructure, which in itself requires the introduction of more intelligent meter systems. On the European level this principle is agreed in two Directives – the Energy Services Directive (2006/32/ED, ESD), and Third Energy Package and more particularly the Directive on the internal electricity market (2009/72/EC). Modernization of the electricity grids is the key for the integration of highly volatile sources of electricity such as local and large scale wind and PV. An intelligent grid does not stop at electricity production but includes flexible customers that help to balance demand and supply. Because it is said that more intelligent meters are essential for the DSOs’ grids of the future, let’s see what this future grid looks like, following the US Department of Energy (DOE) definition:• Be able to heal itself – anticipate, detect and respond to system problems in the network, and avoid or mitigate power outages, power quality problems and service disruptions• Motivate consumers to actively participate in operations of the grid• Resist attack• Provide higher quality power that will save money wasted from outages• Accommodate all generation and storage options• Enable electricity markets• Optimize assets• Enable higher penetration of intermittent power generation sources. It is clear that more intelligence seems the prerequisite to fulfill these characteristics. Although a lot of definitions exist on what a more intelligent “smart” meter should look like, the common understanding seems to be that this generation of meters, which are digital instead of analog and support 1 or 2 way communication, have some new features like anti tamper, optional breaker, local communication ports for HAN, wired and wireless ports for other energy metering points, register logs etc., all with highly secured communication. It´s obvious that not only forces driving the positive side of acceptance exist. The downside of introducing smart meters is mainly represented in e.g. social discussions on privacy and more technical discussion on security and radiation. Since a new generation of meters will be on the intersection between public energy networks and customer premises, additional information and communication technology is introduced. This increases risks. These risks are (to be) assessed and mitigated by DSOs. In general the proposed smart meter infrastructure in The Netherlands is described in NTA 8130 from NEN (Nederlands Normalisatie Instituut) and in DSMR4. Privacy and security requirements are an integral part of this, although the level of requirement is a mix of functional and technical requirements. It is obvious that for new smart meters one of the objectives is to protect the privacy of the customers and to fulfill requirements related to WBP (Wetboek Bescherming Persoonsgegevens: the Dutch Act in Constitution to protect personal data). For this reason, privacy and security guidelines were already agreed within Netbeheer Netherlands by 2010 and the code of conduct has been proposed to and was accepted by the “College Bescherming Persoonsgegevens” (CBP), a Dutch institution guarding privacy for citizens and advising the Ministry of Justice in privacy related cases. These discussions are likely to continue and privacy and security requirements are likely to be maintained as the technology is maturing. SMART METERS – THE EUROPEAN CONTEXT The latest publication of the project “SmartRegions – Promoting best practices of innovative smart metering services to European regions” (funded by Intelligent Energy – Europe, source: http://www.smartregions. net/default.asp?SivuID=26927) in the best way assesses the overview of the variety of legislation among European countries. It is made clear that the legislative push by the European Union is currently the main driver for the introduction of “smart” metering systems in Europe. As a consequence, the smart metering landscape is highly dynamic at the moment with many member states adjusting their energy legislation to comply with the third EU energy market package and the Energy Services Directive. As the report says, across the European Union countries are moving towards electronic energy metering as a way of modernizing electricity grids and improving the information that is available for grid operators. There are various layers of action in and between EU member states and different EU institutions that are currently working on standardization, regulatory recommendations, technical functionalities, and other issues of importance. While some member states are awaiting the results of these various working groups and task forces, others are actively moving towards smart metering and starting with a rollout independent of existing barriers to the deployment of smart grids. Due to the regulatory push and the efforts of market actors, the development of legislation and regulation for smart metering in Europe is highly dynamic. The Smart Metering Landscape Report analyzed all countries on the dimension of this legal and regulatory status: it was evaluated whether or not a framework has been created not only to provide clear guidelines to utilities for installing meters but also to do so with the goal of achieving energy savings and/or peak load shifting. For each country the status quo has been assessed on the following dimensions:• Cost-benefit analysis and rollout plan• Timeline for the rollout• Barriers from additional legislation and regulation, e.g. privacy and data protection, measurement and calibration of meters• Legal minimum functional requirements. Combined with the progress of smart meter implementations per country, including the assessment of an existing and clear roadmap per country, the overview in the Figure was abstracted. The Netherlands can be seen as a dynamic mover because of a clear path towards a full rollout of smart meters with a major pilot project that is paving the way. The Netherlands has been proactive in translating EU legislation as a framework into general administrative acts (AMVB´s – Algemene Maatregel van Bestuur), by the Minister for Economic Affairs and Innovation, who submitted an alteration (Novelle) to the legislative amendment. The Ministry of Economic Affairs and Innovation then asked TNO to give an opinion on the implementation regulations. Implementation regulations set out the details of legislation and stipulate the requirements that smart meters must comply with. The House of Representatives agreed with the Novelle in 2010, as did the Senate in February 2011. SMART METERS IN THE NETHERLANDS – DSOs ARE LEADING THE WAYThe Dutch DSOs are well prepared for the introduction of smart meters. They undertook major smart metering pilots in the late 2000s and have spent several years developing system solutions to support advanced data applications. During 2012, installations of smart meters were started on a small scale in replacements and new constructions to gain experience for the upcoming large scale replacements. Smart meters have been offered to consumers for many years by energy retailers to enable flexible tariffs. The alternative energy retailer Oxxio, since 2011 part ofEneco, has provided over 200,000 smart meters using GPRS as the communication technology of choice. IBM has led this program and provided an end-to-end service. Now, the revised Dutch Electricity Act and the Gas Act, that was accepted in 2011 in the House of Parliament and came into law in 2012, obliges DSOs (as owners of the meters) to offer all households a smart meter. Households still have a choice in accepting a smart meter with full functionality, having no smart meter at all or to make the choice to have a smart meter but not to provide interval data to the DSO (and consequently a service provider of choice). The DSOs need explicit customer acceptance. With the revised Act, energy retailers or suppliers have to provide customers with bi-monthly consumption and cost statements. More detailed energy insight services for households, provided that it is ensured that individual measurement data is only used for the specific purposes, are considered a market responsibility that supports the overall business case for smart metering. In 2009, the initially proposed mandated introduction of smart meters was not approved by the Dutch Senate and the original proposal had to be changed to allow a voluntary rollout. As a result of that development, the Ministry of Economic Affairs instructed KEMA to perform a revised cost-benefit analysis and recalculate the consequences of the changed circumstances with respect to the business case for the introduction of smart meters in The Netherlands. Quoting Berg Insight, there are three major differences that prompted the new analysis:1. The smart meter will only be read once every two months in the standard situation2. The customer will have the option of refusing the smart meter, or can have the smart meter treated like a traditional meter by registering it as ‘administrative off’3. The need to get an understanding of the possible measures the Dutch government could take to influence the social costs and benefits in the desired direction. Now, an updated and positive business case is still expected of approximately € 770 million, considering that almost 100% of the households will accept the smart meter (with almost 100% standard readings). The benefits considered are first and mainly energy savings, secondly savings on call centre costs, and lastly lower cost for executing the market mechanisms like customer switching, moving and saving meter reading costs. As a consequence, the rollout of smart meters in the Netherlands will continue with a small scale rollout from 2013 until 2014/2015. Mostly regular meter replacements or new house installations or renovations will be addressed in this phase to get experience for the mass rollout. This mass or large scale rollout aims to get a smart meter in at least 80% of households. THE ROLE OF NETBEHEER NEDERLANDIn order to support the small and large scale rollouts more effectively, the DSOs have joined forces by cooperating under the Netbeheer Nederland umbrella. Netbeheer Nederland promotes a dialogue with government and market parties about the contribution that DSOs can make to the transition to a sustainable energy system. It consults with the Office of Energy Regulation(ACM) about how gas and electricity supply can be maintained and extended at socially responsible and efficient levels with security of supply and safety in mind. One of its project groups, ‘Uitrol Slimme Meters’, coordinates activities for the national smart meter rollout. Within the program the Smart Buying project is responsible for the selection of the preferred suppliers, as described in the introduction. With the ambition ‘Smart Buying = Smart Delivering’, the Smart Buying program executed an extensive preferred supplier selection process. The initial pre-qualification result was audited by Netbeheer Netherlands in 2011, including a factory visit at Shenzhen Kaifa Technology Co., Ltd. After the final decision by Netbeheer Netherlands to select IBM-Kaifa as one of the preferred suppliers, the development-test project and contract negotiations started. Due to requirements discussions and complex interoperability tests the development and test project was more time consuming than expected. Although contractually all was agreed in 2012, final product release was only given in 2013. Since then the production is up to speed and first deliveries have been planned from September 2013. By having the newly released meters available in the Dutch warehouses for rollout, Dutch DSOs can fulfil their obligations of starting rolling out of the latest DSMR4 meters in The Netherlands from 2013. THE IBM-KAIFA COOPERATIONAs one of the preferred suppliers for Netbeheer Nederland, IBM works closely with Shenzhen Kaifa , founded in 1985 and operating the Metering Division since 1995. Kaifa operates various other divisions, and thus has profound experience in e.g. storage products and microelectronic s products. Until now Kaifa has shipped over 22 million smart meters to Europe, 8 million anti-tampering meters to Asia and provided several million meters for China´s enormous domestic market. For 2011 Kaifa was ranked 7th of MMI Top50 EMS Providers. Since 1994 it has been a stock company, the number of employees increased to beyond 17,000 and today is in 10 locations worldwide: China, Hong Kong, Australia, Singapore, UAE/Dubai, USA, UK and Italy. In 2012 its sales revenue exceeded $2.64 billion. In 2004, IBM Global Business Services and Technology Services and one of the biggest European utilities entered into an alliance in the area of advanced metering management (AMM)/advanced metering infrastructure (AMI). Since then, IBM has delivered, together with its mainframe and software solutions, more than 2 million PLC and GPRS smart electricity meters for almost 30 European projects (for example to Enemalta, WSC Malta, Oxxio The Netherlands, A2A Brescia Italy, etc.). The metering hardware is sourced, procured and quality controlled by an IBM Smart Energy Technology Procurement Centre of Competence (CoC) that was built up in Mainz, Germany at the same time IBM stepped into this alliance. This Procurement CoC is engaged whenever such metering hardware is needed to be procured, and it then manages all necessary procurement and supply chain management activities. When the Procurement CoC started sourcing activities in 2004, Shenzhen Kaifa Technology Co., Ltd, headquartered in Shenzhen, China and part subsidiary of China’s giant Great Wall Technology Co., Ltd, already had a long history of collaboration with IBM especially in the area of storage hardware. Many years of manufacturing experience with the e-meter technology needed by IBM at their start into the first European AMM/AMI engagements in 2004, made Kaifa a perfect fit for cooperation in this area. Now, after almost 10 years of excellent win-win collaboration in the smart metering hardware business, it is no surprise that Kaifa was chosen by IBM as an early development partner and supplier of the final products for this project. YES, the Dragon can dance!