The social costs and benefits of smart grids

Creating ‘smart’ electricity grids would have benefits for the energy supply of the future, leading to lower prices for both private and industrial consumers. This is the conclusion of a social cost-benefit analysis (SCBA) performed by CE Delft and KEMA on a commission from the Dutch Ministry of Economic Affairs, Agriculture and Innovation.

In the analysis a number of energy scenarios were run through to 2050. In virtually all the scenarios smart grids have a positive effect, regardless of whether these build on robust climate policy, involve modest or extensive use of locally generated power, and other variations. This is due above all to the changes in user behaviour anticipated when variable energy tariffs are introduced and to cost savings on grid construction and power production. A number of ‘Pilot Smart Grids’  were recently established in the Netherlands to assess actual consumer response to time-indexed price incentives.

Until now it had been assumed that smart grids are above all useful and necessary in the context of a radically green energy system, but the SCBA shows that even an energy system not underpinned by robust climate policy would benefit from such grids.

The analysis of ‘social cost and benefits’ encompassed the full range of costs and benefits of smart grids, regardless of the party or parties bearing the costs. Consideration was also given to whether government policy is required to move parties to incur costs that benefit others.