Guidelines for smart grid project cost-benefit analyses released in Europe


Brussels, Belgium — (METERING.COM) — May 15, 2012 – Guidelines for conducting a cost-benefit analysis (CBA) of smart grid projects in Europe have been released by the European Commission’s Directorate-General for Energy (DG-Energy).

The guidelines, based on the methodology of the Electric Power Research Institute (EPRI), offer a step-by-step assessment framework for cost-benefit analyses, with assumptions tailored to the European context.

The proposed approach comprises three main parts:

  • Definition of local boundary conditions (e.g. demand growth forecast, discount rate, local grid characteristics) and of implementation choices (e.g. rollout time, chosen functionalities)
  • Identification of costs and benefits
  • Sensitivity analysis of the CBA outcome to variations in key variables/parameters.

Notably the CBA seeks to go beyond the costs and benefits incurred by the actor(s) carrying out the smart grid projects, and aims to take a societal perspective, considering the project’s impact on the entire value chain and on society at large.

Guidelines include defining assumptions and setting critical parameters; reviewing and describing technologies, elements and goals of the project; mapping assets into functionalities; mapping functionalities onto benefits; establishing the baseline; monetizing benefits and identifying beneficiaries; identifying and quantifying costs; comparing costs and benefits; performing sensitivity analyses; and complementing CBA with a qualitative impact analysis including externalities.

As a case study Portugal’s InovGrid project is used.

The guidelines were prepared by Europe’s Joint Research Center in conjunction with DG-Energy.