(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
LONDON Oct 12 Smart grid and meter applications in Europe are having to compete with other services for radio frequencies, raising questions over grid stability and value for money.
All wireless technologies transmit and receive information across airwaves known as the radio spectrum, an increasingly crowded resource essential for services from mobile phones to wireless internet and TV and radio broadcasting.
Utilities are installing smart meters to help to manage peak power demand, while smart grid services are being expanded to enable real-time monitoring and automated remote control. Some of that communication will be across fixed wires, including power lines; the rest will be wireless.
To do this, utilities argue that they should be allocated free dedicated spectrum. As things stand, frequencies can be reserved for particular applications through competitive auctions of exclusive licences, or there is the option of regulated, unlicensed use.
So far, smart energy operators have chosen between purchasing licences or using unlicensed wavelengths in an ad hoc approach.
The European Commission estimates the spectrum's annual value at 200 billion euros ($259 billion) or more in Europe, leading some grid operators and utilities to argue that they cannot compete with mobile phone companies to acquire licences. They say that doing so would involve passing on heavy costs to energy consumers.
To justify free dedicated spectrum, however, they will have to do a better job of explaining the threats to grid stability, such as how the rise in local solar and wind power generation, plus increasing cross-border transmission capacity, are putting new strains on the network.
The European Commission recently cancelled a planned impact assessment on dedicated spectrum for smart energy systems after an inconclusive consultation, it said.
Instead, it is including that initiative in work on other sectors and a more generic programme to promote the "shared use of radio spectrum resources in the internal market".
Supporting policies for the smart grid include the EU's 2009 renewable energy law, which viewed such technology as an enabler for the integration of an increasing amount of renewable energy.
The Energy Efficiency Directive identified smart meters as an important measure contributing to energy efficiency, while the 2009 "third package" for the internal energy market imposes an obligation to roll out smart metering in member states by 2020.
Smart meters allow two-way, real-time communication between utilities and residential and commercial energy customers and their appliances, enabling consumers to offer to cut peak energy use in exchange for cheaper tariffs.
The meters are expected to communicate with operators' back offices through wireless or fixed-line connections, and with appliances across the home by wireless.
Smart grid services, meanwhile, are intended to make grids more secure, especially the final distribution to consumers. One way this would be done is with sensors and switches to direct power in multiple directions.
That can help to incorporate more local renewable power generation and avoid replacing cables and sub-stations to upgrade capacity.
While grid monitoring and management is usually conducted through fixed-line connections, wireless applications are increasingly important to control the lower voltage and more extensive distribution end of the grid, and as back-up.
Whether smart energy systems need dedicated radio spectrum partly boils down to whether the service is needed urgently.
The EU utility trade body Eurelectric argues that grid management is critical, in contrast with the "loose timing/ response requirements of demand response services" such as smart meters.
It concluded in its response to the European Commission consultation on spectrum allocation that grid operators should have some dedicated bandwidth, while both grids and meters would benefit from a harmonised, EU-wide approach.
"The existence of a specific band for smart grid and smart metering applications at the European level would bring more competition in the metering and control equipment industry, leading to lower costs," it said.
"A dedicated band reserved for DSOs (distribution system operators) and smart grid applications ensures secure and reliable communication, which should reduce the risk of attacks and the breach of integrity."
It argues that during critical events of grid instability, such as voltage spikes or blackouts, it needs to have exclusive control of uncluttered airwaves to direct electricity flows.
Smart grid service providers point out the more prosaic rationale for requesting free dedicated spectrum: the expense of having to compete with mobile phone companies to purchase exclusive licences.
Phone companies are expected to bid several billion pounds in a forthcoming UK auction of 4G spectrum.
As regulated entities, European grid operators are limited in the tariffs they can charge energy consumers and would have to justify to regulators why they need to be able to charge more so that they can compete for radio frequency licences.
Any allocation of free dedicated bandwidth would be a big step for issuing authorities because it would be seen as preferential treatment over other services that have huge value to the economy and pay for licensed airwaves.
Furthermore, standardising which airwaves smart energy use may make sense for grid operators operating across European borders, but it is unclear how it will cut costs.
U.S. smart meter specialist Echelon was unconvinced by either in its response to the EU consultation, especially given the availability of power lines for communication.
"We advocate the use of existing RF (radio frequency) networks and spectrum, rather than allocating additional spectrum specifically for these applications. It would not make sense to dedicate specific spectrum across Europe, since in many situations it will not be used." ($1 = 0.7726 euros)
(Editing by David Goodman)