Costs and benefits of the implementation of smart grids in the European Union

Abstract

This paper discusses the costs and benefits of implementing smart grids in EU member states. Only six EU member states have achieved full coverage with smart meters. Smart grids contribute to increasing energy efficiency, balancing demand and supply for electricity and reducing harmful impacts on the environment. There are four regulatory incentives for Distribution System Operators cost efficiency and productivity. The treatment of costs in the functioning of energy distributors differs between countries. According to the capacities of Distribution System Operators for the application of smart grids, countries can be grouped into three clusters. EU member states are divided into two groups according to the net benefit from the application of smart meters. Although the capacities for integrating a smart grids into the energy system are the largest in Germany and the Czech Republic, in these two countries the cost benefit analysis of smart meters gives negative results.