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Report RSE 17001130

Support for cost-benefit analysis of Smart Grid projects



Request Document (3.21 MB, .pdf)

A. Bassini (RSE SpA), I. Losa (RSE SpA)

RETE-DIS 2016 - Evolution and development of distribution networks

The report consists of two sections: the first provides methodological contributions to the cost-benefit analysis of Smart Grid projects (mainly addressing the economic analysis); the second part is dedicated to completing the overview (started in the previous year) of the methodological approaches developed by smart grids pilot projects to evaluate the scalability and replicability potential of the most promising solutions tested in the demos

The report consists of two sections, one providing methodological inputs for cost-benefit analysis of Smart Grid projects and the other dedicated to complete the overview, already started during previous research activities, of the approaches to scalability and replicability analysis (SRA) of European projects. With regard to the first theme, the report provides a few methodological indications related to the cost-benefit analysis (CBA) of Smart Grid investments in the European context, mainly addressing the economic analysis, in order to support those who have to make or to check the CBA of such projects.

These indications integrate the European guidelines and the American reference methodology, respectively developed by JRC and by EPRI, clarifying some aspects as well. The features and the goals of the economic and financial analysis within the CBA of a Smart Grid investment are explained. The economic analysis has the purpose of assessing the social desirability of the large scale deployment of the solutions tested in the demonstrators, while the financial analysis assesses the economic sustainability of the project for the parties involved in its implementation.

The steps for the correct implementation of the CBA are described, specifically: 
− the context analysis in order to identify the constraints for future grid development and in order to recognize the variables which are exogenous in the analysis and the ones which are evaluated within the CBA of a project with specified objectives;
− the definition of the project perimeter considering its objectives and the possible share of new part of grid infrastructure with other logically independent implementations;
− the definition of the reference scenario highlighting 1) the need to define a distinct baseline for each major project goal, except in the particular case of ‘mutual influence’ among the goals, and 2) the link with the identified exogenous development constraints and their application period.

The identification of the exogenous grid development constraints and the baseline definition are contextualized in the case of a project improving the continuity of supply and in the case of projects which aim to increase the grid hosting capacity.

The process of benefit identification and quantification through impact analysis is described and the benefit economic evaluation is discussed with reference to specific benefits and/or Smart Grid solutions. As regard the benefit monetization, only criteria and conceptual expression can be generally specified. About the costs, main differences with respect to the financial analysis, namely externalities and fiscal corrections, are highlighted; the costs evaluation in case of assets shared among different implementations is addressed.

The importance and the meaning of the sensitivity analysis are discussed and a few possible approaches to perform this analysis are indicated. The possible impact in terms of investment risk due to the uncertainty on the values of the variables is highlighted.

In the second section of the report, following a description of the scalability and replicability approach developed by the EcoGrid project, the main steps that can characterize an SRA are presented, referring, where necessary, to a project aimed at increasing the host capacity of a distribution network with different technological solutions.

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