• Energy Research

This report provides an overview of the state of the art of smart grids in Italy and pinpoints the factors conditioning their development and application in our country, while providing the overall scenario and perspective regarding Europe and world wide. It identifies the main actors concerning industry, applications and research & development, provides an outline of the main Italian smart grid projects, and discusses drivers and barriers to wider adoption in Italy. The report includes three parts. The first part gives a conceptual definition of smart grids and points out the main economic and technical factors driving or conditioning their adoption within the context of present-day electric system. It is shown that there exist many different views of what a smart grid and, starting from that, it reaches its own synthetic definition; 'a smart grid delivers electricity from generators to end users by making use of ICT in such a way as to spare energy, reduce costs, increase reliability and transparency of the power system. Smart grids contribute to energy independency, decrease global warming and increase system security'. This way smart grids couple online monitoring, control and optimization capabilities to power transmission and distribution, in such a way as to achieve optimum efficiency and reduce global warming. Based on that definition, the report discusses the main features of smart grids: distributed power generation and energy storage, reduced environmental impact and network control issues. Drivers and barriers for further development and wider adoption include market pressure, end user behaviors and expectations, power system ageing and its current regulatory framework on one side, and enabling technologies on the other: information, communication and control, new materials, energy storage, power electronics and distributed generation. The second part focuses on relevant research & development projects. The chapter shows how the smart grid concept was born, its story and the overall related research & development in Europe and Italy. The smart grid concept was born in the USA based on seminal research at EPRI. Since the beginning, the US concept stresses on system security, because the US power system is both more vulnerable than the European one, and more likely to be the potential target for cyber wars. The term smart grids was introduced by the paper 'Toward A Smart Grid' by S. Massoud Amin and Bruce F. Wollenberg, published by the IEEE Power & Energy Magazine, September/October 2005. The CIN/SI project lead by Massoud Amin at EPRI until 2003 had a seminal role in defining the intelligent interactive power network concept, although the main standpoints for developing this concept date back to two technical phenomena late in the eighties and nineties of last century: o widespread diffusion of power systems controls and especially the emergence of intelligent metering systems; o emergency of distributed power generation and the drive to wider adoption of renewables which are distributed by their nature. The European counterpart of the CIN/SI project is the European Technology Platform for the Electricity Networks of the Future, established December 2004: this groups the key industrial stakeholders and the research community and provides a vision for EU research in the area as summarised in this report, together with the key EU projects which gave background to the platform, and an overview of current major application projects: some of them will have substantial impact on the future European power system. The European vision is compared with the US one, where system security aspects prevail and there is stronger emphasis on application. Finally, based on a six layer functional model provided by the European Electricity Grid Initiative, we provide an overview of the current key R&D themes in Europe. 6 Rapporto Tecnico, Anno 6, n° 36; febbraio 2011 The report presents the main innovation players in Italy: utilities, among them Enel plays a key role together with ACEA, A2A, CIE, Edison, Eni, IREN and Sorgenia, and the key R&D centres: CNR, Enea and RSE. The views of these players are summarised in the report, as gathered through interviews with their representatives. The report provides an overview of the key R&D projects in Italy. In the main Enel appears to be the key player concerning innovation and development in this area. This brings about a first comer power as far as technology standards and innovation dynamics are concerned. At the same time, Enel is the prime mover, and makes possible continuous development of the Italian power system, among the most advanced worldwide. As far as distribution is concerned, remote metering systems were widespread by Enel since the late nineties based on a company investment. In 2006 the Italian Energy and Gas Authority recognised the advantages on the end user side and made their installation compulsory in the whole of Italy. In 2000-'01 Enel deployed another large project for remote control of the medium voltage power grid, this makes possible fault isolation within secondary power substations and makes maintenance by far more efficient. Future developments of Smart Grids are the object of the ADDRESS project grouping 25 partners among distribution utilities, R&D companies, manufacturers and ICT suppliers to the aim of enabling active demand in the context of the smart grids of the future, i.e. active participation of small and commercial consumers in power system markets and provision of services to the different power system participants. The third part of the report discusses how Smart Grids are impacting on the Italian economy: the main stakeholders are identified joint with their engagement in R&D and future application, and barriers to wider deployment are considered: how enable active demand, how to make data widely available, how to join efforts among several stakeholder categories, how stimulate investments in presence of imperfect benefit appropriation. In the main, as far as application perspectives are considered, the phase of conjecturing and scenario simulation seems to be overcome. However, the critical issues mentioned above make most stakeholders reluctant to engage in wider scale application although there are significant exceptions. While these issues may justify a cautious attitude, the fact that the Italian electric system is among the most advanced worldwide should be exploited as a competitive advantage. While the US economy is widely investing on smart grids, engagement in the European union is not far beyond, and one must take into account that considerable part of the US investments are to recover the infrastructure gap as a far as physical grids are concerned (those are older/more inadequate/more aged than the EU ones). Despite these favourable conditions, the prevailing stakeholders attitude looks over cautious because, although technology appears mature, no one wishes to engage in the first step because of the critical issues that remain to be solved, the difficulty to forecast emerging scenarios (especially cocerning standards) and the systemic nature of the technology.

Power system controls are vulnerable to cyber-attacks that can seriously affect and even inhibit their operation. Such attacks may affect large portions of the power system, make repair difficult and cause huge societal impact, so pressure to ensure cyber-security of control and communication systems is now strong worldwide. Several cyber-security frameworks were developed, but it is rather difficult to anticipate adoption costs and benefits, and this hampers their generalised adoption. T his paper focuses on the outcome of two case studies (concerning the Italian power generation and the Polish transmission systems. The socio-economic impact of failures and the costs of standard adoption are estimated on an objective basis. It is up to public authorities to decide whether to require the adoption of security standards to operators in the electric system. The nature of public good of security underlines the necessity of public support for this operation, but we discuss the extent and the management of this support.

Competition has been introduced in the electricity markets with the goal of reducing prices and improving efficiency. The basic idea which stays behind this choice is that, in competitive markets, a greater quantity of the good is exchanged at a lower and a lower price, leading to higher market efficiency. Electricity markets are pretty different from other commodities mainly due to the physical constraints related to the network structure that may impact the market performance. The network structure of the system on which the economic transactions need to be undertaken poses strict physical and operational constraints. Strategic interactions among producers that game the market with the objective of maximizing their producer surplus must be taken into account when modeling competitive electricity markets. The physical constraints, specific of the electricity markets, provide additional opportunity of gaming to the market players. Game theory provides a tool to model such a context. This paper discussed the application of game theory to physical constrained electricity markets with the goal of providing tools for assessing the market performance and pinpointing the critical network constraints that may impact the market efficiency. The basic models of game theory specifically designed to represent the electricity markets will be presented. IEEE30 bus test system of the constrained electricity market will be discussed to show the network impacts on the market performances in presence of strategic bidding behavior of the producers. Accepted for publication in the European Journal of Physics B. Presented at the Int. Conf. NEXT-SigmaPhi, 13-18 August 2005, Crete

One of the most important aspects that may affect market welfare is that related to the low demand responsiveness to price. This situation may greatly impact the market performance causing low efficiency, high prices and a disproportional allocation of surpluses. The structure of electricity markets is usually oligopolistic; producers may bid prices higher than their marginal costs to the short run wholesale market, inducing outcome deviations from the perfect competitive benchmark. The possibility of gaming the market is amplified in the presence of low demand responsiveness to price. This paper proposes a model to assess the role of demand elasticity in mitigating the effects of supply side strategic bidding behavior. We model the supply side in a conjectural supply function (CSF) framework, which allows incorporation of exogenous changes in demand elasticity and different levels of competition in a given market. The impacts of demand responsiveness on the market performances are assessed through a set of proposed indices that are applied to a model of the Italian market.