ECONOMIC DILLEMMAS OF SMART GRID DEVELOPMENT: ILLUSIONS, REALITIES AND PROSPECTS

Purpose: the purpose of this work is to systematize data on the economic effects of Smart Grids, classify these effects, identify the challenges associated with their implementation, elaborate approaches and conditions under which Smart Grids can maximize returns for business entities, the economy and society.

Methods: the work is based on the analysis of scientific and analytical materials devoted to the research problem, including those prepared on the basis of surveys of industry actors, as well as systematic materials on implemented pilot and industrial projects in the field of Smart Grids.

Results: two groups of economic effects of Smart Grids are considered: optimization ones (related to the operating and investment costs reductions of industry actors) and innovative (related to the implementation of the prospective functionality of Smart Grids). It is shown that, despite the presence of positive economic results, the optimization effects of Smart Grids are partly overestimated, partly have temporary nature (due to natural limits for long-term costs savings and economy of investment resources, transfer of the resulting benefits to consumers and other reasons). Innovative effects are still difficult to assess due to the predominantly pilot nature of the Smart Grids projects, inadequate level of market penetration (considering network effects in accordance with the Metcalfe Law) and other factors. The contradiction between the declared innovative effects and the existing architecture of the market, industry regulations (especially tariff formation) and other systemic factors is accented – this serves as a natural barrier to the implementation of innovative effects.

Conclusions and relevance: narratives describing the development of Smart Grids can be considered a metaphor for the representations of subjects about the «ideal» energy system of the future, so it is senseless to expect Smart Grid technology to solve all possible problems of the industry and energy systems. But the demand for an innovative transformation of the power sector and for innovative effects remains significant. This assumes (with enhanced support for development of new technologies) an emphasis on the economic dimension of industrial innovation processes. New approaches are needed – defining agents of change, solutions for rising investments, changing the role of the state, etc. Three approaches are proposed in the paper that can support implementation of innovative effects: evolutionary (emphasis on smooth changes in industry regulation for accommodation to new conditions and goals), return to the «traditional» model of development of basic infrastructures and emerging technologies (government as a key player and investor), and revolutionary scenario (shifting focus to consumers and new actors, forming innovative Smart Grid clusters within the existing energy system and markets). The limitations of these approaches are assessed, it is noted that in reality, their overlapping or consistent application will be observed. It is noted that the main challenge will be cultural changes and the formation of transit institutions for the industry.

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