Fortum's view on smart grids

The smart grid concept is more than a technology; it is also about new market models, regulation and increased activity on the customer side.


The EU has committed itself to a challenging task: to reduce greenhouse gas emissions by 20%, to increase the share of renewable energy by 20% and to increase energy efficiency by 20% by 2020. In order to reach these targets, a major transformation of the energy system is required.

The extensive increase of renewable energy, especially intermittent wind and solar energy, will create a major challenge to the operation of the present energy transmission infrastructure. Existing grids are not capable of absorbing the very significantly increasing volumes of intermittent renewable electricity. Moreover, in order to increase energy efficiency, there is a need to develop ways to use energy more rationally, both with regards to industrial and domestic end-use, e.g. by making more active demand response possible. Smart meters and smart electricity grids will provide a new operating environment for suppliers and customers alike. The further development of retail markets, with the Nordic market as a forerunner, will empower customers to take better control of their consumption and to make active choices that impact on their costs and environmental footprint.


Huge investments are needed in the coming decades – not only in renewable and low/non-carbon generation but also in back-up generation and transmission infrastructure. These issues are well reflected in the recent Commission Communication on the Blueprint for the European Energy Infrastructure priorities (COM(2010) 677/4). The main driver for smart grid development is the EU energy policy and its implications on the energy system transformation. 


Smart grids

The European Technology Platform SmartGrids defines smart grids as electricity networks that can intelligently integrate the behaviour and actions of all users connected to it - generators, consumers and those that do both – in order to efficiently deliver sustainable, economic and secure electricity supplies.


Smart grids use digital technology to monitor and manage the generation and transmission of electricity from all sources in order to meet the varying electricity demands of end users as efficiently as possible. With appropriate market signals in place, smart grids can minimise both costs, especially in the context of a current energy only electricity market, and environmental impacts while maintaining system reliability, resilience and stability. Smart grids will also enable new business models both for energy sales and distribution to develop and realise new products and services to all customer groups. In order to support these technologies, distribution grids shall also support two-way power flow in the network.

Meeting peak demand for electricity requires that the system is able to handle efficiently a load that may occur only for a very short duration. Encouraging and making demand response possible, smart grids reduce peak demand by allowing industrial and household customers, manually and/or automatically, to reduce and/or time-shift their consumption with little impact on operation or on their lifestyle.

Deployment of smart grids makes it possible to integrate advanced electricity storage and peak-shaving technologies including plug-in electric and hybrid electric vehicles.


Fortum view on smart grid development

Smart grids and competitive, liberalised and integrated energy markets will be key enablers for the implementation of the EU energy policy. The smart grid concept is more than a technology; it is also about new market models, regulation and increased activity on the customer side. It can be seen as the final step in liberalization of the end-customer market by bringing all the benefits of the dynamic and competitive wholesale market also to retail customers. In order to guarantee necessary investments in the development of new grid technologies and in the implementation of smart grids, a proper regulatory framework is needed.


Fortum is of the opinion that:

• Efficient network regulation is an important vehicle for driving European development towards a highly modernized grid, thus benefiting European customers as a whole. The regulatory framework should create necessary incentives for operators to develop and implement smart grids where it is economically viable.


• Although electricity distribution is still subject to national regulation, there should be efficient coordination between countries operating in the same regional wholesale electricity market on regulatory framework and standards concerning e.g. tariffs and consumer protection aspects in order to support the development of cross-border retail market and to avoid market distortions.


• A clear EU-level policy, including common standards for smart grids and smart metering, are needed to ensure interoperability across the network and across countries.


• Technological innovation is of utmost importance both in terms of reaching the ambitious energy and climate policy targets and improving European competitiveness. Whereas energy production should not be based on long-term public financing, it is important to allocate necessary funding for research and development of new energy technologies such as smart grids.


• Public support for research and development of smart grids and ICT systems that enable businesses to utilize innovative service arrangements to improve their efficiency and enhance their services to customers, including large-scale demonstration projects, is therefore needed. The European Commission should secure the necessary financing for the implementation of the SET-Plan's (EU Strategic Energy Technology Plan) Smart Grid Initiative (EEGI = European Electricity Grid Initiative) and Smart Cities Initiative in the forthcoming EU Research and Framework Programme (FP8).


• Supporting the transition process from R&D over demonstration to full deployment of smart solutions should be one of the future tasks for national regulators.


• All major stakeholders should be involved in smart grid projects in order to define a concept for a smart grid system that fulfils simultaneously the requirements of end customers, society and industry and to ensure that Europe’s electricity networks develop in a way that enhances Europe’s competitive position without compromising environmental objectives or the commitment to sustainability.


• Consumer protection aspects, especially legitimate concerns relating to the protection of personal data and privacy in the implementation of smart meters and smart grids, need to be tackled properly in order to guarantee public acceptance of these technologies. Clear European wide rules as regards data to be collected, data storage and use of data etc. are needed.


• Energy market models for European-wide energy markets should support open retail and wholesale business in the EU with limited restrictions in transmission capacity, thereby enabling open interfaces for all actors in the electricity business.


Fortum's activities relating to smart grids

Fortum has engaged in several smart grid-related R&D and demonstration projects in order to learn about the smart grid concept and about detailed requirements on market models and regulation.

Smart grid delivers electricity from suppliers to consumers using two-way digital communications to control appliances at consumers' homes. Smart grid enables consumers to become active participants in the energy market. Examples of Fortum's smart grid R&D activities:


• Stockholm Royal Seaport - large-scale urban smart grid (in partnership with ABB)

- Smart homes and buildings and demand response

- Distributed energy systems

- Integration and use of electric vehicles

- Energy storage for network support and decentralized energy solutions (DES)

- Harbour control solution

- Smart primary substations

- Smart grid centre (innovation centre)


• Eco-friendly living house in Espoo, Mäkkylä, in Finland (part of SGEM research programme, in partnership with Skanska, ABB, BaseN and Kone):

- Solar panels, electric vehicle and charging pole- Internet-based follow-up and control system allows residents to monitor and to regulate their own electricity, heating energy and water consumption

- Invoicing of water and heat based on actual consumption in apartments


• Smart house building in Stockholm (in partnership with Skanska)


• Electric vehicle (PHEV and BEV) cooperation on charging units with municipalities in Finland and Sweden


• Smart Grids and Energy Markets research program (CLEEN Ltd) with focus on power distribution, including related interfaces:

- Intelligent management and operation of smart grids

- Active resources

- Future infrastructure of power distribution

- Smart grid architectures

- Development of energy market and business model potentials


• Glava Energy Center in Värmland, Sweden: Solar park (with 5 industrial and society partners)


• 55-kW solar power plant at Espoo car depot in Finland (joint effort by Espoo City and Fortum)