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Assessment and roadmap forthe digital transformation ofthe energy sector towards aninnovative internal energymarketFinal ReportOctober – 2019

EUROPEAN COMMISSIONDirectorate General for EnergyDirectorate B – Internal Energy MarketUnit B.3 Retail markets ; coal & oilContact: Manuel Sanchez JimenezE-mail: [email protected] CommissionB-1049 Brussels

Assessment and roadmap forthe digital transformation ofthe energy sector towards aninnovative internal energymarketFinal ReportList of authors: Simona Benedettini (PwC), Guglielmo Brugnetta (Tractebel),Franco Fumiatti (Tractebel), Paolo Gentili (PwC), Giulia Ghiglione (PwC),Vincenzo Giordano (Tractebel), Aviv Gidron (Tractebel), Gerd Küpper(Tractebel), Pavla Mandatova (Tractebel), Roberta Masci (PwC), AlessandroRubino (PwC).

EUROPEAN COMMISSIONEUROPE DIRECT is a service to help you find answersto your questions about the European UnionFreephone number (*):00 800 6 7 8 9 10 11(*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you)LEGAL NOTICEThis document has been prepared for the European Commission however it reflects the views only of theauthors, and the Commission cannot be held responsible for any use which may be made of the informationcontained therein.More information on the European Union is available on the Internet (http://www.europa.eu).Luxembourg: Publications Office of the European Union, 2020PDFISBN 978-92-76-17310-6doi: 10.2833/36433 European Union, 2020Reproduction is authorised provided the source is acknowledgeDirectorate-General for Energy2020MJ-02-20-185-EN-N

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketACKNOWLEDGEMENT TO REVIEWERSThis report has been reviewed in draft form by EC officials participatingin the DG ENER Task Force for Digitalisation and the Smart Grids TaskForce. The purpose of the review was to provide candid and criticalcomments that assisted the authors in making the final report as soundas possible, and to ensure that the report meets the Commission’sstandards for objectivity, evidence and responsiveness to the study incharge.We wish to thank the following individuals for contributing to the reviewprocess:Manuel Sánchez Jiménez (ENER), Guido Bortoni (ENER), Una Shortall(CEER), Patricia Arsene (CNECT), Constantina Filiou (ENER),Konstantinos Stamatis (ENER), Michaela Kollau (ENER), AntoniosMarinopoulos (JRC), Laila Kienel (ENER), Cristobal Irazoqui (ENER),Mugurel-George Paunescu (ENER), Ruud Kempener (ENER) and PedroAlfonso Perez-Losa (INEA).Although the reviewers listed above have provided many constructivecomments and suggestions, they were not asked to endorse theconclusions and/or recommendations. Responsibility for the final contentof this report rests entirely with the authors.6 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy market“The transition to a smart, secure and sustainable energy system isno longer a choice for Europe; it is a responsibility towards allcitizens, our future generations and the planet. This transitionrepresents a real economic opportunity and requires first andforemost bridging energy and digital economy.”Dominique Ristori (former Director-General, DG ENER),Roberto Viola (Director-General, DG CNECT)7 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketTable of contentsList of Acronyms . 10Executive Summary . 14Roadmap to 2030 . 301.2.3.4.Introduction . 331.1General Background . 331.2Purpose and structure of the document . 331.3Scope of the study . 34Policy context . 362.1The relevant legal framework for the digitalisation of the power sector . 362.2The Energy Union and the Digital Single Market strategy. 372.3The role of investments in the digitalisation of the power sector . 45Methodological approach . 513.1Overview . 513.2Main tasks . 53Analysis of the selected use cases . 614.1On-site optimisation for C&I and Residential buildings . 614.2Smart districts . 844.3Energy Aggregators . 944.4Customer Data Analytics .1064.5Smart EV charging and charging management.1234.6Urban data platforms .1388 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy market5.6.7.4.7Energy communities .1514.8RES Origin Tracking .1634.9Improved O&M.1704.10Flexibility Market Platforms .186Policy Scenarios .1975.1Flexibility services at the distribution level .2015.2Privacy and Data Protection .2355.3Cybersecurity .2395.4Interoperability and standardisation .247Roadmap .2536.1Choosing the preferred scenario .2536.2Preferred scenario implementation timeline .255Recommendations .2587.1Flexibility services at the distribution level .2587.2Privacy and Data Protection .2637.3Cybersecurity .2637.4Interoperability and standardisation .2658.9.Annex I – Detailed analysis of the policy context .26710.Annex II – Summary of Policy Scenarios .30511.References .3209 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketList of AcronymsAbbreviation5GACERADPAESAFifth GenerationEuropean Union Agency for the Cooperation of Energy RegulatorsAuthority for Consumers and Markets (Autoriteit Consument &Markt)Active Digitalisation PolicySpanish Aviation Safety and Security AgencyAIAIOTIAMIAPAPIArtificial IntelligenceAlliance for Internet of Things InnovationAdvanced Metering InfrastructureAccess PointApplication Program InterfaceAPMB2BB2CBAUBEMAsset Performance Business-As-UsualBuilding Energy ManagementBERECBEUCBIMBMBRPBody of European Regulators for Electronic CommunicationsEuropean Consumer OrganisationBuilding Information ModellingBusiness ModelBalance Responsible PartyC&ICAPEXCBACCRCommercial and IndustrialCapital ExpenditureCollective Awareness Programs for Sustainability and SocialAwarenessCost Benefit AnalysisCapacity Calculation RegionsCEERCEFCEPCGCGMCouncil of European Energy RegulatorsConnecting Europe FacilityClean Energy PackageConsistent GovernanceCommon Grid ModelCHPCPOCRECRMCSIRTCombined Heat and PowerCharging Point OperatorEnergy Regulatory CommissionCustomer Relationship ManagementComputer-Security Incident Response TeamCSPNDAMDEICertification de Sécurité de Premier NiveauDay-Ahead MarketDigitising European IndustryACMCAPS10 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketDEPDERDLMPDLTDigital Europe ProgrammeDistributed Energy ResourceDistribution Locational Marginal PricesDistributed Ledger TechnologiesDPADPIADPPDRDSIEuropean Data Protection AuthorityData Protection Impact AssessmentDigital Power PlantDemand ResponseDigital Service InfrastructureDSMDSOEaaSEASADigital Single MarketDistribution System OperatorEnergy-as-a-ServiceEuropean Aviation Safety AgencyEBPEBSIECEEDEEFIGEuropean Blockchain PartnershipEuropean Blockchain Services InfrastructureEuropean CommissionEnergy Efficiency DirectiveEnergy Efficiency Financial Institutions eanEuropeanEuropeanEMEMSENISAENTSO-EEPBDEnergy ManagementEnergy Management SystemEuropean Union Agency for Network and Information SecurityEuropean Network of Transmission System Operators - ElectricityEnergy Performance of Buildings DirectiveESCOESMIGETIPETPAETSIEnergy Service CompanyEuropean Smart Metering Industry GroupEuropean Technology and Innovation PlatformsEnergy Trading Platform AmsterdamEuropean Telecommunications Standardisation InstituteEVFCRFITFSPElectric VehicleFrequency Containment ReserveFeed-in-TariffFlexibility Service ProviderGDPRGHGGISGOHANGeneral Data Protection RegulationGreenhouse GasesGeographic Information SystemGrid OperatorHome Area NetworksHEMHEMSHVACHome Energy ManagementHome Energy Management SystemHeat Ventilation Air Conditioning11 / October 2019Energy–Information Sharing Analysis CentreFund for Strategic InvestmentsInnovation CouncilInnovation Platform Smart Cities and CommunitiesInstitute of Innovation and Technology

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketI/OiBMSiBPMICTInput/Outputintelligent Building Management Systemintelligent Business Process ManagementInformation and Communication TechnologyIEAIEMIICINATBAIoTInternational Energy AgencyInternal Energy MarketIndustrial Internet ConsortiumInternational Association for Trusted Blockchain ApplicationsInternet of ThingsIPIPRISMSITInternet ProtocolIntegrated Planning and ReportingInformation Security Management SystemInformation TechnologyITERJRCKORRRKPILEEDInternational Thermonuclear Experimental ReactorJoint Research CenterKey Organizational Requirements, Roles and ResponsibilitiesKey Performance IndicatorLeadership in Energy and Environmental DesignLEITLV/MVM2MMFFmFRRLeadership in Enabling and Industrial TechnologiesLow Voltage/Medium VoltageMachine-to-MachineMultiannual Financial FrameworkFrequency Restoration Reserve marketMRLMSMSPNABEGNC DCCMarket Readiness LevelMember StateMoblity Service ProviderNational Grid Expansion Acceleration ActNetwork Code Demand ConnectionNC HVDCNC RfGNECPNILMNISNetwork Code High Voltage Direct Current ConnectionNetwork Code Requirements for GeneratorsNational Energy & Climate PlanNon-Intrusive Load MonitoringNetwork and Information SystemsNRANZEBO&MOCPINational Regulatory AuthorityNearly Zero-Energy BuildingOperation and MaintenanceOpen Charge Point InterfaceOEMOESOICOPEXOSCPOriginal Equipment ManufacturerOperators of Essential ServiceOpen Internet ConsortiumOperating ExpenditureOpen Smart Charging ProtocolOTOTTP2POperational TechnologyOver-the-top TechnologyPeer-to-peer12 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketPaaSPEBPEDPEERPlatform-as-a-ServicePositive Energy BlockPositive Energy DistrictPartnership for the Enforcement of European RightsPPAPPPPSIPVR&DPower Purchase AgreementPublic Private PartnershipPublic Sector InformationPhotovoltaicResearch and DevelopmentR&IRABREREDResearch and InnovationRegulatory Asset BaseRenewable EnergyRenewable Energy DirectiveRESRFIDRLROIRSPPRenewable Energy SystemsRadio-Frequency IdentificationReinforced LegislationReturn on InvestmentRadio Spectrum Policy art Appliances Reference ontologyStandard Development OrganisationsEuropean Strategic Energy TechnologySmall and Medium EnterpriseSO GLSTFToUTRLTSOSystem Operation GuidelineSpecialists Task ForceTime-of-UseTechnology Readiness LevelTransmission System OperatorUASUAVUCUDPV1GUnmanned Aircraft SystemsUnmanned Aerial VehiclesUse CaseUrban Data PlatformVehicle-to-Grid (Unidirectional power d (Bidirectional power flow)Vehicle-to-HomeVirtual Power PlantVRWACCWPSVirtual RealityWeighted Average Cost of CapitalWi-Fi Protected Setup13 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketExecutive SummaryWhy this study?Thanks to the European Union’s policy pressure, the EU energy system is going throughincreasing decentralisation and decarbonisation processes. Digitalisation, in thiscontext, is a key enabler, as it unlocks opportunities for actors across the value chain(i.e. consumers, prosumers, retailers, traders, producers, network operators), providingthem with new solutions.At the moment, digital technologies are already playing an important role in the energysector. Internet of Things, Artificial Intelligence, Big Data, Cloud, 5G and Blockchaintechnologies are influencing changes both in energy companies’ value creationstrategies and in customer behaviour. They are expected to have an impact on longtime established roles, particularly by creating trust and empowering consumers.In addition to this, digital technologies also provide the opportunity to integrate morerenewable energy into grids and use energy more efficiently in households, industry andthe whole system. They thus contribute to the creation of favourable conditions fortackling the sustainable low carbon economy challenge.To support policy making, this study assesses in which way and to what extent aredigital solutions affecting the energy transition. It does this firstly by analysing tenspecific use cases which provide, altogether, a good coverage of what is happening inrepresentative segments of the energy value chain; and secondly, thanks to such acomprehensive view, by proposing a Roadmap for future EU and MS actions aimed atremoving existing barriers to the digital transformation and its opportunities unlockingpotential.Such a Roadmap presents a list of short-term actions able to remove those barriers andaccelerate the implementation of the most relevant provisions of the Clean EnergyPackage. At the same time, looking forward, the recommended policy measures at EUand MS level are consistent with two of the six priorities of the new Commission, namelythe “European Green Deal” and “Europe fit for the Digital Age”, confirming the continuityof the EC’s action in support of the energy transition.Scope of the studyThe study focuses on an overview of the European Commission’s digitalisation policies,on the assessment of ten selected use cases which can be enabled by further actionsremoving hampering factors, on the design of four policy scenarios depicting suchfurther actions and, finally, on a roadmap identifying timelines for both actions andimplementation.14 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketThe main questions that this study addresses are: why do we need digitalisation in theenergy sector, whether it is worth paying for it, and who shall pay for it. To respond tosuch questions, the study goes through five tasks, whose main objectives are to provide:1. A description of the most relevant future business cases in the energy sectorwhich are dependent on the digitalisation of the sector, identifying existingbarriers to their development;2. The design of four realistic scenarios for the digital transformation of the energysector by 2030;3. The evaluation of synergies among different policy making areas in view of awider “digitalised energy sector” and the regulatory challenges stemming fromthe rising need for cross-sectoral cooperation among different policy areas, atthe EC and MS level;4. The indication of a preferred policy scenario with actions to take and objectivesto be pursued;5. A comprehensive policy roadmap (2020-2025-2030)recommendations to implement the identified measures.andtherelatedPolicy ContextThe digitalisation of the power sector calls for a coherent policy making in the Energyand ICT domain, namely in the implementation of the Energy Union and the DigitalSingle Market (DSM) strategies. The implementation needs to ensure coherence anddevelop synergies, in order to create the most suitable conditions for consistent publicregulation and public/private investments on smart energy products and services acrossEurope. To this purpose, it is of paramount importance to apply consistency in theregulation of several cross-cutting issues – such as security, privacy, interoperability and also in all the sectors involved (Energy, ICT, Transport, etc.).The study analyses the relevant EU policies and investment programmes, with a focuson those bridging the Energy and Digital portfolios, and in line with the bond establishedby the new EC’s priorities between the “European Green Deal” and “Europe fit for theDigital Age”. On the policy side, the most notable are the Clean Energy Package, theFree Flow of non-personal Data Regulation, the Network and Information SystemsDirective (NIS Directive), the Cybersecurity Package, the General Data ProtectionRegulation (GDPR) and the New Deal for Consumers. On the investments side, the studytakes into consideration the information available on the new Multiannual FinancialFramework 2021-27.As a result, the study assesses the capacity of both public policies and investments tofacilitate the penetration in the Energy sector of Big data and data analytics, AI, IoT, 5Gand Blockchain. All of these are technologies with a significant potential to improveproductivity, efficiency, competition and sustainability in energy systems, to delivervalue to every segment of the power sector, and also to unlock opportunities for jobcreation.15 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketUse Cases AnalysisDigitalisation has a barrier-removing effect along the entire energy value chain. Toanalyse the opportunities that digital technologies can create for energy businesses andconsumers, ten use cases (UCs) relevant for the digitalisation of the power sector havebeen selected.The ten UCs span the entire energy value chain to capture the full potential ofdigitalisation. They cover the following areas: smart homes, digital customerengagement, wholesale energy markets, smart cities, digital power grids, smart EVcharging and digital power plants.The starting point of the UCs analysis is the identification of opportunities thatdigitalisation can unlock for customers and society more widely, resumed in thefollowing table for each UC.Use Cases1. On-siteoptimisationfor C&I andresidentialbuildings2. SmartDistricts3. EnergyAggregators4. CustomerDataAnalytics5. Smart EVChargingandChargingManagement6. UrbanDataPlatformsOpportunities for Customers Cost savings (bill reduction) Customers empowermentImprovement of buildings maintenancein terms of performance and costs(predictive maintenance, earlyidentification of faults)Opportunities for Society / EnergySystem Contribution to the EU energy efficiencytargets through enabling Nearly-ZeroEnergy Buildings Increase of energy system flexibility Improving distributed RES integrationSupport to EV integration Reduction of energy bills for finalusers Development of e-mobility thanks tothe increased availability of chargingstations at district level GHG emissions reduction due to theincrease of distributed generation fromRES Enhanced innovation push due to newforms of energy management solutionsImprovement of buildings maintenancein terms of performance and costsImproved life quality thanks to improveddistrict service availabilityValorisation of customers’ flexibility,enabling reduction of the energy bill Improved customer experience Cost savings (bill reduction)Familiarity with market dynamics andenergy efficiency programmes Lower balancing, energy and peak capacitycostsBetter RES integration Optimising (reducing) energy consumption Changing behaviour as a cost-effectiveway of cutting carbon emissions Energy cost savings (off-peakcharging) Additional revenue streams byproviding ancillary services to TSOsand local services to DSOs Backup power source & resilience Access to electric mobility via sharing Energy cost savings Avoidance of local grid issues Higher RES shares through betterintegration Provision of flexibility Access to integrated energy services Improved mobility services Lower taxes due to reduced bills forpublic energy consumption Efficient public lighting, wastemanagement, traffic monitoring, etc. Air quality monitoring and preventionactions Advanced traffic planning andmanagement (both public and privatetransport) Predictive maintenance on cityinfrastructures Security/safety planning and management16 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketOpportunities for CustomersOpportunities for Society / EnergySystem More consumers can activelyparticipate in the energy transition(e.g. tenants in a building, low-incomeor vulnerable household) Reduction of the energy bill Supporting RES development throughbetter access to financing and selfconsumption Possibility to address local grid issues Better allocation of RES support, towardsthe ones willing to pay for more local andgreen energy8. RESOriginTracking Choose the origin of the energy in aneasier and more transparent way Lower transaction costs Improved access to PPAs will support theacceptability and further development ofRES Cost saving because of administrativesimplification9. ImprovedO&M High efficiency (optimizingperformance while minimizingoperational costs) Lower costs for power plant start-ups Increased revenue through feweroutages Portfolio optimization Optimisation of transmission anddistribution grid management in terms ofavailability, reliability and flexibility Lower carbon emissions from power plantsthanks to improvement in theirperformance10.FlexibilityMarketPlatforms Valorisation of customers’ flexibility Lower grid charges through bettercoordination between TSOs and DSOsand better resource planning for(local) congestion management Better resource planning throughcoordination and local congestionmanagement, reducing overall system cost More efficient RES integration, throughlocal price signalsUse Cases7. EnergyCommunitiesFor each UC, the study identifies key issues by analysing major Business Models (BM)through a technical, market and regulatory feasibility assessment. Such key issues,listed in the table below, highlight market and regulatory barriers that need to beaddressed via targeted policy actions (or in some cases, they have already beenaddressed, though partially).Use Cases1. On-site optimisation forC&I and ResidentialbuildingsBusiness ModelsBuilding Energy Management(BEM)Home Energy Management(HEM)Key Issues1. Customer privacy and dataprotection2. Cybersecurity of ICT products3. Interoperability betweenconnected devices4. Lack of customer engagement1. Role of prosumers2. Smart DistrictsPositive Energy District (PED)2. Interoperability betweenconnected devices (IoT)3. Detachment from EU incentives?1. Difficult market access byindependent aggregators3. Energy AggregatorsAggregator SupplierIndependent Aggregator2. Limited access to consumption andproduction data3. Limited or uncertain marketpotential and difficulty to stackrevenues4. Prequalification & product designrequirements17 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketUse Cases4. Customer Data AnalyticsBusiness ModelsB2C Customer engagementsolutionsB2B Customer engagementsolutionsKey Issues1. Customer privacy and dataprotection2. Cybersecurity of ICT products3. Data monetization4. Lack of customer engagement1. Lack of certification for powerquality and standardisation for V2G5. Smart EV charging andcharging managementV1G' Smart ChargingV2G or V2X' Smart Charging2. Customer acceptance of EVs,smart charging and car sharing3. Double taxes, levies and networkcharges for storage4. Absence of e-roaming & charginginteroperability1. Customer privacy and dataprotection6. Urban Data PlatformsVertical Platform2. Cybersecurity of ICT productsHorizontal Platform3. Interoperability betweenconnected devices (IoT)4. Lack of business models on dataaccess1. Sharing of consumption andproduction data jeopardizing thecontractual relationship of P2Ptrading business models7. Energy CommunitiesPeer-to-Peer (P2P) tradingCollective self-consumption2. Dependence of collective selfconsumption business models onbehind the meter advantages3. Definition of community’s selfconsumption when not everyonejoins the community8. RES Origin TrackingSmart PPAsAPM-Digital Power Grid9. Improved O&MAPM-Digital Power PlantPlatform-as-a-Service1. Acceptance & sustainability ofblockchain technology1. Drone use regulations andconstraints created by their limitation2. Risk of cyberattacks and threats toa digitised energy criticalinfrastructure3. Need for APIs and interoperabilitystandards for integrated platforms10. Flexibility MarketPlatformsGrid congestion managementplatformSingle platform for energytrading and ancillary services1. Low incentive for DSOs to procuremarket-based flexibility services2. Insufficient TSO-DSO-Marketcoordination in the procurement offlexibility services3. Absence of products reflecting“local” needsIn addition, for each UC, specific cases developed in nine selected EU countries arepresented to illustrate the existing business models and the current issues for their fulldevelopment.18 / October 2019

Assessment and roadmap for the digital transformation of the energy sectortowards an innovative internal energy marketPolicy ScenariosThe study proposes targeted policy actions which tackle the most relevant and recurringkey issues identified in the UCs analysis. The study considers various levels ofintervention (legislative, regulatory, non-legislative measures) and levels of governance(EU, MS and industry). Key issues are grouped into four policy areas of intervention withthe greatest potential to foster the digital transformation of the power sector: Flexibilityservices at the distribution level, Privacy and Data Protection, Cybersecurity,Interoperability and Standardisation.The combination of the suggested policy actions defines the four policy scenarios for thedigital transformation of the energy sector, namely the Business As Usual (BAU),Consistent Governance (CG), Reinforced Legislation (RL) and Active Digitalisation Policy(ADP) scenarios. For each scenario, the study identifies specific timelines (2020, 2025,2030) for implementing the proposed measures.The Business As Usual scenario foresees the full implementation of the already adoptedprovisions under the Energy Union and the Digital Single Market strategy, i.e. CleanEnergy Package, GDPR, Free Flow of Data, Cybersecurity Package, NIS Directive andNew Deal for Consumers.The Consistent Governance scenario envisages the adoption of targeted policy actionsaddressing the key issues identified in the UCs analysis and aiming to safeguardconsistency between different areas of sectoral regulation. This scenario entailstechnical and timely measures as well as binding guidelines and implementing acts tobe made, mostly at the MS level, to accelerate the digitalisation strategy designed bythe Commission. In this scenario, the Commission shall oversee the process and ensurehomogeneous application of the current Directives and Regulations, by best practicessharing among NRAs and main market actors.The Reinforced Legislation scenario foresees the adoption of additional regulatorymeasures to fully overcome the key issues, requiring an additional effort to the EuropeanCommission. To inform this additional effort, the scenario suggests new legislativeprovisions which will address potential future changes in the market design andoperations brought by P2P and VPP and on the ground of already well-established andmature regulatory frameworks for the integration of resources connected at thedistribution level.The Active Digitalisation Policy scenario incorporates the investments foreseen for 20212027 in the next EU budget which will have a direct impact on the key issues strictlyrelated to energy infrastructure and digital technologies. The study proposes the ActiveDig

Force. The purpose of the review was to provide candid and critical . HVAC Heat Ventilation Air Conditioning . Assessment and roadmap for the digital transformation of the energy sector . NECP National Ene