• Germany
  • Utility Transformations
  • Utility Transformations
  • Policy Regulation
  • Smart Meters
  • Europe

Unraveling Germany’s Smart Meter Strategy

Michael Kelly
Nov 04, 2016

Power Line Test Equipment

With smart meters quickly becoming the norm for grid operators and utilities, Germany presents an interesting case study given the country’s hesitance to adopt this smart grid technology. Western Europe has distinguished itself as one of the global leaders in smart meter deployments. Buoyed by nationwide deployments from countries like France, Italy, Sweden, Spain, and the United Kingdom, the region is quickly advancing the business case for smart meter technologies. While many of the most affluent nations within Western Europe have initiated large volume deployments already, Germany has been largely hesitant to jump on the bandwagon.

This changed in July 2016, as legislation was passed that will kick-start smart meter activity within the country, though careful attention must be paid to the details, as this rollout deviates significantly from traditional deployment strategies seen elsewhere in the region. According to the recently enacted Digitisation of the Energy Turnaround Act, Germany’s smart meter rollout is finally set to commence. Years in the making, the country’s approach is unique given its selective deployment and tiered installation schedule.

Starting in 2017, large consumers with average annual consumption in excess of 10,000 kWh will be required to install smart meters. This threshold will be lowered to 6,000 in kWh in 2020, which applies to approximately 15% of electricity consumers. The majority of German households will remain unaffected given that average consumption hovers around 3,500 kWh. For households where smart meters are not required, utilities will still maintain the option to supply this technology to its customers, though the meters are subject to a cost price cap of 40 euros per year. While the overall program is set to last until 2032, some types of consumers and operators will be required to have rollouts finished before the end of 2024.

A Considered Approach

This resolution is long-awaited as Germany has struggled to justify the need for smart meters. In the summer of 2013, Germany’s Federal Ministry for Economics and Technology contracted with Ernst & Young to perform a cost-benefit analysis relating to a nationwide deployment of smart meters by 2020, in line with European Commission target deadlines. The study concluded that such a mandate was not economically beneficial and instead recommended a selective rollout similar to the country’s aforementioned strategy. While industry advocates may view Germany as dragging its feet on the issue, the country is taking its time to carefully study the implications of installing smart meters in a country with over 50 million households and businesses.

One of the benefits to this approach is the availability of more technologically advanced smart meters on the market today relative to the more primitive smart meters installed in Italy and some of the Nordic countries during earlier rollouts. Given the typically shorter lifespan of smart meters relative to traditional electromechanical meters, some of these European countries are already expected to be looking at upgrades or replacement units in the coming decade. While many in the industry have long touted the benefits of smart meters, Germany is taking a responsible approach in studying the overall implications and has a clear and rational basis for delaying nationwide implementation.