Pier Nabuurs, Chairman Smart Energy Collective, ex-CEO KEMA, on how to go forward with liberalisation and smart grids

"My smart meter should belong to me, not to the network company"

Pier Nabuurs, retired CEO of the prestigious Dutch energy consultancy KEMA, Chairman of the Smart Energy Collective in the Netherlands and former President of the European Technology Platform Smart Grids, is concerned that anti-market sentiments could derail the liberalisation of the European energy market. That would be a disaster, he says. 'The transition to a low-carbon economy needs a free, competitive energy market.' Nabuurs is dismayed that the European Commission has put responsibility for the development of smart grids into the hands of the network companies. 'We need to involve a wide range of different companies to build the platform that will launch innovation in the energy market.'

Pier Nabuurs: 'Europe is going to roll out smart meters, but nobody knows what we want to do with them'

The liberalisation of the European energy market, one of the great projects of the EU, is running into strong headwinds these days. Analysts complain that the liberalisation has not brought any benefits to consumers. For example, a recent French study concluded that the liberalisation of electricity markets in the EU has not had an effect on prices. Earlier, the Oxford Institute for Energy Studies (OIES) published a strong indictment of UK energy policy, generally viewed as the model of energy liberalisation for the rest of Europe.

Meanwhile policymakers in Brussels are frustrated at what they view as the lack of competition and innovation in the energy market. Energy companies ‘don't seem to be too eager to compete’, said Philip Lowe, Director-General Energy at the European Commission, in an interview with European Energy Review earlier this year. ‘They are focused more on regulations than on their customers.’ Lowe said the energy sector ‘is still in the dark ages when it comes to satisfying consumers.’

For their part energy companies complain that politicians keep interfering in the market. ‘We have been seeing many different interventions by the State – new taxes, new regulations – and changing every quarter’, Fulvio Conti, CEO of Italian energy company Enel and President of industry association Eurelectric, said in an interview with EER. He warned that the European energy sector threatened to become ‘uninvestable’.

Pier Nabuurs, although optimistic by nature, is concerned by the criticisms he hears of the liberalisation project. ‘The transition from state control to a free market takes 30, 40 years’, he notes. ‘We are barely halfway. You cannot judge liberalisation on the basis of short-term effects.’ He believes much of the opposition to liberalisation is ideological. ‘Some people find it difficult to accept that electricity could be part of the free market. But oil and coal have traditionally been distributed freely. It’s only when we started using coal to produce electricity, that we put it under control of the state. The same for gas that was used in power plants. But there is no good reason why electricity can’t be subject to a competitive market.’

Inefficiencies

Nabuurs, who as CEO of KEMA was intimately involved in many free market transitions that were made in recent years in the new EU member states, does not agree with the claim that liberalisation has not benefited consumers. ‘Eurelectric did a study in 2005 that showed that energy prices had gone down considerably after liberalisation. But at the start of this century they started rising again as a result of higher commodity prices and higher taxes.’ (Editor’s note – this is confirmed roughly by the French study.) Nabuurs is convinced that without liberalisation, costs would have been higher than they are now. ‘There were a lot of inefficiencies in the old system. But they were hidden from the public’s view.’

The most important benefit of competition, however, says Nabuurs, is not lower prices, but more innovation. ‘Which is desperately needed to make possible the transition to a low-carbon energy

'There were a lot of inefficiencies in the old system, but they were hidden from the public's view'
system’, he adds. ‘If Alexander Graham Bell rose up from his grave, he would be astounded by how telephony has developed. If Thomas Edison came back to life, the energy system would look quite familiar to him. Energy companies have innovated very little, for the simple reason that they did not have to. They did not have any competition.’

Even now, when the market is liberalised, the sector is still stuck in old routines. Nabuurs agrees with Philip Lowe that most energy companies are not doing enough to make the market work. ‘Why can’t I sell my power to my neighbor? Why should I sell power to the same guy from whom I buy it? You don’t do that with your car.’ In the past five years, says Nabuurs, the energy market has shown very little development. ‘Where are the tools, the apps, that give the energy users new possibilities to tap into the energy market, to adjust their use to price incentives? For example, tools that will stimulate people to put solar panels on their roofs?’

He notes that consumers ‘are not at all tuned in to a free energy market – no wonder, if you consider that all the information get is one invoice a year! And that’s usually so complicated no one understands it.’ Nabuurs has this idea that energy applications should be feminized. ‘Women are important deciders at home. But they have no affinity with energy. So maybe energy companies should develop feminized user-interfaces. It’s just an example of what could be done, but I don’t see anything happening along those lines.’

Serious mistake

One innovation that is crucially needed to shake up the energy market and enable the transition to a low-carbon energy system, says Nabuurs, is the roll-out of the smart grid. In this respect he is less happy with the contribution of the European Commission. He was until recently president of the EU-supported European Platform SmartGrids (www.smartgrids.eu), but he left because he disagreed with the approach taken by Brussels. ‘The problem is that with the European Grid Initiative the Commission has put responsibility for the development of the smart grids into the hands of the network companies. I don’t think that’s a good idea. For the development of a new energy system that includes decentralised generation and trading you need to involved other companies as well, such as technology providers, service companies and utilities. Grid companies are not suited by their nature to be leading in this.’

Nabuurs thinks it would be a serious mistake if the network companies are given ownership and

'Energy companies have innovated very little, for the simple reason that they did not have to'
control of smart meters. ‘You have to leave this to the free market. My smart meter should belong to me, not to the network company. All they will do is just change the meter from electro-mechanically to electronically driven with remote reading. They will manage to block a lot of other innovations.’ He also notes that ‘we should not add anything to the regulated part of the system when it is not needed’.

What is currently happening, he says, is that ‘Europe is going to roll out smart meters, but nobody knows what we want to do with them.’ He gives an example. ‘What should be the frequency at which energy use is measured? Once every hour? But if you don’t measure continuously, you will never notice that the boiler under the sink turns itself on every time the temperature dips below 65 degrees when you are on holiday. This takes just a few seconds, but it costs a lot of energy.’

He firmly rejects the notion that smart meters will be connected to a big database controlled by the network company. ‘No way this is going to happen. It flies in the face of privacy rules. And consumers will not accept it. The company needs to be able to produce invoices, yes, but that’s all. They’re not going to turn my washing machine off or on. I will decide that for myself! When I see that the wind is blowing hard, I will turn the machine on. I should be given information based on which I can make my own decisions, with the help of automated systems of course.’

Way forward

Nabuurs believes the way to go forward is to bring together a diverse range of companies that will decide together what the smart grid “platform” will look like. Now he is Chairman of the Smart Energy Collective, a new Dutch group that is doing just that: bringing together companies from different sectors, ranging from energy companies to consumer electronics and software companies, who are discussing the architecture of the future smart grid, so that they will all be able to tap into it and develop applications. ‘This is how it was done in mobile telecommunications’, says Nabuurs, who worked for Philips and Océ before he joined KEMA. ‘This is also what I wanted to do at a European scale, but there was too much resistance to that in Brussels.’

Thomas Edison experimenting in his laboratory
(photo: Operation Motivation)
The Smart Energy Collective, which includes companies like Philips, Essent, ABB, Siemens, Miele, APX Endex, NXP and Gasunie, now has five pilot locations where projects are being developed. ‘You can only do this together, he says. ‘We are talking about a systems change. You have to involve a lot of different parties. Don’t forget that around 1990 we had a similar problem with the internet. We didn’t know what it could be used for. It was not clear at all where it would go! My wife wondered at the time why I wanted a faster internet connection. It was the free market that found applications.’

In addition to smart grids, what the European electricity market needs, says Nabuurs, is more interconnections. ‘To create a true European market, with a large share of intermittent renewable energy, large investments must be made in the infrastructure.’ Although the need for these investments is widely acknowledged, including by the European Commission, Nabuurs is not completely convinced that they will actually happen. The incumbent energy companies, he notes, do not necessarily have an interest in expanding interconnections, since they want to protect their local markets – although he also sees exceptions.

In addition, he notes that national governments are all ‘pursuing their own agendas. Each country has its own priorities, and they change regularly. Whenever there is uncertainty in the market, politicians can’t resist the temptation to interfere. It’s natural that there are economic rules of course, but this is straightforward political interference. That is hindering the development of a truly free market.’

Extreme weather

Nabuurs notes that ‘there is a risk that the entire liberalisation project will fail. A lot of people are stepping on the brakes. That would be a disaster.’ He is convinced the transition to a low-carbon economy requires a free market. It is up to policymakers to make it clear to the public where the energy

'Consumers are not at all tuned in to a free energy market - no wonder, if you consider that they get an invoice once a year'
future is headed and what it takes to get there. ‘We know that we are moving towards renewables. Falteringly perhaps, but it’s made inevitable by climate change. It costs money but that’s a pill we have to swallow. We did it in the Netherlands when we built the Delta Works. We have to do it again now. Some people are still in denial. But look around you. There are more and more extreme weather events. Something is happening to the climate. And 90% of the scientists tell us it is caused by humans. People that deny this probably just don’t want to swallow that pill.’

He finds it difficult to understand that energy companies still want to build coal-fired power plants, when it is clear that a low-carbon transition is waiting. ‘I would not build a coal-fired power plant now if I were an energy company. It is an investment for 30 years or more. You know that the efficiency of coal-fired power plants cannot be improved anymore. But costs of coal and other commodities will go up with inflation. Renewable technologies, on the other hand, are still at a much earlier stage in the learning curve, especially solar power. There will come a point when solar power will be cheaper than coal-fired power. Then you are stuck with your coal-fired power plant. And you probably have to equip it with CCS as well. So why not spend the money on pushing down the cost of renewables and be the first one to make money on this? Although it seems China is solving this issue already.’

He believes that American author Jeremy Rifkin was right when he said in 2007 that the economic crisis and the energy crisis and the climate crisis are one and the same. ‘We need to start doing things differently. It’s not about the future of the economy, but the economy of the future.’

 

Who is Pier Nabuurs?

Pier Nabuurs (pier@nabuurs.be) is one of the best known energy experts in the Netherlands. He studied electrical engineering and graduated in telecommunications from Eindhoven Technical University. During many years he held jobs in the management of R&D at Philips and Océ. For the latter he became responsible for managing the global purchasing and the supply chain.

After that he was CEO of Océ-Belgium and Executive Director of the Strategic Business Unit Document Printing, including the responsibility for the product development program. In January 2002 he became CEO of KEMA, an international company specialized in advanced technical energy consultancy and R&D, inspection, testing and certification.

Nabuurs is involved in many discussions on energy systems of the future. He was member of the Dutch Task Force Energy Transition and Chairman of the European Technology Platform Smart Grids.

Currently he holds memberships in Boards of companies and governmental organizations and is independent advisor for many companies on technology and innovation related subjects. He is Chairman of the Steering Committee of the Smart Energy Collective in the Netherlands.