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1、May 2023Powering decarbonisation through technology investmentSmarter G Grids powering decarbonisation through technology investment2 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliate
2、d with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Foreword03Executive summary0408IntroductionPart 1:Smart grid technology121.What makes a grid smart?122.Strategy and implementation20Part 2:Case studies:Markets and regulations enabling smart grid inv
3、estment221.China Vertically integrated electricity market232.United Kingdom Liberalised electricity market303.United States Hybrid electricity market 36Key considerations for stakeholders44Conclusion47References4854About KPMG China56Acknowledgments57Guide to abbreviationsForewordWei LinPartner,Head
4、of Environmental,Social and GovernanceKPMG ChinaEbele Angela OnyeaboAssociate Director,Climate and Sustainability KPMG ChinaAngus ChoiPartner,ESG AdvisoryKPMG ChinaEnergy transition is a critical imperative facing countries as they chart a course towards actualising their net zero ambitions.In the s
5、hort term,energy security continues to be an important issue amid an inflationary economy and ongoing geopolitical uncertainties.In the medium to long term,countries need to address the energy trilemma of security,affordability and sustainability.Energy independence and the need to decarbonise the e
6、conomy by transitioning from fossil fuels is a key policy and business opportunity driver.Many countries not only have strategic roadmaps for expanding renewable energy generation,but they are also charting pathways for alternate energy options including green hydrogen and energy storage.These chang
7、es have contributed to the renewed urgency to strengthen the grid.Reducing the carbon intensity of electricity generation and consumption requires additional action beyond renewable energy integration.The introduction of advanced technologies allows the grid to run more efficiently.Improved efficien
8、cy means less electricity is deployed towards satisfying the same energy demand profile.This in turn leads to emission reduction from power generation.The integration of smart technologies into the grid system,such as artificial intelligence-based data aggregation,is at the core of smart demand-side
9、 management and power decentralisation.The electric power industry is now catching up to the level of digital transformation that has permeated the communications industry due to the integration of advanced communication systems into the grid.This technology forms the bedrock of the smart grid revol
10、ution,allowing the grid to adapt quickly to the growing diversity and disparity in the energy mix across continents.Billions of dollars are being invested in smart electricity grids,including in the research and development of smart grid technology.The expansion of renewable energy(RE)assets is intr
11、icately linked to the growth of smart grids investment across the globe.In 2022,China accelerated smart grid investment with the State Grid Corporation of China(SGCC),budgeting more than RMB500 billion for ultra-high-voltage projects,increasing the digitisation of its grids and upgrading the distrib
12、ution networks ability to cope with Chinas RE expansion.This report examines smart grid technology through the lens of deployment strategy,carbon reduction,investment and policy.We hope it provides you with valuable insights and we welcome the opportunity to discuss our findings further.Smarter Grid
13、s powering decarbonisation through technology investment3 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guara
14、ntee.All rights reserved.ForewordExecutive summaryIntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionReferencesAbbreviationsAbout KPMG ChinaAcknowledgmentsExecutive summaryDigitisation,decarbonisation and decentralisation are three core benefits of a smart grid
15、.Through advanced artificial intelligence(AI)and cloud technology,a smart grid can enable the bidirectional flow of energy and communication,which helps to promote energy efficiency through enhanced precision in balancing electricity demand and supply,as well as the integration of decentralised ener
16、gy sources.The combination of these three core benefits ultimately accelerates the decarbonisation of the electric power sector.This report analyses how smart grid technology enhances the operational and energy efficiency of the grid and better integrates renewable energy(RE),resulting in a signific
17、ant reduction in emissions.This report evaluates smart grid technologies,the policies that support its implementation and the investments incentivised by these enabling policies.By focusing on investment flows through country-level case studies,the report analyses how the energy market structure of
18、the UK,China and the US representing liberalised,vertically integrated andhybrid electricity markets respectively impact thedepth,scalability and adaptability of smart technologyinto various aspects of the grid.This analysis is madetaking into account countries electric power regulatorystructure,nat
19、ional decarbonisation goals and historicemission trajectory.Smarter Grids powering decarbonisation through technology investment4 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated wi
20、th KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesForewordExecutive summarySmart grids are revolutionising th
21、e power sector,enabling better operational efficiency and integration of distributed energy resources(DER).Electricity consumers have more autonomy because of smart meters,photovoltaics(PV),vehicle to grid(V2G)and microgrids.The focus of energy savings and grid efficiency continues to shift from con
22、sumer power saving and behavior modification to an AI and data-enabled grid demand response.The advancement of the Internet of Things(IoTs)and blockchain are shaping the evolution of smart grid technology.Digital transformation in the electricity sector is currently being driven by a number of facto
23、rs such as rapidly expanding electricity demand,the maturity of advanced technology and a desire to fortify the grid against cyberattacks and physical damage.Climate change and the associated need to efficiently incorporate more RE into the energy mix has also provided momentum.Smart grids integrate
24、 digital and cyber infrastructure to enhance the performance of the systems sensory,communication,data management and security functions.The ultimate goal in implementing such systems is to ensure a more efficient,green,resilient,clean,affordable and reliable grid.Consumers increasingly have access
25、to more information about their energy use and sources.This information enables them save energy and contribute to energy efficiency.Consumers can also generate additional revenue by participating in electricity supply as“prosumers”.This flexibility is especially important for industrial consumers,w
26、ho are levied with increasing emission costs and taxes,and are exploring pathways to reduce the carbon intensity of their production processes.The advancement of RE integration through PVs,battery energy storage systems(BESS)and microgrid technology provides a clear path towards reducing the carbon
27、intensity of industrial processes.Studies show that population growth in various markets across the globe is causing electricity demand to continue to trend upwards.This in turn has an impact on the ability for jurisdictions to strive towards climate change goals.While energy transition remains the
28、primary goal,energy efficiency has been identified as a significant source of potential emissions reduction in the power sector.The International Energy Agency(IEA)projects that countries with well-developed policies that support energy efficiency in grids could save up to 15%of their total electric
29、ity generation.1 Smart grids are increasingly improving operational efficiency through enhanced precision in Demand Side Management(DSM).Intergovernmental alliances and innovation institutes such as the International Smart Grid Action Network(ISGAN),are working to develop technology that enhances th
30、e consumer experience and bridges the communication gaps between energy supply and demand.However,technology segregation remains an issue.As this technology matures,public entities,consumers and third parties will have increased capabilities to interact with the grid.The integration of IoT in areas
31、such as V2G and microgrids enables peer-to-peer trading of electricity(prosumerism).Digital enhancements in remote lighting,heating and cooling in places like malls,airports and even homes,will also help to cut down emissions and provide more consumption data that is essential to DSM.Key observation
32、s from our study include:Smarter Grids powering decarbonisation through technology investment5 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a pri
33、vate English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordThere are differences in the scalability and depth of smart grid tech
34、nologies being deployed in various markets.COVID-19 impacted investment in grid infrastructure and smart metersFor example,Chinas vertically integrated electricity market enhances its ability to carry out piloting and testing in designated controlled zones and upscale the implementation of advanced
35、transmission and distribution(T&D)technology.As a result,we see Chinas UHVDC T&D projects expanding even beyond its borders.In markets like the UK and US,competition is driving technology innovators to develop more and more advanced digital grid products.In contrast,less competition in markets that
36、are more vertically integrated can impact the depth of technological advancement in those markets.The impacts of COVID-19 rippled through every aspect of the global economy and the electric power industry was no exception.Lockdowns caused supply chain issues that impacted the viability of new projec
37、ts and the pace of existing ones.As parallels are drawn between this and the investment downturn in smart grids,it is also acknowledged that investment in this infrastructure is long-term,and the structures have an average life span of above 30 years.This indicates that there will be peaks and valle
38、ys in the grid investment trajectory.Smart grids,which are typically funded by governments,institutional investors and other private investors,are increasingly benefitting from sustainable finance and carbon reduction regulations.Smart grid investment has thrived in liberalised,hybrid and vertically
39、 integrated electricity markets,however market features impact growth in certain aspects of the grid.In 2021,climate-tech companies raised a total of$165 billion from global public equity markets and private investors.2 The market size for smart grid technology in 2021 was$36.9 billion and projected
40、 to hit$55.9 billion by 2026.3 Green and sustainable finance has become a major channel for raising capital for smart grids.For instance,in 2021,carbon neutral bonds issued by State Grid Corporation of China(SGCC)raised RMB15 billion to help finance smart grids projects.4 SGCC also issues sustainabi
41、lity-linked bonds to source working capital for the repair and maintenance of transmission lines,as well as the management of the grid system.5 Corporates,policymakers,financial institutions and utilities all have a collective role to play in ensuring the development and scaling of digitised,efficie
42、nt,low-carbon grids.Investment in grid technology is tied to broad national strategic decarbonisation goals and access to finance.The highest levels of grid investment,advancement in grid technology and deployment of grid infrastructure currently exist in the UK(and generally across Europe),the US a
43、nd China.However,electricity market features can cause several aspects of the grid to advance faster than others.For instance,China has invested significantly in ultra high voltage(UHV)transmission lines that span longer distances and integrate more RE,while markets like the UK promote consumers fle
44、xibility in supplier choice,enabling the wide deployment of smart meters.In the US,cutting-edge innovation driven by competition has helped to advance remote heating,ventilation,and air-conditioning(HVAC)systems.Smarter Grids powering decarbonisation through technology investment6 2023 KPMG Advisory
45、(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey co
46、nsiderations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesForewordExecutive summarySmarter Grids powering decarbonisation through technology investment7 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG glo
47、bal organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesE
48、xecutive summaryForewordIntroductionSmart grid technology enhances the operational efficiency of the grid and its ability to transmit energy with minimal loss.When developed and scaled,smart grids help address four main challenges facing the power sector:modernisation,decarbonisation,digitisation an
49、d electrification.Angus ChoiPartner,ESG Advisory,KPMG ChinaBackgroundElectricity generation is the largest source of energy-related carbon emissions,accounting for 36%of global emissions.6 These numbers are expected to rise further with the electrification(including hydrogen production)of hard-to-ab
50、ate industries,such as shipping,aviation,cement and steel,if cleaner electricity sources are not used.As a result,electricity grids are being upgraded and infused with digital infrastructure that enhances the efficiency,affordability and reliability of electricity.The global effort to address climat
51、e change has accelerated the urgency of this transformation.Improving the energy efficiency of grids has been identified as a large potential source of emissions reduction for the power sector.According to IEA figures,total energy losses across global grid infrastructure led to the emission of aroun
52、d 1 gigaton of carbon dioxide in 2018.7 An analysis of nine large markets,including China,the EU and the US,reveals how improved energy efficiency standards helped to save about 1,500 TWh of electricity in 2018,equivalent to that years total generation of wind and solar power in those markets.8 This
53、 not only highlights the extent of energy loss that occurs throughout the generation and transmission process;it also shows the ability of advanced grid technology to mitigate these losses.Smarter Grids powering decarbonisation through technology investment8 2023 KPMG Advisory(Hong Kong)Limited,a Ho
54、ng Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Smart grid technologyCase studiesKey considerations for stakeholdersConclu
55、sionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesForewordIntroductionExecutive summaryFunding smart grids Expanding energy efficiency requires a functional synergy between policymakers,financial institutions,electric utility companies,grid technology innovators and consumers.Over the years,
56、there has been substantial growth in smart grid investment,driven by the development of ecosystems that connect climate-tech companies with grid operators,utility companies,governments and sustainable finance with the goal Figure 1:Smart grid technology market size worldwide,2021-2026(forecasted)Sou
57、rce:Statista110202140.143.651.455.920222023(est.)2024(est.)2025(est.)2026(est.)0Market size in bilion U.S.dollars47.336.9of incentivising grid investment.In 2021,climate-tech companies raised a total of$165 billion from global public equity markets and private investors.9 The market size
58、for smart grid technology in 2021 was$36.9 billion and projected to hit$55.9 billion by 2026.10 Part 1 of this report examines the primary smart grid technology available and outlines the considerations for developing an effective implementation strategy.Smarter Grids powering decarbonisation throug
59、h technology investment9 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Introduc
60、tionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordAnalysing smart grids in three key markets This report assesses the global smart grid outlook from the perspective of three case studies:Ch
61、ina,the UK and the US.These three markets combined make up a substantial portion of the global investment in electricity grids(see Figure 2 below).They also represent the three major forms of electricity markets,Smart grids,smart policies Across global markets,policies are being developed to incenti
62、vise smart grid investment and supporting technological advancement.The operational efficacy of the grid is based situation specific issues such as,the age of existing infrastructure,energy mix,national climate goals,tariffs,and energy security,as well as the overall organisation of the electricity
63、market.The challenge for regulators is to develop policies that balance energy security priorities,while incentivising smart grid investment and advancing net zero targets.These policies,as explored in the three case studies,are discussed in Part 2 of this report.billion USD(2020)United StatesEurope
64、ChinaRest of the worldEmerging markets and developing economiesSource:IEA12Notes:Values for 2021 are estimatesFigure 2:Investment spending in electricity networks by region,300400200namely liberalised,vertically integrated and hybrid respectively,that can impact
65、the manner,direction and pace of policy and investments.The innovation,policy and implementation journeys in these markets are generally applicable to similar electricity markets in other jurisdictions.Smarter Grids powering decarbonisation through technology investment10 2023 KPMG Advisory(Hong Kon
66、g)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Smart grid technologyCase studiesKey considerations for stak
67、eholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesForewordIntroductionExecutive summarySmart grids,smart partnershipsTo create application synergies,policies related to smart grids are typically developed in consultation with relevant research institutes that support the develo
68、pment,validation and roll out of smart grid technology.These include the IEAs International Smart Grid Action Network(ISGAN),the National Institute of Standards and Technology(NIST),the Institute of Electrical and Electronics Engineers(IEEE),GridWise Alliance and the European Research Infrastructure
69、 supporting Smart Grid(ERIGrid).These research centres accelerate innovation by providing a repository of cutting-edge research and a technological coalition of several stakeholders.Meanwhile,in the US,advocacy groups such as the GridWise Alliance draft policy principles that form the basis for iden
70、tifying,exploring and developing new policies at every tier of government.The group also lobbies the US Congress to boost smart grid investment.13 In the EU,ERIGrid has created a holistic,cyber-physical systems-based approach through a coalition of 18 European research centres that develop common me
71、thods,concepts,and procedures for validating and testing smart grid configurations.14Smarter Grids powering decarbonisation through technology investment11 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent
72、member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordFigure 3
73、:Types of smart grid technologyTechnologyHardwareSystems and softwareEnabler:Internet of Things(IoT)technologyIoTs are primarily physical objects(or groups of such objects)with sensors,processing ability,software,and other technologies that connect and exchange data with other devices and systems ov
74、er the internet or other communications networks.IoT-enabling technologies are typically digital processes,computation methods,or systems that enhance system operation,improve business value,and accelerate technology adoption.Wide-area monitoring and controlPhasor measurement units(PMU)and other sen
75、sor equipmentSupervisory control and data acquisition(SCADA),wide-area monitoring systems(WAMS),wide-area adaptive protection,control and automation(WAAPCA),wide-area situational awareness(WASA)Information and communication technology integrationCommunication equipment(Power line carrier,WIMAX,LTE,R
76、F mesh network,cellular,),routers,relays,switches,gateways,computers(servers)Enterprise resource planning software(ERP),customer information system(CIS)Renewable and distributed generation integrationPower conditioning equipment for bulk power and grid support,communication and control hardware for
77、generation and enabling storage technologyEnergy management system(EMS),distribution management system(DMS),SCADA,geographic Information system(GIS),Distributed Energy Resource Management Systems(DERMS)Transmission enhancementSuperconductors,FACTS,UHVDCNetwork stability analysis,automatic recovery s
78、ystemsDistribution grid managementAutomated re-closers,switches,breakers and capacitors,remote controlled distributed generation and storage,transformer sensors,wire and cable sensors,hardware(servers,storage etc)for Operational Technology(OT)deploymentGeographic information system(GIS),distribution
79、 management system(DMS),outage management system(OMS),workforce management system(WMS)Advanced metering infrastructureElectric vehicle charging infrastructureSmart meter,in-home displays,servers,relaysCharging infrastructure,batteries,invertersMeter data management system(MDMS)Energy billing,smart g
80、rid-to-vehicle charging(G2V)and discharging vehicle-to-grid(V2G)methodologiesCustomer-side systemsSmart appliances,routers,in-home display,building automation systems,thermal accumulators,smart thermostatEnergy dashboards,energy management systems,energy applications for smart phones and tablets Sou
81、rce:IEA15,KPMG AnalysisSmart grid technologyPart 1What makes a grid smart?Making grids smarter entails the systematic integration of advanced software and hardware technology into an electricity network across the value chain that digitises the monitoring,balancing,decentralisation and the bi-direct
82、ional flow of information and energy.It also includes AI-enabled security,resilience and repair as well as consumer autonomy,transparency and overall energy efficiency.Smarter Grids powering decarbonisation through technology investment12 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited
83、liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Case studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowle
84、dgmentsReferencesExecutive summaryForewordIntroductionSmart grid technologyFigure 4:Smart grid technology areas across the electricity value chain GenerationTransmissionDistributionControl CentreIndustrialResidentialWide-Area Monitoring&ControlInformation&CommunicationTechnologies(ICT)IntegrationRen
85、ewable&Distributed Generation IntegrationTransmission Enhancement ApplicationsDistribution Grid ManagementAdvanced Metering InfrastructureEV Charging InfrastructureCustomer-side Systems(CS)Battery Energy Storage Systems(BESS)Source:IEA16,KPMG ChinaSource:KPMG ChinaSmart grid technology focus areasTh
86、e goal of the digital enhancement of the grid is to achieve operational efficiency,minimise costs and environmental impacts while maximising system reliability,resilience,visibility,flexibility and stability.17 This report identifies four core smart grid objectives in relation to three technology fo
87、cus areas.Figure 5:Four core objectives and three key technology focus areas for smart gridsFour core objectivesThree key technology areasOperationsResilience&repairConsumer control&transparencyDecarbonisationOperational efficiency/energy efficiencyCyber security and digital twinSmart meters,prosume
88、rs and data utilisationIntegrating intermittent renewable energyIntegration of renewable energyData managementResilience and repairSmarter Grids powering decarbonisation through technology investment13 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm o
89、f the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgme
90、ntsReferencesExecutive summaryForewordPower loss along long-distance transmission and a lack of sufficient energy storage systems(ESS)to reduce load cycles are key challenges faced by the industry.The International Energy Agency estimates that total energy losses across global grid infrastructure le
91、d to 1 gigaton of carbon dioxide emissions in 2018.Legacy distribution grids(LDGs)typically struggle to accommodate the long-distance transmission of energy from DERs.Typical LDGs cables could cause a significant amount of power loss,occurring in the form of heat across the line.Integration of Renew
92、able EnergyThe International Energy Outlook projects that electricity consumption in non-OECD countries will increase by up to 70%between 2018 and 2050;signifying an upward trend in global electricity demand.18 RE has been increasingly deployed towards meeting this demand.Global solar and wind energ
93、y penetration is projected to increase from 2,300TWh in 2019 to 45,000TWh by 2050.19 To cope with the exponential growth in electricity demand from conventional and RE sources,technology is improving the ability of the grid to integrate large scale intermittent RE.Enhancing the integration of distri
94、buted energy resources(DER),primarily RE,is a major grid target.A Distributed Energy Resource Management System(DERMS)connects individual DERs and helps to optimise and aggregate their operations based on real-time grid conditions fed into the distribution management system(DMS).Essentially,this pro
95、vides solutions that manage consumption levels of dispersed DERs,either through an aggregator or directly.20 This harmonises the flow and expansion of RE into the grid.Advancements in extra high-voltage direct current(EHVDC)and ultra-high-voltage direct current(UHVDC)offer an efficient solution to r
96、educing power loss and cost when carrying energy,particularly dispersedly generated energy,over longer distances.Microgrids allow for the creation of smaller clusters separate from the central grid(decentralisation),providing organisations with greater control of the source and use of their energy.M
97、icrogrid users can improve energy efficiency and,with some limitations,operate semi-independently from conventional energy providers.This reduced dependency allows users to reduce costs by curtailing peak usage and reasonably insulate themselves from blackouts.21 Through IoT technology,advances in m
98、icrogrids continue to transform electricity distribution and enable greater integration of RE IoT-enhanced microgrids give individual users the platform to accurately monitor their energy use and trade their excess power where permissible.However,building and maintaining microgrids pose some challen
99、ges that impact large-scale utility companies and the centralised grid.22Microgrids peer-to-peer trading of electricity elevates consumers to electricity-producer status,i.e.,“prosumers”.Prosumerism occurs when technology,is used to enable consumers to store and sell excess power.23 For instance thr
100、ough a blockchain-enabled web-based book-keeping system,residents can make peer-to-peer transactions.24 Accordingly,prosumers can sell excess generated power back to the grid or to other homes connected to the same grid/microgrid.25 Key issue:power loss across long-distance transmissionA growing pop
101、ulation,electrification of hard to abate sectors,rural electrification and rapid urbanisation is creating a rise in demand for sustainable and affordable electricity to be transmitted across longer distances.Smarter Grids powering decarbonisation through technology investment14 2023 KPMG Advisory(Ho
102、ng Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Case studiesKey considerations for stakeholdersConclus
103、ionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordIntroductionSmart grid technologyElectric vehicles storage(EVS)is increasingly part of the smart home concept.Although EVs are not primary sources of storage for the grid,IoT-enabled smart grids and smart homes now int
104、egrate EVS as a form of supplementary energy storage,particularly for DER.If connected to the grid,parked EVS has the potential to deliver the energy that is stored in their batteries through the concept of vehicle to grid(V2G).29 V2G utilises grid integrated EVS reserves to support peak power shavi
105、ng and voltage frequency regulations.30 When implemented on a broad scale,large EV fleets connected to the grid can not only alleviate transportation dependence on fossil fuels,but prompt the upgrade of EV technology on the consumer front to accommodate this extended application into DSM.Battery ene
106、rgy storage is the most common and accessible Energy Storage System(ESS).Lithium-ion batteries make up 90%of the global grid battery storage market.Battery Energy Storage Systems(BESS)can operate drawing charge directly from the grid typically off-peak or in many cases deployed alongside solar panel
107、s.26 In addition to regulating the intermittency of RE,BESS equipped with anti-islanding protection would isolate BESS from the network during faults.27 Digitised BESS have emerged as an effective solution to alleviate RE intermittencies.28Smarter Grids powering decarbonisation through technology in
108、vestment15 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid
109、 technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForeword The deployment of smart meters,V2G,G2V and other forms of prosumer enablement would have greater implications for Distributed Energy Resource Management
110、(DERM).System adaptation to enhance the monitoring status of the network and its ability to respond and recover quickly from problems such as voltage imbalance,electricity congestion and power outage stemming from DER is essential.Grids are increasingly vulnerable to physical and cyber-attacks.These
111、 attacks could cause large-scale power outages,threatening communication and national security.The repercussions could include loss of life and significant economic losses.Resilience and repairSmart grids consist of a combination of two layers,a cyber layer and a physical layer.31 The cyber layer co
112、nsists of the monitoring software and applications.The physical layer,including field devices ranging from smart sensors to remote terminal units(RTUs),are devices that can be used to monitor and control different processes in the grid.32 Through the support of networking protocols,IoT technologies
113、can quickly identify inefficiencies and damage in the system.This creates new opportunities in data management,ranging from enhanced cybersecurity utilising machine learning(ML)to project models of potential cyber threats before they even happen,to optimising DSM impacting energy prices.Key issue:ad
114、vanced monitoring and repairSmarter Grids powering decarbonisation through technology investment16 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a
115、 private English company limited by guarantee.All rights reserved.Case studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordIntroductionSmart grid technologyGrid monitoring is an essential preventative process that ensures
116、 the continuous delivery of electricity along the system with reduced risk of downtime.33 By relaying information from the site to the maintenance monitoring centre(MMC),physical interferences and inefficiencies can be projected onto a digital twin for easy identification of affected areas.IoT techn
117、ologies provide improvements that centralise the information collected about the health and efficiency of power grids.34 Once a potential threat is identified,CM software acts to dampen out oscillations in the power grid and reroute power through the grid,avoiding overloading fuses in the power line
118、s.35 These increases can be done without human intervention,minimising disruptions in the grid.Advanced grid technology improves the monitoring and control of large grid transmission systems.Phasor Measurement Units(PMU)are developed to sample current and voltage multiple times within seconds.Equipp
119、ed with communications technologies and IoT,the information is then relayed to the MMC,providing an instantaneous snapshot of the power system at any given time.New software aided by ML can also be used to help decrease unexpected power oscillations,avoiding unproductive flows of current and energy
120、waste,as well as enabling a self-healing smart grid.36 The digitisation of smart grids has also enabled the integration of digital twin as a means of increasing power systems adverse climate resilience.37 Through digital twin technology,information collected from PMUs can be projected in real-time a
121、nd presented in a digestible manner to resolve inefficiencies.Digital Twins also enable distribution planning models with geographic information systems(GIS)to increase efficiency and accuracy when integrating grid models with data from external sources that cannot be obtained internally,such as wea
122、ther conditions.38 Digital Twin technology provides a seamless connection between distribution planning models and external information systems,cutting down the average time needed for model creation of grid systems by 90%.39The vast information and data processed by smart grids requires a resilient
123、 secure cyber-physical connection to run its computerised network technology and process the data it collects daily.40 This data is sensitive and susceptible to cyber threats such as malicious data breaches.More so,bad actors could use breaches to cause substantial disruptions or blackouts.To combat
124、 these threats,Human Centric(HC)precautions such as authentication,training and awareness of threats are now insufficient to mitigate these elevated risks.Non-Human Centric approaches(NHC),such as ML,play an important role in detecting and identifying data traffic on a scale that HC approaches are u
125、nable to process.41 ML can be used to model potential attack behaviours based on sets of historical data with high levels of accuracy,and has been a leading alternative in the field of cybersecurity.In terms of smart grids,ML is directly applicable through data analysis of inbound and outbound data
126、traffic of both the cyber and physical layers to create a reconstruction of a data-driven model,identifying and capturing anomalies on both layers.42Smarter Grids powering decarbonisation through technology investment17 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company a
127、nd a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG
128、 ChinaAcknowledgmentsReferencesExecutive summaryForewordKey issue:efficient aggregation,management and application of data The advanced predictive functions of smart grids are driven by increased data,consumption visibility,flexibility and interaction enabled by devices such as smart meters AI and c
129、loud computing enable the effective aggregation,storage and utilisation of data Data optimisation and managementThe digitisation of grid components and assets has resulted in access to vast amounts of data regarding every part of the grid.Using a digital monitoring platform,utility companies can ana
130、lyse,compare,and evaluate consumers energy usage,including the time of day,weather conditions and other data to identify patterns,with enhanced accuracy.43 In particular,predictive weather forecasting enables data companies to more accurately anticipate seasonal energy demand and pre-emptively prepa
131、re to meet this demand.This data can also help set goals for RE providers and storage systems,resulting in a more effective usage of BESS to balance the intermittency of RE generation.44Artificial Intelligence(AI)is the driving intelligence agent behind smart grids.Its functions range from maximisin
132、g energy output to monitoring the natural environment impacting the grid infrastructure.45 DSM is a pivotal function of smart grids that utilises AI and the data collected in smart grids to maximise their efficiency.46 As discussed earlier,DSM can be used to ensure the optimum use of power generator
133、s,prevent instability and level peaks.The peaks in energy demand can put utility providers under delivery strain.Through AI and smart meters installed in users homes and offices,algorithms can more accurately predict and anticipate changes in energy demand.47Smart meters improve DSM by providing con
134、sumers with close to real-time data on energy usage,alongside pricing.48 Smart meters reflect the pricing of energy,including during peak periods,so that consumers can control and reduce energy consumption(load shifting)at peak periods,or switch to battery stored capacity(peak shaving)during peak ho
135、urs.More so,smart meters support vehicle-to-grid(V2G)and grid-to-vehicle(G2V)smart charging.Smarter Grids powering decarbonisation through technology investment18 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of indep
136、endent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.Case studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordIntroductionSmart grid technologyF
137、igure 6:Maturity and impact of enabling technology for smart gridsSource:KPMGMaturity of technologyImpact of technologyHighRobotic process automationCloud computing and storage solutionEnergy efficient data centersArtificial intelligenceIoTLow carbon electricityHighMediumMediumLowLowEdge computingRo
138、boticsBlockchainLow emission transportThe convergence of energy transition,digital technology and sustainability offer great opportunity for innovation in the power sector.Energy conservation through better demand-side management and integration of renewable energy into the grid are some of the key
139、benefits that can be leveraged by countries across market types through implementation of smart grid solutions.Sharad SomaniHead of Infrastructure,KPMG Asia PacificSmarter Grids powering decarbonisation through technology investment19 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liab
140、ility company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbrevia
141、tionsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordStrategy and implementationA forward-looking smart grid implementation strategy requires collaboration between governments,financial institutions,utility companies and smart grid technology innovators.Efficiently operationalising
142、 smart grids would require a multi-stakeholder approach across all phases i.e.,from planning to roll-out.Utility companies are directly impacted by the growth and scale of smart grid technology.Integrating this technology across their value chain would involve outlining an implementation strategy th
143、at incorporates internal and external stakeholders.Liberalised electricity markets would require strong policy incentives to drive partnerships between several distinct generation,transmission and distribution companies as well as other stakeholders.Decarbonisation and decentralisation attributes of
144、 smart grids technology creates a role for banks,asset managers,institutional investors,and corporates.As financial institutions continue to invest in smart grids,they are also encouraged to upgrade their assets with energy efficient retrofits.Key issue:navigating smart grid technology integrationSm
145、arter Grids powering decarbonisation through technology investment20 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limit
146、ed by guarantee.All rights reserved.Case studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordIntroductionSmart grid technologyFigure 7:Strategy flow for operationalising smart gridsTARGET:Set clear measurable smart grid d
147、eployment and development roadmap in line with net zero goalsTARGET:A clear understanding of the smart grids implementation landscape from a policy,technology and finance perspective TARGET:Smart grid project plan and change management planTARGET:Integrate smart grid technology into the grid.Ensurin
148、g that the process is efficient,forward looking,dynamic and avoids duplicity and waste Assessment of access to finance such as government subsidies and decarbonisation incentives,sustainable finance such as transition loans and private investmentDevelop business case,project plan and define procurem
149、ent process.outline technology,provider(s),costs,workflow,duration and maintenance/service subscription Commence data-based consumer management and commence communications management to all stakeholders Cross-sectoral engagement involving manufactures,mass transport sector,large infrastructure opera
150、tors,smart grid research institutes,grid consultants Stakeholder mapping and engagement01Government and policymakers both on a national and district level are key strategy driversMaturity assessmentAssess maturity of smart grid technology already deployed within the interconnectionAssess maturity of
151、 the available smart grid technology in the market ready to be deployedAssessment of policy that support investment,tech transfer,product import,cloud hosting and computingPlanning and Implementation roadmapTechnical assessment of smart grid hardware and software to be installed and its integration
152、with existing systemsAssess and initiate change management protocol as it impacts personnel,operations and customersDefine and assess installation priorities,such as wide-area monitoring and control systems before AMIPilot and roll-outDepending on the technology,pilots could be conducted in test zon
153、es to assess impactDefine roll-out timetable for instance AMI deployment in sections.Define milestones and contingencies Deploy technology alongside personnel,maintenance,upgrades and service subscription Utility companies(for liberalised markets multiple generation and distribution stakeholders)Int
154、eroperability mapping:Connecting hardware and software developers with large infrastructure operators relevant to the gridSource:KPMG China020304Smarter Grids powering decarbonisation through technology investment21 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a
155、 member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG Chi
156、naAcknowledgmentsReferencesExecutive summaryForewordCase studies:Markets and regulations enabling smart grid investment Part 2Across global markets,three key factors generally tend to influence the process of raising capital,investing in and upscaling smart grid infrastructure:The decarbonisation go
157、als of a country,territory or jurisdiction and its net zero implementation strategy;The regulatory structure and character of the Electricity market;Access to capital and technology from both the public and private sectors;In this section,the above factors will be discussed in three case studies tha
158、t represent the three electricity market structures most prevalent across global markets:vertically integrated(China),liberalised(UK),and hybrid(US).Smarter Grids powering decarbonisation through technology investment22 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company a
159、nd a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesEx
160、ecutive summaryForewordSmart grid technologyCase studiesBackground With ambitions to reach peak emissions by 2030 and achieve carbon neutrality by 2060,China has set policy objectives to scale down the consumption of coal and fossil fuels and integrate more renewable energy into its energy mix.In pu
161、rsuit of these goals,China has rolled out several national policies across all sectors.49 These included improving energy efficiency in the electric power sector,strictly controlling fossil fuel consumption and phasing down coal by the 15th Five-Year Plan.50 These objectives,among others,are contain
162、ed in the“Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy(Working Guidance)”and the“Action Plan for Reaching Carbon Dioxide Peak Before 2030”rolled out in 2021.51China Vertically integrated electricity market Fig
163、ure 8:Chinas total primary energy consumption,along with bifurcation by fuel2019(exajoules)2020(exajoules)2021(exajoules)Renewables 6.88.511.3Hydro-electricity11.312.512.3Nuclear energy3.13.33.7Coal81.882.486.2Natural Gas11.112.113.6Oil27.928.730.6Total142.0147.6157.7157.7147.6142.0Source:BP,BP Stat
164、istical Review of World Energy 202255As of 2021,China was able to grow energy from wind and solar farms to reach 290 million kW(a 34.6%increase)and 260 million kW(a 24.3%increase)respectively.52 At the start of 2022,Chinas installed capacity of renewable energy totaled 1.06 billion kW,accounting for
165、 44.8%of total installed power generation capacity.53China has developed smart grid technology that has been widely deployed across the country.Projects include the database power system built by China Southern Power Grid(CSG)that connects power supply information to grid,load and energy storage inf
166、ormation.54 This enhances DSM and energy efficiency.Smarter Grids powering decarbonisation through technology investment23 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
167、 International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordChinas investments in its transmission an
168、d distribution network support the transfer of higher amounts of green energy across provinces and regions,while mitigating transmission loss.As a result of these improvements,Chinas transmission loss was reduced from 6.31%in 2010 to 5.26%in 2021.56 In 2020,the State Grid Corporation of China(SGCC)b
169、uilt the worlds first VSC-HVDC grid project in Zhangbei,realising flexible DC transmission with a total capacity of 9,000 MW to support a more stable supply of multi-type clean energy.Its four terminals allow capacity to be maximised by collecting clean power from Zhangbei and Beijing,and regulating
170、 fluctuations of wind energy with local pumped-storage hydropower from plant in Fengning.57 Another major T&D project is the 2,383 kilometres Jiuquan-Hunan 800kv UHVDC transmission line built to transmit solar and wind energy from farms in Gansu Province.Gansu,in the northwest of China,is now capabl
171、e of delivering green energy generated from its wind and solar resources eastward to consumers in Hunan Province through the Jiuquan-Hunan 800kV UHVDC transmission line.This line,commissioned in 2017 by SGCC,travels more than 2,383 kilometres.58 The Gansu Dispatching Center measures and tracks real-
172、time data on energy generation to efficiently distribute energy and minimise transmission loss along the lines.59China also plays an active role in international collaboration on smart grids.This extends beyond its borders in line with its pledge to support clean energy along the Belt and Road by he
173、lping developing countries combat climate change.60 For instance,SGCC has built UHVDC transmission lines in Brazil to help energy be transferred more efficiently and safely.61 China is also involved in the Asia Super Grid(ASG),initiated in 2017 by the Renewable Energy Institute in Japan.Although thi
174、s project is at a very early stage,ASG aims to share the RE among different Asian countries to secure mutual benefits.China plans to contribute to the 366km submarine power cable that will transmit energy to South Korea and Japan.62China plans to reduce national energy consumption by 13.5%per unit o
175、f GDP by 2025 according to its 14th Five-Year Plan.To achieve these goals,smart grids have attracted significant attention.In particular,the smartening of rural grids are a great opportunity for green investment that aligns with Chinas national and global decarbonisation goals.Frank MeiPartner,Head
176、of Risk Consulting,KPMG ChinaSmarter Grids powering decarbonisation through technology investment24 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,
177、a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesEvolution of Chinas energy market Although Chinas energy market
178、has several players across all streams,the market is primarily dominated by state-owned enterprises(SOE)and comprehensively regulated.As of 2020,SOEs were responsible for 90%of energy generation and almost all of the T&D infrastructure is owned by the state.63Two major market reforms have facilitate
179、d Chinas transition into a vertically integrated market.Before 2002,State Power Corporation(SPC)was the only utility corporation and owner of all grid infrastructure in China.Its control of the entire energy sector,from generation to electricity price setting,resulted in operating inefficiencies,low
180、 generating capacity and inefficient demand side response.Rural areas in particular suffered from supply shortages and infrastructure that was highly vulnerable to natural disasters.64In 2002,the government issued Document No.5,a power system reform scheme that aimed to separate SPC into five genera
181、tion companies,two grid companies and four power service entities.An energy market emerged following the introduction of competition between generation companies in selling electricity to State Grid Corporation of China(SGCC)and China Southern Power Grid(CSG),the two major grid enterprises.The State
182、 Electricity Regulatory Commission(SERC)was established to serve as the policy maker and regulator of the market.However,this reform also brought challenges which affected the market and consumers.The reformed pricing mechanism led to high electricity costs for consumers,particularly industries.The
183、National Development and Reform Commission(NDRC)set high on-grid prices reflected by the generation companies.Local government control resulted in suboptimal power system planning across provinces.65The State Council issued a second major reform in 2015 under Document No.9 to increase the transparen
184、cy of the pricing mechanism,develop more integrated power system planning and encourage higher utilisation of RE.66 The reform has increased competition in the distribution and retail market and enhanced overall energy efficiency.Generation companies can sell power to grid enterprises at a transacti
185、on price directly negotiated between the generation companies and consumers,therefore significantly lowering the electricity price within a transparent pricing mechanism.Reliable electricity is critical to economic growth,especially when the world is accelerating its transformation to the digital ec
186、onomy.China generated over 8,500 TWh of electricity last year,accounting for 1/3 of global output.China joins the rest of the world in the transition to greener and more efficient electricity production and transmission through its advancement in smart grid technology.This is certainly a major trend
187、 to watch.Kevin KangChief Economist,KPMG ChinaSmarter Grids powering decarbonisation through technology investment25 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG Inter
188、national Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordRegulation and investment Key players All the k
189、ey players in generation and T&D are SOEs.The big five SOEs account for about 45%of generation capacity,with another 45%held by four smaller SOEs along with several provincial SOEs.67 In terms of T&D,transmission is almost 100%state-owned.The percentage is primarily shared between SGCC,CSG and Inner
190、 Mongolia Power Company(IMEP),with SGCC holding more than 80%.68 These three key players also dominate the distribution sector.Advances in DSM and RE has fostered some development of prosumers,leading to a growing share of independent power supply.69Figure 9:Key players in Chinas electricity marketS
191、ource:KPMG ChinaChinas Electricity MarketGrid enterprisesGeneration enterprisesChina Huadian Corporation LtdChina Datang Corporation LtdChina Energy Investment Group Corporation LtdState Power Investment CorporationOther SOEs and private enterprisesChina Huaneng Group LtdChina Southern Power GridSta
192、te Grid Corporation of ChinaInner Mongolia power CompanyThe biggest market player,SGCC,has been increasing its investment in electricity networks and transmission lines over the years.SGCC has upscaled the development of smart grid compliant UHVDC and flexible AC transmission lines.In distribution,t
193、he advancement in smart grid infrastructure has fostered DSM,which will facilitate the expansion of EVs,V2G and smart meters.Smarter Grids powering decarbonisation through technology investment26 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the
194、KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordS
195、mart grid technologyCase studiesKey investors SGCC is the countrys biggest investor in smart grids with several projects and research institutes.In addition to government support,SGCC issues carbon neutral bonds to help finance these projects.In 2021,three periods of carbon neutral bonds were issued
196、.70 Key regulators The government retains a considerable degree of control over Chinas energy market through a series of regulations.In addition to national energy laws enacted by the National Peoples Congress(NPC),the NDRC under the State Council coordinates energy planning with the national develo
197、pment strategy.It primarily formulates economic and social development plans,managing investments in energy,setting energy consumption targets and controlling energy prices.The National Energy Administration(NEA),under the NDRC,formulates and implements key energy policies and development planning f
198、or the energy sector.72 It is also the main regulatory body for approving energy investment projects and proposing market reform and fiscal spending to the NDRC for authorisation.73 In addition,the State-owned Assets Supervision and Administration Commission(SASAC),under the State Council,administer
199、s all SOEs and state-owned assets across the energy sector.74Impact on smart grid investmentGreater regulation of Chinas green finance market has resulted in greater access to green bonds and other financial tools,which is critical for enabling China to achieve its carbon neutrality goals more effic
200、iently.In 2021,China became the second largest issuer of green bonds,following the US,with the total value of green bonds issued reaching$68 billion.78 An increasing interconnection between domestic and The bonds raised RMB15 billion to finance three projects.SGCC also issues sustainability-linked b
201、onds to source working capital for the repair and maintenance of transmission lines,as well as management of the grid.71Government and financial regulators also play an essential role in supporting the growth of Chinas green finance sector through building a unified classification system or taxonomy
202、.75 In 2021,a domestic taxonomy,the“Green Bond Endorsed Project Catalogue”,developed by the Peoples Bank of China(PBoC),the NDRC and China Securities Regulatory Commission(CRSC),came into effect as the unified principles and criterion for green projects.76 Also,the China-EU common ground taxonomy de
203、veloped in 2021 is recognised in both jurisdictions.In addition,initiatives to strengthen the authenticity and reliability of green bonds have been enforced to prevent“greenwashing”.In 2021,the Green Bond Standards Committee released Operational Rules for Market-Based Assessment and Certification In
204、stitutions for Green Bonds,Chinas first regulations on third-party green verification to ensure a standardised,transparent evaluation of green bonds.77international policies has allowed faster growth of a more transparent,standardised green bond market,enabling key players to attract private investm
205、ents through various financing tools.CSG raised over RMB1 billion by selling 84.7 million shares on the Shanghai Stock Exchange in December 2021.79 The variability within the vertically integrated structure allows for some inflow of private investments to support smart grid development.Smarter Grids
206、 powering decarbonisation through technology investment27 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guara
207、ntee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordIn line with its national net zero strategy,China has significantly grown its capacity to generate and tra
208、nsmit RE.This growth has been steady and is projected to continue as RE attracts more investment.Although the total amount of renewable energy supplied increases annually,it is unlikely that Chinas total electricity consumption(see Figure 11 in the next page),which shows steady growth,can be satisfi
209、ed primarily by RE in the immediate future.Essentially,a RE growth rate of 9.4%is not expected to meet a power consumption growth rate of 39%.This indicates that in the coming years,China will continue to rely on fossil fuels to meet its energy needs.Energy consumption,emissions and the role of rene
210、wablesFigure 10:Chinas electricity generation and transmission from renewable sourcesSource:EIA and China Energy Portal,KPMG China Analysis801,5291,6551,8241,8942,2092,3531,2881,3941,5521,6241,8942,00021Electricity generation from renewable sources-(TWh)Renewable electricity su
211、pplied-(TWh)Smarter Grids powering decarbonisation through technology investment28 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English
212、 company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesAs electricity consumption grows annually,an annual increase in CO2 emissions fro
213、m electricity generation is also anticipated.However,the amount of CO2 emissions generated in relation to electricity consumption per TWh in 2021(0.56 MT CO2 per TWh)is below 2016 levels(0.59 MT CO2 per TWh).SGCC is the largest electric utility company in the world.Consequently,with its dominant pos
214、ition,SGCC accounts for 93%of Chinas total investment in grid infrastructure.While the slight decline in 2020 is attributed to the economic downturn caused by the pandemic,the 2021 numbers show some recovery in investment.Figure 11:Chinas GHG emissions with respect to electricity consumptionSource:C
215、hina Electricity Council and AskCI,KPMG analysis81Electricity consumption(TWh)CO2 emissions from electricity generation(million tonnes)Number of smart meters installation(in millions)Million units5,9716,3646,9407,2497,7628,3133,5583,7974,0854,1744,2464,6472000.09,000100.060.06,
216、00030.03,00080.08,00050.05,00020.02,00070.07,00040.04,00010.01,0000.00Although the substantial decline in smart meter installation in 2020 could be attributed to the economic downturn caused by COVID-19,the sharp recovery in 2021 is a result of the investment and economic recovery from the start of
217、the 14th installment of Chinas Five-Year plan(2021-2025).Figure 12:Chinas investment in gridOverall investment in grid in ChinaState Grid(SGCC)investment in grid(CNYbillion)543534537508548944746720021Source:China Electricity Council and SGCC82China is one of the larg
218、est investors in T&D globally,with a total investment of RMB492 billion($69 billion)in 2021.This enables the country to continue to upscale advanced grid technology both domestically and overseas.Smarter Grids powering decarbonisation through technology investment29 2023 KPMG Advisory(Hong Kong)Limi
219、ted,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations fo
220、r stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordBackground The privatisation and subsequent reform of the energy sector in the UK in the 1990s created a liberalised Great Britain(GB)83 energy market.This energy market connects England,Wales and
221、Scotland,excluding Northern Ireland.Achieving energy security alongside a low carbon economic transition is at the core of the UKs ambitious United Kingdom Liberalised electricity market Figure 13:Total UK primary energy consumption,along with bifurcation by fuel7.77.17.22019(exajoules)2020(exajoule
222、s)2021(exajoules)Renewables1.11.41.2Hydro-electricity0.10.10.1Nuclear energy0.50.50.4Coal0.20.20.2Natural Gas2.82.62.8Oil3.12.42.5Total7.77.17.2Source:BP,BP Statistical Review of World Energy 202287With the Climate Change Act 200888 and the announcement of the net zero targets in 201989,the UK becam
223、e the first major economy in the world to pass laws to ensure the country ends its contribution towards global warming by 2050.The government identified three ways to help achieve this target,namely incentivising investors to choose low carbon initiatives,getting consumers to choose low carbon optio
224、ns,and improving energy efficiency.90The British Energy Security Strategy reiterates the UKs vision to produce 95%of its electricity from low carbon sources by 2030.In 2022,National Grid reported that renewable energy(RE)currently makes goal to reach net zero by 2050 and peak emissions in the power
225、system by 2035.84 Achieving this will involve big changes in the way the UK supplies and uses energy.85 These changes include adopting and scaling smart energy saving technologies,such as heat pumps,EV,smart meters,smart appliances etc.86 With these goals in mind,there is still a significant portion
226、 of fossil fuel in the UKs energy mix.up around 32%of electricity generation in Great Britain.91 It included generation targets for 50GW of wind by 2030,70GW of solar by 2035,and an additional 24GW of nuclear by 2050.92 The government anticipates that liberalisation would best position the UK to imp
227、lement the most cost-efficient pathway towards decarbonisation.93To encourage consumer participation and the use of low carbon technologies,the government has implemented demand-side measures to establish industry confidence in both the feasibility and profitability of decarbonisation.This creates s
228、tructures that support consumers opting for low carbon energy saving options.94Smarter Grids powering decarbonisation through technology investment30 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member
229、 firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesEvolution of t
230、he UK Energy Market Focusing on Great BritainThe Electricity Act of 1989 put the UK on the path to liberalisation.The Central Electricity Generating Board,which owned the generating assets in Great Britain,was split into new companies,which were subsequently privatised.The transmission assets in Eng
231、land and Wales were transferred to National Grid,while those in Scotland were transferred to Scottish Power and Scottish Hydro Electric.These three transmission network owners are licensed by the regulator Ofgem(the Office of Gas and Electricity Markets)to own and operate the electricity transmissio
232、n system.They are responsible for new connections,as well as maintaining the infrastructure that facilitates large power flows around the country,from power stations and renewable generators to demand zones.The 14 licensed distribution network operators(DNOs)responsible for maintaining the lower vol
233、tage substations are owned by eight different companies.These DNOs are each responsible for specific regional areas and operate as geographical monopolies.There are several independent DNOs(IDNOs)operating smaller networks within the DNO areas.There are multiple active energy suppliers that purchase
234、 energy at wholesale prices and trade the volume by breaking up the supply into multiple contracts to consumers.This offers UK consumers several suppliers to choose from and gives them the flexibility to change suppliers to reflect both their low cost and low carbon preferences.Liberalisation in the
235、 retail market not only provides flexibility for customers to change electricity suppliers,it also restricts vertical integration by ensuring transmission and distribution are independent from generation and supply entities.95 The unbundling requirement(part of the EU third energy package now transp
236、osed into UK law)generally increases competition.96As the UK continues to reduce power generated from coal and gas and expand the integration of renewable energy sources,the grid system in Great Britain is evolving to meet these demands.The countrys liberalised market has several attributes that imp
237、act its ability to develop and scale smart grid technology;liberalisation also affects which part of the grid gains accelerated operationalisation and policy-stimulated investment.As a result,smart meters have seen growth in deployment.Figure 14:Number of domestic smart meters in operation in Great
238、Britain from 2013 to 2021(in millions)0510152025Number of smart meters(in millions)20201.9917.6315.212.658.984.952.320.670.27Source:Statista97Smarter Grids powering decarbonisation through technology investment31 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)l
239、imited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclus
240、ionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordRegulation and investment The UK regulatory environment balances consumers best interest with the implementation of net zero goals.Ultimately,net zero targets are driven through regulatory strategies that include inves
241、tment incentives,emission deterrents,fair play,subsidies and access to finance.The transmission owners and DNOs are regulated by a central energy regulator who sets a funding allocation to determine the amount they are allowed to invest in their networks.This mechanism is known as“RIIO”,which stands
242、 for Revenue using Incentives to deliver Innovation and Outputs.Introduced in 2013,the RIIO framework has been fundamental to the deployment of smart grid technology in the UK by rewarding those network owners who invest in grid-related innovation to help drive efficiency in the construction and ope
243、ration of the network,as well as specifically measuring the carbon impact of network investment decisions.Key regulators Figure 15:UK energy policy and regulatory frameworkSource:KPMG China Electricity Act 1989;Competition Act 1998;Utilities Act 2000;Enterprise Act 2002;Energy Acts of 2004,2008,2010
244、,2013 and 2016;Climate Change Act 2008,Electricity and Gas (Market Integrity and Transparency)(Enforcement etc.)Regulations 2013 (SI 2013/1389);Domestic Gas and Electricity(Tariff Cap)Act 2018.Key legistation Electricity marketRegulatorsPolicy formulatorEnsures the market works in the interests of c
245、onsumers by monitoring the market and strengthening competition.Ofgem implements govt policy and enforces the rules binding licensed participants (Office and Gas and Electricity Markets)OfgemResponsible for consumers protection particularly through delivering a greener,fairer energy system(The Gas a
246、nd Electricity Markets Authority)Responsible for promoting competition to benefit of consumers.Has concurrent powers with Ofgem to prohibit anti-competitive arrangements and the abuse of a dominant position(The Competition and Markets Authority)Responsible for policy setting in the electriciy sector
247、(The department for Business energy and Industrial Strategy)BEIS CMAGEMASmarter Grids powering decarbonisation through technology investment32 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms
248、affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesInvestment and suppor
249、ting regulatory policiesRegulators also provide financial pathways to inject public finance and private investment into incorporating emission reduction and energy efficient technologies,like smart meters,home insulation and heat pumps.For instance,the Department for Business,Energy&Industrial Strat
250、egy(BEIS)runs the Energy Entrepreneurs Fund(EEF),which seeks to promote clean tech and energy efficient technologies across all sectors,such as floating offshore wind projects and the building of Britains largest solar farm.98 As at 2021,around 102 million of grant money was invested in over 214 com
251、panies.99Policy strategies like the Home Upgrade Grant and the Social Housing Decarbonisation Fund raised more than 1.2 billion to support low-income households install energy efficient devices.Additionally,energy costs are cut for consumers who install technology that enhances energy efficiency,suc
252、h as heat pumps and insulation,while they also gain access to green finance products,such as green mortgages.100Smart meters also enable consumers to access“smart tariffs”as part of an innovative adjustment to the billing protocol.The“time-of-use”tariffs(smart tariffs)deployed by suppliers,such as O
253、ctopus Energy,enable real-time energy use records through in-home displays(IHD).Time-of-use tariffs also alter the energy bill to reflect wholesale energy prices.These tariffs reward consumers financially for using less electricity at peak times and vice versa.101Schemes such as Contracts for Differ
254、ence(CfDs),which replaced the Renewables Obligation(RO),have also been deployed to incentivise the sale of generated renewable energy or low-carbon electricity.The CfD stipulates that the generator is paid the difference between the“strike price”(a price for electricity reflecting the cost of invest
255、ing in a particular low carbon technology)and the“reference price”(a measure of the average market price for electricity in the British market).102 The goal of this is to incentivise investment in the generation and transmission of RE by ensuring its profitability.The UK Emissions Trading Scheme(UK
256、ETS)was developed in response to exiting the EU ETS post-Brexit.The UK ETS cap aligns with the governments net zero commitments and signals to investors that investing in products or energy sources that reduce their carbon intensity will yield returns under the scheme.103Figure 16:The UK governments
257、 framework to unlock investment in low carbon technologySource:HM Government,Industrial Decarbonisation Strategy104Policy reform mitigates risk of carbon leakage for specific sectorsAn effective carbon-pricing mechanism sends a clear market signalFunding mechanisms overcome barriers to securing priv
258、ate sector investmentSmarter Grids powering decarbonisation through technology investment33 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a privat
259、e English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordUK and EU joint smart grid investmentThe 2022 energy crisis in Europe,ex
260、acerbated by the Ukraine situation,has amplified the need to diversify energy sources and accelerate RE development.The EUs REpowerEU plan and the 10-point plan to reduce reliance on Russian natural gas proposes:the acceleration of wind and solar projects;the acceleration of energy efficiency in bui
261、ldings;encouraging thermostat adjustments in buildings;innovation and investment etc.In recent years,investments have been made to support interconnector projects across European countries.Through a joint venture between National Grid and Statnett,North Sea Link(NSL),a cross-country transmission pro
262、ject,was recently completed.NSL was built with a 720km HVDC interconnector that supports clean electricity transmission between Northumberland in the UK and the Norwegian village of Kvilldal.105 The company has previously developed four interconnector projects across Europe,connecting the UK with co
263、untries including Belgium,France and the Netherlands.106 Analysts anticipate that energy security will be prioritised in the short term to address the security of supply.However,in the long term,with initiatives like the REpowerEU plan,it is projected that RE integration and energy efficiency will c
264、ontinue to form the basis of Europes energy security strategy.107 Investment,emissions,and electricity consumption in the UKThe upward trend of RE in the UK indicates the advancement of the UKs net zero strategy.The drop in these figures from 2020 is attributable to several factors,including a globa
265、l economic downturn from COVID-19,inflation and rising energy costs.Energy security is of critical importance,and as the UK faces rising energy costs,exacerbated by the current Ukraine Figure 17:Renewable electricity generated and supplied in the UK837999294820019202
266、02021Electricity generation from renewabe sources(in TWh)Renewable electricity supplied(in TWh)Source:UK energy 2022,UK Government,UK energy in brief 2022108situation,it is anticipated that RE deployment will be impacted.Although the conflict could potentially intensify renewable energy investment i
267、n the future,current energy security needs are increasing the import of fossil fuels.While the UK aims to scale up RE and diversify energy sources,it is yet to be seen how this will be executed,given the current economic and energy cost climate.Smarter Grids powering decarbonisation through technolo
268、gy investment34 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey c
269、onsiderations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesFigure 18:Number of smart meters and GHG emissions by power station in the UK Source:UK energy 2022,UK Government109Number of domestic and non-domes
270、tic smart and advanced meters installed(in millions)Number of smart meters operating(in millions)Territorial greenhouse gas emissions by power station(in MtCO2 equivalent)2000.515.65.110.04.95.990.060.030.080.050.020.070.040.010.00.03.83.24.53.123.627.8Competition in the UKs li
271、beralised market means increased private sector and supplier participation.This impacts the availability of multiple suppliers with smart meter packages.As a result of the UKs smart meter rollout and schemes,such as smart tariffs,smart meter patronage in the UK increased substantially year-on-year.T
272、his increase in smart meters happened alongside a yearly reduction in GHG emissions.In 2020,the UK government projected that smart meter users could save up to 250 on their bills with an estimated carbon reduction of 45 million tons.110 However,these projections are impacted by the 2022 energy crisi
273、s in Europe stemming from the ongoing situation in the Ukraine.Enhanced visibility from smart meters enables better energy savings and reduced emissions.As smart meter rollout continues,more data would give a clearer picture of the impact of smart meters on carbon reduction.Investment in electricity
274、 infrastructure increased in 2021.However,the highest investment was made in 2018,with a substantial decline in 2020.The 2020 drop could be attributed to the economic stagnation at the height of the COVID-19 pandemic,with a post-pandemic investment recovery in 2021.Electricity investment increased b
275、y 8.6%from GBP10.5 bn in 2020 to GBP11.4 bn in 2021.Figure 19:UK Electricity Consumption and Investments in electricityElectricity consumption(in TWh)Investment in electricity(GBP bn)GBP bn11.510.0119.51210.59.08.5207202203Source:UK Energy Statistics,electricity supp
276、ly111MtCO2 equivalentSmarter Grids powering decarbonisation through technology investment35 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a privat
277、e English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordBackground The US aims to have a 100%carbon-free power sector by 2035 an
278、d achieve carbon neutrality by 2050.112 To realise these goals,experts project that more than 1 million miles of new transmission infrastructure will have to be built within three decades.113 Accordingly,the US Congress passed the Infrastructure Investment and Jobs Act in 2021 which earmarks$65 bill
279、ion to operationalise smart grid and clean energy technology investment.114 The Inflation Reduction Act of 2022,which came into law in August 2022,represents the largest energy investment in US history addressing climate change.115 It allocates$369 billion to modernise United States Hybrid electrici
280、ty marketthe US energy system and hit emissions reduction targets in 2030.Together,both Acts invest more than$430 billion into revamping the US energy system and infrastructure.116In 2021,the US was the second largest carbon emitter from electricity generation behind China,at 1.57 billion metric ton
281、s of CO2.Coal and natural gas are currently the main sources of electricity generation in the US,although renewables have seen considerable growth and coal usage as a source of electricity has declined over the years.Figure 20:US total primary energy consumption along with bifurcation by fuelSource:
282、BP,BP Statistical Review of World Energy 20221172019(exajoules)2020(exajoules)2021(exajoules)Renewables 5.76.77.5Hydro-electricity2.52.72.4Nuclear energy7.67.57.4Coal11.39.210.6Natural Gas30.630.029.8Oil37.132.535.3Total94.988.593.088.593.094.9The complex US grid and electricity market is set up to
283、ensure competition and guard against market manipulation.The 48 contiguous states in the US are divided into three main interconnection networks:the Eastern Interconnection,which operates in states east of the Rocky Mountains;the Western Interconnection,which covers the Pacific Ocean to the Rocky Mo
284、untain states;and the Texas Interconnection(ERCOT).118 These three interconnected power grids function independently of each other,although there are instances of power exchange between them.Within the three grids,the actual operation of electricity is controlled by the balancing authorities.119 The
285、y manage the grid from electricity generation to consumption,maintaining the efficiency of the electric grid system.120 There are 66 US balancing authorities that each operate a portion of the grid,consistently balancing supply and demand,and assuring federal reliability standards are met.121 Most b
286、alancing authorities are regional entities,such as Independent System Operators(ISOs)and Regional Transmission Operators(RTOs).The rest are electric utilities.122Smarter Grids powering decarbonisation through technology investment36 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liabil
287、ity company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgment
288、sReferencesExecutive summaryForewordSmart grid technologyCase studiesEvolution of the US energy market The US electricity market is trending towards a much less-regulated system.Deregulation of the US electricity market was initiated by the Public Utilities Regulatory Policy Act(PURPA)in 1978 to int
289、roduce competition to the electricity energy market for higher efficiency.123 The process of deregulating the US electricity sector started in the late 1990s.The Energy Policy Act of 1992 marked the key event that allowed more independent producers to enter the open market.124 Since then,state gover
290、nments have initiated different restructuring methods.That said,not all the states are deregulated.Thus,the market structures,as well as the approaches taken in promoting deregulations,vary from state to state.Some states electric sectors are restructured,such as Texas,while some states,like Califor
291、nia,have partially regulated markets.Overall,the US energy market is considered to be hybrid,i.e.,made up of states with vertically integrated markets,unregulated,and partially regulated markets.Geographically,the US electric energy market is fragmented.125 Cases that exemplify the vertically integr
292、ated market and the deregulated market,namely North Carolina and ERCOT(Texas)respectively are further discussed below.Smarter Grids powering decarbonisation through technology investment37 2023 KPMG Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG gl
293、obal organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerations for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferences
294、Executive summaryForewordERCOT:deregulated marketThe Electric Reliability Council of Texas(ERCOT)covers almost all parts of Texas,consisting of a single balancing authority.The ERCOT grid serves 26 million electricity customers within Texas and covers about 75%of the states land area.126 In contrast
295、 to other states in the US,most of Texas electricity market is not under the jurisdiction of the Federal Energy Regulatory Commission(FERC).While ERCOT has two Direct Current(DC)ties with the Eastern Interconnection,such ties are not considered to result in interstate commerce.Therefore,the Public U
296、tility Commission of Texas(PUCT or the Commission)solely regulates the electricity market within ERCOT.This has resulted in greater coherence in the retail and wholesale markets,more regulatory certainty,and closer coordination between legislative authorities and regulators involved in restructuring
297、 the power industry within ERCOT.In addition to being the nations largest electricity consumer,Texas is also the highest national power sector carbon emitter.Consequently,Texas has made considerable efforts towards reducing the sectors carbon intensity and expanding its renewable energy,such as sola
298、r,biomass and hydroelectric power.127 Coal was reduced to 18%in 2021,from a high of 36%in 2011.Given the size of the market,Texas transition towards a cleaner and smarter grid system will substantially impact the US.In particular,Austin has set a community-wide goal to reach net zero by 2040.Electri
299、city utility companies,such as Austin Energy,have also developed climate protection plans that incorporate smart grids as a means to achieving a carbon-free future.This binds local utilities and major electricity market players in the state.Oncor,which operates Texass largest electric distribution s
300、ystem,has made substantial investments in infrastructure and cutting-edge technology to produce a safer,smarter,and more dependable electricity grid.In terms of renewable energy integration,in 2021 through 80 RE generators,Oncor provided approximately 15,500 MW of RE capacity to the ERCOT grid.This
301、interconnection represents approximately 34%of all ERCOT wind generation.129Figure 21:Electric power industry carbon dioxide emissions in the United States in 2020 by selected state(in million metric tons)0NextEra EnergyDuke EnergySouthern CompanyDominion EnergySepraAmerican ElectricExelon2040608010
302、05.2787.9880.4868.8253.1150.5847.68Source:Statista128With regards to improving energy efficiency,in 2021,Oncor introduced a programme that incentivises participation in ENERGY STAR-certified and Department of Energy(DOE)Zero Energy Ready Homes.This certification requires homes to meet spe
303、cific energy efficiency requirements,under which new homes must be at least 10%more efficient than standard homes,with additional incentives for installing Solar PV,heat pump water heaters,EV chargers,and thermostats.130Smarter Grids powering decarbonisation through technology investment38 2023 KPMG
304、 Advisory(Hong Kong)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeho
305、ldersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesNorth Carolina:vertically integrated marketNorth Carolina has a more vertically integrated electricity market.There are a limited number of electricity provider options for
306、residential consumers and industrial customers.Duke Energy Carolinas and Duke Energy Progress are the dominant electricity providers in North Carolina.Their activities span across the value chain,from electricity generation to transmission and distribution to consumers.Duke Energy Carolinas owns 20,
307、100 MW of energy capacity,supplying electricity to 2.8million residential and industrial customers and supplying up to 90%of North Carolinas electricity.131 Dominion Energy North Carolina,another electricity generation entity,supplied the balance,accounting for less than 10%.132As a dominant integra
308、ted utility,Duke Energy owns and operates transmission systems while also being responsible for bulk power system reliability.This demand and supply balancing function could,in theory,enable Duke Energy to actualise its net zero goals by incorporating RE through digitised transmission systems and ac
309、cumulating real-time condition monitoring data.However,this integration does not negate the functions of the balancing authorities that are responsible for grid operation and stable electricity supply.133Duke Energy announced its net zero targets in 2019.It plans to collaborate with stakeholders to
310、achieve net zero by 2050,securing cleaner electricity for its consumers through smarter solutions and advanced technology.134 Its primary strategy involves modernising its electric grid.Duke Energy is investing in long-term efforts to provide a smarter and more resilient grid infrastructure.These ef
311、forts include expanding RE capacities,DSM,ensuring blackout prevention,and promoting greater consumer transparency and control.Duke Energys Fort Bragg solar facility energy security project is part of a$36 million contract that focuses on infrastructure modernisation,HVAC,and boiler system improveme
312、nts.Overall,its wind and solar capacity increased from 8,800 MWs in 2020 to more than 10,500 MWs by the end of 2021.It is projected to generate 16,000 MWs of renewables by 2025 and 24,000 MWs by 2030.135Smarter Grids powering decarbonisation through technology investment39 2023 KPMG Advisory(Hong Ko
313、ng)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionSmart grid technologyCase studiesKey considerat
314、ions for stakeholdersConclusionAbbreviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordRegulation and investmentThe US has a federally structured smart grid programme that promotes increased partnerships between the DOE and large companies.The Energy Independence and Security
315、Act of 2007(EISA)requires the DOEs Office of Electricity to report on the status of smart grid deployment and related challenges every two years.136 Alongside private sector capital,the American Recovery and Reinvestment Act of 2009(Recovery Act)supports more than 130 projects across the country tha
316、t deploy smart grid technologies.The technology deployed enables utilities to improve the effectiveness and efficiency of their operations,particularly relating to mitigating power outages,DSM,peak levelling,and enhanced customer participation through smart meters.Accordingly,in implementing the EIS
317、A,the Recovery Act has allocated$4.5 billion towards grid modernisation.Several large programmes,such as the Smart Grid Investment Grant(SGIG)programme and the Smart Grid Demonstration Program(SGDP),were developed by EISA to operationalise the deployment of these funds.137 In 2021,Section 40107 of t
318、he Infrastructure Investment and Jobs Act allocated$3 billion,expanding the SGIG program.138Despite these policy-backed investments,impaired structural transformation stemming from policy dissymmetry poses challenges to US smart grid deployment.139 The decentralised nature of systems that incorporat
319、e more renewable energy,as well as increased consumer participation,requires a policy synergy across the three major interconnection networks in the US to significantly adapt the future grid to emerging technology and changing demands.The US regulation system contains three layers:federal,state,and
320、local government.The Federal Energy Regulatory Commission(FERC)(an independent regulatory agency within the DOE)enacts legislation that establishes the regulatory structure for the states.Local governments play a significant role in promoting decarbonisation processes.They are authorised by state go
321、vernments to address electricity issues within their localities.The Infrastructure Investment and Jobs Act,supported by the federal government,enabled local governments to expand their integration of smart grids.This initiated projects that enhanced electrification,maintained grid infrastructure,and
322、 developed local distributed energy resources.140 This trend is projected to accelerate smart grid projects in counties,cities,and towns.Key regulators Source:Thomson Reuters141 and KPMG ChinaFigure 22:Key regulators in the US electricity market Regulates the wholesale market outside ERCOT(Texas),pr
323、omote the efficiency of the electricity market and environmental impacts.The structure created here binds the state government.ERCOT is overseen by the Public Utility Commission of Texas.It is not subject to FERCOther electricity market regulators includes state energy commission,state Air Resources
324、 Board,the office of the governor of state,state legislation as well as state department of water resourcesState public utilities commissions have tools to engage in promoting the electricity market efficiency,but progress is still uneven in each state and require more proactive action from regulato
325、rs at the state levelPUC(Public Utility Commissions)Counties/cities and townsState levelFederal levelElectricity market regulatorsLocal governmentFERC(Federal Energy Regulatory Commission)within the DOESmarter Grids powering decarbonisation through technology investment40 2023 KPMG Advisory(Hong Kon
326、g)Limited,a Hong Kong(SAR)limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.IntroductionKey considerations for stakeholdersConclusionAbb
327、reviationsAbout KPMG ChinaAcknowledgmentsReferencesExecutive summaryForewordSmart grid technologyCase studiesKey playersThere are around 3,000 electricity providers in the US,including Investor-Owned Utilities(IOUs),cooperatives,public-owned,and federal electricity utilities,as well as retail and wh
328、olesale providers.In 2020,IOUs accounted for a 57%share of electricity sales,with public and deferral entities accounting for 16%,and cooperatives 12%.For transmission,there are five large US transmission project owners,namely American Transmission Company,Pacific Gas&Electric Company(PG&E),American
329、 Electric Power(AEP),Xcel Energy and Dominion.142 Though these transmission projects are usually privately owned,ISOs and RTOs manage the process from electricity generation to consumption,maintaining competition and ensuring the reliability of electricity supply.143 AEP,one of the largest power pro
330、ducers in the US,which owns both significant generation capacity(approximately 30,000 megawatts and 5,300 megawatt of renewable energy)and the largest transmission system,plays an important role in enabling the US to achieve its net zero goals.As owners of the largest US transmission system(a 39,000
331、-mile network that includes several 765 kV extra-high voltage transmission lines),its ability to promote RE integration is critical to US climate goals.144Investment,emissions and electricity consumption in the USFigure 23:US electricity generation and transmission from renewable sourcesTotal renewa
332、ble generation at utility scale facilities-in TWhRenewable electricity supplied through transmission-in TWhNumber of meters(in millions)advanced metering infrastructure(AMI)Number in millions2002670762460906006637557687553Source:EIA145The US re-joined the
333、Paris Agreement in March 2021 and restated its commitments to net zero goals.As part of its net zero strategy,the US has seen a steady growth in RE generation and transmission,with a 6.3%annual growth rate.Although the decline in smart meter installation in 2021 could be attributed to the COVID-19 economic downturn,smart meter deployment in the US is expected to pick up as investment in technology