German Smart Meters: Europe's Biggest Market Needs the Regulatory Push

Published: 2 Sep 2011

By Neha Vikash

Germany is the largest economy in the European Union with a population of 81.7 million. Given this large customer base, the smart meter market is expected to witness strong growth in the future. According to Frost & Sullivan research, the German smart meter market is expected to grow at a CAGR of 81% from 2010-2017.

In Germany, the Federal Network Agency is working with the market participants to provide strong standards and legal certainty regarding smart meter implementation. It is fostering the integration of smart metering standards to achieve energy efficiency goals. The future investment prospects in this market are high but currently there is a lack of regulation. Trials are being undertaken by some utilities, but the market participants are awaiting a legal mandate to carry out large scale roll outs which is expected by 2013. The market is expected to gain momentum post 2014.

Complexity of the Market

Major challenge facing the German smart meter market is the lack of a proper business case. Although Germany is a leader in terms of renewable energy generation, the number of smart meters installed is low due to the lack of legislation and majority of the energy suppliers have not taken action in implementing smart metering.

According to the German Energy Industry Act, smart meters must be installed in new buildings and buildings that are undergoing major refurbishing from the beginning of 2010. From the beginning of 2011, electricity suppliers are required to offer load-variable or time-of-use tariffs to stimulate consumers to save energy and control their consumption. Though there is no nationwide rollout planned, the German legislation and regulation follows a policy of increasing competition in the metering and retailer market. There are no minimum functional requirements specified for smart meters and hence utilities hold back on their investments. According to the Third EU Directive 2009/72/EC concerning common rules for the internal market, an economic assessment of the long term cost and benefit of smart meter implementation has not been carried out yet in Germany. It is assumed that the legislature in Germany will adopt the policy in the near future to suit the European requirements drawn in the third Energy Package which mandates all member states to have at least 80 percent of consumers to be equipped with smart metering by 2020 and also prepare a timetable with a target up to ten years for smart metering implementation.

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