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Unlocking Smart

Grid Opportunities

in Emerging Markets

and Developing

Economies

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies

that will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

11 association

countries and beyond.

Please note that this

publication is subject to

specific restrictions that limit

its use and distribution. The

terms and conditions are

available online at

www.iea.org/t&c/

This publication and any

map included herein are

without prejudice to the

status of or sovereignty over

any territory, to the

delimitation of international

frontiers and boundaries and

to the name of any territory,

city or area.

Source: IEA. All rights

reserved.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

INTERNATIONAL ENERGY

AGENCY

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine

Unlocking Smart Grid Opportunities Abstract

in emerging markets and developing economies

PAGE | 3

IEA. CC BY 4.0.

Abstract

The clean energy transition requires a fundamental transformation of power

systems, including much higher levels of digitalisation at scale across all grid

domains, from generation to transmission and distribution to end-use. Strong

policy attention is required to scale up investments in smarter and more resilient

grids in emerging and developing economies where electricity consumption is set

to grow at a rapid rate while also providing greater levels of electricity access.

Investments in smarter and more resilient grids will be necessary to accommodate

the greater deployment of renewable energy and enhance energy security.

Digital technologies designed for power systems are instrumental to unlock

essential system services required to integrate high shares of variable renewable

energy. They can also provide solutions to leverage data flows, connectivity, and

management across the whole electricity system. To unlock these digital

opportunities, adequate planning, investment, and policy action are needed.

As part of the Digital Demand Driven Electricity Networks (3DEN) initiative, this

report provides guidance for energy policy makers on possible ways to enable and

drive investments in smart and resilient electricity grids. It also gives suggestions

on how to start creating an environment that supports the effective use of

innovative digital technologies within the electricity sector. It draws on examples

and case studies to show the wide range of digital opportunities and solutions that

can help governments implement efficient and smart power systems.

/107

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UnlockingSmartGridOpportunitiesinEmergingMarketsandDevelopingEconomiesTheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Pleasenotethatthispublicationissubjecttospecificrestrictionsthatlimititsuseanddistribution.Thetermsandconditionsareavailableonlineatwww.iea.org/t&c/Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.Allrightsreserved.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:INTERNATIONALENERGYAGENCYArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineUnlockingSmartGridOpportunitiesAbstractinemergingmarketsanddevelopingeconomiesPAGE3IEA.CCBY4.0.AbstractThecleanenergytransitionrequiresafundamentaltransformationofpowersystems,includingmuchhigherlevelsofdigitalisationatscaleacrossallgriddomains,fromgenerationtotransmissionanddistributiontoend-use.Strongpolicyattentionisrequiredtoscaleupinvestmentsinsmarterandmoreresilientgridsinemerginganddevelopingeconomieswhereelectricityconsumptionissettogrowatarapidratewhilealsoprovidinggreaterlevelsofelectricityaccess.Investmentsinsmarterandmoreresilientgridswillbenecessarytoaccommodatethegreaterdeploymentofrenewableenergyandenhanceenergysecurity.Digitaltechnologiesdesignedforpowersystemsareinstrumentaltounlockessentialsystemservicesrequiredtointegratehighsharesofvariablerenewableenergy.Theycanalsoprovidesolutionstoleveragedataflows,connectivity,andmanagementacrossthewholeelectricitysystem.Tounlockthesedigitalopportunities,adequateplanning,investment,andpolicyactionareneeded.AspartoftheDigitalDemandDrivenElectricityNetworks(3DEN)initiative,thisreportprovidesguidanceforenergypolicymakersonpossiblewaystoenableanddriveinvestmentsinsmartandresilientelectricitygrids.Italsogivessuggestionsonhowtostartcreatinganenvironmentthatsupportstheeffectiveuseofinnovativedigitaltechnologieswithintheelectricitysector.Itdrawsonexamplesandcasestudiestoshowthewiderangeofdigitalopportunitiesandsolutionsthatcanhelpgovernmentsimplementefficientandsmartpowersystems.UnlockingSmartGridOpportunitiesTableofcontentsinemergingmarketsanddevelopingeconomiesPAGE4IEA.CCBY4.0.TableofContentsAbstract.....................................................................................................................................3Acknowledgements,contributors,andcredits.....................................................................5Executivesummary..................................................................................................................9Introduction.............................................................................................................................17Emergingmarketsanddevelopingeconomiesneedreliableandefficientgrids.................17Lossesareweakeningutilitiesandcontributingtoemissions..............................................21Decarbonisationrequiresdigitalisation.................................................................................26Thedigitalisationopportunity...............................................................................................31Smartgridtechnologydeploymentisstilllow.......................................................................31Smartgridscanenablecleaner,moreaffordableandsecureelectricity.............................32Improvingsystemperformancereduceslossesandcosts...................................................34Howtogetinvestmentstoflow............................................................................................47Gridinvestmentislagging.....................................................................................................47Differentinvestorprofilescanbeleveragedtoovercomebarrierstoinvestment................53Howtoconveyvalueandattractinvestors...........................................................................63Howtoacceleratesmartgridimplementation....................................................................69Createacoherentvision.......................................................................................................70Co-ordinateimplementation..................................................................................................76Facilitaterulesandregulationsthatadequatelyvaluedigitalopportunities.........................84Integratesecurityandresilienceacrossallelectricitypolicydomains.................................90Track,evaluateanddisseminatedigitalisationprogress......................................................92Startingthesmartgridjourneytoday..................................................................................95Activelyengagewithstakeholders........................................................................................96Managedatafromthestart...................................................................................................96Ensureanequitabledistributionofcostsandbenefits.........................................................96Thewayforward....................................................................................................................97Annexes...................................................................................................................................99Abbreviationsandacronyms.................................................................................................99Unitsofmeasure.................................................................................................................101Glossary..............................................................................................................................102UnlockingSmartGridOpportunitiesAcknowledgements,contributors,andcreditsinemergingmarketsanddevelopingeconomiesPAGE5IEA.CCBY4.0.Acknowledgements,contributors,andcreditsTheIEAgratefullyacknowledgestheItalianMinistryofEnvironmentandEnergySecurityfortheirsupportofthisprojectaspartoftheircontributionstotheIEA’sDigitalDemandDrivenElectricityNetworksInitiative(3DEN)onelectricitygridmodernisationanddigitalisationandtotheCleanEnergyTransitionsProgramme.SpecialthanksgotoFedericaFricano,AnnalidiaPansini,AlessandraFidanza,EmanuelaVignolaandAlessandroNegrin.TheIEAalsothankstheItalianMinistryforForeignAffairsandInternationalCo-operationforitsstrategicguidanceandcollaboration,inparticularNicolaBazzani,StefanoSalomoni,AlessandraPastorelliandValeriaPiazza.ThisreportwasdevelopedbytheIEA’sEnergyEfficiencyDivisionintheDirectorateofEnergyMarketsandSecurity.VidaRoziteledandco-ordinatedtheanalysisandproductionofthereport.ItwasauthoredbyBrendanReidenbach,EmiBertoliandGhislaineKieffer,withkeycontributionsfromPaulineHenriotandSungjinOh,aswellasformerIEAanalystsGeorgeKamiyaandEdithBayer.KeisukeSadamori,DirectoroftheEnergyMarketsandSecurityDivision,BrianMotherway,HeadoftheEnergyEfficiencyDivision,andKevinLane,SeniorProgrammeManager,providedsupportandstrategicdirection.ValuablecommentsandinputswereprovidedbyIEAcolleagues(inalphabeticalorder):AshleyAcker,PiotrBojek,StéphanieBouckaert,FrancoisBriens,ErenCam,JonathanCoppel,JavierJorqueraCopier,MarcCasanovas,TanguyDeBienassis,ChiaraDelmastro,MichaelDrtil,KeithEverhart,EricFabozzi,PaoloFrankl,EnriqueGutierrez-Tavarez,JuliaGuyon,PabloHevia-Koch,ZoeHungerford,NickJohnstone,RenaKuwahata,SilviaLaera,RebeccaMcKimm,AloysNghiem,AlessioPastore,KseniaPetrichenko,IsaacPortugal,AlisonPridmore,ArnaudRouget,AlexandreRoussel,GianlucaTonolo,KartikVeerakumar,BrentWanner,JacquesWarichet,andbyformerIEAanalystLuisLopez.TheworkbenefitedfromtheexpertiseofconsultantsMattChester,PeterFraser,AsthaGupta,LuisMunuera,HelenaLinquist,AlvaroLopez-Peña,andMonicaTroilo.TheIEAwouldliketothankthefollowingexpertswhoprovidedvaluableinputs,reviewandencouragement(inalphabeticalorder):BunmiAdekore(BreakthroughEnergyVentures),JohnAndersson(TheLightswitch),ElisaBastos(BrazilianElectricityRegulatoryAgency(Brazil’sElectricityRegulator[ANEEL]),MaxBerggren(TheLightswitch),AlbertoBiancardi(ItalianEnergyServiceSystemUnlockingSmartGridOpportunitiesAcknowledgements,contributors,andcreditsinemergingmarketsanddevelopingeconomiesPAGE6IEA.CCBY4.0.Operator[GSE]),PierreBivas(Voltalis),DanielBrooks(ElectricPowerResearchInstitute[EPRI],BrittaBuchholz(HitachiEnergy),FelipeCalábria(ANEEL),AliciaCarrasco(OlivoEnergy),JoséPabloChavesÁvila(ComillasUniversity),RussConklin(USDepartmentofEnergy),GaneshDas(TataPower),ErcoleDeLuca(Areti),GilbertoDeMartinoJannuzzi(InternationalEnergyInitiative),MicheledeNigris(ResearchontheEnergySystems[RSE]),MarkDyson(RockyMountainInstitute),GabrielaElizondo(WorldBank),JuanManuelEspañaForero(MedellínUniversity),NiccoloFattirolli(OlivoEnergy),AlexFeil(ANEEL),YannFromont(SchneiderElectric),ClaudiaGibbard(UKDepartmentforBusiness,EnergyandIndustrialStrategy[BEIS]),PabloGonzalez(Iberdrola),GiorgioGraditi(ItalianNationalAgencyforNewTechnologies,EnergyandSustainableEconomicDevelopment[ENEA]),BrunoGoulart(ANEEL),NikosHatziargyriou(EuropeanTechnologyandInnovationPlatformofSmartNetworksforEnergyTransition),ShanHu(TsinghuaUniversity),M.Ilham(IndonesianCoordinatingMinistryofMaritimeAffairs),SelenaJihunLee(WorldBank),LawrenceE.Jones(EdisonElectricInstitute),NicoleKerkhof-Damen(DutchEnterpriseAgency[RVO]),ArunKumarMishra(NationalSmartGridsMission),MassimoLaScala(PolitecnicodiBari),HelenaLindquist(TheLightswitch),KabirMalik(WorldBank),MassimoMaraziti(DirectorateGeneralforEnergy,EuropeanCommission),LucaMarchisio(TrasmissioneElettricaReteNazionale[TERNA]).PeterMarkussen(Energinet),RodolfoMartinez(Iberdrola),LucianoMartini(RSE),VincentMinier(SchneiderElectric),JuanDavidMolinaCastro(ColombiaInteligente),AntonelloMonti(Rhine-WestphaliaTechnicalUniversityAachen),MarioMotta(PolitecnicodiMilano),NgalulaSandrineMubenga(ElectricityRegulatoryAgencyofCongo),YacobMulugetta(UniversityCollegeofLondon,DepartmentofScience,Technology,Engineering&PublicPolicy),StephenNash(KuunganaAdvisory),AndresPinto-Bello(SmartEnergyEurope[smartEn]),AnilRawal(IntelliSmart),TimReber(NREL),J.B.V.Reddy(DepartmentofScience&Technology,GovernmentofIndia),JersonReyes(ComisiónNacionaldeEnergía,Chile[CNE]),YvonneRuwaida(Vattenfall),ErnestoSandosVallejo(OlivoEnergy),BarisSanli(MinistryofEnergyandNaturalResources,RepublicofTürkiye),MarinaSantos(Neoenergia),AlexandraSchneiders(UsersTCP,GlobalObservatoryP2P),DavidShipworth(UniversityCollegeofLondon,EnergyInstitute),SanjaySeth(TheEnergyandResourcesInstitute[TERI]),ReenaSuri(IndiaSmartGridForum),MarceloTardío(CESI),JavierToro,CNE),MatteoTroncia(ComillasUniversity),FernandoDavidMartinUtrilla(Iberdrola),MarcosVasconcelos(BrazilianElectricityRegulatoryAgency,ANEEL),MarianaVaz(ANEEL),VivianaVitto(Enel),KumudWhadwa(NationalSmartGridMission,andDaYan(TsinghuaUniversity).ThanksalsototheIEACommunicationsandDigitalOffice(CDO)fortheirhelpinproducingthispublication,especiallytoJadMouawad,HeadofCDO,PoeliBojorquez,CurtisBrainard,JonCuster,AstridDumond,TanyaDyhin,MerveErdil,UnlockingSmartGridOpportunitiesAcknowledgements,contributors,andcreditsinemergingmarketsanddevelopingeconomiesPAGE7IEA.CCBY4.0.GraceGordon,BarbaraMoure,IsabelleNonain-Semelin,JuliePuech,CharnerRamsey,GregoryViscusi,ThereseWalsh,andWonjikYang.MarilynSmith(ORENDACommunications)editedthereportandgraphicdesignwasbyCarenandDavidWeeks(Weeks.de)TheIEAremembersKathleenGaffneyandhercontributiontotheworkonenergyefficiencyanddigitalisation.Sheisdearlymissed.UnlockingSmartGridOpportunitiesAcknowledgements,contributors,andcreditsinemergingmarketsanddevelopingeconomiesPAGE8IEA.CCBY4.0.UnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE9IEA.CCBY4.0.ExecutivesummaryDigitaltechnologiescanhelpresolveimmediatechallengesandreduceinvestmentcostsThesuccessofthecleanenergytransitionrequiresafundamentaltransformationofpowersystems,includingmuchhigherlevelsofdigitalisationatscaleacrossallgriddomains,fromgenerationtotransmissionanddistributiontoend-use.Thedigitalisationofgridscansupportutilitiestoaddressdemandgrowth,decarbonisationchallengesandimproveresilience.Forexample,digitalsolutionscanenableutilitiestolocateandfixfaultsmoreeffectivelyandprovidequickerrestorationtimes,loweringthecostanddisruptioncausedbyoutages.Digitaltechnologiescanalsohelpimprovemaintenanceandextendthelifetimeofgridassets,whichcoulddeferanestimatedUSD1.8trillionofgridinvestmentgloballyto2050.Globally,currentinvestmentingridsisfarshortofthelevelneededtobeontrackfornetzeroglobally;annualinvestmentingridswillneedtomorethandoublefromaroundUSD330billionperyeartoUSD750billionby2030,witharound75%oftheinvestmentsallocatedtothedistributiongridstoexpand,strengthen,anddigitalisetechnologies.Thereisgreatpotentialforraisingambitions;however,manychallengestorampupinvestmentremain.Thisreportguidesenergypolicymakersonthefunctionalitiesdigitaltechnologiescanprovideformoreefficientandresilientelectricitygrids.Inaddition,itoutlinespossiblewaystoenableanddriveinvestmentsandcreateasupportiveregulatoryandpolicyenvironment.Electricityiscentraltocleanenergytransitions,butnumerouschallengesneedtobetackledElectricitydemandissettooutpaceenergyconsumptionoverthenext25years.Inemergingmarketsanddevelopingeconomies1,demandcouldincreasebyover2600TWhbyasearlyas2030,equivalenttofivetimesthecurrentelectricitydemandofGermany.Duetounderinvestment,electricitysystemsgloballyfacemyriadchallenges,includinginefficiencies,losses,congestionandoutages.Climatechangeiscausingfurtherdamagetoassetsandaffectingreliability.Electrificationofend-1Inthisreport,emergingmarketsanddevelopingeconomies(EMDE)isnotincludingthePeople’sRepublicofChina.UnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE10IEA.CCBY4.0.uses,andchangesindemandcoupledwithincreasingsharesofvariablerenewablesarecreatingadditionalpressuresforadvancedeconomies,emergingmarkets,anddevelopingeconomies.Theimperativetostrengthenandmodernisegridsisincreasinglyacuteinemergingmarketsanddevelopingeconomies,whereelectricityconsumptionissettogrowataroundthreetimestherateofadvancedeconomies.Oneofthegrowingsourcesofelectricitydemandiscooling.ManyelectricityutilitieswerealreadyinadifficultfinancialsituationheadingintotheCovid-19pandemic,withoperationallossesclimbingsubstantiallysincethen.Moreover,2022sawareversalofrecentprogressinimprovingaccesstoelectricity,withanadditional20millionpeoplelivingwithoutaccess,bringingthetotalaffectednumberofpeopletonearly775million.UnreliablegridsareposingsevereriskstoeconomiesandpeopleOneoftheimmediatebenefitsofpowersystemdigitalisationisimprovementsinreliability.Thecostofunreliablegridsishigh.Duetoelectricityoutages,firmsinemergingmarketsanddevelopingeconomiesoperatebelowcapacityeachyearandmustpayforbackupelectricitygeneration.IEAestimatesthatwithoutanimprovementinthesecurityofelectricitysupplyenabledbydigitaltechnologies,theselossescouldamounttoalmostUSD1.3trillionthroughto2030.Thislostrevenuecouldbevitaltoimprovingutilities'financesandboostingeconomicdevelopment.InSub-SaharanAfricain2021,theamountofelectricityproducedbybackupgeneratorsbytheend-usersexceededthatofallrenewableenergyproduced,withexpenditureonbackupgenerationexceedingtherevenueofallcombinednationalgridsintheregion.Insomecountries,unreliablegridshavefar-reachingeffectsontheeconomy,leadingtogrossdomesticproduct(GDP)lossesofupto6%.Beyondmonetaryimplications,interruptionsaffectallcriticalinfrastructuresandcanaffectwaterandfoodsupply,accesstomedicalassistance,financialservices,telecommunicationsandmobility.Therebyposingriskstohealth,wellbeingandsafetyandconstrainingdailyactivitiesandproductivity.Inaddition,globally,technicallossesingridsresultinaroundonegigatonofcarbondioxide(GtCO2)emissionsannually,whilenon-technicallossesarethesourceoflostrevenueof80-100billionperyearbutalsocreateseveresafetyrisksforpeople.UnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE11IEA.CCBY4.0.PowersystemdigitalisationiscrucialforefficiencyanddecarbonisationSmartgridimplementationprovidesaddedvalueacrossarangeofareas.TheIEAestimatesthatdigitallyenableddemandresponsecouldreducethecurtailmentofvariablerenewableenergysystemsbymorethan25%by2030,increasingsystemefficiencyandreducingcostsforcustomers.Decarbonisationcanbefurthersupportedthroughenhancedsupplyanddemandforecasting,enablingintegratedenergyplanningandprovidingbettervisibilityandgreaterelectricitydemandflexibility.Manycountries,includingBrazil,IndiaandSouthAfrica,areseeingarapidincreaseintheuptakeofdistributedsolarphotovoltaic(PV)systems.Forexample,inBrazil,distributedsolarPVinstalledcapacityrosebyalmost7GWin2022,anincreaseofmorethan50%inoneyearalone.Whilehighersharessignificantlybenefitenergysecurityanddecarbonisation,managingsuchgrowthiscrucialtomaintainsystemreliability,controlsystemcosts,andensurethatutilitybusinessmodelskeeppacewiththesechanges.Digitallyenabledtechnologiesarealsocrucialforexpandingdecentralised,cleanenergyaccesstocommunitiesinremotelocationsorlow-incomeareasnotcurrentlyservicedbyelectricitygrids.Digitalsolutionscanenablemoreefficientmini-gridsandlargerstandalonecommunityassets.Inaddition,technologiessuchassmartinverterscanhelpautomaticallymonitorandmanageelectricitydeliveryandreduceserviceinterruptionsduringpeakdemandwhileincreasingtheproductiveuseofelectricityduringlowerdemand.Digitaltechnologiescanalsoenablebettermanagementofgrowingdemandcombinedwiththeelectrificationofend-usestohelpavoidunnecessaryinvestmentingridexpansion.Inaddition,thesetechnologieslimitinfrastructureinvestmentneedsbyprovidingreal-timemonitoringandcontrol,especiallyindistributionsystems.Forexample,spacecoolingisoneofthefastest-growingsourcesofelectricitydemand.Insomecountries,coolingdemandinbuildingsalreadyaccountsforasmuchas30%ofpeakelectricityloads.Moreover,rapidlyincreasingownershipanduseofairconditionerswilllikelycauseittoriseevenfaster.Fromaround2billionunitstoday,thenumberofairconditionersgloballycoulddoubleby20302,ofwhich590millionmaybeaddedinemergingmarketsanddevelopingeconomies.Asdemandgrows,themoregranularlocationalandtemporalvisibility2BasedontheIEANetZeroEmissionsby2050Scenario.UnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE12IEA.CCBY4.0.ofdigitalelectricitydistributionsystems,combinedwithsuper-efficientappliances,cansupportgridstability,ensureelectricityaffordabilityandavoidlocalisedoutages.TargetedactionscanhelpscaleupinvestmentsinsmartgridimplementationTounlockthesedigitalopportunities,adequateplanning,investmentandpolicyactionareneeded.Forexample,tobridgetheinvestmentgapanddriveinvestmentstowardsmodernisinggrids,policymakerscouldconsideractionstoleveragethefullrangeofpotentialinvestorsanddevelopmodelsthatadequatelyvaluebroaderbenefits.Manypotentialinvestorsexistforsmartgridprojects,fromstate-ownedenterprisestoprivateinvestorsandmultilateralorganisations.Governmentscouldsupportthedesignofprojectstoleverageeachtypeofinvestorbest,consideringtheirpreferencesfortherightcombinationofdebt,equityorgrantfinancingtomobilisecapitalwhilestillensuringappropriateriskallocation.Policymakerscouldconsideropportunitiestoaggregatesmallprojectstoincreasethepotentialpoolofinvestorsorrealiseeconomiesofscalewhenfocusingonprocurement.Toattractcontinuedinwardinvestmentandbuildconfidence,governmentscansignaltothemarkettoformafuturepipelineofprojects.Thisrequiresfuturevision,planningandimplementation.Substantialpotentialcapitalisavailableforgridprojects.Still,itisnecessarytobuildthebusinesscaseforgridreinforcement,minimisetransactioncosts,reduceprojectriskprofiles,andopenupnewvaluechains.Internationalco-operationcanpromotestandardisationtoreducebarriersandincreasedigitalgridinvestments.Beyondthesepoints,acriticalaspectiscreatingincentivesforutilitiestoinvestandsupportingthedevelopmentofplans,capacity,andtoolstostimulateinvestmentsandaccelerateimplementation.FivepolicyactionareastosupportsmartgridimplementationandcontinuousimprovementBeyondtargetedactionstofacilitateinvestments,thisreportidentifiesfivekeystepsforgovernmentstoacceleratetheimplementationofdigitaltechnologies.CreateacoherentvisionandmoderniseplanningAcrucialfirststepisforgovernmentstoenvisionhowdigitalgridtechnologiescanhelpmeetcountrypriorities–includinggridupgrades,energyaccessanddecarbonisation.ThisvisioncanthenbetranslatedintoupdatedpolicyandUnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE13IEA.CCBY4.0.regulatoryframeworks,whichrecognisethevalueofinvestmentstoharnessdigitalcapabilitiesandsystemefficiency.Thisrequiresengagingallstakeholdersfromthedigitalandenergyspaces.Governmentscanalsodriveinvestmentbyhelpingutilitiesadoptintegratedplanning.Aselectricitygridsbecomeincreasinglycomplex,awhole-systemsapproachtoplanningiskeytoembeddingdigitaldeploymentintoenergyandbroadereconomicplans.Toooften,planningdoesnotincludeasystemicapproach.Itisalsoimportanttoconsiderdistributedresourcesandthedemandsideinplanningandaligninginvestmentdecisionsacrosssystemoperators,networkcompaniesandotheractorsinverticallyintegratedandunbundledmarkets.Co-ordinateimplementationGovernmentscanhelpensurecoherencebetweenenergy,electricity,economy,digitalandotherdepartments,digitalandenergyregulators,andthedigitalandelectricityindustry.Governmentscanalsohelpalignnationalinnovationsystemsfordigitaltransformationwithenergypolicyobjectives.Forexample,large-scaledemonstrationscanhelptestdigitalsolutionsonenergyinfrastructure,whichgenerallyrequireacertainscaletovalidatebusinesscases.Governmentscanalsoplayanactiverole,includingaconveningone,inenhancingdataaccessandsharing–allcrucialfordigitalinnovationstovalidatetheirbusinessmodels.Governmentstewardshipofpowersystemplanningcouldalsoensurethatmorecomprehensivesocio-economicbenefitsofdigitalisationarewidelyandequitablyshared,notleasttoimproveaccessandprovidetheskillsneededfornewemploymentinsmartgrids.FacilitaterulesandregulationsthatadequatelyvaluedigitalsolutionsIntheirregulatorycapacity,governmentscouldconsiderdedicatedpoliciesandregulationstoincentiviseandde-riskdigitalisationinvestments.Thisincludesconsideringashifttowardsperformance-basedregulatoryoversightbyprovidingincentivesandpenaltiestomeetcleanenergytransitionobjectivesandmeasurestosupportinnovation.Governmentscanalsohelpincorporatethevalueofelectricityacrossallpoliciesandtheimportanceofsupply-demandbalanceandflexibility.Providingguidanceandsupportformorenuancedevaluationsofcostsandbenefitsandfuture-proofingpoliciesandconstraintscanpavethewayfordigitalisationtointeractwithelectricitygridsinawaythatpromotessystemsefficiency.UnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE14IEA.CCBY4.0.IntegrateresiliencyandsecurityacrossallelectricitypolicydomainsInthecontextofmountingclimateimpacts,thereisanopportunitytobuildresiliencewhileexpandinganddevelopingpowersystems.Governmentsincreasinglystrivetointegrateresiliencyandsecurityacrossallelectricitypolicydomains,includingthroughlong-termplanningandstrategicframeworkssuchasNationallyDeterminedContributions(NDCs),energytransitionplans,orLowEmissionsDevelopmentStrategies(LEDS)whichhighlightthevalueofphysicalanddigitalresilience.Theycouldalsoensurecyberresilienceismainstreamedacrossrulesandregulations–whichcangreatlypromotedigitalisationinvestment.Governmentsalsohaveakeyroleinhelpingmanagesystemicrisksandstrengthenthetiesbetweendigitalandphysicalinfrastructureresiliencyandsecurity.Track,evaluateanddisseminatedigitalisationprogressGovernmentscancreateadata-drivencultureinthepublicsector,whichincludesmonitoringandevaluatingdigitalisationprogress.Targeting,implementingandenforcinggovernmentpoliciescanallbeenhancedbycontinuouslymonitoringtheimplementationofenergytransitionanddigitalstrategies.Digitaltoolscanplayakeyroleinthisrespect,providedgovernmentsreinforcetheirinstitutionalcapacitytomanageandmonitorprojectimplementation.Policymakerscouldconsideractionstopromoteinformationsharingunderpinnedbyrobustdataframeworks,monitoringandevaluation.Strengtheninginternationalcollaborationandknowledgesharingisvitaltodevelopingcommonpracticesandstandardsandidentifyingareaswhereinnovationcanbeleveragedjointly,acceleratingprogressatalowercost.Collaborativeapproachesarewarrantedfordemonstrationprojectstoprovidevaluablelessonsonhowtomanagedigitaltechnologiesatalargerscaleandcreateevidenceofthevaluecreatedbydigitalsolutionsandtechnologies,whichcan,inturn,helpde-riskfutureinvestments.TheIEAmonitorselectricitysystemdigitalisationprogressandprovidescontinuedguidanceProducedundertheDigitalDemandDrivenElectricityNetworks(3DEN)initiative,thispublicationisthefirstofasetofthreeIEA2023reportsongridsanddigitalisationaspartofagrowingportfolioofanalysisandpolicyguidance.ItwillbefollowedbyanIEASpecialReportonPowerGrids,thatwillprovideaglobalstock-takeandperspectives,whichinturnwillbefollowedbyafurther3DENreport“GridsoftheFuture”thatwillfocusontheroleofdigitaltechnologiesinacceleratingandintegratingdistributedandrenewableenergytechnologiesandUnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE15IEA.CCBY4.0.thepolicyactionsneededtoday.ThisreportwilllookthroughthelensoftheIEANetZeroEmissionsScenarioandexaminetheshiftsinelectricitylandscapesandthefunctionalitiesneededtoaddressthesechangeswhilemaintainingsecurity,affordability,andsustainability.Thiswillthenbeusedasamirrortoreflectonelectricitygridstodaytoexplorewhatactionswillbenecessarytofacilitatetheincreaseddemandduetocross-sectoralelectrification,highersharesofvariablerenewableenergypenetration,andhowdigitalisationcanbeleveragedasatooltomanagetheintermittencyofsupply,providesystembalancing,andultimatelyincreasewholesystemefficiency.Inaddition,theIEAisproducingarangeofknowledgeproductsandiscreatingopportunitiesforpeer-to-peerexperienceexchangeandlearning.IEA.CCBY4.0.UnlockingsmartgridopportunitiesinemergingmarketsanddevelopingeconomiesExecutivesummaryPAGE16IEA.CCBY4.0.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE17IEA.CCBY4.0.IntroductionEmergingmarketsanddevelopingeconomiesneedreliableandefficientgridsInrecentdecadeselectricitygridsinmanyemergingmarketsanddevelopingeconomieshaveimproveddramatically,withincreasedreliability,addedcapacity,andaccessextendedtomillionsofpeopleforthefirsttime.However,theseimprovementshavenotbeenreplicatedinallregions,wheresomehavestruggledtomeetgrowingdemandwithlimitedresourcesandalegacyofold,inefficientpowersystems.Withmanyhouseholdsstilllackingaccesstoreliableelectricity,thereisgreatpotentialforwell-functioning,modern,digitallyenabledelectricitygridstodrivesocio-economicdevelopment.Thestartofthe2020shasgreatlyexacerbatedtheseissues,amplifyingasenseofurgencyaboutthestateofelectricityinfrastructureanditsroleintheplanet'sfuture.First,inadditiontobringingtheimmediateburdenofamajorpublichealthcrisis,theCovid-19pandemictriggeredeconomicrecessionsinmanyemergingmarketsanddevelopingeconomies.Second,in2022,theRussianFederation’s(hereafter,Russia)invasionofUkrainesentshockwavesthroughglobalenergymarkets.Thespikeinfuelcostsin2022-23hascreatedextraordinarilydifficultfinancialcircumstancesforutilitiesaroundtheworld.Manywerealreadyunderpressuretominimisepriceincreases,ascustomersareparticularlysensitivetopricehikesandstillmaintainfinancialstrength.Theimpactonutilitiesinemergingmarketsanddevelopingeconomiesisevenmoredebilitatingasitslashesfundsavailableforinvestmentwhensuchfinancingneedstoincreasesubstantiallyandrapidly.Formanyutilities,theneedtodealwithacontinualflowofpressingchallengesmakesitimpossibletoplanordirectlimitedresourcestowardsembeddingmodernfunctionalitiesduringroutineassetreplacements.Ultimately,thiscanleadtostrandedassetsorinefficienttechnologicallock-ins.Inturn,unreliablesupplyandassociatedload-sheddingpracticescreateaviciouscirclethatfurtherunderminesutilityrevenues.Theserecentcriseshighlighttheincreasingurgencytotransformenergysystemsinlinewiththe2015ParisClimateAgreement.Thelatest(2023)assessmentfromtheInternationalPanelonClimateChange(IPCC)concludesthattolimitglobalwarmingto1.5°C,globalCO2emissionsmustbereducedbynearlyone-halfby2030andreachnetzerobyaround2050.Thishingesontwomajortransformations:bringingonlinevastamountsofcleanelectricitygeneration,muchofitvariable;electrifyinglargevolumesofdemand.ToachieveapeoplecentredUnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE18IEA.CCBY4.0.andinclusivecleanenergytransitionthatenhancespeople’slives,anoverarchingchallengeistoensureaccesstoreliable,affordable,andsustainableelectricity.Withgrowingpopulations,increasedurbanisationandeconomicdevelopmentleadingtoanincreasedstandardofliving,electricitydemandisexpectedtocontinuetoincreasesignificantlyinthecomingyears.Electricitydemandinemergingmarketsanddevelopingeconomiescouldincreasebyover2600TWh3byasearlyas2030,equivalenttofivetimesthecurrentelectricitydemandofGermany.Oneofthegrowingsourcesofelectricitydemandiscooling.Opportunitiesexiststodevelopandimplementstrategiesthatshifttowardselectrification.Whilestillintheearlystagesinmostemergingmarketsanddevelopingeconomies,electrificationofheating,transportandmanyindustrialprocesseswillalsodriveelectricitydemandandchangedemandpatterns.SpacecoolingdemandbyregionintheStatedPoliciesScenarioandAnnouncedPoliciesScenarioby2030and2050IEA.CCBY4.0.Note:Electricitydemandforcoolingrisesby3200TWhto2050intheStatedPoliciesScenario(STEPS);growthiscutbymorethan50%intheAnnouncedPledgesScenario(APS)thankstoairconditionerandbuildingenvelopeefficiencygains.Whetheremergingmarketsanddevelopingeconomiescanleveragethisopportunitydependsheavilyonwhetherelectricitygeneratedcanbedeliveredefficientlyandreliablytodemandcentres–whichraisesthecorequestionofgridpreparedness.Inrecentyearsinmanyemergingmarketsanddevelopingeconomies,therehasbeengoodprogressinfinancingandconstructingadditionalgenerationcapacity.However,theeffectivenessoftheseresponses,inparticulartheamountofnewvariablerenewablesthatcouldbeinterconnectedtothegrids,3BasedonIEAAnnouncedPledgesScenario,electricitydemandforEMDEcountriesexcludingthePeople’sRepublicofChina.4%8%12%2000400060002021STEPSAPSSTEPSAPSLeftaxislabelRestofworldJapanAfricaEuropeanUnionC&SAmericaMiddleEastSoutheastAsiaUnitedStatesChinaIndiaShareofelectricityUnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE19IEA.CCBY4.0.willdependonthegridinfrastructureitselfandoperationalreadinessofgridoperators,atdistributionandtransmissionlevel.Privateinvestmenthasalsonothelpedalleviatethesituation:theinternationalfocushasbeenkeptonchannellinginvestmentflowstowardgenerationassets.CurrentandfuturechallengesforelectricitygridsinemergingmarketsanddevelopingeconomiesIEA.CCBY4.0.UnderinvestmentisholdingbackdevelopmentTodayweareexperiencingaglobalenergycrisis–notjustoilbutalsogas,coal,andelectricity.Theshortagesofgasandcoalaredrivingelectricitypricesupandmakingelectricityunaffordableand,insomecases,unavailable.WhilemuchoftheattentionhasbeenonEurope,thiscrisisisaffectingemerginganddevelopingcountriesevenmoreincludingthroughgrowinginabilitytopaytehighpricesforgasandcoalthatwenowseeinworldmarkets.Thisiscausingelectricitysecurityconcernsinsomecountries–suchasPakistan,Bangladesh,India,andThailandfacingdifficultytosecuregascontractswithallthepotentialnegativeimpactsonthehealthofcitizensandoneconomicgrowthanddevelopment.Concernsaboutelectricitygridreliabilityandthecostofgrid-suppliedelectricityaredrivingmoreandmoreconsumerstoinvestinalternatives,oftenfossil-fuelledgenerators.Thisplacesadditionalpressureonalreadyweakutilities.Inmarketswiththehighestfossilfuel-basedgeneratoruse,includingmuchofSub-SaharanAfrica,spendingonfuelforgeneratorsnowexceedsthatoftheentireelectricitygrid.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE20IEA.CCBY4.0.However,thesearesymptomsofabroader,chronicissue:thecostoflong-termunderinvestmentinelectricityinfrastructureinmanypartsoftheworld.Therearecostandvalueimplicationsforenergyutilities,businesses,citizens,andthenationaleconomy.InsufficientinfrastructureisconstrainingeconomicgrowthItisestimatedthatduetoelectricityoutages,eachyearfirmsinemergingmarketsanddevelopingeconomiesexperienceanefficiencylossofaroundUSD38billionduetooperatingbelowcapacity,saleslossesofUSD82billion,fixedandvariablecostsforbackupelectricitygenerationofUSD65billion,allofwhichcouldamounttoalmostUSD1.3trillionthroughto2030.Insomeemergingmarketsanddevelopingeconomies,thelossofelectricityismorefrequent.Onaverage,Nigerianfirmsforexample,experience25electricityoutagesinatypicalmonth,whileinBangladesh,firmsreportedover100electricityoutagesamonth.Thereareobviousimpactsfromelectricityoutagestoafirmrelyingonelectricityforproductivework,shopsandmarketsbeingaffected,andfoodmanufacturingbeingforcedtostopproductionandcreatingsupplychainissues.Manyfirmsrelyonelectricityforcardpayment,forstaffworkingfromhomeoronsite,orforadministrationpurposes.Theglobaleconomiceffectsofelectricityoutagesarenotspreadevenly.China,itisestimatedthattheinterruptioncoststofirmsforasingleoutageeventisaroundUSD200million.Firmsinhigh-incomecountriesexperience,onaveragealossinsalesofaslittleas0.5%annually,whereasfirmsinEMDEscanexperienceasmuchas5.5%lossinsales.MeasuringthecostsofinsecureelectricitysupplyOnemetricusedtoestimatetheeconomiceffectsofinsecureenergyisthevalueoflostload(VoLL),whichisseenasthepricesocietyiswillingtopaytoavoidanelectricitycut.StudiesshowthattheVoLLintheEuropeanUnionrangesuptomorethanUSD130.00/kWh,andintheUnitedStatesandNewZealandtomorethanUSD250.00.InIndonesia,itiscalculatedtobejustoverUSD2.00/kWhwhileinBrazil,itislessthanUSD1.50.TheVoLLcanbeusedtoevaluatedirectcostsoflimitedamountsofenergynotsupplied,dependantonseveralfactorssuchastheaffectedstakeholders,thetimeofday,duration,frequencyandseasonofthedisruption.However,itdoesnotfullyreflectallthebroadercoststosocietyofinterruption,especiallyforhigh-impacteventsorlackofaccess.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE21IEA.CCBY4.0.LossesareweakeningutilitiesandcontributingtoemissionsOneissuethatcontributestobothgridinstabilityandpoorfinancialstandingofutilitiesislosses.Inbothelectricaltransmissionanddistributionsystems,therearetwocategoriesoflosses:technicallosses(TL)andnon-technicallosses(NTL).SomeTLareafunctionofthesizeofagridandareduetothedistanceselectricityneedstotravelalongtransmissionanddistributionsystems.However,technicallossescanalsobeattributedtoaginginfrastructureorfaultyworkmanshipatweakpointswherecablesarejointedtogetherorterminatedattransformersorswitchgear.Infrastructureoperatingoutsideofitsdesignedparametersforexample,whereundergroundcables,overheadlineconductorsortransformersareinadequatelysizedforcurrenttheyarecarrying–willalsoexacerbateefficiencylosses.Incontrast,NTLarelinkedtootherfactorssuchasfaultymeters,unregisteredmetersorfraudulentmeterreadingteams;bypassedmeters;orillegalconnectionstothedistributionsystem;orincorrectbillingbytheutility.NTLcanbefrombothresidentialandlargenon-residentialusers.Indeed,whenNTLaregreaterthan25%ofsupplytothesystem,thenitislikelytobefromlargecommercialorindustrialusers.Globally,technicallossesingridsresultinaround1gigatonofcarbondioxide(GtCO2)emissionsannually.TheIEAestimatesthatreducingworldwidelossestowardsefficientlevelsofaround5%–fromasmuchas18%insomeregionstoday–couldreducetheseemissionsbyover400milliontonnes(MtCO2),whichismorethanthetotalannualemissionsofMexico.Globally,itisestimatedthatthecommercialeffectsofnon-technicallossesamounttobetweenUSD80-100billioneachyear.TheadditionalburdenofweakgridsTomitigatetheintermittencyofelectricitysupply,manyfirmsfacedthedecisionofwhethertoacceptthattherewillbeperiodsinwhichactivitieswillceasebecauseofoutagesortoinvestinanelementofself-resilience.Thisisusuallyanemergencybackupgenerator,whichmostofthetimereliesondieselasasourceoffuel.Firmsincuradditionalcoststoacquireandoperatesuchsystems.Itisestimatedthat,eachyear,firmsinemergingmarketsanddevelopingeconomiesspendUSD6billiontoprocuregeneratorsandalmostUSD60billiononoperatingcostsforfuelandmaintenance.InIndia,forexample,commercialandindustrialentitiesUnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE22IEA.CCBY4.0.consumeupto300litresofdieseleachhourduringoutagesofupto6hoursperday.InSub-SaharanAfrica,thecollectivespendonfuelforgeneratorsismorethantheexpenditureforoperatingthecombinednationalgrids.Thisfurtherreinforcesthetrapoftheviciouscycleofunderinvestmentinelectricityinfrastructure.InSub-SaharanAfrica,backupgeneratorcapacitywas45GWin2021,morethanalltherenewables‐basedgenerationcapacityintheregion.Nigeriaalonehas13GW,with40%oftotalelectricityproducedfrombackupgeneration.Worseningfinancialdifficultiesexperiencedbymanyemergingmarketsanddevelopingeconomiesutilitiesarehamperinginvestmentinnewtransmissionanddistributionassets,resultinginaprogressivelyobsolescentsystem.Forfirms,theadditionalrunningcostsforbackupgenerationcanbetwiceasexpensiveasgrid-connectedelectricity.Between2021and2022inNigeria,forconsumersusingamixofgridandbackupgeneration,electricitycostsincreasedby150to170%;thosedependentondieselgeneratorsalonehavefacedanincreaseof220to260%.Economiceffecttofirmsduetoinsecureelectricitysupply,withaverageannualelectricityserviceinterruptionsIEA.CCBY4.0.Source:IEA(2023),IEAanalysisbasedonWorldBank(2023),andWorldBank(2019),TheBusinessCostsofUnreliableInfrastructureinDevelopingCountries(accessed30May2023)Backupgenerationisalsolinkedtoenvironmentalissuesindevelopingcountries,contributingover100MtCO2emissionsannually,whichismorethanthetotalemissionsofBelgium.Italsocreateslocalisedambient(outdoor)airpollutionwithdeadlylevelsofparticulatematter.Globally,ambientairpollutionisresponsibleforover4millionprematuredeathsannually,anddisproportionatelyaffectsdevelopingcountries.PeopleinAfricaaresixtimesmorelikelythanthoseintheUnitedStatestodieprematurelyfromairpollution.10%20%30%40%50%60%05101520253035MoroccoTunisiaIndonesiaIndiaColombiaBrazilSouthAfricaSystemaverageinterruptiondurationindex(SAIDI),2020Systemaverageinterruptiondurationindex(SAIDI)Averagelossesduetoelectricaloutages(%ofannualsales)Ifageneratorisused,averageproportionofelectricityfromagenerator(%)UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE23IEA.CCBY4.0.ThemainfactorsforNTLcanbeunaffordabilityfortheuser,poorcustomer-energyutilityrelationswhereunpaidconsumptionisviewedasameansofprotestandacultureofnon-paymenthasbeenestablished,orfaultyequipmentwherethecustomerorutilitymaybeunawareofanissue.InGhana,aftermultipleinterventions,NTLisover25%ofgrosselectricitygeneratedandhasanestimatedcostofoverUSD400millionannually.In2021,NTLsinBrazilamountedtoalmost36TWh,costingaroundUSD1.8billion.Lossoflifeisanotherchallenge,particularlyforthosewhocomeintocontactwithlivecableswhileactivelyinvolvedinillegallyobtainingelectricity–ordosounwittingly.OneelectricaldistributionutilityinGhanastatedthatintheiroperationalareaalonecovering30%ofthecountry,between2014and2022,over180peoplesufferedelectricshock,ofwhichmorethan130werefatallyinjured.Thetruenumberislikelytobemuchhigher,particularlyinruralareaswhereincidentsmaygounreported.Forexample,inUganda’sEasternregion,thereareanestimated50incidentsofelectricshockoccurperweek.TheGhanaianDumsorCrisisDumsoristranslatedfromlocaldialectsinGhanaas“quenchandkindle”or“off-on”andisusedcolloquiallytodescribepersistentelectricityoutages.Dumsorhasprovidedafascinatinginsightintohowunreliablesupplyreducedthevalueofelectricityandcreatedaviciouscycleofreducedwillingnesstopay.Initially,acapacityshortageprecipitatedtheDumsorduetoreducedwaterlevelsintheVoltaHydroelectricDam.Toincreasethesecurityofsupply,additionalgasturbineswerebroughtonlineinsubsequentyears,butdamagetoaNigeriangaspipelinesupplyingGhanaledtofurthercapacityshortagesandsubsequentelectricityoutages.TheeconomiceffectsfromDumsorovertheperiod2012-16havebeenestimatedasaGDPlosssomewherebetweenUSD320-920million,amountingtobetween2-6%ofGhanaianGDP.Atthesubnationallevel,theeffectsofoutageswerenotevenlyspreadacrosstheelectricitygrid,withsomefeedersexperiencingmorelossofsupplyincidences.Thedatafroma2019studyonnon-paymentofelectricityinGhanademonstratedhowtheseeventscontributetoaviciouscircle.Thereisanalmost17%increaseinunpaidelectricitybillsfromcustomersonthemost-affectedsectionsofthegridcomparedtothosethathaduninterruptedsupply,withtheaveragedebtstandingatalmostthreetimesthemonthlycharge.Thissituationofpoorqualityofsupply,highnon-paymentofbillsandlowfinancialperformanceoftheutilityisnotthecaseonlyofGhana.Of76utilitiesinthe45countriesofSub-SaharanAfrica,aroundone-in-threerecovertheiroperatinganddebt-servicecosts.Withoutgovernmentsubsidies,thisratiofallsevenlower,toone-in-four.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE24IEA.CCBY4.0.MillionshavelostaccesstoelectricityThefirstprioritiesforelectricitypolicyacrossAfricaremainincreasingaccessandimprovingreliabilityforend‐users.In2022,some80%offirmsandcloseto60%ofhouseholdsintheregionfaceregularunplannedandlengthyoutages.Electricityaccessremainedunavailableforalmost775millionpeoplein2022–mostlyinSub-SaharanAfrica.Infact,upto30millionpeopleacrossthecontinentwhopreviouslyenjoyedaccesscannolongeraffordelectricity.Thisnumberisontheincrease,reversingadecadeofsteadyimprovement.Fewerthan6in10Africanhouseholdsareconnectedtoanelectricgrid.PreliminaryfindingsfromanongoingIEAassessmentindicatethataroundone-thirdofAfricanhouseholdscannotaffordtopayfor100kWhpermonth,whichcorrespondstotheelectricityneededtopoweronadailybasisforfourlightbulbsforfourhours,aTVforthreehours,afanforsixhoursandarefrigeratorrunning24/7.Unreliableelectricitysupplyalsocausesstrainonbusinesses,disruptingproductionandcommercebyforcingtheclosureofshopsandaffectingrevenues.Moreover,electricityqualityiscriticalforbusinessesaselectricaltoolsandmachineryaresensitivetodisturbancessuchassagsinvoltage.Thesecanleadtoexpensivedowntimeandproductionlossesorcoulddamageequipmentwithincreasedoutlaysfornewequipment,repairormaintenancecosts.PressureonelectricitysystemsisincreasingInrecentyears,increasingdemandforelectricity,alackofflexibilityandincreasedfrequencyandseverityofclimate‐relateddisastersincludingstorms,floodsandwildfiresareincreasingtheriskprofilefortransmissionanddistribution(T&D)systemsandassets.Individuallyorcollectively,theycanleadtohighlosses,large-scaleoutages,changesintransfercapacity,physicaldamageandacceleratedaging–allofwhichcanundermineenergyaccess,availability,reliabilityandsecurity.Globally,aroundhalfofelectricitynetworksarecurrentlylocatedinareaswithahighfireweatherindex,meaningmeteorologicalconditionsarefavourableforfirestostartandspread.Some18%ofgridsareexposedtoahighriskofwildfires,experiencingmorethan200daysoffireweatherannually.Inturn,over10%ofsystemsareexposedtotropicalcyclones.InIndonesia,tropicalcyclonesdamagedelectricitytransmissionnetworksin2019and2021.Anextremeheatwavein2019triggeredahavoc-wreakingcombinationofhigherpeakelectricitydemandforcoolingandlowerproductioncapacity,resultinginrollingblackoutsonLombokIslandoverseveralweeks.InBeijing,50%ofalldistributionnetworkfailuresinrecentyearshavebeenlinkedtometeorologicaldisasters.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE25IEA.CCBY4.0.Butnotallclimatechangeimpactsaresuddenandsevereanomalies.In2021,inCentralandSouthAmerica,lowerthanexpectedrainfallinthelastfewyears–includinginArgentina,EcuadorandMexico–meanttheBrazilianhydroelectricitygridwhichisaround60%ofelectricitygrosssupplyexperienceditsworstnaturalinflowrateinalmost100years.Theneedtousethefullthermalbackupcapacityandtoprocureemergencyassetsandelectricityexchangefromforeigncountriespushedupthegeneration-drivencoststhatgetpassedontoretailallconsumers.Forinstance,duringthepeakofthefinancialcrisisfromSeptember2021toApril2022,theretailsegmentapproximately60%ofthepowermarket,sawthevariablepartofthetariffincreaseby980%againstthesameperiodaveragepatternofthethreeprecedingyears.Anticipatedsea-levelrisemayforcesomecountriesorcompaniestorelocateelectricitygridassets.Onestudyfoundthattoavoidinundation,Bangladeshwouldhavetorelocateapproximatelyone-thirdofallelectricityplantsby2030.Thesedatademonstratetheimportanceofinvestingtomakegridsmoreresilient.ManagingdemandgrowthisbecomingmorechallengingInmanyplaces,continuedurbanisationandeconomicdevelopmentleadingtoincreasedlivingstandardsisdrivinghighenergydemandgrowth,particularlyforelectricity.Spacecoolingisalreadyoneofthefastest-growingsourcesofelectricitydemand,andrapidlyincreasingairconditioner(AC)ownershipanduseislikelytocauseittoriseevenfaster.Heatwavesareexpectedtoincreaseinfrequencyandintensityasaveragetemperaturesriseandpopulationsgrowandbecomeincreasinglyurbanised,furtherpushingupcoolingneeds.By2040asidentifiedintheIEAIndiaEnergyOutlook,increaseddemandforcoolingcouldincreaseannualelectricitydemandby10%,withadailydifferencebetweenthelowestandhighestair‐conditioningloadofover200GW4,comparedwithlessthan40GWtoday.Mostpeoplewithspacecoolingneedsstilldonothaveaccesstoadequatemeanstocooltheirhomes.Only10%ofhouseholdshaveACinIndiaandIndonesia,comparedtoover90%intheUnitedStatesandAustralia.Evenso,the2022heatwavesinIndiacreatedunprecedentedspikesindemandfromACunitsandfans,causingelectricityoutagesformillionsandpromptingplanstoboostcoalproductionby100Mtoverthenextthreeyears(2023to2026)tosatisfyincreasedfueldemandforelectricitystations.Electrificationofmanyotherend-usesisalsorapidlychangingtheoveralldemandoutlook.Whilestillintheearlystagesinmostemergingmarketsanddevelopingeconomiesduetolowerabilitytopayandlimitedavailabilityofaffordablemodels,4BasedonIEA(2021),StatedPoliciesScenario,IndiaEnergyOutlook.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE26IEA.CCBY4.0.electrificationofheatingandtransportisexpectedtofurtherpushupdemandwhilealsochangingdemandpatterns.Around20%ofnewcarsalesinthePeople’sRepublicofChina(hereafter,“China”)arenowelectricvehicles.InBrazil,IndiaandIndonesia,fewerthan0.5%ofnewcarsalesareelectric.However,manycountriesareseeingrapidlyincreasingelectrictwo-andthree-wheelersales.In2021,salesoftwo-andthree-wheelersreached230000inVietNamand300000inIndia,andChinaregistered9.5millionnewsalesalone.DecarbonisationrequiresdigitalisationSecure,affordable,cleanenergytransitionsrequirelargeincreasesininvestmentinelectricitygrids.Whilesolar,windandotherrenewablesreceivealotofattentioninemergingmarketsanddevelopingeconomies,ablindspotregardingtheroleofgridsisincreasinglyevident.Tomakethetransitiontocleanelectricitygenerationmoresecureandaffordable,moreelectricitywillneedtoflowthroughT&Dnetworks,comingfrommoresourcesandbeingdeliveredtomoreend-usepoints.WithoutadequateandtimelyinvestmentinelectricityT&Dnetworks,developinganddeployingnewgenerationcapacitymayfailtodeliveronbothclimateactiongoalsandpurelyeconomicterms.Fasterdeploymentofvariablerenewableenergycanhelpemergingmarketsanddevelopingeconomiesboostnationalenergyindependenceandmeetclimategoalsearlier.Thispotential,however,isbeingseriouslyconstrainedbyshortcomingsintwokeyareas:a)lackofinvestmentinT&Dgridinfrastructure,includingmodern,digitalsolutions;andb)theneedtostrengthenplanningandoperationalpracticesofutilitiestomodernstandardsinordertoproperlyassessstability,reserves,generation,andadequacy.TheBrazilianexampleisillustrative.Overa20-yearperiodfrom2003,Brazilhassystematicallypursuedastrategytomorethandoubleitstransmissioninfrastructure,from80000kmtoalmost190000km,andincludedlarge-scaledeploymentofbothdistributedandutility-scalevariablerenewables.Thisambitiousexpansionhowever,posedcertainchallengesincludingtransmissionconstraints.ArecentstudybytheBrazilianregulatorexaminedthetransmission-drivencostsembeddedinelectricitytariffs,andmaderecommendationsbasedonnode-levelpricing.Thisprovidedbettereconomicsignalsregardinglocalitieswhereinvestmentsandreinforcementsaremostneeded,thenewregulationisdesignedsuchthattransmissiontariffsreflectmorepreciselythegeneration-sitingcosts.Acrossemergingmarketsanddevelopingeconomies,thenextdecadeisessentialtoensureelectricitygridscanreliablyabsorbthelargevolumesofrenewableelectricityneededforenergysecurityandclimatechangemitigation.Inparalleltosubstantiallyincreasedgridinvestments,thisrequiresopeningupsystemsinUnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE27IEA.CCBY4.0.theseregionstonewtechnologiesandsolutionsthatsupportincreaseddemandflexibility.TheIEANetZeroEmissionsby2050Scenario:indicatesthat,by2030,aroundone-quarterofglobalgridflexibilityneedswouldbemetbydemandresponseandbatterystorage.Demand-sideflexibilityinparticulargrowsten-foldcomparedto2020levelstoreach500GWby2030–acapacityequivalenttoallofEurope’swindandsolarplantsin2022.OpportunityexiststodrawonlessonslearnedManycountriesareactivelypromotingincreaseduptakeofdistributedsolarphotovoltaic(DPV)systemsaswellasdemand-sideandflexibilityassets.Allhavedecarbonisationbenefits:ifnotmanagedcarefully,however,theycancreateunintendedstressforelectricitygrids.RapiduptakeofDPV,ifunmanaged,canincreaseoperationalcomplexityandimpacttheresilienceoftransmissionnetworks.Reverseflowsindistributionfeederscouldleadtomassdisconnectionwhenthegridbecomesunstable;inturn,additional,furtherstressonthegridcouldtriggerablackout.Assuch,largeDPVdeploymentmaymakeitnecessarytoreinforcecertainpartsofthegrid.Itmayalsorequireaddressingnetdemandforecastuncertaintyandcreatedifficultiesinplanningandoperationofelectricitygrids.Allofthesechangescouldhavethenegativeeffectofreducingrevenuesforutilities–andthuschallengetheirviability.Asnotedabove,whiledistributioncompaniesinBrazilhavemadeconsiderableinvestmentstoboostDPVconnections,actualoperationsareaffectingtheaffordabilityofelectricityforconsumers.InSouthAfrica,frequentblackoutsresultingfromgenerationinadequacypromptedanincreaseofDPVinstallations,whichhadtheeffectofreducingsupplyboughtfromthegridandmeantthatsurplusinjectedthrougholdermetersactuallyturnedthemetersbackwards.Thisresults,defacto,inanet-meteringschemeforconsumersandafinancialstrainforutilities–whichisexpectedtoacceleratewiththelaunchofregulatoryincentivesdesignedtohaveDPVhelpplugtheelectricitysupplygap.Theseexamplesdemonstratethat,withoutadequateplanninganddeploymentoftoolstoallowforvisibility,monitoring,managementandcontrol,large-scaleDPVdeploymentcouldbecomeagridproblem.Electricvehicles(EVs)areanotherimportantelementinbroaderenergysystemdecarbonisation.Globally,EVsalesreachedanhistoricalhighof10millionin2022.Theshareofelectriccarsintotalcarsaleswas14%in2022,morethan10timestheirsharein2017.HowEVsaffectelectricitydemandandelectricitygridswilldifferregionally.InGermany,addinganEVtoatypicalhouseholdoffourpeoplecouldincreaseitspeakelectricitydemandby70%.WhiletheshareofEVsinemergingmarketsanddevelopingeconomiesisstilllow,uptakeisontheriseUnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE28IEA.CCBY4.0.andprojectionssuggestthatby2030therecouldbeover240millionEVs5,includingtwo-andthree-wheelers,ontheroadinEMDEcountries,withanother100millioninChina.SalesofelectriccarsinIndia,ThailandandIndonesiamorethantripledin2022comparedto2021.OverhalfofIndia’sthree-wheelerregistrationsin2022wereelectric.Inareaswithrobustgrids,ahighlevelofEVpenetrationcanbeachievedwithoutanynegativeimpacts.Wheretransformersarealreadyoverloaded,however,evenlowlevelsofEVuptakecancausedisruptions.Toavoidsuchoperationalproblemsandlostrevenues,systemoperatorscouldadequatelyplan,developprocesses,anddeploytoolsthatallowforvisibility,monitoring,managementandcontroloflarge-scaleDPVdeployment.Infact,opportunityexiststointegrateDPVsandEVssuchthattheycontributetoimprovingoverallsystemefficiencyandelectricitysecurity.InAustralia,themarketoperatorhasadigitalregisterforalldistributedenergyresources(DER)installationssuchasDPVandbehind-the-meterbatteriestoimprovevisibilityandcontrollability.Thisenablestheoperatortoknowwhathasbeeninstalledandwhere,andwhichfirmcompletedtheinstallation.Italsoidentifiestheindependentagentthatcoulddisconnectthedeviceinanemergencysituationtoavoidacascadingblackout.SmartgridscanhelpresolvechallengesfasterandatalowercostDrawingonlessonslearnedinplanningandexecutionfromearlieradoptersofdigitalisationaroundtheworld,emergingmarketsanddevelopingeconomiescouldsignificantlybenefitfromtargetedsmartgriddeploymentstobothupgradetheirelectricitynetworkinfrastructure,andtacklethenumerouschallengesoutlined.Earlyinvestmentcanhelpbringdownthetotalcostofcleanenergytransitionsovertime.Smartgridimplementationprovidesaddedvalueacrossarangeofareas.TheIEAestimatesthatrealisingthepotentialofdigitalisationingridscouldreducethecurtailmentofvariablerenewableenergysystemsbymorethan25%by2030,increasingsystemefficiencyandreducingcostsforcustomers.Digitaltechnologiesapplicabletoelectricitygridsencompassbothhardwareandsoftware.Inthefirstcategory,examplesincludesmartmeters,digitalsubstations,sensorsandotherdigitalmonitoringequipment,smartEVcharginginfrastructure,andsmartinverters.Softwaresolutionstypicallyoptimiseuseofsuchtoolsbyaddingcapacitiessuchasrenewablegenerationanddemandforecasting,geographicinformationsystems(GIS),automatedmonitoringanddecisionsupport(AMDS)tools,advancedgridplanning,andassetmanagement.Mostare5BasedonIEA(2023),StatedPoliciesScenario,GlobalEVOutlook2023.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE29IEA.CCBY4.0.supportedbyenablinginfrastructureintheformofcommunicationnetworksandplatformsthatcollect,storeandmanagedata.Byprovidingimproveddataandanalyticsforplanninganddecisionmaking,aswellasenhancedcontrolsandautomation,digitaltechnologiessupportsystem-wideefficiencyandresilience.AMDStools,forexample,helppre-emptproblemsonthegridandimprovemaintenance,therebyavoidingfaultsandextendingthelifespanofassets.Enhancedmonitoringandearlywarningsystemsalsoholdpotentialtorespondmorerapidlyandeffectivelytounusualcircumstances,suchasextremeweatherevents.Byprovidingquickerrestorationtimes,theycanlowerthecostanddisruptioncausedbyoutages.Digitaltechnologiescanalsohelpreducelosses,whethertechnicalornon-technical,byreducingoperationalcostswhichtranslatesintolowerbillsformostconsumers.Lowerlossesalsoimproveelectricityquality,therebyreducingtheriskofdamagetoconsumerassets.Importantlyaselectricitygridsbecomemoredecentralised,toolstobettermonitorandmanagesupplyanddemandcanimprovereliability,unlocknewsourcesofflexibility,increasethehostingcapacityofrenewablesanddistributedenergyresources,reducecurtailmentofrenewablesandDERs,andimproveproductivityofplants.UnlockingSmartGridOpportunitiesIntroductioninemergingmarketsanddevelopingeconomiesPAGE30IEA.CCBY4.0.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE31IEA.CCBY4.0.ThedigitalisationopportunitySmartgridtechnologydeploymentisstilllowManycountriesworldwidearewellunderwayonajourneyofelectricitygridmodernisation,includingthroughupgradingexistinginfrastructurewithmoderndigitallyenabledtechnologies.Othersarejuststartingtoexplorewhatopportunitiesdigitalisationcanunlockandwhatchallengessmartgridtechnologiescanhelpresolve.Digitalisationisabroadtermthatencompassesawiderangeoftechnologies,applicationsandfunctionalitiesthatleverageinformationandcommunicationstechnologies(ICT).Fortheelectricitysector,digitalisationopensnewopportunitiestoimprovetheefficiencyandresilienceofsystemsbyleveragingdatacollectionanddatainsightstoimplementnewlevelsofobservability,controlandautomation.Digitaltechnologiesallowforincreasedcommunicationamongdevicesandfacilitatesbothremotecontrolandself-regulation.Asmartgridisanelectricitynetworkthatusesdigitalandotheradvancedtechnologiestomonitorandmanagethetransportofelectricityfromallgenerationsourcestomeetthevaryingelectricitydemandsofend-users.Smartgridsco-ordinatetheneedsandcapabilitiesofallgenerators,gridoperators,end-usersandelectricitymarketstakeholderstooperateallpartsofthesystemasefficientlyaspossible,minimisingcostsandenvironmentalimpactswhilemaximisingsystemreliability,resilience,flexibilityandstability.Digitalsolutionstotackleshort-andlong-termnetworkchallengesIEA.CCBY4.0.Note:DG=Distributedgeneration.Source:WorldEconomicForum,AcceleratingSmartGridInvestments.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE32IEA.CCBY4.0.Atthetransmissionlevel,advancedsensorssuchasphasormanagementunits(PMUs)supportfasterandmoreflexibleoperationandimprovedcontrol,makingthegridmoreobservablesothateffectsoffurtherintegrationofvariablerenewableenergy(VRE)andothertechnologiescanbebetterunderstoodandmanaged.Atpresent,however,deploymentisstilllowinsomeemergingmarketsanddevelopingeconomies.Globally,digitalinfrastructureinvestmentisincreasinglybeingdirectedtowardsdistributiongridwithtwoactivitiesdominating.Thefirstistheroll-outofsmartmeters,andsecondlytheautomationofsubstations,feeders,lines,andtransformersviadeploymentofsensorsandmonitoringdevices.Thespectrumofsolutionsavailableisbecomingbroaderandisrapidlyexpanding.Examplesoftechnologiesthathavepotentialtoreducecostsandimproveperformanceincludedigitaltwinswhicharedigitalsimulationsofphysicalinfrastructurethatmimicreal-worldconditions,andnewapproachessuchasnon-wirealternativeswhichusedigitalmanagementtomanagedemandtopostponeoravoidreplacingsectionsofgridinfrastructure.Thelargemenuofdigitaloptionsislinkedtoanimportantpoint:thereisnosingularstartingpointoruniversalpathwaytowardsestablishingasmartergrid.Progressisachievedovertimethroughsystematic,incrementalprocessesandthefinalstatevariesdependingoneachsystem.Reflectingthechallengesathandandtheresourcesavailable,changesandimprovementsinsystemareusuallyimplementedincrementally.Thepathwaystowardssmartgridswillalsovaryacrossnationalandregionalcontexts;theexistingstateoftransmissionanddistributioninfrastructure;generationcapacitiesanddemandpatterns;andpriorities,needsandcapabilities.Smartgridscanenablecleaner,moreaffordableandsecureelectricitySmartgridtechnologieshaveapplicationsacrossthewholeelectricitysystem,includinggeneration,transmission,distributionanddemandside.Whilesometechnologiesofferfunctionalitiesforspecificpartsofthesystem,themainvalueofdigitaltechnologiesarisesfromopportunitiestoleveragedataflow,connectivityandmanagementacrosssystems.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE33IEA.CCBY4.0.Digitalsolutionsforcleanenergyandsystem-wideefficiencyIEA.CCBY4.0.Digitalisationcanprovidereal-timedatatohelpimprovegridoperatingreliability,reduceoperationalcoststhroughautomationwhileimprovingworkersafety,andincreaseoverallsystemefficiency.Tocapturetheirfullbenefits,technologiesneedtobeutilisedinharmonyacrossvariouspartsofsystems.Tobetterunderstandthepotentialofspecificsolutionsandhowtheycanbeintegratedforoptimalgains,technologiesandsolutionscanbecategorisedingroupsbasedonfunctionalitiesprovided.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE34IEA.CCBY4.0.FivemainareaswheredigitaltechnologiescanpositivelyimpactgridstodayIEA.CCBY4.0.ImprovingsystemperformancereduceslossesandcostsDeployingandusingdigitaltechnologiescreatesmoreefficient,agile,andresilientsystemsinwhichdecisionsarebasedonrobustevidenceandreactiontimesaredramaticallyreducedfromtensofminutes,orevenhourstosecondsorless.Inhelpingtodecreaselosses,temperpeaktimestrains,reducethenumberandUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE35IEA.CCBY4.0.durationofelectricityoutages,minimisecurtailment,andavoidtraditionalwireupgrades,digitalsolutionshelpreducesystemcosts.Betterdataandinsights,coupledwithenhancedsystemmonitoring,canalsohelpimproveplanningandbuildresiliencetowithstandimpactsofclimatechange.Allofthesemeasuresalsoprovidewiderpublicgoodbenefitsintermsofimprovingreliabilityofelectricitysupply,whichcanhelpcreateamoreattractivebusinessenvironmentforinvestorsandenablelocalbusinessestodevelopandgrow.IEA.CCBY4.0.ReducingelectricitysystemlossesAcombinationofdigitaltechnologiesandapproaches,includingdigitalmeteringandanalytics,customer-centredactions,andnewpaymentoptions,canhelptoassessandreducebothTLandNTL.Thiscanbedoneincost-effectiveways,thusensuringavailablecapacityisefficientlyused,improvingthequalityofsupply,boostingbillingaccuracy,andincreasingpaymentcollection.Inturn,reducingbothlossesandoperationalandmanagementcostsforutilitiescanlowerconsumerbills.Byinvestinginsmartmeterdeployment,withover45millionunitsdeployedgloballybetween2001–2022,networkautomationanddigitalisation,Enelhasimprovedtheefficiencyofdistributionnetworksinmanysystemsaroundtheworld.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE36IEA.CCBY4.0.Therearealsogainstobehadinadvancedeconomies.InItaly,thishascontributedtoaconsiderabledropintheaveragenumberofminutesofserviceinterruptionannually,correspondingtojust42minutesin2022,aswellaslossreductionbymorethan20%from6%in2014to4.7%in2022.Whenplacedthroughoutnetworks,sensorsprovidereal‐timemeasurementsandhelpuncoverthedynamicsofelectricityflows.InPakistan,thePeshawarElectricSupplyCompanytestedasystemtomonitorandcontroldistributiontransformers,andachievedlinelossreductionof6.7%.Since2005,theUgandanutilityUmemehasdoubledthesizeofitsdistributionnetwork,increaseditscustomerbasesixfoldtoaround1.6millioncustomersandreachedover99%paymentrecoveryforelectricitysold,whilealsomorethanhalvinglossesfrom38%to17%.InKenya,atelecomproviderisplanningtosupply330000smartmetersviathebuild,own,operate,transfer(BOOT)modeltoKenyaElectricitycustomers.TheoverarchinggoalistoreducebothtechnicallossescostingnearlyUSD90millionannually,andnon-technicallossesvaluedatoverUSD160millioneachyear.Counteringinformalconnectionsandreducingnon-technicallossesBysignificantlyreducingnon-technicallosses,digitallyenableddevicesaresubstantiallyimprovingtheprofitabilityofutilities.However,digitaldevicesaloneareinsufficienttoachievesuchgains:inparallel,utilisetypicallyneedtoimplementprocedurestomonitorandintervenewherenecessary.Earlytrialstousedigitalprepaidmeterstoreducenon-paymentofelectricitybyusersdemonstratethispoint.InGhana,evidenceshowsthatinstallingsmartmetersdidnot,byitself,reducetheft;additionalinterventionwasneededintheformofmonitoringandenforcement.Asubsequentstudyin2019ofasmartpre-paymetersprogrammereportedanincreaseincustomerbillsofover13%,demonstratingreducedNTL.Monitoringconsumptiondataisonemeansofreducinglossesfrommeterbypassingbut,similarly,itisapplicableonlyifcustomersaremeteredinthefirstplace.TraditionalmethodscanalsobeusedtofurtherreduceNTL.Arialbundled/bunchedcables(ABCs)forexample,areinsulatedconductorscanbeinstalledonoverheaddistributionlinestopreventthe“hooking”thatleadstoNTL.Providingformaldistributionsystemstomanylocationsmaynotbeeconomicwithoutheavysubsidies,asrevenuesfromaverageconsumptionwouldbelessthanthefixedcostoftheinstallation.Therecouldbeacase,however,forprovidinggrantstosupportbasicsupplyasameansofreducingexcessiveNTLandtobeginformalisingelectricitydistributionindistrictswithhistoricallyhighUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE37IEA.CCBY4.0.DecreasingoutagesandachievingfasterrestorationByinstallingmultiplesensorsonlinesandassets,utilitiescanrapidlylocatefaults.Inturn,automatedsystemscanrerouteelectricitytowhereitisneededwhilelimitingareasaffectedbyoutages.Infact,automatedsystemscanreactmorequicklythanhumanoperators,promptlyisolatingpartsofthegridthatareexperiencingissuesbeforeproblemsspreadandaffectmorecustomers.InGhana,useofGIS,outagemanagementsystems,andautomationandcontrolonmediumvoltagelinesresultedina15‐foldreductioninthenumberofhoursofaverageoutagedurationforeachcustomerservedinAccra.Colombiaaimstoreduceelectricityoutagesinlocationswithahighproportionofoverheadlines–fromaround30hoursperuserperyeartoabout5hoursby2030–throughtheuseof“self-healing”auto-reclosingcircuitbreakerswhilealsoreducingthedurationoftransientfaultsusingsupervisorycontrolanddataacquisition(SCADA)andothermethodsofcommunication.Similarly,asmartgriddemonstrationprojectinHaryanastateinIndiasoughttoidentifyopportunitiestoimprovethereliabilityofelectricitysupply.Itshowedthatacombinationofhardwaresuchascircuitbreakersandloadbreakswitches,andgridreconfigurationanalyticsinaSCADAsystemcouldsignificantlyreducethedurationandfrequencyofoutages–by6.7%forSAIDI(SystemAverageInterruptionDurationIndex)and23.5%forSAIFI(SystemAverageInterruptionFrequencyIndex).InFlorida,installationofself-healingtechnologieshelpedDukeEnergyautomaticallyrestoremorethan160000customersduringarecentelectricalstorm,savingnearly3.3millionhoursoftotallostoutagetime.Sensorscanalsohelpdetectstressonsystemassets,signallingtheneedtodivertelectricityorreduceconsumptiontoavoidcongestionoroutages.PMUs,forexample,providesynchronised,real-timemeasurementofmultipleremotepointsinthegrid.AsPMUshaveahighcost,“right-sizing”theiruseiscritical.AnalysisofthetransmissioninfrastructureinKenyashowedthatitwaspossibletoreducethenumberofPMUsneedednationwidefrom31to26units,thusminimisinglosses.Suchanapproachwouldhelppreventoverloadingelectricitynetworksandreduceoutages.Ina2019studyof11smartgridpilotprojectsinIndia,allreportedreducedelectricitylossesbetween1%and15%.InDelhi,TataPower-DDLmanagedtoreducelossesfrom53%in2002toaround8%in2020usingacombinationofadvanceddistributionmanagementsystems,integratedGIS,smartmeters,automateddemandresponseandfieldforceautomation,inadditiontonetworkupgradestoreplaceoldandinefficientcables,transformersandotherequipment.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE38IEA.CCBY4.0.potentialexpenditurewithoutloweringthequalityofservice.InBrazil,synchroniseddatafromPMUsandSCADAprovidesreal-timeanalysistosupportdecisionmakingforenhancedmonitoringofauxiliaryservicesintheelectricitymarket.Thisalsoimproveselectricitymonitoringandoperation,transmissioncapacity,andreliabilityofgridoperation.Inmanysituations,advancedmonitoringandcontrolsmakeitpossibletobalanceelectricityloads,troubleshootandresolveissueswithouttheneedfordirectinterventionsbytechnicians.Digitaltechnologiescanalsouncovervitalinsightsthatanalogueapproachescannotandtriggermuchfasterreactions,therebyloweringlossesanddamages.Forinstance,Elvira,oneofNorthernEurope’slargestelectricitycompanies,usessmartgridtechnologiestomonitorunexpectedchangesandreactbeforeequipmentfails,outageshappenorfiresstart.Withsensorsandothersmarttechnologies,operatorsalsohavemorecontroloverelectricitydistribution.Energycanbemonitoredallthewaydowntheline,fromwhenitleavestheelectricityplanttowhenitarrivesatthecustomer.InIndia,PowergridandAdaniTransmissionLimitedhavedevelopedintegratedcentraliseddashboardsthatcapturegeneral,system-relatedinformationacrossabroadspectrumofparameters.Remotemonitoringsystemshavealsobeeninstalledtocapturedata–withahighlevelofgranularity–onsystemavailability,trippingandoutages,whichmakesitpossibletosupervisedesignandrespondtosituationsinafractionofasecond.Advancedmeteringinfrastructure(AMI)providesutilitieswithgranularvisibilityonelectricityconsumptionintermsofmagnitude,timeandplace.Assuch,itcanenablethemappingofconsumptionpatternsandprojectionsthatcanbeusedtodevelopeffectivedemand-responseprogrammes.Inparallel,smartmetersreducecostsforlabourtomanuallyrecordconsumptionwhilealsoenablingthedigitalenvironmenttoprovidecustomerswithchoices,includingavarietyoftariffsandincentivestoprovidedemand-sideflexibility.Smartmeterscanidentifyeventsthatchangehowownersofrooftopsolarconsumeorstoretheirgeneration.Importantly,theycanalsorevealopportunitiestoimplementnewbusinessmodels.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE39IEA.CCBY4.0.IEA.CCBY4.0.Smoothingoutdemandisincreasinglyimportantinsystemsthataregrowingquickly,whilesimultaneouslyaimingtodecarbonise.Digitaltechnologiescanhelpshift,storeorshapeelectricitydemandaccordingtotheavailablecapacityofproduction,transmissionanddistributionassets,whichisincreasinglyimportantinsystemsthataredecarbonising.TheycanhelpshiftenergydemandtowardstimesofhighlevelsofVREproduction,therebyreducingcurtailment.Virtualelectricityplantsarenetworksofdecentralisedgenerationcombinedwithflexibleloadsandstoragesystemsthatcanremotelyandautomatically,managedemandaswellasDERstoprovidecleanenergyandgridserviceswhilealsomeetingcustomers’energyneedsinareliablemanner.Theycanhelpreducepeakdemandandrelatedinvestmentinadditionalcapacityandinfrastructuretoserveapeakload.Suchplantsareincreasinglybeingdeployedacrosstheworld,withmosttodateinEurope,AustraliaandtheUnitedStates.Forregionsandgridsatearlierstagesofimplementingdistributedgeneration,ifthegoalremainsUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE40IEA.CCBY4.0.providingsystem-levelbenefits,theseprivateaggregatorscanfillgapswheretherateandscaleofperformanceofnewmodelsforconsumerstousedistributedgenerationhavepreviouslylagged.EnablingenergyaccessatalowercostDigitallyenabledmobilecommunicationstechnologiesplayacrucialroleinexpandingdecentralised,cleanenergyaccesstocommunitiesinremotelocations–particularlyinchallengingclimatesorlow-incomeareasnotcurrentlyservicedbyelectricitygrids.Globally,atleast19000mini-gridsareinstalledin134countries,providingelectricitytoabout47millionpeople.Thesesmallelectricgridsystemsareusuallycomprisedofagenerationunitsanddistributionlinesthatlinkanumberofhouseholdsand/orotherconsumers.Typically,thesesystemsarenotconnectedtomainelectricitynetworks.However,evenonmini-grids,technologiessuchassmartinverterscanhelpautomaticallymonitorandmanageelectricitydeliveryandreduceserviceinterruptionsduringpeakdemandwhileincreasingproductiveuseofelectricityduringlowerdemand.IEA.CCBY4.0.Digitallyenabledmini-gridsolutionsoffereffectiveopportunitiestoprovideenergyaccess.Mobileoff-gridsolarsystemswithbatteries,forexample,canprovideefficientandfastaccessinremotelocations.Infavourablegeographies,standalonesolarsystemscanprovideenoughelectricitytocoverbasicneeds.Potentialexistsfordigitalsolutionstoprovidemoreresilientsupplybyfurtherexpandingandenablingmoreefficientmini-gridsandlarger,standaloneUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE41IEA.CCBY4.0.communityassetswithislandingcapabilitieswhichenablethe“islanded”sectiontocontinueoperatingwhenthereareoutageselsewhereinthegrid.InTanzania,mini-gridsachieve98%reliabilitycomparedwith47%forthenationalgrid.InCambodia,thecompanyOkrasolarundertookasolarpeer-to-peer“mesh-grid”projecttoconnect140householdsin3villages,generatingenoughelectricitytosupportalsoprovidingfridges,ricecookers,kettlesandfoodblenders.Acloud-based,mobile-enabledapplicationconnectstothesystem,whichusesinternetofthings(IoT)connectivitytooptimisethedistributionofelectricityamongconnectedproperties.Theappcanalsobeusedtopayforenergyortoidentifyissueswiththesystem.ThesesystemshavealsobeendeployedinHaiti,NigeriaandthePhilippines.InBangladesh,Solshareusesasimilardigitallyenabled,peer-to-peerplatformwithmorethan115mini-grids,supplyingover1500customersand300electricthree-wheelerswhilereducingCO2emissionsby142Mtannually.InUganda,duetogoodprogressinrecentyearsalmost60%ofthepopulationnowhasaccesstoelectricity,ofwhicharoundhalfofthosearegrid-connected,andtheotherhalfaresuppliedbyoff-gridmeans.Anewmodelisbeingtrialledtoacceleratetheelectrificationofremotecommunitieswheredemandislow,andcostsforconnectiontothedistributiongridwouldbeprohibitiveforprospectivecustomers.Arecentpilotproject,calledUtilities2.0,hasdemonstratedthepotentialforprivatedeveloperstofundremotemini-gridprojectsthatwillbeoperatedusingdigitalmetersmonitoredbythenationaldistributionsystemoperator(DSO)Umeme.Importantly,thelocalnetworkwillbeinstalledtotheutility’stechnicalstandards.Thishasthebenefitminimisingcostsforcustomerswhileguaranteeinginteroperabilitytoenableeasyintegrationtothegrid-connecteddistributionsysteminthefuture.Thiscouldcutbyhalfthecostofconnectingthefinal10millionpeopletothegrid,currentlyestimatedatUSD7billion.Remotemonitoringcanalsofacilitatemanagementofisolatedrenewableelectricityplants.Since2018,theNationalThermalPowerCorporation(NTPC,India’slargestelectricityutility)hashadthecapabilitiestoremotelyoperatethe800-MWKoldamhydroelectricityplantinHimachalPradeshfromitscontrolcentreinDelhi–some300kmaway.BoostingresiliencetoprepareforthefutureUpgradingelectricitygridscanbechallenginginsomecountries,wheremappingofelectricalinfrastructurecanbeincompleteorinaccurate.Withoutsuchknowledge,itbecomesdifficultandcostlytomakeinformedinvestmentdecisionstoexpandandmoderniseelectricgridinfrastructure.Digitaltechnologiescanalsoprovideadvancedplanningtoolsandapproachesthatenhanceresilienceforelectricitygrids.Keyareasofcurrentdevelopmentincludeimprovingvisibilityandmulti-scaleandmulti-objectivemodelling;integratedplanningapproachesacrossgeneration,transmission,distribution,andUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE42IEA.CCBY4.0.customerorthird-partysystems;granular,DERforecastingtools;scenarioanalysistools;andinclusionofresilienceasaplanningobjective.Multipleentitieshavemadeprogressinrecentyearsinimprovingassetandsystemvisibilitythroughdiverseplatforms.TheWorldBankfundedAfricaElectricityGridsExplorerrecordssomelocationsofhighvoltagetransmissionanddistributionlinesbyleveragingOpenStreetMap,satelliteimagingandGPSanalysis.Muchgreatergranularityisrequiredforspatialanalysistoidentifyweaknessesandimprovestability.Open-sourcedatasetsandtoolscansupportelectricityaccessplanningandhelptotargetloss-reductionmeasures.InLamwodistrictinUganda,SunbirdAIishelpingtheMinistryofEnergytoidentifyelectrificationneedsandoptionsforenablingaccessusingGoogle’sOpenBuildings,populationdataandexistingnationaldatasets.OpenBuildingsalsoincludesdatafromcountriesinSouthandSoutheastAsiasuchasBangladesh,Indonesia,Laos,Nepal,thePhilippines,Singapore,SriLanka,ThailandandVietNam.TheCleanEnergyAccessTool,developedbytheEuropeanUnion,gathersgranulargeospatialdataonelectricityinfrastructureanddemographicstosupportelectricityaccessdecisionmaking.IEA.CCBY4.0.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE43IEA.CCBY4.0.Modellingandsimulationtoolscanhelpgridplannersanalysedataandprojectfuturedemandpatterns.Thisallowsthemtomakedecisionsoncapacityexpansionsorupgrades,resultinginmoreefficientandcost-effectivegridplanning.Digitaltechnologies,throughmulti-scalemodelling,canalsohelpoptimisethecostsassociatedwithgridplanningbyidentifyingoptimallocationsfornewtransmissionlinesorsubstationsandminimisingthecostsassociatedwithconstruction,maintenanceandoperations.Thesetechnologiescanalsohelpgridplannersassessandmanagetherisksassociatedwithplanningexercises.Simulationtoolscanbeusedtoevaluatetheimpactoffutureextremeweatherevents,identifypotentialvulnerabilitiesingridsystemsanddevelopplanstomitigatethoserisks.Technologiescanalsoimprovecommunicationbetweengridplanners,operatorsandstakeholders.Involvingmarketdesignprocessesinintegratedplanningisimportanttohaveapositivefeedbackloopofwhatisneeded,whoneedstodeliveritandhowtobetterincentivisebehaviourtoachievethosegoals.Real-timedataandanalyticscanbesharedwithstakeholderstohelpthemunderstandgridperformanceandplanaccordingly.Digitaltechnologiescanhelpgridplannersimprovegridresilience.Modellingtoolscansimulatetheimpactofdisruptionsandidentifyareasorspecificpointsatwhichbackupelectricityorotherresiliencemeasuresareneeded.Digitaltechnologiescanalsoincreaseresilienceinmoreimmediateways.Earlywarningsystemsthatcollectandanalysemultiple,real-timedatasetsprovideutilitiesandotherstakeholderswithmoretimetoprepareforandreacttotheravagesofextremeweatherevents.Advancedmonitoringandcontrolsystemscanhelprecoveryandensurefasterreconnectionofelectricityforcriticalinfrastructuresorvulnerablepopulations,includingbybetterschedulingrestorationcrews.Advancedimageprocessingandartificialintelligence(AI)canhelpidentifyovergrownvegetationandequipmentdefaultsfrompicturescollected,forexample,bydrones.InIndia,theNationalHydroelectricPowerCorporation(NHPC)haslaunchedacloud-basedsoftwareapplicationwithreal-timedatafromtheIndianMeteorologicalDepartment.Bymonitoringriverwaterlevelsanddischargesupstreamanddownstreamofhydroelectricityplants,itservesasanearlywarningsystemthatcanissuewarningstoallowrelevantstakeholderstoact.TheNHPCisalsoplanningtosetupacentralcontrolroomfacilitytomonitorhydroelectricprojectsandplants.PavingthewayforhighersharesofvariablerenewablesDigitaltechnologiessuchasrenewableenergyforecastingtoolsandadvanceddistributionsystemmanagement(ADMS)canreducethecostofinstallingandintegratingrenewableelectricitygeneration.ForecastingandADMShelpimproveUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE44IEA.CCBY4.0.theproductivityofrenewableelectricitygenerators.Dataandanalysiscanalsohelpoptimisesitingofrenewableenergyprojectstoimproveproductivityandgridintegration.Egypt,withthesupportofarangeofinternationalinitiativesandorganisations,developedahigh-resolutionsolaratlastohelpguidefutureinvestmentsanddevelopplansforefficientexploitationofsolarenergy.Inturn,theatlashelpedsecurefundingofUSD2.2billionforsolarprojects.Improveddataandanalyticscanalsoenhancetheproductivityofotherrenewableenergyassets.InIndia,ademonstrationprojectusinganalyticsofatmosphericandoperationaldatainawindfarmboostedoutputby1-3%,dependingonwindspeed.Theadditionalinformationprovidesguidanceforadjustingtheorientationofwindturbinesinaco-ordinatedwaytoavoidthewakeeffect.Betterdataandmodellingcanalsoreduceerrorsassociatedwithforecasting,aswellaswithproductandprojectdesign.Vortex,acompanyspecialisinginwindmodelling,hasdevelopedtoolsthatenableerrorreductionby3-4%.PreparingforthedatarevolutionThenumberofsmartpowermetersworldwideexceeded1billionin2022,a10-foldincreasesince2010.Meanwhile,connecteddeviceswithautomatedcontrolsandsensorsareexpectedtoreach13billionin2023,upfromlessthanabillionadecadeago.Thisnumbercouldexceed25billionin2030.Inaddition,therearearangeofotherdatasourcesthatcanincombinationprovideinsightstoenableenhancedelectricitysystemplanningandoperation.Leveragingthefullpotentialofdigitalsolutionsrestsonthesuccessofdatamanagementframeworksandstrategies.Dataneedstobecollected,stored,analysed,andshared,whileensuringprivacyandcybersecurity.Gooddatamanagementcanbebeneficialforpowersystemsinmanyways.Granulardataonconsumption,combinedwithbetterdemandforecasts,allowsconnectedandautomatedconsumerappliances(suchaswaterheatersorelectricvehiclechargers)toprovideflexibilityforthepowersystem:byturningoffatpeaktimeorswitchingonwhenrenewableoutputishigh,theyfacilitatetheintegrationofrenewables,resolvegridcongestion,andreducepeakconsumption.Moreover,easilyaccessiblehigh-qualitydataonconsumptionandpowersystemscanalsohelpcommercialpartiesdevelopnewservicesandproductsforpowercustomers.Italsospeedsuppowerrestorationafterfaults.Whilelargeamountsofdatacanbringmanybenefitstoelectricitygrids,currentdatasetsarenotbeingfullyexploitedandinsufficienteffortsaremadetoaccessandanalysenewdata.Globally,smartmeterdatautilisationisstillbelowitspotential,withonly2%to4%ofdataavailablecurrentlybeingusedtoenhanceUnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE45IEA.CCBY4.0.theefficiencyofgridoperations.Asurveyof10Transmissionsystemoperators(TSO)showsthatmostagreetheircontrolroomsdonotmakefulluseofdataanalyticapplications,evenwhentheyhavefullydigitalisedgridsequippedwithsensorsandremotecontrol.Theenergysystemiscollectingmoredatathanever,buttoomuchofitremainsidle,orstuckinsiloedstorage,withsignificantuntappedpotential.Therearearangeofareasthatrequireattentiontoensuremoreeffectiveuseofdataincluding:Datasecurity:Asmoredataaregeneratedandtransmittedacrossgrids,theriskofcyberattacksanddatabreachesincreases,whichcouldpotentiallycompromisegridsecurityandreliability.Datamanagement:Managingandprocessinglargeamountsofdatacanrequiresignificantinvestmentsindatastorage,processingandanalysiscapabilities.Privacyconcerns:Thecollectionanduseoflargeamountsofdatacanraisequestionsamongconsumersabouthowtheirdataarebeingusedandwhohasaccesstoit.Interoperability:Withtheincreasingnumberofdatasourcesandsystemsongrids,additionaleffortisneededtoensureinteroperabilityamongdifferentsystemsandplatforms.Humanerror:Whiledigitalisationcanenablegreaterautomationoftasksonthegrid,itcanalsochangetheriskofhumanerror,asoperatorsandtechniciansmayberequiredtomanageincreasinglycomplexandsophisticatedsystems.IEA.CCBY4.0.UnlockingSmartGridOpportunitiesThedigitalisationopportunityinEmergingMarketsandDevelopingEconomiesPAGE46IEA.CCBY4.0.Systematicapproachesandnationalinitiativescanstarttoeffectivelyaddressdatachallengesandhelpunlockopportunities.TheUKgovernment,theelectricityregulatorOfgemandInnovateUKsetuptheEnergyDataTaskForcetodevelopanintegrateddataanddigitalstrategyfortheenergysectorin2018.Thetaskforce,initsrecommendationsreleasedin2019,highlightedthatprogresstowardsmodernenergysystemsishinderedbypoorquality,inaccurateormissingdataandoutlinedactionsneededtotackletheseproblems.Followingtheserecommendations,in2021,theEnergyDigitalisationTaskForcewasestablishedtocontinuetosupportprogresstowardseffectiveuseofdataforcleanandaffordableenergy.Digitaltoolsfordataaccessandusecanalsobeleveragedtostimulateinnovationanddeveloplow-costsolutions.TheGovernmentofGhanaandtheMillenniumChallengeCorporation(MCC)areinvestinginincreasingthequalityoftheelectricgridtoreduceoutages.MCCpartneredwithaUCBerkeleyteamtopilotnewtechnologiesasawaytocrowdsourcegridmeasurementsusingsmartphones(ElectricityWatch)andlow-cost,fixed-pointsensors.Utilisingthesetwosensingmethodologiesinconjunctionwithcellularnetworks,theteamsuccessfullypilotedauniquelyscalablegridmonitoringsystemtoanswerquestionsaboutwhenandwhereoutagesoccur,howlongtheylastandwhetherinfrastructureimprovementinvestmentsincreasereliability.Programmesandplatformscanalsobecreatedtoidentifychallengesandsupportinnovativeideastotacklethem,suchashackathonsandcompetitions.ThedatascienceplatformZindiworkswithstakeholdersacrossAfricatodevelopchallengesbasedoncurrentissuesandshareddatasets,whichdatascientistscanhelptosolve.TheTunisianCompanyofElectricityandGasorganisedanAIhackathoneventtohelpreducetheUSD60millionworthofNTLeachyear.ByusingadvancedMLtechniques,researcherswereabletostudydataandascertainthattheycouldlocateanomalieswithahighlevelofconfidence.Byapplyingthistechniquetoreal-time,smartmeterdata,itispossibletoalertutilitiesforrapidinvestigation.TheBrazilianindependentsystemoperatorhasbeenpromotinghackathoneventsthatapplystatisticalandMLtechniquestohelpfosteritsforecastingframeworksofhydroelectricityinflows,wind,andload.Thereisarangeofotheroptionsintermsofcrowdsourcing.MeterHerotargetsschoolsandcommunities,providingbothlearningopportunitiesanddatainsights.InSouthAfrica,tobridgecurrentgaps,ESKOMisusingadigitalplatformtocrowdsourcepeoplewithmechanical,nuclear,electrical,system,operations,andmaintenanceskillsandexpertise.Mobilephoneapplicationsandtextmessagenotificationscanhelpbothtoinformandtogatherinformationfromconsumersonongoingoutagestoresolvetheissue.TheUrjaMitrainitiativeinIndiaprovidesaweb-basedandmobileoutagemanagementplatformformorethan50distributioncompanies.Thisdeliversreal-timeoutageinformationandisintegratedwiththemeterdataacquisitionsysteminordertoallowfieldstafftomoreeffectivelyinterveneandrestoreelectricity.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE47IEA.CCBY4.0.HowtogetinvestmentstoflowGridinvestmentislaggingInvestmentinelectricitynetworkinfrastructurehasbeenlagginginrecentyears,whichposesmultiplechallengestomeetcurrentdemandandprepareforthesignificantramp-uprequiredinthecomingdecades.Theshifttowardsdeeplydecarbonisedelectricitysystemsnecessitatesare-thinkingofhowgridsoperate,whichcouldguideinvestmentdecisions.Indevelopingeconomies,mostinvestmentswillneedtobedirectedtowardsexpandingandstrengtheningthegrid,whilealsoshiftingtowardssmarterandmoreresilientdistributiongridstoaccommodatetheincreaseddeploymentofnewcooling,heatingandelectrifiedtransporttechnologies.Globalaverageannualinvestmentinthepowersectorbycategory,2011-2023eIEA.CCBY4.0Note:Investmentismeasuredasongoingcapitalspendingonnewpowercapacity;allnumbersthroughoutarein2022USD;Fossilfuelpowerincludesunabatedandabatedpower;EMDEs=emergingmarketanddevelopingeconomies;2023e=estimatedvaluesfor2023.TheIEAestimatesthattheannualaverageinvestmentingridsneedstomorethandoublefromanestimatedUSD330billionin2023toaroundUSD750billion6by2030.Currently,over75%oftotalglobalinvestmentsingriddigitalisationaredirectedtodistributiongridswiththeaimtoexpand,strengthen,andenhancethereliabilityandflexibilityofthegrid.However,whileinvestmentsingridshaveincreasedglobally,jumping8%in2022,theshareofinvestmentsingridsin6BasedonIEA(2022),NetZeroEmissionsby2050Scenario,WorldEnergyOutlook2022.10%20%30%40%50%250500750100012502011-162017201820192020202120222023eBillionUSD(2022)BatterystorageElectricitygridsNuclearFossilfuelpowerRenewablepowerEMDEsexcl.China(share,rightaxis)UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE48IEA.CCBY4.0.EMDEshavefalleninthelastdecade.ThisisaworryingtrendwhenelectricitydemandinEMDEisexpectedtogrowsubstantially.Whileeachcountryhasitsownspecificity,challengesrelatedtohighperceivedriskandcostofcapital,aswellastopoorfinancialhealthofutilities,arehinderinginvestmentingridsacrossmanycountries.Afterthesurgein2021and2022,manycriticalmineralpricesstartedtomoderatein2023butremainwellabovethehistoricalaverages.In2022,copperandaluminiumrepresentedaround30%ofthecostofnewgridinvestment,10%higherthanintheinvestmentsmadebetween2010and2020.CurrentinflationlevelsareincreasingthecostofcleanenergytechnologiessuchassolarPVmodules,batteriesandinverters.Thecostsofsolarandhybridmini‐gridsareestimatedtohaveincreasedbymorethan20%onaveragein2022;themarketpriceofsolarhomesystemsincreasedbyaround30%since2020.Combinedwithlocalcurrencydepreciation,thiscoulddiscourageinvestmentinaffectedcountries.Public-privatepartnershipsinvestmentinenergyprojectsandexternaldebtstocksinEMDEcountries,2011-2021IEA.CCBY4.0.Source:IEAanalysisbasedonWorldBank(2023).AccordingtotheInter-AmericanDevelopmentBank,toensureuniversalaccesstoelectricityby2030,LatinAmericaandtheCaribbeanwouldneedtoinvestmorethanUSD25billioninnewinfrastructure,mainlyatdistributionnetworkslevelofwhich80%isinurbanareas.Inaddition,aroundUSD64billionisneededtomaintainandreplacedistributiongridassetsintheregion.InIndia,investmentingridshastrendeddownwardsinrecentyears,frommorethanhalfofelectricity012345678910010203040506070809010020112012201320142015201620172018201920202021USDTrillionUSDBillionUSDbillionPPPinvestmentsUSDtrillionexternaldebtUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE49IEA.CCBY4.0.investmentin2015toaroundone-thirdin2020,reflectingthechallengingfinancialsituationofdistributioncompanies.Globally,inadditiontoinvestmentsingridstomaximisethepotentialfordigitalisation,overUSD400billionisneededforuniversaldigitalconnectivityby2030,withIndiaalonerequiringalmostUSD100billion.Thegovernmentsofmanyemergingmarketsanddevelopingeconomiesareundertheincreasingstrainofdebt,whichhasdoubledinthelastdecade,muchofitowedexternally.TheunprecedentedchallengesoftheCovid-19pandemichaveaddedtotheseeconomicwoeswithaglobalslowdownthathaspushedmanycountriesfurthertowardsdebtdistress.Asnationaldebthasriseninmanyemergingmarketsanddevelopingeconomiesinthelasttwodecades,inparallelthecorrespondingvolumeofinvestmentsfrompublic-privatepartnerships(PPPs)whichcanbeusedtominimiseincreasingnationaldebtburdenshaveplummetedbyaroundtwo-thirds.Additionally,manyoftheserecentprivateinvestmentshavefocusedonthegenerationsideratherthanimprovingelectricitygrids.Averageannualinvestmentinthepowersectorbygeographyandcategory,2011-2023eIEA.CCBY4.0.Note:REP=renewablepower;FFP=fossilfuelpower;batteriesareexcludedhere;2023e=estimatedvaluesfor2023.TheenergycrisistriggeredbyRussia'sinvasionofUkrainehascreatedfurtherdisarray,justasmanynationsbegantorecoverfromthepandemic-relatedeconomicslowdown,whichledtoseveredisruptionsinfinancialmarkets,increasedriskaversionamonginvestors,andreducedeconomicprojections.Thesetwoeventsalsoledtoanincreaseinpublicdebt,puttinganumberofcountriesatriskandfurtherdeterioratinginvestmentprospects.Extremeweather50100150200250300REPGridsFFPNuclearREPGridsFFPNuclearREPGridsFFPNuclearAdvancedeconomiesChinaOtherEMDEsBillionUSD(2022)2011-162017-202021-23eUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE50IEA.CCBY4.0.eventsrelatedtoclimatechangearebecomingmorefrequentandsevereandcouldresultinfurthergovernmentdebtincrease.Suchendogenousandexogenouspressuresonnationalbudgetsfurtherreducetheavailabilityofpublicfundstoinvestinamongothers,thecriticalphysicalanddigitalelectricityinfrastructureneededtoreachuniversalaccesstoelectricityandenergysecurity,thusleavingawideningspendinggap.Thiscallsforidentifyinginnovativewaystofundrelevantprojectstoavoidsaddlingcountrieswithfurtherdebt.InvestmentisneededacrossthewholesystemWhilethereisnouniformorlinearapproachtoupdatingelectricitygrids,somecommonelementsunderpintheoverallprocess,namelysolidinfrastructure,seamlessdataflowsandanalytics,humancapacity,andacomprehensiveinvestmentplan.Toincreasethechancesofsuccess,thelattercouldincludenotonlyprovidingcapitalforprojectimplementationbutalsofundingforoperationandmaintenanceinthelongterm.Investmentswillneedtoflowtoreinforceexistinggridsandtoimprovestabilitywithnewinfrastructureandmoderntechnologies,particularlywherepopulationsizeandincreaseddemandhaveoutstrippedtheexistinglocalnetworks.Smartgridtechnologyinvestmentopportunitiesspantheentireelectricitygrid,fromhighvoltagetobehindthemeterofcustomers.Theyencompasshardware,softwareandenablinginfrastructureforbothcommunicationnetworksandforplatformstostoreandmanagedata.Investingindecentralisedsolutionsthatareenabledbydigitalisation,opensupnewopportunitiestofast-trackaffordableaccesstoelectricitythroughoff-gridconnections.Intime,thesecanbeconnectedtothemaingridtoenhanceefficiencyandresilience.Critically,toenablesmartgridfunctionalities,investmentsinfoundationaltechnologiesandinfrastructuressuchasreliableandappropriatelysizedtelecommunicationsnetworksareneededforabasicstandardinternetconnectionanddatatransfercapabilities.Thatinvolvescellularbasestations,fixedlinebroadbandfordigitalconnectivity,datacentresfordatastorageandprocessing,andthevariousdigitaldevicesthatserveasinterfacesacrossdifferentdevices.IncountrieswheretheICTinfrastructureisstillweakorcoverageispatchy,approachescouldbeexploredinwhichcollaborativeinvestmentmodelscansupportbuild-out.Sharingnetworksthroughcross-sectoralco-operationbetweenutilitiesandtelecommunications,forexample,createspotentialtoincreaseinfrastructureutilisationandreduceunitcosts.Often,fibreopticcablesinstalledbyutilitiesareonlypartiallyutilised,leavingmanyoftheglassfibresavailable.Theseunlitor“dark”fibrescanbeleasedtothirdpartiestousefordataservices,asisbeingdoneinIndia,Tunisia,Japan,Lesotho,andGhana.WeakincentivesorUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE51IEA.CCBY4.0.disincentives,however,areblockinginvestmentsinmanycountriesandutilitiesandtelecommunicationscompanieslackknowledgeofeachother’soperations.Anyofamyriadofdigitalsolutionscanpotentiallybringvalueandarangeofbenefitstotheelectricitysystem.Theextenttowhichthisvaluecanbecaptured,however,willdependonskillsandcapacityandthedegreetowhichdatacanbeanalysedtoprovideinformationneededtooptimisethesystem.Inturn,italsodependsontheextenttowhichthesetechnologiesandassociateddatacanbemainstreamedintotheexistingsystemsandoperationsofutilities.Whichtechnologycombinationsmayprovidethegreatestvalueforinvestmentwillalsodependonthemostpressingchallengesandexpectedfutureneedsinagivencontext.ArangeofactorscanplayvitalandcomplementaryrolesArangeofentitiescandirectlyinvestorsupportinvestmentsinsmartgridtechnologies,withdiversestakeholdersprovidingexpertiseorknow-howtoachievefullimplementation.Utilities,eitherstate-ownedorprivate,generallyexpandtheirinfrastructurewiththeirownequityalongwithgovernmentfundsanddebtfinancing,oftenfrominternationalfinanceinstitutions(IFIs).Energyservicecompanies(ESCOs)areincreasinglytakingpartinPPParrangementswithutilitiesbyprovidinginfrastructureandequipmentinexchangeforserviceorconcessioncontracts.Institutionalinvestors(pensionfunds,hedgefunds,andinsurancecompanies)areincreasinglyinvestinginenergyinfrastructure.Eachhasitsowntargetsintermsoftransactionsize,balancingtheirdesiredriskprofileandoverheadcostsrelatedtoreachingfinancialcloseonatransaction.Sometechnologyprovidersaredevelopingmodelsinwhichtheyfinancetheinitialcapitalexpenditure(CAPEX)investmentoftheirproductssuchassmartmetersinexchangeforfuturepaymentsinaconcessionor“pay-as-you-save”servicemodel.Theinvestorisnotnecessarilythesolefinancier.Innearlyallcasesofpublicinvestment,andevenmanywithprivateinvestors,atleastonedebtfinancierwouldbeinvolved.Forpublicinvestmentinemergingeconomies,thisisgenerallydevelopmentbanks.Forprojectswithprivateparticipation,thefinancingpartnerisgenerallyaninternationalorregionalcommercialbank,dependingonthesizeoftheinvestment.Evenincasesofprivateinvestment,itisnotuncommonforanIFIsuchastheWorldBankortheInternationalFinanceCorporation(IFC)toprovidefinancialde-riskingproductssuchasinvestmentinsuranceforPPParrangements.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE52IEA.CCBY4.0.ComplexinvestmentbarriersarehinderingdeploymentThebenefitsofmodern,digitalelectricitygridsareundeniableintermsofbothshort-termgainsandadvancingtowardslonger-termgoalsforfullydecarbonisedandresilientelectricitygrids.Still,anumberofhurdlesandbarriersareconstraininginvestmentsinsmartgridtechnology.Oftentoppingthelistofbarriers,investmentindigitalgridinfrastructureiscapital-intensiveandusuallyinvolvesfinancingsmallerpiecesofequipmentthatneedtobeinstalledinadistributedyetintegratedmanner.ThecostofcapitalinsomecountriesinemergingmarketsanddevelopingeconomiesisuptoseventimeshigherthanintheUnitedStatesandEurope,evenconsideringthehigherrisklevelsinotherriskiersectors.Thiscreatesahighbarforinvestmentstoaccessdebtfinanceandtomeetequityreturnhurdlerates.Capital-constrainedutilitieshavelimitedoptionstoobtainlow-costdebt.Raisingconsumertariffsisoneapproachregulatorsusetofinanceinvestments.InEMDEregions,wherehouseholdincomesarelow,policymakerstypicallyhaveastrongfocusonelectricityaffordabilityforthemajorityoftheirpopulationandruralelectrification.Currentregulatorymodelstendtoskewinvestmentstowardsphysicalassetsratherthannewtechnologicalsolutions,leadingtosituationsinwhichcompaniesorutilitieswouldratherinvestinnewcablesthaninsensorsthatmonitortheperformanceofcomponents.Useofdigitaltechnologiesalsorequiresnewknowledge,changesinworkflowsanddifferentengagementamongactors.AccordingtotheWorldBank,utilitiesindevelopingcountriesoftendonothavetheinstitutionalknowledgeortechnicalcapacitytomanagethesystemriskslinkedtosmartgridservices.Often,itisnotonlythatutilitiescannotimplementtheservices,buttheyalsolackcapacitytoprocuresuchservicesfromtheprivatesector.Well-plannedinvestmentsinsmartgridtechnologiescandeliversignificantbenefits.Somebenefitshavepublicgoodcharacteristicslikedecarbonisationthatdonotfullytranslateintorevenuefortheinvestor.Thiscomplicatestheinvestmentdecisionsinceallbenefitsmayneedtobemonetisedandaccountedforinordertocreateapositivebusinesscase.Forinstance,onebenefitofadvancedmeteringinfrastructureistohelpmanagepeakdemand.Reducingpeakdemandcanbenefitthetransmissionanddistributionsystemif,forexample,ithelpstodeferinvestmentingridupgrades,avoidoutagesandinsomecaseslowerthecostofgeneration.Investmentcostsaretypicallyborneentirelybytheutilitiesandassuch,unlessregulationsarerevisedtocompensateforefficiencygains,utilitieswouldultimatelynotbeabletorecovercosts.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE53IEA.CCBY4.0.DifferentinvestorprofilescanbeleveragedtoovercomebarrierstoinvestmentPublicinvestmentscanhelpattractprivatecapitalPublicsectorinvestments,eitherdomesticorinternational,canbeusedtobuildconfidencetoincentivisetheflowofprivatecapitaltoindividualprojectsorworkprogrammesinemergingmarketsanddevelopingeconomies.TheJustEnergyTransitionPartnershipwithSouthAfricaforexample,isonesuchprogrammewiththeaimofreducingitsdependenceoncoal,whilstalsotacklingthesocialaspectsofapopulationreliantofthefossilfuelindustryforemployment.ThefirstphaseoftheschemewillcommitUSD8.5billionofinvestmentsfromtheEuropeanUnion,theUS,andtheUK,toSouthAfricathroughgrants,concessionalloans,andrisksharinginstrumentstode-riskprojectstofacilitateprivatesectorengagement.Similarly,theJustEnergyTransitionPartnershipwithIndonesiaismobilisingUSD20billionofpublicandprivateinvestment,halfofwhichfromtheUnitedStates,Japan,Canada,Denmark,France,Germany,Italy,Norway,andtheUnitedKingdom,amongothers.AdditionalpartnershipagreementstomobiliseinvestmentscouldalsoincludepackagesforIndia,Senegal,andVietnam.Similarinitiativescouldbeusedtofinancetheenergyanddigitalinfrastructureinvestmentsnecessarytobuildresilientsmartgrids.PrivatesectorparticipationcanhelpfilltheinvestmentgapAtpresent,manyutilitiesinemergingmarketsanddevelopingeconomiescannotaffordnewinfrastructure.If,however,newinvestmentmodelscanbeimplementedtocovertheupfrontcapitalcosts,manysmartgridinvestmentscanactuallypayforthemselvesinatimelymannerthroughreducedlossesandoperatingcosts,whichalsogenerateincreasedrevenues.Todate,investmentingridsinEMDEshasbeenundertakenmainlybystate-ownedenterprises(SOEs).Whilethisshareremainspredominant,IEAclimate-drivenscenariosshowthat,goingforward,privatesectorparticipationcanhelpfilltheinvestmentgapandachieveuniversalaccess.InIEAclimatescenarios,70%ofinvestmentincleanenergycomesfromtheprivatesector,althoughthissharedropstoaroundonly25%forgrids.Africa,hometomostofthenearly775millionpeoplewhostilllackedaccesstoelectricityin2022,attractslessthan5%ofglobalenergyinvestment–ofwhich40%isdirectedtoSouthAfricaalone.Aprerequisiteforprivatesectorparticipationinthetransmissionanddistributionsectorsisthatitislegallypossible.InBrazil,forexample,thecurrentregulatoryframeworkhasenablednearly77%ofthedistributionbusinesstoberunbyprivateUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE54IEA.CCBY4.0.utilities.RecentprivatisationofEletrobras(formerlyafullSOE)maylead,inthefuture,tonearly89%ofprivateshareinthetransmissionsegment.InBrazil,Enelhasalreadyinstalledabout180000smartmetersasof2022intheSãoPauloarea,withintheBrazilianElectricityRegulatoryAgency’s(Aneel)R&Dprogram,whoseaimistoreach300000installations.Asafurtherstep,Enelisplanningtocontinuewiththesmartmeterpenetration,targetingabout1.8millionunitsoperationalby2025.Smartmetersincludefunctionalitiessuchasremotebillingandreading,remotedisconnectionandreconnection.Notably,thesmartmeterswillbeproducedlocally,creatingmanufacturingandjobopportunities.Toattractprivateinvestment,havingstableandsupportivepolicyandregulatoryframeworks,aswellasastronggovernance,areessential.Otherimportantenablingfactorsincludeaclearlydefinedframeworkunderwhichtheprivatesectorcanparticipate,namelywhatactivitiesareallowedandrelatedtimelines,whatobligationsapplytotheactorsinvolved,andwhatremunerationmechanismmightbeused.Inturn,visibilityovertheselectioncriteriaandprocessisvital.TheWorldBankmapsoutpreconditionsnecessaryforoptimaldeploymentofPPPprojectsinEMDEstoenabledevelopmentofsmartgridtechnologiesandservices.Theseincludethestageofelectricitysectorreform,theoperationalreachofrelevantutilityinwhichsmartgridtechnologymightbedeployed,andconditionsunderwhichlong-termcontractswithprivateserviceprovidersarepossible.PrivatesectorparticipationmodelsModelDescriptionTypicaldurationExamplesServicecontractTheawardingutilitypaysaperiodicfeetotheprivateoperatorforthesupplyofaspecificservice(e.g.meterreadingandbilling).1to3yearsContractoroperatesAMIforFinland’slargestDSOfor6years.ManagementcontractTheawardingutilitypaysafixedfee,whichmightincludeperformanceimprovementelements,totheprivateoperatorforthemanagementofoneormorefunctions(suchasoperationsandmanagement).2to5yearsContractstodesign,build,finance,own,operateandtransferforAMIforsmartprepaidmeteringinIndia.Contracttoimprovepublicutilityoperationalandfinancialperformance,torebuildtheelectricitysystemandincreaseaccessinLiberia.Managementcontractthatincludespreparationofastrategicinvestmentplan,implementationoforganisationalchanges,thesetupofamanualdataandinformationsystem,andoversightofoperationandmanagementproceduresinSierraLeone.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE55IEA.CCBY4.0.Source:IEA(2023),RES4Africa(2021),PrivateSectorParticipationinAfricanGridDevelopment(accessed30May2023).Manyprivateinvestmentshavefocusedonelectricitygenerationprojectsintheformofindependentpowerproducer(IPP)contracts,whichcanofferaroleforprivatecapitaleveninregionswithverticallyintegratedutilities.Thesecanprovideusefullearningtoimplementsimilarmodelstosupportgridinvestment,asisthecaseofindependenttransmissionproject(ITP)contracts,whichdonotrequiretheutilitiestobeunbundled.Becausetheyenableconstructionoflargeinfrastructureprojectswithoutnationalutilitiesassumingtheconstructionrisk-andarealsoeconomicallyefficient–ITPcontractscanhelpreducethefinancialburdentonationalbudgets.IntheUnitedKingdom,forexample,someprivateconstructedtransmissioncontracts(whichwerecompetitivelytendered)wereestimatedtogeneratesavingsof23to34%.ITPcontractscanbeeasytofinance,discretebydesignandinternationallytendered.Inturn,theycanbuildinvestorconfidence.Brazilalonehasover50000kmoftransmissionlinesconstructedviaITPcontracts;otherprojectshavebeencompletedinChile,IndiaandPeru.InthecaseofPeru,thisapproachrealisedreducedcapitalcostsofaround36%.ArecentandpioneeringbestpracticeexampleforattractingprivatefinanceininfrastructureinAfricawaslaunchedinKenyain2023.WithfundingtotallingnearlyUSD300million,apilotwillproceedtobuildtwotransmissionlinesegmentsandassociatedinfrastructure,coveringalmost240km.AsthefirstsuchprojectinAfrica,itcouldserveasaproofofconceptandbuildinvestorconfidence.SuchPPPvehiclescouldgoalongwayinalleviatingfinancingpressureonthepublicsector.TheWorldBankestimatesKenyahasafinancinggapof90%fornewtransmissionprojectsto2030–aburdenthatthestate-ownedKenyaElectricityTransmissionCompany(KETRACO)hassofarstruggledtomeetsolelywithstatefunding.ModelDescriptionTypicaldurationExamplesLeaseagreementTheprivateoperatormanagesoneormorefunctions.Itisremuneratedthroughtariffcollectionandhastopayaleasefeetotheawardingutility.8to15yearsContractforthegeneration,transmission,distribution,importandexportofelectricityinCôted'Ivoire.ConcessionTheprivateoperatormanagesnew(greenfield)orexisting(brownfield)publicinfrastructure,investingingridexpansionormodernisation.20to30yearsIndependenttransmissionprojectcontractsinBrazil,Chile,IndiaandPeru.ConcessioncontractsfordistributionutilitiesinBrazil.TransferofoperationrightsandconcessionmodelsfordistributioninTürkiye.Newlawthatallowsprivatesectorparticipationtobuild,manage,andoperateelectricitygridsinVietNam.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE56IEA.CCBY4.0.IndependenttransmissionprojectcontractualstructureIEA.CCBY4.0.Note:EPC=engineering,procurement,andconstruction.Source:WorldBank(2023),LinkingUp:Public-PrivatePartnershipsinPowerTransmissioninAfrica.Onthegridedge,Indiahasmadesubstantialefforttosupportprivatesectorparticipationintheconsiderableroll-outofsmartandsmartprepaidmetersforpublicutilities.InIndia,theSmartMeterNationalProgramme(SMNP)wasconceivedtoaddresstheissuesofhighlevelsofaggregatetechnicalandnon-technicallosses(AT&C)andpilingdebtofthestateelectricitydistributioncompanies(DISCOMs).Bothofproblemshavebeensignificantbarrierstoinvestmentingridupgradesanddigitalisation.TheSMNPaimstoreplace250millionconventionalmeterswithsmartprepaidmetersby2025onastandardised,competitivebiddingbasis.DeploymentofsmartmetersundertheSMNPhasbeencarriedoutunderfinancingmodelsthatrequirenoupfrontcapitalexpenditurefromDISCOMsorstategovernments.Instead,DISCOMsarerequiredtoonlypaymonthlyleaserentalsonthesmartmetersthemselvestoprivateoperators,whichtheygenerallyareabletofinancethroughsavingsrealisedovertheoperationperiodduetoreducedAT&Clossesincurred.DigitaltechnologiescanhelpprepareforthefutureDERs,includingsolarPV,batteries,electricvehiclesandothersignificantdistributedloadssuchasairconditioners,arerapidlyexpandingglobally.ManyEMDEcountries,includingBrazil,IndiaandSouthAfrica,areshowingincreaseduptakeofrooftopsolarPVsystems,withSouthAfricaaddingaround500MWinUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE57IEA.CCBY4.0.oneyearalonewhileinstalledcapacityinBrazilrosebyalmost7GWin2022,51%greatercomparedto20217.Whilethisprovidessignificantbenefitsinenergysecurityanddecarbonisation,itiscrucialtomanagethisgrowthtomaintainsystemreliability,controlsystemcostsandensurethatutilitybusinessmodelskeeppacewiththesechanges.Electricitygridsinemergingmarketsanddevelopingeconomiescancapitaliseonfuturecostreductionsandtherapiddeploymentofmatureelectricitygridtechnologies.Bettermonitoringofthesystemfromgenerationtoend-useprovidesutilitieswithinsightsneededforeffectiveplanning,optimalsizingandlocationofassets,andinformationonwheregridreinforcementismosturgentlyneeded.Advancedmeteringincreasesefficienciesandreduceslossesandcantranslateintolowercustomerbills.Digitaltechnologiesarecriticaltobalancesupplyanddemand,ensuringtheoptimaluseofVREsources.Thisenablesmoretargetedenergyefficiencymeasuresandimplementationofdemandresponsetolowerandshiftdemand,therebyreducingthecostofmeetingincreasingpeakdemand.Inaddition,thesetechnologiescanhelpshiftenergyconsumptiontowardstimesofhighlevelsofrenewableenergyproduction,whichcanreducecurtailmentandsupportelectricitygriddecarbonisation.TheimmediatechallengesexperiencedinEMDEs,suchashightechnicalandnon-technicallossesandhighenergydemandgrowth,couldsignificantlybenefitfromsmartgridtechnologydeployment.Inaddition,theneedtodeployelectricitysysteminfrastructurereinforcementtomeetincreaseddemandcouldbemitigatedwithsmartandflexibleelectricitysystemsthatmoreeffectivelyintegraterenewableenergyandlowerelectricitygridtransitioncostsovertime.TargetedactionscanhelpscaleupinvestmentsthataccelerategriddigitalisationFrequentsupplyinterruptionsandchronicunderinvestmentingridinfrastructurearepervasiveinmanyEMDEs.ManyelectricityutilitieswerealreadyinaperilousfinancialsituationheadingintotheCovid-19pandemic;formany,operationallosseshavesinceclimbedsubstantially.Whiledecarbonisationofelectricitygridswillsupportenergysecurity,adequateplanning,strategicinvestmentsandtargetedactionareneededinparalleltoavoidstressontheelectricitygridduringthetransition.Tobeontrackgloballyfornetzero,annualinvestmentingridswillneedtomorethandoubleinthenextdecade,frommorethanUSD330billionperyeartoday,7InputsprovidedbyBrazilianElectricityRegulatoryAgency(ANEEL).UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE58IEA.CCBY4.0.toaroundUSD750billion8in2030.Globallyinvestmentsingridsrose8%from2021to2022butappeartoflattenin2023.However,themajorityoftheseinvestmentsareinadvancedeconomiesandChina,withEMDEsfallingbehind.Tofilltheunderinvestmentgapanddriveinvestmentstowardsgrids,policymakerscouldconsidertwooverarchingactionsthatsupportmorespecificactivities.Giventhewidearrayofpotentialinvestorsforgridprojects,fromSOEstoprivateinvestorsandmultilateralorganisations,governmentscouldsupportthedesignofprojectswithaviewtobestleverageeachtype.Thisimpliestakingintoconsiderationtheirrespectivepreferencesfortherightcombinationofdebt,equityorgrantfinancingtomobilisecapitalwhilestillensuringappropriateriskallocation.Policymakerscouldconsideropportunitiestoaggregatesmallprojectstoincreasethepotentialpoolofinvestorsorrealiseeconomiesofscalewhenfocusingonprocurement.Toattractcontinuedinwardinvestmentandbuildconfidence,governmentscansignaltothemarkettoformapipelineoffutureprojects.Thisrequiresfuturevision,planningandimplementation.Whilealargevolumeofpotentialcapitalisavailableforgridprojects,itisnecessarytoidentifythebusinesscaseforgridreinforcement,minimisetransactioncosts,reduceprojectriskprofiles,andopenupnewvaluechains.Internationalco-operationcanpromotestandardisationtoreducebarriersandincreasedigitalgridinvestments.Beyondthesepoints,acriticalaspectiscreatingincentivesforutilitiestoinvestandtofacilitatethedevelopmentofplans,capacityandtoolstosupportinvestmentsandimplementation.Indiausesinnovativebusinessmodelstoachievesmartmeterroll-outEnergyEfficiencyServicesLimited(EESL),asuperESCOundertheMinistryofPowerinIndia,waschosentoimplementasmartmeteringprogrammeatthenationallevel.Inturn,EESLenteredintoajointventurewiththeNationalInvestmentandInfrastructureFund(NIIF)andestablishedIntelliSmartInfrastructurePrivateLimited(IntelliSmart),takingonroleofdemandaggregatorandmakingtheentireupfrontinvestmentforsmartmeters.Asisoftenthecase,bulkprocurementofthesmartmetersthroughcompetitivebiddingcreatedeconomiesofscaleandreducedtheoverallcostsofthesmartmeterroll-out.ProjectsarenowbeingdevelopedinvariousIndianstates,amountingto7.8millionsmartmeters.Thebulk-procuredmetersbyEESLarethenleasedouttoDISCOMsatrentalratesthatareequaltoorlowerthanthecalculatedincreaseinrevenuegeneratedfrom8BasedonIEA(2022),NetZeroEmissionsby2050Scenario,WorldEnergyOutlook2022.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE59IEA.CCBY4.0.increasedbillingefficiencyandavoidedmeterreadingcosts.Attheendoftheleaseperiod,theentiresmartmeteringsystemistransferredtotheDISCOM.Todate,morethan5.2millionsmartmetershavebeeninstalledundertheprogramme.Between2021-32,theprogrammeisexpectedtosavecumulativecommerciallossesofDISCOMsequivalenttoUSD~115billion–anamountalmostequaltothetotalaccumulateddebtoftheelectricitysector.TheschemenowfallsundertheMinistryofPower’sRevampedDistributionSectorScheme(RDSS),andisexpectedtobeakeycontributortothescheme’sstatedaimsofreducingAT&Clossesto12-15%andachievingcostreflectivityby2024/25.Thetargetsareambitious:Indiaaimstoimplement250millionsmartmetersby2025.Thisimpliestheindustrywillhavetoincreaseitscapabilityofrollingoutsmartmeterstoaround20timesitscurrentaveragemonthlyrate.Inthefuture,smartmeterdataareexpectedtoallowDISCOMstoanalysehouseholdenergyusagepatternsandbenefitfromdemand-sidemanagement,outagepreventionanddistributionoptimisation.Institutionalinvestorsneedtobebroughton-boardInOrganisationforEconomicCo-operationandDevelopment(OECD)countriesalone,overUSD100trillionhasbeeninvestedeachyearinassetsbyinstitutionalinvestors.However,futureinvestmentopportunitiesininfrastructureprojectsareestimatedatoverUSD900billioneachyearinEMDEmarkets.However,thereisadditionalpotentialinnon-OECDlocationsasfutureinvestmentopportunitiesininfrastructureprojectsareestimatedatoverUSD900billioneachyearinEMDEmarkets.Projectssuchastransmissionnetworks,whichhavealowyieldandaverylongpaybacktime,maynotbesuitableforsomeprivateinvestors.Theycan,however,besuitabletoinstitutionalinvestorsthatfavourlow-riskinvestmentswithacombinationofdebtandequityandaguaranteedreturnoveralongerperiodoftime.RecenttransactionsbypensionfundsinplacessuchasBotswana,Chile,Nigeria,andCanadademonstratethepotentialformutualbenefitsfornationalutilitiesandinvestors.Whilecleardemandexistsforinvestingingrids,amajorbarriertomobilisingprivatefinanceistheshortageofwell-structured,bankableprojectpipelines.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE60IEA.CCBY4.0.InternationalfinancialinstitutionscanassistAssmartgridinvestmentprojectscanbecomplexandcanbeperceivedasrisky,thereisaneedtoraiseawarenessoftheirimportancewithintheinternationalfinancecommunitytoensurethatloansandrelevantfinancialproductsaredevelopedandaccessible.Multilateraldevelopmentbanks(MDBs),developmentagenciesandotherIFIscansupporttailoredprogrammestoprovideaccesstofundingandexpertise.Theycanhelptostrengthenexistingactivitiesandpromotemorefundamentalinstitutionalandpolicyreforms.MDBsplayakeyroleinhelpinggovernmentscreateeffectiveenablingenvironmentsfordeployingdigitaltechnologies,buildingcapacityandprovidingvariousinnovativefinancialinstrumentstoboostparticipationoftheprivatesector.TheGlobalInfrastructureFacility(GIF)isaG20initiative,providingfundingandadvisorysupporttogovernments,MDBsandotherglobalpartnerssuchastheAfricanDevelopmentBank(AfDB),theEuropeanBankforReconstructionandDevelopment(EBRD),theInter-AmericanDevelopmentBank(IADB),theIFC,andtheWorldBank.TheGIFassistsinearly-stageprojectdevelopmenttoactasaprojectpreparationfacility(PPF)thathelpsselect,design,structureandprepareinfrastructureprojectsinemergingmarketsanddevelopingeconomiestomobiliseprivatesectorinvolvement.UptoDec2022,theGIFhasassistedprojectsin67countrieswithanestimatedtotalinvestmentvalueofUSD87billion,includingUSD56billionofprivateinvestment.Ofthetotalinvestments,37%hasbeenallocatedtoenergyprojectswithanother5%toICTprojects.TheRenewableEnergyIntegrationprogramme,launchedin2021bytheClimateInvestmentFunds,offersarangeofflexiblecost-andrisk-bearingfinancialinstrumentscoupledwithtechnicalassistancetohelpscaleuppublicandprivateinvestmentsinsmartgrids,energystorageandnewbusinessmodels.Ukraine,Fiji,Colombia,KenyaandMaliarethefirstcountriestoparticipate,withBrazil,CostaRica,India,IndonesiaandTürkiyebeingprioritycountriesforthenextphase.TheAfDB,NordfundandotherpartnersrecentlysetuptheFacilityforEnergyInclusion(FEI)tocatalysefinancialsupportforinnovativeenergyaccesssolutions.Itprovidesarangeofdebtproductsincludingcorporateandprojectloans.WithsupportfromtheGlobalEnvironmentFacility(GEF),theFEIdisbursesreturnablegrantfundingfromitsPPFtofundlast-mileprocesses.Thishelpsclosetransactionsandfundextraordinarycostsincurredinestablishinginnovativestructuresortransactions.InColombia,undertheFENOGEBeEnergyprogrammefinancedbytheIADB,morethan13000electricitycustomersbenefitedfromthereplacementoflightUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE61IEA.CCBY4.0.bulbswithalmost5000familiesprovidedwithenergy-efficientrefrigeratorsandairconditioners.Additionally,solarPVsolutionswereinstalledin18officialandsocialinfrastructures.AspartofthereconstructionprocessoftheislandsofProvidenciaandSantaCatalina,devastatedbyhurricaneIotain2020,morethan500solarsystemswithstoragewereinstalledtocontributetothesustainabilityandresilienceofcommunities.Developmentfinanceinstitutions(DFIs)cansupportspecificprojectstofacilitatedeploymentofsmartgridstoreducepressingissues,suchasoutagesandlowcollectionrates.InBrazil,theWorldBankdisbursedUSD272millionintheEletrobrasDistributionRehabilitationProjectwhichfocusedonsixdistributioncompanies,whileEletrobrascontributedUSD148million.Capacitybuildingcanbesupportedbyarangeofactorstomeetdiverseneeds.TheWorldBankhassetuptheUtilityoftheFuture–KnowledgeExchangePlatform(UKEP)toprovideinsightsandpeer-to-peerlearningopportunitiesforutilitiesinEDMEs.InIndia,facingtheneedtoraiseawarenessaboutandbuildacommonunderstandingofsmartgrids,theIndiaSmartGridForum,withthesupportofShaktiSustainableEnergyFoundation,publishedasmartgridhandbookforregulatorsandpolicymakers.ThePuertoRicoCommunityEnergyResilienceInitiative(CERI)isacollaborationbetweentheGlobalEnergyAllianceforPeopleandPlanet,FundaciónComunitariadePuertoRico(FCPR),andtheRockyMountainInstitute(RMI),withsupportfromEnelNorthAmerica.Itfostersequitableaccesstoaffordable,resilientandcleanenergyinlower-andmiddle-incomecommunities.Installingsolarandstoragemicrogrids,i.e.decentralisedenergysystemthathavetheirownsourcesandloadsandcanbeislandedfromthemaingrid,atcriticalfacilitiescanimproveenergyresilience,enablingthemtostayoperationalforcommunitiesduringroutineoutagesandattimesofcrisis.CERIblendsgrantsandloanstocreatecleanelectricitysystemstailoredtoeachcommunity’sneeds.Programmeelementsaredesignedforcommunityinvolvementandownershipoftheenergysystem,includingoperationaltrainingforsysteminstallation,operationandmaintenance.GridinvestmentscanbemadeeligibleforinternationalclimatefundsSmartgridinitiativesandprojectsareexplicitlymentionedintheNDCsofanincreasingnumberofEMDEs,especiallyastheysubmitupdatedandnewNDCs.Colombiaassessesthat,withoutsmartgrids,reachingitsNDCcommitmentby2030wouldrequireanadditionalcostofUSD42millionperyear.In2020,Colombiaincludedactionsaimedtonarrowthegapbetweenenergyuseacrosspeakandoff-peakhoursinitsNDC.ThailandlistssmartgridsasapriorityareaUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE62IEA.CCBY4.0.undertechnologydevelopmenttransferinits2020NDC.ThePhilippinesisalsoexploringhowsmartgridscanhelpintegrateincreasingsharesvariablerenewablestowardsachievingitsNDCcommitment.Egypt,whichhostedCOP27in2022,submitteditsfirstupdatedNDCinJune2022,withsmartgridsidentifiedasanimportantpillaroftheclimatestrategy,notablytointegratelargersharesofrenewableenergygeneration.TherevisedNDCaimstosignificantlytoimproveelectricityefficiency,reducecarbonemissions,andreducetheinvestmentrequiredforinfrastructureforelectricalnetworksthroughasmartgridtransformation.InIndonesia,theMinistryofEnergyandMineralResources(EMR)isplanningtodevelopasmartgridprojectin2025aimedtoaddressthemismatchbetweenthelocationsofrenewableenergysourcesandareaswithhighelectricitydemands.Theprojectwillpromotetechnologiessuchassmartgrids,smartmetersandbatteryenergystoragesystem(BESS).Likewise,MauritiushasembeddedsmartgridsinitsupdatedNDC,asapillarofitsgridmodernisationstrategytointegratedistributedgeneration.AsNDCsareincreasinglyalignedwithnationalenergyplansandpolicies,smartgridstargetsandgoalscanbeframedmoreholistically,reflectingtheirtwincontributionstoclimatechangemitigationandadaptation.EnablingtheuseofclimatefundsforinvestmentsingridsinEMDEsGiventheimportanceofrobust,reliableandflexibleelectricitygridstosupportthecleanenergytransition,exploringiswarrantedastohowclimatefundscouldbeleveragedtoenablegridstosupportdecarbonisationmoreeffectively.Consideringthescaleofgridinvestmentsneededtosupportdecarbonisationinemergingmarketsanddevelopingeconomies,internationalfinanceiscriticalformobilisingthefinancialresourcesneededtohelpde-riskandrealisethenecessaryinvestments.Recentanalysisindicatesthatundercurrenteligibilitycriteriausedbyfinancingorganisations,lessthan40%ofthegridinvestmentneededinthesecountriesin2030wouldbeclimatefinanceattributable.ImportantstepstowardsdirectinginvestmentstosustainableprojectsandactivitiesincludeboththeCommonPrinciplesapproachofIFIsandtheEUTaxonomydevelopedbytheEuropeanCommission.Forcountriesinnascentstagesofelectricitygriddecarbonisation,however,ariskexiststhatgridinvestmentprojectswouldnotmeettheeligibilitycriteria.Furtherclaritycouldenablegreateraccesstoclimatefinanceforgridinvestmentneeds.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE63IEA.CCBY4.0.HowtoconveyvalueandattractinvestorsAstandaloneinvestmentopportunityinEMDEsmaynotbesufficientlyappealingtosingleinvestors.Tobetterpositionprojects,itisnecessarytoexplorevaluationroutesthatlookbeyondthebasicrateofreturn.Ifthebenefitsofasingleprojectoranoverallprogrammeofworksareexploredsufficiently,itisoftenpossibletoidentifygreatersocialorenvironmentalpotential.Thiscouldintroducemoresourcesofprojectfinancing.ProjectscanbeaggregatedintopackagestoattractinvestmentCombiningmanysmallerandlowercostprojects,whichindividuallymaynotbeconsideredattractive,intoamoresignificantpackagecouldcreateamorevaluablepropositionandopentheworkstreamtoawiderfieldofinvestors.Thepackagecouldbeeitheracollectionofhomogenousprojectsoradiverseofferingwithclearlydefinedoutcomesandmaybesituatedinoneregionorinmultiplelocations.Itispossibletodesignapackagethatcouldfocusondeployingindividualtechnologiesinisolation,inparallelwithotherworkprogrammeswheretherearenooperationalconstraints,oraspartofalargerworkprogramme.Havingclearlydefinedpackageswithidentifiabledeliverablesimprovesthepotentialtoattractinvestorsandcanalsoenabletheparticipationofmultiplepartnersinparalleltosatisfyfundingrequirementsandfacilitateanacceleratedprogramme.Aggregatingmultipleprojectscanhelpmanagethehighlyfragmentedinvestmentmarket,reducetransactioncosts,andoffereconomiesofscaleforbothmaterialprocurementandlabourforcecosts.Fundingcouldbeprovidedintheformofspecialpurposevehiclesthatseparatethebusiness-specificassetsfromautilityorgovernment,byjointprocurementofthemultiplepartnersseekingfunding,orbycollectivelyissuinggreenbonds.CapeTowninSouthAfrica,forexample,marketedgreenbondstothevalueofalmostUSD60millionin2017tofinancetheprocurementofelectricbuses,energyefficiencyimprovementsinbuildings,watermanagementinitiatives,sewagetreatment,andtherehabilitationandprotectionofcoastalstructures.Thegreenbondmarketofferssubstantialgrowthpotential.In2021,theClimateBondInitiativereportedthatcumulativegreenbondissuancestoodatUSD1.1trillion,havingsurpassedtheUSD1trillionmilestoneinDecember2020.Investmentintheenergysectorcomprisesthelargestshareoftotalinvestment,atalmostUSD355billion,followedbylowcarbonbuildingsatmorethanUSD260billion,andtransportataboutUSD190billion.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE64IEA.CCBY4.0.StandardisationofinvestmentcriteriacanhelpreducetransactioncostsStandardsarethebridgebetweenhigh-levelprinciplesandtheimpactmeasurementandmanagementframeworksandtoolsthatdiverseorganisationsuseforperformancereportingandbenchmarking.Internationalco-operationcouldhelptoreducetransactioncostsrelatedtolegalfinancialandtechnicalduediligence,whichcanaccountfor1%to10%ofprojectoffinalprojectcostsfrombothprojectdesignandcontractdesign.Standardisationcanreducecomplexity,timeinvolvedandupfrontcostswhilealsostrengtheninginvestorrights.Theinformationrequiredbyinvestorstoassesstheseriskstructures–andtheinfrastructuremarketingeneral–islackingorhighlyscattered,creatinguncertainty.Manyinvestorsalsoviewthelackofclearbenchmarksformeasuringinvestmentperformanceasoneofthemainbarrierstoinfrastructureinvestment.Alackofcommondefinitions,lowtransparencyandbarriersimposedbyconfidentialityagreements,andpoorcollectionandsharingofinformationonimpactandoutcomesalsohamperprogress.Greatertransparencycouldalsohelpcreditratingagenciesmakemoreinformedassessmentstomobilisefinance.Moredisaggregateddatacouldunderpinmoreinformedprivateinvestmentdecisions,removingsomeoftheuncertaintyoverunderservedmarketsandtheirlegal,regulatoryandpoliticalenvironments.Includingenvironmental,socialandgovernancerelatedvalueinprojectscoulddrawpotentialinvestorsEnvironmental,socialandgovernance(ESG)basedinvestmentsaregrowingfromaroundUSD30trillionin2018toUSD41trillionin2022,withthepotentialtohitUSD50trillionby2025.WhenassessingtheESGratingofaprospectiveinfrastructureproject,itisimportanttoconsidernotonlytherisksbuttoalsoapplyascoringofpotentialbenefitsthatcouldbetterpositionitasaninvestableprospect.ForautilityseekingtoproposeESG-compliantinvestmentsforanewsectionoftransmissiongrid,forexample,asthepotentialtoreducegreenhousegas(GHG)emissionsreceivesahighweighting,itwouldobtainabetterscoreforfacilitatingtheconnectionofautility-scalesolarplantthanagas-firedelectricitystation.Ashighweightingsarealsoappliedtocustomerengagementandsafety,aprojecttoformaliseasectionofinformaldistributionsystem,forexample,couldbeagoodcandidateforinvestment.Identifyinghoweachprojectcanincreaseenergyefficiency,andthusimprovethetotalsystembenefitofadigitalorphysicalsystemupgrade,couldimprovetheinvestmentprospects.GovernanceofacandidateutilityorhostnationmayalsoheavilyinfluencewhetheraninvestmentUnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE65IEA.CCBY4.0.isdeemedloworhighrisk.Thenationalriskofdefaultalsofeaturesindecisionmaking;infact,arecentdeclineinESGscoresinEMDEsshowsastrongcorrelationwithworseningcreditratings.BlendedfinancecanhelpreduceinvestorriskInsituationsofmarketfailure,whennoinvestorisforthcomingasaprojectmayinitiallybedeemedcommerciallyunattractivebecauseoflowreturnsorbeinggeographicallytoorisky,blendedfinancecouldplayaroleinthefirstinstancetocreateinvestorconfidence.Similartothepotentialbenefitsoflinkingmultipleprojectsonthedemandside,aggregatingthesupplyoffinanceresourceoptionscanincreasethepotentialofsuccessfullyfinancingprojects.Thisapproachallowsheterogeneousfinancingorganisationstoinvestandlendjointly,evenwithdifferentobjectives.Thiscouldincludeacombinationofinvestorssuchasmultilaterals,developmentaid,sociallyconsciousimpactinvestors,institutionalfundmanagersorphilanthropicorganisations.Someoftheseentitiesmayacceptalowfinancialreturnaslongasprojectshelpthemrealisetheirdevelopmentaltargets.Blendedfinanceisdesignedforeachprojectandconsiderscountry-specificrisks.Itcanbedeployedaspartofawidersuiteofenablingmeasurestoscaleprivatecapitalmobilisation.TypicalblendedfinancemechanicsandstructuresIEA.CCBY4.0.Source:Convergence(2022),Stateofblendedfinance.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE66IEA.CCBY4.0.Blendedfinancecanbeincludedinaproportionofprojectfinancingstructurestoeaseinvestorconcernsandprovidealevelofconfidence,therebybroadeningthenumberofprospectiveinvestors.Thefinancingstructuretypicallyincludesacombinationofdebt,equityorgrantfinancing.ThisapproachhasbeensuccessfulinmobilisingcapitaltoclosetheinvestmentgapinEMDEs.In2021,overUSD7billionwasmobilisedthroughblendedfinanceagreements,ofwhich29%wasintheenergysector.Between2019and2021,morethantwo-thirdsofallclimate-relatedblendedfinancialtransactionstargetedSustainableDevelopmentGoals(SDG)7–affordableandcleanenergy.BlendedfinancingrecentlyenableddevelopmentofasolarfarminBurkinaFasoandadigitallyenabledmicrogridinKenya.ProjectpreparationfacilitiescanhelpkickstartinvestmentOnebarriertomobilisingprivatesectorfinancingisthatitisoftendifficulttoidentifyinvestmentopportunities.Alackofnationalinfrastructureinvestmentplans,energystrategiesorroadmapshastheeffectofobscuringwhereprojectinvestmentsareneeded,whentheycouldbebuilt,oriftheyaresufficienttomeetlong-termobjectivestoreduceprojectrisks.Thisisacriticalchallengeforattractinginvestmentstocountriesandsectorsinneedofsuchinfrastructure.Developingapoolofinvestment-readyprojectsrequiresconsiderableplanningandcapacitytoaddresstheassociatefinancial,legalandtechnicalchallenges.Internationalco-operationisanimportantmeanstofacilitatethepoolingofknowledge,supportandinvestors.Toencourageprivatesectorinvestmentforprogrammesorstandaloneprojects,itisbeneficialtocreateavisiblepipelineofprojects,whichcouldalsobeenhancedthroughaffiliationtolargeinstitution.OneexampleofatechnicalassistanceschemesupportedbyafinancialinstituteistheStrengtheningProjectPreparationCapacityinAsiaandthePacificprogramme,supportedbytheAsianDevelopmentBank(ADB),anddesignedtohelpEMDEsprepareinfrastructureprojects.Variousphasesoftheprogrammehavefocusedonaclusterapproach,targetingactivitiessuchassectororpolicyreform,capacitybuildingandperformancemonitoring,developmentofenablingenvironmentsofPPPs,andpreparinginfrastructureprojectsforprivatesectorparticipation.TheEuropeanInvestmentBank(EIB)hasasimilartechnicalassistancefunctiontoenhanceprojectsuccessratessupportingCentralAsia,Sub-SaharanAfrica,andtheCaribbeanandthePacific.TheEIBschemehastwomainfunds:anEUR80millionaccesstoenergyfund;andanEUR75millioninfrastructurefund,targetinginvestmentsincludingelectricityanddigitalICTassets.ItrecentlyprovidedaEUR100millionloanforexpansionandmodernisationoftheelectricitytransmissionnetworkinArgentinatosupportintegrationofrenewablegeneration.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE67IEA.CCBY4.0.TheGreenClimateFund(GCF)isaplatforminvolvingupto194governments,withafundofoverUSD11billion.Itaimstoachievea50:50balancebetweenmitigationandadaptationinitsfunding.Todate,ithasdisbursednearlyUSD3billion.Amongareasofprioritysuchashealthorforestry,italsohasafocusoninfrastructureandenergyacrossthreemainareas;energygenerationfromrenewablesources;transmission,distributionandstorage;andpromotingaccesstocleanenergy.Sofar,projectshavebeenundertakeninBotswana,CentralAfricanRepublic,Chile,DemocraticRepublicoftheCongo,Haϊti,India,Kenya,Mali,NamibiaandUzbekistan.TheGlobalInvestorsforSustainableDevelopmentAlliance(GISD),convenedbytheUnitedNationsSecretary-General,isanotherexampleofacross-disciplinaryinitiativedesignedtoscaleupprivatefinanceforsustainableprojectsthatinvolvesfinancialinstitutions,corporationsandmultilateralpartners.Whilegovernmentsandinstitutionsarealreadytakingactionstodeveloppipelinesofprojectsinmanyregions,furtherstrengtheningisneededtoachievedeploymentatscale.UnlockingSmartGridOpportunitiesHowtogetinvestmentstoflowinemergingmarketsanddevelopingeconomiesPAGE68IEA.CCBY4.0.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE69IEA.CCBY4.0.HowtoacceleratesmartgridimplementationWhenapproachingthedevelopmentofasmartgridstrategy,itisessentialtoavoidcommonmisstepsandtocreatenewproblemsbynotconsideringallofthephasesrequiredtobeachievedonthedigitaljourney.Thesuccessofsmartgriddeploymentishighlydependentoncountryconditions,thespecificitiesoflocalenergysystems,technologychoices,socio-economicgoalsandinvestmentpriorities.ThisreportidentifiesfivekeyareasforgovernmentactiontosupportimplementationofdigitaltechnologiesandunlockthepotentialtheyholdinEMDEs.FivekeyactionareastosupportdeploymentofdigitaltechnologiesIEA.CCBY4.0.Agrowingbodyofevidencedemonstratesthatco-ordinatedactionacrossthesefivepillarscangeneratevirtuouscyclesofinvestmentandcostrecovery,andthusensureeffectiveandinclusivedeploymentofdigitalisedgridsatscale.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE70IEA.CCBY4.0.CreateacoherentvisionAnimportantstartingpointtoanysmartgridjourneyistocreateaunifiedvisionofhowsmartgridtechnologiescanhelpmeetcountrypriorities,includingthoserelatedtoenergyaccessanddecarbonisation.Thisvisioncanthenbefurtherarticulatedintostrategiesandroadmaps.Inlinewiththisvision,regulatoryframeworkswouldneedtobeadjustedtorecognisethevalueofinvestmentsthatharnessdigitalcapabilities.Thisrequiresengagingallstakeholdersfromthedigitalandenergysectors.Governmentscouldalsoclarifytheirownroleforincorporatingdigitalisationintheirenergytransition,nationallydeterminedcontributionsandlowemissiondevelopmentstrategyplanning.Thiscouldincludetheintegrationofdistributedenergyresources,notablydistributedsolarPV,inwaysthatpromotesystemsefficiency.Integrated,digitallysupportedplanningcanbenefitverticallyintegratedsystemsanddoesnotrequiresubstantialrestructuring.Aselectricitygridsbecomeincreasinglycomplex,awhole-systemsapproachtoplanningiskeytoembeddingdigitaldeploymentintoenergyandbroadereconomicplans.Thisapproachalsoconsidersdistributedresourcesandthedemandsideinplanningandinaligninginvestmentdecisionsacrosssystemoperators,networkcompaniesandotheractors.DeveloproadmapstoprovidecleardirectionontheexpecteddevelopmentofdigitalisedgridsInvestorsoftencitepolicyandregulatoryuncertaintyasakeyriskfactorforinvestments.Thiscanbeaddressedbycleararticulationofgovernmentpolicy,supportedbylegislationandregulatorychanges.Visionstatements,nationalstrategiesandroadmapsarekeyinstrumentstoindicatemedium-tolong-termaimstodeploymoderndigitalelectricitygrids,whilewell-definedshort-termactionsprovidedirection.Together,theseinstrumentscanprovideaunifiedpolicyframeworkonwhichkeystakeholders,includingtheprivatesector,canbasetheirUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE71IEA.CCBY4.0.plansandactionsfortechnologydeployment,supplychaindevelopment,resourcemobilisation,financingandbudgeting,andcapacitybuilding,amongothers.Roadmapshaveemergedasakeyelementofgriddigitalisationpolicy,astheyprovidecleardirectionwhiletheprocessofdevelopingroadmapscanhelpbuildconsensusamongkeystakeholders.Theyareanimportanttooltosettimeframesbyoutliningatemporalvisualisationofthewholesystem,whichhelpsshowwhatadditionalinvestmentsandtechnologiesareneeded,whenandwhere.Theycanalsospellouttherelationshipofgriddigitalisationwithothergovernmentpolicies,suchasenergyaccess.Roadmapscanalsoprovidedeeperexplorationofdiversesmartgridtechnologiesandtheirfunctionalities.Withoutaclearvisionintermsofexistingandfuturefunctionalityneeds,theriskarisesofoverinvestment,investmentintechnologiesthatneedtobereplaced,orothersuboptimaloutcomesaslackofthefunctionalitiesneededcanundermineoptimalutilisationofassets.Earlysmartmeterroll-outintheUnitedKingdomisanexampleofthis,wheresomeofthefirstmetersstoppedworkingwhencustomersswitchedelectricitysuppliers.Angrowingnumberofcountrieshaverecentlydevelopedroadmapsrelatedtogriddigitisation,includingChile,Colombia,CostaRica,IndiaandTürkiye.TheSmartGrid2023VisionandStrategyRoadmapproject,managedbyTürkiye’sEnergyMarketRegulatoryAuthority(EMRA)andtheAssociationofDistributionSystemOperators(ELDER)includesadetailedtimelineandestimatedbudget.Activelyengagingwithrelevantstakeholdersthroughouttheprocesscanensurethatdifferentperspectivesandconcernsareaddressed.Thisalsohelpstoco-ordinateandalignvisionsandstrategies,includinginplanselaboratedbyutilities.Indiaiscurrentlyhelpingdistributioncompaniesassesstheirpreparednessandelaborateroadmaps.Linkingwithotherrelevantroadmapsandplans,suchasoncleanenergyinvestmentanddevelopmentofICTinfrastructure.Chinaissuedanationalstrategyin2016aimingtoincreasetheproportionofrenewableenergy,andimprovetheoverallefficiencyofenergybyleveragingIoTpotential.Inadditiontosettingtargetsfordeployinginfrastructureandequipment,roadmapscouldalsoestablishgoalsforenhancingoperationalproceduresandforexpected,longer-termefficiencygains,whichimplyactionsandlinkageswithothersectors.Moderniseplanningtowardsintegrated,wholesystemplanningprocessesEnergysystemsareinamomentofprofoundchange,drivingactorsfromacrossthesectortoadaptandtoanticipateneeds,challengesandopportunities.Communicationamongactorsisincreasinglyimportant,includingthosewhomaynothavetraditionallyworkedcloselytogether.ElectricitygridsareincreasinglyUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE72IEA.CCBY4.0.complexandrequireintegratedplanning.Newapproachesareemergingforco-ordinatedandintegratedplanningpracticesthatexpandthescopeoftraditionalresourceplanningbetweentheelectricitysectorandothersectors.Co-ordinationbetweentransmissionanddistributionoperators,forexample,isessentialtomaintainreliablesystemoperationandoptimiseuseofsupplysideanddemandsideassets.Maincharacteristicsoftraditionalandintegratedandco-ordinatedplanningTraditionalresourceplanningIntegratedandco-ordinatedplanningElectricitygridcontextLarge,centralisedconventionalelectricityplants,unidirectionalelectricityflow.IncreasingsharesofvariablerenewablesincludingdistributedPV,demand-sideresourcesandbidirectionalelectricityflow,transformingtheenergylandscape.Planningprocess(transparency)Top-down,transmission-distributionsystemplanningwithlimitedinteraction;publicconsultationattheendoftheprocess.Participatoryandtransparentprocess,continuousengagementwithrelevantstakeholders.ResourcesconsideredCentralisedgeneration,transmissionanddistribution.Generationbothcentralisedanddistributed,transmission,distribution,demand-sideresourcesandsystemflexibility.InputparametersandestimationtoolsApproximation,reservemargincalculations.Multidimensionalanalysis,includingenvironmentalandsocialaspects.Source:USAid(n.d.),BestPracticesGuide:IntegratedResourcePlanningforElectricity.Integratedandco-ordinatedplanningframeworksincreasetransparencyandprovideinformationtomarketplayersandotherstakeholders,includingmanufacturers,projectdevelopers,gridoperatorsandauthorities.Theseframeworksarecrucialinco-ordinatinginvestmentsingenerationandgridsacrosspublicandprivatesectoractors.Utilitiesaroundtheworldareevolvingtheirapproachestogridplanning.ThisimpliesdeployingICTplatformsanddataanalyticsthatimprovevisibilityofandcontroloveralargernumberofsourcesofgeneration.Italsomeansregulatorsneedtoallowforabroaderrangeofplanningoptionsandare-thinkingoftraditionalenergysystemplanning,aiminginsteadtodeploynodalplanningandincreasetheplanningcapacitiesofdistributionnetworkownersandoperators.Whensupportedbydigitalsolutions,integratedplanningacrosstheelectricitysectorenablesoptimaluseofallassets.Conversely,investinginsmartmeterswithoutassociateddatamanagementstrategies,frameworksandcapacitytoanalyse,manageandutilisedataandinsightsmayfailtocapturetheirfullvalue,UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE73IEA.CCBY4.0.resultinginmissedopportunitiestooptimiseelectricitygridplanningandoperation–andoftenalongerpaybackperiod.Newapproachestoinvestmentscanhelpaccommodatehighersharesofrenewableenergyincludingfromdistributedsourcesatleastcost.Traditionally,transmissionordistributionnetworkownersandoperatorswouldinvestincabling,wiresandsubstationsthatcanbeeasilyaccountedforandincludedintheregulatedassetbaseforwhichtheywouldreceiveareturn.Smarttechnologiescanfacilitateservicessuchascongestionmanagement,orotherancillaryservices,however,marketsandincentivemodelscurrentlypreventparticipation.Majorcomponentsofelectricitysectorplanningandco-ordinatedapproachesIEA.CCBY4.0.Frequencycontrolisanexampleofafunctionalitythatisundergoingrapidevolution.Untilrecently,itwasmostlycarriedoutbyflexibleconventionalelectricityplants,traditionalhydroelectricityorpumpedhydroelectricitystorage.Todayandintothefuture,largenumbersofPVsystems,coupledwithstorageandotherdispatchableloads,couldprovidethesetypesofservicesbutmayrequireamuchfinerunderstandingofgenerationandloadportfolios,aswellasaneedtoaddressregulatoryconstraints.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE74IEA.CCBY4.0.Innovativesolutionssuchasco-ordinatedmanagementofdistributedenergy,storageorbroaderdemandresponsepresentnewchallenges.Todate,nostandardbusinessmodelorprocessexistsforprocuringnon-wirealternatives.Someoftheseoptions,suchasstorageordistributedassetmanagement,aremodularandcanbedeployedwheretheneedisgreatest.Monetisingtheseopportunitiesthroughbusinessmodelsthatsupportthirdpartiessuchasaggregatorscouldbenecessary.Anothernewchallengeisthatofbalancingthecomplexityofincentivesandratestructuresthatincentiviseutilitiesandthirdpartiestodeployinnovativeoptionsoverlargenumbersofconsumersandequipment,andthenecessitytosimplifyprocedures.SupportutilitiesindevelopingrobustplansfordigitalelectricitygridsOncepolicyandregulatoryframeworksareinplace,theonusfallsontoutilitiestoplantheirinvestmentsinadigitalisedgrid.Creatingrobustplansisvital:ifinvestmentindigitalisationoccursinanadhocmannerwithoutintegratedplanning,theriskarisesthatsolutionsmaynotbeoptimallyutilisedandfailtodeliverthevalueexpected.Enhanceddistributionplanningmethodologiescanensurethatutilitiesconsistentlyconsidernon-wirealternatives.Beyondplanningthedistributionnetworkandactivityitself,utilitiesneedtobetterintegratetheirplanningactivitieswithgenerationandtransmissionplanning.ThiscanbedoneaspartofbroaderandimprovedTSOco-ordinationwiththedistributionsystemoperatorsinbothplanningandoperation.Brazil,forexample,isworkingonameritorderframeworktoreducecurtailmentofrenewablesbythenationalsystemoperator.Similarly,accelerateddeploymentofdistributedPVwillrequireamoredigitaliseddistributionsystem,withtheaccompanyingICTplatformsanddataanalyticstoimprovethevisibilityandcontroloveralargernumberofpointsourcesofgeneration.Leveragedigitalmonitoringtoolsforlong-termplanningOverall,griddigitalisationmightleadtoutilitiesmanaginghigheramountsofdatathanexperiencedcurrently.Inturn,whenproperlycollectedandanalysed,suchdatacanenablemoreaccurateandforward-lookingplanningthanwaspreviouslypossible.Gridoperatorscouldseektoutilisearangeofdigitalmonitoringandtrackingtools,especiallywhenfacingunprecedentedDPVgrowth.Theimportanceoftrackingwheresolarisbeinginstalledacrossaregion–alongwithhowmuchandwhattypes–growswithincreaseddeployment.Also,understandingdailypatternsofUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE75IEA.CCBY4.0.intermittencywillbeessentialforanylong-term,grid-wideplanningtoensurethatthoughtfuldecisionsreflectaccurateinformationaboutthatgrowth.AlackofreliabledataonDPVinstallationsinSouthAfrica,reflectingthetendencyforDPVownerstonotofficiallyregistertheirsystems,isagreathindrancetoEskomandthegovernmentinaddressingthetypeofgridupgradesnecessaryasDPVincreases.Whileworkingontheregulatoryandpermittingsidetoresolvethelackofregistration,thoughtfulgridplanningcouldincludetrackingcustomerconsumptionpatternstoidentifyunregisteredsystems,installationofmoresmartmeters,GISmappingofknownandsuspectedsolarinstallations,andotherdigitalverificationtools.Regularlytrackedandanalyseddatacouldleadtobetterforecastingmodelsforthegridtoanticipatedemand,planaroundexpectedDPVproductionandotherfuturegridtrends,andcreateopportunitiesfordynamicpricing,demand-sidemanagement,andothertools.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE76IEA.CCBY4.0.Co-ordinateimplementationGovernmentscouldenhanceco-ordinationbetweenenergy,electricity,economy,digitalandotherdepartments,aswellaswithdigitalandenergyregulators,andthedigitalandelectricityindustries.Takingmeasurestowardsalignmentandadequatesupportfordigitalandenergyresearchanddevelopmentactivitieswithenergypolicyobjectivescanfacilitatethedevelopmentofcost-effectivesolutions.Governmentsalsohavearoletoplayinensuringthatthebroadersocio-economicbenefitsofadigitaltransformationarewidelyandequitablyshared,notleasttoimproveenergyaccessandprovidetheskillsneededfornewemploymentopportunitieslinkedtotheimplementationofdigitallyenabled,reliablegrids.PrioritiseenergyaccessandaffordabilityIncountrieswhereenergyaccessremainsachallenge,accesspoliciesneedtorecognisetheimpactofthedigitaltransformationinprovidingsolutionsforthemillionsofpeoplewithoutelectricity.Governmentsandtheirruralelectrificationagenciesarebecomingincreasinglyexperiencedinleveragingdigitaltoolstomeettheirsocio-economicobjectives.Forexample,increaseduseofgeospatialanalysistoestimateenergydemandinruralorperi-urbanareashashelpedidentifyleast-costandmostsuitableelectrificationtechnologiesinassessingarangeofoptionssuchasgridextension,mini-gridsorsolar-home-systems.Digitalinnovationhasalsoresultedinalargerrolefortheprivatesectorindeliveringelectricityservices.Deliveryofutilityservicesonapay-as-you-go(PAYGo)basis,especiallywhenintegratedwithmobilepayments,hashelpedtoimproveaccess.InSub-SaharanAfricain2021,almost50%ofsolarhomesystemswerebasedonthePAYGomodel.Enabledbysmartmetersandtwo-waydigitalcommunication,thesesystemsallowcustomerstospreadtheirpaymentsovertimeinsmallinstalments,accordingtotheirconsumption.Thisavoidsahigh,upfrontcost.Governmentscouldlooktowardspoliciesandregulationstofacilitatetheseopportunities.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE77IEA.CCBY4.0.Policymakers,donororganisationsandtechnologydeveloperscanworktogethertocreateanenablingenvironmenttoharnessdigitaltechnologiesinmini-grids.Policymakerscanprovidelong-termplansforgridextensionanddevelopsuitableregulatoryframeworkssothatmini-griddeveloperscanevaluatetheextenttowhichitmakessensetoincorporatedigitaltechnologies.Policymakerscansupportthetestingofdigitalsolutionsinpilotlocationswithpotentialforproductiveuses.Donororganisationscouldpromotetheuseofdigitaltechnologiesinmini-gridsbyrequiringthatdatafrommini-gridstheyfundissharedtoinformfuturedesign.Inthe2022editionofitsDigitalEnergyChallenge,theFrenchDevelopmentAgency(AFD)includeddigitalinnovationsinthefieldofmini-gridsasoneofthreethemesonwhichitbasesselectionofprojects.Examplesincludeusingdigitaltoolstofacilitateinterconnectionswiththemaingridand/orothermini-gridsorsystemsanduseofgeospatialdataanalyticsforelectricitydemandevaluationand/orcreditriskassessment.DigitalisationacrossenergyaccessvaluechainsolutionsIEA.Allrightsreserved.Note:DFI=developmentfinanceinstitutions.OGS=off-gridsolar.Source:TFEEnergy(2020),EnergyAccess,DataandDigitalSolutions.EnsurebenefitsofdigitalisationarewidelyandequitablysharedArangeofsocialissues,suchasskillsgapsandchangesinjobmarkets,couldputthedigitaltransitionatrisk.TheinfluenceofenergydigitalisationoncreatingUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE78IEA.CCBY4.0.newsocietalnormsandbehaviouralpatternsalsoneedstobeconsideredtoensureitbringswidersocio-economicbenefitswithoutexacerbatinginequalityandotherpre-existingproblems.Digitalisationcanenhancetheabilityofconsumerstoadopttechnologiesandsolutionsthatenablethemtomanageenergyconsumptionandcosts,reducetheimpactoftheirenergyuse,andreducecarbonemissions.However,facilitatingaccesstoinformationisacentraldimensiontothis.AllinterestedstakeholderscouldhaveeasyaccesstoelectricityconsumptioninformationandrelevantfactsaboutelectricityincludingtimeandlocationdimensionsofelectricitypricesandrelatedGHGemissions.Theshifttosmartersystemshaspotentialtocreatenegativedistributionaleffectsintermsofsystemcostsandbenefits,andtoexcludesomevulnerablegroupsduetothecomplexityandcostsofparticipating.ArecentUKresearchprogramme,SmartandFair,conductedanin-depthassessmentofconsumervulnerabilitylinkedtoimplementationoftime-of-usetariffsandarangeofsmarttechnologiesandenergyservices.Theresearchledtotwomainfindings:thecapabilitiesrequiredforconsumerstoparticipateinandbenefitfromsmartersystemscouldcreateuncertaintyforconsumers,andsmartandfairoutcomesmaynotemergewithouttargetedpolicyinterventions.Theresearchhighlightskeysuccessfactorstoreducetherisksofconsumerharmfrompoorlydesigned,smartenergyoffers.Theseincludecommittingresourcestoeffectivemarketmonitoring,ongoingdistributionalimpactsanalysisandre-evaluatingdefinitionsofconsumervulnerabilitytoreflectnewrisks.Measuresmustbetakentoconsidertheaffordabilityofandequitableaccesstodigitaltechnologiesthatenableconsumerparticipationandtheiraccesstobenefitssuchasparticipatingindemand-responseprogrammes.Otherwise,theriskarisesofexacerbatingthedigitaldivide,leadingtosituationsinwhichlow-incomeconsumersareunabletoreapbenefitslikeincentivestoshiftdemandtooff-peak,whilebeingsubjectedtohigherbillsbecauseoftheneedofutilitiestorecuperatecostsassociatedwithelectricitygridreinforcement.AcknowledgementoftheserisksisdrivingmanygovernmentandenergyactorstoexplicitlyincludeprinciplesofjusticeandinclusivitysuchastherecommendationsfromtheIEAGlobalCommissiononPeopleCentredTransitions.MaximisejobcreationandcapacityopportunitiesInparalleltooraheadofinvestmentsindigitaltechnologies,thereisaneedtoinvestinhumancapacityacrossseveralrelatedareas.Theseincludetheabilitytoassesswhichtechnologiestoprioritiseandtheskillsandcapacitytodevelopsmartgridinvestmentprojects,includingassessingcostsandbenefits.Inturn,investingUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE79IEA.CCBY4.0.ineducationalservicesandvocationaltraininglocallymaybenecessary.Theeducationsystemmustalsoprovidegraduatesofrelevantprogrammeswiththeskillsetsneededtoplanandoperatemoderndigitallyenabledelectricitygrids.Thesecapacitiesareneededtoderivemaximumvaluefrominvestmentsintechnologies.Agrowingevidencebaseshowsthatalackofdigitalskillsandadigitalmindsetareamongthemainbarrierstothedigitalisationoftheenergysector.Alargesurveyofengineersandseniorexecutivesacrosstheenergysector,fromstart-upstolargecorporations,revealedthat91%ofenergyprofessionalsrecogniseafundamentalneedfordigitalskillstraining.Likewise,a2021surveyof159electricityandutilitiesexecutivesrepresentingaglobalcohortshowed89%ofrespondentsidentifyingtheskillsgapasamainchallengetodigitaltechnologyadoption–particularlyrelatedtoemergingdigitallyenabledsolutionssuchasvehicle-to-gridandvirtualreality.ThelatestUSDepartmentofEnergySmartGridSystemReporthighlightshowtheapplicationofdigitaltechnologyrequiresmorehighlyskilledworkersandengineers,includingsystemarchitects,datascientists,modellingandsimulationexperts,IT/OTcybersecurityspecialists,andcommunicationsanddigitalcontrolengineers.Manyofthepolicyrecommendationstoensurecapacityandjobcreationincleanenergytransitionsalsoapplytothedigitalisationofelectricitygrids.Examplesincludeupdatingacademiccurriculatoprovidetherightsetofskills,includingtechnicalandvocationaleducationandtraining.Accountingforthetimelaginbuildingupaskilledworkforce,continuingeducationcoursesandcapacity-buildingprogrammesthatenableactiveprofessionalstoadapttorapidindustrychangesareneeded.Acrossallactivitiesineducationandtraining,appropriatecertification,qualityassurance,andmonitoringandevaluationisimportant.Trainingpoliciescanplayacriticalroleinencouragingcurrentandfutureworkerstoseizethejobopportunitiesemergingfromcleanenergytransitions.Governmentscanuseenergydigitalisationtoaddressemployment,equityandinclusionchallengesthroughtargetedandinclusiveskillingpoliciesthatprioritisevulnerableandunderrepresentedgroups.Digitalreskillingandupskillingmaybeimportantforfuturecleanenergyjobsandseveralgovernmentsaredeployingcross-cuttingstrategies.Italyrecentlylaunchedanationalcoalitionfordigitalskillsandjobstoroll-outdigitaltrainingprogrammestocloseskillsgaps.Governmentsarealsoaligningpoliciestopromotejobcreationinrelatedareassuchasenergyefficiency,renewablesandsmarttechnology.Severalsystemoperatorsareactivelytrainingstafftoequipthemwithnewskills.InColombia,thenationalinterconnectedsystemoperator,istrainingofstafftouselarge,real-timedatasetsanddevelopdatamanagementsystems.TheNationalUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE80IEA.CCBY4.0.ElectricCoordinatorofChilehassetupateamtoanalysedatabeinggeneratedbymultiplemonitoringandinformationsystems.Inparallel,workisunderwaytoimprovedatacollectionandmanagement,aswellastobuildskillstoutilisedataandanalysis.Inthefieldofenergyaccess,severalregionalandinternationalnetworksandorganisationsarelaunchingnewcapacity-buildingeffortsthatfocusonthenexusofenergyaccesspoliciesanddigitaltools.TodevelopsustainablenationalenergyinformationsystemsandenergymodellingcapabilityinSub-SaharanAfricancountries,theIEArecentlystartedatechnicalsupportandcapacityreinforcementprogramme.TheRenewableEnergySolutionsforAfrica(RES4Africa)MicroGridAcademyhasprovidedvocationaltrainingondecentralisedenergyto800youngpeopleacrossSub-SaharanAfrica.Somecountriesarepioneeringnewaccessdeliverymodelsthatcombinecleantechnologies,digitalsolutionsandlarge-scaletraining.TheTogoleseAgencyforRuralElectrificationandRenewableEnergy(AT2ER)wonthe2020AshdenAwardforSystemInnovationforEnergyAccessforaseriesoftraininginitiativestoboostthenumberofsolarhomesysteminstallersandtechniciansnationallyandtosupportthedeploymentofmobilemoneysystems.Asdigitaltoolstriggernewbusinessmodelsforenergyaccess,theyalsochangelocaljobprofiles.Comparedtocash-based,off-gridsolarmodels,thePAYGomodelemploysmorepeopleinafter-salecustomerrelationsandintechnical,skilledjobssuchassoftwaredesignandlogistics.FacilitatedemonstrationandexperimentationatscaleAfundamentalroleforgovernmentsincreatingconditionsfordigitalinnovationthatalignwithenergypolicyobjectivesissupportinglarge-scaledemonstrations.Regulatorysandboxenvironmentsareshowntohaveverypositiveeffectsfordigitaltechnologiesastheymakeitpossibletotestdigitalsolutionsonenergyinfrastructureatscale.Thisisneededtoleveragetheopportunitiesfromdataaggregationandanalytics,andtovalidatethebusinesscasesofdigitalsolutions.Governmentscanalsoplayanactiverole,includingaconveningone,inenhancingdataaccessandsharing–allofwhicharecrucialfordigitalinnovationstoincentivisenewbusinessopportunities.Whilemanysmartgridtechnologiesareatanadvancedstageofmaturity,theyhavenotbeenwidelydeployedinEMDEs.Thiscreatestheneedfortestingunderreal,localconditionsand,mostimportantly,totestapproachesandmethodstobuildlocalcapacityandsharelearningseffectivelyandontime.Testscandeliverinvaluablelessonsonmanagingdigitaltechnologiesatalargerscaleandprovideevidenceofthevaluetheycreate.Globally,manypilotprojectshavedemonstratedvariouselementsofsmartgridoperation;however,resultsandlessonslearnedarenotalwayswidelyshared.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE81IEA.CCBY4.0.Increasedfocusonusingthelearningsincludingquantifiedanddocumentedresultscanunderpineffectivereplicationandscalingup,ultimatelyencouragingmoreinvestorstosupportsmartgridprojects.InSeptember2021,theItaliangovernmentincollaborationwithUnitedNationsEnvironmentProgramme(UNEP)launchedacallforpilotprojectsthatprovideopportunitytogainin-the-fieldinsights,testnewapproachesanddisseminatelearningsthatwillfeedintotheIEA’sDigitalDemandDrivenElectricityNetworks(3DEN)initiative.PilotsarenowbeingimplementedinBrazil,Colombia,IndiaandMoroccototestdifferentapproachesonhowdigitalisationcancontributetoflexibleandresilientenergysystems.Creatingexperimentalsandboxesisanotherwaytotestdigitalsolutions.Typically,thisapproachallowsderogatingrulesorregulationforalimitedperiodoftime,usuallyinawell-definedgeographicalarea.Creatingsandboxesinneighbourhoods,townsornewlydevelopeddistrictsmakesitpossibletotesthowhighlydecarbonisedsystemsfunctionwithlocalcharacteristics.Thiscanprovidevaluablelessonsformanagingthematalargerscaleandhelptoidentifywhichdigitalsolutionsandtechnologiesprovidethehighestvalueinenergysecurity,resilienceanddecarbonisation.Brazilrecentlycreatedasandboxtotestnewtariffsforlow-voltageconsumers,leveragingsmartmetersandothertechnologiesrelatedtomanagingenergyconsumption.Regardlessofthemodality,pilotprojectdesignshouldidentifytheproblemthatthepilotaimstoaddress,whileaccountingfortheuniquegeographicalandsocio-economiccontext.Tomaximisethevalueofpilots,keysuccessfactorsinclude:Ensureajointunderstandingoftheroleofthepilotinaddressingcontext-specificopportunitiesandchallengessostakeholderscanformulateacoherentandsharedvision.Designthepilotaccordingtothissharedvision,prioritisingactivitiesthataddresstheidentifiedissuesandensuringtheinvolvementofallrelevantstakeholders.Sincepilotsareembeddedinuniquegeographicalandsocio-economiccontexts,theyarerarelyreplicatedexactly.Partoftheirvalueliesinleveragingthegeneratedknowledge,establishednetworksandstrengthenedlegitimacytoenablefurtherdeployment.Developascalingstrategyearlyinthedesignphaseofthepilot.Thiscouldindicatethetypesofknowledgelikelytobeproduced,thepotentialbeneficiaries,andpotentialbarrierstoscalingandhowtheycouldbeaddressed.Engagewithfutureusersandotherkeystakeholdersasearlyaspossibletounderstandtheirneedsandnecessarypreconditionsforadoptingthetechnology.Toimprovethescalingpotentialofapilot,activitiescouldbedesignedbottom-up,prioritisinguserneeds.Evaluationcouldfocusonsystem-levelbenefitsandadoptabroadsocio-technicalperspective.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE82IEA.CCBY4.0.Ensurethatpilotsareleveragedtobuildcapacityforfutureimplementationandscalingup.Considerhowpilotscanbeusedtode-riskinvestmentsanddemonstrateaviablebusinesscasetopotentialinvestors.Ensurethatlessonslearnedfrompilotsareleveragedtodevelopenablingpoliciesandregulations.StrengtheninternationalcollaborationandknowledgesharingDeploymentofsmartgridsmaybepursuedatdifferentspeedsindifferentregions,andchallengesandsolutionswillvary.Sharingexperiences,developingcommonpracticesandstandards,andidentifyingareasinwhichinnovationcanbeleveragedjointlycanaccelerateprogressandlowercosts.Giventhecomplexityandmulti-facetednatureofsmartgriddeployment,sucheffortswouldbenefitfrombothcross-cuttinganddeeperinternationalcollaboration.Thedepthandbreadthofknowledgepertainingtosmartgrids,aswellastheirrapidevolution,callfordeployingabroadrangeofinternationalandcross-cuttingcollaborationefforts,rangingfrompeer-to-peerexchange,andestablishingcommunitiesofpractice.Thesecanhelptosharesolutionsandapproachesforcommonchallenges,buildcapacityandfacilitatedialogueamongstakeholders.TheInternationalSmartGridActionNetworkisastrategicplatformtosupportgovernmentactionforaccelerateddevelopmentanddeploymentofsmarter,cleanerelectricitygridsaroundtheworld.TheGreenPoweredFutureMission,aglobalpublic-privatepartnership,aimstodemonstrateby2030thatelectricitygridsindifferentgeographiesandclimatescaneffectivelyintegrateupto100%variablerenewableenergiesintheirgenerationmixwhilemaintainingcost-efficient,secureandresilientsystems.TheRegulatoryEnergyTransitionAcceleratorisaglobalinitiativebringingtogetherenergyregulatorstodiscusscommonchallengesandsharebestpractices.TheGlobalPowerSystemTransformationConsortiumbringstogethersystemoperatorstoidentifycommon,cutting-edgeresearchquestionsthatcaninformlarge-scale,nationalresearchanddevelopmentinvestments.Facilitatedialogueamongstakeholdersthroughcross-cuttingnetworksGiventhenascentstateofdeploymentofsomedigitaltechnologies,knowledgesharingamongtheexpertandacademiccommunitiescouldfacilitatedrawinglessonsfromon-the-groundimplementation,notablythroughrelevantinternationalagenciesandmultilateralandregionaldevelopmentbanks.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE83IEA.CCBY4.0.InternationalthinktanksandnetworksalsoplaykeyrolesinknowledgeexchangeanddisseminationasexemplifiedbyRenewableEnergySolutionsforAfrica(Res4Africa),afoundationthatsupportsAfricaneffortstoensureaccesstoaffordable,reliable,sustainableandmodernenergyforall.ServingasabridgebetweenEuropeandAfrica,Res4Africagathersmembersfromacrossthecleanenergysectortomobiliseinvestment.UnderthemandateoftheAfricanUnion,theAfricaRenewableEnergyInitiative(AREI)isanAfrican-led,inclusiveefforttoaccelerateandscaleupharnessingofthecontinent’svastrenewableenergypotential,includingthroughdigitaltechnologies.Strengthenpeer-to-peerknowledgeexchangetoidentifybestpracticesTheWorldBank’sUtilityKnowledgeExchangePlatformisoneexampleofanonlinetooltoconnectstakeholdersintheelectricitysector–includingutilities,energysectorinstitutions,regulators,systemoperatorsandtheprivatesector–tohelputilitiesimproveoperationalefficiencies.Thisincludesfindingwaystobetternavigatethetechnologicalchangeandbusinessinnovationsthatunderpintheenergytransitionandaretransformingthesector,notablythroughdigitaltechnologies.Atthenationallevel,IndiaSmartGridForumisapublic-privatepartnershipinitiativeestablishedtoacceleratedevelopmentofsmartgridtechnologiesintheIndianelectricitysector.Itcarriesoutresearchandanalysis,andconvenesexpertsfromthepublicsector,industryandacademiatodevelopenablingpolicies,standardsandregulation.ColombiaInteligenteisaninitiativethatengagesrepresentativesfromprivateentitiesandpublicenergyinstitutionstoacceleratethedigitaltransformationofelectricitygridinColombia.Thenetworkpursuesknowledgeexchangeandpromotessmartgridpilotstoadvancetheprocessofregulatorychangeandstandardisation.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE84IEA.CCBY4.0.FacilitaterulesandregulationsthatadequatelyvaluedigitalopportunitiesDespitebeingregionswheredemandforenergyisexpectedtogrowfastestinthecomingyears,emergingmarketsanddevelopingeconomiesarelaggingupdatingtheirelectricitygridsfortheenergytransition.Wheretheweakfinancialsituationofutilitiesisanissue,policymakersandregulatorscouldseektoimplementadequateinvestmentframeworks,developleast-costsystemplansandcorrectthedesignofnetworktariffs,whilealsotacklinghighoperationalandcommerciallosses.Internationalco-operationcanprovideadditionalfinancialandtechnicalsupport,includingconcessionalcapital,privatesectorcapitalandinflowsfrominternationalmarkets.Inturn,governmentscouldconsiderdedicatedpoliciesandregulationstoincentiviseandde-riskdigitalisationinvestments.Thismayincludeashifttowardsperformance-basedregulatoryoversightbyprovidingincentivesandpenaltiestomeetcleanenergytransitionobjectivesaswellasspecificmeasurestosupportinnovation.Someexamplesincludereformingplanningandconsentingprocedures;streamliningpermittingprocesses;increasingborrowingthresholds;issuingtaxcreditsorgrants;loanguarantees;expandingemployeecaps;encouragingtrainingandskillsconversionprogrammes;andinvestinginresearchanddevelopment.Asthedigitaltransitionwillinvolvenewproductsandservices,andnewvendors,procurementprocessesmayalsoneedtoberestructured.Currently,utilitiesmainlyengagewithlargevendorsthathavelongtrackrecords.Goingforward,utilitiesmayneedtoalsointeractwithawiderrangeofstart-upsorsmallerdigitaltechnologyorserviceproviders.Assuch,theymayneednewprocessestoprocureandonboardresourcesquickly.Whileastrongbusinesscaseexistsforinvestmentingridupgrades,raisingthecapitalmaybechallengingandcomplex.Investorslookingforenergytransitioninvestmentstendtofavourrenewableprojectswithobviousbenefitsonthesupplysideratherthannetworkupgradesthatenablemoreeffectivetransmission,UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE85IEA.CCBY4.0.distributionanduseofelectricitygenerated.Itisthusimportanttoconsidercurrentframeworksgoverningutilityinvestmentandtoincorporatestrategiesthatincreasethereturnoninvestmentsinsmartgridtechnologies.StructureutilityregulationtoincentiviseinvestmentsUtilityregulationiscentraltosteeringhowutilitiesinvest,includingencouragingorinadvertentlydiscouraginginvestmentineffectivedigitaltechnologies.Traditionally,regulatorsencouragedinvestmentininfrastructuretogenerateanddeliverelectricitytoconsumers,withtheregulatorbalancinginvestmentneedslinkedtoaffordabilityandreliabilityofservice.Goingforward,regulationneedstoalsoencourageinvestmentsindigitalanddemand-sideinfrastructure,whilemaintainingthebalanceofinvestmentneeds,consumercostsandreliableservice.Inthiscontext,itiscriticaltoconsiderhowregulatorystructuresneedtochangetoaccountfordigitalanddistributedtechnologies.Traditional,cost-of-serviceregulationtendstobeframedtoenableutilitiestorecovertheirfixedcostswithafairrateofreturnoninvestmentwhilepassingoperationalcoststhroughtoconsumers.TariffsarebasedonacalculationofthepriceperkWhneededtorecovertheseoperationcostsfromconsumers.Thisframeworktendstoincentiviseinvestmentininfrastructureandtoencourageutilitiestomaximisesalestoconsumers;itisbasedonthepremisethatoncethetarifflevelsareset;highersaleswillboostrevenuesandprofits.Therateofreturnoncapitalexpenditureencouragesutilitiestopursuecapital-intensiveprojectsoverotherdigitalalternativesevenif,overtime,thealternativescouldsavemoneyforbothutilitiesandcustomers,duetolackofincentive.Overemphasisonminimisinginvestmentlevelscanleadtomissedopportunities,suchthathigherlevelsofinvestmentindigitalisationcanactuallylowerconsumerbills.Acceleratedgridaccessand/orelectrificationmayincreaseutilityrevenuesmorequickly.Likewise,installingAMIcansignificantlyimproverevenuecollectionandreducenon-technicallosses,againimprovingbottomlines.Keyactionstoconsiderwhenreviewingregulatorymodelstocreateincentivesforsmartgridinvestmentsinclude:Developregulatoryschemesthatpromptutilitiestoimplementthemostcost-efficientsolution.Createattractiveconditionsforinnovationbyoffsettingregulatoryrisksandshiftingawayfromcost-reductiononlyregulation.Enhancetheremunerationtoolboxbymakingfundsavailableforresearch,developmentandinnovation,decoupledfromordinarybusiness-as-usualallowances.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE86IEA.CCBY4.0.Setupdedicatedinnovationincentiveschemesthatcanincludecostsforsmartgridprojects.Includeincentivesforoperationalexpensestoreflectcostslinkedtothegrowingneedforflexibilityindistributionnetworks.Ensurestableandclearregulatoryframeworksthatencourageutilitiestodevelopbothshort-andlong-terminnovationsneededforsystemtransformation.Explorewhetherashifttowardsthebenefitsofawhole-of-lifetotalexpenditurecouldattractmoreinvestments.Re-alignregulatoryincentivestodrivedigitalanddemand-sidesolutionsInmostplaces,utilitiesearnarateofreturnoninvestmentonCAPEX,whiletheyrecovertheircostsforoperationalexpenditures(OPEX).Thisusuallymeansthatmuchoftheinvestmentneededtointegratevariablerenewableenergy,andincreasinglycomplexgridstomanagedemanddoesnotgenerateaprofit.Notsurprisingly,itisthereforenotamainfocusforutilities.Recentregulatoryinnovationshavesoughttoaddressthreekeyissuesinherentintraditionalapproaches:Theincentivetoincreaserevenuesbysellingmoreenergy.Theincentivetoincreaserevenuesbymakingcapitalexpenditures,whichearnaregulatedreturnoninvestment.Thedis-incentivetoinvestininnovativeapproachesortechnologies.Withtheseissuesinmind,manyregulatorshaveshiftedawayfromcost-of-serviceorrate-of-returnregulationtoapplyingarevenueorpricecap,oftenreferredtoasaformsofincentiveregulation.Revenue-capregulationputsaceilingontotalrevenuesautilitycanrecoveroveracertainperiod.Astheutilitycanretainanycostsavingsrealisedunderthecap,thisencouragesittoimprovetheefficiencyofoperations.Inturn,astheutilitymaynotearnrevenuesbeyondthecap–evenifsalesgoup–itremovestheincentivetomaximisesales.Thisalsomeansthattheutilityisnotadverselyaffectedifenergyefficiencyprogrammesreducetheirsales.Pricecapsaresimilar,buttheyputaceilingonthepricesthatcanbechargedtocustomers.Animportantconsiderationisthatthey,therefore,donotremovetheincentivetomaximisesales.Inbothcases,thecaphassomeroomforadjustmentbasedoncriteriasetbytheregulator.MostcountriesinEuropeandmanyUSstateshaveintroducedrevenueorpricecapregulation,whichhashelpedremovethedis-incentiveforenergyefficiencyanddemand-sidemanagementprogrammes.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE87IEA.CCBY4.0.Evenwherearevenuecapisinplace,theCAPEXbiasremains.TocorrecttheCAPEXbias,regulatorsareincreasinglyexploringthebenefitsofawhole-of-lifetotalexpenditure(TOTEX)approachtoinvestmentthatbundlesCAPEXandOPEX.Ashareoftheinvestmentiscapitalisedandearnsanapprovedreturnwhilecostsforthenon-capitalisedportionarepassedthroughtoconsumers(aspertraditionalmeansofrecoveringOPEX).ByeliminatingtheCAPEXbias,theTOTEXapproachencouragesinvestmentsthatwouldtraditionallylackthelustreofanapprovedrateofreturnthatmatchedthatofinfrastructureinvestments.TheTOTEXapproachmaystimulateinvestmentsinsmartgridtechnologiesanddemand-managementstrategies.Severalcountrieshavestartedtoreviewregulationstofacilitateinvestments;boththeUnitedKingdomandItalyhaveintroducedTOTEX.Toencourageinnovation,somecountriesareofferinganallowanceforpilotprojectsthatcanbetestedandscaledup.In2010,theItalianRegulatoryAuthorityforEnergy,NetworksandtheEnvironment(ARERA)definedthecriteriatoselectandincentiviseinnovativegridpilotprojectswithanextraremunerationforDSOs–setat2%ontheweightedaveragecostofcapitalforadurationof12years.SevensmartgridspilotprojectswereimplementedandtheirresultsusedtoevaluatesmartgridsfunctionalitiesandelaborateaspecificincentiveregulationforDSOs.Basedonthepilotoutcomes,in2015,ARERAadoptedanoutput-basedregulationapproach,meaningthatincentivesandpremiumsarebasedonthebenefitsinvestmentsbringtothesystem,measuredbygridandsystemperformance.AsthismechanismallowsDSOstoobtainderogationsfromordinaryregulationincriticalareasforaperiodoffouryears,itencouragesinvestmentsforinnovativesolutionsfordistributionnetworkmanagement.Throughawardsandpenalties,italsoprovidesincentivesforqualityofservice.DevelopperformancetargetsandmetricsTargetedincentivescanhelptoensureutilityinvestmentsalignwithspecificpolicygoals,fromimprovingqualityofservicetoreducingconnectiontimesforPVandexpandingeffectiveuseofsmartmeters.Performanceincentivemechanisms(PIMs)areasetofregulatorytoolsthattieaportionofutilities’earningstodesiredregulatoryoutcomes,offeringutilitiesopportunitiestocreatetheprogrammesandservicesneededtoadvancepriorities.CombiningPIMswiththeregulatorystructuresdiscussedearliercanalsohelpalignutilityincentiveswithpolicyobjectives.PIMscanbelayeredontotraditionalcost-of-serviceregulation,asalongasregulatoryoversightassuresthePIMs'rewardsandpenaltiesdonotover-orunder-compensateutilitiesforthebenefitstheyprovideand/orthecostsandriskstheyincur.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE88IEA.CCBY4.0.SeveralcountriesinLatinAmerica,includingBrazil,Chile,Colombia,MexicoandPeru,haveincludedperformanceindicatorsintheirregulation.Whenexploringregulatoryreforms,learningfrombestandinnovativepracticesisausefulstartingpoint,butthereisalsovalueinlearningfromapproachesthatworkedlesswellandsubsequentadjustmentsorchangesmade.Examplesofpoorapplicationarenotfullyunderstandingthebusiness-as-usualcostsbeforesettingincentivelevels,or,bybasingperformanceoninputsratheroutputsorsavingsachieved.Althoughincentiveandoutput-basedregulatorymechanismsperformwell,securingsmartgridinvestmentsmayrequireotherapproaches,suchasinnovationincentivesrepresentedasanadjustmentofrevenuesandextraweightedaveragecostofcapital(WACC).SeveralcountriesinEuropehaveadjustedtheirregulatoryframeworkstoprovideincentivesforR&Dandpilotprojects.ConsiderqualitystandardsInmanydevelopingcountries,consumerscanbeexposedtoaninfluxoflow-qualityenergyaccessproducts,whichtendstodisproportionalityaffectlow-incomepopulationsandcanerodelong-termconsumerconfidence.Thishaspromptedinternationaleffortstoharmonisequalityassuranceframeworksforoff-gridsolarproducts.Likewise,qualityinfrastructureforsmartmini-gridsincludescomprehensivestandards,testing,certificationandaccreditation.Suchstandardshelpimproveprojectfinancingaswellaslegal,regulatoryandperformancecertainty,therebystrengtheningthemarketforsmartmini-grids.SupportcomprehensiveassessmentofcostsandbenefitsofsmartergridsAppropriatemethodologiestoassesstheeconomicvalueofsmartgridprojectsareneededtoencourageinvestmentsinthem.Atypicalapproachusedisacost-benefitanalysis(CBA),whichfollowsasystematicprocesstomonetisebenefitsandrelativetocostscreatedbyasmartgridinitiative.Differentthanfinancialanalysis,CBAcoversabroaderscopethatincludes,forexample,societalimpacts,irrespectiveoftowhomthecostsandbenefitsaccrue.Theoutcomeofsuchanalysesmaydependonthedefinitionofthescopeandmethodologiesused.Assmartgridprojectshavearangeofimpactsthataredifficulttomonetise,applyingconventionalapproacheswithanarrowscopemayleadtoanundervaluationofbenefits.Assuch,morenuancedapproachesarewarrantedthatcanappropriatelyconsidermultiplevalueelementsincludingcapacityvalueresultingfromreducedpeakdemand;balancingvaluerelatedtoprovisionofbalancingandsharedreserves;valueofproductionandoperationalcostsavingsbyshiftingelectricitydemandfrompeaktooff-peakperiods;valueofreducedUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE89IEA.CCBY4.0.renewablescurtailment;andvalueofhighersupplyreliabilityandsecurity.Beyondtheelectricitysectoritself,othersmartgridscanhavepositiveimpactsonenvironmentandsocio-economicdevelopment.Multi-criteriacostandbenefitanalysisIEA.CCBY4.0.Source:AdaptedfromFlorenceSchoolofRegulation(2022),SmartGridReplication.Actionsthatpolicymakerscouldconsiderincludeestablishingguidelinesandmethodologiescouldbeadaptedtofitlocalcircumstancesandconstraintsandhowexistingguidanceandtoolscouldbeleveraged.Whenappliedtosmartgridevaluation,therearenotabledifferencesbetweenatraditionalCBAandamulti-criteriacost-benefitanalysis(MCCBA).ACBAprimarilyfocusesonthefinancialcostsandbenefitsofsmartgridinvestments,quantifyingandmonetisingimpactsinmonetaryterms.Incontrast,anMCCBAtakesabroaderperspectivebyincorporatingmultiplecriteriabeyondfinancialconsiderations.Itconsidersenergyefficiency,reliability,environmentalimpact,costsavings,customersatisfaction,gridflexibility,andcybersecurity.WhileaCBAprimarilyreliesonquantitativeanalysisandmonetaryvaluation,anMCCBAinvolvesamorecomplexevaluationprocessthatcombinesquantitativeandqualitativeanalysis.MCCBAexplicitlyassignsweightstoeachcriterion,reflectingtheirrelativeimportancebasedonstakeholderpreferences,andallowsforexplicittrade-offsbetweendifferentcriteria,enablingdecision-makerstoconsiderarangeoffactorsandmakeinformedchoicesthatalignwiththebroaderobjectivesofsmartgridevaluation.UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE90IEA.CCBY4.0.IntegratesecurityandresilienceacrossallelectricitypolicydomainsGovernmentscanintegratesecuritymeasuresintobothphysicalanddigitalinfrastructuretopromoteresilienceandsecurityintheirelectricitypolicies.Strategicframeworkssuchasnationalenergytransitionplans,andlong-termplanningcanincorporateresilienceacrossregulationsandrulesandencourageinvestmentindigitalisation.Thereisalsoacriticalroleforpolicymakersinmanagingsystemicrisks,includingstrengtheningthelinksbetweendigitalandphysicalinfrastructureresiliencyandsecurity.StrengthentiesbetweendigitalandenergysecurityAselectricitysystemsbecomemoredigitallyinterconnected,diverse,complexandautomated,theyalsobecomemorevulnerabletothearsenalandcapabilitiesofcybercriminals.Thisincreasesthepotentialcyberattacksurfaceandthepotentialscaleofdamage.Electricitysystemsmustmademorecyber-resilienttowithstand,adapttoandrapidlyrecoverfromincidentsandattacks,whilepreservingthecontinuityofcriticalinfrastructureoperations.Policymakers,regulators,utilitiesandequipmentprovidersallhavekeyrolesinensuringthecyberresiliencyoftheentireelectricityvaluechain.Thefundamentalprinciplesofcyberresiliency–i.e.embeddingacultureofcyberhygieneandimplementingriskmanagementstrategies–aregenerallyapplicableacrossallsectorsandindustries.Theirapplication,however,needstobetailoredtosector-specificcharacteristicsandneeds.Intheelectricitysector,theseincludereal-timerequirementsforandexpectationsofveryhighavailability;interdependenciesandcascadingeffectswithinandacrosssystems;andamixofnewtechnologiesandlegacyassetswithlonglifetimes.Enhancingthecyberresilienceofelectricitysystemsisacontinuousprocessinvolvingseveralstages:1)identifyandassessrisksandpreparedness;2)implementariskmanagementstrategytoprioritiserisksandactions;3)establishUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE91IEA.CCBY4.0.robustresponseandrecoveryprocedurestofollowintheeventofanattack;4)documentandincorporatelessonslearnedfromincidents;and5)shareknowledgewithotherstakeholders.Becausecyberthreatsareconstantlyevolving,allorganisationsneedtocontinuouslymonitorandevaluatetheirvulnerabilitiesandriskprofilesandtakeappropriateaction.Nationalpolicymakerscouldconsiderthefollowingactions:Developnationalstandardsbasedoninternationalstandardsandbestpractices.Inturn,obligestakeholderstodevelopguidelinesandprocedures.Forboth,requireprocessestoupdatetotacklenewandemergingthreatsandestablishmechanismstoensurecompliance.Requirethatcybersecurityconsiderationsareembeddedinplanningprocessesandinsystemsandoperationstoensurethatsecurityisbasedonproactiveandcomprehensiveapproachesratherthanreliantonresponsesthatarereactiveorfragmented.Establishframeworksforreportingoncybersecurityandtoensureinformationsharingamongstakeholderstoreducerisksandimprovereactiontimes.Requirethatcybersecurityisembeddedintoprocurementprocesses.Supportcapacitybuildingforpersonneltoraiseawarenessaboutcybersecurityrisksandprocedurestominimiserisksandreactappropriatelytocybersecuritybreaches.Proactivelyco-ordinatedatamanagementacrossallstakeholdersGriddigitalisationhasthepotentialtobringsignificantbenefits,suchasbetterinteroperability,improvedvisibility,andco-ordinatedcontrol.Whensmartgridtechnologiesinterfacewithusers,suchassmartmetersandtechnologiesfordemandresponse,itiscrucialforappropriatestakeholderstoraiseawarenessandcommunicateeffectivelytoensureend-useracceptanceandbuy-in.Deployingsmartmeters,sensors,remotecontrol,automationsystems,DERsandconnecteddevicesgenerateslargeamountsofnewdata.Sharingthesedatawillbeessentialtorealisegreatervaluefromthesetechnologies.Still,policymakersandregulatorsmayhavetodefinetherulesforwhocanown,accessandsharedata.Intheelectricitysector,customerusagedataareofinterestandvaluetosomethirdparties.Someregulatoryareas,includingCalifornia,Colorado,Illinois,andTexas,havealreadyadopteddataprivacyrulesthatsetstandardsforsharingdatawiththirdparties.AproposalinNewYorkwouldallowutilitiestosellcustomerdatawhileincludingsecurityprovisionstokeepthatdatasafe.Ultimately,smartgridswillgeneratemoredataandcreatenewpossibilitiesfordataanalyticstoprovidemultiplebenefits.PolicymakerscouldconsideractionsUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE92IEA.CCBY4.0.topromoteinformationsharingunderpinnedbyrobustdataframeworks,monitoringandevaluation,andadequatelevelsofsecurity.However,riskscanalsoarisefromexcessivelystrongdataprotectionframeworksthatprohibitorhinderdatasharingthatwouldbenefitthesystem.Theseriskscouldalsodeterthedevelopmentofinnovativebusinessmodelsandnewservices.Therefore,abalancedapproachisnecessarytoensuredataprivacyandsecuritywhileenablingthepotentialbenefitsofdatasharing.Track,evaluateanddisseminatedigitalisationprogressToleveragethecapacitiesofdigitalisation,governmentsmusttakestepstocreateadata-drivencultureinthepublicsector.Providedgovernmentsreinforcetheirinstitutionalcapacitytomanageandmonitorprojectimplementation,digitaltoolscansupportefficienttargeting,implementationandenforcementofgovernmentpoliciesacrossbothenergytransitionanddigitalstrategies.Digitaltoolscanhelpgovernmentsevaluateprogressoftheimplementationagainstgoalsandmilestonessetoutinstrategiesandroadmaps.Aslearningandexchangingknowledgeandlessonsfromdemonstrationprojectsisalsovital,governmentscanhelpstrengtheninternationalcollaborationandknowledgesharing,inparttobeconfidentthatindustryisadoptingbestpractices.Collaborativeapproachesfordemonstrationprojectsprovidevaluablelessonsonhowtomanagedigitaltechnologiesatalargerscaleandgenerateevidenceofthevaluecreatedbydigitalsolutionsandtechnologies.Inturn,thiscanhelpde-riskfutureinvestments.Strengtheninginternationalcollaborationandknowledgesharingarevitaltodevelopingcommonpracticesandstandards,andtoidentifyingareaswhereinnovationcanbeleveragedjointly,acceleratingprogressatalowercost.CreatebaselinesandtrackprogressDevelopingbaselinesandtrackingprogressareintegraltoatrajectorytowardssmartergrids.Frameworkstotrackprogressshouldbetransparentandbasedonindicatorsthathelpidentifyareasforimprovement.Ultimately,showingquantitativeresultsfromimplementationcanhelpde-risksmartgridprojects.Anoverarchingchallengeinthisareaisthattherearenouniversalorstandardisedmetricsorindicatorstomeasurehowsmartaregridsorprogresstowardsincreasingtheirlevelsofsmartness.Arangeofexistingmetrics,however,couldbeconsideredandusedbycountriesorutilitiestocreateatailoredsetofindicatorstoassessthestatusofagivengridandtrackprogress.DevelopedbyCarnegieMellonUniversity,theSmartGridMaturityModelhasbeenusedbyutilitiesinUnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE93IEA.CCBY4.0.diversecountriestosupportcreationofsmartgridsvisionsandstrategies.Careneedstobetakentoselectindicatorsthatprovidethemostusefulinsightsandtoensurethecostandeffortofcollectingdataforeachindicatorarereasonableandreplicableovertime.ThebenefitsofgoodindicatorsSeveraltypesofindicatorscouldbeconsideredtoassessthesmartnessofgrids.Gridqualityindicatorsshowhowwellagivengridisguaranteeingdistributionservicesregardlessoftechnologiesandchoiceofsolutions.Whilenotspecifictosmartgrids,suchindicatorsarecoretoservicedeliveryand,thus,crucialtomonitor;specificsmartgridindicatorsarecomplementarytothem.Gridefficiencyindicatorshelptoevaluateifthedistributiongridiscost-efficient.Whenselectingsmartgriddevelopmentindicators,itisimportanttoaimtobetechnology-neutralandtoprioritisethemeasurementofoutputssuchasimprovedgridoperationefficiency,orfasterrestorationtimes,ratherthanfinancialinputs.ExamplesofindicatorstoassessthesmartnessofgridsGridqualityGridefficiencyGriddevelopmentDatautilisationSystemAverageInterruptionFrequencyIndex(SAIFI),whichmeasurestheaveragenumberofinterruptionsthatacustomerwouldexperienceoverthecourseofayear.Yearlylosses(byvoltagelevel,technicalandcommercial).Observabilityofthegrid,whichmeanstheabilityofassetstosenddatatocontrolcentres.Dataavailabilitytoutilities,consumers,thirdparties.Includesindicatorsonthequalityofdataanddataplatforms.SystemAverageInterruptionDurationIndex(SAIDI),whichmeasurestheaverageoutagedurationforeachcustomerservedinminutesorhoursoverayear.Costofgridpaidforbyconsumer/kWhserved,andperkmofgrid.Controllabilityofthegrid,whichmeanstheshareofassetsthatcanberemotelycontrolled,byvoltagelevel.Useofdatawhenplanning:availabilityandeffectiveuseofvarioussetofdataforgridplanning.Yearlylostload(realisedandexpected)andvalueoflostload.Costofgridpaidforbyotherparties.Availabilityandeffectivenessoftelecommunicationcapabilities.Digitalisationtoharnessflexibilityatthegridedge.Shareofconsumptionthatsettledonrealdatavsmodelled.Yearlycurtailment(realisedandexpected).UnlockingSmartGridOpportunitiesHowtoacceleratesmartgridimplementationinemergingmarketsanddevelopingeconomiesPAGE94IEA.CCBY4.0.Settingindicatorstoassesswhethertheelectricitygridisutilisingdigitaltechnologieseffectivelygoesbeyondtechnicalrequirements.UtilitiesinavarietyofcountrieshaveusedtheSmartGridMaturityModelfromCarnegieMellonUniversitytosupportsmartgridvisionsandstrategiesandtotrackdeployment.Itsetsoutseveraldomains–suchasstrategy,organisation,gridoperationsandsocietalimpacts–tohelputilitiesdeterminewheretheyareontheirpathtowardsdevelopingsmartgrids.IndicatorsontheimplementationofsmartgridroadmapsBenchmarkingagainstmorespecifictargets,setaccordingtothespecificitiesofagivenelectricitygrid,isalsocritical.Differentcountriesandstakeholdersmayseektorealisediversebenefitsinsmartgriddeployment.Wherehightechnicallossesmakeitdifficulttorecovercosts,capturingdataonlossreductionthroughdigitaltechnologiescouldbeanimportantkeyperformanceindicator(KPI).Inothersystemswhereinfrastructureisexposedtofrequentintermittenttripping,fasterfaultrestorationmaybeahigherpriorityandrequiredifferentindicatorsformeasuringprogress.Thefirststeptoeffectivebenchmarkingistoestimatethebenefitsofdigitaltechnologyinrelationtospecificaimssuchasavoidedcosts,savedenergyoravoidedCO2emissions.Cost-benefitanalysisatthesystemscalecanhelptoidentifythemosteffectivewaystoimplementsmartgridtechnology.InColombia,theSmartGridsColombiaVisión2030studyidentifiedpotentialbenefitsofsmartgrids,includingreducingserviceinterruptiontimes,lowerenergylosses,reducedGHGemissionsandincreasedgridinvestments.Resultsofthecost-benefitanalysiscanshapethesmartgridroadmap,whichoutlinethespecificstepstoimplementsmartgridtechnologyandachievethedesiredbenefits,withclearlyspecifiedKPIs.Forinstance,aspartoftheDigitisationofEnergyprogramme,theEuropeanUnioniscreatingaSmartGridIndicatortodefinecommonindicatorsandobjectivesforthem,sothatregulatorscanmonitorinvestmentsindigitalaspectsofelectricitygridsandmeasureprogress.UnlockingSmartGridOpportunitiesStartingthesmartgridjourneytodayinemergingmarketsanddevelopingeconomiesPAGE95IEA.CCBY4.0.StartingthesmartgridjourneytodayThebroadrangeofcategoriesandcountrylevelexamplesofdigitaltoolsandtechnologiesinthisreportdemonstratesthemanydifferentstartingpointsthatcanquicklydeliverpositiveimpacts.Theprevioussectionsinthischaptercoverawiderangeofareasthatrequireattention.However,notalltheseactionsneedtoorcanbetackledatonce.Smartgridscanbecreatedthroughincrementalactionsaswellasthroughtransformativeapproaches.Countriesjuststartingtheirsmartgridjourneyscouldconsiderfocusingonthefollowingfiveinitialsteps.Aboveall,theystartwithavisionandacoalition.ThefivestepstostartthedigitaljourneyIEA.CCBY4.0.CreateavisionforsmartgriddeploymentBasedonspecificcountryneeds,immediateproblems(suchasheavygridlosses),preparingforrapidloadgrowth,orhandlingalargeinfluxofPVondistributionsystemsmayneedtobeprioritised.Inrelationtoeachaim,setoutnear-andlong-termtargets,identifyingendgoalsandmilestonesthatcanbeusedtobenchmarkprogress.Establisharoadmaptodefinewhatneedstobedone,when,whereandbywhom.AcknowledgethatnotallsolutionswillbedigitalwhileUnlockingSmartGridOpportunitiesStartingthesmartgridjourneytodayinemergingmarketsanddevelopingeconomiesPAGE96IEA.CCBY4.0.seekingtoidentifywheredigitaltechnologiesdelivergreatervalue,atlowercost–whetherintheshortorlongrun.Investigatetransferablelessonsfromotherlarge-scaledeploymentsandongoingdemonstrationsofsmartgridtechnologies,whilerecognisingthatregional,culturalandinfrastructurecontextscanbevastlydifferent.Establishabenchmarkofwherethegrid’scurrentstatusandindicatorsagainstwhichtomeasureprogresstowardscountryobjectives.Matchneedswithdigitalsolutions.Identifydigitaltechnologiesrelevanttopriorityobjectivesandranktheircostsandbenefitsbyquantifyingtheirpotentialimpacts.Thiscanhelpsequenceprioritiesandkeepactivitiesfocussedovertime.Thisimpliescreatingacultureofcost-benefitthinkingacrossthestakeholderbaseanddevelopingmoreformalCBAmetricsandassessments.ActivelyengagewithstakeholdersThishelpstoco-ordinateandalignonvisionandstrategies,includinginplanselaboratedbyutilities,andtoensurethatdifferentperspectivesandconcernsareaddressed.Collaborationandpartnershipsbetweenpublicandprivatestakeholdersarecrucialtoeffectivelymanagerisksandbalancethepaceofgridmodernisation.Itiscriticallyimportanttobroadenthesetofstakeholdersbeyondtraditionalgroups,toincludedigitalandtelecomsproviders,technologymanufacturers,andelectricityanddigitalstandardbodies.Thegrowingrangeofsmaller,third-partyactorsthatareincreasinglydeployingdigitalgridservicesandsolutionscouldalsobeincluded.ManagedatafromthestartCollectingandsharingdataiscrucialtobeabletoevaluatethebenefitsofallsmartgridprojectsandtocapturelessonslearnedinthebidtoachievelarge-scaledeployment.Willingnesstolearnfrommistakes–andtoletothersdoso–supportscontinuousimprovementandscaling.Policymakersplayakeyroleinfacilitatingdataandknowledgeexchange,includingbysettingbaselinerules,organisingforums,andprovidingtemplatesandproceduresfordatasharing.EnsureanequitabledistributionofcostsandbenefitsEachoftheabovestepshelpsdevelopadeepunderstanding–basedondataandevidence–ofcostsandbenefitslinkedtosmartgriddeployment.Theyalsodemonstratetheneedtomovebeyondtraditionalgridmetrics,towardsbroadersocietalbenefitsandimpactsofdigitalisationinareassuchasairpollution,water,waste,economicimpacts,oraccesstoenergyanddigitalservices.Framingaroadmapandapolicydevelopmentstrategyaroundequityincostsandbenefitsisvitaltostakeholderengagement,asiscommunicatingtheminatransparentmanner.UnlockingSmartGridOpportunitiesStartingthesmartgridjourneytodayinemergingmarketsanddevelopingeconomiesPAGE97IEA.CCBY4.0.ThewayforwardDigitalisationisreshapingthepowersector,creatingnewopportunitiesacrossmultipleapplications.Therapidevolutionofdigitaltechnologiesiscreatingnewfunctionalitiesandusecases.Withincreaseddatasharingacrosstheenergyvaluechain,andlinkingthesedatawithweathermodels,satellitedata,mobilitypatterns,financialservicesandgeographiclocationsystems,itwillbepossibletocreateinnovativeserviceswithgreaterlevelsofgranularityandrelevance.Acrosstheenergysector,futurechallengesandopportunitiesareoutgrowingcurrentpolicy,regulatoryandgovernanceprocessesandstructures.Proactive,data-drivenandevidence-basedapproachesareneededtoensurethatnear-termdecisionsactivelysupportdecarbonised,affordable,inclusiveandsustainablefutureenergysystems.Digitalisationisavitalenabler;tooptimisethepotentialofsmartgrids,theyneedtobemeshedwithsmartpoliciesandregulationstocapturethemaximumvalueofdigitaltoolsandthedatatheycandeliver.Gridsofthefuturewillbecharacterisedbygrowingcomplexityandinter-connectednessIEA.CCBY4.0.UnlockingSmartGridOpportunitiesStartingthesmartgridjourneytodayinemergingmarketsanddevelopingeconomiesPAGE98IEA.CCBY4.0.UnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE99IEA.CCBY4.0.AnnexesAbbreviationsandacronyms3DENDigitalDemandDrivenElectricityNetworksInitiativeABCArialbundled/bunchedcablesACAirconditioner/airconditioningunitADBAsianDevelopmentBankAFDFrenchDevelopmentAgencyAfDBAfricanDevelopmentBankAIArtificialintelligenceAMDSAutomatedmonitoringanddecisionsupportAMIAdvancedmeteringinfrastructureAREIAfricaRenewableEnergyInitiativeARERARegulatoryAuthorityforEnergyNetworksandEnvironmentASUAirseparationunitAT2ERTogoleseAgencyforRuralElectrificationandRenewableEnergyAT&CAggregatetechnicalandnon-technicallossesBESSBatteryenergystoragesystemBOOTBuild,own,operate,transfermodelCAPEXCapitalexpenditureCBACost-benefitanalysisCERICommunityEnergyResilienceInitiativeCOPConferenceofthePartiesDERDistributedenergyresourcesDFIDevelopmentfinanceinstitutionDISCOMDistributioncompanyDPVDistributedphotovoltaic(solar)DSODistributionsystemoperatorEMDEsEmergingmarketsanddevelopingeconomiesEMREnergyandMineralResourcesEMRAEnergyMarketRegulatoryAuthorityEBRDEuropeanBankforReconstructionandDevelopmentEESLEnergyEfficiencyServicesLimitedEIBEuropeanInvestmentBankEMRAEnergyMarketRegulatoryAuthorityESCOEnergyservicecompanyESGEnvironmental,socialandgovernanceESKOMElectricitySupplyCommissionELDERAssociationofDistributionSystemOperatorsEUEuropeanUnionEUREuroUnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE100IEA.CCBY4.0.EVElectricvehicleFCPRFundaciónComunitariadePuertoRicoFEIFundforEnergyInclusionFENOGEFondoadeEnergíasNoConvencionalesyGestiónEfficientedelaEnergíaGCFGreenClimateFundGDPGrossdomesticproductGEFGlobalEnvironmentFacilityGHGGreenhousegasGIFGlobalInfrastructureFacilityGISGeographicinformationsystemGISDGlobalInvestorsforSustainableDevelopmentAllianceGPFMGreenPoweredFutureMissionIADBInter-AmericanDevelopmentBankICTInformationandcommunicationtechnologiesIEAInternationalEnergyAgencyIFCInternationalFinanceCorporationIFIInternationalfinanceinstitutionIoTInternetofthingsIT/OTInformationTechnology/OperationalTechnologyIPCCInternationalPanelonClimateChange(UnitedNations)IPPIndependentpowerproducerIRENAInternationalRenewableEnergyAgencyISGANInternationalSmartGridActionNetworkISGFIndiaSmartGridForumISOIndependentsystemoperatorITPIndependenttransmissionprojectKETRACOKenyaElectricityTransmissionCompanyKfWKreditanstaltfürWiederaufbauKPIKeyperformanceindicatorLACLatinAmericaandtheCaribbeanLEDSLowEmissionsDevelopmentStrategiesMCCMillenniumChallengeCorporationMC-CBAMulti-criteriacost-benefitanalysisMDBMultilateraldevelopmentbankMLMachinelearningNEDCoNorthernElectricityDistributionCompanyNDCsNationallyDeterminedContributionsNHPCNationalHydroelectricElectricityCorporationNIIFNationalInvestmentandInfrastructureFundNSONationalsystemoperatorNTLNon-technicallossesNTPCNationalThermalPowerCorporationNZENetZeroEmissionsby2050Scenario(IEA)OECDOrganisationforEconomicCo-operationandDevelopmentOPEXOperatingexpenditureUnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE101IEA.CCBY4.0.PAYGoPay-as-you-go(paymentplan)PIMPerformanceincentivemechanismPMUPhasormanagementunitPPFProjectpreparationfacilityPPPPublic-privatepartnershipPVPhotovoltaic(solar)RDSSRevampedDistributionSectorSchemeRes4AfricaRenewableEnergySolutionsforAfricaRETARegulatoryEnergyTransitionAcceleratorRMIRockyMountainInstituteSAIDISystemAverageInterruptionDurationIndexSAIFISystemAverageInterruptionFrequencyIndexSCADASupervisorycontrolanddataacquisitionSDGSustainableDevelopmentGoalsSMNPSmartMeterNationalProgrammeSOEState-ownedenterpriseT&DTransmissionanddistribution(systems)TLTechnicallossesTOTEXWhole-of-lifetotalexpenditureTSOTransmissionsystemoperatorTVETTechnicalandvocationaleducationandtrainingUKEPUtilityKnowledgeExchangePlatformUSDUnitedStatesdollarVoLLValueoflostloadVPPVirtualpowerplantVREVariablerenewableenergyWACCWeightedaveragecostofcapitalUnitsofmeasureGt/yrGigatonnesperyearGtCO2GigatonneofcarbondioxideGtCO2/yrGigatonnesofcarbondioxideperyearGWGigawattGWhGigawatthourMtMegatonneMWMegawattMWhMegawatthourtTonne(metric)WpWattpeakcapacityUnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE102IEA.CCBY4.0.GlossaryAdvancedmeteringinfrastructure(AMI):asystemthatincludesmeters,communications,andinformationmanagementnetworksbetweenconsumersandutilities.AMImayalsoprovideconnectivitytoothertypesofdevicessuchasgridsensors,switches,andDERs.Aggregator:entitymanagingaportfolioofmultipledistributedresourcestoofferservicessuchasflexibilitytopowersystems.Ancillaryservices:servicesthathelptheelectricitygridmaintainbalancebetweengenerationanddemand.Artificialintelligence(AI):programmingmodelsandalgorithmsimitatinghumanintelligence.Broadbandline:high-speedinternetaccesswhichallowsforfastercommunication.ItislargelyusedbyutilitiesforsubstationandSCADAcommunications.Cybersecurity:protectionofcomputersystems,networksorcomputerprogrammesfromoffensiveassaulttargetingdevices,networksordatabases.Demandresponse(DR):mechanismbywhichelectricitydemandisshiftedorreducedovergiventimeperiodsinresponsetopricechangesorotherincentives.Thiscanbeusedtoreducepeakdemandandprovideelectricitysystemflexibilityandallowsutilitiestocyclecertaincustomerloadsonandoffinexchangeforfinancialincentives.Demandresponsemanagementsystem(DRMS):softwarewhichcontrolsandoperatesDRaggregationsandotherDRprogrammes.Demand-sideflexibility:capabilityofdemandsideresourcestoadjustloadprofilesacrossdifferenttimescales;energyflexibilityandloadflexibilityareoftenusedinterchangeablywithdemand-sideflexibility.Demand-sidemanagement:themodificationofenergydemandbycustomersthroughstrategies,includingenergyefficiency,demandresponse,distributedgeneration,energystorage,electricvehicles,and/ortime-of-usepricingstructures.Demand-sideresponse(DSR):actionsthatcaninfluencetheloadprofile,suchasshiftingtheloadcurveintimewithoutaffectingtotalelectricitydemand,orinterruptingdemandforashortdurationoradjustingtheintensityofdemandforacertainamountoftime.UnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE103IEA.CCBY4.0.Digitaltwins:virtualreplicaofaphysicalobject,building,city,orgrid,usedtosimulateandmanageoperations.Distributedenergyresource(DER):aresourcesitedclosetocustomersthatcanprovideallorsomeoftheirimmediatepowerneedsand/orcanbeusedbytheutilitysystemtoeitherreducedemandorprovidesupplytosatisfytheenergy,capacity,orancillaryserviceneedsofthegrid.Theyincluderooftopsolar,batterystoragesystems,electricvehicles,amongothers.Distributionsystemoperator(DSO):organisationmanagingtheelectricitydistributiongridatlow-voltagelevel.Dynamiclinerating:automaticvariationofpowerflowsinelectriccablesdependingonweatherconditions.Faultlocation,isolation,andservicerestoration(FLISR):acombinationofhardwareandsoftwaretechnologiesthatcanidentifythefaultlocationautomatically,isolatethefaultedlinesectionandrestoreservicetoallcustomersnotdirectlyconnectedtothefaultedlinesection.Thissmartfunctionisalsoreferredtoasaself-healinggrid.GeographicInformationSystem(GIS):inthecontextofelectricitysystems,GISisasoftwarewhichcaptures,records,anddisplaysdataongridassetsandtheirgeographiclocationsonamap.Gridedge:coversalltechnologiesthatconnecttheenergysupplysidewiththedemandside,bothhardwareandsoftware,includingsolarpanels,EVcharginginfrastructure,smartappliances,andreal-timegridoptimisation.Gridflexibility:abilityofthepowersystemtoalleviatedisruptionbetweensupplyanddemand.Gridhardening:gridimprovementssuchasrebuildingorproactivelyreplacingassetsintheelectricitygridtostrategicallypreparetopotentialrisks.Gridresilience:abilityofthepowersystemtorecoverafterdisturbancessuchasextremeweathereventsorcyberattacks.Gridservices:servicesthatsupportthegeneration,transmission,anddistributionofelectricityandprovidevaluethroughavoidedelectricitysystemcosts(generationand/ordeliverycosts).Grid-interactiveefficientbuilding(GEB):anenergy-efficientbuildingthatusessmarttechnologiesandon-siteDERstoprovidedemandflexibilitywhileco-optimisingforenergycost,gridservices,andoccupantneedsandpreferencesinacontinuousandintegratedway.UnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE104IEA.CCBY4.0.Integratedvoltagecontrol:aprocessofcontrollingvoltagetoimproveoverallsystemperformance,allowingautilitytoreduceelectricallosses,eliminatevoltageprofileproblemsandreduceelectricaldemand.Internetofthings(IoT):networkofphysicaldevicesandsensorsconnectedtoacommonnetworkandreportingdatadynamicallytocentralreceivers.Interoperability:capabilityofcomputersystemsorsoftwaretomatchdataaccordingtopredefinedstandards.Machinelearning:applicationofcomputersystemsthatusealgorithmstolearnandexploitpatternsfromdataandautomaticallyimprovethemselvesbyreiteration.Microgrid:agroupofinterconnectedDERsandloadsabletooperatewhenconnectedtothelargerdistributiongridandalsoabletooperateasan“island”whenthereisanoutageorothergriddisturbance.Smartcharging:systembywhichthesystemoperatoroptimisesthechargingprofileofanelectricvehicleaccordingtohowmuchenergythevehicleneedsoveraspecifiedlengthoftime,howmuchenergyisavailable,thepriceofwholesaleelectricityandgridcongestion,amongothers.Reliesonthesharingofreal‐timedata.Smartinverter:apowerelectronicsdevicethattransformsdirectcurrenttoalternatingcurrent,usefulforDERsintegrationonthegrid.Itsfeaturesalsoincludevoltageandfrequencyride-throughresponsestoenhancethedistributionsystem’sstability,reliability,andefficiency.Smartmeter:adevicecapableoftwo-waycommunicationsusedformeasuringelectricityconsumptionandotherend-useinformationandtransmittingthisinformationondemandtoacentrallocation.Smartmetersprovidenearreal-timecustomerusagedata,aswellasinterfacewithother‘smart’devicesinthehomeorbusiness.Supervisorycontrolanddataacquisition(SCADA):acombinationofhardwareandsoftwarewhichenablestheremotemonitoringandcontroloftransmissionanddistributionsystems.Transmissionsystemoperator(TSO):organisationmanagingtheelectricitytransmissiongridathighvoltagelevel.Variablerenewableenergy(VRE):cleanresourceswhichdependonvariablesupply,suchaswindorsolarenergy.UnlockingSmartGridOpportunitiesAnnexesinemergingmarketsanddevelopingeconomiesPAGE105IEA.CCBY4.0.Virtualpowerplant(VPP):anetworkofdigitallyaggregateddistributedenergyresources,flexibilityprovidersandstoragetechnologies,centrallycontrolledtoprovideefficientdispatchingandintegrationintothepowermarket.Wideareanetwork(WAN):atelecommunicationsnetworkconnectingdistributionsubstationswithoperationsandcontrolcentresandotherutilityfacilities.InternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.Forfurtherinformation,pleasecontact:WorldEnergyOutlook(weo@iea.org).SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/a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