Discussion Papers

Matthias Wissner

ICT, Growth and Productivity in the Energy Sector - on the Way to a Smart Grid

No. 320 / May 2009

Summary

The German energy industry is faced with great challenges. It is necessary to provide eco-nomic efficiency, security of supply and environmental compatibility of the energy system in the years and decades to come. Particularly, there are different tasks to manage: The great number of players that have entered the market after liberalisation and unbundling have to be informationally connected in such a way that efficient processes for the entire value chain are feasible. In the field of generation there is an increase in both central as well as local re-newable energy sources, that feed into the grid and have to be integrated into the energy system. The provision of a stable supply confronts the grid management with new tasks, too. Finally the final customer is to be integrated in the whole process more than before. If he himself feeds energy into the grid he transforms himself more and more to an active player.

All described challenges will technically and economically only be overcome through the in-creased application of information and communication technologies (ICT). In how far the German energy industry has realised productivity and growth potential arising from ICT in the past can be analysed by the methodology of growth accounting. This analysis with a special focus on the role of ICT yields the result that especially in the years after 2000 a decrease in the contribution of ICT to average labour productivity (ALP) is observable. This holds true for the relative comparison of ICT capital deepening to Non ICT capital deepening within the energy industry on the one hand. Here the contribution of ICT to ALP is also on a relatively low level when it is compared to the average value of all industries. On the other hand, the absolute contribution of ICT ( that was above industry average before) decreases from 2000 on. All this leads to the conclusion that a certain catch-up is needed that can be realised through investment in Smart Grids.

Within the single parts of the energy value chain there exist different options. While in the field of generation the integration of different generators by communication networks is a promising option, the grid itself may be steered more efficiently through the ability of control-ling loads and the generally higher information status that results of increased data collection in all parts of the system. In the retail sector the technology of smart meters will lead to a wider range of offered products and intensify competition. The necessary investments need a corresponding legal, regulatory and economic framework to be implied properly. This means that a holistic approach has to be developed to solve the complex issues that to some extent hide behind the realisation of a smart grid.

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