Attachment 0

Ref.
Ares(2018)740938 - 08/02/2018
FLEXMETER 646568 D5.1 Business models H2020-LCE-2014-3
Public
FLEXMETER
H2020-LCE-2014-3
Flexible smart metering for multiple energy vectors with

active prosumers
Project Duration 2015-01-01 – 2017-12-31 Type CP
WP no. Deliverable no. Lead participant
WP5 D5.1 POLITO

Business models for smart meters and retail market
Prepared by Andrea Acquaviva

Issued by FLEXMETER Project Office
Document Number/Rev. FLEXMETER/D5.1/V2.0
Classification Public
Submission Date 2016-02-02
Due Date 2015-12-31
This project has received funding from the European Union’s Horizon 2020 research and innovation
programme under grant agreement no. 646568

©Copyright 2015 POLITECNICO DI TORINO, IREN ENERGIA SPA, STMICROELECTRONICS SRL, TELECOM ITALIA,
RHEINISCH-WESTFAELISCHE TECHNISCHE HOCHSCHULE AACHEN, INSTITUT POLYTECHNIQUE DE GRENOBLE,
UNIVERSITATEA POLITEHNICA DIN BUCURESTI, SIVECO ROMANIA SA, ALMA MATER STUDIORUM – UNIVERSITA’
DI BOLOGNA, E-ON SVERIGE AB.
This document and the information contained herein may not be copied, used or disclosed in
whole or in part outside of the consortium except with prior written permission of the partners
listed above.
Document
Title Business models for smart maters and retail market
Type Deliverable
Ref D5.1
Target version V3.0
Current issue V3.0
Status Final
File D5.1_flexmeter_v3.0.doc
Author(s) Lorenzo Bottaccioli, Andrea Acquaviva (PoliTo) - Enrico Battisti, Paola de Vicensis (UniTo),
Federico Boni Castagentti, Enrico Pochettino (IREN) – Luca Barbierato, Pino
Castrogiovanni (TI) – Anamaria Dumitrescu (UPB) – Thomas Pehrsson (Eon)
Reviewer(s) All consortium
Approver(s) Andrea Acquaviva
Approval date 2018-01-28
Release date 2018-01-31
Distribution of the release
Dissemination level PU
Distribution list All Consortium
History of Changes
Date Version Comments

2017-12-21 0.1 Creation
2017-12-30 1.0 First version
2018-01-20 1.1 Second version
2018-01-30 2.0 Final version
2018-02-05 3.0 Added mention about replicated info in D5.2
Contents
1. INTRODUCTION ........................................................................................................................ 5
2. THEORETICAL BACKGROUND: REGULATORY FRAMEWORK AND MARKET
DATA 5
ITALIAN ELECTRICITY MARKET .................................................................................................. 5

2.1.1. The liberalization of the Italian electricity market ........................................................... 6
2.1.2. Institutional Actors............................................................................................................ 7
2.1.3. Organization of the electricity market .............................................................................. 8
2.1.4. Smart meter roll-out ........................................................................................................ 12
2.1.5. Recent Changes in the Italian Balancing Market ........................................................... 13
SWEDISH ELECTRICITY MARKET ............................................................................................... 13
2.2.1. The liberalization of the Swedish Electricity Market ...................................................... 13
2.2.2. Market evolution ............................................................................................................. 13
2.2.3. The energy trading markets ............................................................................................ 14
2.2.5. Demand flexibility ........................................................................................................... 15
ROMANIAN ELECTRICITY MARKET ........................................................................................... 16
2.3.1. R&D investments in energy sector .................................................................................. 17
2.3.2. Emergent structures/companies in energy sector: ESCOs, aggregators, clusters, think
tanks .......................................................................................................................................... 18
2.3.4. The R&D investment in energy industry in Romania ..................................................... 20
2.3.5. Energy prices .................................................................................................................. 20
3. BUSINESS MODEL FRAMEWORK ...................................................................................... 26
SUPPORTING DATA ................................................................................................................... 26

3.1.1. Analysis of questionnaires .............................................................................................. 26
FLEXMETER REVENUES ............................................................................................................ 31
3.2.1. Residential Users ............................................................................................................ 32
3.2.2. Distribution System Operators ....................................................................................... 33
3.2.3. Energy Aggregators ........................................................................................................ 34
ASSUMPTION ............................................................................................................................ 34
BUSINESS PLAN ........................................................................................................................ 40
4. CONCLUSIONS ......................................................................................................................... 43

List of Figures
FIGURE 1 THE ITALIAN ELECTRICITY MARKET SOURCE: WWW.MERCATOELETTRICO.ORG................. 7
FIGURE 2: ROMANIA PUBLIC SPENDING ON ENERGY R&D 2008-2013 VS OVERALL GDP [DATA
EXTRACTED ON 24 APR 2017 16:42 UTC (GMT) FROM OECD.STAT] ..................................... 18
FIGURE 3: SURVEY – USERS AGE ....................................................................................................... 27
FIGURE 4: AVERAGE AMOUNT OF BI-MONTHLY ELECTRICITY BILL.................................................... 27
FIGURE 5: MOST CONSULTED INFORMATION IN ELECTRICITY BILL .................................................... 28
FIGURE 6: LEVEL OF INTEREST ABOUT HAVING INFORMATION ON THE BREAKDOWN OF ELECTRICITY
CONSUMPTION BY TYPE OF HOUSEHOLD APPLIANCE (5 = VERY INTERESTING AND 1 =
ABSOLUTELY USELESS) .............................................................................................................. 28
FIGURE 7: AVAILABILITY TO PAY FOR ENERGY CONSUMPTION ANALYSIS SERVICES ......................... 29
FIGURE 8: MAXIMUM AMOUNT OF EURO THAT THE CONSUMER WOULD BE WILLING ANNUALLY TO PAY
FOR ENERGY CONSUMPTION ANALYSIS SERVICES. ..................................................................... 29
FIGURE 9: DISCOUNT LEVEL FOR MONTH (PRE SPECIFIED TIMES) ...................................................... 30
FIGURE 10: DISCOUNT LEVEL FOR MONTH (SPECIAL OCCASION FOR DISTRIBUTOR NEEDS) ............... 30
FIGURE 11: LIMITATION OF USE, ON AN ONGOING BASIS, IN CERTAIN TIME SLOTS ............................ 31
FIGURE 12: SWITCHING ON/OFF AT THE REQUEST OF THE ELECTRICITY SUPPLIER WITH MINIMUM
NOTICE ....................................................................................................................................... 31
FIGURE 13: REVENUES AND OPERATING COSTS FROM 2018 TO 2026 (VALUES IN €).......................... 42
FIGURE 14: PROFITS/LOSSES FROM 2018 TO 2026 (VALUES IN €) ....................................................... 42
FIGURE 15: ROS FROM 2018 TO 2026 (% VALUES) ........................................................................... 43

List of Tables
TABLE 1: THE FIRST TWENTY SALES GROUPS IN THE FREE MARKET IN ITALY SOURCE: OWN
ELABORATION OF DATA ITALIAN REGULATORY AUTHORITY FOR ELECTRICITY GAS AND WATER
(2016) .......................................................................................................................................... 7
TABLE 2: COMPARISON OF EUROPEAN EXCHANGES FROM 2005 TO 2016, YEARLY SUMMARY -
AVERAGE PRICE (€/MWH) SOURCE: OWN ELABORATION OF DATA THOMSON REUTERS (2016) . 9
TABLE 3:DATASET: GROSS DOMESTIC EXPENDITURE ON R-D BY SECTOR OF PERFORMANCE AND
SOCIO-ECONOMIC OBJECTIVE IN NABS2007 ............................................................................. 17
TABLE 4: NUMBER OF SM INSTALLED IN ROMANIA, SOURCE ANRE ................................................ 20
TABLE 5: CR TARIF ........................................................................................................................... 21
TABLE 6: CI TARIF ............................................................................................................................ 21
TABLE 7: CD TARIF ........................................................................................................................... 22
TABLE 8: CR2 TARIFF ....................................................................................................................... 22
TABLE 9: CR3 TARIFF ....................................................................................................................... 23
TABLE 10: CTP TARIFF ..................................................................................................................... 23
TABLE 11: CS TARIFF ........................................................................................................................ 24
TABLE 12: STABIL TARIFF ............................................................................................................... 24
TABLE 13: MOBIL TARIFF ................................................................................................................ 25
TABLE 14: TIME TARIFF ................................................................................................................... 25
TABLE 15: ASSUMPTIONS .................................................................................................................. 36
TABLE 16: REVENUES ........................................................................................................................ 37
TABLE 17: INDIRECT CUSTOMERS ..................................................................................................... 37
TABLE 18: COSTS OF SERVICES .......................................................................................................... 39
TABLE 19: NUMBER OF EMPLOYEES AND COSTS ............................................................................... 39
TABLE 20: TOTAL COSTS FOR EACH YEAR ......................................................................................... 39
TABLE 21: BUSINESS PLAN ................................................................................................................ 41

1. INTRODUCTION
In order to address most of the objectives of WP 5 - “Business Models” regarding a preliminary but
comprehensive analysis of business models and addressable markets for FLEXMETER services, the
partners decided to aggregate the results of tasks T5.1, T5.2 and T5.3 in this deliverable, coupling
the objective of D5.1 “Report on business models for smart meters and retail market” and D5.2
“Report on energy aggregator impact and business model”. Information related to energy
aggregator business models are also reported in D5.2.
Taking into account the national constraints several Member States put on the deployment (and
detailed technical specifications) of electrical smart meters in DSO perimeters, in some way closing
the door to the installation of other solutions, FLEXMETER decided to put more emphasis on the
development of added-value services for multi-utility players in regulated markets (e.g. water and
electrical, taking into account also unbundling rules) and not regulated markets, at least in some
countries (e.g. District Heating in Italy).
These services, corresponding to FLEXMETER already identified use cases, will be based on
meters/sensors/data infrastructures already available at clients side or, if not available or needed
to perform innovative, breakthrough analysis, will be supported by the installation of dedicated,
post-fiscal smart meters tested during the projects.
In order to present in the best way possible the technical and economic assumptions and results of
the business model, we decided (as already presented and accepted by the officer during the last
review meeting) to imagine FLEXMETER will become a Company/startup offering their services on
the European Market.
Revenues and costs have been evaluated and all financial assumptions have been made considering
the Company based in Italy, that is under Italian fiscal laws: such a choice derives from the necessity
to close a Business Plan and the fact that the partners most involved in these WP and tasks are
Italian ones, that is expert on their country laws and rules.

2. THEORETICAL BACKGROUND: REGULATORY FRAMEWORK AND

MARKET DATA
ITALIAN ELECTRICITY MARKET

The evolution of the competitive environment is leading to significant changes for Italian and
European utilities.
The energy scenery is undergoing a phase of profound evolution. The arrangement of the electrical
system is affected by significant changes in the paradigm, with increasing penetration of
intermittent renewable sources, fragmentation and distribution of production points, diffusion of
efficient and innovative technologies, and shift of the value axis from energy production to supply
of services.
The framework of an electricity market responds to two very specific requirements:
• stimulating competition in the production and sale of electricity through the creation of
market platforms;
• promoting high degree of efficiency in the management of electricity dispatch through the
creation of a market for the purchase of the dispatching services.
The electricity market, commonly referred as “Italian Electricity Stock Exchange” (“Borsa Elettrica
Italiana”, actually Italian Power Exchange), allows manufacturers, consumers and wholesalers to
enter into timetables for the purchase and sale of electricity. Transactions take place on a telematic
platform where operators connect via the Internet, with secure access procedures, through digital
certificates, for the online trading of electricity purchase and sale contracts.
2.1.1. The liberalization of the Italian electricity market

Privatization of goods and services, implicitly understood in the Maastricht Treaty, also affected the
electricity market. The first examples of liberalization of energy markets date back to the mid-1980s
and mid-1990s, when Britain and the Scandinavian countries first started to open up markets to
competition.
Italy has started a regulatory process for competition also in utilities with Law 481/1995. In
particular, D.Lgs. 79/99, the so-called “Bersani decree”, initiated the liberalization of the electricity
market. The Decree incorporated the information contained in Directive 96/92/CE on the creation
of the Single Market for Energy, which marked the beginning of the process of liberalizing the
production, import, export, purchase and sale of electricity.
Previously, in Italy there was a monopolistic market model. In particular, since 1962 all activities
related to the production, transport and sale of electricity were by law only reserved to Enel. Only
since 1999, the Authority for Electricity and Gas, created in 1995 with the objective to regulate and
control energy sectors, has taken steps to segment the electricity market. After eight years of
procedural steps, starting from 1 July 2007, domestic consumers and small businesses have been
1
able to freely choose their own electricity provider .
The main justifications for liberalization were related to:
Technological evolution that reduced the fixed costs of generation and reduced the minimum
efficient scale of the manufacturing companies;
Information technology (IT) that reduced both the need for dispatching decision concentrations
and transaction costs and associated economies of scale justifying vertical integration.
The main novelties of the Bersani Decree regarding the various fields of the power supply chain
were related to:
• Production: faculty for every new operator in the sector to produce, import, buy and sell
electricity;
• Transmission-distribution: separation between ownership and transmission network
management; access and use of the national transmission network guaranteed to the
operators requesting them;
• Sale: introduction of a new wholesaler figure (intermediary purchasing electricity and
reselling it to end consumers in a free market system); subdivision of end customers into
eligible customers (with the requirements to purchase electricity on the free market) and
constrained customers (without requirements for accessing to the free market);
establishment of the Energy Exchange; establishment of the figure of the Single Buyer,
with the function of supplying electricity to distribution companies to cover the demand
of the constrained market.

1
Main laws: D.lgs. 79/99 (Decreto Bersani), L. 239/04 (Legge Marzano), L. 125/07 (conversione del
D.L. 73/07).
The Energy Exchange consists of the Spot Electricity Market (MPE), of the Platform for physical
delivery of financial contracts concluded on IDEX (CDE) and of the Forward Electricity Market (MTE).
The Figure 1 summarizes the framework of the electricity market in Italy.

Figure 1 The Italian Electricity Market Source: www.mercatoelettrico.org

Table 1 highlights the first twenty sales group that operated in the free market in 2016.
Table 1: The first twenty sales groups in the free market in Italy Source: own elaboration of
data Italian Regulatory Authority for Electricity Gas and Water (2016)

Name Ammount in GWh Share
Enel 40.831 21,10%
Edison 11.793 6,10%
Eni 10.686 5,50%
Axpo Group 7.772 4,00%
Gala 6.655 3,40%
Hera 6.557 3,40%
E.On 6.222 3,20%
Metaenergia 6.197 3,20%
Sorgenia 5.962 3,10%
A2A 4.662 2,40%
Acea 4.459 2,30%
Iren 4.380 2,30%
C.V.A. 4.315 2,20%
Energetic Source 4.176 2,20%
Duferco 4.074 2,10%
Dolomiti Energia 3.739 1,90%
Repower 3.593 1,90%
SC Holding 3.222 1,70%
Egea 3.072 1,60%
Alperia 3.038 1,60%
Others 48.321 24,90%
Total in Free markets 193.725 100%
Following the liberalization process, the Authority for Electricity and Gas has also set up initiatives
and instruments to ensure a system of protection and safeguarding (the so-called “Maggior Tutela”
Service) for customers who have not yet chosen their own sellers. Furthermore, the Authority has
also provided the “Tutela Simile” Service that is a particular free-market offer of only electricity (no
additional services can be expected) with mandatory and homogeneous contractual terms.
2.1.2. Institutional Actors

Authorities for electricity gas and water system
The Italian Regulatory Authority for Electricity Gas and Water (AEEG) is the independent regulatory
th
body of the energy markets and the integrated water services. Law 14 November 1995, n.481
established it with the purpose to protect the interests of consumers, promote competition and
ensure efficient, cost-effective and profitable nationwide services with good quality level.
The Regulatory Authority for Electricity and Gas pursues two main objectives as laid down in Law
481/95: “guaranteeing the promotion of competition and efficiency” and “ensuring adequate
service quality standards” in the electricity and gas sectors.
“Gestore dei Servizi Energetici” (Energy Service Manager)
The Energy Services Manager (GSE), originally the Electrical Services Manager, was born in 2004. It
works to promote sustainable development through the technical-engineering qualification and the
verification of plants for renewable and high-efficiency cogeneration. It also recognizes the
incentives for electricity produced and placed on the network by such plants. It is the second
national energy intermediary operator: it retains and places on the electricity market the energy
produced by the incentive plants and certifies the source from renewable sources of power
supplied to the grid.
“Acquirente Unico” (Single Buyer)
Acquirente Unico (AU) is a public company totally owned by the Energy Services Manager. It was
born with the aim of guaranteeing the supply of electricity to customers in the protected market
(“Maggior Tutela” Market).
With the completion of the liberalization of retail electricity sales, AU continues to serve as a supply
for domestic customers and small businesses, who decide not to go to the free market and are
supplied under the Maggior Tutela Service, established by law. In particular, it has the task of
purchasing electricity based on demand forecasts and in line with the mission, it entrusts to the
most favourable conditions on the market and giving it to distributors for the needs of customers
belonging to the "greater protection" market who did not choose a new supplier in the free market.
“Gestore dei Mercati Energetici” (Energy Market Manager)
Gestore dei Mercati Energetici (GME), 100% owned by the GSE, is the company responsible for the
organization and management of the national market in accordance with criteria of transparency,
neutrality, objectivity and competition between the producers. It ensures the economic
management of an adequate availability of the power reserve.
GME is also entrusted with the organization of the "Green Certificates" bargaining venues and
Emission Units.
Terna S.p.A.
The Terna Group is the transmission system operator for electricity transmission in Italy. The
Company manages electricity transmission in Italy and guarantees its safety, quality and
affordability over time.
It pursues electricity grid development, ever-increasing operating efficiency and integration with
the European grid. It ensures equal access conditions for all grid users. It develops market activities
and new business opportunity with the experience and technical expertise it has acquired in
managing complex systems. It also creates value for shareholders thanks to continual commitment
to professional excellence, and a responsible approach to the community, fully respecting the
environment and the areas in which it operates.
2.1.3. Organization of the electricity market

The electricity market, which is the seat of trading concerning electricity, was born in Italy, as
previously observed, because of Legislative Decree 79/99 in the process of transposing the
Community directive on the creation of an Internal energy market.
The management of the electricity market is entrusted to the GME (Energy Markets Manager), the
exclusive property of the GSE (Electrical Services Manager). The GME has set up the electrical
market on which is exclusively traded the sale and purchase of electricity. The goal is to stimulate
efficiency by introducing competitive elements. The guiding principle of the market is that of the
merit order of the bid, i.e. the economic valorization of the most efficient plants. Selling offers are
ordered for a non-decreasing price, ranging from low to high price (from those without price, to
those with highest price). All eligible subjects may apply for admission to the market and sign the
contract of admission, under which they undertake to submit to the required information,
technology and economic obligations.
In Italy there are 261 Market Participants admitted to the electricity market (as of October 31,
2017).
Those who are admitted acquire the status of operators and are entered in a special list. To ensure
the functioning of GME, operators will pay a fixed and annual fixed fee for each MWh subject to a
purchase and sale transaction.
The IPEX (Italian Power Exchange) is virtual venue where wholesale electricity supply and demand
meet. GME is vested with the management of transactions on the Power Exchange under art. 5 of
Legislative Decree 79/99. The following table (number 3) summarizes the average price (€/mWh)
of the main Power Exchange in Europe.
Table 2: Comparison of European exchanges from 2005 to 2016, yearly summary - average price
(€/mWh) Source: own elaboration of data Thomson Reuters (2016)
Period IPEX EPEX Germany Nord Pool EPEX France
2005 58,59 45,97 29,33 46,67
2006 74,75 50,78 48,59 49,29
2007 70,99 37,99 27,93 40,88
2008 86,99 65,76 44,73 69,15
2009 63,72 38,85 35,02 43,01
2010 64,12 44,49 53,06 47,50
2011 72,23 51,12 47,05 48,89
2012 75,48 42,60 31,20 46,94
2013 62,99 37,78 38,35 43,24
2014 52,08 32,76 29,61 34,63
2015 52,31 31,63 20,96 38,48
2016 42,78 28,98 26,91 36,75

The electrical market (ME) is divided into:
• Spot Electricity Market (MPE)
o Day-Ahead Market (MGP)
o Intra-Day Market (MI)
o Ancillary Service Market (MSD)
• Forward Electricity Market (MTE)
• IDEX – Italia Derivate Energy Exchange (CDE)
In particular, the electrical market is subject to very strict technical constraints:
• given the impossibility of storing electricity, instantaneous and continuous balancing
between the amount of power input into the grid and those taken from the grid, taking
into account the losses in the lines;
• constancy (with little fluctuations) of frequency and voltage;
• power flows per single power supply. Parameter deviations would lead to crises in the
national energy system.
The electrical market must take into account the technological and physical characteristics of the
structure. In this respect, besides the usual financial products for the Stock Exchange, mechanisms
were created to respond to technical issues related, for example, to short-term bargaining to
ensure balancing action.
Critical factors are mainly three:
• the variability of demand;
• the absence of storage;
• the externality of the network.

The electricity system is subdivided into portions of transmission networks (zones) for which there
exist energy crossing boundaries with the corresponding adjacent zones. These transit limits are
determined based on a calculation model based on the balance between power generation and
consumption. The Italian system is articulated into market areas, aggregated in geographical and/or
virtual areas, each characterized by a zonal price of energy. The six geographic areas are center-
north, north, south-central, south, Sicily and Sardinia.
In the case of input programs, the supply bids correspond to the individual production units, i.e.
plants for the conversion of energy supplied from any primary source of electricity. Input programs
must be defined for individual drives so that they can select the units from which to supply
resources for dispatching services.
In the case of withdrawal programs, pick-up points may correspond to individual withdrawal points
(individual units of consumption) and aggregates of withdrawal points.
A "dispatching user" is identified for each bidding point. This is responsible for Terna both by
running the input and output programs and the execution of the balancing orders. These orders
can be sent from Terna to real-time bidding points to ensure system security. Failure to respect
cumulative programs involves the payment of unbalanced charges, i.e. the penalties attributable
to the bidding points.
Spot Electricity Market (MPE)
The Spot Electricity Market is the place to trade electricity every day. The electrical market consists
of a series of market sessions, i.e. a set of activities aimed at receiving and managing bids, as well
as determining the outcome of the market. An interval of time for the receipt of bids is set in each
meeting session: this interval is defined as "sitting". This market, which hosts most of the electricity
trading transactions, is divided into three markets: Day-Ahead Market, Intra-Day Market and
Ancillary Service Market.
The three markets have some common features:
Operators have bid / purchase deals, consisting of quantity (MWh) and price (€/MWh) for each bid
point, for each hour of the day.
Offers include the availability of: to sell a quantity of energy not higher than that indicated in the
offer at a price not lower than that specified in the offer itself; Buy an amount of energy not higher
than that indicated in the offer at a price not higher than that indicated in the offer itself.
After closure, the Market Energy Manager makes the acceptance of the offers on the day before
and by Terna on the Market of Dispatching Services.
Quantity cumulative programs are communicated to Terna and dispatcher users.
Day-Ahead Market (MGP)
This market is aimed at exchanging wholesale energy between producers, wholesalers and
customers, defining input and output programs for each hour of the next day and allocating
available transit capacity. Usually, it takes place in the morning of the day before the delivery day
and all the operators who have acquired the qualification of an electricity market may participate.
Both the demand and the supply are offered to the market, and bargaining takes place through sale
and purchase offers of electricity to reach the definition of prices, quantities traded and the
definition of input and withdrawal programs for the next day. The bids accepted determine the
preliminary entry and withdrawal programs for each bidding point for the next day. These will be
refined in the Intra-Day Market.
In particular, The Day-Ahead Market sitting opens at 8.00 a.m. of the ninth day before the day of
delivery and closes at 12.00 p.m. of the day before the day of delivery. The results of the MGP are
made known within 12.55 p.m. of the day before the day of delivery.
Bids/asks are accepted after the closure of the market sitting based on the economic merit-order
criterion and taking into account transmission capacity limits between zones. Therefore, the MGP
is an auction market and not a continuous-trading market.
All the supply offers and the demand bids pertaining both to pumping units and consuming units
belonging to foreign virtual zones that are accepted in the MGP are valued at the marginal clearing
price of the zone to which they belong. This price is determined, for each hour, by the intersection
of the demand and supply curves and is differentiated from zone to zone when transmission
capacity limits are saturated.
The accepted demand bids pertaining to consuming units belonging to Italian geographical zones
are valued at the “Prezzo Unico Nazionale” (PUN – national single price); this price is equal to the
average of the prices of geographical zones, weighted for the quantities purchased in these zones.
The Energy Service Manager acts as a central counterparty.
Intra-Day Market (MI)
The programs defined at the end of the Day-Ahead Market can be modified with the Intra-Day
Market (MI). With this market, operators can modify the programs defined on the Day-Ahead
Market by submitting additional sales / purchase deals for each time of the next day. It takes place
immediately after the Day-Ahead Market and all the operators can participate, in an optional
manner.
Bargaining takes place by means of offers to sell/purchase of energy, to change the input and
output and withdrawal schedules defined before. The sessions open on the day before the delivery
day and close either the day before or the same day, depending on the type of session. Compared
to the latter, however, bids are valued at the zonal balance price to avoid arbitrage risks.
Supply offers and demand bids are selected under the same criterion as the one described for the
MGP. Unlike in the MGP, accepted demand bids are valued at the zonal price. The Energy Service
Manager acts as a central counterparty.
Ancillary Services Market (MSD and MB)
This market handles deviations between actual inputs and withdrawals compared to programs
defined on the Day-Ahead Market and eventually modified by the Intra-Day Market. Only units
providing dispatching services may participate in the market, and its dispatching users may only
submit bids. The Ancillary Services Market (MSD and MB) is the venue where Terna procures the
resources that it requires for managing and monitoring the system relief of intra-zonal congestions,
creation of energy reserve, real-time balancing. In the MSD, Terna acts as a central counterparty
and accepted offers are remunerated at the price offered.
This Market is divided into MSD (Mercato Servizi Dispacciamento) and MB (Mercato Bilanciamento)
ancillary Services. Terna is the only counterparty of the operators while GME conducts the activity
of collecting bidders' offers and communicating outcomes.
In the MSD market, Terna accepts energy purchase and sale offers for resolving the residual
congestion and the establishment of an adequate reserve margin that is divided into three phases
while the presentation of bids is unique. It opens at 3.30 p.m. and closes at 5.00 p.m. on the day
before the delivery day. The results are announced the next day by 2.00 p.m.. On the Ancillary
Services Market, bids are accepted based on economic merit, consistent with the need to ensure
the proper functioning of the system. Accepted offers are valued at pay as bid.
The MB market is related to Terna's real-time purchase and sale offerings for balancing inputs and
withdrawals, by committing orders to production units. The different offers refer to groups of hours
on the same day that the session takes place. This market is currently divided into five sessions; in
the first phase, they consider the bids submitted by operators during the MSD Market. For the other
market sessions, the bidding sessions open at 11.00 p.m. on the day before the delivery day and
close one hour and a half before the first hour that can be negotiated in each session.
Forward Electricity Market (MTE)
The Forward Electricity Market (MTE) is the virtual venue where forward electricity contracts are
negotiated, with delivery and withdrawal obligations for future electricity supplies. Trading in the
Forward Electricity Market takes place on a continuous basis. Market participants are automatically
admitted to the market by participating in proposals that indicate the type and period of delivery
of the contracts, the number and the price at which they are willing to sell or buy.
The types of contract that can be submitted are two: Base load and Peak Load. These contracts
diversify for the relevant periods of delivery of electricity belonging to the delivery period.
In particular, the sessions will take place from Monday to Friday, from 09.00 a.m. to 5.30 p.m.,
except on the next-to-the-last day of open market of each month, when the closing time is
advanced at 2.00 p.m. for operational reasons. The sessions of the MTE will be held every day
except on all Saturdays; all Sundays; 1 January; Friday before Easter; Monday after Easter; 1 May;
15 August; 24 December; 25 December; 26 December; 31 December.
Italia Derivatives Energy Exchange (IDEX)
IDEX, launched in 2008, offers Baseload and Peakload Futures on both Italian and German power.
The unique features of electricity price dynamics define high price volatility. Power futures allow
operators within the industry to allay undesired risks by providing hedging tools in a safe trading
environment, encouraging better business planning and greater operational profitability.
The platform is the main venue for the registration of transactions corresponding to the derivative
financial contracts concluded on the IDEX for which the operator has applied for the option of
delivering on the electricity market. An operator may exercise the physical delivery option on the
electricity market below the financial contracts concluded on the IDEX, in accordance with the
terms and conditions defined. Physical delivery takes place through the registration of an energy-
purchase transaction that GME becomes a counterpart and is registered on an Energy Accounts
Platform (PCE).
In the Day-Ahead Market and the Intra-Day market- also defined as Energy Markets -
manufacturers, wholesalers and end customers, as well as Single Buyer (AU) and Energy Services
Manager (GSE), purchase and sell wholesale power bills for the next day. These markets, managed
by the Energy Markets Operator (GME), define equilibrium prices to which the negotiated energy
is valued. In Ancillary Services Market, Terna supplies the resources needed to manage and control
the system (infrasound congestion resolution, energy reserve creation, real-time balancing).
2.1.4. Smart meter roll-out

Italy has been the first member state that has developed electricity smart meter for end users on
large scale and is the first state in the world for number of installed smart meter. THE REPORT OF
EU COMMISSION on Benchmarking smart metering deployment in the EU-27 with a focus on
electricity states that the Italian system has been the most efficient in the deployment of the first
generation of electricity smart meters. After the legislative decree 102/2014, the Authority has
defined the general provisions for the new generation of electricity smart meters (SM 2.0) and cost
recognition (646/2016/R/eel and 87/2016/R/eel). With the deliberation 222/2017/R/eel, the
authority has approved the plan for the roll-out of the second generation of electricity smart-
meters. On the gas sector the Authority have started the roll-out of smart-gas meters in 2013 The
Italian committee on Gas have defined the technical regulation for the smart-gas meter with
particular attention with interoperability. The smart-gas meter architecture could be point to point
or point to multipoint using the communication channel on 169 MHz.
The authority has reviewed many times the roll-out plan by taking in to account deployment
difficulties. Actually, the authority has set a target of substituting the old gas meters of 50% for
2018. For the water sector the authority has started a survey on the activity of water metering in
order to identify the minimum levels of efficiency and possible criticalities. Actually, water meter is
often deployed at the building scale and not at the end user scale. On the development for smart-
water meters the authority is now developing projects for multiservice metering.
2.1.5. Recent Changes in the Italian Balancing Market

Since May 2017 the Authority for Electricity Gas and Water system with the resolution
300/2017/R/Eel have opened for the first time the Balancing Market (Mercato Bilanciamento MB)
to virtual union of consumption units (UVAC). Before May 2017 the balancing market was only open
to production unit, mainly Hydroelectric and Gas plants. In the resolution 300/2017/R/EEL the
Authority establish the possibility of creating Aggregation of consumption units in order to create
an UVAC with limitation due to the different zones of the electrical system. With the same
resolution the Authority have lunched pilot projects for the participation of Aggregation of
consumption unit to the MB and instructed TERNA to define a regulation for the participation of
the UVAC to pilot projects. In the end of May 2017 the TSO TERNA publishes the regulation for the
participation to the pilot projects and set a minimum requirement of an UVAC. The requirements
says that an UVAC in order to participate to the MB must have a minimum capacity of 10MW that
must be available in 15 minutes for a duration of 3 hours. In middle June to the poor participation
to the projects by energy operators TERNA have reduce the minimum capacity to 5 MW. Few days
ago in December 2017 TERNA have further reduced the minimum capacity to 1MW in order to
increase the participation to pilot projects. During the first round of the pilot project the number
of energy operator have been very small 2-3 have participate. In the last round of the pilot project
from January 2018 to March 2018 the number of energy operators participating is 6.
SWEDISH ELECTRICITY MARKET

2.2.1. The liberalization of the Swedish Electricity Market
The task of deregulating the Swedish electricity market began in early 1992, when the Swedish
parliament agreed targets and strategies for an electricity market reform, all aimed at increasing
competition. Grid owners were given the responsibility of transporting electricity to or from
anyone who requested it. Grid-related activities were to be strictly separated from electricity
production and trading activities. This led to the start of the liberalized market in the autumn of
1996.
The drivers for liberalisation was that there was a political strive to increase the efficiency in the
electricity market and also increase the influence from customers in the development of products,
tarifs and services in the market. In Sweden at that time, there also were other markets which were
liberalized around the same time, for example taxi and telecom services. The liberalization of the
UK energy market was also a guiding example.

2.2.2. Market evolution

In 1996, a government owned system operator was formed “Svenska Kraftnät” was formed,
which owns the 220/400 kV transmission grid and also is system responsible for the actual power
balance in the market. Svenska Kraftnät has also been responsible for the balancing markets
together with Nordpool and since 2017, also eSETT. In this perspective, Svenska Kraftnät is
working together with the other Nordic system operators to create an integrated Nordic
electricity market.

Starting in the autumn of 1996, there was a new regime in the electricity market.
Now the consumers could change suppliers.

The responsibilities for distribution of electricity, and also metering and reporting of energy usage
was given to the DSO:s and this role of responsibility have not changed over the years.

However, initially there were some thresholds, the customer who wanted to change supplier had
to invest in a new electricity meter, capable of measuring consumption on an hourly basis. Those
meters were relatively expensive, which usually meant that it made no financial sense for small-
scale consumers to switch supplier.

On 1 July 1997, a capped price of SEK 2,500 on hourly meters was introduced for
small-scale consumers. The aim was to make it financially viable for them to benefit
from the open electricity market.

A new Electricity Act (1997:857) came into force on 1 January 1998. The new act was effectively a
modernisation of the 1902 Electricity Act, in terms of its wording and content. No major changes
were made to the provisions introduced as part of the electricity market reform a few years
earlier. The big change, however, was the incorporation of the separate Electricity Trading Act
into the new Electricity Act. In late 1998, parliament implemented the "Directive of the European
Parliament and of the Council concerning common rules for the internal market in electricity"
(Internal Market in Electricity Directive).

In October 1999, parliament decided to abolish the requirement for hourly meters for small-scale
consumers, introducing profile-based settlement of consumption instead.
In profile-based settlement, consumption is distributed over the hours in the year according to a
consumption profile. This means that hourly values can be obtained even for consumers without
hourly meters. It now made financial sense even for low usage consumers to switch supplier. The
legislative changes came into force on 1 November 1999.

Another electricity market reform came into effect on 1 July 2009. From then on, all domestic
customers must be billed according to their actual monthly usage. The DSO reads the meter
automatically, and the readings are sent to the electricity supplier. The consumer's bill contains
information about the electricity used during the month and the price charged.

The latest reforms are:
• Proposal for a new metering code, as a result of the Energy Efficiency Directive, requiring
that all customers should be able to have 1 hour interval metering (and in the future
15min interval). Also requirements on a local customer interface for metering data
• A common Nordic balancing and settlement company, eSETT, handling all balance
settlements in the market
• Proposal for a new Supplier Centric Electricity Market, making the supplier the single
point of contact for the customer, in this context, introduction of a new market
information model will also be introduced, a “Electricity Market Data Hub”. The DSO will
be a pure “infrastructure provider” as part of the suppliers obligations to the customers,
and will have no customer contacts other than for operational purposes.

2.2.3. The energy trading markets
OMX/Nasdaq operates an exchange for long-term contracts (financial trading) for organisations
involved in the Nordic electricity market.
Nord Pool Spot AS is owned by the system operators in the Nordic countries, and it runs the spot
market – the exchange for hourly trading of electricity for the next day (physical trading).
From the point of view of the market players, the different parts of the power exchange work as a
single market place.

Spot market for hourly trading
At Nord Pool Spot, the market players buy and sell electricity on an hourly basis for the next day.
The countries involved are Sweden, Norway, Finland and Denmark. Estonia was established as a
bidding area on 1 April 2010. At present, most electricity is traded on the spot market. In 2009,
over 70% of consumption in the Nordic countries was traded at Nord Pool Spot.

Nord Pool Spot calculates the system price, which forms a reference price for the financial
contracts concluded in the financial markets, and also for bilateral agreements.

Adjustment market – when the spot market is closed
Nord Pool Spot has an adjustment market called Elbas, where the market players can carry out
intra-day trading, correcting any imbalances that arise after the spot market closes.
The adjustment market starts trading for the next day at 14:00 – two hours after the spot market
finishes for the day. In the adjustment market, electricity can be traded in Finland, Sweden,
Denmark and Norway up to one hour before delivery.

Futures market for longer-term trading
The financial futures market allows organisations to hedge the price of the electricity they buy, so
they can offer fixed-price agreements to their customers.
Standardised financial instruments (futures) are purchased for delivery in the future. The contract
is for a specified amount of electricity over a specified period for a specified price. Because the
contracts being traded do not involve physical delivery, this market place is also an attractive
proposition for other categories of market player, for example banks.
As a consequence of the market reform which came into effect on July 1, 2009, all DSO:s in Sweden
decided to invest in smart meters (even if it was not an explicit technology requirement). The
government decision came in 2003, so the DSO:s had a 6 years of preparation time. A contributing
factor was that the DSO:s were allowed by the regulator to increase the grid fees with approx.
5€/year, to partly compensate for the increased cost of investment and operation.
The roll-outs were successful, and since 2009 all 5,4 million electricity customers have smart meters
with basic functionality to register and collect monthy meter readings. Some DSO:s invested in
meters with additional capabilities and also made some web development to present consumption
(monthly/hourly) for private customers.
In 2012, the regulator decided that for customers have spot-price retail agreements, the DSO
should register and collect hourly meter data without additional costs for the customers. However,
the interest from the customers for this type of product was very low.
In 2015, the regulator presented the first proposals for the new metering code. The code will be
decided in 2018 and come into effect Jan , 2025. One of the reasons is to adopt to the Energy
Efficiency Directive and also to the EU Grid codes regarding connection, balancing etc.
In this metering code, the regulator will mandate 7 functional requirements, which are:
• Registration of active and reactive power both for consumption and production,
and also registration of voltage and current values perphase
• Ability to register meter data with 15 or 60 minute intervals
• Local customer interface, giving the customer access to real-time meter data
• Registration of outages, lasting longer than 3 minutes
• Remote collection of all relevant parameters
• Capability to remotely update meter firmware and configure meter parameters
• Remote controlled mains breaker in the meter

The consequence of this new metering code is that all small-consumption meters in the
Swedish market have to be changed again, in a 2nd roll-out wave, in the period from 2019
to 2024.

2.2.5. Demand flexibility

There are several decisions taken to shut down nuclear electricity plants, and it is also becoming
difficult to build new large-scale production plants.
In this context, a need for increasing the participation of demand flexibility assets is foreseen.
Today, it is not possible for households to participate and bid in flexibility. It is only possible for
large assets, >5MW.
However this threshold may decrease in the future, and there also pilot projects started, to see if it
is possible to allow assets down to 0,1 MW, or even households to participate in the spot and
adjustment markets with flexibility, either directly or via an “aggregator.
ROMANIAN ELECTRICITY MARKET

Since the beginning of the liberalization process (2000 – the breakup of monopoles), OPCOM, the
Romanian electricity market operator has administered inter alia the daily market. In 2005, a new
spot trading mechanism (day-ahead market) Centralized Market of Bilateral Contracts (CMBC) was
launched at OPCOM. This platform allows two-side bidding which will further ensure the best
liquidity in Eastern Europe.
In 2007, by Governmental decision 638/2007, the market opened fully for both electricity and
natural gas. On the competition retail market, suppliers sell electricity through bilateral contracts
at negotiated prices or through standard offers.
At this moment 30% of the electric energy price is set by government (i.e. ANRE) and 70% is bought
from the free market (bourse). Starting this year (2017) the government will set the price for only
20% of the electric energy and 80% will be set by the free market. By the beginning of January 2018,
the price of electric energy should rely 100% on the free market.
Romania’s market framework has one TSO (Compania Nationala Transelectrica SA), which also
serves as the Balancing Market Operator; one Market Operator (OPCOM In 2015, in the Romanian
electricity market have operated a total of 49 electricity distribution operators, from which 8 are
serving over 100,000 customers. All 8 companies have completed the legal separation of the
distribution activities of electricity supply. Electricity distribution operators with less than 100,000
customers do not have the obligation to legally unbundle the distribution activity from other
company activities in accordance with Directive 72/2009/EC on common rules for the internal
electricity market
In Romania there is not a large area of the energy legislation, considering that there are two major
laws in force in this domain, updated in time (Electricity and Natural Gas Law no.123/2012 and
Energy Efficiency Law no 121/2014), which are not quite incentive for the stakeholders to begin the
process of analysis and implementation of Smart Grid systems.
Although there is a project plan proposal, which implies regulations and provisions, it hasn’t yet
been approved by Romanian Energy Regulatory Authority (ANRE).
The above-mentioned Plan provides high important elements concerning the smartening electricity
as:
• The National Plan of Smart Grid Implementation
• The General Smart Grid Architecture
• The Smart Meters Functionalities
• The Smart Meters interoperability with the existing measurements systems
• The personal data security and population health security
• The Evaluation and monitoring of the Smart Grid implementation
• Dissemination among the consumers.

The Romanian electricity market consists of the following specific markets:
1. Centralized bilateral contracts market operated by OPCOM (Romanian gas and
electricity operator)
2. Day-Ahead Market operated by OPCOM. The price cap for day-ahead market is
3000 €/MWh, while the minimum value is 0.2 €/MWh.
3. Balancing Market operated by Transelectrica. The price cap for balancing reserves
is currently 100 €/MWh. The price cap of the balancing market too low, that the
suppliers sometimes don’t buy energy from day ahead market and buy it from
balancing market with penalties.
4. Intra-day Market operated by OPCOM
5. Ancillary Service Market (ASM)/Reserves market
The first three producers in Romania in 2016 were: Hidroelectrica (29.83%) – hydro based
generation, “Oltenia” Energetic Complex (21.21%) – coal based generation, and
Nuclearelectrica (17.9%) – nuclear based generation. In 2016, the Romanian generation mix
was: 42.4% from RES (29% from hydro, 10% from wind, 2.6% from PV, 0.8% other sources),
24.5% from coal, 17.5% from Nuclear, 15% from gas and 0.6% from other sources. RES are
participating in the market once for selling the energy and on a different market for selling the
Green Certificates (the Green Certificates Market).
Generation units above 5 MW are considered dispatchable, and thus they must be connected
to the national dispatching centre by means of SCADA. Generation units of less than 5 MW
rating power will be part of the portfolio of a Third Responsible Party. Green certificates are
sold on the green certificates market for price between 29.4 and 35 €/certificate.
There are only one TSO (Transelectrica), eight DSOs (Electrica Distributie Transilvania Nord,
Electrica Distributie Transilvania Sud, Electrica Distributie Muntenia Nord, Enel Distribuţie
Muntenia, Enel Distribuţie Banat, Enel Distribuţie Dobrogea, CEZ Distribuţie Energie Oltenia,
EON Delgaz Grid), one market operator (OPCOM) and one balancing market operator.
2.3.1. R&D investments in energy sector

Romania is not part of International Energy Agency (IEA) and therefore the details on the energy
investment are not published. The Organization of Economic Coo-operation and Development
(OECD) statistics platform has published details concerning the investment in energy until 2013.
Table 3:Dataset: Gross domestic expenditure on R-D by sector of performance and socio-
economic objective in NABS2007
Country Romania
Measure PPP Dollars – Current prices
Unit US Dollar, Millions
Year 2008 2009 2010 2011 2012 2013 2014
Sector of Performance
Business enterprise 29.635 50.462 35.002 No data
Government 26.808 22.508 14.98 30.336 9.064 29.98
Higher education 23.994 1.725 0.87 1.154 2.19 2.613
Private non-profit 0.043 .. 0.084
Total intramural 80.48 74.696 50.952


Figure 2: Romania public spending on energy R&D 2008-2013 vs overall GDP [Data extracted on
24 Apr 2017 16:42 UTC (GMT) from OECD.Stat]
As shown in Figure 2 the investments in R&D energy sector dropped down in the economic crisis
period and since 2012 it follows closely the curve of GDP even though it remains very low.
The signature of the Partnership Agreement 2014-2020 offers a potential infusion of funds
dedicated to the energy sector through the Large Infrastructure Program (POIM) that has three
energy-dedicated axes:
• Axis 6 – Promotion of the clean energy and energetic efficiency regarding sustainability of
low carbon emission economy – allocated funds: 197.329.787,00 Euro
• Axis 7 – Growing the energetic efficiency of the centralized heating system in chosen cities
– allocated funds: 249.478.723,00 Euro
• Axis 8 – Smart and sustainable systems for electric energy and natural gas transport –
allocated funds: 68.026.596.00 Euro.
2.3.2. Emergent structures/companies in energy sector: ESCOs, aggregators,

clusters, think tanks
In the latter half of 2014 in Romania there was also initiated an ESCO Project – EBRD Pilot project
financed GEF) that aims at opening the market for ESCOs.
In Romania there are now around 30 ESCO companies most of them small and only few large
companies. ESCO companies offer integrated solutions that may decrease energy spending and
they are remunerated for the performance of the implemented solutions. They support
investments in energy by facilitating the communication with partners and stakeholders; if on the
traditional mode, a client must contact entrepreneurs, equipment producers, planners, energy
suppliers, legal and financial institutions; in the ESCO mode clients have only one communication
partner that intermediates the communication with all the other partners and offers tailor-made
services. In this way, the customer shifts the technical/economical risk to the ESCO. In Romania this
type of service is called EPC (Energy Performance Contracting).
Romania has also founded a Cluster (ROSENC CLUSTER) for energy domain in order to promote
Romania as a leader in the renewable energy sectors, energy efficiency and the new sustainable
energy. In this cluster are registered several types of members, which are interacting through three
working groups (Energetic efficiency, Photovoltaic, Biomass).

In September 2012, A.T. Kearney, commissioned by European Bank for Reconstruction and
Development (EBRD), released a market feasibility study on Smart Metering in Romania. This study
indicated that implementation of smart metering in the electricity sector has a potential to be a
profitable investment thanks to benefits coming from reduction of grid loses and reduction in the
operational cost at utilities.
Following this study, Romania adopted a policy of regulation driven introduction of smart meters
and started the implementation of a large project in order to meet the European Commission
requirements that by 2020 80% of customers are expected to be equipped with smart metering
system and mentioned a full roll-out by 2022.
In March 2017 the National Plan of implementing Smart Metering (not yet approved) was published
by Romanian Energy Regulatory Authority (ANRE) and the rollout was adjusted.
Starting with 2017 the requirements for starting the national plan for Smart Grid implementation
in Romania were established and so was the implementation calendar.
The national plan for Smart Grid implementation will last ten years, starting with 2017.
The Romanian Energy Regulatory Authority (ANRE) will approve the Smart Grid implementation
plans for each concession zone of the energy distribution service.
The national plan for Smart Grid implementation will run in two stages:
• Stage I: 2017– 2020. In this stage the DSOs will respect the following requirements:
• Until 2020, in each concession zone of the energy distribution service will be installed
smart meters for at least 30% from the total number of consumers
• The smart meters’ investment value in the first year of implementation won’t exceed 10%
from the total value of the annual investments’ plan approved by ANRE
• For each of the following years from stage I the smart meters’ investment values won’t
exceed 20% from the total value of the annual investments’ plan approved by ANRE
• The above-mentioned percentage will be applied for the values of the annual investments’
programmes of Smart Grid implementation which will be financed from own sources or
borrowed sources.
• Stage II: 2021 – 2026. In this stage the DSOs will project the implementation rhythm so
that, by the end of the last year of Smart Grid implementation, the percentage of the
integrated consumers would achieve 100%.
• The annual investments value for smart meters’ implementation won’t exceed 25% from
the total value of the annual investments’ plan approved by ANRE Error! Reference source
not found..
In the following we present some particular aspects for the Romanian market of energy related to
the implementation of smart metering solutions. As opposed to many EU countries, Romania is in
an incipient stage of implementing smart meters. Table 4 shows the number of Smart Meters (SM)
installed in Romania.
Table 4 shows the vast majority of SM implementations in Romania are not advanced. There are
three types of Smart Metering solutions:
- Advanced Metering Reading (AMR) – offers “one way” communication allowing meter
reading remotely without sending employees into the field
- Advanced Metering Management (AMM) –– has a management module which allows user
to interact with the meter
- Advanced Metering Infrastructure (AMI) – includes meters offering bi-directional
communication between consumers and suppliers and has capabilities to improve
consumption and make energy efficient decisions.
Because there aren’t many implementations for SM in Romania, there aren’t many software
applications or solutions either. The existing smart metering solutions, based on intelligent
measurement devices / infrastructure, implemented in other countries follow the
recommendations of EU Directive (Directive 72/2009).
Our functional benchmarking analysis for the Flexmeter solution considered the recommendations
of functionalities in this directive and the ones specific for Romania as they resulted from the CBA
(Cost Benefit Analysis) study.

Table 4: Number of SM installed in Romania, source ANRE
SM type Customer type Customers With AMR With AMI/AMM

no.
Electricity Large public non- 20,000 - -

residential
Small and medium 600,000 - -

non-residential
Households 8,380,000 - -
Total 9,000,000 ~75,000 ~15,300
Gas Non-residential 176,330 - -
Households 2,855,670 - -
Total 3,032,000 ~3,000
Heat Total 1,557,000 ~1,705 -

The ANRE3 report details the desired functionalities for SM in Romania. The functionalities are
grouped in three categories: minimum requirements as identified by EU Directive 72/2009,
additional requirements from a list of 33 also proposed by EU, and recommended functionalities
identified by the project team performing the CBA in Romania.

2.3.4. The R&D investment in energy industry in Romania

The R&D investment in energy industry in Romania is mainly sustained by the transposition of EU
directives and recommendations via opening the energy market, implementing Smart Grids and
allowing the ESCOs and clusters to provide tailor made services to consumers.
Romania assumes the targets of EU-28 in energy efficiency via regulating smart grids and
st
implementing the calendar of fully opening the energy market by 1 of January 2018 and allowing
competition in this sector fully closed until 2012.
By 2026, the Smart Grids will integrate 100% of customers and the expected outcome is reduction
of commercial losses and meter reading costs.
ESCOs and clusters are emerging structures that assess consumer behaviour, acts like
communication facilitators and promises lower costs.
2.3.5. Energy prices

The Wholesale Electricity Market represents the framework in which electricity is acquired by
suppliers from producers or other suppliers for resale or own consumption, as well as by network
operators to cover their own technological consumption. The Market Operator is OPCOM, which
is a subsidiary of Transelectrica (TSO).
The wholesale electricity market consists of the following specific markets:
a) the bilateral contracts market;

b) Next Day Market;
c) Balancing Market;d) Market of technological system services.

The biggest supplier is Electrica Furnizare with a market share of about 12,5%.
In Romania, the energy market is divided in 2: regulated market and competitive market.
1. There are 7 regulated tarrifs from which consumers can choose:
• CR tarrif:
- It is one of the most used types of tariffs and involves the invoicing at a unique price
of all the electricity consumed during the billing period, as well as the booking related
to the billing period.
- The tariff has two components: the price of energy consumed during the billing period
(lei / kWh) and the reservation price (lei / day).
Table 5: CR Tarif
Voltage level Reservation price – Energy price – lei/kWh
lei/day (EUR/kWh)
(EUR/day)
Low voltage (0-1 kV) 0,15 0,3119
(0,03) (0,07)
Medium voltage (1- 0,15 0,2425
110kV) (0,03) (0,05)

• CI tarrif:
- It has two components: subscription and electricity price.
- The subscription is calculated according to the number of days in the billing period.
Includes the reservation price and a daily energy quantity of 1 kWh. The amount of
electricity included in the subscription and not consumed is not reported.
Table 6: CI Tarif
Voltage level Subscription – lei/day Energy price – lei/kWh
(EUR/day) (EUR/kWh)
Low voltage (0-1 kV) 0,4310 0,3119
(0,09) (0,07)
Medium voltage (1- 0,3685 0,2425
110kV) (0,08) (0,05)

• CD tariff:
- The CD tariff monom type without reservation involves single-rate billing of all the
electricity consumed during the billing period. It is intended for household customers
who do not want to apply a reservation fee for their own electricity consumption.
- It consists of a single price for electricity that includes fixed costs regardless of the
amount of electricity consumed. No booking fee is charged.


Table 7: CD Tarif
Voltage level Energy price – lei/kWh
(EUR/kWh)
Low voltage (0-1 kV) 0,4161
(0,09)
Medium voltage (1-110kV) 0,3235
(0,07)

• CR2 tariff
- The CR2 tariff monom type with reservation is advantageous if the share of electricity
consumption in night and weekend hours exceeds 55% of the total consumption.
- It is composed of:
• reservation price (lei / day), which is intended to cover fixed expenses;
• day energy price, which applies Monday to Friday between 7.00 and
22.00;
• night energy price, which applies to consumption during Monday to
Friday between 22.00-7.00 and weekends between Friday 22.00 and
Monday 7.00.
Table 8: CR2 Tariff

Voltage level Reservation price Day energy Night energy price
lei/day price lei/kWh
(EUR/day) lei/kWh (EUR/kWh)
(EUR/kWh)
Low voltage (0-1 0,15 0,4970 0,1616
kV) (0,03) (0,11) (0,04)
Medium voltage 0,15 0,3928 0,1271
(1-110kV) (0,03) (0,09) (0,03)

• CR3 tariff
- The CR3 tariff monom type with reservation differentiated on 3 hour zones is
advantageous if peak hours consumption can be avoided and if the share of electricity
consumption is shifted to night and weekends.
- It is composed of:
• reservation price (lei / day), which is intended to cover fixed expenses;
• a price of electricity consumed in the peak hours area, which applies to
summer season consumption between 8.00 - 9.00 (April 1 - September
30) and in the winter season between 8.00 - 10.00 and 19.00 - 22.00
(October 1 - 31st of March);
• a price of electricity consumed during empty hours, which is applied to
the consumption during the summer season between 0.00 - 08.00 and
21.00 - 0.00 and on Friday from 21.00 until Monday at 8.00, and in the
winter season, in the interval hours 0.00 - 08.00 and 22.00 - 0.00 and
Friday from 22.00 until Monday at 8.00;
• a price of electricity consumed in the normal area, summer between 9.00
- 21.00 and the winter season, between 10.00 - 19.00.

Table 9: CR3 Tariff

Voltage level Reservation Energy price Energy price Energy price
price lei/day peak hours normal area empty hours
(EUR/day) area lei/kWh area
lei/kWh (EUR/kWh) lei/kWh
(EUR/kWh) (EUR/kWh)
Low voltage 0,15 0,7049 0,3928 0,1847
(0-1 kV) (0,03) (0,15) (0,09) (0,04)
Medium 0,15 0,5546 0,3119 0,1387
voltage (1- (0,03) (0,12) (0,07) (0,03)
110kV)

• CTP tariff
- The CTP tariff monom type is intended for low-voltage domestic consumers and is
divided into three power-supply contracts (up to 3 kW, between 3 and 6 kW and over
6 kW).
- It is advantageous for those household consumers who balance their electricity
consumption without exceeding the contracted power.
- Exceeding contracted power leads to disconnection of the customer by triggering the
automatic switch, adjusted to the value of the load corresponding to the requested
power.
- The reconnection is carried out by the consumer and is conditional upon discharge of
the surplus load from the power supply.
- The tariff consists of two components: The price of energy consumed during the billing
period (lei/kWh) and the reservation price (lei/day).
Table 10: CTP Tariff

Voltage level Power steps Reservation price Energy price
kW lei/day lei/kWh
(EUR/day) (EUR/kWh)
Low voltage (0-1 up to 3 kW 0,1500 0,2543
kV) (0,03) (0,06)
Low voltage (0-1 3-6 kW 0,3235 0,2543
kV) (0,07) (0,06)
Low voltage (0-1 over 6 kW 0,4853 0,2543
kV) (0,11) (0,06)

• CS tariff (social tariff)
- In case of applying the social tariff, consumption from the billing period is broken
down into three successive installments:
• The quantity corresponding to the first step is calculated as 2 kWh/day
for each day of the billing period and is the lowest price.
• The quantity corresponding to the second step shall be calculated as 1
KWh/ day additional to the first installment for each day of the billing
period and shall be higher than the one applicable to the first step.
• The amount corresponding to the third step is not limited, but the price
applied to it is superior to all the prices for the other tariffs.
- Due to this calculation, the social tariff is advantageous only for customers with an
average monthly electricity consumption of up to 100 kWh. If the average monthly
consumption of a customer exceeds 100 kWh, the social tariff is no longer
advantageous, and it is recommended to choose another type of tariff from the

regulated ones for the household consumers.
Table 11: CS Tariff

Voltage level Step 2 kWh/day Step 2-3 Step over
kW/day 3kWh/day
Low voltage (0-1 0,1734 0,4161 0,8202
kV) (0,04) (0,09) (0,18)

2. The competitive market has 3 tariffs:
- STABIL: STABIL 30 (payment deadline 30 days) or STABIL 45 (payment deadline 45 days)
Table 12: STABIL Tariff
STABIL30 STABIL45
LV MV LV MV
Operator
lei/kWh lei/kWh lei/kWh lei/kWh
(EUR/kWh) (EUR/kWh) (EUR/kWh) (EUR/kWh)
Societatea de Distribuție a Energiei 0,48460 0,37525 0,48490 0,37555
Electrice Muntenia Nord
(0,11) (0,08) (0,11) (0,08)
Electrice Transilvania Nord
(0,11) (0,09) (0,11) (0,09)
Electrice Transilvania Sud
(0,11) (0,09) (0,11) (0,09)
Distribuție Energie Oltenia 0,50264 0,39067 0,50294 0,39097
(0,11) (0,09) (0,11) (0,09)
Delgaz Grid 0,50790 0,38500 0,50820 0,38530
(0,11) (0,08) (0,11) (0,08)
ENEL Distribuție Banat 0,48153 0,37821 0,48183 0,37851
(0,11) (0,08) (0,11) (0,08)
ENEL Distribuție Dobrogea 0,49963 0,38089 0,49993 0,38119
(0,11) (0,08) (0,11) (0,08)
ENEL Distribuție Muntenia 0,46829 0,36419 0,46859 0,36449
(0,1) (0,08) (0,10) (0,08)
LV- Low Voltage

MV – Medium Voltage
- MOBIL: MOBIL 30 (payment deadline 30 days) or MOBIL 45 (payment deadline 45 days)


Table 13: MOBIL Tariff
MOBIL30 MOBIL45 Reservatio

n price
LV MV LV MV
Operator
lei/kWh lei/kWh lei/kWh lei/kWh lei/day
(EUR/kWh) (EUR/kWh) (EUR/kWh) (EUR/kWh) (EUR/day)
Societatea de Distribuție a 0,42722 0,31787 0,42752 0,31817
Energiei Electrice Muntenia
(0,09) (0,07) (0,09) (0,07)
Nord

Energiei Electrice Transilvania
(0,09) (0,07) (0,09) (0,07)
Nord


Energiei Electrice Transilvania
(0,1) (0,07) (0,1) (0,07)
Sud
Distribuție Energie Oltenia 0,44526 0,33329 0,44556 0,33359
(0,1) (0,07) (0,1) (0,07)
Delgaz Grid 0,45052 0,32762 0,45082 0,32792 0,22
(0,1) (0,07) (0,1) (0,07) (0,05)
ENEL Distribuție Banat 0,42415 0,32083 0,42445 0,32113
(0,09) (0,07) (0,09) (0,07)
ENEL Distribuție Dobrogea 0,44225 0,32351 0,44255 0,32381
(0,1) (0,07) (0,1) (0,07)
ENEL Distribuție Muntenia 0,41091 0,30681 0,41121 0,30711
(0,09) (0,07) (0,09) (0,07)

- TIME: TIME 30 (payment deadline 30 days) or TIME 45 (payment deadline 45 days)
Table 14: TIME Tariff
TIME30 TIME45 Reserv

ation
LV MV LV MV price
Operator Day Night Day Night Day Night Day Night
lei/kWh lei/kWh lei/kWh lei/kWh lei/kWh lei/kWh lei/kWh lei/kWh lei/da
y
(EUR/k (EUR/k (EUR/k (EUR/k (EUR/k (EUR/k (EUR/k (EUR/k
Wh) Wh) Wh) Wh) Wh) Wh) Wh) Wh) (EUR/
day)
Societatea de 0,45982 0,37407 0,35047 0,26472 0,46016 0,37431 0,35081 0,26496
Distribuție a
(0,1) (0,08) (0,08) (0,06) (0,1) (0,08) (0,08) (0,06)
Energiei Electrice
Muntenia Nord
Societatea de 0,45972 0,37397 0,36299 0,27724 0,46006 0,37421 0,36333 0,27748
Distribuție a
(0,1) (0,08) (0,08) (0,06) (0,1) (0,08) (0,08) (0,06)
Energiei Electrice
Transilvania Nord
Societatea de 0,46738 0,38163 0,36365 0,27790 0,46772 0,38187 0,36399 0,27814

Distribuție a
(0,1) (0,08) (0,08) (0,06) (0,1) (0,08) (0,08) (0,06)
Energiei Electrice
Transilvania Sud
Distribuție 0,47786 0,39211 0,36589 0,28014 0,47820 0,39235 0,36623 0,28038 0,22
Energie Oltenia
(0,11) (0,09) (0,08) (0,06) (0,11) (0,09) (0,08) (0,06) (0,05)
Delgaz Grid 0,48312 0,39737 0,36022 0,27447 0,48346 0,39761 0,36056 0,27471
(0,11) (0,09) (0,08) (0,06) (0,11) (0,09) (0,08) (0,06)
ENEL Distribuție 0,45675 0,37100 0,35343 0,26768 0,45709 0,37124 0,35377 0,26792
Banat
(0,1) (0,08) (0,08) (0,06) (0,1) (0,08) (0,08) (0,06)
Dobrogea
(0,1) (0,09) (0,08) (0,06) (0,1) (0,08) (0,08) (0,06)
Muntenia
(0,1) (0,08) (0,07) (0,06) (0,1) (0,08) (0,07) (0,06)
Day - day energy price (Monday to Friday between 7.00 and 22.00)
Night- night energy price (Monday to Friday between 22.00-7.00 and weekends - between Friday
22.00 and Monday 7.00)
Average Exchange Rate at the date of this report: 1EUR = 4,6 lei
Under the legislation, the bill will additionally include the contribution for high-efficiency
cogeneration, the value of green certificates, excise duty and VAT.

3. BUSINESS MODEL FRAMEWORK

The business model is structured in two main parts. In the first, we proceeded to carry out a support
analysis through the use of a questionnaire addressed to end users. In the second, after having
defined the main revenues of Flexmeter and some assumptions, the business plan of the Flexmeter
company was prepared, in order to evaluate the economic sustainability of the company.
SUPPORTING DATA
The objective of the questionnaire is to investigate the potential interest of the services offered by
Flexmeter, in relation to the consumption and information habits of a sample of end users. The
compilation of the questionnaire, enclosed, made it possible to better understand how to use the
potential of this new technology both from an environmental point of view and for maximizing
potential economic benefits for all the actors involved: users, suppliers, distributors and producers
of electricity or of electrical equipment.
3.1.1. Analysis of questionnaires

From the analysis of the questionnaires submitted to a final sample of 537 people (sample of
students; researchers, professors, technical staff of School of Management and Economic and
Politecnico of Turin; Young Entrepreneurs Group of Turin) it is possible to detect the following
evidences. First, the age of the respondents is so structured.

Figure 3: Survey – Users age
Approximately 45% of respondents have a degree while about 33% have a master or Ph.D as shown
in Figure 3. The composition of the family unit is quite heterogeneous and, on average, more than
70% of respondents pay a bi-monthly electricity bill of between 20 euro and 100 euro (see Figure
4).

Figure 4: Average amount of bi-monthly electricity bill
The information that consumer checks in electricity bill are potentially many, however consumers
tend to look predominantly the “total amount due” or “total amount due and date of payment”. In
particular, the most consulted information in electricity bill the one reported in Figure 5:

Figure 5: Most consulted information in electricity bill
With reference to the information contained in the bill, the results are very conflicting because
about 35% believe that such information is sufficient, 33% do not, while the remainder does not
have an idea about it. However, almost half of respondents would find very interesting to receive
information on the breakdown of electricity consumption by type of household appliance. See
Figure 6.

Figure 6: Level of interest about having information on the breakdown of electricity
consumption by type of household appliance (5 = very interesting and 1 = absolutely useless)
Furthermore, about 83% would be very interested in receiving a service to analyze their energy
consumption, with related proposals for optimizing consumption. 78% of respondents would also
be interested in an energy consumption analysis service aimed at assessing the economic
advantage of replacing certain household appliances and to know the potentially savings obtainable
on the electricity bill by such replacements. Despite the strong interest in such services, only 13%
would be willing to pay a price and also 43% would be willing to pay, but only for a one-off charge.
See Figure 7.

Figure 7: Availability to pay for energy consumption analysis services
In particular, about 76% of respondents (for 37,70% lower than 10 euro and for 38% between 10
euro and 20 euro) would be willing to pay up to a maximum of 20 euro on an annual basis for these
services. See Figure 8.

Figure 8: Maximum amount of euro that the consumer would be willing annually to pay for
energy consumption analysis services.
In addition, the analysis of the questionnaires showed that if the electricity supplier were to
propose a discount on the bill in exchange for limiting the use of some appliances at certain pre-
specific times, about 77% a would be favorable, to condition that the discount is between 10% and
20% for month of the electricity bill (for 38,60% between 10% and 15% and for 38,40% just about
a 20% for month). See Figure 9.

Figure 9: Discount level for month (pre specified times)
However, only 43% of respondents would be willing to accept a discount on the bill in exchange for
turning on or turning off certain appliances on special occasions and due to distributor needs. For
more than half of respondents this discount should be at least 20% per month and, in particular,
for about 35% ought to be more than 30% for month. More details in Figure 10.
34,8%
32,8%
35,0%
30,0%
25,0%
18,0%
20,0%
15,0%
10,2%
10,0%
4,3%
5,0%
0,0%
Between 1% and Between 5% and Between 10% Approximately a More than 30%
5% for month 10% for month and 15% for 20% for month for month
month

Figure 10: Discount level for month (special occasion for distributor needs)
Among the household appliances investigated (Washing machine, dryer, dishwasher, conditioner,
traditional oven, microwave oven, hair dryer, television and computer), consumers would be willing
to accept limitation of use, on an ongoing basis, in certain time slots (Figure 11) and/or the
switching on/off at the request of the electricity supplier with minimum notice (Figure 12), mainly
for the washing machine and the dishwasher.

Figure 11: Limitation of use, on an ongoing basis, in certain time slots

Figure 12: Switching on/off at the request of the electricity supplier with minimum notice
FLEXMETER REVENUES
Based on the use cases defined and developed during Flexmeter, we assumed that almost all use
cases will be considered by the Company as revenues. Given the applications of each use cases, the
involved stakeholder and energy actors, we also imagined that Flexmeter Company will have
different type of clients, that is for example energy retailers, Aggregators, DSOs, multi-utility for
other commodities services.
Given the assumptions of the business plan regarding the number of Clients during the model time
frame, the possibility to serve different actors of the Energy market/world on a European base, will
grant several benefit to the sustainability of the assumptions, but most important of the revenues:
1. The transnational legislation frame secured by the European Commission that, especially with
the “Energy Union” and other legislation initiatives (e.g. the “Winter Package”), will hopefully
grant an homogeneity of market rules in a short to mid period;
2. The possibility to address different “business”, assets and type of Company in a B2B2C scheme
(at least in a first phase of the Company life).

The revenues were divided as follows:

• User empowerment services electricity without devices;
• User empowerment services electricity – NILM;
• User empowerment services district heating without devices;
• User empowerment services water with devices;
• Outage detection;
• NILM for secondary substation;
• Dynamic storage management;
• Storage integration.
For each revenue, it has been identified (for utilities, customers, substations) “Upfront fee” and/or
“client fee” and/or “Hardware fee” and/or “Annual, maintenance” and/or “Una tantum cost”.
In particular, referring to every type of revenue, we have considered the following aspects, always
considering a B2B2C scheme.

3.2.1. Residential Users
All the following residential users’ services are intended in a B2B2C scheme and are usually based
on an upfront fee (intended as a payment for the personalization for each company/client) + a
clients’ fee, based on the number of final clients receiving the service.

User empowerment services electricity without devices
The service is based on monthly/billing data already available at Retailer side: data are aggregated
or used to produce energy empowering services and statistical analysis.
For reference only, as out of scope of this business model, the provisioning of such services to final
residential clients should probably be for free on the whole client base of a Retailer Company.
For this type of revenue, we have considered, for the B2B part:
• An upfront fee of 10,000€;
• A client fee of 3€.
User empowerment services district heating without devices
The service will be based on the same assumption as the revenue 1. The main differences, at least
taking into account the project pilots, is that district heating is always a building service, while
electricity is a home/apartment provisioning.
For this type of revenue, we have considered:
• A client fee of 3€.
User empowerment services water without devices
The service will be based on the same assumption as the revenue 1. The main differences, at least
taking into account the project pilots, is that potable water is always a building service, while
electricity is a home/apartment provisioning.
• A client fee of 0,50€.

Further details on user empowerment services can be found in D.2.3.
NILM user side
The service is based on the provisioning of the necessary hardware (1 Hz-frequency post fiscal smart
meter) and software/app to manage the disaggregation of electrical load at residential level. It
could be considered and improvement of the previous service and, given the current regulation
that is not yet considering the participation of residential demand to electric market in most
European States, a future possibility for the management of aggregated demand /consumers once
actively participating in the Market . having said that, the value proposition of the service in the
first years of the business plan will be the possibility to provide residential clients with energy
footprint service, home devices management and energy related alerts.
The B2C, not considered in this business plan, could be on a monthly/yearly fee base (giving the
hardware for free) or a mix of upfront and periodic fee. More details in D.4.2.
• A client fee of 5€;
• An hardware fee of 50€ (for the years 2018-2019-2020) and 35€ (for years 2021-2022-
2022-2023-2024-2025-2026).

3.2.2. Distribution System Operators

The following services/revenues are intended for electrical DSOs. They are intended as always-
running services (outage detections, NIALM in secondary substations, dynamic storage
management) while other are studies/reports (intended as una tantum services).
The proposition of the following service is a B2B one, as the final clients are not directly involved
but of course will benefit from an improvement of electrical network management and reliability.
Outage detection
The objective of this service is to provide DSO with a real time tool able to detect outages on the
network and involved customers, in such a way to reduce the time required for network
reconfiguration. More details in D3.2.
• An annual maintenance of 5,000€.

NIALM for secondary substation
The objective of this service is to provide DSO with a disaggregation tool able to detect energy
patterns on DSO networks and automatically evaluate faults or overloads.
• A client fee of 10€;
• A hardware fee of 40€.

Dynamic storage management
The tool will help DSO to manage storage systems on its network in real time, defining charging and
discharging strategies on the basis of the grid operating conditions. More details in D4.4.
• An annual maintenance of 5,000€.

Storage integration
The storage integration algorithm is used identify the possible location of new electrical energy
storage in specific grid areas and to determine the opportunity, costs and benefits of adding it. The
details about the procedure are detailed in the first part of D3.2.
• An una tantum cost of 80,000€.

3.2.3. Energy Aggregators

During the project the consortium have spent time in defining the role and scope of the Energy
Aggregator in the residential sector. The choice to focus only on the residential sector is related to
the aim of the project of developing services and platform for multi-vector smart-metering of
residential prosumers. The Energy Aggregator in our vision is an independent entity that enables
the possibility for residential customers (Prosumer & Consumer) to participate directly in the
Electricity Markets. In particular by enabling the possibility to participate to Balancing Markets with
Demand Response events and in the Day-Ahead/Intra-day with Demand-Side-Management events.
The analysis of the regulatory framework of the Electricity Markets of states of the consortium and
in general European markets have revealed criticalities in the development of a business model and
plan for the Energy Aggregator as defined by the consortium. The main criticalities are reported in
the followings:
• The markets in EU are not harmonized, every country have it’s own regulatory framework
with different market barriers
• In the majority of EU states the regulatory framework do not present the role of
independent aggregators. Only France and Switzerland have a clear framework for
independent energy aggregators. Other countries such as UK, Nordic countries, Germany
and Italy are now starting the discussion on the role of inidpendent energy aggregators.
• In general market structures do not encourage the use of flexible resources. In those days
only few pilot projects have been developed with no clear market structure.
• Wholesale Markets are not open to Energy Aggregators, or if they are the requirement can
not be addressed with residential customers.

From our knowledge the only available business models for energy aggregators are related to the
energy aggregators that engage commercial and industrial customers. With the only exception of
few companies in France an UK, were the regulatory framework is more defined, are starting to
aggregate residential customers to offer appliances home management.

Due to the limitations and criticalities in defining a business model for a Energy aggregator in both
consortium countries and at the EU level we decide to not consider it in revenues streams of the
business plan of the Flexmeter company. This because in absence of a clear vision of the regulatory
framework the assumptions on market values and regulations, that we should have done, have led
to unrealistic numbers in both plan and model.
ASSUMPTION
"Flexmeter S.p.a." is an Italian Company based in Turin (Italy). The duration of the Company is
established until 2068. The equity is 500,000 euro. The Company follows the provisions of articles
2325- 2451 of the Italian Civil Code.
The present business plan summarizes, from a strictly economic-financial point of view, the
contents and characteristics of the "Flexmeter" business idea.
From a fiscal point of view, the Flexmeter’s business plan has been prepared considering the Italian
law. In particular, referring to the:
• Taxes - The taxes payed by the Company are the Corporate Income Tax (IRES) and the
Regional Tax on Production Activities (IRAP)2. For the Corporate Income Tax the rate is
equal to 24% and the Regional Tax on Production Activities is equal to 3,90%. In Italy, IRES
applies to the total net income of a company, determined according to the provisions of

2
IRES: Imposta sul reddito delle società; IRAP: Imposta regionale sulle attività produttive.
Italian law (D.P.R. 917/1986). For limited companies, IRAP is calculated on the difference
between the value and costs of production, with the exclusion of costs of staff, write-
downs, provisions and other specific costs (D.Lgs. 446/1997).
• VAT – In Italy, the VAT (Value added tax) for the utilities (e.g. electricity and gas) is equal
for the domestic use to 22% and for the other use to 10%.
From a structural point of view, the business plan considers a horizon of explicit prediction of nine-
year economic results (from 2018 to 2026).
We have assumed for utilities, customers and substations the following hypotheses.
Referring to the utilities, the number analyzed for Italy, Sweden and European Union are divided
for expected period (1st year, 2nd year, 3rd year, higher than 3rd year) and for the average
customers for utility that utilizing NIALM (we have hypnotized for Italy and Sweden: 750, 5,000,
40,000, 90,000, and for EU: 1,000, 10,000, 100,000, 200,000).
The assumptions are reported in Table 1. See the Table 16 for the single revenue in each year
analysed.
:

Table 15: Assumptions
2018 2019 2020 2021 2022 2023 2024 2025 2026

Average customers for
Total number of Utilities utility utilizing NIALM 2 3 5 7 9 10 11 12 13
Italy and Sweden 2 3 4 5 6 6 6 6 6

1st year 750 2 1 1 1 - - - - -
2nd year 5.000 - 2 1 1 1 - - - -
3rd year 40.000 - - 2 1 1 1 - - -
>3rd year 90.000 - - - 2 4 5 6 6 6
EU - - 1 2 3 4 5 6 7
1st year 1.000 - - 1 1 1 1 1 1 1
2nd year 10.000 - - - 1 1 1 1 1 1
3rd year 100.000 - - - - 1 1 1 1 1
>3rd year 200.000 - - - - - 1 2 3 4
Table 16: Revenues

Revenues stream Type 2018 2019 2020 2021 2022 2023 2024 2025 2026
Upfront fee € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00
Client fee € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00
Upfront fee € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00
User empowerment services electricity -NIALM Client fee € 5,00 € 5,00 € 5,00 € 5,00 € 5,00 € 5,00 € 5,00 € 5,00 € 5,00
HW fee € 50,00 € 50,00 € 50,00 € 35,00 € 35,00 € 35,00 € 35,00 € 35,00 € 35,00
Upfront fee € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00
Client fee € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00 € 3,00
Upfront fee € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00
User empowerment services water with devices
Client fee € 0,50 € 0,50 € 0,50 € 0,50 € 0,50 € 0,50 € 0,50 € 0,50 € 0,50
Upfront fee € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00
Outage detection
annaul maintenance € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00
Upfront fee € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00
NIALM for secondary substation annual fee € 10,00 € 10,00 € 10,00 € 10,00 € 10,00 € 10,00 € 10,00 € 10,00 € 10,00
HW fee € 40,00 € 40,00 € 40,00 € 40,00 € 40,00 € 40,00 € 40,00 € 40,00 € 40,00
Upfront fee € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00
annaul maintenance € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00
Storage integration Una tantum cost € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00
Table 17: Indirect Customers
2018 2019 2020 2021 2022 2023 2024 2025 2026
Total number of indirect clients 1.500 10.750 86.750 236.750 516.000 801.000 1.051.000 1.251.000 1.451.000
Italy and Sweden 1.500 10.750 85.750 225.750 405.000 490.000 540.000 540.000 540.000
EU - - 1.000 11.000 111.000 311.000 511.000 711.000 911.000

Referring to the indirect customers, the total number analyzed is reported in Table 17, divided for
Italy and Sweden, and other countries of European Union:
Finally, referring to the substations, we have assumed, as in Turin, that it is a substation for every
180 users.
The main costs that we considered for the type of activity carried out by the Company were as
follows.
• Cost of raw materials, consumables and merchandise;
• Cost of service;
• Cost of staff ;
• Other operating expenses.
In particular, we have considered for each type of cost some points of view.

Cost of raw materials, consumables and merchandise
This type of cost costs is mainly related to the procurement costs of the devices.

Cost of service
For this type of cost, we have considered:
• Utilities (e.g. electricity, water and gas).
• Travel and accommodation: represents the 1,2% of the total revenue in each year.
• Tax consulting and auditing: with a growth trend, but proportionally higher the first year
due to initial tax consultant.
• Advertising and promotion: with a growth trend, but proportionately higher in the first
year to better advertise the company's services.
• Insurance: represents the 0,2% of the total revenue in each year.
• Cloud maintenance: represents the 0,2% for total customers in each year.
• Legal advisory: higher in the first year for the establishment costs of the company.
• Building rental: 2,200€ for month.
• Warehouse rental: 2,000€ for month (until 2021), 2,500€ for month (since 2022) due to
higher volumes.

The total costs of services for each year are summarized in Table 18. The total number of employees
considered and the total amount of cost of staff are reported in Table 19. The total costs of staff
for each year are summarized in Table 20:

Cost of staff
For this type of cost, we have considered the following types of employees:
• Research & Design (annual cost: 39,000€);
• Marketing and sales (annual cost: 40,000€);
• Administrators/managers (annual cost: 68,000€);
• Call center (annual cost: 23,000€);
• Logistics (annual cost: 30,000€);
• Information Technology (annual cost: 38,000€);
• Administrative (annual cost: 35,000€).
Table 18: Costs of services
2018 2019 2020 2021 2022 2023 2024
Number of employees R&D 2 2 3 3 4 4 5
Number of employees Marketing and Sales 2 2 3 3 4 4 5
Number of administrators/managers 1 1 1 1 2 2 2
Number of employees Call center 2 3 3 4 4 5 5
Number of employees Logistics 1 2 2 2 2 3 3
Number of employees IT 2 2 2 3 3 4 4
Number of administrative 1 1 1 2 2 2 3
Total number of staff 11 13 15 18 21 24 27
Total cost of staff € 413.000 € 466.000 € 545.000 € 641.000 € 788.000 € 879.000 € 993.000
Table 19: Number of Employees and Costs
2018 2019 2020 2021 2022 2023 2024 2025 2026
Cost of services
Utilities € 5.520 € 5.520 € 5.520 € 5.520 € 5.520 € 5.520 € 5.520 € 5.520 € 5.520
Travel and accommodation € 7.341 € 9.475 € 23.305 € 45.800 € 97.368 € 149.078 € 146.434 € 145.111 € 168.195
Tax consulting and auditing € 33.500 € 25.000 € 25.000 € 28.000 € 28.000 € 31.000 € 31.000 € 34.000 € 34.000
Advertising and promotion € 13.500 € 13.500 € 14.000 € 14.000 € 15.000 € 15.000 € 18.000 € 21.000 € 25.000
Insurance € 1.224 € 1.895 € 11.652 € 22.900 € 48.684 € 74.539 € 97.622 € 116.089 € 134.556
Cloud maintenance € 300 € 2.150 € 17.350 € 47.350 € 103.200 € 160.200 € 210.200 € 250.200 € 290.200
Legal advisory € 22.000 € 4.000 € 3.000 € 3.000 € 3.000 € 3.000 € 3.000 € 3.000 € 3.000
Building rental € 26.400 € 26.400 € 26.400 € 26.400 € 26.400 € 26.400 € 26.400 € 26.400 € 26.400
Warehouse rental € 24.000 € 24.000 € 24.000 € 24.000 € 24.000 € 33.600 € 33.600 € 33.600 € 33.600
Total cost of service € 133.785 € 111.941 € 150.227 € 216.970 € 351.172 € 498.337 € 571.776 € 634.920 € 720.470
Table 20: Total Costs for each year
2018 2019 2020 2021 2022 2023 2024 2025 2026

Cost of staff
R&D € 78.000 € 78.000 € 117.000 € 117.000 € 156.000 € 156.000 € 195.000 € 234.000 € 273.000
Marketing and sales € 80.000 € 80.000 € 120.000 € 120.000 € 160.000 € 160.000 € 200.000 € 200.000 € 200.000
Administrators/managers € 68.000 € 68.000 € 68.000 € 68.000 € 136.000 € 136.000 € 136.000 € 136.000 € 136.000
Call center € 46.000 € 69.000 € 69.000 € 92.000 € 92.000 € 115.000 € 115.000 € 115.000 € 115.000
Logistics € 30.000 € 60.000 € 60.000 € 60.000 € 60.000 € 90.000 € 90.000 € 90.000 € 90.000
IT € 76.000 € 76.000 € 76.000 € 114.000 € 114.000 € 152.000 € 152.000 € 190.000 € 190.000
Administrative € 35.000 € 35.000 € 35.000 € 70.000 € 70.000 € 70.000 € 105.000 € 70.000 € 70.000
Total cost of staff € 413.000 € 466.000 € 545.000 € 641.000 € 788.000 € 879.000 € 993.000 € 1.035.000 € 1.074.000
BUSINESS PLAN
This part of the business plan is structured in an expected Profit and Loss Statement, in order to
better highlights the capacity to produce revenues and profits during the year analysed. In
particular, the revenues are divided, as previously explained, in:
• User empowerment services electricity without devices;
• User empowerment services electricity – NILM;
• User empowerment services district heating without devices;
• User empowerment services water with devices;
• Outage detection;
• NILM for secondary substation;
• Dynamic storage management;
• Storage integration.
The costs are divided in:
• Cost of raw materials, consumables and merchandise;
• Cost of services;
• Cost of staff ;
• Other operating expenses.

The Flexmeter’s Business Plan is reported in Table 21 (from 2018 to 2026, value in Euro):
From the Business Plan, it is possible to observe that the company has in each year considered an
increase in turnover and in EBITDA (Earnings before interests, taxes, depreciations and
amortizations) over the years analysed. We report only a loss for the first two years (2018 and
2019), due to the higher development costs of the company compared to revenues. We suppose
that the retained losses for the firsts two years will be largely compensated by the future profits
Table 21: Business Plan
Profit & Loss Statement 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E
Revenues
Utilities revenues
Upfront fees € 20.000,00 € 10.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00
Variable fees (for customer) € 4.500,00 € 32.250,00 € 260.250,00 € 710.250,00 € 1.548.000,00 € 2.403.000,00 € 3.153.000,00 € 3.753.000,00 € 4.353.000,00
User empowerment services electricity - NIALM
Upfront fees € 40.000,00 € 20.000,00 € 40.000,00 € 40.000,00 € 40.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 20.000,00
Variable fees (for customer) € 7.500,00 € 53.750,00 € 433.750,00 € 1.183.750,00 € 2.580.000,00 € 4.005.000,00 € 5.255.000,00 € 6.255.000,00 € 7.255.000,00
Variable fees HDW (for customer) € 75.000,00 € 537.500,00 € 4.337.500,00 € 8.286.250,00 € 18.060.000,00 € 28.035.000,00 € 36.785.000,00 € 43.785.000,00 € 50.785.000,00
Upfront fees € 20.000,00 € 10.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00
Variable fees (for customer) € 2.250,00 € 16.125,00 € 130.125,00 € 355.125,00 € 774.000,00 € 1.201.500,00 € 1.576.500,00 € 1.876.500,00 € 2.176.500,00
User empowerment services water with devices
Upfront fees € 20.000,00 € 10.000,00 € 20.000,00 € 20.000,00 € 20.000,00 € 10.000,00 € 10.000,00 € 10.000,00 € 10.000,00
Variable fees (for customer) € 750,00 € 5.375,00 € 43.375,00 € 118.375,00 € 258.000,00 € 400.500,00 € 525.500,00 € 625.500,00 € 725.500,00
Outage detection
Upfront fees € 100.000,00 € 50.000,00 € 100.000,00 € 100.000,00 € 100.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00
Annual maitenance fees € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00
NIALM for secondary substation
Upfront fees € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00
Annual fee (for substation) € 83,33 € 597,22 € 4.819,44 € 13.152,78 € 28.666,67 € 44.500,00 € 58.388,89 € 69.500,00 € 80.611,11
Variable fees HDW (for substation) € 1.666,67 € 11.944,44 € 96.388,89 € 263.055,56 € 573.333,33 € 890.000,00 € 1.167.777,78 € 1.390.000,00 € 1.612.222,22
Other revenues
Upfront fees € 100.000,00 € 50.000,00 € 100.000,00 € 100.000,00 € 100.000,00 € 50.000,00 € 50.000,00 € 50.000,00 € 50.000,00
Annual maitenance fees (on number of utility) € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00 € 5.000,00
Storage integration (for utility) € 160.000,00 € 80.000,00 € 160.000,00 € 160.000,00 € 160.000,00 € 80.000,00 € 80.000,00 € 80.000,00 € 80.000,00
TOTAL REVENUES € 611.750,00 € 947.541,67 € 5.826.208,33 € 11.449.958,33 € 24.342.000,00 € 37.269.500,00 € 48.811.166,67 € 58.044.500,00 € 67.277.833,33
Operating costs
Cost of raw materials, consumables and merchandise € 61.333,33 € 439.555,56 € 3.547.111,11 € 6.839.444,44 € 14.906.666,67 € 23.140.000,00 € 30.362.222,22 € 36.140.000,00 € 41.917.777,78
Cost of services € 133.784,50 € 111.940,50 € 150.227,25 € 216.969,75 € 351.172,00 € 498.337,00 € 571.775,83 € 634.920,25 € 720.470,25
Cost of staff € 413.000,00 € 466.000,00 € 545.000,00 € 641.000,00 € 788.000,00 € 879.000,00 € 993.000,00 € 1.035.000,00 € 1.074.000,00
Other operationg expenses € 1.223,50 € 947,54 € 2.913,10 € 5.724,98 € 12.171,00 € 11.180,85 € 14.643,35 € 14.511,13 € 16.819,46
TOTAL OPERATING COSTS € 609.341,33 € 1.018.443,60 € 4.245.251,47 € 7.703.139,17 € 16.058.009,67 € 24.528.517,85 € 31.941.641,41 € 37.824.431,38 € 43.729.067,49
EBITDA € 2.408,67 -€ 70.901,93 € 1.580.956,87 € 3.746.819,16 € 8.283.990,33 € 12.740.982,15 € 16.869.525,26 € 20.220.068,63 € 23.548.765,85
Ammortisation € 3.000,00 € 2.400,00 € 1.800,00 € 1.200,00 € 600,00 € 2.000,00 € 1.500,00 € 1.000,00 € 500,00
EBIT -€ 591,33 -€ 73.301,93 € 1.579.156,87 € 3.745.619,16 € 8.283.390,33 € 12.738.982,15 € 16.868.025,26 € 20.219.068,63 € 23.548.265,85
Financial costs
Interests € 914,01 € 1.527,67 € 6.367,88 € 11.554,71 € 24.087,01 € 30.660,65 € 39.927,05 € 47.280,54 € 54.661,33
EBT -€ 1.505,35 -€ 74.829,60 € 1.572.788,99 € 3.734.064,45 € 8.259.303,32 € 12.708.321,50 € 16.828.098,21 € 20.171.788,09 € 23.493.604,51
Taxes € 16.083,94 € 15.315,22 € 461.839,77 € 1.070.026,75 € 2.341.797,90 € 3.588.457,02 € 4.744.906,05 € 5.681.485,15 € 6.611.852,17
NET PROFIT / LOSS -€ 17.589,28 -€ 90.144,82 € 1.110.949,22 € 2.664.037,71 € 5.917.505,42 € 9.119.864,48 € 12.083.192,16 € 14.490.302,94 € 16.881.752,34
of the company. From 2020, it is expected that the company will be able to generate significant
growth in profits, thanks two main elements. First of all, the ability to expand the number of
customers that utilize the Flexmeter’s service during the years (starting from Italy and Sweden to
other European countries, e.g. Romania). Secondly, the possibility to optimize some costs thanks
to the economies of scale.
The following two figures shows the trend of revenues-operating costs and the trend of
profits/losses during the years.

Figure 13: Revenues and operating costs from 2018 to 2026 (values in €)

Figure 14: profits/losses from 2018 to 2026 (values in €)

Based on our Business Plan, one of the most important ratio used to evaluate a firm’s operational
efficiency is the Return on Sales (ROS), which expresses the ratio between the company's operating
profits in relation to the profitability of the revenue stream. ROS is also known as a company’s
operating profit margin and this measure provides insight into how much profit is being produced
per euro of sales. See the following figure.


Figure 15: ROS from 2018 to 2026 (% values)

ROS is growing significantly in the expected years and this increasing indicates that Flexmeter is
rising more efficient with the passing years.
Based on expected Profit and loss statement, we can assert the Company has the ability to supports
its costs and to create value for its shareholders.
4. CONCLUSIONS
This document tried to define, under the idea of the creation of a Startup Company selling the
services developed in FLEXMETER, the main economic and financial assumptions of an industrial
exploitation of project results.
It was quite tricky to define a market value of the innovative services developed: the partners relied
on some public available benchmarks or feedbacks from the industrial partners.
Another important aspect to be considered in a commercial exploitation of project results, at least
at European level, is the differences in regulatory frameworks: this adds complexity to the
evaluation of clients’ bases but it also represents an opportunity to diversify the businesses and
possible revenue streams.

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Flexible smart metering for multiple energy vectors with

Project Duration 2015-01-01 – 2017-12-31 Type CP

WP no. Deliverable no. Lead participant

WP5 D5.1 POLITO

Business models for smart meters and retail market

Prepared by Andrea Acquaviva

Title Business models for smart maters and retail market

Target version V3.0

Current issue V3.0

Reviewer(s) All consortium

Approver(s) Andrea Acquaviva

Approval date 2018-01-28

Release date 2018-01-31

Distribution of the release

Distribution list All Consortium

Date Version Comments

ITALIAN ELECTRICITY MARKET .................................................................................................. 5

SUPPORTING DATA ................................................................................................................... 26

2. THEORETICAL BACKGROUND: REGULATORY FRAMEWORK AND

ITALIAN ELECTRICITY MARKET

2.1.1. The liberalization of the Italian electricity market

2.1.2. Institutional Actors

2.1.3. Organization of the electricity market

• the externality of the network.

2.1.4. Smart meter roll-out

2.1.5. Recent Changes in the Italian Balancing Market

SWEDISH ELECTRICITY MARKET

2.2.2. Market evolution

2.2.5. Demand flexibility

ROMANIAN ELECTRICITY MARKET

2.3.1. R&D investments in energy sector

Measure PPP Dollars – Current prices

Unit US Dollar, Millions

Year 2008 2009 2010 2011 2012 2013 2014

Business enterprise 29.635 50.462 35.002 No data

Government 26.808 22.508 14.98 30.336 9.064 29.98

Higher education 23.994 1.725 0.87 1.154 2.19 2.613

Private non-profit 0.043 .. 0.084

Total intramural 80.48 74.696 50.952

2.3.2. Emergent structures/companies in energy sector: ESCOs, aggregators,

2.3.3. Smart meter roll-out

SM type Customer type Customers With AMR With AMI/AMM

Electricity Large public non- 20,000 - -

Small and medium 600,000 - -

Total 9,000,000 ~75,000 ~15,300

Gas Non-residential 176,330 - -

Total 3,032,000 ~3,000

Heat Total 1,557,000 ~1,705 -

2.3.4. The R&D investment in energy industry in Romania

2.3.5. Energy prices

a) the bilateral contracts market;

Table 8: CR2 Tariff

Table 9: CR3 Tariff

Table 10: CTP Tariff

advantageous, and it is recommended to choose another type of tariff from the

Table 11: CS Tariff

LV- Low Voltage

MOBIL30 MOBIL45 Reservatio

TIME30 TIME45 Reserv

Societatea de 0,46738 0,38163 0,36365 0,27790 0,46772 0,38187 0,36399 0,27814

3. BUSINESS MODEL FRAMEWORK

3.1.1. Analysis of questionnaires