Segmentation of smart grids

The segmentation of smart grids (지능형전력망의 세분화/知能型電力網 細分化) refers to the strategy to enhance the efficiency, and reduce the cost of smart grid construction by means of segmentation of smart grids proposed by some specialists.

A smart grid is an electrical grid that uses information and communications technology (ICT) to gather and act on information, such as information about the behaviors of suppliers and consumers, in an automated fashion to improve the efficiency, reliability, economics, and sustainability of the production and distribution of electricity.

Key words
smart grid, market segmentation, electric power, consumption

Necessity for the Segmentation of Smart Grids
In view of the characteristics of electricity consumption, it is highly necessary to make a market segmentation of consumers of electric power on the basis of the smart grid governance.

Precisely speaking, the market segmentation could be realized based on the price elasticity of demand for electric power. But at the moment in Korea, such price elasticity cannot be the standard for the market segmentation because the current prices of electricity are far from the market conditions.

As a result, the market segmentation should be realized by the following criteria:
 * Are there great needs for advanced metering infrastructure (AMI or smart meter) and energy saving system (ESS) as well as effective incentives for installation?
 * Is it reasonable for the consumers of electric power to assume the installation costs of AMI?
 * Is it possible to separate the electric grid by the consumers on the basis of benefit-cost analysis?

It is advisable that smart meters should be installed step by step in view of the above-mentioned criteria. It depends on the classification of A, B and C group in view of the use pattern of electric power, the characteristics of needs, etc.

Take an example of factories (A), which show great demand for electric power, but have good merits for electricity peak reduction and cost down. They will be provided with partial subsidies in installing smart meters. But commercial buildings and shopping malls (B) consume electricity constantly during business hours and very positive to electricity peak reduction. On the other hand, high-rise apartments (C) consume more electric power at night and relatively effectless during the electricity peak time. Their (B&C) bills are eligible for securitization (ABS).

Residential houses (D) are in constant need for electric power. They (D) are very sensitive to privacy and electricity price pick-up. So gradual installation of smart meters with partial subsidies is desirable. Finally, hospitals and public/traffic facilities (E) are in need of electric power constantly regardless of price. They (E) are exceptional as a matter of fact.

Proposed Segmentation of Smart Grids

 * Source: Whon-il Park and Duk-chan Yoon, "Smart Grid Projects and Privacy Issues: Does Smart Grid Governance cure all?", Business Law Review Vol. 26, No. 2, Korea Business Law Association, June 30, 2012, pp. 279-280.