European Commission Releases Guidelines for Smart Grid Project Cost-Benefit Analyses

EC27 April 2012: The European Commission Directorate-General for Energy (DG-Energy) has released a report titled "Guidelines for Conducting a Cost-Benefit Analysis (CBA) of Smart Grid Projects." The report provides guidance for those conducting CBA of smart-grid projects and bases its step-by-step CBA framework on work conducted by the Electric Power Research Institute (EPRI). 

The report reviews cost-benefit literature and the policy background, defines boundary conditions and set parameters, and defines elements of cost-benefit analysis, sensitivity analysis, and qualitative impact analysis, which can be applied to smart grid projects. It concludes with guidelines for CBA assessments, which include: defining assumptions and setting critical parameters; reviewing and describing technologies, elements and goals of the project; mapping assets into functionalities; mapping functionalities onto benefits; establishing baselining; monetizing benefits and identifying beneficiaries; identifying and quantifying costs; comparing costs and benefits; performing sensitivity analyses; and complementing CBA with a qualitative impact analysis including externalities. The Report emphasizes the importance of tailoring assessments to local circumstances. [Publication: Guidelines for Conducting a Cost-Benefit Analysis of Smart Grid Projects]