Following the inventory of Smart Grid projects carried out by the JRC in 2011, the goal of this report is to provide guidance and advice for conducting cost benefit analysis of Smart Grid projects. We present a step by step assessment framework based on the work performed by EPRI (Electric Power Research Institute) on cost-benefit analysis and provide methodological guidelines and best practices. Modifications to fit the European context have been proposed wherever necessary. This work draws on the existing collaboration between the European Commission (EC) and the US Department of Energy in the framework of the EU-US Energy Council.
A European Smart Grid project has been selected from the JRC catalogue and used as a case study to test and illustrate the proposed assessment framework. The analysis is supported by a thorough reference to existing literature on cost-benefit analysis and on concrete results of available cost-benefit analysis carried out on the field.
On the basis of this exercise, we provide guidelines to tailor assumptions to local conditions, to identify and monetize benefits and costs, and to perform sensitivity analysis of most critical variables. The report also discusses the identification of indirect benefits (externalities) and social impacts that can result out of the implementation of Smart Grid projects but that cannot be easily monetized and factored in the cost-benefit computation.