Energy regulators in the EU have raised concerns that the slow rollout of smart meters is hindering the electricity system’s flexibility, according to Andreas Poullikas, chairman of the Cyprus Energy Regulatory Authority (Cera).
This delay, he pointed out, limits consumers’ access to dynamic pricing contracts and threatens the EU’s target of climate neutrality by 2050.
Poullikas mentioned that a recent report from the Agency for the Cooperation of Energy Regulators (ACER) indicated that nearly 75 per cent of EU households remain in fixed electricity contracts, restricting their participation in more adaptable pricing models.
Poullikas explained, “The slow implementation of smart metres remains a barrier to unlocking the flexibility of the EU electricity system.”
He added that regulators and Member States must now prioritise demand-side response frameworks, incentivise efficient grid use, and accelerate the rollout of smart metres to fully capitalise on the potential of the retail electricity market.
In 2023, the EU witnessed a 12-fold increase in negative wholesale electricity prices, driven by the rise in renewable electricity generation.
Poullikas also emphasised that managing the increasingly congested EU grid came at a cost of €4 billion. He noted that these figures underline the need for greater electricity market integration and demand-side flexibility, which will become ever more vital as the EU’s flexibility needs are expected to double by 2030.
Meeting these future demands will require increased storage capacity, more distributed generation, improved electricity interconnections, and enhanced demand-side response mechanisms.
At present, fixed-price contracts dominate the EU’s retail electricity market, insulating consumers from market volatility but often locking them into higher prices. Despite the potential savings from dynamic pricing, many consumers are not offered such alternatives.
Poullikas explained, “Consumers need the right knowledge, choices and tools to actively contribute to the efforts of the energy transition towards a climate-neutral EU.”
The report stresses the crucial role of smart metres in enabling dynamic contracts, which allow consumers to adjust their electricity usage in line with periods of higher renewable electricity production and lower prices.
However, the rollout of smart metres remains limited in ten Member States, preventing consumers from reaping the benefits of flexible pricing.
Poullikas pointed out that “The lack of dynamic and hybrid contracts limits the ability of consumers to adapt their electricity use to periods of higher renewable electricity production and correspondingly lower prices, limiting their participation in the energy transition.”
Even in countries where smart meters have been installed, he continued, dynamic pricing contracts for residential consumers remain sparse.
Poullikas explained that while not all consumers may wish to participate in demand-side flexibility, those who do can help stabilise the system, benefiting everyone.
He pointed out the need for regulators to introduce incentives encouraging consumers to adjust their electricity usage during periods of high renewable energy availability.
Regulators should also consider schemes that promote off-peak electricity usage, especially for households with high energy consumption. Poullikas noted that these initiatives should gradually be expanded to a wider range of consumers.
Vulnerable households, he added, should be supported by targeted social systems, ensuring they are not left behind in the energy transition.
ACER’s report calls on regulators and Member States to provide clear and accessible information on the benefits of flexible electricity contracts, particularly to industries, which have a significant role to play in reducing carbon emissions.
“Ensuring optimised electricity use will be critical in driving down emissions and fostering more cost-effective energy consumption across the EU,” Poullikas concluded.
