The electricity market is in the throes of change due to significant regulatory, societal and environmental developments, as well as technological progress. The guiding principle for this will be the transformation of traditional passive electricity networks into smart grids – and Europe needs to act fast or it will be overtaken by the US.

Every millionth of a second, the electricity grid has to balance out production and consumption. Now with the increasing share of renewable energies in the energy mix, changes in consumption patterns, a likely increase in consumption and the difficulty in constructing power lines, intelligent grid management has become a necessity.

Intelligent grids function bidirectionally, unlike the present unidirectional systems, and would cater to the growing demand on the part of users to become "consumers" in managing energy more efficiently and reducing CO 2 emissions.

Moreover, flow management is vital for integrating scattered and decentralised renewable energy (wind and solar) production to the grid. With smart grids, electricity would no longer flow from large central plants to passive consumers, but in directions adapted to the more complex flows of the future.

Smart grids are digital. Computers speed the exchange of information, and gather a greater amount of data and act on it, to improve grid management and customer service. More accurate network management is vital for handling the rising, but unpredictable, proportion of renewable energy. Computing systems will have to be adapted to the increase in amount of data gathered, and define protocols to allow numerous plants and equipment to communicate.

The first step to an intelligent distribution network is usually the installation of smart electricity meters. In 2003, the Swedish government made smart metering obligatory. By July 2009, approximately 6m were installed, providing households with better control of their consumption and accurate monthly billing.

A study by Capgemini in the 15 EU countries showed that if smart meters were installed on a voluntary basis they would save some 200 terawatt hours per month by 2020 – the residential consumption of Spain and Germany – and approximately 100m tons of CO 2 emissions.

However, the conditions for deploying smart grids have yet to be met. First, political courage is required to impose the inevitable increase in electricity prices to cover return on investment. Next, further research is needed, for instance in electricity storage and the technological and economic innovations necessary to minimise load. Lastly, standardised communications protocols are vital upstream and downstream for exchanging data between types of equipment on the network – for instance, enabling end-users' domestic appliances to communicate. The only possible scale for such action, especially for standardisation, would be at EU level. European countries must share financial and technological resources and work with regulators. The EU has mobilised considerable sums of money to this end but funds are managed in different EU programmes and on different national scales.

The US government has released $4.5bn for designing prototypes and improving technologies, and the US department of energy has set up working groups to study communications protocols.

If the EU doesn't move fast, US equipment makers will gain a double advantage: they will have tried-and-tested technology, and will be in a position to impose their standards.

Colette Lewiner is the international head of energy, utilities and chemicals at Capgemini

This story originally appeared in Le Monde

Colette Lewiner's title was corrected from "chemistry" on August 25