Stakeholder Workshop – WP 5
Electricity markets
and RES integration
DSO perspective
10.04.2015
Roberto Zangrandi
Special Adviser to EDSO
The voice of the industry
•  Helmar Rendez, Stromnetz Berlin/Vattenfall, Vorstand
Vorsitzender Vattenfall Europe
“In big metropolitan cities and regions the need of
energy is high; here we need good and better
integration between surrounding areas where the
generation lies and large distribution networks”
•  Richard Vidlicka, CEZ, Chairman of the Board
“Unregulated deployment of RES causing imbalance
between supply and demand – an easy message, but
that is the principal of the problems on the path to
integration between TSO and DSO roles”
Gathered at the 2015 Innogrid2020+ conference 2 The voice of the industry
Jan Peters, Enexis, Director of Asset Management and
Innovator
“DSO have a limited role, and this is the big issue.
DSO have anyway a big responsibility in the RES/
DRES integration and we must face this responsibility
without overdoing. Where – and if the market can
provide a solution – we should step back”
Pierre Mallet,ERDF, Innovation and technical strategy
Director
“We shall witness a large digital revolution, and
cooperation is needed to cope with such a revolution;
we have to innovate with the support of start-ups and
small enterprises where visionary innovation is quick”
Gathered at the 2015 Innogrid2020+ conference 3 EDSO discussion framework
ü Where new pressure is placed on the grid, such as connection of
more distributed renewables, network tariffs inevitably tend to rise
ü DSOs need more data to manage their grids, but also need to
increase cooperation with other network operators, be they other
DSOs or TSOs.
ü This becomes pivotal for the security of the system.
ü Adjusting the current regulatory framework is necessary to ensure
that quality of supply remains high for all customers and at an
affordable price.
ü These challenges across Europe do not call for an uniform
regulation, since DSO activities vary from one country to another
and depend on geographical conditions, population density, and
even climate: thus no “one-size-fits-all” model applies
ü Hence, a wide cooperation program is to be agreed even beyond
the current relationsbetween TSO and DSO
4 EDSO discussion framework
EDSO agrees with the three principles listed by CEER
q The DSO must run its business in a way which reflects the
reasonable expectations of network users and other
stakeholders
ü DSOs must strive to deliver the best service to all consumers
ü This translates into fewer and shorter outages
ü DSOs will continue to make efforts to further increase quality of
service
ü DSOs also explore new and innovative ways to improve current
practice as regards connection and access
ü DSOs are also actively contributing to creating a real internal market
by implementing new processes such as supplier switching in an
increasingly timely manner
5 EDSO discussion framework
q The DSO must act as a neutral market facilitator in
undertaking its core functions
ü DSOs facilitate economic activity by channelling electricity to
consumers and give transparent, non-discriminatory connection,
access and switching
ü DSOs collect metering data in order to enable suppliers to bill their
customers
ü With smart meters continued evolution, more data will be gathered
that will allow DSOs to better manage their networks
ü Data made available also in a non-discriminatory manner to market
players with the consumer’s consent, will allow new services and
technologies to flourish
ü DSOs must guarantee that wherever there is competitive market
activity that relies partly on the duty and functions of DSOs, a level
playing field must be in place. To this end, full implementation of the
Third Energy Package must be enforced where it has not.
6 EDSO discussion framework
q The DSO must act in the public interest, taking into account
impact of costs and benefits
ü  DSOs perform cost benefit analyses (CBAs) when developing their networks
to ensure that the solutions chosen are the most cost-efficient
ü  DSOs are willing to act in the public interest and must be supported in this
role by a coherent and stable regulatory framework that allows more costefficient options to be developed and tested, and for the application of new
solutions and models that prove economically and socially beneficial.
ü  This can mean fundamental changes to the way regulation allows grid
development and management to be funded, for example a move from
CAPEX to OPEX, but is also applicable to the models chosen for certain
activities.
7 The increasing complexity
ü The distribution networks are being challenged by current trends
ü The capacity of Distributed Renewable Energy Sources (DRES)
connected to the distribution network is increasing, generating a
“prosumer dilemma” impacting investments, costs, tariffs, and
connected regulation
ü Consumers want to understand and make better use of their
flexibility by embracing smart grid technologies, expected to be
simple, clear and operative “apps” for their immediate benefit
ü The amount of Electric Vehicles (EVs) on the road and public
charging stations will see a major increase by 2020 and a possible
larger evolution in the decade to follow – impact on grids will not
be negligible
© evolvDSO “Development of methodologies and tools for new and evolving DSO roles for eﬃcient DRES integraBon in distribuBon networks”. 8 The increasing complexity
ü In the future, the core responsibilities of DSOs will not change –
increased management complexity of the distribution systems
may hinder their fulfilment
ü Current challenges might affect ability to develop, operate, and
maintain the network (in order to deliver high-quality services to
grid users and other stakeholders of the electric power system,
while ensuring safety of people, assets most efficient use and
system security in cooperation with TSOs).
ü DSOs need to evolve from a former “fit and forget” approach
towards an Active Distribution System Management approach
taking advantage of the opportunities brought by smart grid
technologies, new regulated services, the facilitation of electricity
markets, the empowerment of the end-customer and the creation
of sustainable public policies for the cost-efficient integration of
renewables.
© evolvDSO “Development of methodologies and tools for new and evolving DSO roles for eﬃcient DRES integraBon in distribuBon networks”. 9 The shift towards an active role of DSOs
ü Active Distribution System Management approach will facilitate
and support energy markets. DSOs have a privileged position.
They can empower consumers to support the system.
ü Consumers/prosumers could bring flexibility, originating from DG
units and/or flexible loads, to the system through competitive and
transparent mechanisms.
ü This flexibility can help to integrate generation based on
intermittent renewable sources.
ü DSOs as market facilitators will play a central role in enabling
these flexibility to reach the market.
ü Active Distribution System Management requires that current roles
evolve and new ones are created.
ü These will provide a level playing field by handling the increasing
management complexity of the distribution system – so that an
optimal use of flexibilities connected at distribution system level
could lead to the provision of services the system requires.
© evolvDSO “Development of methodologies and tools for new and evolving DSO roles for eﬃcient DRES integraBon in distribuBon networks”. 10 The shift towards an active role of DSOs
© evolvDSO “Development of methodologies and tools for new and evolving DSO roles for eﬃcient DRES integraBon in distribuBon networks”. 11 The shift towards an active role of DSOs
The “active approach” includes the following opportunities:
ü The improvement of network planning and operation processes, in
order to optimise network investments,
ü The possibility to contract and activate flexibilities at different
timeframes to solve specific network constraints,
ü The reinforced cooperation between TSOs and DSOs,
ü The ability to facilitate and enable electricity markets in a neutral
and transparent way,
ü The possibility to provide regulated services based on data
management and provision, in order to facilitate national and local
public policies and enable customer empowerment.
© evolvDSO “Development of methodologies and tools for new and evolving DSO roles for eﬃcient DRES integraBon in distribuBon networks”. 12 A discussion underway
Proposed rationalisation of DSOs role from the
discussion paper:
“Preliminary assessment of the future roles of
DSOs, future market architectures and regulatory
frameworks for network integration of DRES”
www.evolvdso.eu 13 Bottom line: what is needed? evolvDSO says…
ü The current regulatory framework must be adapted
ü The current market design and regulation do not promote DSOs to
exploit their full potential of active grid management
ü The new paradigm and the promotion of a more efficient energy
system require a sound regulatory framework to support/promote
non-conventional investments and management mechanisms
ü The differences amongst the European distribution systems make
it difficult to foresee a specific path for the evolution and/or
creation of DSOs future roles
Keeping in mind that:
technologies, services and products evolve faster than regulation
14 Bottom line: regulators should…
ü Regulators should promote the definition of a clear and coherent
market and regulatory framework
ü Policy makers are asked to set adequate rules, incentives and
unbundling requirements for the evolution of DSOs and other
stakeholders
ü In a smart grid environment, DSOs will need clear incentives that
encourage and facilitate their advancement towards an active role
ü Certainty on network investments and innovative management
approaches will allow DSOs to exploit their full potential in the
most cost-efficient manner
15 “A journey of 1000 miles starts with one step”
Lao Tzu, Chinese philosopher, ca.500 B.C., quoted by many – JFK included 16 Stakeholder Workshop – WP 5
Electricity markets and RES integration
DSO perspective
10.04.2015
Roberto Zangrandi
Special Adviser to EDSO
[email protected]
18 DSF, a 2014 view from GEODE
ü From the perspective of network operators,
Demand Side Flexibility has the potential to:
§  lower costs
§  enhance security of supply and contribute
to sustainable energy development through
§  facilitating the low carbon technology roll-out
ü Already DSOs have to play a more active role in the
electrical system to handle demand in an age of increased
renewable and intermittent energy.
ü DSF and smart networks will be vital to enabling that level of:
ü interaction as the need for it increases in the future. The paper also
focuses on the impact DSF can have on small customers and the
way they consume energy.
GEODE report “Flexibility in Tomorrow’s Energy System DSOs’ approach”, May 2014 19 DSF, a 2014 view from GEODE
ü Technology alone is not enough to bring about the change that is
needed, and the ‘smartness’ of the grid will be determined by the
customers’ behaviour.
ü Therefore, presenting a clear vision to small customers of how
DSF can lower their energy bills with the minimum of effort will be
fundamental to ensuring the technology delivers the maximum
benefit.
GEODE report “Flexibility in Tomorrow’s Energy System DSOs’ approach”, May 2014 20 The Prosumer
dilemma
21 Micro-generation in a flexible market
ü Prosumers, electricity producing consumers, are gaining ground in
the electricity market
ü The promotion of electricity from renewable energy sources has
created a strong incentive in many countries for many consumers
to produce energy for their own consumption or even more than
that
ü The term “micro-generation” refers to a wide variety of energy
sources, like river or pumped storage power plants, photovoltaic,
wind, biogas or small cogeneration installations, all of which
having unique production profiles.
ü Particularly impressive how solar photovoltaic has shown how
peak demand can be met by local
ü For this reason distribution networks need to be more flexible and
a greater variety of local energy production is needed to balance
weather-dependent issues.
GEODE report “Flexibility in Tomorrow’s Energy System DSOs’ approach”, May 2014 22 Micro-generation in a flexible market
ü  From the economic perspective, the installation of such
technologies will secure real consumer benefits by providing
financial gains, depending on each Member States’subsidy
policies, from feed-in tariffs and / or bill savings from not buying
electricity from the grid.
ü The future challenge for the DSOs will be to create dynamic
databases bringing together consumption and decentralised
production on a spatial level.
ü At this level, efficient energy management including heat and gas
is crucial. The coordinated control of a large number of distributed
energy sources, with probably conflicting requirements and limited
communication, is problematic and will create higher costs for the
DSOs.
GEODE report “Flexibility in Tomorrow’s Energy System DSOs’ approach”, May 2014 23 Micro-generation in a flexible market
ü A large number of micro-generators can impact the operation of
distribution networks. For this reason, the DSOs may need real
time information from micro-generators.
ü For this information flow a separate information channel is
needed, because smart metering systems are not designed to
provide this real time information.
ü The unbundling provisions of the Third Package directive and the
on-going efforts to implement the NCs, may be seen as a first step
towards a framework to develop locally optimised market models.
ü This goal can be achieved by the deployment of the right
infrastructure together with an adequate legislative framework.
GEODE report “Flexibility in Tomorrow’s Energy System DSOs’ approach”, May 2014 24 The prosumer dilemma: additional
intermittence and tariffication problems
ü In principle, self-consumption is not an issue: prosumers should
be able to use their own generation as they please.
ü However, in most European countries distribution network tariffs
are not yet adapted to self-consumption.
ü The network tariff paid by consumers is based on their energy
use, while the cost incurred by the DSO depends on the network
capacity used by consumers.
ü Self producing and consuming households consume less energy,
but do not lower the need for grid capacity.
EDSO posiBon oﬀered to the EU Commission in the framework of the “DG ENER workshop renewable energy self-‐consumpBon” 25 on 27.03.20015 Let’s have look at a regular household
GeneraBon, consumpBon and self-‐consumpBon on a clear summer day (four-‐person household and solar power plant with 5 kW peak power). Source: SMA ü  When consumpBon is low, energy is fed back to the grid. This is a grid use. ü  When the sun does not shine, the grid is used to cover the energy need of this household. ü  If the distribu4on tariﬀ is energy-‐based, the DSO is only paid for the blue hours, while investment and maintenance (depending on maxium grid capacity used) are not reduced. EDSO posiBon oﬀered to the EU Commission in the framework of the “DG ENER workshop renewable energy self-‐consumpBon” 26 on 27.03.20015 Why is this an issue?
ü  An imbalance appears between the DSO costs and the DSO revenues. Higher energy charges for all (€/kWh) ü  This adds uncertainty for the DSO: revenues will vary depending on DER generaBon. This can be signiﬁcant with a high PV penetraBon. ü  Today, to cover this risk, the DSO (backed by the regulator), has to increase the network charges (€/kWh) for all consumers. ü  BUT, this is not a long term solu4on. The Electricity bill uncertainty issue is not solved, and consumers without generaBon are penalised. Electricity bill Electricity bill Electricity bill Electricity bill EDSO posiBon oﬀered to the EU Commission in the framework of the “DG ENER workshop renewable energy self-‐consumpBon” 27 on 27.03.20015 Preliminary questions
Tariffs should be more capacity-based
rather than volume-based.
Other options to be investigated, complementary to the
volume-based tariffs:
ü Special tariffs for prosumers?
ü Time of use tariffs ?
ü  Direct incentives (smart contracts) for the
users having a larger impact on the grid?
ü Dynamic tariffs?
EDSO posiBon oﬀered to the EU Commission in the framework of the “DG ENER workshop renewable energy self-‐consumpBon” 28 on 27.03.20015 Preliminary ideas submitted to the
EU Commission - DG Energy
ü Support to innovation
ü Cost reflectiveness
ü Sufficiency: network tariffs should ensure full recovery of
all allowed network cost and reasonable return on capital
ü Market openness: network tariffs should not hamper
innovative pricing for demand response and energy
efficiency
ü Transparency: determination of tariffs should be
transparent, auditable, consistent and easily
understandable.
ü Non-discrimination: there should be no discrimination
between customers of the same customer group
EDSO posiBon oﬀered to the EU Commission in the framework of the “DG ENER workshop renewable energy self-‐consumpBon” 29 on 27.03.20015