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June 19, 2017
The distinctive role of distribution system operators in the new energy system
By: Sander van Ginkel

These days, a centrally planned energy system seems like a distant memory. What’s now happening in Europe is quite different: the creation of a hybrid model combining aspects of centralization with increasing adoption of distributed energy resources. In this more decentralized environment, a host of new distributed energy resources are connecting to the grid and are now found throughout the energy system.

The advent of distributed energy resources is bringing new participants to the market: Consumers are taking an increasingly active role, different service providers are now competingand another set of participants is emerging: platform operators and microgrid operators. All these participants have different behaviors and motivations, and thereby contribute to more diversity and complexity in the system.

What does all this mean for the energy industry? A new optimization mechanism for managing the distribution network is needed to cost-effectively maintain the historically high performance of the European energy system. This includes:

  • Optimizing investments

  • Optimizing capacity management

  • Optimizing the behaviors of system participants

Distribution system operators (DSOs) could play a vital role in realizing new optimization mechanisms—orchestrating and optimizing platforms connecting participants in the energy system. If we think of DSOs as “distribution platform optimizers,” we can see that they could perform their distinctive roles in new ways:

  1. Bottom-up asset planning: Focuses on optimal integrated solutions across different energy carriers, combining granular insights in technology development and consumer behaviors with data about the state of the distribution network in the planning process.

  2. Active systems management: Involves investing in intelligent systems that help leverage flexibility from sources connected to the distribution network for managing congestion, primarily through financial incentives.

  3. Neutral market facilitation: Lowers the threshold of access to the energy system and the energy market in a non-discriminatory way, verifying all participants in the energy system are treated equally and can act based on equal information.

DSOs are in a position to become effective platform operators, but they need new smart grid capabilities to perform their tasks effectively. Some of these capabilities run across the three roles of a platform operator. Other capabilities are specific to just one of these tasks.

New market frameworks
New market frameworks need to be developed to facilitate the transition to the platform model, and four primary factors should be considered:

  1. The roles and responsibilities of DSOs in relation to transmission system operators (TSOs) and commercial system participants need to be redefined.

  2. Tariffs for connecting to and using the network need to become more cost-reflective.

  3. New requirements are needed for communication infrastructure and data exchange.

  4. Regulation should support innovation and adoption of new flexibility solutions DSOs can use to perform their tasks.

Serving the needs of European society
As DSOs transition to new models, we will see more diversity in applications and implementation pathways throughout Europe. The pace and nature of the energy transition will vary by country, and so will the resulting generation mix, network infrastructure and supply and demand patterns. EU Member States and DSOs will make different decisions reflecting local market arrangements and regulation.

DSOs should move beyond experimentation and start integrating flexibility options into network planning and operations. They should also start developing capabilities to perform the new tasks effectively. DSOs need to explore opportunities to partner with other actors in transactive energy initiatives that extend open and non-discriminatory access to participation in the energy system. The energy transition requires a new kind of dialogue between DSOs and other stakeholders. All participants need to look actively for opportunities to join forces in initiatives that serve the needs and interests of Europe’s consumers and European society.

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