Repowering the role of DSOs

In the smart energy world, DSOs are becoming active system managers of the distribution grid, writes Hans ten Berge

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Credit: Fotolia

The power sector is undergoing a complex and long-term transformation.

In the past, predictable flows in the electricity network did not require extensive management and monitoring tools.

With the expansion of renewables across Europe, the power system reality has changed drastically. This change, together with the fact that customers are moving to the centre of the new value chain, has led to rethinking the way distribution system operators (DSOs) should operate and plan their networks.

These changes take place in the framework of energy industry liberalization and decarbonization of the economy, as well as revolutionary ICT developments. DSOs are consequently moving away from their role as passive network operators towards active system management of the distribution grid. They are taking on a more active co-ordinating role in facilitating markets while continuing to provide a stable and high-quality service to all customers in a smarter grids context.

The discussion about the renewed role of DSOs takes place as new policymaking objectives are increasingly driven by the willingness to pursue more competition and create new market opportunities.

Under this new scenario, DSOs must continually adapt and extend their central role in facilitating an open and competitive market. Being at the heart of the changes that are happening within their own networks and with a deep understanding of how their own distribution systems work and operate, DSOs are in a position to act as neutral energy market facilitators and co-ordinators of all customers.

In the future evolution of energy networks towards a smarter grid concept, DSOs are responsible for guaranteeing distribution system stability, power quality, technical efficiency and cost-effectiveness through the intelligent use of technology.

DSOs are key to upgrading and operating an increasingly more complex network, allowing market parties to enable customers to optimize the way they use energy and benefit from it while keeping costs and complexity at acceptable levels.

New tools for new challenges

A network evolution has already started and this is only the beginning. In a changing context made up of distributed generation, self-/micro-generation, electric transport, more active customers and smarter distribution grids, DSOs are establishing a foundation of smarter network monitoring, improved metering, control and automation to best fulfil their security of supply obligations.

As smart metering deployment increases, distributed generation expands and customers play a more active role in demand response and energy efficiency, flexibility must be stimulated and correctly valued. This way, customers will be able to benefit from the services they may be willing and able to provide to local systems.

Meanwhile, DSOs are facing complex grid operations, characterized by increasingly intermittent and bidirectional energy flows, whilst at the same time being responsible for system quality and security in their core business. As a result, DSOs are reorganizing themselves in terms of new organizational business models, re-training of crucial staff, digitalization of grid operations and other important managerial issues.

New elements connected to the distribution are already triggering more active grid management. By using flexible ICT techniques to enable smart grids, DSOs have begun to manage capacity in their network. Although the role of DSOs will not fundamentally change, it is evident that they will need a bigger toolbox to move from the traditional ‘connect and forget’ concept towards one of ‘connect and manage’.

DSOs have also begun signing flexible contracts for network customers. These flexible network customers are remunerated for the services they provide and are helping network operators manage certain grid issues such as network congestion or voltage constraints. As things stand, flexibility procurement on an open market must be further developed in most European countries in order for flexibility to achieve its full benefits and enable DSOs to reach their potential in active system management.

DSOs are in a position to act as neutral energy market facilitators, says Hans ten Berge

Credit: Fotolia

While grid operation is changing due to network innovation, the new economic and technical landscape is also affecting grid planning. This is mainly due to network customers who can or will be in a position to offer flexibility services directly, or through suppliers and aggregators, to the DSO through procurement processes. These procurement services will increase customer involvement in demand response. Along with the availability of increased information, using the distribution network more flexibly and having more precise and timely information at hand will guarantee that grid capacity is optimized during the network planning process. Grids that are more efficient will not only help DSOs to better plan their grids, but also make it easier for policymakers to achieve environmental targets.

DSOs will need a bigger toolbox to move to the ‘connect and manage’ concept

Credit: Fotolia

Data handling is top priority

It is under this new scenario that the importance of secure, high quality and robust data management techniques has become apparent. Smart meters, distributed generation, storage facilities, demand-side response, smart charging and ICT solutions installed in the grid are producing more and more data that has to be adequately managed and protected.

A key part of the DSO’s role in facilitating the energy market is thus data management. The goal of any data management system does not revolve only around ownership, but rather around correct and fair information sharing in an efficient, transparent, non-discriminatory way. In order to manage their networks in a more active way, policymakers need to clarify the DSO involvement in data management.

Clearly, there is no ‘one-size-fits-all’ approach to data management. Different data hubs, formats and market models have been and are being implemented in different EU Member States. The evolution of technology and ICT systems, alongside the deployment of smart meter infrastructure, will enable much better observability and operability of the distribution grid, thus speeding up the achievement of smart grids.

As competition and choices increase for the customer, new data privacy challenges emerge. The transformation will lead to a ramp-up in information and data flows, leading to the need for appropriate measures to be established to guarantee secure, neutral and efficient data management.

In contrast with the transmission network, in which connected customers and connection points to other networks are very few, distribution networks are usually characterized by a large number of customers, self-generators and larger-scale (distributed) generators. The connection of a greater number of generation resources, such as renewables, to satisfy demand requires substantial growth in the size and complexity of distribution grids.

As the technical contact point for customers, DSOs are in a unique position to meet their needs and choices in terms of connection, quality, security and continuity of power supply. Hence, DSOs are ideally suited to manage very large numbers of connection points and to balance local grids. DSO activities must therefore be separate from – and complementary to – those of TSOs, bearing in mind that DSOs are the only players capable of exploiting the benefits of a local approach in terms of grid management and customer support.

To meet the challenges ahead, national energy regulators must make sure that DSOs are properly incentivized through a sound regulatory methodology covering both traditional and innovation-related assets. Regulatory schemes must incentivize DSOs to be efficient, to deliver long-term investment according to a predictable and consistent regulatory framework and to make efficient trade-offs between active system management and physical grid reinforcement.

Minimizing costs

Performing these new roles will evidently lead to extra costs related, inter alia, to the introduction of smart grid solutions and the increasing complexity of data handling. The new energy reality requires energy regulators to ensure that all these changes benefit customers and other network customers. Policy, regulations, roles and procedures have to be set taking into account efficiency and non-discrimination. The new setup must make sure that costs are minimized whilst competition is nurtured and a level playing field is guaranteed for all market participants.

Amongst growing concerns about high electricity tariffs across the EU, it is important to limit and avoid any unnecessary extra costs. Any proposal of creating new regulated entities such as separate and regulated data hubs should be carefully assessed to make sure that the benefits of new solutions are truly superior to any resulting increase in the cost and/or complexity of the system.

DSOs are the impartial market facilitators enabling access to, and use of, the distribution grid. They will share relevant information with all parties and create an adequate level playing field in which competition is fostered and new energy services can be provided on a competitive basis while still respecting data privacy. DSOs must also make sure that the whole system is as resilient as possible against cyber-attacks and other privacy violations. In summary, DSOs are adapting to this evolving environment, implementing the required changes in the way they operate and plan their networks to face future challenges. The DSOs’ role will not fundamentally change, but will have to be repowered and strengthened.

Hans ten Berge is Secretary-General of European electricity trade group EURELECTRIC. www.eurelectric.org

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