The rate of development of distributed generation (DG) depends to some extent on the structure of national electricity systems and the arrangements for operating distribution systems in particular. Gianluca Fulli, Angelo L’Abbate and Stathis D. Peteves examine the current penetration of DG – and its prospects – across the 27 EU member states.

Society and industry in Europe – and elsewhere – are increasingly dependent on the availability of electricity supply and on the efficient operation of electricity systems. In the European Union (EU), the average rate of growth of electricity demand has been about 1.8 % per year since 1990 and is projected to be at least 1.5% yearly up to 2030.

In response to concerns over security of energy supply, energy market restructuring processes and environmental pressures, the European electric power system (at generation, transmission and distribution level) is experiencing trends which may lead to changes in its architecture and mode of operation.

At the distribution level, the increased penetration of small- or medium-sized power plants (with capacities of up to several tens of megawatts), generally located near consumers, promises to overcome some of the techno-economic, environmental and social constraints affecting the upstream transmission/generation system.

These small-scale power plants that are closer to customers – often fed by renewable energy sources (RES) and/or run via CHP schemes – are the main elements of the well-known distributed generation (DG) architecture. Since the definition of DG varies widely in the electricity sector, this article ultimately considers DG to be power generation that is connected to distribution grids. Thus the definition excludes decentralized electricity power units connected to sub-transmission or transmission networks. For this reason, the figures for DG penetration presented in this article are lower than those of some international analyses (for example those by the World Alliance for Decentralized Energy) and are mainly in line with the findings of recent EU co-funded projects DG-GRID, SOLID-DER and SUSTELNET.

DG expansion in Europe’s distribution networks is limited by technical, regulatory and other location-specific issues (for example in terms of voltage levels, network structure, availability and mix of distributed power sources, grid ownership and management). In fact, it has to be stressed that at the outset, distribution systems in Europe were generally not designed to operate with DG technologies. Furthermore, there are still major issues concerning the integration of DG technology into distribution networks, mainly in terms of flexibility of the generating units (production cycling) and management of the DG systems (need for local power-balancing resources).

Distribution systems in Europe

Currently, distribution networks generally differ greatly from transmission networks, mainly in terms of role, structure (radial against meshed) and consequent planning and operation philosophies. The features of distribution systems vary markedly throughout Europe. The distribution system operators (DSOs) are loosely co-ordinated, even on a national basis, and do not always have common technical rules.

As Figure 1 shows, some countries of the 27 European Union member states (EU-27) have just one (dominant) DSO controlling the whole distribution network, while other countries have tens or hundreds of DSOs operating their distribution networks on regional or municipal bases. These differences are due to historical, geographical, socio-political and economic reasons. The number of distribution operators is, however, continuously changing in response to the restructuring of the electricity market.


Figure 1. Number of DSOs in the EU-27 in 2006
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In some analyses, the distinction between transmission and distribution is based on the legal definitions of the two systems, particularly in a competitive electricity environment. These legal definitions vary from country to country in the EU.

Also, a distinction between transmission and distribution based on the voltage level does not give uniform results across the EU. In most countries, the distribution network is defined as a grid that has an operational voltage of lower than 220 kV, even though some countries consider smaller levels (for example 63 kV in France) as transmission. The most common maximum distribution voltage in the EU is 110-150 kV (see Figure 2), but this is not the case everywhere in the EU.


Figure 2. Maximum voltage levels of EU-27 distribution networks
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Penetration of distributed generation

According to WADE, the distributed power capacity worldwide is about 7% of global capacity and is constantly increasing.

Some EU countries are recording a gradual and steady upward trend in the deployment of distributed generation resources connected to low-voltage electricity networks. However, in contrast with large power plants, how to collect precise figures about the number of DG units that are embedded in European low-voltage networks is still an open question. There are several reasons for this:

  • there is a lack of centralized databases and structured communication channels between DSOs and the TSO in some EU countries
  • DSOs are geographically scattered and
  • DG faces obstacles in accessing the market.

The statistics available in open literature are not always consistent, often due to differences in the definitions of DG (for example in terms of size and type of connection to the grid). For these reasons, Figure 3 shows the amounts of DG capacity – as fractions of the total installed generation capacity – as averages (in 5% bands) of the values that recent technical assessments have calculated using 2004 data.


Figure 3. DG’S share (range) of installed generation capacity in EU-27 (2004)
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As Figure 3 shows, DG’s share of overall capacity is, on average, higher in the old EU member states (the EU-15) than in the new member states (the EU-12). The share of DG in most EU-15 countries spans 10%-20%, with Denmark having an extremely high percentage, around 30%, and with France and Greece having percentages below 5%. In the EU-12, DG has its highest share of overall capacity in Hungary and Slovakia (nearly 10%), while the lowest levels are for Estonia, Malta and Cyprus (below 1%).

Table 1 shows CHP and renewable (RES) electricity (RES-E) capacity compared with the total installed capacity in the EU-27 in 2004. Note, however, that the RES-E figures include large hydro and wind plants, which cannot generally be considered as DG. Analogously, not all CHP capacity refers to distributed CHP.

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DG’s advantages and drawbacks

DG’s characteristics give it the potential to contribute to the achievement of the three main objectives of EU energy policy as reaffirmed in the 2006 Green Paper and in the recent Energy Package (2007). These are environmental sustainability, competitiveness and security of supply.

The main contributions of DG on these fronts are:

Sustainability

  • the proper location and operation of DG systems provides efficiency gains as transmission network losses are reduced
  • emissions of pollutants are reduced thanks to renewable DG displacing power production based on fossil fuels
  • primary energy resources (for example waste products or renewables) and waste heat (through CHP) are used more efficiently
  • DG energy infrastructure has lower territorial and visual impact because of the smaller size of DG facilities and the avoidance of having to reinforce transmission systems.

Security of supply

  • renewable and efficient DG technologies can reduce energy imports and build a diverse energy portfolio
  • effective and prompt islanding mechanisms reduce risks if networks suffer attacks or other disturbances
  • DG may provide network support and contribute to ancillary services.

Competitiveness

  • DG may be better at giving more market players (consumers, generators or both) access to power trading activities
  • RES and other DG units have shorter authorization and construction times than do large central power plants
  • DG contributes toward reducing the congestion that occurs on existing upstream transmission grids.

Technical issues

The integration of DG technologies into the distribution network raises several technical issues that must be dealt with:

  • In traditional distribution networks, power flows in one direction under normal operating conditions, from a central generation unit or a transforming substation to passive loads. But DG systems, in general, have a two-way power exchange. This is because of the dispersed installation of power units in the grid. This means that distributed control systems have to be redesigned to handle two-way power flows on distribution lines (the so-called active network concept).
  • Connection of DG technologies not only changes the pattern of power flows, it also significantly affects local voltage and fault current levels. Therefore there is an additional need for redesigning the local protection system to manage more critical voltage and fault current values while, at the same time, being able to deal with bidirectional power exchanges.
  • The variability of electricity output from solar or wind power installations means that DG control centres must be able to manage fast-changing local power generation and effectively communicate with the interconnected transmission control systems in order to maintain an adequate power reserve.
  • Data collection for the control of the distribution system and the DG units can be a complicated task because the distribution system is generally not managed by supervisory control and data acquisition systems as used in the transmission operation.
  • Given the expected growth of the market share of intermittent renewables and heat-based CHP, the costs of imbalances between generation and demand will become progressively more important, and the application of priority dispatch mechanisms – at transmission and distribution level – may be increasingly difficult.
  • Power quality might deteriorate because of the use of power electronics-based converters for connecting DG technologies to the distribution grid. Harmonics generated by power electronic converters cause disturbances on the main grid, although these may be damped by properly designed filters.
  • The effects of DG growth on the European transmission system should not be neglected for the following reasons: the borders between electricity transmission and distribution are not always that clearly defined and sometimes overlap. In some countries, the ownership or the management of network assets at the same voltage level – typically high voltage – is shared by the TSO and DSOs. Without properly co-ordinated system interfaces and flexible network control devices (like FACTS), the consequences of a power disruption at distribution level may be suffered at transmission level.

European regulatory framework

The main drivers for promoting DG are recognized by the European Commission, which talks of the ‘common concerns to use primary energy as efficiently as possible, with the least possible environmental impact whilst ensuring that energy supply is secure, safe and supplied at an agreed quality universally and at a competitive cost’. Even if an EU-specific framework providing common rules for DG deployment is lacking, DG is implicitly or explicitly included in some EU legal provisions and policy documents (as summarized in Figure 4).


Figure 4. European Directives affecting DG deployment
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Directive 2003/54/EC sets common rules for the internal electricity market and is the first EU-wide action that explicitly deals with DG. Some of its important parts are:

  • Article 2(31). This defines DG as: ‘Generation plants connected to the distribution system’, where ‘distribution means the transport of electricity on high-voltage, medium voltage and low voltage distribution systems with a view to its delivery to customers, but not including supply’.
  • Article 6(3). This concerns the permit procedure for DG: ‘Member states shall ensure that authorization procedures for small and/or distributed generation take into account their limited size and potential impact.’
  • Article 14(4). This aims to promote the use of RES and CHP for DG: ‘A member state may require the distribution operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power.’
  • Article 14(7). This is very important for distribution planning: ‘When planning the development of the distribution network, energy efficiency/demand-side management measures and/or distributed generation that might supplant the need to upgrade or replace electricity capacity shall be considered by the distribution system operator.’
  • Article 23(1(f)). This says: ‘[The regulatory authorities will be responsible for monitoring] the terms, conditions and tariffs for connecting new producers of electricity to guarantee that these are objective, transparent and non-discriminatory, in particular taking full account of the costs and benefits of the various renewable energy sources technologies, distributed generation and combined heat and power.’

Finally, the actions following the Energy Package launched in January 2007 (although DG is not directly mentioned there) are expected to address security of supply and environmental issues and promote more ambitious targets towards the deployment of renewables (20% of energy from RES by 2020) and more efficient energy sources (20% efficiency improvement by 2020).

As the framework conditions for DG given by EU legislation are rather broad, there is substantial scope for interpretation and application at national level regarding the economic regulations, market requirements, network regulation regimes and support mechanisms employed for DG.

Another important aspect to consider in the connection of DG to distribution systems is the legal unbundling provision of the vertically integrated electricity utilities, set out by Directive 2003/54/EC to be implemented by 1 July 2007 but with specific exemptions for small undertakings. Such exemptions may represent an entry barrier for new DG operators that wish to access a network area operated by a DSO not subject to the unbundling obligations.

Finally, the countries of the EU face different situations that depend on their fuel mixes, geography, progress in liberalization, prevalent market structures and the socio-political evolution of their electricity sectors. All these aspects are interrelated and influence current DG penetration in every EU member state.

Potential for DG deployment

Figure 5 displays the EU-27 countries grouped by DG penetration and then ranked according to the maximum distribution voltage level. Also shown is the number of DSOs operating on the territory of EU-27 countries. By comparing such data, it is possible to highlight some common features of the status of development of DG schemes in European distribution systems. This assessment, matched with forecasts on DG deployment by other studies and in accordance with some assumptions on the technical and regulatory framework, is the basis for the following medium-term (up to 2030) DG penetration qualitative assessment.


Figure 5. DE share, maximum distribution voltages and DSOs in the EU-27
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As Figure 5 also shows, the EU-27 countries may be grouped into three subsets according to the percentage of DG to date installed in their distribution networks (shares refer to the installed electricity generation capacity).

Group A – present low DG penetration (<10%)

Figure 5 depicts a possible direct correlation between DG penetration rate in this group and number of DSOs. In fact, except for France, the Czech Republic and the Slovak Republic (where in any case only a few DSOs have a dominant position by controlling large portions of the distribution system), there are few DSOs on their territory. This could also be related to an incomplete process of unbundling of the electricity companies. A lack of unbundling may mean that DSOs discriminate network access in favour of their (former) group companies. Local specific situations may, however, apply and differentiate the countries of this group.

Group B – present intermediate DG penetration (10%-20%)

This group is the most homogeneous in terms of distribution voltage level, with the maximum voltage level ranging from 110 to 150 kV. All these countries – except for the UK – feature a quite high number of DSOs. Nevertheless, almost all these states have few dominant distribution operators – again, apart from the UK, where the liberalization and consequent unbundling process has been ongoing for a longer time and with more effective results. The larger DG shares, compared to the first group’s figures, may therefore also be due to earlier developments in addressing the technical and regulatory issues surrounding DG.

Group C – present high DG penetration (20%-30%)

The group at the forefront is rather varied in terms of geographical position. This group seems to prove that in countries where DG technologies are well established and on their way to being integrated into the distribution systems, a high penetration of DG resources is not necessarily linked to a high number of DSOs. Indeed, the Netherlands and Portugal have a very limited number of DSOs acting on their territories.

expected DG progress

As far as the assessment of DG potential is concerned, the EU-27 countries fall into the same three clusters that are used to show the present state of DG in Europe. Some members of these subsets, especially those having higher DG potential, may move forward more quickly and join an upper DG penetration cluster.

Figures 6 and 7 respectively show the current state of DG penetration and the medium-term potentials for DG development in the EU-27. Each cluster of countries is represented by an ellipse whose area is proportional to the average DG penetration share. The more the countries move towards a higher DG penetration share, the more they are faced with regulatory and technical issues (horizontal and vertical axes) that may actually be more easily addressed in countries with lower DG shares.


Figure 6. Current DG penetration in the EU-27
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Figure 7. Medium-term potentials for DG development in the EU-27
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Expected progress

 

Group A – mid-term less decentralized power systems (DG share 10%-20%)

This group comprises Bulgaria, Cyprus, Estonia, France, Greece, Malta, Poland, Romania, Belgium, the Czech Republic, Hungary, Ireland, Latvia, Lithuania, Luxembourg, the Slovak Republic and Slovenia.

Many countries in this group are expected to show the largest increase in DG penetration. This is because the present grids are technically able to host larger shares of DG resources without key modifications and because some of their higher-voltage distribution networks not only have greater capacity but have also already implemented control systems that partially allow them to operate as transmission networks in terms of system flexibility and control over the power produced.

Moreover, these countries with low levels of DG presence – the new member states especially – may outperform some older EU member states since their implementation of electricity law has closely followed the relevant European Directives. These countries may be expected to see a quicker introduction of more transparent and non-discriminatory grid connection rules, grid use conditions and investment cost allocation between DG operators and DSOs in particular.

Studies have confirmed that a 10%-15% DG penetration can be absorbed by the electricity network without major structural changes. Some of these countries are expected to move to a DGshare of the order of 20%.

Group B – mid-term partially decentralized power systems (DG share 20%-30%)

This group comprises Austria, Finland, Italy, Germany, Sweden and the UK.

These countries may be expected to have a more limited increase in DG penetration, on average lower than that foreseen for group A. The distribution grids in these countries may in some cases be technically unable to host further large shares of DG resources without major system changes and, in particular, implementation of the active operation (and planning) of the distribution networks.

From the regulatory point of view, to guarantee non-discriminatory access to the grids, adequate incentives for DSOs and TSOs to increase the network capacity by means of grid reinforcement are required as much as the enforcement of legal unbundling by the power companies (already set out by European and national provisions).

Most countries belonging to this group are expected to move from the 10%-20% DG penetration level to higher shares but will find difficulty in reaching 30%.

Group C – mid-term extensively decentralized power systems (DG share >30%)

This group comprises Denmark, Portugal, Spain and the Netherlands. Even though this group is the most advanced in the deployment of DG units, some saturation effects of the lower voltage networks have already been recorded. Therefore, even if a marginal increase of DG share is expected, in relative terms it may be even lower than that of group B, where the electrical distribution facilities are in general more capable of accommodating further distributed power. The real challenge for this group is to move entirely from DG unit installation to DG systems integration.

The networks to be further exploited in these countries seem to be the low-voltage networks, but there is a need for increased efficiency in micro-DG installation and transmission-like ICT schemes to manage power flows to avoid issues of congestion or instability.

Another saturation effect in some of these countries is related to the regulatory framework. Paradoxically, these countries, with the highest level of DG penetration, like Denmark, with regulatory regimes capable of achieving higher DG level goals, have difficulty in adjusting their regulatory framework to a situation where DG is a major market player.

Naturally, in some local networks, a further increase can be expected only on the proper implementation of suitable management and control of the lower voltage.

Few countries in this group are projected in the medium term to reach a DG share of 40%.

Conclusions

The growth of DG installations in distribution systems in the countries of the EU-27 faces a number of technical and regulatory challenges, strictly related to the level of DG penetration already achieved and the degree of maturity of the electricity system liberalization.

This article identifies three clusters of member states. Countries in each cluster have comparable levels of DG penetration and share common issues concerning further integration of DG units. Countries presently scoring a higher DG penetration – Denmark especially, which has an approximate 30% share of the installed generation capacity, followed by the Netherlands, Portugal and Spain – may be confronted with more stringent technical and regulatory issues due to a possible saturation effect in the infrastructure (network congestion and constraints) and the radical changes needed in the still evolving regulatory framework to fully realize a market integration of DG schemes.

The group of countries currently with lowest DG penetration, however, shows remarkable potential for DG development. This is primarily because these countries can plan in advance the architecture of their future electricity distribution grids by taking advantage of the technical and regulatory experience accumulated by nations that have been forerunners and by exploiting infrastructures not yet saturated by a large deployment of DG units.

The presently intermediate DG penetration group may be expected to have, on average, a DG share increase lower than the one foreseen for the currently lower DG penetration group. These grids are in many cases incapable of hosting large DG shares without major system changes (in other words, moves towards active operation of the distribution networks).

In conclusion, such development of systems and technology has to be carefully monitored and co-ordinated in Europe, thus permitting a smoother transition of the energy infrastructures involved and thereby mitigating the risk of major criticalities and security of supply issues.

Gianluca Fulli, Angelo L’Abbate and Stathis D. Peteves are all with the Institute for Energy, Petten, The Netherlands, which is part of the European Commission’s DG Joint Research Centre.

e-mail: gianluca.fulli@jrc.nl
estathios.peteves@ec.europa.eu

Disclaimer: The views expressed in this article are the sole responsibility of the authors and do not necessarily reflect the views of the European Commission.

This article is on-line: www.cospp.com