The active DSO in Europe – a work in progress

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Surveys of Europe’s distribution system operators (DSOs) and national regulatory authorities (NRAs) indicate work to do in clarifying the best way forward.

With more than 2,500 distribution system operators (DSOs) across Europe ranging in size and scope from tens of thousands to over 10 million customers and from small geographic areas up to whole countries, they comprise a very diverse collection of utilities.

This diversity needs to be harnessed in policy and regulation but a new survey conducted by the Centre on Regulation in Europe (CERRE) indicates a difference of opinions not only among the DSOs themselves but also the national regulatory authorities (NRAs).

At the core of the issue is the more active role in network management required of DSOs. While the JRC’s DSO Observatory concluded they are ready to take on this challenge, CERRE finds that more support is needed.

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Based on parallel surveys of DSOs and NRAs, CERRE finds that their move towards a more active role remains a work in progress for both the DSOs themselves and their NRAs.

However, there is little evidence of progression so far, except in UK. Moreover, there is not full alignment on how this movement should be supported.

Many DSOs want more regulatory support, while NRAs remain uncertain about the potential for the more active DSO.

In terms of barriers, the DSOs identify tariff structure and regulation among the most significant to a more active DSO. The NRAs are most concerned about a lack of potential providers of flexibility and lack of information on the state of the network.

Role of DSO Entity

A key party in this new DSO landscape is the newly established EU DSO Entity as a representative body paralleling the TSOs’ ENTSO-E.

The DSO survey responses indicated the most common suggestions for its role as promoting flexibility, supporting the drafting of network codes, promoting the energy transition and network solutions.

The NRA responses emphasised the need to learn from ENTSO-E, provide a European voice for DSOs and promote competitive procurement of services.

However, there also was concern over the potential tension between providing a unified voice for DSOs and promoting a nuanced set of policies reflecting the diversity of DSOs.

From the findings, CERRE recommends a potential role for the body as collecting and distributing information and experience on DSO projects. Many trial projects are underway at local, national and EU levels on the future of the DSO, but few are well known outside their own jurisdiction. Interest also was minimal in developments outside Europe.

“There are a lot [of learnings] out there, but it’s not clear at the moment who is learning from these projects or whether the collective learning is being adequately shared,” comments Michael Pollitt, professor at the Judge Business School, University of Cambridge and an Academic co-director of CERRE, the lead author of the study.

Even as it starts the DSO Entity has already attracted controversy in its make-up and it remains to be seen how this will play out.

Regulation

On regulation the CERRE researchers recognise that it will take time for the EU’s Electricity Regulation and Directive to have a significant impact on the region’s DSOs.

However, based on various DSO role scenarios they find several areas for future regulatory development. One is on cooperation between the electricity and gas DSOs, given the future sector coupling. Another is the potentially wide interpretation on the role of the DSO in storage and electric vehicle charging, when its optimal role in different circumstances remains unclear.

CERRE also suggests there is work to do in providing evidence of clear consumer benefit. The NRAs need to prioritise evaluation of the evidence on the value of various competitive mechanisms for the procurement of such services.