Europe’s DSOs ready to take on challenge of their new role – DSO Observatory

22

Europe’s DSOs are considering advanced technologies, massive distributed energy resources and regulatory experimentations, the EC’s Joint Research Centre reports.

In the European Clean Energy package the distribution system operators (DSOs) assume the roles of neutral market facilitators and innovators driving the transition of the energy system towards a more sustainable future.

The latter is a completely new role for the DSOs and they seem ready to take on the challenge, the JRC reports in its latest Distribution System Operator Observatory 2020.

In particular, the Observatory, which takes an in-depth look at the region’s distribution grids, focusses on the large DSOs serving over 100,000 customers, with a survey of 44 of these.

Related articles:
Europe’s DSOs need new market model, innovative technological tools
Europe’s distribution grids need €400bn by 2030 says study
‘No one will be left behind’ in Europe’s Just Transition

Eurelectric data quoted by the JRC indicates a total of 2,556 DSOs across the EU27, of which the majority are small and medium sized. Fewer than 10%, just 182, have over 100,000 customers.

Smart grids

Among the findings of the survey (all of which have been anonymised) are that 12 of the DSOs had attained the 80% rollout target for smart meters, reaching almost two-thirds of the 140 million customers represented. However, while the region’s 80% target has not been met, there is a clear polarisation with some DSOs having completed their rollouts while others have barely started.

For the DSOs sampled, the average smart meter rollout was 38.5%.

Eight of the DSOs (out of 35) also communicated that they own storage, which is mostly storage set up along the grid to power substations or consumers in critical situations.

However, only a quarter had connected distributed resources generating for more than 2,000 equivalent full hours. Moreover, only a handful were managing active customers in their distribution grids.

Another finding in the smart grid dimension is that more than half of the DSOs are considering non-wires options, such as demand side management and demand response, as alternatives to network infrastructure investments.

Digitalisation

Another trend emerging in DSO operation is digitalisation. Almost all of the DSOs sampled have a SCADA system but so far more than three-quarters had fewer than one in ten of their MV substations remotely controllable.

When dealing with management of advanced technologies, the picture becomes fragmented. They are used for asset planning and investment strategies and sensors are widespread for outage detection, but the majority are not implementing storage or distributed energy management tools.

The picture is scattered also for data coordination with TSOs: while demand and generation forecasts are usually shared or received from TSOs, data on network conditions are seldom received.

Regulation

On the regulatory aspect, DSOs are likely to be more and more at the core of regulatory innovation over the next years, both as enablers of regulatory experimentation and as leading actors. The most common form of regulatory experimentation in which DSOs participate in Europe is the now well established pilot smart grid projects.

Regulatory sandboxes are emerging and expected to be significant in coming years, as are country-wide regulatory pilot projects.

Another insight from the survey concerns the readiness of DSOs to prepare 10-year network investment plans. More than three-quarters are already preparing plans, although so far there is no clear guidance at European level.

The survey also revealed that almost three-quarters are funded through fixed network tariffs. In addition, capacity based tariffs and volumetric with net metering tariffs are commonly in use.

Policy recommendations

The JRC recommends, drawing on its experience with the Observatory, that there should be an EU-wide approach to DSO technical data gathering.

Serious reflection is needed at policy level on the use of grid enhancement with e.g. digitalisation vs grid expansion. DSOs should be incentivised when drafting their investment plans.

A common taxonomy of innovative regulation in the distribution grid across Europe should be adopted, so that policies targeting each type of innovation can be clearly compared. A common template for DSOs investment plans also should be adopted.

These are significant and for example the JRC estimates a requirement of roughly €4.6 billion ($5.62 billion) for the up to 23 million new smart meters for the 37 DSOs included in the survey to reach their 80% rollouts.

As DSOs are paid by tariffs, the regulatory authorities should consider including remuneration that focuses on DSO-led innovation, like digitalisation, automated grid management and other solutions to better manage distributed generation in the grid.

The Observatory concludes with a comment to pay attention at policy level to the long-term impacts of the COVID-19 pandemic. The significant decrease in energy demand that has occurred in some countries might hinder the ability of DSOs to secure resources to dedicate to innovation where tariffs are linked to demand.