DSO models

Evolving DSO models in Europe

Perspectives on trends driving distribution operator models have been identified by E.DSO’s high level Stakeholders and Innovation Council.
Published: Wed 20 Mar 2019

While the energy transition is impacting on all participants, suppliers and users alike, arguably the biggest challenges – and the greatest changes – are being faced at the distribution level with the new demands that are emerging as the focus moves to the grid edge with the growth of prosumers with distributed resources and decarbonisation across all sectors.

To meet these demands, distribution system operators (DSOs) must evolve their business models towards a service approach. However, while the end goal is conceptually clear, the evolutionary path is layered with complexities. In order to assist European DSOs, the stakeholder association E.DSO (Distribution System Operators' Association for Smart Grids) has formed a high level Stakeholders and Innovation Council comprised of eight energy sector experts to bring outside perspectives.

Following the Council’s first meeting in November 2018, their deliberations are now available in the form of a discussion paper, with a focus on the four key topics of futurability, grid edge transformation, resilience and customer perspectives.

Futurability

The design of ‘futurable’ energy systems is considered to need a new mindset with the multiple scenarios possible.

The sharing economy and social participation is evolving the ownership relation between people and things, while synergy among energy sectors and industries will reshape competition among energy vectors. Data intelligence and digital customer services will exponentially increase, with a predominant role of global IT companies. The consumer data collected by the DSO has a major technical and commercial value and is key to create value added services for society and industry.

DSOs have to be flexible to play different roles and serve society in different ways and they should position themselves to anticipate and actively enable sector coupling. DSOs have to be ready to be part of the digital society and to help build smart cities and they need to digitalise their operation and planning processes to enable a highly dynamic energy system at all layers and timescales.

Sustainable cross-sector regulation and innovative financial mechanisms also are required.

Grid edge transformation

To unlock the new value opportunities at the grid edge DSOs should be market catalysers in addition to their role as market facilitators. Digitalisation, electrification and decentralisation are paving the way for the ‘platformisation’ of the energy sector and with all aspects impacted, including operational, technical, market and regulatory/governance, the new role for DSOs is envisaged to include that of local dispatcher.

Decentralisation of the power system requires higher and extended visibility on the network of resources and customers and the operation of the grid should enable and benefit from flexibility services. However, proper remuneration and incentives are required to foster the transformation at the grid edge.

Innovative resilience

Market changes but also other factors such as cybersecurity and extreme weather events are demanding a new approach to resilience of ‘resilient by design’.

Cross-sector partnerships, engagement of customers and new players are the key elements of this new approach, which also requires stronger coordination among control layers and taking into account the new ‘market catalyser’ role of DSOs. Action plans should be developed based on specific local needs and constraints as well as best practices gathered worldwide.

Customers and DSOs

DSOs should be perceived as reliable partners enabling the largest variety of customers and diversity of behaviours and lifestyles. Technology innovation must be beneficial, taking into account ways to help and incentivise consumers’ engagement.

The golden rule and protocols of experimentation should drive decisions and actions from inception through design, execution and monitoring, to allow joint learning from demonstration projects, sharing expertise and experiences. Those initiatives should be based on co-ownership of experiments which should lead to the desired behavioural pattern changes as well as the emergence of new business models enabling retention of successful actions/experiences.

New simple to understand flexible and dynamic pricing options should be made available to customers and incentives should help DSOs make use of flexibility services and distributed energy resources.

Energy poverty and inclusion also should be addressed through innovative models, including partnerships with communities.

Next steps

With this identification of what it calls “key messages”, E.DSO says that the next step will be evaluate and revisit the priorities with its members. With this aim in mind, specific task forces of analysis are being defined to pursue further development of new models of collaboration and engagement, modernising the pricing model, promoting innovative inclusion, supporting innovation and digitalisation and developing a new energy architecture.

The members of the task force are Ronnie Belmans, CEO of the Energyville research centre and Executive Director of the Global Smart Grid Federation; Martin Hans Henning, Director of the Fraunhofer Institute for Solar Energy Systems ISE and Professor of Solar Energy Systems at the University of Freiburg; Jorge Vasconcelos. Chairman of the new energy solutions consultancy NEWES and first chairman of the Portuguese Energy Regulatory Authority, ERSE; Dan Delurey, Founder of the US Association for Demand Response & Smart Grid; Philip Lewis, Founder and CEO of the VaasaETT energy think tank; Guido Bortoni, former president of the Italian regulatory authority for gas, electricity, water and wastes, ARERA; Patrice Geoffron, Professor of Economics at the Université Paris Dauphine and Director of the Centre of Geopolitics of Energy and Raw Materials; and Joisa Saraiva, Professor of Economics and  Director of the Centre for Regulation and Infrastructure Fundação Getulio Vargas in Brazil.