Building the DSO of tomorrow

Engerati speaks to key experts about the future role of the DSO in Europe and possible regulatory barriers to development.
Published: Thu 13 Jun 2019

The three D’s – decarbonisation, democratisation and digitalisation – will drive fundamental changes to the way electricity grids are operated and the formerly passive DSOs look set to become the nucleus of the new system as envisaged in the EU’s Clean Energy Package. Smart meters and digital platforms to exchange flexible services will transform demand management and allow the customer to become more engaged, providing services to help with the increasingly challenging task of balancing the grid as more distributed, intermittent renewable supply sources are connected.

Engerati interviewed some distribution experts at two key events recently, Utility Week Live and CIRED, to hear their views on the transformation of the DSO.

Pierre Mallet, Director of R&D and Innovation, Enedis and chair of CIRED technical committee:

“The distribution systems are undergoing a dramatic change, because of the digital revolution and the energy transition, the systems are changing a lot. In the past you had big power plants which are producing power going into transmission lines and along distribution lines to the customer; in the future we have many small plants which are mostly connected to the distribution systems; these PV and wind plants are producing in an intermittent way. We also have the development of active demand to make sure that we have a balance between power and supply. There is also the development of E-mobility, local storage, so the system is becoming more complex, and the distribution system is here to make all this possible.”


DSOs have traditionally been responsible for connecting new capacity to the grid and ensuring resilience with appropriate investment. So far DSOs in Europe have been very successful at managing increased distributed generation while maintaining reliability. But meeting climate targets with existing capabilities will become ever-more challenging.

Tomi Yli-Kyyny, CEO, Caruna:

“I strongly believe that the distribution system operator should be a platform for different services coming into the business. It’s a little bit like a chicken and egg situation that we should be active as well ourselves there and apply some sort of active DSO attitude because at the same time you have climate change, digitalisation means customer empowerment, customers are being more active and all these challenges the operators have to answer.”

Robert MacDonald, Head of Consulting, Smarter Grid Solutions:

“We’re seeing over the last ten years the evolution from a DSO perspective going from a very passive approach to how they plan and operate their network to something that has become more active, so that shift from passive network operation to active network operation and now going forward the next five/ten years we’re looking at an evolution of that active role as they scope out the market opportunities that exist.”

DSOs are going to have to take on some system management tasks previously under the purview of the TSO, and it is unclear whether the necessary investments will be made as current tariff and cost-recovery structures are based on outdated assumptions, while the benefits of upgrades may be accrued by other stakeholders other than the DSO.

Jan Buesink, Manager of Strategic Asset Management, Alliander and lead for Netherlands national committee, CIRED:

“The DSO should be more responsible and more involved in voltage stability. Nowadays if you’re talking about frequency stability the TSO is responsible but when in the lower network the power demand is fluctuating very fast and you’re getting more problems with possible islanding you also should consider how could we support stability in the network and not making it, well, it’s an issue for the TSO, but also for the DSO. That will change.”

Franz Strempfl, Managing Director, Energienetze Steiermark:

“The Clean Energy Package from my point of view was the first time the Commission or legislation-makers are recognising the DSO is very important to make the energy transition a success. The DSO is mentioned in nearly every chapter of the legislation and now it’s up to the DSOs to take action to recognise they are no longer network operators but also system operators. They have to act with the TSOs on an equal eye level and make active system management in order to keep the system stable in the future.”

So are the DSOs prepared to take on these new responsibilities, and if not – what incentives and regulatory changes will be required? This is the ‘elephant in the room’, said John Scott, director of consultants Chiltern Power at Utility Week Live. At the moment these regulated utilities have an asset-based rate of return, meaning they are allowed to recover costs based on investments in physical hardware. But almost all of the innovative solutions to flexibility and grid management are digital – and software is not included in the rate-base. Without investment in congestion management, a sudden increase in the electric vehicles fleet could lead to demand spikes in the evening peak as EV owners plug in when they get home. Whose responsibility is it to manage these potential bottlenecks, and who will pay for the solutions?

John Scott, director Chiltern Power:

“How are they going to earn their money? What incentives are they going to have to take new risks? Why should investors encourage them to move away from traditional assets to smart systems? The world is moving on from big centralised power plants and transmission and distribution to a highly distributed world with lots of activity behind the meter – many of the exhibitors here are at the grid edge but the underlying technologies are almost without exception digital and data has to got to move around across the whole system. It’s got to move across company boundaries and across different markets – who is responsible for joined up systems? Complex, subtle technical systems have to be designed, they don’t just drop out of a market – and that’s nobody’s job.”

Digitalisation is enabling a dramatic change in the energy markets, where the consumer is able to take a much more active role and some innovative market structures are developing. For example in the UK a new company Ripple is offering part ownership in a wind farm after a crowdfunding round, where the customer will have a much closer link to generation.

Sarah Merrick, CEO and Founder, Ripple:

“You can’t own a bit of a coal station or a gas station but you can own a bit of a wind farm or a large-scale solar park. So when you couple that with digitalisation it means that consumers can be put in charge of the whole value chain instead of just picking up the tab whatever that tab is. So once you link in smart meters, and you’ve got smart EV charging, smart appliances in the home, what we hope to do is have our customers consumption patterns start to reflect the varying output of the wind farm and then that could help balance the grid out and it could help make the impact of the wind farm on the grid a bit more secure.”

The interviews from which these transcripts are taken are also available on the Engerati Youtube channel.


Pierre Mallet, Director of R&D and Innovation, Enedis and chair of CIRED technical committee

Tomi Yli-Kyyny, CEO, Caruna

Robert McDonald, Head of Consulting, Smarter Grid Solutions

Jan Buesink, Manager of Strategic Asset Management, Alliander

Franz Strempfl, Managing Director, Energienetze Steiermark

John Scott, director Chiltern Power

Sarah Merrick, CEO and Founder, Ripple