The ‘big picture’ of the future energy system is by now well understood, described in various combinations of the ‘D’s’ – distributed, decentralised, decarbonised, digitalised, democratised. As such the greatest impact is clearly at the distribution level, placing the distribution operator at the heart of the energy transformation and forcing a major evolution of the distribution business.
The question facing distribution operators, however, is how they should evolve given the varieties of local circumstances – which capabilities should they acquire and when, and how should they prioritise their investments?
In the UK, for example, a major initiative is well underway for the distribution network operators to transition to distribution system operators (DSOs). Elsewhere in Europe some jurisdictions will be characterised by high electric vehicle adoption but others by low technology implementation and lower levels of distributed energy resources (DERs). Some will serve buzzing urban communities and others mainly rural users. In some markets, network customers and market players will face multiple DSOs whereas in others there will be one or two.
To provide some direction, a new study from consultants EY and the European sector association Eurelectric combines input from interviews with energy company C-suite executives with on-the-ground experiences, an online survey and other industry insights.
Energy sector insights
While there is general agreement on the future role of the DSO, most envisage a sea change occurring in the period from 2025 to 2030 in terms of when the new technologies coming onto the grid become economically viable. For example, while most respondents to EY’s survey believe rooftop solar will be economically viable in 2025, less than two-thirds think electric vehicles will be and half or less think grid connected storage and demand side storage will be. However, most believe all of these as well as EV charging infrastructure and electrification of heat will be economically viable by 2030.
Another notable finding of the survey was that the greatest operational barrier DSOs need to overcome was considered to be a lack of data and analytics to study and control system configuration in real time. Inadequate IT and OT systems and a lack of commercial frameworks for contracting with DERs and aggregators also were top barriers. However, few considered insufficient protection against security threats or inflexible connections for constraint management as barriers.
Given these and the other findings, the report states that the next five years will be critical with the need for investment “in tools, people and infrastructure” and thus “the time to act is now”. Specific investment areas include monitoring DERs across all voltage levels, creating visibility over power flows at local distribution level, enabling the integration of flexible solutions and developing platforms for procuring flexibility services.
The report states that DSOs will need to work with TSOs to co-design markets in which all network customers can connect and exchange energy services. The challenge is to create a market that combines and optimises local peer-to-peer interactions, and provides access to regional, national and cross-border trade.
A phased approach is proposed. In phase 1 investment is required in the resilience and intelligence of the grid to accommodate the increase in DERs, EV charging infrastructure, data centres and electrification of heat and other large-scale users of energy. At the same times, it will allow demand profiles to be adjusted to the supply peaks in renewable generation. Success will depend on organisations’ ability to enhance visibility across multiple connection points and to evaluate and plan for their likely impact on the network.
In phase 2 there should be investment in digital solutions and technology, such as the wide deployment of sensors to automate and control the network. This should include most likely the ability to value flexibility from different kinds of generation and demand sources, development of platforms for streamlined customer enquiries, connections and installations, and trial and prototype solutions across the network. In parallel, DSOs and TSOs should jointly develop new market frameworks for ancillary services that encourage participation from DER owners and aggregators. Increasingly, by managing platforms, the DSO will become the neutral facilitator of markets, enabling the sale and purchase of energy between participants, irrespective of technology.
Phase 3 will be the point at which investment translates into enhanced systems and optimised networks that enable the energy transition and secure the future of DSOs for the years ahead. The phase should include embedding active network management capabilities across power systems in the EU to ensure grid stability, deployment of advanced distributed grid intelligence and control systems, and creation of platforms for energy trading and microgrid service strategies.
The report concludes stating that while the sector is on the brink of a technology-enabled transition, it is compromised by the absence of a relevant and adaptive regulatory and policy framework. Issuing a call for “timely and national implementation” of the Clean Energy package, it suggests that failure to anticipate oncoming changes to generation and technology, and delays in reacting to the red flags that are waving today, risk undermining the affordability of the energy transition and jeopardising energy security and supply going forward.