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Assessment of interactions between the economics of distributed generators, distribution system operators and markets

S. Ropenus , S.T. Schröder , H. Jacobsen , L. Olmos , T. Gómez , R. Cossent

Renewable energy sources for electricity generation (RES-E) and other distributed generation (DG) technologies, such as local combined heat and power (CHP) power plants, are among the core elements in reducing greenhouse gas emissions. Besides, they help achieving other EU policy targets such as security of supply. With an increasing penetration, the focus shifts from direct support schemes to efficient market integration. Incentives should support flexibility based on market price signals in the short term, and long term distortion of markets should be minimised. Locational signals for DG/RES investments should include interaction with distribution and transmission grids. Regulation of network companies and support schemes should be coordinated to secure that incentives for efficient integration exist. One of the key issues is the interaction with distribution system operators (DSOs), which constitutes the physical connection between a DG/RES unit and the remaining power system. The design of support schemes and national distribution network regulation is to the discretion of the individual EU Member States. This report analyses the economic factors of DG/RES and DSO operations with a focus on their interactions. Both points of view are confronted with each other to derive regulatory implications for the single aspects of their interaction. Based on the relevant regulation affecting DG operators’ and DSOs’ operations in different countries, existing grid codes and the changes to these rules that have been proposed, we aim to identify which rules could be implemented in order to provide DSOs with the right incentives to facilitate and pass on incentives to DG to install capacity and integrate operation of DG/RES in a way that increases total efficiency. Different possibilities for designing the regulation of the DG producers’ and DSOs’ operations in a way that increases the incentives for these entities to integrate DG/RES in the electricity system have been analysed. In the following, the influence of network regulation and application of support schemes on cost and revenue streams of DG operators and DSOs are illustrated by means of a simple analytical modelling approach. Subsequently, some light will be shed on the qualitative implications of market interactions and market power. This report constitutes Deliverable D3 of the dissemination activities of Work Package 2 of the IMPROGRES project, dealing with current DG/RES, DSO and market interactions. The D3 Deliverable discusses the interactions between the aforementioned entities and illustrates them with five cases: West Denmark, the Netherlands, Germany, Spain and the United Kingdom. […]


IIT Project: IMPROGRES (IMPROGRES)

Funding entity: Comisión Europea. Intelligent Energy-Europe (IEE)

01/02/2009

IIT-09-089I

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