Digitalisation at the core of energy networks: the backbone of the energy transition

A brief assessment on the infrastructure investment regulatory framework

The paper “Digitalisation at the core of energy networks: the backbone of the energy transition. A brief assessment on the infrastructure investment regulatory framework” will be presented at the 10th FSR Annual Conference (10-11 June, 2021).

ABSTRACT:

The transition to a decarbonised economy requires a significant increase in electrification and new generation and demand paradigms to achieve the Paris agreement’s objectives. Smart networks, which digitalisation makes possible, become critical infrastructure for this evolution to take place.

Digitalisation, with large doses of automation, allows to observe and control the network in real-time and makes it possible to integrate a large volume of renewables despite the intermittency of its primary wind or solar energy. Demand flexibility, backed with storage, also made possible by digitalisation, saves generation tips and associated greenhouse gas emissions (Check “The Digital World Knocks at Electricity’s door: Six Buiding Blocks to Understand Why” FSR Energy Issue 2018/16).

The European (2030) decarbonisation target of the economy requires multibillion-dollar investments in networks. The study will focus on distribution networks as a critical infrastructure to connect a large part of renewable generation plants. The distribution grid is also the enabler for flexibility and demand side management and a key element to enable consumer participation in the Energy Transition.

The regulatory framework for the remuneration of DSOs (Distribution System Operatos) for installing, maintaining and operating the networks remains anchored, fundamentally, in the technological paradigm of centralised generation: more cable and thicker.

The purpose of the study is: first, to describe the most frequent regulatory approaches, in terms of remuneration of DSOs, and to determine the extent to which they incentivise digitalisation or promote investments in line with the previous technological paradigm. Second, to identify which regulatory guidelines can articulate a remuneration system that boosts digitalisation to achieve environmental sustainability and, at the same time, promotes competition between different operators.

The study will develop according the following steps:

1- Setting the framework for the investments needed in intelligent (distribution) networks.

2- Describing regulatory approaches related to distribution network operators’ remuneration regulatory framework and confronting them with investments in grids digitalisation.

3- Selecting, by way of example, a specific investment to transform the grid into a smart grid and submit it to different regulatory approaches to identify the criteria that incentivise such investments the most.

4- Checking the regulatory criteria identified with better regulation principles. It is also matching those regulatory criteria with the following energy law principles: security of supply, economic efficiency and environmental sustainability.

5- Considering if those regulatory criteria identified could apply to digitalisation investments in other sort of networks. Networks that, as the electricity grid, are also natural monopolies.

6- Conclusions

For the study to be accomplished we will rely on existing publications (articles, policy briefs) and, in particular, as regards figures and data on investment and regulatory frameworks in place, we will rely on different studies by electricity market actors (e.g. Eurelectric) and regulators (CEER, ACER, national regulators). If necessary, we will ask for data directly to relevant stakeholders.

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