A new deal for energy consumers
From the Clean Energy Package to the future of Electricity Network Codes
FSR Topic of the Month by Athir Nouicer, Valerie Reif, Tim Schittekatte
In this Topic of the Month, we look at new developments in the area of electricity network codes and guidelines that were triggered by the recent adoption of the Clean Energy Package (CEP)[i]. The recast of the electricity Regulation (Regulation (EU) 2019/943) explicitly lists several areas for new network codes and guidelines. In many other areas, the electricity Directive (Directive (EU) 2019/944) allows the Member States to first experiment with innovative regulation. Best practices may later inspire the development of new European principles or rules or point out necessary amendments to network codes and guidelines.
The research FSR Energy conducts on these areas is done in the context of the European H2020 project INTERRFACE (“TSO-DSO-Consumer INTERFACE aRchitecture to provide innovative grid services for an efficient power system”). INTERRFACE brings together more than 40 partners from all across the electricity sector. Besides thinking about future regulation, several pilots are being also set up within the framework of the project.
[i] The last legislative text of the CEP was published in June 2019 in the Official Journal of the European Union.
Electro-mobility
by Athir Nouicer (Florence School of Regulation)
What is it about?
The uptake of electro-mobility together with the diffusion of renewable energies, within the energy mix, are among the necessary conditions for the transition and the gradual decarbonisation of energy systems, as well as for the achievement of climate targets. The Commission’s Communication on 20 July 2016 ‘European Strategy for Low-Emission Mobility’ highlights the need for decarbonising the transport sector. However, numerous challenges exist.
One commonly recognised challenge is the estimated increase in electricity consumption due to the expansion of electro-mobility. This is magnified by the electrification of heating via heat pumps and other trends in the electricity sector. According to a recent JRC report on the evolution of Electric Vehicles (EVs) in Europe, a 15% integration of electric cars among the total number of cars on European roads in 2030 would correspond to an additional electricity demand of roughly 95 TWh per year. This represents about 3% of the total electricity consumption in the EU projected for 2030. Other reports and studies exceed this projected integration level of 15%, such as the EC report ‘A European Strategy for Low-Emission Mobility’.
The main challenge, however, is not necessarily the increase in the volume of electricity consumed but is more related to the changing shape of load curves, i.e. a possible increase in evening demand peaks as users charge their EVs overnight. Such instantaneous local increase in demand peaks, if not properly managed, may constrain the network and require, inter alia, significant grid investments. At the same time, according to the EC impact assessment, EVs and heat pumps are considered potential sources of demand response allowing active engagement of their owners and other electricity customers. This requires the existence of enabling technologies providing shiftable load and a regulatory framework valuing their flexibility for the grid through so-called Vehicle-to-Grid (V2G) and smart charging solutions.
Will electro-mobility be a blessing or a curse for the power system? In order to obtain the former, a regulatory framework needs to be provided which allows unlocking the flexibility potential of EVs while avoiding unmanaged charging of thousands or millions of them at critical hours for system operation. In addition, regulators should ensure a sufficient development of publicly accessible recharging infrastructure, whether it is a market-based procedure or assigned to a DSO in the absence of competitors.
What does the Clean Energy Package say?
The integration of electro-mobility in the power system, i.e. smart charging and possibilities to provide services to grids, is only implicitly covered in the CEP. What is explicitly described in the CEP is the regulatory framework around electric charging infrastructure. More precisely, the CEP e-Directive sets a framework contributing to creating favourable conditions for electro-mobility. Member States shall ensure that their national regulations and market rules do not hamper the deployment and ownership of EV recharging stations, clarify the role of DSOs, transparency, efficiency and fairness of tariffs and ensure their neutrality as well as ensure that electricity prices reflect actual demand and supply.
More precisely, Art 33(1) of the e-Directive requires Member States to provide the necessary regulatory framework to facilitate the connection of EV recharging points (both publicly accessible and private) to the distribution networks. Member States should ensure that DSOs cooperate on a non-discriminatory basis with any party that owns, develops, operates or manages the publicly accessible EV recharging points. DSOs shall not own develop, manage or operate EV recharging points, except where those are DSOs’ private recharging points for their own use or by way of derogation. Article 33(3) lists three conditions, upon whose fulfilment a Member State may allow a derogation:
‘(a) other parties, following an open, transparent and non-discriminatory tendering procedure that is subject to review and approval by the regulatory authority, have not been awarded a right to own, develop, manage or operate recharging points for electric vehicles, or could not deliver those services at a reasonable cost and in a timely manner;
(b) the regulatory authority has carried out an ex-ante review of the conditions of the tendering procedure under point (a) and has granted its approval, and;
(c) the distribution system operator operates the recharging points on the basis of third-party access in accordance with Article 6 and does not discriminate between system users or classes of system users, and in particular in favour of its related undertakings.
The regulatory authority may draw up guidelines or procurement clauses to help distribution system operators ensure a fair tendering procedure.’
Article 33(4) adds that ‘where the Member States have implemented the conditions set out in paragraph 3, the Member States or their designated competent authorities shall perform, at regular intervals or at least every five years, a public consultation in order to re-assess the potential interest of other parties in owning, developing, operating or managing recharging points for electric vehicles. Where the public consultation indicates that other parties are able to own, develop, operate or manage such points, Member States shall ensure that distribution system operators’ activities in this regard are phased-out, subject to the successful completion of the tendering procedure referred to in point (a) of paragraph 3. As part of the conditions of that procedure, regulatory authorities may allow the distribution system operator to recover the residual value of its investment in recharging infrastructure.’
Which Network Code and Guideline Areas are relevant?
Market rules for electro-mobility are not explicitly mentioned in the network code areas listed in Article 59 of the e-Regulation. However, electro-mobility could serve as a potential source for demand response and the provision of grid services. In such a case, five network codes areas are deemed relevant:
(1) Rules for trading related to technical and operational provision of network access services and system balancing, (2) Rules for the non-discriminatory, transparent provision of non-frequency ancillary services and (3) Rules for demand response, including rules on aggregation, energy storage, and demand curtailment
These three areas are relevant for electro-mobility to provide extra-revenues for owners. Rules and requirements to participate in balancing markets are included in the existing Electricity Balancing Guideline (EB GL) and System Operation Guideline (SO GL). To account for the balancing potential of demand-side flexibility and V2G services stemming from EVs, the relevant existing EB GL and SO GL provisions could be subject to amendments. Such amendments could concern the definition of balancing products or the requirements for frequency ancillary services.
The second area on non-frequency ancillary services constitutes a new network code area introduced by the e-Regulation. An example of non-frequency ancillary services is voltage control.
The third area relates to the rights and rules for consumers when engaging in all electricity markets either independently or through aggregation (Art 15(2) of the e-Directive). EVs are a potential source for demand response through aggregation, thus fostering engagement of active customers and new intermediaries. This area also constitutes a new network code area introduced by the e-Regulation.
(4) Network connection rules
This area is related to the question of whether EVs are classified as demand, generation or storage. Currently, large differences exist in the connection network codes with regards to these three categories. In the case of classification as demand, the current network code on Demand Connection (DC NC) only applies to new or existing demand facilities connected at the distribution level if they provide demand response services to relevant system operators and relevant TSOs. Generation is regulated by the Requirements for Generators network code (RfG NC), applicable to generation units with a maximum capacity of 0.8 kW and more. Storage devices, except for pump-storage, are currently are not included in a connection code. With increasing numbers of EVs and battery storage devices, the current exclusion of storage from connection codes is likely to change.
(5) Third-party access rules
This area covers recharging station access as they can be given to a third-party. Thus, a transparent and non-discriminatory framework shall be established for all recharging stations services providers.
