Decentralised resources and flexibility – Policy Workshop

FSR Regulatory Policy Workshop Series 2022

The European Union has committed to double the share of renewables in final electricity consumption over the next ten years, from 34% in 2020 to 65-70% in 2030. In this way, the electricity sector will continue to contribute more than proportionally to the overall renewables penetration target of 40% of final energy consumption in 2030 and the decarbonisation goal of reducing greenhouse gas emissions by 55% by the same date.

A large part of the new renewable-based generation – including solar PV and wind – will be characterised by a higher variability (and somewhat lower predictability) of its output compared to conventional generation. Therefore, in order to accommodate the increased penetration of renewables, the electricity system would need to increase its flexibility, i.e. its ability to withstand and respond to sudden and unexpected changes in residual demand (the difference between total demand and the part of it served by renewables-based generation).

Fortunately, technological development – e.g. in batteries, electric vehicles and smarter appliances – provides new resources which can offer flexibility to the system. The increase digitalisation of the energy sector and of contiguous sectors provides the opportunity to harness this flexibility to the benefit of the electricity system. The new resources – generally referred to as Distributed Energy Resources (DERs) – are typically smaller and more decentralised than those, mainly generating plants, which have so far provided most of the flexibility in the electricity system. This poses challenges, but also provides opportunities, e.g. to develop local flexibility markets helping distribution grids to manage local congestion.

Beyond technological advances, a conducive regulatory system and market design is necessary to allow DERs to enter the market to offer their flexibility. In fact, many of the current rules relevant for the connection and participation of these smaller, more decentralised DERs were developed with larger generating units as a reference and might need to be adapted to the characteristics of DERs.

Currently, the participation of DERs in electricity balancing markets, whether individually or aggregated, is still rather limited[1]. It is however now widely accepted that new approaches to system operation and the sourcing of ancillary services[2] from DERs[3] are now needed.  As DERs are in general relatively flexible, i.e. being able to adjust the volumes of electricity withdraw from or injected into the grid at short notice, they are considered very suitable to provide all types of system services.

in developing an enabling regulatory environment for the participation of DERs in balancing and ancillary services markets, a number of aspects should be considered, including:

• the definition of market requirements – e.g. minimum bid size and formats, DER observability – which recognise the characteristics of DERs
• whether the current organisation of the balancing mechanism is suitable for accommodating the participation of DERs or whether the effective interaction of DERs requires a re-organisation of the balancing system;
• the identification of the most effective flexibility aggregation model;
• issues related to data interface and portability.

Against this background, this Workshop on decentralised resources and flexibility will aim at identifying which aspects of the current organisational, regulatory and market design frameworks will need to be adapted to enable the increasing penetration of DERs.

For this purpose, the Workshop will be structured in two sessions:

• Session I will aim at identifying which aspects in the current regulatory and market design (especially in relation to balancing and reserve markets) would need to be adapted to enable the participation of DERs;
• Session II will consider which new market structures would be required fully to exploit and support the participation of DERs in the most efficient manner and which organisational model might best serve these developments.

A recent report produced by the Florence School of Regulation on “Distributed Energy Resources and electricity balancing: visions for a future organisation” will be presented at the Workshop and its conclusions discussed.

Sustainability assessment

The FSR assesses the sustainability and carbon footprint of all its Workshops of the Regulatory Policy Series. This Workshop is run online due to the COVID-19-related restrictions. Therefore, there is no travel involved and the Workshop’s carbon footprint is limited to the impact of using ICT. It is considered that there are no viable ways further to reduce the carbon footprint of the Workshop.

Please note that this event ‘Decentralised resources and flexibility – Policy Workshop’ is exclusively open to National Regulatory Authorities, delegates from public institutions and FSR Energy Donor companies. For further information, please contact Elena Iorio.

Read more

Read more about the previous Policy Workshop of this series ‘Electricity prices and market design‘.

Technical report: Distributed energy resources and electricity balancing

[1] Recent overviews per Member State of the European Union (EU) can be found in The smartEn Map 2020 – PROSUMERS – smartEn.

[2] Article 2(48) of Directive (EU) 2019/944 defines ‘ancillary services’ as a range of functions which system operators contract to guarantee system security. Ancillary services include balancing, but also various other services, such as reactive power provision and black-start capability, but not redispatch.

[3] See, for example, CEDEC, E.DSO, ENTSO-E, Eurelectric, GEODE, 2021. Roadmap on the Evolution of the Regulatory Framework for Distributed Flexibility. A joint report by ENTSO-E and the European Associations representing DSOs (CEDEC, E.DSO, Eurelectric, GEODE), June 2021.