Concept of strategic planning in electricity distribution business

Abstract

PurposeThe purpose of this paper is to establish a methodological framework to address key issues in electricity distribution network development. The paper defines subtasks in the strategy process and presents key elements in the strategy work and long‐term network planning. The results are illustrated by a case network.Design/methodology/approachThe paper describes the methodology for cost and reliability analyses in the strategy work. The focus is on techno‐economic feasibility of certain network development technologies in the network strategy and the surveys are linked to economic regulation, specifically to reliability of supply and allowed return. The study addresses the stages of strategic decision making and compilation of investment strategies.FindingsThe strategic planning concept and methods are applicable in practice; the results have proven valuable in the long‐term business development and in discussions with the company owners. Outage costs are an essential element in the economic regulation of the business, reliability being a key driver in network planning.Research limitations/implicationsThere is no universal solution to strategic decision making, but each development task is highly case specific. This is due to diverging operating environments and targets set by the company owners; these issues strongly influence the strategy process.Practical implicationsThe work illustrates strategic planning in an actual distribution company and shows how the methodology can be applied to the strategic network development. Nevertheless, the results cannot be generalised as such, but each network has to be considered individually.Originality/valueThe proposed concept can be applied to the long‐term development of distribution networks. The results are internationally applicable, yet diverging regulatory models call for specific methodology in each country.

Improving reliability in an urban network

“…The analysis consists of a survey on different aspects of society, distribution company, development in the field and initial data. Based on the strategic analysis it is possible to make alternative long-term development plans for the distribution network [20,21]. Traditional technologies to improve reliability for distribution networks are the transfer of overhead lines to roadsides, the replacement of lines with covered conductors, underground cabling, circuit reclosers, primary substations and compensation of earth fault currents [20].…”

Valuing security of supply: does experience matter?

“…a kilowatt hour) of electricity (London Economics, 2013). The VoLL of electricity consumers is an important measure for assessing the welfare-optimal level of security of supply (Röpke, 2013;Lassila et al, 2011;Tanskanen et al, 2010).…”

Utilisation of reliability and asset management tool in strategic planning

“…Even the reliability issues have high importance in the regulation, they are just a piece of the model; for instance, the profit of the operator is dependent on the network valuation. Thus, the effects of economic regulation should be taken into account as an entity in strategic planning that has also been the idea in the developed asset management tool [5].…”

“…It makes easier to exploit the computer software in strategic planning. A good strategy takes into account the age of network, reliability, electro-technical and mechanical condition of the network and environmental factors [5]. The strategy provides keys for the distribution system operator to manage the state of change and guidelines to network development in the long time scale.…”