Electricity networks

Abstract

While the economics of low carbon generation technologies is fast improving due to a mix of policy and market driven incentives, innovation in electricity networks has been relatively sluggish. This slow adaptation of electricity networks is challenging as they are key to the energy transition. Further electrification of the economy requires significant investment and innovation in the grid segment of the electricity supply chain. Traditional regulatory models of natural monopoly network utilities are designed to incentivise cost efficiency, with the assumption that network business is costly and the task of regulation is to encourage cost reduction subject to firm achieving a certain level of reliability. A feature of innovation activities is that they are riskier in comparison with the business-as-usual activities of network firms. This paper reviews the evolution of electricity grids from the technological and organisational perspectives and analyses the efficacy of existing incentive models in encouraging innovation. We show that incentive mechanisms that do not take uncertainty into account in the outcome of innovation efforts divert the attention of network utilities from innovation to normal efficiency gains. We also demonstrate that the issue of risk can distort the outcome of a competitive scheme for innovation funds when bidders are heterogeneous in their risk tolerance. Finally, based on the results of our analysis about the role of risk in innovation activities and a review of innovation incentive mechanisms in the UK and Italy, we provide recommendations for addressing the problem of innovation under regulation.

Optimal Selection and Location of Fixed-Step Capacitor Banks in Distribution Networks Using a Discrete Version of the Vortex Search Algorithm

“…The objective function corresponds to the minimization of the total energy cost during a continuous year of operation added to the investment costs in fixed capacitor banks, as presented in (1).…”

“…Electrical distribution networks are responsible for transferring energy from the transmission system to industrial, commercial, and domestic users [1]. The convectional configuration of these networks is radial; this means their configuration is like a tree where each user has one main supply source [2,3].…”

Electricity Markets in the Resource-Rich Countries of the MENA: Adapting for the Transition Era

“…The barriers to full utilization of the interconnection include a lack of enabling regulations (for instance, current regulations do not require members to provide support for more than 30 minutes) and a lack of accurate price signals (which would require information on the marginal costs of electricity production in member countries) (MEES, 2018c). There is also a need for a compensation plan that remunerates network firms for their cost of efficient investment and operation as well as innovation, while sharing the risks between firms and their customers in an efficient manner (Poudineh et al, 2017). Regulators in these countries can adopt a combination of an input-based approach, which includes the costs of network services in regulatory expenses, output-based regulation, which allows firms to benefit from the full value of successful investment and innovation outcomes (for example by allowing for additional revenues or extending the regulatory period), and tendering in order to regulate innovation and business-as-usual expenses of the firms.…”

“…For example, DNOs may need to evolve their roles outside of the traditional network business into DSOs. A step ahead of this would be DSOs' evolution into distribution system platforms (DSPs): intermediaries that convert data to accessible information-aiding consumers and suppliers alike to make efficient consumption/production choices-connect participants, and reduce transaction costs (Poudineh et al, 2017). 18 As distribution and retail supply have remained integrated in the resource-rich MENA countries (including countries which have progressed the furthest with reforms, such as UAE), such changes would be very slow unless institutional settings are adapted accordingly.…”

On the Efficiency in Electrical Networks with AC and DC Operation Technologies: A Comparative Study at the Distribution Stage

“…Presently electrical distribution networks are essential systems in economic development around the word [1,2]; these grids are also responsible for distributing energy from large-scale power systems to all end users at medium and low voltage levels [3], which implies that in terms of size, the distribution networks are the lengthiest infrastructure inside of the power system [4,5]. This is important since higher losses can be presented at distribution networks in comparison to power systems (transmission and sub-transmission networks), e.g., in the Colombian context, energy losses at distribution networks can be between 6% and 18% while losses at transmission networks can be between 1% and 2% [6].…”