Restructuring Revisited Part 1: Competition in Electricity Distribution Systems

Abstract

This paper addresses the implications of the emergence of distributed energy resources (DERs) for competition in the electricity distribution systems. The regulations on industry structures in place today were designed in an era characterized by centralized resources and relatively price inelastic demand. In light of the decentralization of the power sector, regulators and policy makers must carefully reconsider how industry structure at the distribution level affects competition, market development, and cost efficiency. We analyze the economic characteristics of distribution network owners and operators, DER owners, and aggregators and retailers. We translate the foundational theories in industrial organization and the lessons learned during the previous wave of power system restructuring to the modern context to provide insight into three questions. First, should distribution system operations be separated from distribution network ownership in order to ensure the neutrality of the DSO role? Second, should DNOs be allowed to own and operate DERs, or should DER ownership be left exclusively to competitive actors? Third, does the emergence of DERs necessitate a reconsideration of the role of competition in the provision of aggregation services such as retailing? This paper is the first part of a two-part series on competition and coordination in rapidly evolving electricity distribution systems.

Flexibility markets: Q&A with project pioneers

“…Is the flexibility market operator a third party? (Burger et al, 2019a;Gerard et al, 2018;Ramos et al, 2016;Stanley et al, 2019) (ENTSO-E et al, 2019USEF, 2018) 3. Is there a reservation payment?…”

“…Is there TSO-DSO cooperation for the organisation of the flexibility market? (Brunekreeft, 2017;Burger et al, 2019a;Gerard et al, 2018;Hadush and Meeus, 2018;Le Cadre et al, 2019;Ramos et al, 2016) (CEER, 2018EDSO et al, 2018;ENTSO-E et al, 2019;USEF, 2018) 6. Is there DSO-DSO cooperation for the organisation of the flexibility market?…”

“…Second, there is a debate about who should be the market operator. Burger et al (2019a), Stanley et al (2019), Ramos et al (2016) emphasize that to ensure transparency and prevent foreclosure the market operator must maintain complete independence from market activities. Gerard et al (2018) and USEF (2018) note that the party being the market operator will be a function of whether the flexibility market is separated or integrated with other markets.…”

“…Most academic papers, i.e. Brunekreeft (2017), Burger et al (2019a), Gerard et al (2018), Ramos et al (2016), and most stakeholder reports, i.e. CEER (2018), EDSO et al (2018), ENTSO-E et al (2019) and USEF (2018) all discuss whether the DSO and TSO should procure flexibility in the same market.…”

“…However, in principle, all these markets could be separately organized at transmission and distribution level. For example, Burger et al (2019a) and Gerard et al (2018) discuss the option to have DSOs doing local balancing.…”