Grid regulation needs to be revised to stimulate investments in European electricity distribution networks to ensure a safe, sustainable and reliable electricity supply for European citizens. This is the main question of a joint statement from European electricity distribution system operators (DSOs), launched in Brussels on 22 May.
The joint statement of EURELECTRIC and the associations of DSOs CEDEC, EDSO for Smart Grids and GEODE outlines the central role of DSOs in the energy transition and the conditions necessary to fulfill this role. In particular, it highlights the need for significant long-term investments in distribution networks if Europe is to achieve its energy and climate goals.
“EU policies have encouraged the development of decentralized electricity generation, electric vehicles, energy storage and flexible demand. This change has given DSOs the opportunity to rethink traditional system operations and think about how best to develop and manage Europe's distribution networks with a view to the future," the document reads.
The need to integrate renewable energy sources into the electricity system, plus the replacement of assets and the development of smart grids and smart meters, places high demands on DSOs' investments. However, a report from EURELECTRIC shows that regulations do not make the necessary investments possible. However, a report from EURELECTRIC shows that regulations do not make the necessary investments possible. DSOs today even face lower investment incentives than in 2010.
As regulated companies, DSOs' compensation is determined by national regulations. The EURELECTRIC analysis of national regulatory systems and DSOs' accounting statements shows that the feasibility and adequacy of regulated returns have decreased, as has the reliability of planning. Furthermore, regulations often treat R&D and pilot projects like any other expense, without recognizing the risks associated with testing new processes and technologies. The result is that much-needed investments are not made.
In addition to stimulating investments, regulation must also ensure that distribution users pay fair and cost-oriented network rates. To achieve this - and to enable DSOs to better deal with changing operational challenges - more capacity-based network tariffs need to be introduced.