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The emergence of the active DSO model - introduction

Ever since the early days of electric power, which was characterised by small local networks, the trend has been towards integration, resulting in the large, centrally-managed transmission networks we see today. Whilst the ownership structures have varied over the years and from country to country (private vs public, vertically integrated vs unbundled), the picture has been one of power flowing from high voltage generators to low voltage consumers, with a central system operator balancing the generation and consumption in real time.

In that world, operators of lower voltage distribution networks have played a largely passive role in system operations, leaving the real-time balancing of the system to the Transmission System Operator (TSO) on the higher voltage network. The distribution businesses have focused instead on connecting customers and maintaining and reinforcing the network, with real-time operations focused mainly on outage and fault management.

However, in recent years the trend towards centralisation has effectively reversed, with smaller-scale “distributed” generation becoming a material part of the market. This, combined with the advent of “smart” technologies, is leading to the emergence of a more active Distribution System Operator (DSO) model. By necessity, more balancing activity is taking place at a local level with distributed generation, frequently intermittent in nature, leading to greater variability in flows on distribution networks.

At the same time, new smart grid technologies are providing DSOs with the ability to access flexible resources such as dispatchable embedded generation, storage and demand-side response, allowing them to operate their networks closer to their operational limits and reducing the need for reinforcement. Regulatory frameworks, focused on total expenditure rather than capital expenditure, are evolving to incentivise DSOs to seek out such opportunities and thus reduce costs for end consumers.

For TSOs, having more dynamic DSOs connected to their transmission systems presents both an opportunity and a challenge. On one hand, the burden of balancing the overall system is shared, but on the other hand, having multiple agents all actively balancing in real-time has the potential to create conflicting actions and inefficiencies. Co-ordination and information sharing will be key.

Although this transition is just around the corner, the model for this new world is still being debated in Europe. It is not yet clear which of the existing organisations are best placed to perform the role. Do DSOs have the right people, processes, commercial focus and technology to perform the real-time management necessary? Could TSOs extend their reach down to the lower voltages?

In this blog series we explore some of these unresolved questions about the evolving DSO model, drawing on thinking and experience from around Europe and the G-20 nations. Topics include:

  • What is driving the uptake in flexible connections?
  • What is the developer perspective on Active Network Management and local balancing?
  • How are end consumers engaging?
  • The TSO-DSO interface: what are the opportunities and challenges?
  • Do we need to rethink market design in a world of more active local balancing?
  • What are the regulatory implications of the DSO model?
  • What is the role of technology in driving and facilitating the change?
  • What can we learn from non-European markets, e.g. the US experience?


Back to September 2015


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