DSOs fit for 55: Challenges, practices and lessons learnt [Promoted content]

Recent legislative actions in the form of the Fit for 55 package and REPowerEU drastically increased  ambitions and accelerated the process to decarbonise Europe.

Time pressure for the delivery is high, especially on the distribution grid, which is responsible for connecting most of the new renewable energy  resources, facilitating the electrification of transport and heating/cooling, and thereby empowering customers. However, physically enforcing and digitally smartening the power infrastructure cannot be delivered in the blink of an eye. DSOs remain heavy infrastructure actors and regulated entities that are  dependent on the right framework conditions to deliver. The current situation of increased uncertainties  additionally aggravates the conditions.

Proactive DSO engagement alone cannot meet all challenges  

This paper outlines seven – non-exhaustive – challenges currently faced by DSOs when facilitating the  energy transition by connecting decentralised energy resources, especially solar PV. DSOs are often confronted with obstacles on different levels and ill-fitting framework conditions.

The paper also  illustrates how DSOs attempt to overcome some of the obstacles by launching proactive initiatives and/or  fostering close cooperations with relevant actors to make it work. Nevertheless, some challenges remain  and cannot be solved by proactive DSO action alone. More fundamental changes in the current framework  are necessary to empower DSOs and ultimately customers.

Only then can DSOs remain enablers of this  energy transition and not develop into bottlenecks. Without upgraded, smartened and well-equipped  power grids this historic transition towards a renewable energy system will not materialize.  

Lessons learnt from shared practices  

This paper presents practices implemented by DSO Entity members to overcome the following challenges: high demand in short time, capacity constraints, investment and financing needs, permitting, regulatory  framework, network tariff regime and staff and skills shortage.

Some general conclusions can be drawn from the displayed practices, while keeping in mind that with more than 2,500 DSOs in the whole of Europe differing both in sizes and capabilities, no one-size-fits-all solution can be proposed.  

In brief, the following lessons can be learnt from the practices displayed. 

• A transformed energy system requires an adapted – forward looking – regulatory (investment)  framework to thrive: Since the transition of the energy system primarily takes place in the  distribution grid, unprecedented investments within a short timeframe are required. DSOs, as  regulated entities, are dependent on suitable regulatory frameworks that apply a more forward looking investment approach. Furthermore, in situations of increasing uncertainties, adaptable regulatory frameworks that support DSOs in coping with more unstable conditions are key. These  are conclusions drawn from several of the practices that show the positive effects of a proactive  investment climate, the introduction of capacity tariffs for instance as a form of tariff network  reform or developments towards flexible connection agreements.

• Transparency between DSOs and RES developers/ investors leads to better results: Some of the  displayed practices showed the benefits of more exchange and transparency between  developers/investors and DSOs. While it is important that renewable developers involve DSOs  early in their projects, DSOs can also provide support with information about the available  capacity in their grid. Faster grid connection agreements and less additional investment in extra  capacity are the obvious benefits. Already now, most DSOs offer either capacity maps or display  the numbers of available capacity at transformer level or have clear commitments to react within  a short time to specific requests.

• Early involvement and cooperation with DSOs are key for a smooth (connection) process: Practices such as the bundling of permitting in the Netherlands show how several obstacles can  be overcome by, for instance, synchronizing permitting procedures for assets like wind farms and  the grid-infrastructure. The early and close involvement of DSOs and TSOs in the spatial planning  on regional/provincial level can lead to faster and better results. A precondition is the  acknowledgement of the key role of DSOs in the whole process of connecting RES.

• Incentives for a grid-supportive behaviour of customers and investors can accelerate a cost efficient and faster deployment of RES: Practices such as the geo-dependent standard connection fee in Denmark and/or the capacity tariff in Belgium/Flanders show how capacity constraints can be better managed through innovative concepts, closer cooperation, and more transparency. Again here, positive adaptations in the regulatory environment of DSOs are key to guarantee an  optimal outcome.  
• The benefits of smartening the grid are displayed in practice, evoking further innovations: Not  only the physical expansion of the grid but also its digitalisation and smartening are crucial. Investments that go into the smartening of the grid can lead to innovative solutions that help  meet several challenges. This could be seen in two of the practices in which smart metering  functionalities were used in an innovative way that enabled the DSO to use the grid to its full potential, thereby, connecting more renewable users in less time and with fewer staff. Again here,  a close link to the right regulatory framework is seen.

• Managing external factors must be a collective effort with sufficient support from the national  and EU-level: The practices displayed showed that a proactive approach of DSOs to manage the  drastic staff shortages is always organised in close cooperation with partners, public bodies, and governmental organisations. Close cooperations with universities and schools show the need for a holistic cooperation between all actors, including the educational system. Initiatives at the EU-level can provide additional support and should include DSOs as an important net-zero industry  sector.

DSOs try their best to stay on track to be “Fit for 55” and remain a promotor of this energy transition. However, as regulated entities, they are dependent on the right framework conditions and adequate support to be able to live up to their role as key partner of renewables, facilitator of customers’ needs and an enabler of the energy transition.

Read the report here.