Active Distribution Networks

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The Status in Europe (2012)

Ruggero Schleicher-Tappeser:

"Today, at least in Europe, distribution system operators (DSOs) have only very limited balancing activity. Backup and ancillary services are being organised by the transmission grid operators. Most consumers, in Germany all below 100 MW h/year, are being taken into account by simply using their standard load profiles. When they start producing power themselves and developing own consumption flexibility for dealing with fluctuating generation, this standard profile approach does not work anymore. Local grid operators need to look more carefully at their own balance for avoiding dangerous or inefficient new load peaks in all directions. They need to set specific, time-dependent incentives for balancing the producers and consumers in their grid to a certain extent, before relying on balancing services from the level above. This would completely reverse the logic of the present system. Pushed by the new balancing capacities of the prosumers at the bottom of the pyramid, balancing starts to be organised bottom-up. But under the present rules in Europe, distribution system operators have no possibilities to fulfil such a role. Unbundling has separated the roles of energy provider and grid operator.

Internationally, the increase of distributed energy resources (DER) and the availability of new semiconductor-based power electronics have led to an increasing interest in “microgrids” and active distribution networks, not only for remote areas, but also as a utility strategy. A useful overview on these concepts is given by Chowdhury et al. (2009), however their use by different authors and projects is not yet coherent.

In the US, where grids are less dense and power quality is lower than in Europe,37 this debate has gained in intensity over the last decade ( [Driesen and Katiraei, 2008], [Lasseter, 2002] and [Marnay, 2011]). Recently, the IEEE has adopted a new standard (IEEE Standards Organisation, 2011) that gives guidance for the integration of microgrids into electric power systems. In combination with initiatives of the Federal Energy Regulatory Commission for enhancing demand response (FERC and DOE, 2011) it might strongly facilitate the implementation of grid-tied microgrids (Carson, 2012).

Europe seems to have come a bit later in this development but meanwhile there is intensive research on active distribution networks. In the ambitious project the Danish grid operator ENERGINET38 sketches the architecture for a grid that can accommodate 50% wind energy (Lind, 2009) emphasising the importance of active distribution and of decentralising operation and control. But while the technical reports are explicit on this subject, the summary report is more cautious about decentralising competencies.39 The strategy of unbundling pursued in the last decade in Europe is not fully compatible with the idea of integrated management underlying the microgrid concept,40 which is perhaps the reason why the term “microgrid” has become rather unusual in Europe.41 Among the EU projects in this field, the DISPOWER project (Degner et al., 2006) was one of the first to systematically address new functioning modes of distribution systems for coping with high shares of distributed energy resources. Today, the ADDRESS project42 (Valtorta et al., 2011), with the participation of large European utilities is looking at a more flexible and responsible role of DSOs. For reconciling a stronger role of prosumers in balancing the system with present market structures it envisages to introduce “aggregators” mediating between prosumers, DSOs and national markets for ancillary services. Aggregation – also in the form of virtual power plants – is a concept frequently referred to in a variety of projects43 which originally does not take into account physical grid capacities. It seems to be an open question how this concept can be transparently combined with an enhanced role of DSOs, so as to really allow for optimal local balancing. Rather advanced in the search of new optimisation mechanisms at the local level are six model regions financed under the programme “E-energy—smart grids made in Germany,” 44 which develop technical platforms for local electricity markets. Interestingly, municipal and independent regional utilities play an important role in these projects. But also these do not directly address the question whether it might be useful to reconsider the whole market architecture. They are all technology-oriented and try prudently to integrate innovative technological concepts into existing market and institutional structures. The same can be said of most of the wider range of projects dealing with “smart grids” (Giordano et al., 2011), a broad term embracing a wide variety of concepts.

After the blackouts and the crash of ENRON in 2002, several states in the US have successfully introduced the market concept of “nodal pricing” for an optimal allocation of grid capacities in transmission grids. The concept46 allows for a direct consideration of grid topologies and location specific pricing. Also, in Europe it is supposed to have considerable advantages for changing requirements in transmission ( [Vogel, 2009] and [Weigt, 2006]). In the EU, Poland is presently testing the concept for its transmission grid (Sikorski, 2011). More recently, it has been suggested for managing distribution grids (Sotkiewicz and Vignolo, 2006)—an idea which does not yet seem to have been further developed systematically ( [Brandstätt et al., 2011] and [Neuhoff and Boyd, 2011]).

Locational pricing in one form or another will be an essential element of a new market architecture that would be able to optimally balance production and consumption of electricity in time and space with the help of transmission and storage.

Evidently, the question of the overall architecture is a political one. There is little systematic discussion concerning basic control and governance approaches as well as system typologies. The transition from the old central control approach, where customers could be treated as statistically predictable units, towards a system with much more self-organisation growing from the bottom is a complex process involving not only technical innovation but also strong economic, institutional, and political interests. The definition of coordination levels and the design of markets strongly affect power relations between the actors. The generally acknowledged need for more distributed generation, distributed grid intelligence and active balancing in distribution networks is weakening the position of large utilities.

This can be clearly seen in Germany, where the four large incumbent companies lost market shares and increasingly also political influence, while municipal utilities are getting stronger.48 In 2010, 51% of the installed renewable power generation capacity of 53 TW was owned by private persons and farmers, 7% by smaller utilities and only 6.5% by the four large power companies. Concerning PV, the figures were even more impressive—the four large utilities owned only 0.2% of the capacity (Trend Research, 2011).

Despite all bottom-up developments, however, it is clear that large-scale power generation and long-distance transmission will remain important, since half of the electricity is not flowing through the retail system and going directly to large consumers. Their supply will continue to come from large generation units. Moreover, the distribution grids will need more long-distance interconnection for compensating weather-dependent fluctuations. And inter-seasonal storage will probably be most efficiently be provided by large units connected to the transmission system. For all these reasons national systems and markets in Europe are not sufficient anymore. More coordination is required. Incumbent big utilities understand this trend as their opportunity; they try to maintain as many large structures as possible for defending their business model.

In a perspective that focuses on one main coordination level, which for a long time was the national one, increasing decentralisation and increasing scales of exchange seem to be opposed tendencies corresponding to conflicting strategies. Development seems to have reached a point, however, where neither a transition to a unified, centrally managed European electricity market, nor a complete decentralisation to regional electricity supply (“energy autarchy”) seem possible or desirable. Also, considering the high pressure for change and the short transition times available, both extremes would need massive state intervention for blocking alternatives, massive investments, or technical breakthroughs. Below and above the national level, new tiers of active balancing and optimisation are needed. Given the complexity of the optimisation tasks and the multitude of interests involved, market mechanisms at each of these echelons and between them seem to be the appropriate instrument. “Regional markets,” “market coupling,” “multi-level governance,” and “subsidiarity” have become important keywords in other discussions on similar kinds of problems, such as regional and transport policies.49 In the electricity sector, seemingly contradictory trends are leading towards a new kind of multi-level systems of continental size.


The semiconductor revolution has reached the energy business. Power generation, power transformation and quality control, as well as the whole management of production, consumption, and exchange are all switching from conventional, basically electromechanical technologies to microelectronic, semiconductor-based, modular and software-controlled technologies. They allow for far more interaction and flexibility, thereby transforming the roles of the persons and institutions involved. The upcoming transformation is in some regards similar to the transition from the railroad to the car, or from the television to the internet.

Trying to predict the speed of disruptive structural change is difficult since new interactions may produce unknown dynamics. In complex systems it is possible to identify tensions and opportunities, but where a tipping point has been reached is often only discoverable ex-post. The new dynamics in the energy business is characterised by new technologies developed by new industry networks, enabling millions of new actors to start to produce power themselves and to interact in new ways with new tools. Self-organisation is starting to play an unprecedented role in a sector which until now has been characterised by relatively hierarchical structures, controlled by a small number of actors with a limited number of choices. Self-organisation and chaos theories may therefore be more adequate to describe the dynamics than the assumptions of conventional planning. The accelerated change of key indicators – which many actors in the political arena have not yet acknowledged – might be an indication that we are approaching a turning point at which new organisational patterns start to spread rapidly. Basic principles for increasing system stability, such as subsidiarity, participation, diversity, and networking may give guidance in phases of turbulent transformation (Schleicher-Tappeser and Strati, 1999). While for years “prudent” or “moderate” public and private policies meant not to bet too much on a desirable but difficult transformation, today prudence means to be prepared for unexpectedly rapid change in a turbulent environment.

Minimising risks gets more important than in the past. From an energy consumer perspective, price and quality risks of public power supply increase, while the opportunities to protect oneself against unwanted developments get more interesting. For those involved in the energy business, the transformation requires more efforts to innovate and adapt. In both cases, the rapidity of change requires proactive initiative. Increasing awareness of the transformation may therefore accelerate the transformation itself. Cooperation in networks may be a promising strategy for facilitating adaptation. System competence is increasingly essential for surviving in turbulent markets. New business models are urgently needed.

The stepwise liberalisation of electricity markets and of international trade, in combination with growing climate change awareness and front-runner support policies for renewable energy have unleashed a highly dynamic development which is about to get uncontrollable with the means of the present regulatory and institutional setting. However, reliable public electricity supply and an effective public grid remain essential for modern industrialised societies. The high probability of accelerated change requires a more rapid development of an appropriate regulatory and institutional framework. It will be important to focus on a lean, transparent structure which can be flexibly adapted, changing only a few key parameters. Complex regulations and market constructions would need too frequent changes in turbulent times and may not be sufficiently transparent for competent democratic control. Most urgent is perhaps the need to formulate and publicly discuss a strategic vision for a multi-level future system which does not lose clarity in technical details." (

See also graphic at