Are Distribution System Operators in a World Without Competition?

Are Distribution System Operators in a World Without Competition?

Eric Morel 23/10/2018 4
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In our minds, everything seems clear, distribution network operators (DSOs) belong to the regulated world, therefore remain in a monopoly and are without competition.

Is the situation as clear as that? Will we see the network managers, in the coming years, look like the utilities of yesterday?

Even though regulation retains DSOs in an environment that seems protected, several factors confront them with characteristics of the competitive world.

DSOs are Increasingly Under Pressure on Performance

They are the facilitators of the energy transition. Indeed, their adaptation to intermittent, renewable energy penetration rates determines the speed of responses to requests for connection of new production facilities and the cost of these connections. We begin to observe responses that are too slow, and frequently high costs, which make the DSOs appear as responsible for being obstacles to the energy transition, a situation acceptable neither to citizens nor to public leaders.

DSOs also have a difficult economic equation to manage: they have more and more investments to ensure: the traditional renewal of electrotechnical assets, the digitalization of the network to manage increasingly distributed resources, management of data infrastructure, charging infrastructures for electric vehicles, the reduction of congestions, etc. The repercussion of these investments on the cost of energy cannot, for obvious political reasons, increase significantly and the overall consumption, on which they are distributed, grows less quickly or decreases.

This emerging situation is not meant to be temporary and pushes the DSOs to look for productivities.

DSOs are Stimulated by Comparison

If the DSOs are not directly competing, they are compared. In countries where the market is fragmented, with DSOs by region, cities or villages such as Austria, Germany, Sweden, Norway, Switzerland and many others, national authorities tend to compare the performance of DSOs and to publish them. Nobody likes to be pointed at.

But They are not Immune to Real Competition

There are also areas on which the DSOs could, according to the evolution of the regulation, be in a situation of competition: the operation of microgrids, in particular microgrids of eco-disctricts could return to private, multifluid operators, with a developed sense of service; the deployment and operation of charging stations for electric vehicles on public roads are not reserved to them; the management of energy communities is not durably attributed to them etc …

I am not exhaustive in my list but what we have just shared pleads for an in-depth transformation of the DSOs. Their business model is probably to revisit and adapt.

In their case, the regulated world may well be a partial guarantee of monopoly: grid operators will also experience the effects of the energy revolution.

Read other articles of the same author by visiting www.smartcitiesbymachnteam.com         

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  • Jordan Gray

    Great thoughts and powerful read by the way !!

  • Nigel Smith

    Worth reading

  • Eddie Cotter

    Moving from theory to practice is the most important!

  • Ryan Charnock

    Thoughtful piece Eric. I never wanted this article to end! Waaaayyy too short for me.

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Eric Morel

Energy Guru

Eric Morel is a worldwide recognised expert of energy transition and digitalisation. In the past, he has served as VP Corporate Business Strategy and VP Global Smart Grids and Energy Efficiency at Schneider Electric as well as CEO of Ilevo, a telecommunication start-up. He is a founding member and a former Board member of the Gridwise Alliance, the main professional private/public association dedicated to Smart Energy.

   
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