DSOs as enablers for a 'competitive, green and resilient EU’

The relevance of DSOs is increasing as the EU energy system is changing with roles becoming more complex and system relevant, the DSO Entity has highlighted.

Consequently, the relevance of DSOs for the three EU energy objectives has increased.

To support sustainability, DSOs are the technical enablers of the EU energy and climate objectives. For competitiveness, DSOs are a prerequisite for a competitive European economy. For resilience and security of supply, DSOs are a guarantor of secure energy distribution.

But with the core challenge of empowering consumers, guaranteeing a stable electricity distribution, connecting renewables to a modernised grid while keeping energy prices at an affordable level, they need to right regulatory conditions to deliver, the DSO Entity comments in a new paper, 'Let's Connect'.

Also of interest
Europe Energy Briefs | Anticipatory investments for DSOs and TSOs

Key measures to be implemented

The paper presents three key measures that should be implemented, alongside three core principles that should guide EU activities on the grids – introducing a grid mainstreaming approach, ensuring timely national implementation and advancing European solutions on strategic topics.

Regulation and planning

Regulatory frameworks need to adapt towards a more long-term, forward-looking and anticipatory approach as already encouraged in the latest electricity market design reform.

Longer term planning (10+ years) on the DSO-side combined with an anticipatory regulatory approach and a greater focus on DSOs in EU funding guarantees electrification of transport and heating as well as that renewables can be connected on time and that positive price effects from cheap renewables will be felt in the medium and long term.

In many circumstances anticipatory investments will be more efficient and faster. Adequate compensation in combination with easier access to EIB and EU financing to de-risk projects is central to acquire the required capital.

Active grid management

To ensure active grid management, DSOs need to be equipped with the right tools to efficiently manage available grid capacity. In that regard, more room should be given to DSOs for using implicit and explicit flexibility solutions such as flexible connection agreements, more capacity-based tariffs and the development of local flexibility markets.

Such solutions support DSOs in efficiently using existing grid capacity and can contribute to reducing the need for immediate infrastructure investments. At the same time, consumers are made aware of grid needs and can earn monetary remuneration for a more grid-friendly behaviour.

Also, in this respect, the latest electricity market design reform contained important improvements that will need to be implemented in a fast pace at the national level.

The network code on demand response, aiming to remove barriers to entry and facilitate equal opportunities for all market participants, should provide for an equal level-playing field between DSOs and TSOs.

The digitalisation of the grid is a prerequisite to enable most of these solutions and empower consumers.

Managing external factors

Active support to eliminate external factors to grid-build out are central with a special focus on the acceleration of permitting processes, the simplification of public procurement, faster access to critical raw materials and supply chains and the promotion skilled workforce.

The first political steps were taken with the Net Zero Industry Act and recent announcements to revise and simplify the public procurement directives. However, fast implementation and a collective effort from the EU and national level will be central in managing these complex external factors, the DSO Entity concludes.