Should distribution networks shape renewable generation, and if so how?

As we roll out more renewables, we see more, and more correlated zero-marginal cost generation leading to negative wholesale energy prices and effects like the recent phenomenon in Victoria, Australia which had cumulative negative prices in August.

But renewables are also creating new kinds of constraints on the distribution network, leading to the risk of voltage or thermal limits being breached when there is too much local generation relative to load.

DNOs, DNSPs, DSOs, LDCs, EDCs, Discos (*)—whatever you call them, the builders, owners and operators of distribution network infrastructure, have an incredibly important role to play in our power system.

One way they can respond to these challenges is by slowing or stopping new connections or preventing exports, but consumers love generating their own electricity, and we need more renewables to transition away from fossil fuels, so this creates political and social licence issues.

Another way they can respond is to augment or build out more network capacity, but this takes time and drives up electricity costs for network users.

Luckily they have four other levers they can pull (and model in Gridcog):

1. More flexible connections
2. Procuring local flexibility
3. Multi-function resources
4. Innovating on network tariffs

Flexible Connections

Traditional network connection agreements offer network users conservative and static export limits, which can make the investment case for adding renewable generation to the distribution network challenging because these resources can be prevented from participating in wholesale energy markets and must rely entirely on self-consumption for their investment case.

But new technology is enabling DNOs to improve their real-time visibility of the network (undarkening the network) and create a more detailed understand of network constraints (with advanced powerflow modelling).

This is in turn enabling new kinds of connections to be offered to network users, including fixed but shaped export limits, like the Limited Generation Profiles being offering in California, through to more dynamic export limits like the Dynamic Operating Envelopes being rolled-out in Australia.

Local Flexibility

Next we have the option of procuring flexibility from network users.

This can be a cheaper and quicker way to address network constraints than more traditional capex-heavy augmentation. Networks can still earn regulated returns on the costs associated with procuring these services.

New local flex marketplaces like Piclo and Electron are making procuring, offering, and contracting local flexibility services much more efficient. While Piclo and Electron are both out of the UK, Australia had an early attempt at realizing this vision with Greensync’s Distributed Energy Exchange. And now Piclo is bringing its marketplace to Australia.

Depending on the regulatory regime, the economics of higher capital expenses from traditional network investment can be more profitable for regulated networks than incurring higher operating expenses associated with procuring flexibility, but we are seeing a trend towards Totex regulatory models in more parts of the world, which treat Capex and Opex in exactly the same way to deal with potential incentive issues that might discourage this more efficient approach.

Multi-Function Resources

Traditionally there has been a bright line between infrastructure that sits within the regulated asset base of the DNO, earning regulated revenues, and the infrastructure that is connected to the network. This bright line has been seen as being important to avoid the risk that the monopoly powers of the DNO crowd out the competitive market.

But Distributed Energy Resources blur this line because they have multiple functions and through co-optimisation they are able to simultaneously deliver network and system services, market services, and customer services.

From community batteries (and other kinds of network-connected batteries), to stand-alone power systems, and smart EV charging infrastructure, we are seeing everything from trials to scaled roll-outs going on in different parts of the world to enable some network ownership of these multi-function resources.

Network Tariffs

Network service pricing, or tariffs, can be used to encourage network users to shift load to times of high renewable production and can encourage grid injection or exports outside of these times, either by paying for exports at times when this is beneficial to the local network, or charging for exports at times that are problematic.

In the following video we discuss how network tariffs can influence Solar, Storage, and EV charging projects.

A key point to emphasise here is that if Networks can have a better understanding of the economics of consumer investment in DER (beyond just network value) they can better align consumer and network interests by offering more innovating and cost-reflective tariffs, which Gridcog can enable through virtual tariff trials.

In Conclusion

As we see more and more generation being deployed at the distribution-level, DNOs need to use all the resources at their disposal to shape renewable generation. From flexible connections and local flexibility, to multi-function resources like community batteries, and more innovative network pricing, they now have a wide range of tools at their disposal.

P.S. How’d you go on the acronyms at the start of this article?

DNOs: Distribution Network Operators (UK)

DNSPs: Distribution Network Service Providers (Australia)

Discos: Distribution Companies (New Zealand)

DSOs: Distribution System Operators (Europe)

EDCs: Electric Distribution Companies (United States)

LDCs: Local Distribution Companies (Canada)