Skip to main content

The future of the DSO and TSO relationship - A look at the September 2016 CEER position paper

Energy networks and their operators are facing tremendous challenges as their role diversifies and the nature and number of actors they are collaborating with change. As challenging this can be, network operators should also turn it into opportunities, which will probably include more coordination along the value chain. This leads to greater interactions between the transmission and distribution levels of the energy system.


In that context, the recent position paper from the Council of European Energy Regulators (CEER) offers a timely reflection on "the Future DSO and TSO relationship" (DSO and TSO standing respectively for Distribution System Operator and Transmission System Operator). Hereafter are summarised and commented some of the main points addressed by CEER in its paper.

The need for coordination is based on the following grounds:
  • better network planning, including at the level of long-term scenarios, development plans and investment decisions;
  • rationalise revenue recovery for DSOs and TSOs and the need to create incentives for the system as a whole;
  • seek for better use of the networks and cost efficiency gains, including greater information sharing, increased flexibility and better assistance between each others.
Coordination can take different forms, including:
  • The definition of some common coordination principles.
  • Elaboration of a whole system approach.
  • Further clarification of role attribution, building on the requirements of the Network Codes and Guidelines.
  • Conclude remuneration arrangements allowing for a fair allocation of costs, including across networks.
  • Give a stronger representation to DSOs at the European energy governance instances (e.g., where TYNDPs and Network Codes are discussed)
  • Echange information in order to increase transparency on network status and good system operation. This can result in shared network models.
The national circumstances vary very much, including in terms of energy profile and sector structure. CEER predicts that "the appropriate arrangements for the future DSO-TSO relationship are likely to vary from country to country." While there is no single model for the DSO-TSO coordination, CEER recalls that the requirements applicable to DSOs and TSO defined in the Network Codes are "the building blocks of the Internal Energy Market" and should serve as a common basis.
 
The need for coordination is of primary relevance for the electricity system, but it applies to the gas system too. The changes in electricity generation patterns due to an increased share of renewables will lead to variable gas flows predicts CEER. This is particularly true when gas powered flexibility is used for electricity system balancing and network management, or when biogas enters the gas system.
 
Of course, it must be recalled that coordination is not to be a step back to more collusion in the sector. This will be an additional challenge in the practical implementation of coordination, where distinction between roles and responsibilities will be key. An example of this is the proposal made by CEER to define some remuneration arrangements for services provided between DSOs and TSOs, at the condition that those arrangements do not "unduly" distort market mechanisms. This will obviously require some close monitoring. And DSOs and TSOs must continue to act as neutral system operators.

An input to the energy market design package?

The CEER's position paper looks at the impact of the ongoing and forthcoming changes on the relationship between Euroepan DSOs and TSOs, and how both the relationship and the regulatory arrangements need to evolve to accomodate those changes. What the paper does not do is to provide for a detailed action plan or a complete list of technical solutions. It should therefore be considered as a valuable additional contribution to the discussion on TSO/DSO-coordination, keeping up the momentum. Therefore, the next question is to know whether the energy market design package awaited for December 2016 will address this issue, and if so, to which extent.
 
Reference: CEER Position Paper on the Future DSO and TSO Relationship, C16-DS-26-04, 21 September 2016.

Comments