IEEE Power & Energy Magazine - July/August 2016 - 48

This article focuses on the impacts of
DERs on the design, operation, and regulation
of the transmission network.

adopting lMPs and advanced network charges in the radial
part of the network, even if the locational signals in the
meshed part (or in the conventional transmission network) are
poorly designed or even nonexistent. any move in the right
direction will increase efficiency in the deployment and utilization of the DeRs.
The prior discussion about the impact of location on
prices and charges raises still another issue: where (i.e., at
which voltage level) should the DeRs be located for maximum efficiency? as we have seen, this will depend on
whether the considered zone of the distribution network is
mostly exporter or importer and of the values of the lMPs,
which may change depending on whether the node of interest is importing or exporting power. It will also depend
on the possibility of the DeRs providing local electricity
services with economic value other than energy (which is
already valued by the lMP). and, very importantly, it will
also depend on economies of scale effects. Researchers Jesse
Jenkins, scott Burger, and sam huntington in my group at
MIT are investigating this effect.
In fact, the technologies that underlie DeRs can be deployed
at many scales. for example, solar PVs can be deployed at
the kilowatt scale on residential rooftops, the several hundred
kilowatts to 10 MW scale on commercial rooftops or in vacant
fields, or at the scale of tens to hundreds of megawatts. even
inherently distributed technologies like demand response or
combined heat and power can be leveraged at industrial, commercial, and residential scales, each with their own cost of
customer acquisition and coordination.
for these technologies, it is not enough to ask what is the
value (or what are the costs and benefits) of being deployed in
a centralized or distributed fashion. understanding the optimal deployment of these technologies requires a technologyspecific comparison of the benefits of deploying the technology at several possible scales, ranging from centralized to
fully distributed. simply studying the costs and benefits of
deploying the technology in a distributed manner ignores the
fact that the same resource may be more efficiently deployed
elsewhere in the system, resulting in an opportunity cost to
society. The analysis to discern the optimal scale and location for deployment of the technologies underlying DeRs
must consider two factors: economies of unit scale and locational benefits, including the value of energy determined
by the lMP. factors that are common to both centralized
and decentralized units should not be considered drivers
for decentralization.
july/august 2016

These considerations should guide public policy and also
the corresponding detailed regulation. under a strict economic viewpoint, the answer to whether the future provision
of electricity services will be predominately centralized or
decentralized, and in which likely proportion, should only
depend on the characteristics of the services to be provided
and the cost and performance of the diverse means of supplying them. however, we must be aware that other factors
will also have a significant influence on the outcome, such as
customer preferences, driven by cultural background, environmental concerns, fashion, satisfaction, or animosity versus the incumbent utility, social pressure, and the impact of
neutral or biased information.

DERs: Jumping or Going Through
the TSO-DSO Fence?
In principle, DeRs can contribute to the provision of all of
the electricity services that were previously defined and are
displayed in figure 3. Most of these services are needed at
transmission level. But the efficient participation of DeRs
can only take place if they have the economic incentives
to do so and the access to the markets or mechanisms of
participation where these services are traded. here the key
institutions are the system operators at transmission and distribution levels, and their coordination is of essence. note
that in some jurisdictions these two entities are called differently: independent system operator or regional transmission
organization instead of Tso and utilities instead of Dso.
The June 2013 study "from Distribution networks to
smart Distribution systems: Rethinking the Regulation of
european electricity Dsos" identified four major regulatory
challenges raised by the irruption of DeRs: the determination
of the allowed remuneration of distribution networks in the
presence of large amounts of DeRs, the computation of network charges for a diversified ensemble of network users with
DeRs, an adequate definition of new role of Dsos managing
the provision of electricity services with multiple new actors
as suppliers and consumers, and managing the new level of
complexity in the coordination of Dsos and the Tso.
The last two topics are crucial to allow DeRs to supply
electricity services at the transmission-network level. The
Dso has to acknowledge the presence in its midst of active
agents that can provide services, sometimes in competition
or collaboration with those that the Dso itself can provide.
The Dso is thus required to make some sort of neutral platform available, where all agents connected to its network,
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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2016