Technology, business model, and market design adaptation toward smart electricity distribution: Insights for policy making

Abstract

The transformation of the electricity sector towards a sustainable energy supply and use has a disruptive potential for infrastructure and utilities. The spread of digital technologies, renewable energy, and prosumers requires a swift and well-guided adaptation of the electricity distribution industry to smart grid technologies and related business models. This paper, based on the large technical systems (LTS) conceptual framework, investigates the complex evolution and company and market design adaptation needs. Challenges and opportunities are analyzed through nine multi-stakeholder workshops, held in two EU member states (Germany and Portugal) in 2016–2017, engaging distribution system operators, researchers, academics, and integrated utility companies. The results indicate considerable uncertainty for distribution system operators regarding the value of large-scale smart meter rollouts. Also, a corporate culture with resistance to change is observed, challenging the integration of novel technologies and processes. Traditional regulation is seen as a barrier to smart grid investments, and is associated with job losses and knowledge destruction. Policy-makers can benefit from these insights on the dynamics of DSOs, which can contribute to public policy design and market reform which traditionally has often been mainly concerned about operational efficiency in a steady-state, stable economy.