The role of distribution network operators in promoting cost-effective distributed generation: Lessons from the United States of America for Europe

Abstract

This paper explores the different competitive mechanisms applied by electric utilities from the US in promoting cost-effective Distributed Energy Resources (DER) – with a focus on Distributed Generation (DG) – and the challenges that electric utilities are facing due to the increase in DG connections. Cases studies from California, Oregon, Colorado and New York have been selected. The case studies refer to two kinds of competitive mechanisms: Request for Proposals (RFP) and auctions (Renewable Auction Mechanism). A similar behaviour is observed across electric utilities in the way in which competitive auction mechanisms are being managed; however the more sophisticated auction designs are observed in the RFPs. The study proposes a set of auction design elements with a focus on the UK context and examines the role of energy regulators in the design of well-structured auction mechanisms. We think that the experience cited in the four case studies can be replicated by Distribution System Operators (DSOs) from Europe; however unbundling rules established in the European Commission third energy package need to be taken into consideration.