New electricity networks are needed nationally: A new book – Transforming the Grid – analyses possible developments
The development of energy infrastructure – including investments and innovations in electricity networks – is a vital part of the Energy Transformation. Yet, up to now incentive regulation of the networks has notably aimed at reducing the costs of existing networks.
In his new book Transforming the Grid Dierk Bauknecht, senior researcher at Oeko-Institut (Institute for Applied Ecology), analyses whether and how the regulation of electricity networks can tackle these new challenges.
This question is approached on the basis of integration of distributed generation (DG) in the electricity grid, which is becoming more and more important in many countries. The number of DG units will steadily grow, which necessitates the adaptation of the respective distribution networks. Faced with a range of technical challenges, diverse regulatory approaches are analysed and assessed in terms of the connection and integration of DP as well as grid innovation and transformation.
Two country studies – on the UK and Denmark respectively – show how DG can be integrated in the grid in practice. The example of the UK demonstrates how incentive regulation can be expanded while the example of Denmark shows how DG can be very successfully set up outside the scope of incentive regulation.
More small power plants means new electricity networks are required
The question arises of the extent to which the competitive electricity market is in a position to facilitate the long-term transformation of energy infrastructure. It is often assumed that additional objectives can be integrated in the market and regulatory framework, e.g. with the help of emissions trading. But that is not enough. The long-term development of energy infrastructure in particular requires additional approaches to avoid a lock-in in specific development paths and to coordinate innovation processes.
“Incentive regulation does have the potential to pursue new objectives like the efficient integration of decentralised electricity production. At the same time it is necessary not to rely solely on additional instruments of economic incentive. Further development of the overall regulatory framework is needed – which includes the regulatory authority assuming a new role and, alongside economic incentives to improve efficiency, contributing to the coordination of the long-term development of the energy system,” says Dierk Bauknecht.
In Germany the German Federal Network Agency (Bundesnetzagentur) has been given the task of elaborating grid development plans. In the UK the regulator Ofgem is no longer just a competition and energy efficiency authority; now it also has the official task of promoting the sustainable development of the UK’s energy supply. In Denmark this coordinating role is assumed by the national transmission system operator Energinet.dk.
Dr. Dierk Bauknecht
Senior Researcher, Energy & Climate Division
Oeko-Institut (Institute for Applied Ecology), Freiburg Head Office