Restructuring our electricity networks to promote decarbonisation

TitleRestructuring our electricity networks to promote decarbonisation
Publication TypeTyndall Working Paper
SeriesTyndall Centre Working Papers
Tyndall Consortium Institution


Secondary TitleTyndall Centre Working Paper 49
AuthorsAwerbuch, S.
Year of Publication2004

>In most EU countries electricity market liberalization means that generation has been deregulated and that at least some customers can choose from a number of suppliers, all of whom may purchase power in the same centrally-controlled market. Restructuring has ignored electricity networks, which in many countries operate under governance structures, operating protocols and pricing polices that represent an unimaginative reshuffling of former monopoly era practices. Properly organized, however, networks can help create efficient markets thereby unlocking the promised benefits of market restructuring. >European energy policy emphasizes energy diversity and deployment of renewable energy technologies (RET) and distributed generation (DG). While electricity networks are essential in efficiently attaining these objectives, the liberalized systems that policy makers created can only deliver centrally purchased commodity electrons. They cannot deliver desired energy efficiency or diversity, nor can they promote the deployment of RET and DG. Most European network operators have no role and no incentives to induce generators to efficiently locate and no incentives to promote the efficient delivery and use of electricity. >This paper describes a set of decentralized network operating protocols designed to enhance the efficient functioning of electricity markets in liberalized environments characterized by the diffusion of distributed technologies. The protocols rely on strict bilateral contracting for power as well as several ancillary services; they eliminate AGC dispatch, and other centrally provided services. This electricity production system incorporates the ideas of mass-customization as compared to the mass-production paradigm that currently governs electricity production and distribution. >Moreover, with effective governance and incentive regulation, intelligent decentralized networks can efficiently exploit intermittent renewables and enhance energy efficiency in ways that make current DSM and efficiency efforts seem feeble. This paper argues that there exists a strong and widely overlooked connection between the way we organize, regulate and operate our electricity grids and our societal objectives for decarbonisation and energy sustainability. It is widely recognized that the way we run our power networks directly affects the functioning of wholesale and retail electricity markets. Much less well understood is the idea that given proper governance, regulation and tariff design, we can transform the network operator from its lackluster network-caretaker role of today, to a vital active leader and promoter of energy efficiency and the diffusion of conventionally-fired and renewables-based DG. >Today’s network protocols are based on mass-produced electricity to meet an agglomerated load curve. At any moment, this load consists of millions of individual transactions with vastly different values and needs. Informated, decentralized networks create efficiencies by exploiting such value differences principally through their ability to support the potential matching of wind and other intermittent resources with intermittent or “dispatchable” loads. This drastically re-conceptualizes traditional network processes and changes the traditional roles and responsibilities of all network participants, which in turn leads to more efficient pricing for backup power and other services, while exploiting the unique characteristics of intermittent Rest. >Network operators are the essential market facilitators in any liberalized electricity system. With proper governance and regulation, including a three-part balanced incentives network tariff discussed in this paper, network operators can play a pivotal role: they can help facilitate electricity transactions, reduce transactions costs, create open, robust markets and promote energy sustainability all of which combine to enhance the value of commerce along the network. This is the contribution we should expect future network operators to make to society.

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