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How decentralization drives a change of the institutional framework on the distribution grid level in the electricity sector – The case of local congestion markets

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  • Buchmann, Marius

Abstract

The increasing share of renewables in the electricity system results in congestion on all network levels. To address this congestion, the EU Commission proposed that distribution network operators become responsible for local congestion management. Within this paper we analyze the institutional implications of the introduction of local congestion markets (also referred to as flexibility markets) and identify three discrimination concerns related to the DSO's role on these markets. We will argue that the standard governance models (legal unbundling, ownership unbundling, IDSO) do either not sufficiently address the identified discrimination concerns, or come with additional challenges which make their application less feasible. Instead, we discuss two novel approaches: The introduction of Independent Distribution Operators (IDO) or alternatively, a Common Flexibility Platform (CFP). While the IDO results in a change of the regulatory regime in Europe, the CFP could be applied given the current European unbundling rules. Since the CFP does not require stronger unbundling of DSOs, we recommend to investigate this solution further.

Suggested Citation

  • Buchmann, Marius, 2020. "How decentralization drives a change of the institutional framework on the distribution grid level in the electricity sector – The case of local congestion markets," Energy Policy, Elsevier, vol. 145(C).
  • Handle: RePEc:eee:enepol:v:145:y:2020:i:c:s0301421520304523
    DOI: 10.1016/j.enpol.2020.111725
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    Citations

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    Cited by:

    1. Heilmann, Erik, 2023. "The impact of transparency policies on local flexibility markets in electric distribution networks," Utilities Policy, Elsevier, vol. 83(C).
    2. Carlo Schmitt & Felix Gaumnitz & Andreas Blank & Olivier Rebenaque & Théo Dronne & Arnault Martin & Philippe Vassilopoulos & Albert Moser & Fabien Roques, 2021. "Framework for Deterministic Assessment of Risk-Averse Participation in Local Flexibility Markets †," Energies, MDPI, vol. 14(11), pages 1-34, May.
    3. Rebenaque, Olivier & Schmitt, Carlo & Schumann, Klemens & Dronne, Théo & Roques, Fabien, 2023. "Success of local flexibility market implementation: A review of current projects," Utilities Policy, Elsevier, vol. 80(C).
    4. Erik Heilmann & Nikolai Klempp & Kai Hufendiek & Heike Wetzel, 2022. "Long-term Contracts for Network-supportive Flexibility in Local Flexibility Markets," MAGKS Papers on Economics 202224, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Wu, Jing & Zuidema, Christian & de Roo, Gert, 2022. "Collaborative efforts on energy transition in urban China: Institutional enabling and constraining conditions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    6. Manfren, Massimiliano & Nastasi, Benedetto & Tronchin, Lamberto & Groppi, Daniele & Garcia, Davide Astiaso, 2021. "Techno-economic analysis and energy modelling as a key enablers for smart energy services and technologies in buildings," Renewable and Sustainable Energy Reviews, Elsevier, vol. 150(C).
    7. Erik Heilmann, 2021. "The impact of transparency policies on local flexibility markets in electrical distribution networks: A case study with artificial neural network forecasts," MAGKS Papers on Economics 202141, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    Local congestion market; Congestion management; Regulation; Unbundling; Discrimination;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L - Industrial Organization
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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