Regulatory analysis for the integration of Distributed Generation and Demand-Side Participation

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Regulatory analysis for the integration of Distributed Generation and Demand-Side Participation

  1. 1. PROYECTO FIN DE CARRERARegulatory analysis for the integration ofDistributed Generation and Demand-SideParticipationAUTOR: Breogán Pardo ÁlvarezDIRECTOR: David Trebolle TrebolleMADRID, Mayo 2013UNIVERSIDAD PONTIFICIA COMILLASESCUELA TÉCNICA SUPERIOR DE INGENIERÍA (ICAI)INGENIERO INDUSTRIAL
  2. 2. AUTORIZACIÓN PARA LA DIGITALIZACIÓN, DEPÓSITO Y DIVULGACIÓN EN ACCESOABIERTO ( RESTRINGIDO) DE DOCUMENTACIÓN1º. Declaración de la autoría y acreditación de la misma.El autor D. Breogán Pardo Álvarez, como alumno de la UNIVERSIDAD PONTIFICIA COMILLAS(COMILLAS), DECLARAque es el titular de los derechos de propiedad intelectual, objeto de la presente cesión, enrelación con la obra Proyecto Fin de Carrera “Análisis Regulatorio para la implementación de laGD y la Participación Activa de la Demanda1, que ésta es una obra original, y que ostenta lacondición de autor en el sentido que otorga la Ley de Propiedad Intelectual como titular únicoo cotitular de la obra.En caso de ser cotitular, el autor (firmante) declara asimismo que cuenta con elconsentimiento de los restantes titulares para hacer la presente cesión. En caso de previacesión a terceros de derechos de explotación de la obra, el autor declara que tiene la oportunaautorización de dichos titulares de derechos a los fines de esta cesión o bien que retiene lafacultad de ceder estos derechos en la forma prevista en la presente cesión y así lo acredita.2º. Objeto y fines de la cesión.Con el fin de dar la máxima difusión a la obra citada a través del Repositorio institucional de laUniversidad y hacer posible su utilización de forma libre y gratuita ( con las limitaciones quemás adelante se detallan) por todos los usuarios del repositorio y del portal e-ciencia, el autorCEDE a la Universidad Pontificia Comillas de forma gratuita y no exclusiva, por el máximo plazolegal y con ámbito universal, los derechos de digitalización, de archivo, de reproducción, dedistribución, de comunicación pública, incluido el derecho de puesta a disposición electrónica,tal y como se describen en la Ley de Propiedad Intelectual. El derecho de transformación secede a los únicos efectos de lo dispuesto en la letra (a) del apartado siguiente.3º. Condiciones de la cesión.Sin perjuicio de la titularidad de la obra, que sigue correspondiendo a su autor, la cesión dederechos contemplada en esta licencia, el repositorio institucional podrá:(a) Transformarla para adaptarla a cualquier tecnología susceptible de incorporarla a internet;realizar adaptaciones para hacer posible la utilización de la obra en formatos electrónicos, asícomo incorporar metadatos para realizar el registro de la obra e incorporar “marcas de agua”o cualquier otro sistema de seguridad o de protección.(b) Reproducirla en un soporte digital para su incorporación a una base de datos electrónica,incluyendo el derecho de reproducir y almacenar la obra en servidores, a los efectos degarantizar su seguridad, conservación y preservar el formato. .1Especificar si es una tesis doctoral, proyecto fin de carrera, proyecto fin de Máster o cualquier otrotrabajo que deba ser objeto de evaluación académica
  3. 3. (c) Comunicarla y ponerla a disposición del público a través de un archivo abierto institucional,accesible de modo libre y gratuito a través de internet.2(d) Distribuir copias electrónicas de la obra a los usuarios en un soporte digital. 34º. Derechos del autor.El autor, en tanto que titular de una obra que cede con carácter no exclusivo a la Universidadpor medio de su registro en el Repositorio Institucional tiene derecho a:a) A que la Universidad identifique claramente su nombre como el autor o propietario de losderechos del documento.b) Comunicar y dar publicidad a la obra en la versión que ceda y en otras posteriores a travésde cualquier medio.c) Solicitar la retirada de la obra del repositorio por causa justificada. A tal fin deberá ponerseen contacto con el vicerrector/a de investigación (curiarte@rec.upcomillas.es).d) Autorizar expresamente a COMILLAS para, en su caso, realizar los trámites necesarios parala obtención del ISBN.d) Recibir notificación fehaciente de cualquier reclamación que puedan formular terceraspersonas en relación con la obra y, en particular, de reclamaciones relativas a los derechos depropiedad intelectual sobre ella.5º. Deberes del autor.El autor se compromete a:a) Garantizar que el compromiso que adquiere mediante el presente escrito no infringe ningúnderecho de terceros, ya sean de propiedad industrial, intelectual o cualquier otro.b) Garantizar que el contenido de las obras no atenta contra los derechos al honor, a laintimidad y a la imagen de terceros.c) Asumir toda reclamación o responsabilidad, incluyendo las indemnizaciones por daños, quepudieran ejercitarse contra la Universidad por terceros que vieran infringidos sus derechos eintereses a causa de la cesión.d) Asumir la responsabilidad en el caso de que las instituciones fueran condenadas porinfracción de derechos derivada de las obras objeto de la cesión.2En el supuesto de que el autor opte por el acceso restringido, este apartado quedaría redactado en lossiguientes términos:(c) Comunicarla y ponerla a disposición del público a través de un archivo institucional, accesible demodo restringido, en los términos previstos en el Reglamento del Repositorio Institucional3En el supuesto de que el autor opte por el acceso restringido, este apartado quedaría eliminado.
  4. 4. 6º. Fines y funcionamiento del Repositorio Institucional.La obra se pondrá a disposición de los usuarios para que hagan de ella un uso justo yrespetuoso con los derechos del autor, según lo permitido por la legislación aplicable, y confines de estudio, investigación, o cualquier otro fin lícito. Con dicha finalidad, la Universidadasume los siguientes deberes y se reserva las siguientes facultades:a) Deberes del repositorio Institucional:- La Universidad informará a los usuarios del archivo sobre los usos permitidos, y no garantizani asume responsabilidad alguna por otras formas en que los usuarios hagan un uso posteriorde las obras no conforme con la legislación vigente. El uso posterior, más allá de la copiaprivada, requerirá que se cite la fuente y se reconozca la autoría, que no se obtenga beneficiocomercial, y que no se realicen obras derivadas.- La Universidad no revisará el contenido de las obras, que en todo caso permanecerá bajo laresponsabilidad exclusiva del autor y no estará obligada a ejercitar acciones legales en nombredel autor en el supuesto de infracciones a derechos de propiedad intelectual derivados deldepósito y archivo de las obras. El autor renuncia a cualquier reclamación frente a laUniversidad por las formas no ajustadas a la legislación vigente en que los usuarios hagan usode las obras.- La Universidad adoptará las medidas necesarias para la preservación de la obra en unfuturo.b) Derechos que se reserva el Repositorio institucional respecto de las obras en él registradas:- retirar la obra, previa notificación al autor, en supuestos suficientemente justificados, o encaso de reclamaciones de terceros.Madrid, a 31 de mayo de 2013ACEPTAFdo……………………………………………………………
  5. 5. Proyecto realizado por el alumno/a:Breogán Pardo ÁlvarezFdo.: …………………… Fecha: ……/ ……/ ……Autorizada la entrega del proyecto cuya información no es de carácter confidencialEL DIRECTOR DEL PROYECTODavid Trebolle TrebolleFdo.: …………………… Fecha: ……/ ……/ ……Vº Bº DEL COORDINADOR DE PROYECTOSProf. Dr. Fernando de Cuadra GarcíaFdo.: …………………… Fecha: ……/ ……/ ……
  6. 6. PROYECTO FIN DE CARRERARegulatory analysis for the integration ofDistributed Generation and Demand-sideparticipationAUTOR: Breogán Pardo ÁlvarezDIRECTOR: David Trebolle TrebolleMADRID, Mayo 2013UNIVERSIDAD PONTIFICIA COMILLASESCUELA TÉCNICA SUPERIOR DE INGENIERÍA (ICAI)INGENIERO INDUSTRIAL
  7. 7. IANÁLISIS REGULATORIO PARA LA IMPLEMENTACIÓN DE LAGENERACIÓN DISTRIBUIDA Y LA PARTICIPACIÓN ACTIVA DELA DEMANDA.Autor: Pardo Álvarez, Breogán.Director: Trebolle Trebolle, David.Entidad Colaboradora: Unión Gas Natural Fenosa.RESUMEN DEL PROYECTOEl proceso de liberalización y separación de actividades del sector eléctrico que empezóen la década de los 90 en la mayoría de los países europeos, ha supuesto un cambio ensu estructura. Generación, mercados eléctricos (mercados mayorista y minorista) sonactividades liberalizadas, mientras que las actividades de red (transporte y distribución),gestión técnica y operador del mercado (si existe) permanecen como actividadesreguladas.Todas las actividades del sector eléctrico se agrupan en cuatro grupos: capa física,gestión técnica, actividades económicas y marco regulatorio. Esta división es importantea la hora de entender el análisis presentado en este proyecto.En los últimos años, la concienciación del impacto medioambiental debido a laactividad humana, la dependencia exterior de la UE de materias primas (combustiblesfósiles) y la insostenibilidad de los sistemas energéticos han motivado cambios en laspolíticas energéticas. Un ejemplo de ello son los objetivos 20/20/20 para el 2020 quetratan de solucionar los problemas que se acaban de mencionar.Dentro de la demanda energética de un país, el sistema eléctrico supone una granproporción de dicha demanda. Por ello, se requiere que el sistema eléctrico se desarrollede una manera más inteligente y activa evolucionando hacia las “Redes EléctricasInteligentes”.Las redes eléctricas inteligentes son la evolución del sistema eléctrico actual, son elproceso de integración de los Recursos Energéticos Distribuidos (RED) al mismotiempo que se mejora la calidad, eficiencia y seguridad del suministro. Los RED son:Generación Distribuida (GD), Participación Activa de la Demanda (PAD), Vehículoeléctrico y almacenamiento descentralizado. Complementariamente, es imprescindibleun adecuado desarrollo tecnológico y marco regulatorio para la buena integración de losRED.Hay dos aspectos muy importantes a considerar: Las redes inteligentes son un proceso de integración de los RED, por lo que nosuponen un tipo totalmente nuevo de redes con activos de red que descarten a losactuales. Como todo proceso de evolución, las redes inteligentes tienen una hoja deruta en la que algunos RED han de integrarse antes que otros. Los RED debido a sus características, son activos que se conectarán a la red dedistribución, en consecuencia, estas redes juegan un papel fundamental en laevolución de las redes inteligentes.Actualmente, la integración de los RED está suponiendo grandes retos para losdistribuidores que suponen un impedimento para su adecuada integración.
  8. 8. IIGeneración Distribuida (GD)Se considera generación distribuida (GD) aquellos sistemas de generación eléctricaconectados a la red de distribución, caracterizados por su poca potencia y por estarconectados cerca del consumo final.Sólo bajo ciertas hipótesis, la GD puede reducir las pérdidas eléctricas, retrasar lasinversiones del Operador del Sistema de Distribución (OSD) en la red y mejorar laseguridad de suministro. Sin embargo, la realidad es otra muy distinta.En los últimos años, las Autoridades Regulatorias Nacionales (ANR) de Europa hanllevado a cabo planes de incentivos para la GD de carácter renovables. Estos incentivosse otorgaron a las energías renovables por: Alto coste medio de producción de energía: las renovables hace pocos añosestaban en sus inicios y por tanto, eran tecnologías inmaduras incapaces de competiren los mercados eléctricos. Actualmente, algunas tecnologías renovables (eólicaterrestre y geotérmica) presentan unos costes comparables a las tecnologíasconvencionales. Su naturaleza intermitente e impredecible hacen muy difícil su participación enlos mercados eléctricos.Estos dos factores unidos hicieron que la GD renovable (que supone una parteimportante de la GD) obtuviera ayudas como: prioridad de acceso y mecanismo deayudas económicas (tarifas feed-in, cuotas + certificados verdes, etc.). Lasconsecuencias de dichas ayudas han sido que: GD renovable no participe en los mercados eléctricos y el DSO no reciba ningunainformación sobre la potencia que inyecta la GD en sus redes. GD renovables pueden inyectar potencia en la red a cualquier hora del día sin teneren cuenta el estado de la red a la que se conectan.En cuanto a la planificación, el principal problema de la GD es su falta de firmeza(capacidad de un grupo generador para inyectar/absorber potencia cuando el sistema lorequiere). Por este motivo, los OSD no pueden confiar en la capacidad de la GD yplanifican redes sin tener la GD en cuenta, resultando en sistemas sobredimensionados.Respecto a la operación, la integración de la GD (cargas impredecibles y flujos depotencia bidireccional) en las redes de distribución, requiere que los OSD pasen de unaoperación pasiva a una operación más activa y flexible. La GD tiene principalmente dosefectos negativos.En primer lugar, en las redes de MT y BT, la potencia activa inyectada por la GDproduce grandes variaciones de tensión, afectando a la calidad del producto final para elcliente. Para compensar dicho efecto es necesario controlar los flujos de potenciareactiva. Sin embargo, en líneas de MT y BT el efecto de la potencia reactiva sobre latensión es mucho menor que el de la potencia activa.En segundo lugar, puede haber congestiones en el sistema (PG-PL>Pmáx) que lleven alsistema fuera de la operación segura. Como se mencionó antes, esto es debidoprincipalmente a la ausencia de incentivos para que la GD considere el estado deoperación, a nivel local, de la red a la que se conecta.
  9. 9. IIIEn lo que respecta a la forma de conexión y acceso de la GD, es necesario abandonar elmétodo tradicional de “Fit and forget” (sólo se analiza el impacto de la GD en laplanificación y acceso firme) y avanzar hacia una “Gestión activa” (considera elimpacto de la GD en la planificación y luego en la operación, puede o no tener acceso ala red) ya que es la solución más económica y eficiente.Dentro de la conexión de la GD existen los siguientes problemas: Criterios técnicos de conexión: criterios de protecciones eléctricas no adecuados, lano posibilidad de usar cargos por conexión semidirectos en vez de los cargos porconexión profundos. Ausencia de transversalidad a nivel nacional, falta de estandarización, falta detransparencia, criterios discriminatorios de algunos generadores respecto de otros.Debido al “fit and forget”, la GD tiene acceso firme a la red. Si la GD genera cuando elsistema está al límite de la operación segura, puede provocar apagones y cortes desuministro que reducen así la fiabilidad del mismo.Además de todo lo anterior, OSD necesitan integrar en sus redes las TICs para mejorarla monitorización de sus redes y establecer comunicaciones bidireccionales con la GD.Participación Activa de la Demanda (PAD).El término de PAD se usa como un concepto que engloba otros dos: Gestión Activa de la Demanda (GAD): es la implementación de todas aquellasmedidas (por parte de los OSD) que tratan de influenciar la manera en que seconsume la energía, obteniendo los cambios deseados en la curva de la demanda.Estas medidas se pueden clasificar en cuatro grupos: mejorar la eficiencia delsistema, trasladar demanda de los picos a los valles, rellenar los valles y reducir lademanda en momentos críticos para el sistema. Respuesta de la demanda (RD): se refiere a los cambios en los hábitos de consumode los consumidores finales debidos a las variaciones de las señales de precios a lolargo del tiempo.La demanda de cualquier sistema eléctrico está caracterizada por: comportamientoestacional, relación entre picos y valles, eventos especiales, dispersión geográfica de lageneración y la demanda, tipo de demanda (industrial, servicios y consumo doméstico)e inelasticidad. La inelasticidad de la demanda impide la integración de la RD. Esto sedebe a dos factores: El cliente final carece de información acerca del precio real de la electricidad. Parasubsanar esto, es necesario que el cliente final pueda recibir señales de precio. Gran parte de la demanda (pequeñas industrias, servicios y consumos domésticos)presentan tarifas reguladas con precios más o menos constantes, siendo necesariointegrar contratos que reflejen el precio de la electricidad en los mercados eléctricos.Estos dos factores hacen que el cliente final no sea consciente de los precios finales ycarezcan de incentivos para adaptar su consumo según los precios del mercado y elestado del sistema.Desde el punto de vista de la planificación, el DSO debe procurar firmeza en lademanda (reducir o parar su consumo cuando el sistema lo requiere) para poder retrasar
  10. 10. IVsus inversiones en refuerzos de red, mejorando la utilización de los activos existentes.En cuanto a la operación, la RD puede ayudar a gestionar congestiones cuando hayaexceso de demanda.Además de todo esto, la adecuada integración y coordinación de la GD y la PAD, losOSD deben desarrollar herramientas para mejorar su monitorización, previsión dedemanda, simulación y control de sus redes.Modelo regulatorio propuesto: soluciones para la integración de la GD y laPAD dentro del marco de las Redes Eléctricas Inteligentes.En la planificación, los OSD necesitan mejorar la firmeza de la demanda y de la GD.Para este propósito, las ANR deben definir los mercados de gestión de capacidadfirme para incentivar dicha firmeza de la GD y de la demanda.Dentro de los mercados de gestión de firmeza de capacidad hay dos tipos de mercados:los de firmeza de la GD y los de firmeza de la demanda. Gracias a la firmeza obtenidaen estos mercados, los OSD pueden obtener capacidad extra de la GD o reducir lacapacidad de la demanda (a través de comercializadoras y grandes consumidores) enaquellos momentos en los que la red, localmente, vaya a estar sobrecargada. De estamanera los OSD podrán retrasar las inversiones de refuerzo de la red.Estos mercados deberían ser coordinados por los OSD, ya que son los que mejorconocen el funcionamiento de sus redes. Habrá tantos mercados como áreas en las quedividan los OSD sus redes, ya que estos mercados son locales.Los OSD establecerán estos mercados con un plazo mínimo de un año, basándose ensus previsiones de demanda para ese periodo de un año. Por ello, deben determinar lasáreas y el número de horas que se espera que el sistema esté sobrecargado. El uso deeste servicio debería ser ex-post, de manera que el OSD sólo pague por este servicio a laGD, comercializadoras y/o grandes consumidores cuando haga uso de él y al precioestablecido en estos mercados. Los OSD pagarán por estos servicios (OPEX) hasta elmomento en el que investir en refuerzos (CAPEX) a largo plazo sea lo máseconómicamente eficiente.Respecto a la filosofía de conexión y acceso de la GD, los OSD tienen que evolucionarhacia una “Gestión Activa” (conexión y acceso no firmes) que busca la solución máseconómica para el corto y el largo plazo. Los OSD deberían incentivar que la GD acepteestos contratos de acceso variable a cambio de beneficios económicos en la conexión(usar cargos por conexión semidirecta en vez de cargos por conexión profundos). Estoscontratos permitirán a los OSD restringir la inyección de potencia de la GD cuando elsistema esté congestionado durante la operación.Para la conexión de la GD, las ARN deberían definir criterios de protección adecuadospara cada tecnología, evitando la desconexión de GD ante perturbaciones en la red,recomendándose el uso de estándares internacionales como las normas UNE o IEC. LasARN deberían permitir que los OSD ofrezcan a la GD cargos por conexión semidirectapara incentivar su apoyo en la operación y planificación a través de los servicios desistema (firmeza, control de tensión, compensación de pérdidas, etc.). Además, lasANR deberían establecer como obligatorio la implantación de las TICs para establecercomunicaciones entre OSD y GD.
  11. 11. VEn cuanto al acceso y conexión de la demanda, sólo destacar que en la conexión esimprescindible el establecer programas de implementación gradual de los contadoresinteligentes para todos los consumidores finales.En lo referente a la operación, las ARN deberían definir tres estados distintos deoperación del sistema: Estado normal: el sistema está dentro de los límites de operación segura. Estado de alerta: la curva de demanda acordada en el mercado mayorista puedeprovocar congestiones, variaciones de tensión y otros problemas a nivel local querequieren la utilización de servicios de sistema. Estos servicios de sistemaproporcionados por los RED, serán coordinados mediante mercados por los OSD. Estado de emergencia: el sistema ha pasado los límites de operación segura yrequiere la intervención inmediata de los OSD para solventar los problemas cuantoantes.Los OSD utilizarán los servicios de sistema para pasar de los estados de alerta oemergencia al estado normal. Las ANR deben crear dichos servicios de sistema.Además, para que OSD puedan coordinar los RED y los servicios de sistema queproporcionan, los OSD necesitan invertir en TICS, creación de los mercados deservicios de sistema y herramientas de monitorización, simulación, previsión de carga ycontrol.Las ARN deberían considerar los OPEX y CAPEX derivados de la implementación delas TICs, mercados de servicios de sistema y nuevas herramientas para los OSD. Porello, las ANR deberían desarrollar una regulación por incentivos de los OPEX y losCAPEX. Al mismo tiempo será imprescindible la definición de indicadores quecontrolen el grado de implementación y variables económicas de las nuevas solucionesen el caso de los CAPEX e indicadores de calidad, eficiencia, seguridad y variableseconómicas en el caso de los OPEX.Las ayudas para la integración de nuevas tecnologías en la GD deben procurar eldesarrollo tecnológico al mismo tiempo que se procura limitar la inserción a granescala de tecnología inmadura en los sistemas de distribución. Para conseguir esto, lasANR deberían determinar una cantidad fija de presupuestos para estas ayudas. Ensegundo lugar, deberían repartir dicha cantidad de manera que: tecnologías inmadurasreciban una menor proporción del total, pero que esa cantidad se reparta entre menosproyectos (limita el número de proyectos). Por el contrario, tecnologías más madurasrecibirán una mayor proporción del total, pero se repartirá entre más proyectos.Finalmente, las ANR tienen que decidir si las ayudas las obtienen de la tarifa de accesoo si las obtienen a través de los Presupuestos Generales del Estado. Ambas opcionestienen consecuencias negativas a corto plazo, pero son imprescindibles para lacompetitividad del país a largo plazo.Para la integración de la respuesta de la demanda hay dos elementos clave: contratosbasados en precios del mercado y señales de precios a través de contadores inteligentes.Las comercializadoras deben crear productos atractivos para sus clientes objetivo, demanera que de forma voluntaria abandonen los contratos regulados. Además, losconsumidores finales pueden obtener beneficios si trasladan su consumo a momentos demenor demanda o cuando el sistema lo requiera (incentivos de los mercados defirmeza).
  12. 12. VI
  13. 13. VIIREGULATORY ANALISYS FOR THE INTEGRATION OFDISTRIBUTED GENERATION AND DEMAND-SIDEPARTICIPATION.Summary of the dissertation.The de-regulation and unbundling process of the electrical sectors that started in the90’s in most of European countries, has change their structure. Generation, economicactivities (wholesale and retail markets) are de-regulated activities, while networkactivities (transmission and distribution), technical operation and market operator (whenit exists) are regulated activities.The activities involved in the electrical sector can be divided in four groups: physicallayer, technical management layer, economic activities and regulatory framework. Thisseparation is essential for the analysis of the smart grids presented in this dissertation.In recent years, the awareness about the environmental impact derived from humanactivities, the external fossil fuel’s dependence of Europe and the unsustainability of theenergy system have motivated changes in the energy policies of the EU. As a result ofthis tendency, new milestones such as the objectives 20/20/20 for 2020 try to solve thethree aforementioned issues.The electrical systems represent an important share of the energetic demand of anycountry; thereafter, changes in the electrical systems are required if the EU wants toachieve its objectives. In order to face these new challenges, the electrical systems mustbe developed with a smarter and more active approach. Electrical systems must evolvetowards “Electrical Smart Grids”.The electrical smart grids are the evolution of the current electrical systems, theimplementation process of the Distributed Energetic Resources (DER) at the same timethat improving the quality, security and efficiency of the system. The DER are:Distributed Generation (D.G.), Demand-side Participation (DSP), Electric vehicle andDecentralized Storage. However, the development of the technology and properregulatory frameworks are remarkably important for the proper implementation of theDER.It is important to highlight two aspects: The Smart Grids are an integration process of the DER; therefore, they are not atotally new type of networks with new lines and equipment that substitutes thecurrent one. As any evolution process there is a path that must be followed andsome DER must be integrated before some others (DG and DSP must beintegrated before decentralized storage and the electric vehicle). The DER due to their characteristics will be connected to the distributionnetworks; thereby, the integration of the DER requires the proper evolution ofthe current distribution networks to accommodate these DERs.The integration of the DER in the current distribution networks are facing severalproblems that are preventing their proper integration in such networks.
  14. 14. VIIIDistributed GenerationDistributed generation (DG) refers to electric generation systems connected to thedistribution network, which are characterized by their low power and their nearlocation to the load or consumption.Only under certain boundary conditions the DG can bring to the distribution networksthe following benefits: Lower electrical losses. Deferral of the investments required to reinforce the network. Better security of supply service.Nonetheless, the way in which DG is being connected to the network is bringing theopposite effects.Recently, the European National Regulatory Authorities (NRA) have incentivize thedeployment of Renewable Energy Sources (RES) in DG. These incentives were mainlydue to: High levelized costs of energy: at the beginning the RES were immaturetechnologies and they were not able to compete in the electrical markets. Presently,some of these technologies such as geothermal and on-shore wind power havelevelized costs comparable to those of conventional technologies. Their intermittent and unpredictable nature makes very difficult for thesetechnologies to participate in the energy markets.These two factors combined motivated that DG RES (which account for an importantshare of DG) obtain some benefits such as: priority access and economic supportmechanisms (feed-in tariffs, fees and green certificates, etc.). These benefits haveresulted in: DG RES do not participate in the energy markets and DSOs do not receive anyinformation about their schedule and dispatching. DG RES can inject power in the distribution networks at any time withoutconsidering the actual state of the local distribution network where it is connected..In the planning step, the main problem that DSOs have to face is the lack of firmness(capacity of a generator to produce/ absorb power when it is required by the system) ofDG. Because of this, DSOs cannot rely on the capacity provided by DG and they haveto reinforce the network to endure the negative effects of the DG.In the operation step, the integration in the networks of DG (non-predictable load andbidirectional power flows) requires DSOs to shift from the traditional passive approachof operation to a more active operation. The DG has 2 negative effects which lead thelocal distribution network to alert state.Firstly, in the medium and low voltage distribution networks (MV and LV networks),the active power injected by DG produce voltage variations, affecting the quality of theelectricity. To compensate this effect, it is necessary to control the flow of reactivepower. However, reactive power in the MV and LV networks has little effect onvoltage control. This situation results in problem for DSOs to accomplish their tasks.
  15. 15. IXSecondly, there can be congestions in local area of the distribution network (PG-PL>Pmax or PL-PG>Pmax) leading the system beyond the security limits. This is mainlydue to the lack of incentives for DG to consider the state of the distribution network inthe area where it is connected.Regarding the connection and access of the DG, it is necessary to move from thetraditional “Fit and forget approach” to a more “Active management approach”, beingthe more cost effective solution.Within the connection of DG there are the following problems: Technical connection criteria: bad criteria for electrical protections, no possibilityto use shallower connection charges instead of deep connection charges. Lack of homogeneous national criteria, standardization, transparency and non-discrimination.Regarding the access of DG, as mentioned before, the DG has priority access andsupport mechanisms that allow DG RES feed-in at any time. This can lead thedistribution networks to blackouts and curtailments when the security limits aresurpassed (decreasing reliability).On top of that, DSOs need to invest in the integration of ITCs to improve theirmonitoring of the network and establish bidirectional communication with DG.Demand-side ParticipationDemand-side participation is a concept that embodies two other concepts: Demand-side Management (DSM): implementation of those actions aiming toinfluence on the way that energy is consumed, obtaining the desired changes in thedemand curve. These actions oriented to influence the demand are introduced byDSOs and they can be classified in 4 categories: improve overall efficiency of thesystem, shift demand from peak to valleys, fill valleys and reduce demand in criticalmoments for the system. Demand Response (DR): involves all the changes in end-users’ normal consumptionpatterns due to variations on price signals over the time.The demand of any electrical system is characterized by: seasonal behaviour, peak-valley ratios, especial events, geographic dispersion, type of demand (industrial, serviceand household) and price inelasticity.From the demand response point of view, the most important of these characteristics isthe inelasticity of the demand. This is mainly due to two factors: Final customer’s lack of information about the actual price of the electricity. For thisaspect, the integration of the smart meters will be crucial for final customers toreceive price signals from the energy markets or their energy suppliers. A significant part of the demand (small industrial, services and householdconsumption) has regulated contracts with static prices.
  16. 16. XThese two factors combined make that final customers cannot be aware of prices andlack of incentives to modify their consumption habits when the system requires it orwhen the prices of the electrical markets are high.From a planning point of view, ensuring the firmness of demand (reduce/stopconsuming when the system requires it) can be an important tool for DSOs (DSM) toplan their networks in a more efficient way, postponing reinforcements of the networks.Furthermore, in the operation step demand response can be used by DSOs to managecongestions in the system.For the proper integration of DG and DSP, DSOs need to develop new tools that willimprove their visibility of the system and also will improve the planning and theoperation of their networks. Therefore, DSOs should invest in monitoring, simulation,control and forecasting tools.Regulatory framework model: Solutions for the integration of DG and DSPIn the planning step, DSOs need to increase the firmness of the demand and the DG. Forthis purpose, NRA should allow DSOs to integrate firm DG/ Demand and create the socalled “firm capacity management markets”.Within the firm capacity management markets there are two types: the firm DG andfirm demand capacity markets. Because of firm DG capacity markets, DSOs can obtainextra capacity from DG to postpone investments in reinforcements. At the same time,the firm demand capacity markets will enable DSOs to incentivize energy suppliers/large customers to reduce their demanded capacity in some moments when the localarea would be overloaded. Both of these markets try to use demand or DG to providethe necessary capacity without reinforcing the network.These markets should be co-ordinated by DSOs, since they are the ones who betterknow the functioning of their networks. There are as many markets as areas defined bythe DSOs because they consider the local generation and demand.The DSOs based on the expected future demand, must foresee the areas and the numberof hours in the year when the network might be overloaded. These services would bepaid by DSOs ex-post. This means that in these markets, the price of the service isestablished and only when the DSOs make use of it, the DSOs will pay to the DG/energy suppliers/ large customers.The DSOs will procure this services (OPEX) until the moment on which investing inreinforcements of the network (CAPEX) in the long-term time scale breaks even.Regarding the connection and access of DG, DSOs have to evolve towards an “Activemanagement approach” (non-firm connection, non-firm access) since it chases the mostcost-effective solution between OPEX and CAPEX. DSOs should incentivize DGdeveloper to accept non-firm access contracts in reward of benefits in the connectioncharges (use shallower instead of deep connection charges). Non-firm access contractswill allow DSOs to curtail DG feed-in when congestions occur during the operation.For the connection of DG, NRA should define proper protection criteria (stronglyrecommend UNE or IEC) for each type of technology ensuring the security of thesystem. NRA should allow DSOs to offer DG shallower connection charges for thoseDG who offer system services (firmness, DSO voltage control, losses compensation,
  17. 17. XIetc.). Additionally, NRA should define as obligatory the integration of ITCs for thecommunication between the DSOs and the DG. For the connection of the demand, themost important component is the smart meter.In the operation step, a model based on system’s states is recommended. Thedistribution system has three different states: Normal state: the system runs smoothly and no constraints are being violated. Alert state: the distribution system (locally or the whole) goes beyond the securitylimits due to voltage variations, congestions, etc. To solve these problems, the DSOwill purchase system services (services offered by the DER to the DSOs), which arebased on commercial agreements, to come back to the normal state. Emergency state: the system (locally or the whole) goes beyond the safe operationboundaries. For this case, the DSOs will actively influence on the generation/demand to solve the problems, without considering the commercial agreements, assoon as possible. Compensation criteria should be defined for this case.NRAs need to incentivize DSOs to invest in those technologies required in order tointegrate the DERs and their system services to support DSOs in their tasks. DSOsshould invest in: implementation of ITCs, creation of system services markets and tools(monitoring, simulation, control and forecasting) for co-ordination.NRA should consider the OPEX and CAPEX derived from these solutions, toincentivize its gradual integration. For this purpose, NRAs should follow an incentivebased regulation of CAPEX and OPEX at the same time that creating KPIs thatmeasure the integration level of the new technologies, the quality, the efficiency, thesecurity and economic variables considering the most cost effective solution.The subsidies for the integration of new technology in DG should be done in a way thatincentivizes the technological development, becoming more competitive at the sametime that limiting the integration of high shares of immature DG in the system. For thispurpose, NRAs should establish a fix amount of total subsidies. Then, they shouldprovide with higher proportion of the total to more mature technologies, but providingless money by project. Conversely, for less mature technologies, a smaller proportionof the total budget should be devoted, but more money per project. NRAs have todecide according to their energy policy whether the subsidies are withdrawn from theaccess tariff or the National State budget. Both options have negative effects in theshort-term time scale, although the technological development is essential forimproving the competence of the country in the long-term time scale.For the integration of the DR, there are two basic components: market-reflectivecontracts and price signals through smart meters. Energy suppliers must defineattractive products that adjust to their target customer consumption habits, motivatingtheir voluntary shift from regulated contracts to de-regulated contracts. Additionally,final customers can obtain potential benefits if they decide to shift their consumption tothose hours with lower energy market prices or when the system requires it (incentivesfrom firm demand capacity markets).
  18. 18. XII
  19. 19. XIIIIndex1. Introduction, motivation and objectives. .............................11.1 Introduction and motivation..................................................................................11.2 Objectives..............................................................................................................22. The current electrical system in Spain. ................................52.1 Physical layer .........................................................................................................52.2 Technical management..........................................................................................72.3 Economic management level.................................................................................82.3.1 Electricity markets........................................................................................102.3.1.1 Wholesale market.................................................................................102.3.1.2 Retail market.........................................................................................182.4 Regulatory framework.........................................................................................192.4.1 Structure of the electrical sector..................................................................192.4.2 Regulation of the distribution activity..........................................................192.4.3 Quality of service, Security and Efficiency....................................................203. The evolution of the current electrical system: Smart .........Grids. .....................................................................................213.1 Reasons for the change of the current electrical system.....................................213.2 Concept of Smart Grids........................................................................................244. Distributed Energetic Resources (DER).............................294.1 Distributed Generation (DG)................................................................................294.1.1 Definitions....................................................................................................294.1.2 Market accessibility......................................................................................304.1.2.1 Costs of technologies deployed in DG...................................................304.1.2.2 Priority access and support mechanisms for the integration ofrenewable energy technologies..........................................................................314.1.2.3 Objective of subsidies for new technologies.........................................33
  20. 20. XIV4.1.3 Planning .......................................................................................................344.1.4 Operation.....................................................................................................374.1.5 Connection and Access.................................................................................454.1.6 Information exchange ..................................................................................524.2 Demand-side Participation (DSP).........................................................................544.2.1 Definitions....................................................................................................544.2.2 Demand characteristics................................................................................564.2.3 Lack of demand participation in energy markets: Inelastic demand............584.2.4 Planning. ......................................................................................................614.2.5 Operation.....................................................................................................624.2.6 Technology and information exchange ........................................................645. The new role of the DSO and regulatory framework ..........recommendations..................................................................695.1 Planning...............................................................................................................695.1.1 Firmness of DG.............................................................................................695.1.2 Firmness of Demand ....................................................................................705.1.3 Firm capacity management: Firmness markets for DG and Demand. ..........715.1.3.1 Functioning of firm DG capacity markets..............................................715.1.3.2 Firm Demand capacity markets. ...........................................................735.2 Connection and Access........................................................................................755.2.1 Connection and access requirement for DSO...............................................755.2.1.1 Connection based on Active management approach. ..........................765.2.1.2 Network access based on Active Management Approach. ...................765.2.2 Connection and access requirements for DG and Demand..........................785.2.2.1 Connection requirements from DG’s point of view. .............................785.2.2.2 Connection requirements from demand response’s point of view.......805.2.2.3 Access requirements from DG’s point of view. .....................................815.3 Operation ............................................................................................................81
  21. 21. XV5.3.1 System state model and system services as tools for the DSO.....................815.3.2 Concept of system services and system services required for each state ofthe system..................................................................................................................825.3.2.1 System services definition.....................................................................825.3.2.2 System services required for each state. ..............................................835.4 Regulation of OPEX and CAPEX for DSOs .............................................................895.4.1 CAPEX regulation..........................................................................................895.4.2 OPEX regulation. ..........................................................................................905.5 Integration of DER into the market......................................................................905.5.1 DG ................................................................................................................905.5.2 Demand Response .......................................................................................926. Conclusions ...........................................................................94References ...................................................................................98
  22. 22. XVIIndex of FiguresFigure 1: Simplified single line scheme of the electrical system...........................................5Figure 2: The product and service electricity model.............................................................9Figure 3: Concepts included in Costumers bill. Source: Own..............................................9Figure 4: Structure of the electrical market. Source: Own .................................................10Figure 5: Offer and demand curve construction ................................................................12Figure 6: Supply curve [2]...................................................................................................12Figure 7: Demand curve [2]. ...............................................................................................13Figure 8: Marginal Price [2]. ...............................................................................................13Figure 9: Marginal prices of the energy for each hour of a certain day [3]. .......................14Figure 10: Daily and intra-day market sessions [1].............................................................15Figure 11: Adjustment services markets. ...........................................................................16Figure 12: Volatility of prices in the wholesale market. .....................................................18Figure 13: Capacitys evolution of the electrical system depending on the criterion .........23Figure 14: Necessary components of Smart Grids and objectives. Source: Own...............25Figure 15: Possible smart grids’ route integration. Source: Own. ......................................26Figure 16: Levelized Energy Cost for different technologies [4] .........................................31Figure 17: left net capacity curve / right monotonous capacity curve of transformer .......35Figure 18: curves of the cogenerator .................................................................................36Figure 19: curves of the transformer..................................................................................36Figure 20: Thevenin equivalent at the connection point of DG..........................................39Figure 21: voltage profile depending on the length and network conditions. ...................41Figure 22: representation of the extra-cost in the access tariff due to system services co-ordination...................................................................................................................43Figure 23: DER access and connection approaches. Source: [7].........................................47Figure 24: Mechanisms of Demand-side Participation ......................................................55Figure 25: Demand profile of the different groups. [8] ......................................................56Figure 26: seasonal behavior of demand. Own based on data from .................................57
  23. 23. XVIIFigure 27: Dispersion of the generation and the demand [8].............................................58Figure 28: Inelastic and elastic behavior of demand. .........................................................59Figure 29: End-users electricity bill....................................................................................60Figure 30: Possible distribution network topology and the monotonous demand curve forthe transformer during a year. ...................................................................................71Figure 31: Bids of firm capacity of DG producers connected to a certain area. .................72Figure 32: Possible network topology of a certain area with few DG and its monotonousdemand curve................................................................ ¡Error! Marcador no definido.Figure 33: Functioning of the firm capacity of demand market. ........................................74Figure 34: Concept of System Service. ...............................................................................83Figure 35: Difference between the cost of producing energy with a certain technology andthe marginal price of the whosale market according to its experience curve. ...........91
  24. 24. XVIIIIndex of TablesTable 1: Characteristics of the different distribution networks [1] ......................................6Table 2: Electrical activities involved in the electrical sector..............................................20Table 3: Support mechanisms according to different criteria [5] .......................................32Table 4: Typical values for R/X relation for different voltage levels ..................................39Table 5: connection and access approaches. Source: Own ................................................45Table 6: voltage levels and its typical generation technologies..........................................49Table 7: Connection and access approaches. .....................................................................75Table 8: System Services. Source: own and [7]...................................................................88
  25. 25. XIX
  26. 26. XX
  27. 27. 11. Introduction, motivation and objectives.1.1 Introduction and motivationIn Europe recently, the population awareness about the environmental impact togetherwith the high dependence of natural resources from geopolitical unstable countries, hasmotivated changes in the European energy policy. For this reason, future intentions suchas the objectives 20/20/20 are motivating new tendencies in the energy systems of thedifferent European countries.The effect of this policy on the electrical system, especially in Distribution networks, isthat EU countries have incentivized the connection to the network of small generationgroups close to the load (Distributed Generation). The consequences of DG can beextremely positive for the efficiency of the electrical system. Additionally, if animportant share of the DG is renewable technologies, the environmental impact can bedramatically diminished compare to systems entirely based in fossil fuel technologies.Nevertheless, the effect of DG in those networks with high share of DG is becoming theopposite of the desired. Due to the EU regulatory framework, DG: Has priority access to the network, being able to inject power to the networkwhenever they produce it without participating in the electrical markets. Therefore,distribution network operators miss much information from the DG connected totheir network. DG has no obligation to produce when the load peaks or when the system requires aback-up (no firmness of DG). Therefore, distribution network operators cannotconsider DG when designing their networks in the long-term (planning). The monitoring level of Medium and Low voltage distribution networks is deficient.Moreover, DG has priority access and does not participate in the electrical markets.All these factors make that DNOs have no information during the operation aboutthe actual state of the system. The connection of DG produce changes in the operation conditions of the system(Voltage variation, reverse power flows, etc.). Nonetheless, DG has no obligation tosupport DNOs in the operation of the areas where DG is connected. All these counterproductive factors make necessary changes in the currentregulatory framework, in order to about these problems and properly integrate DGin the distribution system.The traditional approach when expanding the distribution networks together with theconsumption habits of final customers, result in over-sized systems. The demand ofelectricity is not constant along the time. It has peaks and valleys but the electricalnetworks are designed to provide the required capacity when the load peaks. However,these peaks represent a small proportion of hours over the total amount of hours in ayear. Consequently, the system is inefficient.
  28. 28. 2In order to avoid over-sized and inefficient distribution networks with high investmentsin capacity, there is the need to change to a new paradigm. The new paradigm “demandfollows supply” in contracts with the traditional one “Supply follows demand” requirethe implementation of the Demand-side participation.The aim of the demand-side participation is to motivate the necessary changes in thedemand curve so that the capacity of the electrical system can be used more efficiently.However, the current regulatory framework does not allow the actual participation ofthe demand in the electrical market. It can be said that the demand is inelastic tovariations of the price. This is mainly due to the lack of information of final customersabout the real price of the electricity.It is necessary changes in the regulatory framework to provide final customers with thenecessary information so that they can participate more actively in the electrical market.Derived from this, the demand will manage more actively their consumption. Thisactive management will allow DNOs to use more efficient the already installed capacityand assets.Both, Distributed generation and Demand-side participation are two of the fourDistributed Energetic Resources (Distributed Generation, Demand-side Participation,Decentralized Storage and Electric Vehicle) which constitute the Electrical Smart Grids.The aim of the Smart Grids through the implementation of these four DER is to improvethe efficiency and sustainability of the system while reducing the environmental impact.All this keeping the quality of the product and security of the service at the minimumcost.To conclude, Smart Grids are the evolution of the current electrical system. The successof this evolution highly depends on the integration process of the Distributed EnergeticResources. This integration process requires important changes in the present regulatoryframework and this is the motivation of this dissertation. Regulatory recommendationsbased in a sustainable model constitute the basis for the already on-going integration ofthe Smart Grids.1.2ObjectivesThe main objective of this dissertation is to create and define a proper regulatoryframework which integrates the Distributed Generation and Demand-side Participation.This regulatory framework must protect the economic interests of all the agents involvein the electrical system at the same time than ensuring the quality of the product and thesecurity and efficiency of the system.In order to achieve this aim, it is necessary to accomplish a series of partial objectiveswhich constitute the basis of this main objective. These partial objectives are:
  29. 29. 3 Define and characterize the Electrical Smart Grids. Identify the key elements for the proper integration of the Distributed Generationand Demand-side Participation. Identify the role of the DSOs and barriers they face for the proper integration ofDistributed Generation and Demand-side Participation. Analyse the regulatory and economic aspects that need to be modified for theproper integration of Distributed Generation and Demand-side Participation.The structure of the dissertation is as follows:In the chapter 2, the four activities involved in the functioning of any electricalsector that has suffered a de-regulation and unbundling process are described. Theseactivities are: the physical layer, technical management layer, economic activitiesand regulation framework. In this chapter there is a special emphasis in the electricalmarkets and the regulation of DSOs.In recent years, due to the new tendencies of the energy policies in the EU, changesin the energy systems are occurring. In the case of electrical system and especiallyin distribution networks, the result has been the connection of a high share of RESDG. However, the connection of the DG is the first step towards the connection ofother distributed energetic resources to the distribution networks. To face these newchallenges, the distribution networks must evolve towards the smart grids.The development of the smart grids for the future integration of the distributedenergetic resources is crucial. Therefore, in chapter 3 the concept of smart grid andcertain characteristic associated to them are explainedThen, Chapter 4 analyses the current economic and regulatory barriers thatdistributed generation and demand-side participation are facing for a properintegration in the distribution networks. This analysis is divided into different partsthat have to be considered to properly integrate the distributed energetic resources inthe distribution networks: definition, market accessibility, planning, connection andaccess, operation, information exchange, etc.Subsequently, chapter 5 define possible regulatory solutions to the problems of eachDER diagnosed in chapter 4. Therefore, chapter 5 creates and defines a regulatoryframework which integrates the Distributed Generation and Demand-sideParticipation. This regulatory framework must protect the economic interests of allthe agents involve in the electrical system at the same time than ensuring the qualityof the product and the security and efficiency of the system.
  30. 30. 4To conclude, in chapter 6 all the regulatory recommendations required to implementthe solutions presented in chapter 5 are summarised.
  31. 31. 52. The current electrical system in Spain.The electrical system has a complexity which goes beyond the physical layer, in fact,the electrical system comprises four different layer: physical layer, technicalmanagement, economic management and regulatory framework. Subsequently, a moredetail analysis about the four different layers that constitute the electrical sector, will setthe basis of how this industry runs.The most important aspect in the current electrical sector was the liberalization processthat has taken place. In 1982, Chile was the first country which separated the differentactivities of the electrical system into regulated and de-regulated activities. In thefollowing years, this trend extended to many other countries.The liberalization process has different characteristics depending on the country.However, all of these processes have in common: Separation of regulated and de-regulated activities. Creation of a wholesale market in which generators compete. Access to third parties to the transmission networks through toll payments. Freedom of clients to choose their energy suppliers.2.1Physical layerThe physical layer refers to the transformation of a primary energy into electricity andthe transmission of it to the final consumers through the electrical network. This layercan be seen as the hardware of the electrical system.A simplified single line scheme of the electrical system is depicted in Figure 1:Figure 1: Simplified single line scheme of the electrical system.
  32. 32. 6The distribution network connects the transmission network with the final costumers.The distribution networks can be divided into three different categories depending ontheir voltage level: High voltage networks (HV). Medium voltage networks (MV). Low voltage networks (LV).The features of each category can differ from one country to another. However, thegeneral characteristics are presented in Table 1.Type ofdistributionnetworkTopology OperationNumberclientsAmount ofequipmentOperationflexibilityMonitoringlevelHV MeshedMeshed/ringFew Several Medium HighMVMeshed/ringRing Several Many Few MediumLVMeshed/ringring Many Many A few LowTable 1: Characteristics of the different distribution networks [1]High Voltage Distribution NetworksHigh voltage distribution networks present a meshed layout, which improves thereliability of this level. Only few clients which demand high power requirementsconnect to this network (for instance: industries, long distance trains and trains andspecial regime).The number of clients connected a type of network is a very important factor. Thehigher number of clients the more difficult to monitor and operate the network.Moreover, many clients connected demands high investments in facilities andequipment.Medium Voltage Distribution NetworksThe typical topologies of medium voltage network are ring or meshed.The topology ofthe medium voltage network depends on the geographical location of customers. Themeshed level is direct related to the level of service continuity that wants to be offeredto the costumers.
  33. 33. 7In the medium voltage networks DNOs have a medium monitoring level but not realtime operability. Typically, the SCADA systems responsible for the medium voltagenetworks control only the substations which are located on the border (either with otherdistributors or with high and low voltage distribution networks).Typically, the SCADA systems can: Monitor the measurements. Maneuver. Protection. Visualization of equipment’ state.However, at the moment DNOs only monitor the limits of the medium voltage networks.Therefore, they cannot visualize the real-time conditions of this networks.Low Voltage Distribution NetworksThe low voltage network starts at the medium voltage substations and finishes at theGeneral Protection Box (GPB). Beyond this point, the network belongs to the clients.The large amount of costumers and equipment connected to this network makesunfeasible to set real-time measurements. The enormous amount of clients makesnecessary high installation and maintenance investments.The monitoring level is deficient and this is why in most of the cases, when costumerssuffer blackouts, distributor are not aware of it. It is only through telephone calls fromthe final clients that they realize there is a fault.2.2Technical management.Technical management is the responsible for the proper functioning of the physicallayer. The technical management activity is carried out by the operators of the electricalnetworks.In distribution networks, the main responsibilities of distribution network operators are: To keep electrical parameters of the system within the security limits (For instance:voltage variation, temperature of active components, maximum current, etc.) Maximize service continuity. Maximize quality of the product for final customers. Minimize system losses.These responsibilities must be achieved by DNOs under any circumstances. These tasks,as any other activity involving the DNOs, are defined and established by NationalRegulatory Authorities.
  34. 34. 8Depending on the country, the operation of distribution networks can be performed bydifferent agents. In the concrete case of Spain, the distribution network is managed bymany distribution network operators such as (Endesa, Iberdrola, E.ÓN, Gas NaturalFenosa, etc.) which are responsible for different parts of the system.2.3 Economic management level.The economic management refers to all the activities related to the purchasing andselling of electricity. At this point it is very important to distinguish the electricity as aproduct [MWh] and the electricity as a service [MW or MWh].Electricity as Product (Energy)Electricity as product (energy). The product electricity is manipulated by de-regulatedactivities whose aim is to satisfy the energy needs of costumers.The price of the electricity as a product can be fixed by different mechanisms. The bestof these mechanisms are the markets ruled by the offer and demand law. These marketsare the best mechanism because they ensure the balance between the interests of theoffer and the demand.Electricity as a Service (Energy)The electricity as a service (power or energy). The service of transmission, distributionand delivering of the product is performed by the regulated activities. Their aim is toguarantee the security and quality of the supply service.Final customers pay for this service through the access tariff, which is the regulated partof their bills. However, part of these services is ruled by the offer and demand markets.This is the case of the adjustment services (technical constraints markets, ancillaryservices, deviation generation-consumption) which are markets ruled by the offer anddemand law but used to ensure the security of supply when there are constraints in thesystem.The concepts of electricity as a product and electricity as a product are depicted inFigure 2.
  35. 35. 9Figure 2: The product and service electricity model.Due to the concept of electricity as a service and as a product, final costumers’ bill ismade up of two different parts: the energy consumption (electricity as a product) and theelectricity service. The price of the energy depends on the contracts between finalclients- energy suppliers or directly the price of the wholesale market.In Figure 3, the breakdown of final customer’s electricity bill is presented:Figure 3: Concepts included in Costumers bill. Source: OwnDue to the unbundling process the regulated activities are not the same in all the country.In all the cases, the regulated activities include investment and maintenance of theElectricity billNetwork(service)Regulated: access tariffEnergy(product)De-regulated( Energy marketprice signals)Price signalsMarket-reflectivecontracts(ToU, CCP, Real-timepricing)Regulated Static prices
  36. 36. 10transmission and distribution network, but other concepts depend on the country. In thespecific case of Spain, the access tariff covers the cost shown in figure 22.3.1 Electricity marketsWhen describing the electricity as a product, it was claimed that the best mechanism tofix the price for the electricity was the markets ruled by the offer and demand law. Inthis section, the markets of the electrical system will be presented.In all countries on which a process of liberalization took place, the structure of theelectrical market is structured as illustrated in Figure 4: Structure of the electricalmarket.Figure 4: Structure of the electrical market. Source: Own2.3.1.1 Wholesale marketThe wholesale market is where large amounts of energy are sold and purchased.Through a series of market sessions, the generators and demand come to an agreementabout the amount and the prices of the energy that is going to be consumed each hour ofa certain day “D”. It is not until that day D that the electricity is actually delivered tofinal customers.The agents involved in the wholesale market are:Electrical marketWholesale market(Generators↔Energy suppliers/Largecustomers)Long-termmarketFinancial tools(no physicaldelivery)Short-termmarketIntra-day marketAdjusment ServicesMarketsDaily market(physical delivery)Retail market(Energy suppliers↔Finalcustomers)
  37. 37. 11 Producers: they are the ones who generate the electricity (Nuclear power plants,hydro power plants, etc.) and offer it in wholesale markets. They are the offer. Large customers/ energy suppliers: they are the ones demanding the electricity inthe wholesale markets. Therefore, they are the demand.The short-term markets within the wholesale market are sometimes characterized by thevolatility of its prices (spot market). This means that the prices of the energy are verychangeable along the time. This volatility involves economic risks, in terms of incomes,for generators and large customers/ energy suppliers. Thus, both parts try to avoid thisrisk using different economic tools. These economic tools can be established days,months and even years in advance to the actual delivery of the electricity in day D(long-term markets).Therefore, the wholesale market is made up of: short-term and long-term markets.A. Short-term marketsThe short-term market comprises: Daily market: economic activities that take place the day before the physicaldelivery (D-1). In this market is where offer and demand purchase and sale theenergy for each hour of the day D.In any market structure, the daily markets are there reference to establish the priceof the electricity. In all those countries where a liberalization of product relatedactivities, in order to operate and manage the daily market, there is a marketoperator. However, there can be immature markets where there is no such marketoperator.The daily market works as follows:In the daily market, generators and consumers send their offers and bids (energy[MWh] and price [€/MWh]) to the market operator for each hour of the followingday (see left side of Figure 5). Besides the offer and demand bids, the operatorreceives the international exchanges and in the case of structured and matureelectrical market, the market operator also receives bilateral agreements (explainedin long-term markets section).As mention above, the supply and demand bids are for each single hour of thefollowing day; this means that there are 24 different products for each day.After the market operator gathers the bids, the market operator places in ascendingprice order the supply offers and in descending price order the bids offered by thedemand for each hour (see right side of Figure 5).
  38. 38. 12Figure 5: Offer and demand curve construction [2].Controllable power controllableSubsequently, the market operator creates the supply and demand curves asrepresented in Figure 6 and Figure 7 respectively.Figure 6: Supply curve [2].
  39. 39. 13Figure 7: Demand curve [2].Finally, these two curves are overlapped and the point where the supply anddemand curve match, establishes the amount of energy [MWh] and the price[€/MWh] for that energy that is going to be consumed for that hour (see Figure 8).Figure 8: Marginal Price [2].As mentioned above, this curve is done for each hour of the day so for the wholeday there are 24 different prices, as represented in Figure 9.
  40. 40. 14Figure 9: Marginal prices of the energy for each hour of a certain day [3].Inspecting the supply curve it can be noticed that the curve starts at 0 €/MWh. Thisis the energy that the nuclear power plants generate. The reason for this is that thenuclear power plants are very stable and changing the working conditions isdifficult. In this way, they make sure that the energy produce by means of nuclearpower plants will be always in the pool. In contrast, some other technologies whichare more flexible on their operational status (cogeneration, renewable energies, etc.)offer higher bids than nuclear power plants and other conventional technologies.Furthermore, it is necessary to underline that all generators which are beyond thematching, will not supply energy to the network. The offers are higher because theiroperational costs are higher than the fixed price established in the wholesale market.At this point is where the competence between generators plays and essential role.In other words, those generators who offer the lowest prices are the ones thatprovide the energy and receive the money. Conversely, if the cost of generatingelectricity is higher than the pool price, it is not profitable to provide the energy andthose generators will not participate in the pool.Changing the perspective to the demand side, the demand curve starts at 183€/MWh. By law, this is the highest price that can be offered in the pool. This isdone because in this way, demand make sure that the vast majority of the energy(around an 80%) they have to supply to the final clients will be provided.In the specific case of Spain, the market operator is OMIE (responsible of the dailymarket not only in Spain but also in Portugal). It guarantees a legal and transparentadministration of the daily market. Intra-day market: those activities during the day of the physical delivery (D).Once the daily market is closed, during day D offer and demand can change theelectricity they purchased/ sold in the daily market.
  41. 41. 15Once the daily market is closed and in the following 24 hours there are 6 intra-daymarket sessions on which the generators and demand can change their deals aboutpurchase-sale (see Figure 10). The agents and market operator involve in thismarket are the same as in the daily market and it works in a very similar way.Due to its proximity in time to the actual delivery of the electricity, the volatility ofthese markets is higher than the daily markets and that is why any agent tries toavoid participating in these markets as much as possible.Figure 10: Daily and intra-day market sessions [1].This market is a consequence of the necessity to keep continuously the equilibriumbetween generation and consumption. The consumption is foreseen by energysuppliers, but this forecast may differ from the actual consumption. Therefore,energy suppliers may need different energy requirement. These sessions helpgenerators and demand to manage the deviation from the actual consumption.Sometimes it may occurs, as it happens in the daily markets, that the agreements ofthe daily market are in conflict with the technical constrains of the system. Theseconflicts are solved by the System Operator through adjustment services markets. Adjustment services markets: additionally, during the day D there are othermarkets which are used to ensure the security of the system and the equilibriumbetween generation-demand. These markets are the adjustment services markets. Thesemarkets include: technical constraints markets, ancillary services and deviationgeneration-demand management.
  42. 42. 16Figure 11: Adjustment services markets.Source: OwnTechnical Constraints ManagementThe daily market is just based on offer and demand laws, economic laws. Nonetheless,the electrical system has technical constrains and the most important, the electricitydoes not follow economical laws but physical laws (Ohm and Kirchhoff).The generation and the demand are scattered all around the national geography and theyare connected through the transmission and distribution networks. Therefore, there canbe technical constrains, for instance overload of lines and substations. Thus, some areasof the electrical system might be congested affecting some of the generation plants thatwere supposed to inject power.To solve this problems, after each session of the daily and intra-day market and takinginto account bilateral agreements, the System Operator execute a process to manage thetechnical constraints. For this purpose, the system operator analyses the scheduledproduction of generation plants and expected international exchanges. With thisinformation the SO can operate the system to solve the constraints and guarantee thesupply of electricity.Ancillary ServicesAs in the technical constrains study performed after the daily market, there is real-timemonitoring of the system. The Ancillary services are those tools necessary to ensure thesecurity, quality and reliability of the electricity supply service. Some of the ancillaryservices are frequency-active power (primary, secondary and tertiary) regulation,voltage variation-reactive power generation and others.Deviation Generation-Demand managementAdjustmentservicesTechnicalconstraintsmanagementAncillary ServicesFrequency- ActivePower regulation.Voltage- ReactivePower regulationOthers.Deviation generaton-deman management
  43. 43. 17Additionally to all the mechanisms mentioned above, in order to solve the differencesthat may appear minute to minute between supply and demand, the System Operator hasmechanisms to solve the deviations. Only in the exceptional case that the differencebetween supply and demand is higher than a defined threshold, the System Operator canconvene a “deviation management market”. In this market, the SO can increase orreduce the energy agreed in the daily and intra-day market.These three services are normally controlled and operated by the System Operator. Theway to make the modifications is through markets on which these services are providedto the SO by the generation groups.A. Long-term markets and risk aversionThe long-term market (before D-1) includes all the economic activities which areperformed before the day of the physical delivery (before D-1).When describing the short-term markets, it was mentioned that they are sometimescharacterized by the volatility of the prices. This volatility represents a risk in terms ofincomes for demand and generation. Therefore, in organised and mature markets it isvery common that the different agents establish bilateral agreements days, months andeven years in advance to the actual delivery of the electricity in the daily markets.Therefore, when the agreements are created, there is not physical delivery of theelectricity (financial products related to the electricity).The objectives of the long-term markets are:1. Allow generation and demand to manage their economic risk.2. Facilitate the development of retail market, increasing the competence on it.These bilateral agreements are established directly between generators and largecustomers/ energy suppliers. Thus, these contracts are not organised by any regulatedand centralised institution.Some of the financial tools used to prevent the economic risk are: SWAP: financial contract established a certain time “t” before day “T” where thereis the actual delivery and cash-flow. This contract determines the energy and theprice of this energy day T.When day T comes, the energy is provided by the generator. The fixed priced of thecontract is compared with the price of the daily market. If the fixed price of thecontract is below the spot market price, demand pays the spot price market andadditionally gives the difference to the generator. Conversely, if the fixed price ofthe contract is above the spot market price, the demand will pay the spot market
  44. 44. 18price but the generator will provide the difference. This cash-flow is depicted inFigure 12.Figure 12: Volatility of prices in the wholesale market.Source: Own Options: provide the owner the right, but not the obligation, to purchase or sell acertain amount of asset (energy) at a specified strike price on or before a specifieddate. The seller receives then a premium from the buyer [6].There are two types of options: CALL and PUT. A CALL option is an option ofpurchasing and a PUT option is an option of selling. In the moment the option isestablished, the one acquiring the option pays a premium. The option can be“exercise” (buy or sell the asset) by its owner at any time before the end of thespecified date. The cash-flow is equal to the difference of the strike price of theasset and the premium already paid.2.3.1.2 Retail marketThe retail market is that one on which the energy suppliers sell the energy they boughtin the wholesale markets to final customers who do not participate in the wholesalemarket.Before the liberalization of the electrical sector, final customers could not choose theirenergy supplier. The energy supplier was the same as the DNO controlling that area.After the liberalization, final customers can choose the energy supplier which best suitstheir needs.The possibility of the final customers to choose their energy supplier motivates a fiercecompetence between energy suppliers trying to attract new customers.
  45. 45. 192.4 Regulatory frameworkAccording to Tenenbaum, 1995, regulation is a “system (of laws and institution) thatenables a Government to formalize and institutionalize it compromises of protectingconsumers and investors in a certain industrial sector”2.4.1 Structure of the electrical sector.Due to the liberalization process, there are activities on the structure of the electricalsector which are regulated while some other activities are de-regulated. The regulatedactivities are network activities (transmission, distribution), technical operation andorganized market operation. The de-regulated activities are generation, wholesalemarkets and retail markets and they are ruled by the offer and demand law.A perfect comprehension of the structure of the electrical sector is critical to fullyunderstand the regulatory framework. In Table 2, there is a schema comprising all theactivities involved in the electrical sector. In yellow the regulated activities and in greende-regulated activities.The network activities (distribution and transmission) are considered as naturalmonopolies. This is because there is no sense in constructing new lines in parallel toallow the competence between different companies. Therefore, distribution is aregulated activity. There are two main aspects within the regulation of the distributionactivity: Cost based or incentives based regulation and the control of the quality of theservice.2.4.2 Regulation of the distribution activityThere are two ways to regulate the distribution activity: Cost of service and regulationthrough incentives.Cost of Service has been the traditional regulation method for natural monopolies in theelectrical sector. According to this method, the National Regulatory Authorities (NRA)establishes the remuneration for the company according to justified costs plus the returnon the invested capital (ROI).The main problem with this regulation is that the companies do not have any motivationto reduce costs and make more efficient their networks. To solve this problem, there isanother type of regulation, incentives based regulation.Incentives based regulation. The NRA fixes a defined amount of money for a certainperiod of time (4 or 5 year). With this method, DNOs try to minimize their costs inorder to obtain higher revenues.When the period of time finishes the NRA supervise the cots and investments. Theresult of this supervision is a new formula that limits the prices or the incomes of thecompany.
  46. 46. 20The main problem with this method is that together with the reduction of costs, DNOsmay incur into less quality service. For this reason, NRA must control and define aminimum quality for supply service.Activities within the electrical sectorGeneration Network Transactions Ordinary regime: all theclassical generationtechnologies. Special regime:All the technologieswhich have lessenvironmental impact orbetter energeticefficiency. Adjusment services. Transmission Expansion planning Construction Maintenanceplanning Maintenance Transmissionoperation Distribution Expansion planning Construction Maintenanceplanning Maintenance Distributionoperation Wholesale market Retail market Energy suppliers Complementaryactivities Settlement. Billing. Metering.Coordination Technical operation of the electrical system Organized market operation ( if it exists)Table 2: Electrical activities involved in the electrical sector.Source: own2.4.3 Quality of service, Security and Efficiency.Another important factor within the regulation of the distribution activity is that NRAskeep the control of the three main tasks of DNOs: Good service quality: maintain voltage and frequency within acceptable values. Security: continuity of the service in the short-term scale. Efficiency: electricity supply with the minimum cost.There are different measures to keep control of these factors and although they mayvary from one country to another, in all the country these three aspects are regulated.
  47. 47. 213. The evolution of the current electrical system: SmartGrids.3.1 Reasons for the change of the current electrical system.In recent years there are three main factors that are determining the energy policy inEurope. These three factors are: Reduction of environmental impact. Improve security of raw materials supply. Sustainability of the power systems.This is why in order to lessen the environmental impact and fossil fuel dependence, in2008 Europe decided to set new milestones in its energy policy for 2020. The attemptgave as a result the objectives referred to as 20/20/20 for 2020: Reduction of greenhouse gases emissions by 20% of those in 1990. A 20% of the total energy consumption produced with renewable energies. Reduction of 20% of the total energy consumption enhancing the energeticefficiency.Environmental ImpactIn recent years society has witnessed a consciousness-raising about the environmentalimpact and the crucial role that human activities play on it.The environmental impact is due to the gas emissions originated in factories, vehicles,fossil fuel power plants, etc.Some of these gases only affect to the local environments (gases such as NOx and SOx),however the emissions of CO2 affect to the global greenhouse effect. The CO2 is one ofthe gasses that appear in the exhaust of the combustion of fossil fuels.Fossil fuels are currently indispensable in human activities such as industry andtransportation. The main problem with CO2 is that it is released to the atmosphere inhigher amounts that what can be naturally.The awareness about this problem resulted in a search of alternative energy sources thatpollute less than fossil fuels. The consequence is the development of renewable energies.Renewable energies enclose all those technologies which use local resources which arevirtually inexhaustible. Nevertheless, the renewable energies are characterized by theirintermittent and unpredictable nature (the wind blows when it wants and the sunshines when it wants). These characteristics introduce new and big challenges in theelectric system because unlike conventional generation plants, renewable energies arenon-controllable technologies.
  48. 48. 22Security of SupplyRegarding the security of supply, fossil fuels constitute the basis for Europeanenergetic system. Most of these fossil fuels are imported from countries outside Europewith unstable political background, decreasing European energetic independence. Thus,it is a must for Europe to find alternative energy sources to be more independent fromexterior energy supplies and improve its security of supply.Due to this dependence, Europe has to introduce changes in its energy policy in order touse more efficiently its own resources while it shifts from fossil fuels to other forms ofenergy which reduce its external dependence. With the aim of contributing to thereduction of fossil fuel dependence, the electrification of the transportation can be theperfect option.Nonetheless, the current electrical system is not prepared for the integration of electricvehicles. Still, there is the need to improve the technology but also to define the properregulatory background for their future integration in the electrical system.Sustainability of the electrical systemRegarding the electrical system, the objective of reducing 20% of the total consumptionimproving the efficiency is inherently linked with its sustainability. This reduction ofthe energy consumption cannot only be based in a reduction of each final customer oftheir consumption. Europe must be able to reduce the energy consumption developingmore efficient electrical system which improves the utilization of the electricity.For instance, In Figure 13 the evolution of networks’ capacity is depicted. The traditionalmethod used to supply the growing demand has been increasing the capacity of thesystem. The method is based on the idea that the electrical system must be able tosupply energy in the worst case that all consumers, at the same time, require themaximum power contracted.The result of this conception is that systems are designed for a capacity which is onlyused few hours a year. Therefore, the electrical systems in most of the cases are over-sized systems. This situation is unsustainable because large investments are required toprovide that capacity which only few hours along the years.In the past (left part of figure 1), conventional generation released its energy to thetransmission network and all based on a centralized control (System Operator). Thetransmission network was connected to the distribution network with a passive control.
  49. 49. 23However, there was a time when distributed generation started to be connected to thedistribution network.Figure 13: Capacitys evolution of the electrical system depending on the criterionProyecto Fenis.Currently (central part of figure 2), the problem that the electrical system is facing isthat distributed generation has a very strong presence on distribution networks.However, this distributed generation is connected to the distribution network as anintermittent generation (lacks of security of supply and firmness). Hence, distributedgeneration is substituting to the conventional generation in energy [MWh], but notcapacity [Mw].Subsequently, the installation of every MW of distributed generation involves anotherMW of conventional generation, in order to maintain security of supply. This situation itis unsustainable and that is the reason why a different perspective needs to be taken toaddress this situation more efficiently.Distributed generation needs to be properly integrated in the network. Furthermore,demand side participation has a very important role to achieve the active managementof the network (right part of figure 1). On top of that, the efficiency of the overallsystem requires bidirectional communication between transmission and distribution
  50. 50. 24network operators. Only changes on this direction can reinforce the efficiency of thesystem.The problems of the electrical system demonstrate that if the electrical system wants toplay an important role in the reach of the three main objectives, new solutions are to beconsidered.The integration of new technologies that help to achieve the 20/20/20 objectives is aprocess which in many countries has been called as “Smart grids”. The smart grids willrepresent the evolution towards a more efficient, secure and environmental friendlysystem. This evolution will improve the quality of the product (electricity) and theefficiency and sustainability of the service.3.2 Concept of Smart GridsSmart grids are those electric networks that enable the integration of the DistributedEnergetic Resources (DER) in an efficient way, maximizing the quality of the service atthe minimum cost.The DERs are:1. Distributed Generation (GD).2. Demand side participation.3. Electric vehicle.4. Decentralized storage.It is crucial to comprehend that smart grids are neither something physical (no smartmeters, no TICs, no new topologies on the networks, etc.) nor a revolution orcompletely new system that discards the present one.The smart grids are a process, an evolution of the current electric system that willenable the integration of the DER enhancing the quality, efficiency andsustainability of the electrical service and product.The success of this process compels the proper technological development and theconvenient regulatory framework. Both of them are fundamental for a convenientintegration of the DER and therefore, the proper implementation of the smart gridsprocess.The NRAs through regulation have to ensure: Protection of the interest of all the agents involve in the electric system. To ensure the security, efficiency and quality of the electricity service andproduct.
  51. 51. 25 To set the proper policies to facilitate the development and maturity that newtechnologies becoming profitable and therefore competitive enough to be integrated intothe electrical markets.The different DERs that constitute the smart grids, together with the complementaryelements (new technologies and regulatory framework) and the objectives, are depictedin Figure 14.Figure 14: Necessary components of Smart Grids and objectives. Source: OwnSince the smart grids are an evolution, they need to introduce step by step each of DER.Each DER requires first the integration of other DER, new technologies and adequateregulatory rules to be successfully integrated into the system.As a consequence and as any other process, the smart grids require several steps to beintegrated within the system. A possible route could be as represented in Figure 15.
  52. 52. 26Figure 15: Possible smart grids’ route integration. Source: Own.Presently, distribution networks are functioning in very good conditions but DNOs needa much higher level of monitoring and operability of their medium and low voltagenetworks. DNOs receive scarce real-time data from these networks what means thatthey are unable to supervise their actual state. Other requirements such us more remotemanagement systems, more tools to help the operation of the grids and better regulatoryframeworks are indispensable to achieve the optimum working condition of distributionnetworks.In parallel the evolution towards integration of DG is occurring. The main problemsabout the integration of the DG is that there is no the proper background to incentivizeDNOs to integrate DG in their networks.Subsequently, the expansion of remote management systems (smart meter among others)with bidirectional communication will be the technological gateway to integrate thefollowing DERs.Afterwards and not earlier, the demand-side participation will be possible. The demand-side participation, involves demand-side management and demand response.Additionally, the introduction of electric vehicles will require more advancedtechnologies and it will play an important role within the demand-side participation. Ofcourse, all these changes must be accompanied by adequate regulatory rules.Finally and after all these steps, the optimization and the coordination of all DERsintegrated within the system must be performed. It is only after completing this route,when the electrical system will be provided with benefits such as:
  53. 53. 27 Self-regenerative: networks will be provided with components able to check,analyse and diagnose in order that they can identify and fix those devices which aredamaged or in bad operative conditions. As a consequence, the quality of thesupply will increase. System focus on consumers: consumer will be well aware of their consumptionand prices and based on this, they can modify their habits. This change will help tothe reduction of electricity utilization in peak hours, when the prices of theelectricity are higher. At the same time, it would be possible to shift part of thedemand of the peak hours to the valley hours, obtaining a more stable demandcurve. Quality improvement of the service: consumers will be able to choose the qualitythey need attending to different prices. Moreover, the use of signal actuators basedon power electronics will prevent perturbations (harmonics and flickers) fromequipment. Facilitate interaction between agents in the electrical markets through a securenetwork that allows the aggrupation of many costumers and distributed generation,facilitating their aggregation and communication. The interaction between offer anddemand side is crucial to achieve resource’s efficiency because there will be abetter agreement in terms of capacity and energy available at any moment. Optimized use of facilities and their operation: due to the information that clientshave, the consumption will be more equilibrated along the day and the utilization ofthe network will be better. This motivates a flatter demand curve, allowing betterdesigns of the network, resulting in fewer costs.All these characteristics can be understood as a more efficient and sustainable systemwith a better quality of electricity product and a superior electricity service.In next chapter, DG and Demand-Side Participation are described. Also an analysisabout the technological and regulatory issues affecting each of them is carried out. Thisdissertation focuses on these two DERs due to their proximity in time and already on-going process of DG integration.The integration of the other two DERs (electric vehicle and decentralized storage) arefurther in time but many of the conclusions of this dissertation can be used for theirfuture integration.In next chapter, DG and Demand-Side Participation are described. Also an analysisabout the technological and regulatory issues affecting each of them is carried out. This
  54. 54. 28dissertation focuses on these two DERs due to their proximity in time and already on-going process of DG integration.The integration of the other two DERs (electric vehicle and decentralized storage) arefurther in time but many of the conclusions of this dissertation can be used for theirfuture integration.

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