Plataforma Española de Redes Eléctricas
ENERGY REGULATORY SANDBOXES
10th March 2022
Enrique Morgades
FutuRed

57%
14%
11%
8%
5%
4%1%
2
FutuRed
Spanish Technological Platform for Electrical Networks
Founded on 2005
Members: 166 (30% of growth on the last 3 years)
Organizational structure
• Permanent: Steering Group and Secretariat
• Temporary: Specific Working Groups.
Promote the technological development of the electricity grid as a key element to achieve the
objectives of the energy transition, promoting innovation and collaboration between all the agents
that make up the Platform.
Business
Universities
Research Centres
Associations
Public bodies
Electricity companies
Others

Plataforma Española de Redes Eléctricas - FutuRed 3
Participants
Type Members
Associations and
organizations
Distribution
network managers
Industry
Research
organizations

Plataforma Española de Redes Eléctricas - FutuRed
Flexibility in
Distribution
Networks
Common
Regulatory
Sandbox
Features
Analysis of
results
4
Work dynamics and progress
March
2021
September
2021
May
2020
Preparation of a document on
Flexibility in Distribution
Networks
Including a map of
technological capabilities
and demonstrators of all the
members of the WG

Plataforma Española de Redes Eléctricas - FutuRed 5
Conclusions on flexibility in distribution
networks
Technical characteristics Economic characteristics
1. Characterization of the problem: congestion, tension control, island
operation.
2. Quantification of the need: flexibility needs (in MW, MVA), direction
(injection or absorption of energy), time and frequency of the problem.
3. Characteristics of the network involved: voltage level, configuration,
meshed or radial exploitation, etc.
4. Scope of location of the need in the network: generalized or very
localized need.
5. Technical characteristics of the users connected to the network
involved.
6. Predictability: it is predictable (structural problem) or it is difficult to
predict.
7. Temporary horizon for contracting flexibility: network planning,
network design criteria and real-time operation criteria.
8. Level of coordination between transmission and distribution
networks: analyze the degree of coordination required between TSOs
and DSOs or between DSOs.
9. Resource response times. Slow or fast response.
10. Degree of network monitoring. It is necessary to monitor the network to
have more information on the flexibility needs of the network.
1. Level of standardization of certain parameters of flexibility
services.
2. Liquidity.
3. Transaction costs.
4. Barriers to entry and exit. Entry barriers can be given by
service attributes or communication requirements, specific
systems for making offers, etc.
5. Access and availability of information. Relevant
information must be available to all suppliers well in
advance
6. Market creation phases and incentive schemes
depending on the type of need
7. Effectiveness and efficiency of the flexibility
mechanisms, for the specific application and the clients
that provide the services.

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Recommendations of flexibility acquisition
mechanisms
In those situations where there
is a potential impact of the
flexibility service on the
transmission network
In those situations where
the potential impact of
the flexibility service on
the transport network is
limited
Long-term markets
Coordinated common
market TSO-DSO Local Market
In situations of low liquidity
Regulatory recommendations:
1. Implementation in the national regulation of article 32 of the European Directive 2019/944 that allows DSOs to acquire and
activate flexibility services and the development of operating procedures to resolve the most frequent technical
restrictions in the network.
2. Regulation of the relationships between these new flexibility mechanisms with the existing mechanisms (current markets
and operating procedures). In particular, it is necessary to resolve the interaction between new flexibility mechanisms and
existing markets.
3. Integration of access and connection criteria and the different flexibility mechanisms.
4. Review of the remuneration framework for DSOs to develop incentives for the adoption of flexibility services and
encourage efficient development of the network

Plataforma Española de Redes Eléctricas - FutuRed
Flexibility in
Distribution
Networks
Common
Regulatory
Sandbox
Features
Analysis of
results
7
Work dynamics and progress
March
2021
September
2021
May
2020
Design of regulatory
Sandbox characteristics, as
an application guide with
common characteristics to be
particularized in each case'

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 The national regulatory framework drives innovation through instruments such as regulatory sandboxes and pilot
projects.
 Until the transposition of article 32 of the European Directive, in the event that a project requires changes or
exceptions in the sectoral legislation in order to be carried out, it will have to be processed as a regulatory test
bench in accordance with the provisions of LRD 23/2020 in order to establish the necessary exceptions.
 Initiatives that may have an impact on the wholesale electricity market and/or on the management of the system's
operation may qualify for recognition as regulatory demonstration projects according to article 24 of Circular
3/2019. Understanding that these projects must also comply with LRD 23/2020, which introduces Law 24/2013,
of December 26, on the Electricity Sector, the twenty-third additional provision "Regulatory test Banks" and that
they must be covered by a call made by a decree of the Government.
 The projects that are limited to the scope of the distribution activity that do not affect the wholesale market or the
system operator, do not seem to fit within Circular 3/2019. However, for simplicity, this document takes as a
reference the criteria described in it.
 It is interpreted that since flexibility is an innovative concept in the electricity distribution sector, in the event that
the investments and associated expenses of a certain initiative do not have ordinary remuneration recognition, it
may be recognized as a pilot project according to article 16 of the Circular 6/2019.
Normative analysis

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Regulatory Sandbox common features
document
Formal Sandbox Request
o Applications with detailed budget and funding
sources.
o Possible prequalification (general) or
qualification (detailed).
o Knowledge of the DNM.
Approval
- Follow-up plan.
- Publication

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Regulatory Sandbox common features
document
Sandbox development
- Plan monitoring.
- Possible additional time.
Results & Conclusions
- Degree of development
- Indicators.
- Main regulatory barriers.
Final and Regulatory Reports
- Opportunities.
- Regulatory change proposal.
4. Start of the
sandbox
5. Development of
sandbox
6. Sandbox
completion
7. Results and
conclusions
8. Final report
9. Regulatory
report

Plataforma Española de Redes Eléctricas - FutuRed
• Defer network investments due to natural growth in user
demand, through activation of the flexibility market (long-
term)
• Defer network investments due to natural growth in user
demand, through dynamic access rates (long-term)
• Solution of structural congestion (N-1) long-term market
(y-1)
• Solution of a congestion (N) in a specific point of the
network (short term)
• Short-term (d-1) market congestion solution (N-1)
• Avoid network reinforcement due to growth of access
requests
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Use Cases
Listed below are potential use cases that can be used as examples to facilitate the
development of real sandbox projects.
1. Actors Involved
2. Current Solution
3. Proposed model
4. Efficiency Condition
5. Customer benefit
6. Regulation involved.
Barriers. Innovation
7. Risks

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Use Case Example (1/4)
Defer network investments due to natural growth in user demand, by activating the
flexibility market
Actors
Current
Solution
Proposed
Model (1/2)
• DNM, MO (Market Operator), FSP (aggregators, users with flexibility capacity as
active consumers, generators, prosumers, energy communities, batteries, etc).
Occasionally TNM (Transmission Network Manager)
• DNM annually presents the annual and multi-year investment plan (3 years)
• Investments not financed by 3º become part of the asset base with the right to
remuneration (RAB).
• The DNM, within the planning process, based on the analysis of the needs for network
growth or reinforcement, summons a market, through the MO, in which the FSPs
can offer their flexibility capacities to reduce the power peak during a range of
hours of the year and for a temporary period
• Subsequently, the DNM presents an investment plan in distribution assets that
contains the flexibility solution to provide a more technically and economically
efficient solution to the need to reinforce the network.
1
2
3

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Use Case Example (2/4)
Defer network investments due to natural growth in user demand, by activating the
flexibility market
Proposed
Model
(2/2)
• In the flexibility auction, both the contracted and activated power prices are
established. Payments are made at the time of contracting (for availability) and
each time the FSP activates the flexibility.
• The total costs of these services constitute a regulated cost that will be
transferred to customers in the corresponding network tolls.
• It is necessary to monitor the energy flows of the participation of each FSP in
the resolution of the congestion in order to subsequently carry out the
economic settlement for the participation of flexibility actors in the resolution of
the congestion.
• Non-compliance by the FSP with the contracted conditions may lead to
penalties that compensate for the effect produced.
3

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Use Case Example (3/4)
Defer network investments due to natural growth in user demand, by activating the
flexibility market
Condition
Efficiency
• This solution optimizes the technical-economic solutions of the distribution
system, generating efficiencies in the average use of physical facilities.
Cost of investment in assets (remuneration for investment and O&M) > OPEX of
the proposed model (includes both payments to customers for the flexibility
services they provide, as well as the costs of managing the system and the DNM,
as well as the incentive to DNMs), the solution is justified
• The FSP receives this new incentive linked to its participation (CAPEX of
contracting and OPEX of activation).
• The system costs are reduced thanks to the cost difference between the
traditional solution and the proposed model. This benefit is transferred to
customers through tolls.
Customer
Benefit
4
5

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Use Case Example (4/4)
Defer network investments due to natural growth in user demand, by activating the flexibility
market
Regulation
Barriers
Innovation
• The current legal and regulatory framework does not allow the DNM to purchase
flexibility assets as an alternative to network expansion.
• For the development of the Use Case, it is necessary to modify regulations
related to: functions assigned to DNMs (Law 24/2013), design and operation,
remuneration (Circular 6/2019) and new regulations for the Definition of Flexibility
Markets, agents involved, information flows in real time, market information flows.
• The main risk presented by the model is for the DNM and the users located in
the congested area.
• The non-compliance with contractual agreements is a concern, Flexibility
Remuneration is not attractive for clients, among others.
Riesgos
6
7

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Conclusions and next steps
01
02
03
It is necessary to separate the application and
development of the sandboxes from the
sources of financing for their execution
Sandbox funding can be provided through a variety of
public funding sources, including Recovery and
Resilience Fund projects. The regulation for its
application, development and evolution could be
developed in parallel.
Sandboxes are instruments to promote
regulatory innovation
Sandboxes allow obtaining experiences that serve as a
basis for developing new regulations.
More definition is needed on the procedure to
follow for the development of flexibility sandboxes
in distribution networks
The FutuRed document presents a proposal on the
procedure to follow to carry out these projects. It is
essential to clarify whether the flexibility sandboxes in the
distribution network are within the scope of Circular 3/2019.
04
05
The Administration must define the competences
of the different institutions
The themes and institutions responsible for receiving,
evaluating and monitoring the projects must be clearly
defined.
Sandboxes on flexibility in distribution
networks are an opportunity to test different
contracting schemes
There are different proposals on the design of local
electricity markets and other alternatives for acquiring
flexibility in distribution networks. The sandboxes are
an opportunity to evaluate these alternatives that will
serve as evidence to implement the European
Regulation.
06
There is a high interest from agents to
develop Sandbox projects
It is important that the administrations prepare
themselves to respond to the requests that are going to
be presented and establish mechanisms for their
evaluation and follow-up. One of the alternatives is to
establish an external Committee to support the
regulator and the competent authorities.

Plataforma Española de Redes Eléctricas - FutuRed
¡Thank you!
Enrique Morgades