THE ROLE OF DISTRIBUTION NETWORK OPERATOR IN PROMOTING COST-EFFECTIVE DISTRIBUTED GENERATION: LESSONS FROM THE UNITED STATES FOR EUROPE Karim L. Anaya, Michael G. Pollitt, Thomas Greve Energy Policy Research Group University of Cambridge – UK 23th International Conference on Electricity Distribution Session 6, Paper 1218

Contents Aim of the paper Case studies Competitive connection arrangements in Europe A competitive mechanism proposal to the UK Final remarks Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

Aim of the paper Evaluate competitive and decentralised mechanisms applied by electric utilities from US in promoting cost- effective DG Proposes an example of auction design with a focus on the UK context Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

Case studies Focus on the US and on Wholesale DG Based on the large experience that US has in competitive procurement mechanisms States with high Renewable Portfolio Standards (RPS) Two types of competitive mechanisms: Request for Proposals (RFP): Medium/large size projects, evaluation criteria: quantitative, qualitative Renewable Auction Mechanism (RAM): Small size projects, evaluation criteria: quantitative Other mechanisms: FIT, Bilateral contracts Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

Case studies Table 1: Case studies summary Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

Evaluation & Bidding process Case studies Figure 1: Main findings Product Renewable and non-renewable technologies Variable total capacity Capacity cap (project),up to 280 MW Ownership options Evaluation & Bidding process Bid price (including upgrade costs/additional services) Individual/multiple proposals Quantitative and qualitative evaluation Independent evaluator Bid evaluation fee (fixed, variable) Competitive process Contractual terms Variable length of contract (1-25y) PPA pro forma (online) Deposits Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

Competitive connection arrangements in Europe Previous schemes represent well-documented decentralised competitive mechanisms A similar auction design can be put in place by the DSOs from Europe, however…. Unbundling rules should be taken into account: DSOs with more than 100,000 customers are not allowed to purchase electricity Two ways to deal with this: DSOs only, where the cost of connection is bid DSOs and third party suppliers, where the cost of connection and energy price are bid Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

A competitive mechanism proposal to the UK The DNO proposes the Point of Connection (POC) and available capacity POC: Only those POC where reinforcement is not required Reserve price: DNO estimates the connection costs at the POC (£/MW) Pre qualification criteria (without scoring) Each DG bids a maximum willingness to pay/MW connected >= reserve price Winners: those with maximum bids (£/MW) DG owners responsible for trading energy Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

A competitive mechanism proposal to the UK Table 2: Auction Design Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

Final remarks A similar behaviour is observed across utilities in the way in which competitive mechanisms are managed Auction design elements can be applied to any DSO The bid price should reflect the total costs/benefits Competitive mechanisms allow the market to define the price and also.. Help DSOs to manage the increase in the number of DG connection enquiries Energy regulators could oversee more decentralised competitive strategies Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218

THANK YOU Anaya, K.L., Pollitt, M.G., Greve, T. - UK – Session 6 – Paper 1218