Economic regulation of distribution system operators and its adaptation to the penetration of distributed energy resources and smart grid technologies

Resumen

This thesis presents a review of the economic regulation of electricity distribution and proposes several recommendations to adapt current regulatory practices to facilitate the efficient integration of smart grid technologies and distributed energy resources. The thesis starts with a review of the economic theory which justifies the regulatory intervention in the electricity distribution sector and which serves as the basis of current regulatory practices. Subsequently, an overview of the evolution of distribution regulation in several countries over the last decades is provided, after which the challenges faced by distribution system operators in the new environment are described. These challenges are mainly related with the connection of new types of distribution network users, such as distributed generators or electric vehicles, and technological developments. Next, the thesis introduces the general methodology followed to set the allowed revenues of distribution companies, as well as the main regulatory tools used for these purposes. Particular emphasis is placed on regulatory benchmarking. The thesis proposes a new taxonomy for classifying the different benchmarking approaches and provides a comprehensive comparative discussion about the pros and cons of each approach. After this review, a framework to determine the allowed revenues of distribution system operators suitable for the new context with smart grid technologies and distributed energy resources is proposed. The major goal of this proposal is to provide stability required to draw investments, whilst mitigating regulatory uncertainties and encouraging distribution companies to elaborate accurate investment plans. In order to illustrate the proposed approach, an implementation strategy for the Spanish context is defined, taking into account the specific conditions of in this country. Finally, the thesis addresses the design of regulatory incentives related with quality of service and energy losses in distribution networks. Firstly, the theoretical framework that guides the design of these incentives and the different mechanisms used is reviewed. Thereinafter, the practical difficulties that can be encountered when implementing the aforementioned mechanisms are enumerated and discussed. Lastly, the thesis analyzes how the penetration of smart grid technologies and distributed energy resources can affect the design and implementation of these incentive schemes.