Elsevier

Utilities Policy

Volume 67, December 2020, 101117
Utilities Policy

Integrating distributed energy resources in electricity distribution systems: An explorative study of challenges facing DSOs in Sweden

https://doi.org/10.1016/j.jup.2020.101117Get rights and content

Highlights

  • DSOs face organizational and regulatory barriers to integrate DERs.

  • Varying context create varying conditions for DSOs to manage DER integration.

  • Current regulatory regimes risk limiting ‘whole system’ solutions to DERs.

  • There are different pathways for DER integration that can be pursued simultaneously.

Abstract

Distribution system operators (DSOs) face challenges integrating distributed energy resources (DERs) into their grid network. This article presents an exploratory study of Swedish DSOs and their actions and capabilities to manage DER integration. The study is based on information from a combination of secondary data, interviews, and surveys. The findings include the current most pressing challenges for Swedish DSOs, different DSO responses to ongoing change, and differences in DSO capabilities to manage increasing shares of DERs. Both regulatory and organizational barriers for DSOs to integrate DERs into distribution grids are identified and discussed.

Introduction

Current electricity systems have developed through a co-evolution of institutional, technological, and organizational structures (Markard and Hoffmann, 2016). When different interdependent structures develop at different rates, they give rise to structural tensions (Dahmén, 1989). The development and diffusion of distributed energy resources (DER) such as solar photovoltaics (PV) and electric vehicles (EV) have created such structural tensions in incumbent electricity systems. DERs connected to electricity distribution grids increasingly decentralizes the control of energy assets in the electricity system, that for a long time have been characterized by centralized power generation and control (Hughes, 1983; Joerges, 1996). DERs can also create technical problems such as voltage disturbances and overloading their point of connection to the grid. However, if the flexibility of DERs is successfully managed, DERs can provide benefits for the overall well-being of the local as well as national electricity systems (Gerard et al., 2018).

Structural tensions can create positive transformation pressure by stimulating innovation and investments in complementary and synergistic elements to form a complete ‘development block’. Unresolved structural tensions can create negative transformation pressure that restrains industrial development (Dahmén, 1989). If a structural problem becomes a radical problem, it may even call for the development of a new and competing system (Hughes, 1983). If DERs create unresolved radical problems in electricity distribution grids, this may create barriers to industrial development around DERs or result in DERs being integrated into alternative systems, such as end-user systems or microgrids. In a complete development block, the elements within the development block mutually enhance each other, increasing marginal returns and enhancing productivity (Enflo et al., 2008). The development of the Swedish electricity system at the turn of the twentieth century is a classic example of a development block (Dahmén, 1950). In this example, an over-capacity in electricity generation created a potential electricity surplus that provided incentives for the development of an energy-intensive industry to match the generation capacity (Dahmén, 1991, 1950). This example is comparable to the current situation in Europe where diffusion of DERs such as solar PV and EVs create local and varying surpluses of electricity and overloads that in turn incentivize the development of complementarities to manage and balance these DERs in the incumbent electricity system. The development of large technical systems is interdependent with industrial development (Dahmén, 1950; Hughes, 1983), which makes both regulators and system operators play an important role in the industrial development of DERs.

Distribution system operators (DSOs) are responsible for maintaining electricity quality and security of supply by building, reconfiguring, and investing in current electricity distribution systems. DSOs have a central role in the successful management of DER integration (Mateo et al., 2017; Perez et al., 2016; Ruester et al., 2014; Simpson, 2017; Zehir et al., 2017). Further expansion of DERs may force DSOs to take on a new, more active role as system operators (ACER, 2014; IRENA, 2019; Prettico et al., 2019). DSOs operate within natural monopolies and are tightly regulated to protect customers and limit grid fees, limiting their abilities to innovate compared to free enterprises (EDSO, 2019). DSOs also tend to respond to regulatory frameworks, not market opportunities and have a tendency for cost reduction measures rather than risk-taking opportunities (Günther et al., 2017; Lockwood, 2016; Prettico et al., 2019). Furthermore, DSOs tend to be subject to path dependency, with capital-intensive sunk investments and long lifetimes of physical assets. Additionally, DSOs are typically affected by highly structured organizational routines that are difficult to alter in the short term (Bolton and Foxon, 2011). Thus, the role of DSOs in relation to DER-induced structural tensions is worthy of scholarly attention.

In this article, we present an exploratory study of Swedish DSOs and their challenges, activities and capabilities to manage DER integration. The study is based on a combination of a desktop study, interviews with 10 DSOs, and a survey with 25 DSO representatives. We pose three research questions to guide our study: (1) What are the DSOs' responses to the development of DERs in Sweden? (2) What are the DSO representatives’ responses to policy developments in Sweden? (3) What capabilities do DSOs have to manage DERs and policy developments in Sweden? Based on our findings, we analyze barriers to the adoption of DER complementarities and discuss potential pathways toward a complete DER development block from a DSO perspective.

Section snippets

Technical challenges with distributed energy resources in incumbent electricity systems

The development of DERs comes with promises of decarbonizing the electricity power sector and has received substantial policy support (Lacal Arantegui and Jäger-Waldau, 2018). DERs are typically characterized as small-to medium-sized resources and can be divided into the following categories: distributed generation (e.g. solar PV technology), energy storage (e.g. batteries and power to heat), and demand response resources (Damsgaard et al., 2015a). Increasing levels of distributed generation

Case selection

Swedish DSOs were selected as a case because Sweden has a diverse and heterogeneous population of DSOs, because the Swedish regulatory framework is both layered and complex – characteristics it shares with several other European nations (CEER, 2019; Lockwood, 2016; Prettico et al., 2019) – and because the Swedish electricity system is currently undergoing significant transformation, with increasing levels of electrification and DERs (Ei-Swedish Energy Markets Inspectorate, 2017a; Svenska

Case description

Swedish DSOs have the objective of ensuring safe, reliable, and efficient distribution of electricity to its customers (Government of Sweden, 2018a). The primary means for Swedish DSOs to create value is through operating and maintaining their respective grids, providing sufficient power quality to all their customers, connecting new customers to their grids, and measuring the generation and consumption of power for all their customers (Government of Sweden, 2018a). The customers of DSOs are

Findings

According to the survey respondents, currently, their main challenges are caused by solar photovoltaics (PV) and electric vehicles (EVs), and the most pressing technological issues concern bottlenecks and voltage quality problems in their grids (see Fig. 1, Fig. 2).

The interviewed DSO representatives highlighted differences in challenges depending on the location of the installed DERs and the tensions arising from resource inefficient siting and sizing of DERs from the perspective of the

Regulatory and organizational barriers to adoption of DER complementarities

The level of DERs in the Swedish grid has not yet caused severe problems for Swedish DSOs. However, DSOs are increasingly acknowledging the limits of traditional methods with a continued increase of DERs. Increased levels of DERs will require the adoption of new technologies and capabilities as complementarities to diffused DERs. These complementarities face barriers both at the regulatory/policy level and at the organizational level. The type of obstacles that DERs face can be illustrated in a

Discussion

In line with earlier studies, the study found that Swedish DSOs are affected by their history. It was found that municipal and smaller-sized DSOs often have a strong connection to their geographical location. Their technological capabilities and routines are affected by how they have solved problems regarding voltage quality or capacity issues in the past. Since the unbundling reform in the 1990s, the actions of Swedish DSOs have become more streamlined – but many of the interviewed DSO

Conclusions

Distributed energy resources (DERs) give rise to different types of structural tensions that need to be managed by DSOs. The completion of a DER development block demands the development of new technological complementarities that in turn demands both organizational and institutional change. The electricity system in Sweden, with large shares of dispatchable hydropower and abundant capacity in many parts of the distribution grids, is in many ways technically well suited for the integration of

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgments

We are appreciative of the Swedish Energy Agency for making this article possible through the funding of this research project [grant number 44638-1]. We are also thankful to Angelica Afzelius and Claes Sandels at RISE for the research collaboration behind the survey study with DSOs presented in this article. We also want to thank Janice Beecher and two anonymous reviewers for their useful comments on previous versions of this paper.

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