1. Jeroen de Joode (ECN/Delft University of Technology) Michiel van Werven (ECN) An analysis of potential bottlenecks Optimal Design of Future Electricity Supply Systems

2. 2/17 IAEE Bergen, 28-30 August 2005 Conclusions  Four long-term developments are identified.  These developments cause certain bottlenecks, some of which have received little attention.  The need for direct government intervention is not evident. Market design solutions may suffice.

3. 3/17 IAEE Bergen, 28-30 August 2005 Outline What is an optimal electricity supply system? Step 1: Identifying long-term developments Step 2: Presenting framework of analysis Step 3: Discussing specific bottlenecks (2) Conclusions

4. 4/17 IAEE Bergen, 28-30 August 2005 What is an optimal electricity supply system? Three criteria to assess the optimality of the system: 1.Reliability 2.Sustainability 3.Affordability

5. 5/17 IAEE Bergen, 28-30 August 2005 Step 1: Identifying long-term developments 1.Increasing electricity demand; 2.More unconventional generation; 3.More decentralised generation; 4.From national systems to a European system.

6. 6/17 IAEE Bergen, 28-30 August 2005 Step 2: Presenting the framework Developments Elements of the value chain Increasing demand More unconventional generation More decentralized generation Towards a European system Generation Network Demand Balancing Policy Regulation

7. 7/17 IAEE Bergen, 28-30 August 2005 Step 2: Presenting the framework Developments Elements of the value chain Increasing demand More unconventional generation More decentralized generation Towards a European system Generation Long-term adequacy of supply Network Lack of locational signals Passive networks Larger influence of international flows Co-ordination problems Demand Local generation exceeds local demand Balancing Insufficient demand response Intermittency causes balancing problems Balancing needs on DSO-level Co-ordination problems Policy Conflicting policy Regulation More complex regulation

8. 8/17 IAEE Bergen, 28-30 August 2005 Step 2: Presenting the framework Developments Elements of the value chain Increasing demand More unconventional generation More decentralized generation Towards a European system Generation Long-term adequacy of supply Network Lack of locational signals Passive networks Larger influence of international flows Co-ordination problems Demand Local generation exceeds local demand Balancing Insufficient demand response Intermittency causes balancing problems Balancing needs on DSO-level Co-ordination problems Policy Conflicting policy Regulation More complex regulation

9. 9/17 IAEE Bergen, 28-30 August 2005 Step 3: Discussion of potential bottlenecks (1) 1.The impact of increasing penetration of distributed generation (DG) on management of distribution networks 2.The importance of demand-side response (DR) resulting from higher balancing needs

10. 10/17 IAEE Bergen, 28-30 August 2005 Advantages of distributed generation (DG).  May reduce transmission/distribution losses;  May defer transmission/distribution capacity investments;  May offer ancillary services to network operator (reactive power, voltage control). … but dependent on specific location of DG!

11. 11/17 IAEE Bergen, 28-30 August 2005 Impact of distributed generation (DG) DG requires changes to distribution system management: DG penetration may require network reinforcements. Local generation requires different, more active distribution system operators:  who act as a market facilitator, and  who provide multiple network and ancillary services through intelligent management of the distribution network.

12. 12/17 IAEE Bergen, 28-30 August 2005 Evaluation of the bottleneck of distributed generation (DG)

13. 13/17 IAEE Bergen, 28-30 August 2005 Role for market and government in development towards active network management  Regulation should provide incentives for innovation.  Insufficient unbundling might impede this move due to partial dependency of the operator.

14. 14/17 IAEE Bergen, 28-30 August 2005 Demand response (DR) More intermittent generation  higher demand for balancing resources  more need for DR. DR improves the price elasticity of demand  reduced cost of reliable demand as well as price volatility. Bottlenecks: the cost of equipment :  real-time meters,  for automatic load control (e.g. devices that switch off loads if the electricity prices exceed a specified level); consumer education; and communications infrastructure to consumers.

15. 15/17 IAEE Bergen, 28-30 August 2005 Evaluation of the bottleneck of demand response (DR)

16. 16/17 IAEE Bergen, 28-30 August 2005 Role for market and government in stimulating DR deployment  Governments: –stimulate the development of the needed technology (benefits to society possibly exceed private benefits). –Governments can increase consumer awareness.  Market: deployment beneficial for both consumer and supplier through more efficiently working balancing market.

17. 17/17 IAEE Bergen, 28-30 August 2005 Conclusions  Four developments: 1.Increasing electricity demand; 2.More unconventional generation; 3.More decentralised generation; 4.From national systems to a European system.  Bottlenecks: 1.The impact of an increasing penetration of distributed generation demands a more active DSO; 2.The importance of the role of demand-side response implies a need for more active consumers.  The need for government intervention is not evident.

18. Thank You for Your Attention! Contact information: Jeroen de Joodedejoode@ecn.nl