Impact of Network Regulation on the Incentive for DG Integration for the DSO: Opportunities for a Transition Toward a Smart Grid

The integration of distributed generation (DG) in distribution grids is one of the pillars of smart grid deployment. However, an increasing amount of DG connected to distribution grids is likely to affect the operation of the grids themselves, e.g., changing the magnitude, and in some cases the direction, of power flows. In order to perform the transition to a smart grid, it is therefore essential to have the distribution system operators (DSOs) involved in the process. However, being that the DSOs´ business is controlled by regulators, regulation has a fundamental impact on the speed and the actual performance of DSOs´ involvement in the transition toward a smart grid. Therefore, a method is needed to assess network regulation impact on DSOs´ incentive to integrate DG into their grids. This paper proposes a new method for the calculation of such incentive, and the method has been applied on a case study to the Portuguese, Danish, and Swedish regulations for different scenarios of DG penetration. The focus is on DSOs´ operational costs and revenues. The analyses indicate that DG has a different impact on DSOs business, depending on the different regulations, the most relevant aspects being the structure of customer tariffs and the regulatory treatment of network losses.