The changing role of distribution system operators in liberalised and decentralising electricity markets

The penetration of distributed generation (DG) is increasing in most electricity markets and it is expected that this development will continue in the near future. This paper addresses the question of how distribution system operators (DSOs) can adapt to the growth and also enhance the competitive strength of DG in a regulated and competitive electricity market and is based on analyses performed in the DISPOWER project. DSOs have to change their business focus in order to keep their business lucrative. By developing new business activities, thereby diversifying the business model, and by transforming operational philosophies from passive into active network management, DSOs can overcome the threats that arise from the increasing penetration of DG, incentive regulation, regulated connection charges, and unbundling. In order for DSOs to embrace such opportunities, regulation also needs to evolve such that it provides DSOs with a wider range of options and incentives in choosing the most efficient ways to run their businesses in the new decentralised electricity market