ERDF s response to ACER s public pre-consultation on «Energy Regulation: A bridge to 2025»

Transcription

1 ERDF s response to ACER s public pre-consultation on «Energy Regulation: A bridge to 2025» Electricité Réseau Distribution France (ERDF) welcomes the opportunity to respond to ACER s public consultation on its proposed work program for a new regulation towards 2025 and is pleased to provide with views on the three consultation documents from a DSO perspective. ERDF favors a customer centric approach of energy policy. Facing 250 million customers in Europe, investing 400 billion by 2020, the 2400 DSOs will play a key role facilitating transition toward a more diverse electricity world, which remains secure, affordable and environmentally friendly. More specifically, ERDF welcomes ACER s emphasis on DSOs role dealing with consumers information, distribution infrastructure and market enabling adaptation. This is why ERDF recommends: - To build a neutral and regulated DSOs active role as a system manager - To give DSOs the possibility to use the new local tool of flexibility for its own needs (security of supply) - To integrate in future market rules not only issues such as energy adequacy, but also peak power issues at all levels (Trans European, National, Local) - To foster innovation (and reward risk taking regarding new technologies) - To improve attractiveness in investment in network infrastructure - To integrate DSOs upfront in concertation process to define future market rules having an impact on the distribution infrastructure The Overarching Paper: 1. Do you agree with this overall approach? Would your emphasis be any different? We fully agree with this comprehensive approach including a wide range of regulatory issues such as renewable, smartness, distribution networks, consumer protection and empowerment demand side response and flexibility. Anyway it seems crucial that EU level focuses on the cross border impact of policies. The national regulations have to take into account the benefits of national investments upon neighbor member states through a cross border impact. It is the spirit of the new regulation Connecting Europe Facility. Such investments should not be submitted to productivity rule, neither for OPEX, nor for CAPEX. 2. Do you agree with this broad analysis and/or do you have further suggestions? Challenges for electricity network at regional level such as loop flows, or capacity remuneration mechanisms are relevant issues. They lay rather on peak power issues than on energy issues. However the open question deals with the lack of investments. The new European regulation model must promote investments through remuneration consistent with market and investors expectations.

2 3. Do you think the list of suggested measures is complete or do you have further suggestions? Do you think that the requirements for infrastructure investment in gas are the same as in electricity? What further ideas do you have on the future role of consumers? The list of suggested measures is quite exhaustive. Creating and enabling a framework for TOU and dynamic demand-side-response definitely begin with an easy but indispensable step which is an adequate network tariff. In one hand the network tariffs have to reflect the costs structure of networks and correctly allocate these costs according to the use of the network (consumers versus generators) on the other hand. The fix and power related parts have to be drastically increased, compared with the energy one. More time differentiation on network tariffs should also be encouraged to reflect costs. The requirements for infrastructure investment in gas are probably more located on the TSO scale, whereas the requirements for infrastructure in electricity are probably more located on the DSO scale as, for instance in France, roughly 95% of the decentralized renewable generation injects at the DSOs levels of voltage. A new regulation should be very careful with such new trends as net-metering for instance as they do not reflect the real cost of the network if the power related part is not high enough (the network being available as an insurance for the pro-sumer or self-consumer). An important development of net metering would require an important change in the structure of the network tariffs. Net metering is a paradox issue. Impacts on the system of a DG is not dependent on the metering scheme, but on the proximity of consumption in size and synchronization. Furthermore considering present tariff formula over weighted in energy, development of net metering would result in an artificial subsidizing of DG that very often does not relieve the constraints (poor guaranteed contribution to peak load reduction) and sometimes creates injection constraints. It would be utterly paradox to subsidize generations that require development of interconnections to be evacuated from one country to another, as if they were relieving constraints on intermediate voltage level of network. Electricity Paper: 1. Although adequacy issues are not likely to disappear completely, do you agree that the current primary focus on levels of adequacy will likely be expanded to emphasise a later priority focus on flexibility? Adequacy in the document refers to generation and cross-border network adequacy. Flexibility can be considered as a local adequacy. However, there is a close link between local and aggregate adequacy. The adequacy comes either from the generation side or also from the customer side. DSOs will be a stakeholder in the adequacy issue, and will have to collaborate with the TSOs to find the right optimization to maximize welfare benefits. All the member states will probably not need a local adequacy mechanism at the same time. One point is central: the first local adequacy mechanisms will have an impact on the aggregate

3 adequacy of the member state and also through interconnectors on the aggregate adequacy of the neighbor member states. Therefore they have to be developed, keeping this cross border impact into account and moreover, being non discriminatory. DSOs should be involved in defining adequacy mechanisms when the solution discussed has a consequence on distribution network. The need to take into account distribution infrastructure is pivotal since it should be properly fitted to allow a fluid market. 2. Should we seek to further define, measure and develop flexibility in addition to the initiatives that are underway? If so, how could this best be done and in which market time periods? We would like to emphasize that the customers and all the stakeholders have to be aware of the fact that electricity is basically a double product: first of all it has a power value, and secondly an energy value. We would respectfully suggest that the figure on current page 3/8 clearly mentions these two factors in the wholesale / flexibility bubble. The crucial question dealing with flexibility is following one: will it be a big volume at the end? The Smart Grid demonstrators will help a lot to understand how big can be the empowerment of the end customers. We can assume that the flexibility markets could emerge on different timescales : year-ahead, day-ahead and intraday. We would push a step by step approach: let us learn from the current initiatives before setting another framework. 3. What are the market-based routes for flexible tools to participate? The simplest market-based route for flexible tools to participate will be the best one. When DSOs will ask for flexibilities, they will ask either for a forward (for instance seasonal) or for an intraday resolution of a capacity problem. 4. What measures may be required to ensure that the market receives the most appropriate signal for the value of flexibility? The market will receive the most appropriate signal for the value of flexibility through following tools, which have to be developed as soon as possible: network tariff structure to be revised (see Question 3 of the overarching paper: a higher fix part and power related part); retail TOU prices to be introduced; the different types of system services to be defined and the relevant payment for them. Dealing with generation flexibility, a measure could be to use dynamic curtailment for a small amount of energy which could be released from the firm energy contractual part. 5. Do you think that in other, for example institutional arrangements should be considered? Is greater TSO and DSO coordination required? If so, what should NRAs do to facilitate this? A greater coordination between TSOs and DSOs will definitely be required. NRAs could put in place local working groups with all relevant stakeholders. Local has to be defined according to local network congestions (it should be the same level as the local capacity market if any). The example to have in mind in putting such working groups in place is the current Regional Working Groups.

4 6. How should regulators facilitate demand side participation (including demand side response and electricity storage)? Regulators can facilitate demand side participation by: - enabling DSOs to use DRM services for their own needs (security of supply) - giving DSOs the right to contact the market players for DRM services - giving DSOs the right to sign contracts with the market players for DRM services (cost efficiency) 7. How can NRAs support, or incentivise TSOs and DSOs to invest in smart networks? What actions are needed, in particular from regulators, to promote more active distribution networks? Do we sufficiently reward avoiding dumb investments? Pan-European electricity highways are not the only networks which will ensure the functioning of the market. More local networks which link areas where resources are abundant and areas where consumption is concentrated are also necessary. In this context we have proposed the PCI GREEN ME where through better demand-supply balance, renewable energy generation in North Italy can be consumed in the South East of France. In the short term, NRAs can incentivize DSOs to invest in smart networks through: - promoting R&D and innovation with a higher rate of return on investments - promoting R&D and innovation without any productivity on the related OPEX - promoting R&D and innovation with subsidies - promoting smart investments with the support of the EIB - taking into account in the allowed revenues the money paid by the DSOs to the DRM services or distributed generators for system services In the long term, dealing with R&D and innovation, it will be a good point that the OPEX / CAPEX trade-off can be adjusted during the regulation period. Moreover, it will be an essential prerequisite for the development of optimal solutions for the society and correlatively for smart grid development. 8. How should NRAs influence the competition debate, for example on support schemes, regulated tariffs, capacity remuneration mechanisms, etc? Dealing with regulated network tariffs, the NRAs should give impulse to have a structure better reflecting the costs for both consumers and generators connected to DSOs grids and give a higher rate of return for smart investments. 9. To what extent should the relationship between competition in electricity and gas markets influence regulators activities? Could regulatory action on the gas market, help solving the flexibility problem of the electricity market? Regulatory action on the gas market and the electricity one could be related dealing with local storage. In that case the regulation has to be consistent, as the local storage will be both directions power to gas and gas to power. However, as the technology is not economically viable it is not the major issue at the current time. 10. How should regulators remove barriers to entry for new supply sources?

5 We do not see barriers to entry for new supply sources, apart from the wholesale current market price. 11. What actions, identified in these papers, should regulators prioritise? We would respectfully suggest following prioritization for regulators: - Agree on higher return for infrastructure investment and encourage experiment to explore new system services at distribution level - Promote reflection on network tariff structure in order to have the different categories (consumers, producers, auto consumers) paying for their own marginal costs - further involve DSOs in negotiation of market mechanisms when they have consequences on operation or security of distribution networks - implement a tariff regulation taking into account the evolution of the nature of the costs (OPEX versus CAPEX) Consumers and Distribution Networks: 1. Do you think that further European level measures should be taken to enhance the operation of retail markets to the benefit of consumers? Consumers empowerment to consumption management (saving and flexibility) will be critical for the delivery of a better energy situation in Europe. Through the trial of a first smart meters deployment (Lyon and Tour) and, more specifically, through Watt&Moi trial in social housing, ERDF learned how important will be the understanding from customer perspective of their key role in the big picture of the energy chain. Consequently, ERDF suggest that NRAs promote communication and education of consumers on energy issues and encourage stakeholders such as suppliers and DSOs to coordinate in develop customer focused actions. This is a necessary condition for consumers to benefit from different supply offers and system services offers. As a first point, the consumers have to understand the difference between power and energy in the electricity retail markets. 2. Can you suggest ways in which we could enhance the voice of consumers in the development of Europe s energy market? ERDF shares the opinion of ACER that consumers should be better represented. Consumer association should be more involved in NRAs and Commission consultation processes. DSOs could also provide valuable information on the need of all consumers as DSOs are neutral and serve all consumers. 3. What are the main questions that you consider the proposed CEER review should address with regard to the future role of DSOs and also to ensure that the regulation of distribution networks remains fit for purpose in 2025? The DSOs are in a great majority legally unbundled (those above delivery points) and they are monitored by NRAs to ensure non-discriminatory behavior in customer connection to the network and in the field of data handling. As a consequence of it, DSOs are neutral actors in the market. Further unbundling would not help flexibility. Unlike commercial actors we do not need the customers data to increase our turnover. ERDF reminds that all data collected are either for system operation and stability of supply, to prevent any local

6 black outs, either for collecting metering data for market participants, provided that this will not breach data privacy regulation. The regulation will take into account the new role of DSOs if: - Costs related to data handling are taken into account in the revenues - Costs related to system services are taken into account - Costs related to organize the flexibility market are taken into account in the revenues. If further requirements occur dealing with data protection or cyber security measures, the relevant costs will be minimal for the society if dealt by the DSOs. The access to the consumption data must remain free of charge for the customer. He decides to whom he gives his consumption data (ESCO, curtailment operator for instance).