Collaboration is the way forward for DSOs and TSOs - Interview with Peter Hermans, CTO of STEDIN

Serving about 4 million consumers and small & medium businesses (electricity and gas), as well as over 20,000 Industry and high volume businesses (again electricity and gas), STEDIN is the third largest DSO in the Netherlands.

It is an “urban” utility serving the big Dutch cities of The Hague, Utrecht and Rotterdam, as well as the extremely busy port of Rotterdam with the help of the 3,880 people under its employment. STEDIN is a progressive DSO building up for a clean and collaborative future.

The CTO of STEDIN, Peter Hermans, explains the vision of the company as well as the need for mutual trust and collaboration between DSOs and TSOs in this new era for the European Energy Sector. 

     

  

by Areti Ntaradimou

Content Director

areti@synergy-events.com

  • In a contemporary European market where DSOs and TSOs have fierce debates on market models and the roles of each agent, Stedin, a DSO, collaborates with TenneT, a TSO, and ETPA, a market agent, to find ways to use flexibility in order to mitigate grid constraints. Could you please highlight the basics of this unique project?

In the coming years DSOs such as Stedin will face the challenge to enable the energy transition towards a sustainable energy system, while also keeping the system reliable and affordable. This will require the use of flexibility to mitigate congestion which might appear in distribution grids.

The pilot project which Stedin, together with Tennet (TSO) and ETPA (market trading organization) initiated aims at acquiring flexibility from the market for this purpose.

What makes this initiative unique is that it follows a market pull instead of technology push approach. It represents one of the first projects on flexibility in Europe where a DSO and a TSO intensively collaborate.

A solution is envisaged which is compliant to unbundling legislation (where grid operators do not take a market position in energy) and where the DSO market interaction for mitigating congestion does not create harmful interference with TSOs balancing activities.

  • What are the scopes, objectives and starting points of the project and when can we expect the first results?

The initial scope of the pilot is restricted to intraday trading. Starting points for the project were formulated based on the European TSO, DSO data management report of 2016. A use case was developed based on these starting points.

The objective of the pilot is to learn whether the market is willing to sell flexibility to DSOs in order to mitigate congestion, and to learn on market behavior and price settings.

Also the Dutch policy maker, the Ministry of Economic Affairs, and the Dutch regulator (ACM) showed interest in this pilot as it potentially could deliver valuable insights for future Dutch legislation, following the European clean energy package and future European codes.

Currently the final system testing has taken place and end-to-end process testing with a market party, selected for this purpose, is planned before the end of 2017. The broader market pilot is foreseen in the first half of 2018.

          

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  • This project represents a new type of interaction between the regulated and commercial domain. Can you please explain what this interaction consists of and what is the element that differentiates it from other initiatives?

Until today, distribution grid capacity plays no role in market trading processes which takes place between the demand and supply of energy, as grid capacity is plenty available (copperplate).

In the future when peaks in demand and supply of energy may increase significantly, this will change as grid capacity may become scarce.

Distribution System Operators will become active as buyers of flexibility on the market and will request load or production reduction on certain moments at certain locations to avoid grid overload. This new type of interaction will occur in different time frames (intraday, day ahead and forward markets).

   

  • With the integration of a constantly increasing number of renewable sources into the energy grid – or talk thereof – some keywords come to mind, like Sustainability, Affordability and Reliability. It seems like we can’t have one without the other. What is Stedin doing right now in order to secure these keywords?

The energy transition towards a sustainable energy system comes with a price.

The task of a DSO is to ensure transport of energy in the most efficient way, as its costs are socialized and paid by all end customers. Also, focus on maintaining system reliability will be required, as now multiple grid operators (TSOs and DSOs) will become active on a system level, simultaneously.

This will require good coordination schemes between TSOs and DSOs. As the discussion on these topics is still in its early stages, Stedin actively participates in European and national debates on these topics, in which also the policymaker and regulator are involved, with the objective to reach timely clarity and agreement on roles & responsibilities, coordination processes and data exchange between all stakeholders involved.

          

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  • During EUW17 you mentioned that nowadays the corporate investment strategy is no longer sustainable and that drives the DSO to become a system operator; the passage from DNO to DSO. This way, DSOs enter the arena where the TSOs are active and this is the point where we are in need of good collaboration, because we have two actors operating on a system level. And they need to cooperate well in order to maintain system reliability. How feasible is that and what can we do to avoid potential clashes?

The question is not how feasible this will be, it is simply a must, if we want to prevent blackouts at some time in the future.

It is the responsibility of TSOs and DSOs together towards society to avoid such a scenario. To avoid clashes between DSOs and TSOs (which in Europe are already sometimes visible), it is important that TSOs and DSOs start to build trust in collaborating: this is achieved by respecting each other’s roles and responsibilities, creating a common context, discussing each other’s ambitions and fears, and from this, come to a common approach, which might differ per European member state.

  • It seems that Stedin is making some bold moves, if we take into consideration not only the pilot project you presented during EUW17 but also the smart grid pilot project of Rotterdam. If I am not mistaken, during the course of the Rotterdam project, about 20,000 smart home solutions and distributed energy sources (such as photovoltaic plants and wind turbines) will be connected to a smart grid over the next 3 years. Are those two pilots indicative of a new direction for Stedin and what would that be?
   

It is not necessarily a direction that we choose. We participate in discussions about market developments and how it should be regulated, but we also like to experience things in practice.

We see that the flex market can provide services to DSOs, suppliers, BRPs and others.

In the smart grid project in Rotterdam we hope to learn how the market could or will work in practice. Which business models are successful and will possibly cause peaks? Which propositions will work on a larger scale and what is the interdependency with grid constraints? What is the most efficient interaction between parties? These are questions that we would like to get answers to in this project.

  • The Rotterdam project, like the one you presented at EUW17 is also trying to even out consumption peaks. How much of a headache do you think these peaks will be in the future?

 We think that consumption peaks will certainly occur in the future, but the extent to which that will happen is uncertain. There are many factors involved here:

  • The distribution of sources
  • The options for self-usage and storage on a decentralized level
  • The development in the built environment.

In our area one of the questions for instance is: in which way buildings will be heated in the future? District heating certainly has perspective in our operating area. But if it is not successful then we possibly have to deal with a larger electrification and more peaks. We do know that the increase in peaks will not occur overnight and at Stedin we are working on forecasting models.

The better we can predict the more control we have over the transition and grid investments.

  • During your presentation at EUW17 you mentioned that your story is not only about new technologies and results but also about culture and people and how we work together. That was a highly interesting remark coming from a Chief Technology Officer. Do you believe that in order to reach a harmonious collaboration in the European energy sector we need to take a deeper look in the people that work there and find a way to either create a common culture or make the various cultures collaborate? And why do you find this important?

This is absolutely important and in my opinion it represents the most important critical success factor.

We should start to recognize that we do not discuss about the distribution grid and transmission grid as separate networks, but that they together form what we called “one integrated system” in the TSO DSO data management report in 2016; and that this system will be as good as designed and developed by people: people that are coming from the DSO and TSO organizations of today.

Therefore, seen from this perspective, there will be also significant value in any project in which TSOs and DSOs jointly embark: just starting to work together!

Comments? Questions? Let me know!

  

by Areti Ntaradimou

Content Director

areti@synergy-events.com

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