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Restructuring Revisited Part 2: Coordination in Electricity Distribution Systems

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  • Scott P. Burger
  • Jesse D. Jenkins
  • Carlos Batlle
  • Ignacio J. Pérez-Arriaga

Abstract

This paper addresses the mechanisms needed to coordinate vertically and horizontally disaggregated actors in electricity distribution systems. The mechanisms designed to coordinate planning, investments, and operations in the electric power sector were designed with minimal participation from either the demand side of the market or distributed energy resources (DERs) connected at distribution voltages. The emergence of DERs is now animating consumers and massively expanding the number of potential investors and participants in the provision of electricity services. We highlight how price signals—the primary mechanism for coordinating investments and operations at the transmission level—do not adequately coordinate investments in and operations of DERs with network infrastructure. We discuss the role of the distribution system operator in creating cost-reflective prices, and argue that the price signals governing transactions at the distribution level must increasingly internalize the cost of network externalities, revealing the marginal cost or benefit of an actor’s decisions. Price signals considered include contractual relationships, organized procurement processes, market signals, and regulated retail tariffs. This paper is the second part of a two-part series on competition and coordination in rapidly evolving electricity distribution systems.

Suggested Citation

  • Scott P. Burger & Jesse D. Jenkins & Carlos Batlle & Ignacio J. Pérez-Arriaga, 2019. "Restructuring Revisited Part 2: Coordination in Electricity Distribution Systems," The Energy Journal, , vol. 40(3), pages 55-76, May.
    • Handle: RePEc:sae:enejou:v:40:y:2019:i:3:p:55-76
    DOI: 10.5547/01956574.40.3.jjen
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    References listed on IDEAS

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    1. Steve Cicala, 2022. "Imperfect Markets versus Imperfect Regulation in US Electricity Generation," American Economic Review, American Economic Association, vol. 112(2), pages 409-441, February.
    2. David P. Brown & David E.M. Sappington, 2017. "Designing Compensation for Distributed Solar Generation: Is Net Metering Ever Optimal?," The Energy Journal, , vol. 38(3), pages 1-32, May.
    3. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
    4. Karsten Neuhoff & Benjamin F. Hobbs & David Newbery, 2011. "Congestion Management in European Power Networks: Criteria to Assess the Available Options," Discussion Papers of DIW Berlin 1161, DIW Berlin, German Institute for Economic Research.
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    Cited by:

    1. Csereklyei, Zsuzsanna & Kallies, Anne, 2024. "A legal-economic framework of wholesale electricity markets: Assessing Australia's transition," Energy Policy, Elsevier, vol. 195(C).

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