Innovation and Energy

Regulation Lessons Learned and Messages of the ERRA

Regulatory Innovation Day (ERID)

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dr. Gábor Szörényi General Secretary of ERRA

Bratislava, 2016 October

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What will change?

Moving from centralized power system to decentralized model

The changing process will be full of challenges, but provide

a lot of opportunities!

Source: EDSO for Smart Grids

Everything will change! Climate policy, Customer choice and Innovation driven Paradigm change!

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Driving forces to Change

Climate Policy targets and requirements

Technological development and

changing consumer expectation

Energy Policy (inc. goals of economic development)

Follow up Regulation

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New forecast (June 2016) by

Bloomberg New Energy Finance

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ERRA regulators and innovation

(Report on ERRA Survey in 2016) (1)

• New innovative technologies and

operation modes, and possible regulatory

(http://erranet.org/news/2016/05/18/erra-has-

published-a-paper-on-innovation-and-energy-

regulation)

• Regulation and Innovation (ERRA survey)

• Recommendations for Regulators

• ERRA Regulatory Innovation Day (ERID)

(in the framework of INNOPOWER 2016 in

Poznan; 400 participants)

(http://erranet.org/OtherActivities/workshops/erid2016)

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Lessons Learned and Messages

of ERID

Lessons Learned and Messages (ERID) (http://erranet.org/index.php?name=OE-

eLibrary&file=download&keret=N&showheader=N&i

d=12639)

Can we boost innovation through regulation?

Although it sounds strange, the answer is

yes. While regulators cannot create

innovation themselves, they can definitely

help by creating an enabling environment,

where innovative ideas can thrive and be

realised!

What will happen, when the NRAs do not

support the innovative processes?

The consumers could fail through less developed supply quality and

less consumer choices.

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Lessons Learned and Messages

of ERID for Regulators (1)

• The regulators should consult with researchers,

academic institutions, energy industry experts,

technology developers and customer representatives on

the available new technologies, innovative methods,

behaviour-changes and the thinking/mind of innovators

in order to learn the potential benefits of new solutions

and to find the solution for the new regulatory

challenges.

• The policy makers and regulators should enable creation

of new markets (room for innovation) in every segment of

energy supply chain. Until the new markets developing

the regulators could allow the regulated companies (e.g.

DSOs „grey zones”) investing in new technologies.

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Lessons Learned and Messages

of ERID for Regulators (2)

• The energy innovation chain does not work well because

of weak incentives on the supply and demand side. One of

the consequences of the barriers to energy innovation is

that energy R&D public and private investments are too

limited compared to non-energy industries due to the strict

(price) regulation.

• The regulators – beside the traditional regulatory models,

which focus on long term investments – should find new

regulatory elements which support/ accept the research,

development , test and implementation of new and fast

developing technologies (e.g. Pilot Projects, Cost Benefit

Analysis, shorter depreciation).

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Lessons Learned and Messages

of ERID for Regulators (3)

• Innovators do not wait for regulators to be ready to

innovate, but innovators need regulators to adapt

regulation so that innovations and associated services are

efficiently provided.

• The transition in the energy supply chain can be “brutal” or

manageable, but – it seems to be – we cannot avoid it!

The regulators should ask themselves whether elements

of regulation hamper the support of the smooth transition

process!

• The dilemma of the regulators; How to share the risk of

new technologies during the development, testing and

evaluation period between regulated industry and

consumers?

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Lessons Learned and Messages

of ERID for Regulators (4)

• The clear definitions for storage technologies are

important to more effective regulatory act. Transmission

and distribution grid investment deferrals by storage

technologies are possible in limited countries. In these

countries the regulation allows the system operators to

deploy storage systems on investment deferral purpose

and the system operators are allowed to operate a

storage system if it is proven to be the most efficient

solution for a problem.

• Preparing supportive regulation (and network tariff) for the

different storage technologies allowing these technologies

to compete on the ancillary service markets assisting

system operators and customers to keep the balance.

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Lessons Learned and Messages

of ERID for Regulators (5)

• Developing (or just implementing) such regulatory

incentives of the network operators, which give them

impetus to support the end-user in energy efficiency

measures (e.g. decoupled rates) and in different demand

side response activities are regulatory tasks!

• Supporting smart meter deployment in those consumers

segments, where the pilot projects and the cost benefit

analysis shows positive results; empowering consumers

and addressing data privacy and cyber-security concerns

are important!

• Continuously measuring the expectation and satisfaction

of customers and adjusting the relevant Supply Quality

Regulation accordingly are important!

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Lessons Learned and Messages

of ERID for Regulators (6)

• Regulators should build internal capacity of regulatory

staff in the area of new and innovative technologies and

the impact they have on the regulatory system!

• The regulation should be adjusted to the need of e-

mobility deployment!

• Setting requirements and providing incentives for DSOs

smoothly connecting the distributed generators are

important!

• Create such pricing regimes, which support the

“prosumers” managing the intermittent surplus of their self

generated power!

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Innovation and Energy Regulation

Thank you for your kind attention!

Please, distribute the

ERRA Innovation Report and

Lessons Learned and Messages

among your colleagues!

Questions & Comments are welcomed!