Impact of Demand Response on Distribution System Operators' economy. A first approach to a basic general model applicable for Swedish Distribution System Operators

Abstract: As the global energy demand is rising, issues of emissions and security of supply arise and become increasingly acute as more energy is being consumed. Schemes of emission reductions and energy efficiency improvements have been introduced to deal with these issues. The answer to part of these efficiency improvements lies within the electricity grid's development towards a so-called smart grid. One integral part of the smart grid is the demand response program which strives to change consumer consumption patterns to further increase grid efficiency. Demand response (DR) has been widely studied in terms of effects and design. Even though much research has been performed, there is still very little knowledge about the economic impact of implementation. This study focuses on uncovering the economic effects DR implementation may have on Distribution System Operators (DSOs) in Sweden. A model has been developed which estimates the possible positive economic effects following a DR implementation for a Swedish DSO. The model is generally applicable to most Swedish DSOs, and their counterparts in other European power markets with similar market design, since it uses universally available data. This is done by investigating the factors driving the DSO's business in terms of impact of DR and generality. Factors identified and used in the model are power losses, grid fee to feeding grid and postponed future investments. These factors were chosen for their economic impact, the rate of effect which DR has on them and on the ability to model them with generally available data. A model implementation is performed to show the possible results which the model can yield. Data from a Swedish DSO is used along with a fictional DR program designed for this purpose. The results show a potential for significant positive effects on DSO economy. An analysis is made on the maximum potential for DR. It is estimated that a reduction in power losses of 19% could be realized, this corresponds to 36% of the annual cost of losses for the DSO. For the grid fee to feeding grid, an estimation of a 46% reduction of the level of subscribed maximum power and 47% of its cost is realized; the subscribed maximum power is the only part of the grid fee to feeding grid affected by peak load shift. For postponed investments, a present value of 45,8 million SEK is realizable over a period of 40 years; this figure is uncertain because of model restraints and long time frames. The current regulation limits the benefits for the DSO however, as many of these costs are passed through to the customer. The customer is thus the current winner when DR is implemented by Swedish DSOs, leaving the DSO with little financial incentive.