capacity constraints in the distribution
system.
• Distribution system operator. This model
involves two levels of control. First, DSOs act
as sole distribution-level VPPs, controlling all
distribution system resources and carrying out
constrained dispatch of the whole distribution
system. DSOs provide the transmission-level
system operator with bid or offer curves for
the generation and demand resources they
operate. Second, the transmission-level system operator carries out constrained dispatch
of the transmission system.
Key criteria when choosing a model are the
computational requirements, institutional characteristics and operational vulnerability of each
model. As explained above, systems with high
computational requirements or small improvements in computing technology will require more
levels of resource coordination; while systems
with low computational requirements or large
improvements in computing technology will
require fewer levels of resource coordination,
and—with sufficiently developed computing
technology—potentially a whole system operator. Preferences for specific institutional characteristics are also relevant. For example, the
system operator and distribution system operator
models involve coordination of resources by a
single operator. Consumers may or may not have
concerns about price, quality of service and privacy. If they have concerns, they might prefer a
model involving control of resources by VPPs,
which compete to meet customer requirements.
Finally, the models may have different degrees of
vulnerability to digital failures, such as those
caused by cyberattack.
Hierarchies of resource control may be needed
until digital capabilities are sufficiently developed.
While in the near term a single operator may be
able to optimise the electricity system with relatively low volumes of distributed resources, once
sufficient volumes of distributed resources are
deployed the task of optimisation may be too great
for a single operator. Hierarchies of control may
be established early to ensure increasing volumes
of distributed resources can be accommodated if
improvements in computing technology fail to
keep pace with increases in computational
requirements. Even if computing technology
improves to the point where a fully distributed
system can be optimised by a single operator, an
increase in the temporal resolution of system
control (for example, from half-hourly settlement
towards real-time settlement) would result in
significant increases in computational requirements. A shift from hierarchies of control to a
whole system operator model would only be
viable if improvements in computing technology
were sufficient to meet the requirements of optimising a fully distributed system in real time.
(4) Coordinated investment in decentralised
resources
Electricity systems with largely centralised
resources provide adequate information to investors on system needs. Electricity systems periodically require investment in new resources, such as
new generation plants. In theory, developers invest
in new resources in response to a price signal in the
wholesale market. These new investments are
typically large. In principle, this leads to a coordination problem, whereby either several investors
might plan to develop a similar resource (overinvestment), or investors might not invest in required
resources due to the risk that other investors might
do so (underinvestment). In practice, these risks are
minimised because the transmission system operator knows which resources are under development
and awaiting grid connection and can make this
information public.
However, a decentralised electricity system
may not provide adequate information, risking
inefficient investment. As resources shift to the
distribution system, the same coordination
problem may arise. This is because unless adequate procedures are introduced, no single market participant knows which resources are under
development and awaiting grid connection across
all electricity systems. The consequence is,
again, inefficient investment: overinvestment,
underinvestment, a poor technology mix, or a
poor spatial distribution of resources.
The risk of inefficient investment can be
mitigated through a coordinated approach to
100
W. Xiaoming et al.
system.
• Distribution system operator. This model
involves two levels of control. First, DSOs act
as sole distribution-level VPPs, controlling all
distribution system resources and carrying out
constrained dispatch of the whole distribution
system. DSOs provide the transmission-level
system operator with bid or offer curves for
the generation and demand resources they
operate. Second, the transmission-level system operator carries out constrained dispatch
of the transmission system.
Key criteria when choosing a model are the
computational requirements, institutional characteristics and operational vulnerability of each
model. As explained above, systems with high
computational requirements or small improvements in computing technology will require more
levels of resource coordination; while systems
with low computational requirements or large
improvements in computing technology will
require fewer levels of resource coordination,
and—with sufficiently developed computing
technology—potentially a whole system operator. Preferences for specific institutional characteristics are also relevant. For example, the
system operator and distribution system operator
models involve coordination of resources by a
single operator. Consumers may or may not have
concerns about price, quality of service and privacy. If they have concerns, they might prefer a
model involving control of resources by VPPs,
which compete to meet customer requirements.
Finally, the models may have different degrees of
vulnerability to digital failures, such as those
caused by cyberattack.
Hierarchies of resource control may be needed
until digital capabilities are sufficiently developed.
While in the near term a single operator may be
able to optimise the electricity system with relatively low volumes of distributed resources, once
sufficient volumes of distributed resources are
deployed the task of optimisation may be too great
for a single operator. Hierarchies of control may
be established early to ensure increasing volumes
of distributed resources can be accommodated if
improvements in computing technology fail to
keep pace with increases in computational
requirements. Even if computing technology
improves to the point where a fully distributed
system can be optimised by a single operator, an
increase in the temporal resolution of system
control (for example, from half-hourly settlement
towards real-time settlement) would result in
significant increases in computational requirements. A shift from hierarchies of control to a
whole system operator model would only be
viable if improvements in computing technology
were sufficient to meet the requirements of optimising a fully distributed system in real time.
(4) Coordinated investment in decentralised
resources
Electricity systems with largely centralised
resources provide adequate information to investors on system needs. Electricity systems periodically require investment in new resources, such as
new generation plants. In theory, developers invest
in new resources in response to a price signal in the
wholesale market. These new investments are
typically large. In principle, this leads to a coordination problem, whereby either several investors
might plan to develop a similar resource (overinvestment), or investors might not invest in required
resources due to the risk that other investors might
do so (underinvestment). In practice, these risks are
minimised because the transmission system operator knows which resources are under development
and awaiting grid connection and can make this
information public.
However, a decentralised electricity system
may not provide adequate information, risking
inefficient investment. As resources shift to the
distribution system, the same coordination
problem may arise. This is because unless adequate procedures are introduced, no single market participant knows which resources are under
development and awaiting grid connection across
all electricity systems. The consequence is,
again, inefficient investment: overinvestment,
underinvestment, a poor technology mix, or a
poor spatial distribution of resources.
The risk of inefficient investment can be
mitigated through a coordinated approach to
100
W. Xiaoming et al.