Research consortium recommends amending the incentive structure for network operators for the development of smart grids
Massive expansion and adaptation in the electricity distribution networks is necessary to accomodate the energy system transformation. The rapid development of decentralized generation drives the transformation of the networks. The associated investment need can be partially avoided with increased intelligence (smartness). On the administrative side this refers to setting adequate incentives for network users, at the same time also at the technical side the innovation need is still high.
The IRIN project funded by the Federal Ministry of Economics (BMWi) investigated from 2010 to 2011 the design of efficient and effective incentive structures for a network infrastructure for smart grids. Four research institutes collaborated under the lead of the Bremer Energie Institut. The consortium analyzed to which degree the current institutional framework in Germany enables or even furthers the development of smart grids, or to which degree adaptations are necessary.
As a main conclusion the consortium finds that incentives for system transformation and efficient investments can and should be improved. Adaptations should be implemented as soon as possible; a major system reform is not desired. Hence, the recommendations focused on small steps that could rapidly be implemented. The proposed adaptations are:
Investment bonus: For several reasons it is recommendable to grant new investments for a limited period of time a higher interest than existing installations. International experience with investment boni is available and indicates the suitability also as a pragmatic approach to remedy the time-lag-problem.
Innovation budget and innovation fund: the current incentive regulation does not support innovations adequately. A combination of innovation budget and innovation fund would improve incentives significantly.
Flexibilization of the institutional framework: intelligent steering of short and long term network utilization can partially avoid network investment needs. The existing rules and regulations already allow time and locational differenitation of network pricing to a limited degree. A more flexible application of the existing rules is a central recommendation to enable routes that are already theoretically feasible.
The accompanying legal analysis supports that the central recommendations could be rapidly implemented from a legal point of view. Small, punctual adaptations can improve the institutional framework for smart grids in the short term without need for a system change.