Investments & Regulation

Investment_RegulationAs mentioned in our report Power Distribution in Europe - Facts and Figures, European networks will require €600 billion worth of investment by 2020. Two thirds of this will take place in distribution grids. The DSO share of overall network investment is estimated to grow to almost 75% by 2035 and to 80% by 2050.

DSO investment includes building new capacity and refurbishing or replacing existing assets as they reach the end of their technical lifetime. Investment is also driven by a changing distribution system, with a greater role played by new loads such as electric vehicles, for distributed generation such as rooftop solar panels, and for smart meters. The DSO investment framework is determined by economic regulation at the national level.

Efficient national regulation focusing on longer-term grid requirements and a fair rate of return should thus be encouraged. EURELECTRIC is working to remove investment hurdles for DSOs and to ensure that the incentives provided by economic regulation are fit for purpose.

In addition, DSOs must be able to collect, in an adequate and timely manner, the necessary revenue to cover network costs and investment. This is done through network tariffs, whose total amount is determined and approved by the regulatory authority.

As stated in our report on network tariffs, EURELECTRIC believes that network tariff structures should encourage customers to shift their peak hour consumption by incentivising demand response and energy-efficient behaviour. Therefore, network tariffs should progressively become more capacity based and/or possibly include on-peak and off-peak elements.

In addition to this, EURELECTRIC supports consumer empowerment and the increasingly active role of the consumer in the electricity markets. In our report on innovation, EURELECTRIC recommends policy makers to establish stable and market-based regulatory frameworks that encourage and stimulate innovation, enabling DSOs to develop innovative initiatives.