Electricity distribution is the ‘final mile’ in the delivery of electricity: the link between the transmission system and electricity customers.


electricity distribution companies

260 million

connected customers, of which


residential customers and small businesses


people employed


TWh a year


    The electricity distribution business across Europe is very diverse. It varies in the number and size of operational areas, the number of customers, network characteristics as well as ownership structure. Models used to review tariffs and allowed revenues need to reflect this diversity to allow valid comparisons to be made.


    Despite this diversity, European distribution system operators (DSOs) generally provide a very high level of reliability and quality of supply to their customers. However, DSOs are facing an increasing challenge of integrating rising shares of decentralised and variable generation and new loads such as electric vehicles into their networks. Considerable investments in distribution networks, including smart grids and smart meters, will be needed to accommodate these challenges and to replace the current ageing infrastructure while maintaining the high quality of service.


    DSOs will play a key role as neutral facilitators of tomorrow’s more decentralised energy system. 14 countries have already undertaken or are planning the mandatory roll-out of smart meters to at least 80% of customers. DSOs already operate the traditional meters in most European countries, and will be responsible for deploying smart meters in 16 European countries.

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DSOs have two main functions: they act as system operators and as neutral market facilitators

  1. 1. System operators: DSOs secure a reliable flow of electricity through their network to their customers. They constantly develop and maintain their networks to ensure that the networks operate efficiently and with high levels of system security, reliability and quality.
  2. 2. Market facilitators: DSOs are also required to provide non-discriminatory access to their networks for other system users, like power generators or service providers. They will increasingly move beyond their traditional role of “building and connecting” towards “connecting and managing”. In many countries, DSOs also own and manage metering infrastructure, organise supplier switching, or act as an information hub by storing and providing metering data.

Electricity distribution is a natural monopoly. DSOs are therefore fully regulated companies: their allowed revenue is determined by national regulatory authorities.

DSOs that are part of a vertically integrated company are obliged to comply with conditions of legal, functional and accounting unbundling as laid down in the Third Energy Package.*3 This applies to more than 190 DSOs with 100,000 and more end users.

DSOs serving less than 100,000 connected customers can be exempted from the requirements of both legal and functional unbundling. In order to find other economies of scale, such small DSOs often integrate horizontally with other activities, such as distribution of water, gas or heat.

*3 Articles 26 and 32 of Directive 2009/72/EC

Unbundling applies to the more than

190 DSOs



and more end users

European networks will require €600 billion of investment by 2020. Two thirds of this investment will take place in distribution grids. The DSO share of overall network investments is estimated to grow to almost 75% by 2035, and to 80% by 2050.

DSO investments include building new capacity and refurbishing and replacing existing assets as they reach the end of their technical lifetime. Investments are also driven by a changing distribution system, with a greater role for new loads like electric vehicles, for distributed generation like rooftop solar panels, and for smart meters.

As regulated companies, the DSO investment framework is determined by regulation at the national level.

Electricity use in transport may only make up a small part of total electricity demand for many years to come, but e-mobility could nevertheless have a big impact on load, in particular if motorists all plug in their vehicles during the peak load time.

Active load management will be needed to avoid network congestions and make use of e-mobility’s potential for smoother network operation.

€400 billion of distribution network investment by 2020

80% of EU citizens to be equipped with smart meters by 2020

Towards smart distribution systems

Metering is crucial for establishing data for billing purposes. In most European countries DSOs own the metering assets and are responsible for reading the meter, estimating consumption and validating metering data. Meters also allow DSOs to be informed as quickly as possible about outages and power quality issues.

The EU has called for 80% of citizens to be equipped with smart meters by 2020, subject to a positive national cost-benefit analysis. This corresponds to 200 million smart meters in total.

DSOs will be responsible for the roll-out of smart meters in most countries. They are therefore a key facilitator of a well-functioning retail market.

Smart meters bring benefits for many electricity system players. They will:

  1. 1. Play a key role in empowering customers to become active managers of their consumption. They will provide possibilities for energy-aware customers to reduce their bills.
  2. 2. Allow retailers to introduce new products, to detect fraud and to identify customers who are unable to pay their bills.
  3. 3. Help DSOs to ensure quality of service (e.g. through detection of faults) and manage connection contracts.

200 million

smart meters by 2020

DSOs are tasked with finding the most affordable and efficient way of delivering energy. They also have to ensure quality of service, including continuity of supply and power quality. These technical performance requirements are laid out in national law, standards and grid codes.

The number and duration of interruptions in European networks is generally low, ranging from about 15 minutes to 400 minutes a year.

Continuity of supply indicators are monitored and often included in the regulatory formula for DSOs. Examples are SAIDI (average duration of interruptions per customer per year), SAIFI (average number of interruptions per customer per year) or indicators like the number and duration of interruptions.

In addition, regulation also often includes power quality indicators. European standard EN 50160, for instance, specifies voltage ranges to be respected in order to maintain an undisturbed operation of all connected devices. Application of this standard by DSOs has ensured consistently high or steadily increasing power quality levels in Europe.

10 million km

of power lines


times to the moon and back


of all power lines in Europe

Around 98-99% of European network customers are connected to the distribution grid. In contrast to their transmission ‘highway’ counterparts, distribution networks are made up of the smaller roads and paths that deliver electricity to its ultimate point of consumption: Europe’s households and businesses. They are linked to transmission systems by around 10,700 interconnection points. Overall, there are more than 4 million distribution transformers in Europe.