Does decentralization make sense?

Ross Baldick Electricity ConsultingI attended The Sixth Annual Austin Electricity Conference last month, which included panels on decentralization (which I moderated), electricity business models, future grid design, and Mexican electricity market restructuring.

My panel asked: Does decentralization made sense? We had  discussions about proposed “distribution system operators,” grid cost parity for renewables, increased demand response, and the increasing fraction of transmission and distribution costs.

I questioned the timeliness of distribution system operators (DSO) in the absence of nodal transmission-level pricing applied to loads and load-serving entities. Various US protagonists have proposed, or are implementing, DSOs. In the long term, this might make sense, but in most jurisdictions currently, loads and load-serving entities are charged zonal average prices, thus putting the horse before the cart. Instead, I would propose that the better scheme is to go with the low-hanging fruit first: Price load at nodal prices, getting the economic efficiencies, and then discuss a DSO at a later point.

About Ross Baldick

Electricity is an increasingly complex industry in the midst of transition to renewables and decarbonization. Using my 25 years’ experience as an engineer, policy analyst, and academic, I help my consulting clients think through their toughest technical challenges and formulate their best business strategies.
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