Distributed generation in European electricity markets. Current challenges and future opportunities

This Ph.D. thesis studies the role of distributed generation in European electricity markets. It focuses primarily on the interactions of economics and policy with the aim of contributing to the understanding of how distributed generation is embedded in the present regulatory and market framework, which barriers exist, and which role it may possibly play in the future.

To capture the interdisciplinarity of the topic, a combination of qualitative and quantitative methods is applied. Subsequent to the identification of barriers, this thesis turns to the microeconomic perspective on the interplay of vertical structure, regulation and distributed generation. This is done through the application of quantitative methods in the form of partial equilibrium models focusing on the effects induced by the vertical structure of the network operator, either a combined operator or a distribution system operator, in a market with small distributed producers.

In areas where the promotion of renewable energy sources and combined heat and power has induced a substantial increase in distributed generation, new challenges in system integration arise. In particular, high levels of generation from intermittent energy sources, such as wind, add to the complexity of network operation and control, which can hardly be tackled with the present 'fit and forget' approach.

The conclusion is that distributed generation has great potential to enhance competitiveness, sustainability and security of supply in European electricity markets. A prerequisite is the removal of market and regulatory barriers, taking the interdependencies of vertical structure, support mechanisms and network access into account.

In the future, higher penetration levels of distributed generation necessitate changes in the power system and the adoption of new technologies, where hydrogen production by grid connected electrolysis constitutes one example. (LN).