Liberalisation of the electricity sector and development of distributed generation: Germany, United Kingdom and France

Historically, electricity systems have been made up of small local networks gradually becoming incorporated to benefit from the diversity of demand and the economies of scale in electricity generation that are possible with large interconnected systems. Today, this logic would seem to have certain limits, now that the benefits related to the size of production units appear to have been exhausted and in view of the growing difficulties in developing new transmission infrastructures. At the same time, there have been considerable improvements in the technical and economic performance of modular generating techniques, which are now enjoying significant development under the effect of electricity sector liberalization and policies to reduce greenhouse gas emissions. The aim of the present paper is to analyse the effect of electricity sector liberalization on the development of distributed generation, and more specifically to examine the conditions in which these new electricity generating technologies can be diffused in a liberalized framework. The paper looks first at how competition has affected the electricity market. This analysis is followed by an examination of the problems of integrating distributed generation into electricity systems. In the third part of the paper, three brief case studies highlight the principal differences between Germany, the United Kingdom and France in the field of distributed generation. This brief analysis reveals that the institutional framework in which distributed generation must operate and the price signals given to electricity sector actors play as big a part as traditional incentives, certificates, bidding systems or guaranteed feed-in tariffs in driving the deployment process. (author)