The EU Electricity Policy. Outlook for the Smart Grid Roll-Out

The energy transition from a socio-economic system based on fossil fuels to a sustainable low-carbon system is a multi-faceted process. This 'transformation' of the energy system, more specifically of the power system, creates several challenges. These concern in particular the connections with the existing electricity infrastructure of new renewable power sources and the distribution of generating systems, together with automated grid assets and smart meters. The European energy transition is based on two different revolutions: i) the 'post-World War II' industrial investment recovery, when electricity systems were built; and ii) the 'Information Technology' revolution that is bringing new communication and connection modes to the grid. There is no unique path towards a de-carbonised electricity system. The implementation of this development depends on the current local configuration of electricity grids, the interaction between grid operators, the generation mix, the availability of backup generation capacities and the level of cross-border interconnections. Moreover, this evolution impacts the roles of all actors of the energy system, in particular those of Transmission System Operators (TSOs), of Distribution System operators (DSOs) and of National Regulatory Authorities (NRAs). Besides the technical challenge, the Energy transition requires the transformation of business models designed as platforms, which are able to integrate different levels of stakeholders, whereas in the past, utilities were based on vertical, public monopoly structures that were often paid based on cost-of-service rules. The traditional utility models were characterised by centralised governance but as a result of technological changes, this system is making way for a more horizontal and multilateral governance. The role of consumers is also changing, with new attributes in particular with regards to demand-response measures. The purpose of this paper is to analyse the key structural developments behind the European energy transition, as well as the main regulatory and policy challenges linked to the transformation of the system. (author)