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Who Art Thou DSO?

Doug Houseman's picture
Visionary and innovator in the utility industry and grid modernization Burns & McDonnell

I have a broad background in utilities and energy. I worked for Capgemini in the Energy Practice for more than 15 years. During that time I rose to the position of CTO of the 12,000 person...

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  • Oct 24, 2016

In the not distant future the California Public Utilities Commission (CPUC) will have a major decision to make about how the distribution grid is operated. That decision will revolve around who will be allowed to be the Distribution System Operator (DSO). In various forums, a number of stakeholders have express opinions on who should be the DSO. Several have already made small moves to establish their credibility to be the DSO. The current list of potential operators are:

  1. The incumbent utilities
  2. The California ISO
  3. Communities that are operating CCAs
  4. A new independent organization, similar to the CAISO
  5. Solar City
  6. And a host of other private entities that would like the opportunity and revenue.

Each of these organizations can make a case for why they should be the DSO and what abilities they bring to being the DSO. Most have stated a case for how they will advance the various state policies and support the end customers. Each has support in the political arena from at least some important supporters. It is not a question of "IF" there will be a DSO, it is a question of "WHEN" and "WHO" will be the DSO.

In the 1990's, the industry learned a number of lessons about what it meant to be an Independent system operator (ISO). There were initially, in the UK and Australia, three different entities: one to deal with the financial futures market, one to deal with the physical market, and one to deal with grid control. In short order, both the UK and Australia found that having separate entities for grid control and the physical market did not work. In the US, the ISO's took these lessons as a starting point and combined the grid control and physical market. The financial market is outside of most ISO's charters, and a number of Hubs have been created for trading financial futures.

The distribution market, when it is established, will probably be a very thin financial market, probably so small and thinly traded that it may never exist. On the other hand the physical market is being designed now by the Department of Energy (DOE), The National Institute of Standards and Technology (NIST) and their various supporting laboratories (e.g. LBNL, PNNL, Sandia, NREL, etc.). The lessons learned in transmission systems operations, will probably be heeded by the distribution system operator design.

So what functions will the DSO be responsible for? Starting with current distribution utility functions the list below shows the most likely candidates to move to the DSO function:

  1. Protection - needed to deal with pervasive DER and other events in the grid
  2. Grid Operations - all the switching and configuration of the grid, including manual switching orders (until they are replaced with remote orders)
  3. Outage (planned and unplanned) - needed to understand what customers and assets are available to control
  4. Field device communications - the FAN will need to be accessible to the DSO to send control signals, receive sensor inputs and overall operate the equipment on the grid
  5. Profiling, forecasting and meteorology, with time intervals similar to transmission, the forecasting and re-forecasting for specific time periods and locations will need to be done quickly and accurately
  6. Planning - the long and medium term planning for transmission primarily resides in the ISO's today, expect that a similar model will exist for distribution.
  7. Dispatch - with control of planned outages, and knowledge of the current unplanned outages, as well as the value of the assets that are impacted, the DSO will have to be able to dispatch to the highest value areas (note: customers have value to the DSO, not just devices, so priorities for dispatch may not change very much from what is done today).  
  8. Metering and measurement - needed for performance verification, profiling, forecasting and other operations functions.
  9. Operational Technology - if the DSO needs to have direct access to the systems, there is no reason for them to not take over selecting, installing, maintaining and operating the Operational Technology systems (e.g. DMS, ADMS, OMS, GIS, DERMS, DRMS, etc.)
  10. Grid interconnect planning and approval

For the traditional distribution utility this will leave: billing, real estate, taxes, accounting, regulatory, asset ownership, call center, safety, logistics, crew management, short-term planning, vegetation management, construction, and a few other functions.

The new functions the DSO will have to take up will include, but not be limited to:

  1. Physical market operations
  2. Wholesale-retail connections
  3. Grid switching, configuration, and control
  4. DER control (where market actions do not bring balance)
  5. Circuit balancing
  6. Proactive grid monitoring & equipment rating

In the long run whoever is the DSO will end up with most of the control, planning, and operations. What the allowed ROIC will be for the asset owner vs. the fees that the DSO is allowed to collect for grid operations is something that was debated at Camp NARUC in August of 2016.

Whoever is the DSO will not have the option of taking up some parts of the role and declining others, they will have to be willing to provide the full set of services, as they are defined by what will probably be a new statute and supporting regulations from the CPUC.

This is the first article in a three-part series. To read the other two:


Doug Houseman's picture
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Ron Horstman's picture
Ron Horstman on Nov 9, 2016

Thanks for sharing these very insightful articles on the newly identified position of "Distribution System Operator." There are a large number of developing services that are pesently being placed under the responsibility of this position/organization and the position does not even exist yet.  There may be a need for regulation to establish the position and to identify the associated responsibilities.  If the utilities take on these responsibilities, regulation will be needed to establish a foundation on which to build.  The same is true if several other entities take on some of the responsibilities.  There are too many stakeholders with differing points of view to allow these roles in such a critical industry to develop in a helter-skelter manner.  

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