Market-based allocation and differentiation of access rights to network capacity in distribution grids

Traditionally, distribution networks were dimensioned to handle demand peaks which were driven by demand for heating in the winter and cooling in the summer. However, with the current decarbonisation strategy based on electrification, the distribution network infrastructure will have to evolve with increasing electricity demand from other sectors and with stronger emphasis on volatility and flexibility in both generation and demand. The ‘fit and forget approach’ to network access is unlikely to be suitable during the energy transition era. In this regard, a key challenge facing electricity distribution grids is how to efficiently integrate new and flexible grid users. In this paper we analyse the concepts of universal versus restricted network access as well as listed pricing versus market-based allocation of network access rights. Differentiating access can increase efficiency and under ideal circumstances, market-based allocations and listed prices can be equivalent. We discuss different dimensions of access and the design of products and market rules for market-based allocation of access to electricity distribution grids. Adequate design serves to balance the benefits of differentiation and market-based allocation with the related complexity, resulting transaction and the negative effects of market power. With restricted connection agreements on the rise and network operators buying back access as flexibility, the insights from this analysis accompany a current trend in electricity distribution grids and inform policy making and regulation.