Abstract
Microgrids are decentralised electricity systems that offer a local approach to the energy transition. They help to bring electricity generation closer to the consumer, facilitate the integration of renewable energy, and increase energy security. However, the implementation of microgrids currently requires regulatory exemptions as they do not fit into the existing regulatory framework. Therefore, regulatory reforms are needed. Those reforms are influenced by National Regulatory Authorities (NRAs). Although NRAs are supposed to make technical decisions, their choices have political implications for microgrid development by creating a technically (un)favourable environment. This article explores the narrative of NRAs in facilitating the development of microgrids as part of the transition towards a more sustainable energy mix. An exploratory multi-method study is applied, combining surveys and interviews with representatives from different NRAs in the EU. The article finds that despite the potential benefits of microgrids, NRAs are generally unsupportive of microgrid development. Alternative models, such as closed distribution systems and energy communities, have been proposed instead. Furthermore, the interviews reveal that the perceived costs of developing microgrids outweigh the benefits when considering the functioning of the overall electricity grid.
Introduction
In the European Union (EU), there is an ongoing regulatory effort to modernise the electricity grid by creating a more sustainable and reliable energy mix whilst ensuring supply security (European Council & Council of the European Union, 2023). However, the traditional infrastructure of the centralised public grid has difficulties in facilitating this transition, in particular when grid users make more use of intermittent renewable energy sources (RES). In this context, various innovative solutions are considered, with microgrids as one option. Microgrids represent a complementary and decentralised mode of generating and consuming electricity alongside the current top-down or centralised approach to electricity generation and consumption via the public grid (Uddin et al., 2023).
Microgrids, as defined in this research, are decentralised electricity systems, with ‘islanded and grid-connected functionalities; (b) clearly defined electrical boundaries, and (c) a control entity able to manage the energy resources along the loads’ (Carpintero-Rentería et al., 2019). This means they are systems in which electricity can be produced and consumed not only connected but also disconnected from the centralised electricity grid (Uddin et al., 2023). A shift towards decentralisation allows consumers to manage their electricity demand within the microgrid, brings electricity generation closer to where it is consumed, facilitates the integration of energy from RES, and increases energy security as the microgrid is less dependent on external support (Eklund et al., 2023). It should be noted that while these benefits can contribute to the energy transition, microgrids can also create costs for both the microgrid and the centralised grid, for example if unorganised disconnections lead to a lack of balance in either grid, causing supply disruptions. However, risks can be mitigated by integrating microgrids into the regulatory framework.
Currently, microgrids fall outside the general regulatory framework governing the electricity market in the EU (Soshinskaya et al., 2014). Implemented microgrids are therefore mainly realised based on regulatory exemptions at the national level (Hirsch et al., 2018). Those exemptions oftentimes operate on a case-by-case basis. As a result, the regulatory exemptions do not necessarily align with the regulatory structure of every microgrid, considering that each system is unique in its technical set-up and its composition of connected customers. To harness the benefits of microgrids, this means that structural regulatory support for microgrids is needed in order for microgrids to be fully integrated into the EU electricity market. Hence, to evaluate the potential for microgrids in the EU, it is important to determine if there are changes anticipated in the regulatory framework.
The regulatory framework can be influenced by the 27 National Regulatory Authorities (NRAs) in the EU, 1 per EU Member State. Broadly speaking, each NRA ensures that the relevant Member State implements the EU’s regulatory policies to maintain a proper functioning of the EU electricity market (Directive (EU) 2019/944, art 58), with a key role in ensuring fair access for market players (Kaschny & Lavrijssen, 2023). The tasks of NRAs include setting distribution tariffs, implementing network codes and guidelines, and monitoring the performance of network operators in relation to the development of smart grids that promote energy efficiency and the integration of RES (Directive (EU) 2019/944, art 59).
As pointed out by the Court of Justice of the European Union (CJEU), NRAs do not make political decisions (Case C-718/18, para 132). The role of the NRA is supposed to be strictly technical in nature (Kaschny & Lavrijssen, 2023). However, even those technical decisions can be very influential and, in effect, have political and legal consequences (Kaschny, Lavrijssen, 2023), also for the development and operation of microgrids. For instance, when setting distribution tariffs, NRAs could help microgrids to connect to the centralised grid at a reasonable tariff that enhances the economic attractiveness of the system. In addition, NRAs have the power to adjust system codes to remove barriers in relation to connecting and disconnecting the microgrid from the centralised grid, a process also referred to as system ‘islanding’ (Li et al., 2014), 1 but also to encourage the development of microgrids in the course of promoting smart grids.
Most importantly in the context of microgrids, NRAs also have an influence on the investment plans of system operators of the centralised grid (Kaschny & Lavrijssen, 2023). Those system operators need to consider the alternatives to grid expansion, such as increased use of demand response (DR) and energy storage (Kaschny & Lavrijssen, 2023), which could also take the form of microgrids. Those plans need to be communicated to the NRAs, who have the authority to require amendments to the plans submitted by the system operators (Kaschny & Lavrijssen, 2023). Hence, if NRAs see microgrids as a viable alternative to grid expansion, they can require system operators to take this into account in their grid development strategies and create the necessary technical requirements to facilitate such a change. The position and views of NRAs are thus relevant determinants for the development of microgrids.
As a consequence, this article specifically focuses on NRAs and their approach to microgrids by conducting an exploratory qualitative empirical analysis. The central question of this article is: ‘Do National Regulatory Authorities endorse the development and operation of microgrids, and if so, to what extent do they provide regulatory support for the development of this system?’
While the academic literature acknowledges that the lack of regulation limits the development of microgrids (Saeed et al., 2021; Soshinskaya et al., 2014; Warneryd et al., 2020), the author has not come across any research that examines the attitude of NRAs towards the legal underpinnings of these systems in the EU. While the existing literature tends to point to a lack of regulatory support based on anecdotal evidence, this is the first article to assess this more systematically based on novel empirical research. In doing so, the aim of this article is to explore the contextual narrative of NRAs in order to understand the regulatory perspectives on microgrids and their potential for the energy transition, and to critically assess this narrative in the discussion.
Methodology
The aforementioned research question was answered by conducting exploratory research using a combination of surveys and interviews. The survey prepared for the NRAs raised a number of key questions about the (lack of) regulatory framework for the development and operation of microgrids and the rationale behind it. 2 The survey was distributed to all 27 NRAs across the EU. Twelve NRAs responded to the survey, and two additional NRAs participated through interviews instead, resulting in an overall response rate of 52%.
The survey and its results are presented in the Annex. Responses have been anonymised in the report. As can be seen in the Annex, one limitation is that not all 12 respondents answered every question. This reduces the response rate and also means that the results cannot be fully generalised. However, this limitation does not significantly affect the findings of the study. The aim of the survey was not to produce statistically significant summaries, but rather to be explorative. The survey aimed to sketch out the contextual narratives of the NRAs through simple yes/no questions coupled with open-ended responses for further detail that guide the discussion on regulatory support for microgrids.
Two interviews were then conducted to explore the themes and perceptions identified in the survey. The aim of the interviews was to obtain in-depth information and insights from each NRA on the implementation of microgrids, using a flexible interview approach. Four key themes anchored each interview: (i) the NRA’s position on the development and operation of microgrids compared to conventional distributed electricity systems, (ii) the NRA’s position towards electricity systems that can island themselves, (iii) the role of the Distribution System Operator (DSO) in the development and operation of microgrids, and (iv) the NRA’s perception of the main challenges in balancing the grid and facilitating two-way electricity flows. Open-ended responses and interview data were manually coded into thematic categories aligned with the main discussion themes, such as legal constraints and regulatory concerns.
It must be acknowledged that this process carries a risk of selection bias, since NRAs that are more actively engaged with the topic are more likely to participate in the research. This may influence the interpretation of the observed preference for a centralised grid, which will be discussed in the next section. However, as the primary objective is to capture the contextual narratives of NRAs, this bias is acceptable if it is transparently acknowledged. Furthermore, given the response rate, it still provides relevant insights into the narratives of NRAs.
Results
The empirical analysis, based on the infomration in the Annex, suggests that there is limited support by NRAs for microgrids that can operate independently of the centralised grid. Instead, their focus seems to be on supporting closed distribution systems (CDS) and energy communities that operate within the boundaries of the existing centralised electricity grid. It is worth noting that in particular CDSs are seen as synonymous with microgrids, which is not legally correct, as will be explained in the discussion section below.
Five NRAs indicate that there is regulatory support for microgrids. Regulatory support for microgrids is provided through experimentation and regulatory sandboxes, as well as regulation of direct lines, CDS and energy communities. It was also asked whether, in addition to regulatory support, the development of microgrids is actively encouraged, for example by providing information on the benefits of microgrids or how to develop one. Only three NRAs answered in the affirmative, mainly for reasons related to renewable energy generation and energy security, and because, according to one respondent, CDSs can provide a response to specific situations in the electricity grid. The three NRAs are actively promoting microgrids do so through dissemination activities and research projects with public intervention, as well as through legal and regulatory developments that have recognised CDSs and streamlined the applicable regulatory framework.
This low positive response to active encouragement is striking, especially when contrasted with the six respondents negating encouragement of microgrids. The reasons mentioned are, for instance, that support depends on the business model for mixed customer sites and that local/regional energy communities still need to be connected to the licenced DSO. Another pointed out that external subsidies, and therefore not NRA activities, support microgrid development, while another points out that the NRA is not actively promoting microgrids as the DSO has never requested changes to the regulatory framework to promote microgrids.
The legal changes required and the regulatory concerns of NRAs focus mainly on how the microgrid fits into the existing centralised grid structure. In terms of necessary regulatory changes, only a few respondents provide some insight, mentioning licensing in particular. Others do not see the need for regulatory change, emphasising that the existing framework supports third party access to CDS. Another respondent questions the shift from centralised to decentralised microgrid systems altogether, citing questionable benefits of microgrids and expressing scepticism about the implementation of microgrids. In terms of regulatory concerns, respondents cite issues around power balancing and grid stability within the microgrid and the centralised grid, as well as concerns about maintaining the unbundling regime. Other concerns relate to investment issues and only two respondents are concerned about consumer protection.
The capacity to island itself means that the microgrid can operate independently of the centralised electricity grid, which is a unique factor of microgrids. However, only four NRAs allow the microgrid to island from the centralised grid. 3 Yet, one of these states that islanding is only allowed in exceptional circumstances, such as faults in the higher voltage grid. Another mentions that the DSO sets the rules and determines the costs for islanding, highlighting the need for a special licence for islanded CDS. Of those against islanding, two cite legal restrictions as the reason for prohibiting islanding.
In essence, the survey suggests that NRAs generally do not support microgrids operating independently of the centralised grid. In-depth interviews with the NRA in two different Member States reveal that microgrid development is not actively promoted or discussed at the regulatory level. For the energy transition, both NRAs focus on solutions within the existing centralised grid, stipulating that microgrids are mainly discussed at the academic level. While NRAs are not opposed to microgrids, practical considerations hinder their implementation. For example, it was stressed that safety and reliability of grid operations is paramount, especially given the complexities introduced by bi-directional power flows. One interviewee highlights that in the energy transition, technological solutions are available. However, the real challenge lies in the strategic selection of the right ones that are tailored to the specific needs of the country’s distribution system. This interviewee warned of the risk of introducing technology into the system without careful consideration, as this could lead to non-compliance with relevant EU legislation and result in significant costs.
Discussion
The empirical analysis suggests that there is limited support from NRAs for microgrids that can operate independently of the centralised electricity grid. Instead, their focus appears to be on supporting electricity systems that are part of the existing centralised electricity grid, such as the CDS and energy communities.
This attitude can be explained by the dominance and lock-in effect of operating within the existing centralised grid, as well as the relatively low regulatory costs involved. This means that NRAs operate within well-established frameworks that prioritise system-wide regulation over microgrid-specific development. These institutional dynamics reinforce the fact that, for the energy transition, microgrids are just one potential option for decarbonising the energy mix. While they offer benefits, they also create costs for the operator of the centralised grid and its connected customers. Benefits include improved energy resilience and economic advantages for microgrid users (Hirsch et al., 2018). However, these benefits mainly apply to a specific group interested in developing such a system, especially the customers connected to the microgrid. Other market participants, such as customers who remain connected to the centralised grid, may actually face higher costs if more users move to an islanded system, because the costs of using the centralised grid will be passed on to fewer customers.
Given that the role of NRAs is to ensure the proper functioning of the electricity market within the EU, NRAs cannot focus solely on the benefits for microgrid developers but must also consider the electricity system as a whole. However, adhering to this perspective encourages reliance on the existing centralised system, which faces challenges in transitioning to sustainable energy practices. It also overlooks the potential for microgrids to provide valuable alternatives in certain areas, such as industrial parks or particularly congested regions (Kurundkar & Vaidya, 2023). In those areas an adequate cost-benefit analysis for the adoption of microgrids should be conducted. If the full costs of microgrid development are mapped, some of those costs could actually be mitigated, for example in the form of special tariff schemes for microgrid users. Crucially, however, this requires some form of regulatory support, which is currently lacking. Against this background, the following discussion critically assesses the NRAs narrative. The aim of the discussion is to unpack the NRAs perception of microgrids and to show where a change of perspective is needed for microgrids to be able to support the centralised electricity grid.
The discussion will first address the tendency of NRAs to discuss energy communities and CDS instead of microgrids. It will then focus on the lack of concern for consumer protection and the NRAs’ perspective on system islanding. The discussion will then focus on the NRAs prioritisation of the centralised grid and the use of regulatory sandboxes for microgrids.
Energy Communities and Closed Distribution Systems
The main finding from both the surveys and the interviews is that energy communities and CDSs are often presented as alternatives to microgrids, and some respondents seem to use energy communities or CDS as synonyms for microgrids. This is also the case in the academic literature. For example, in an earlier study on the status of energy communities in the EU, some other scholars also equate energy communities with microgrids (Gruber et al., 2021). This equation misses important legal nuances though. As demonstrated in another publication, microgrids share certain characteristics with both systems, but regulating microgrids as energy communities or CDSs would necessitate regulatory amendments (Behrendt, 2023). Only relying on the provisions governing energy communities and CDS will not lead to the uptake of microgrids, because those three systems differ in their scope, purpose and organisational structure, as will be explained hereafter.
Energy communities are regulated either as Citizen Energy Communities or Renewable Energy Communities (Directive (EU) 2019/944, art 15; Directive (EU) 2018/2001, art 22). In general, both communities include groups of individuals, households or businesses that cooperate manage and share energy resources. These communities are generally connected to the centralised public utility grid. The primary purpose of an energy community is to promote the local production, consumption and sharing of energy among community members for community benefits. Energy communities can take various forms, ranging from informal cooperation between neighbours to more formally organised entities. Participants may invest together in renewable energy projects, share energy through peer-to-peer trading platforms, or negotiate energy contracts together (Gruber et al., 2021). This is fundamentally different from a microgrid, which is a localised and controllable group of interconnected loads and distributed energy resources, such as generators, storage systems and RES. 4 It can operate either autonomously or connected to the centralised grid and therefore has its own control system that manages the generation, distribution and consumption of electricity within the defined boundaries of the microgrid. In essence, the energy community focuses more on the individuals within the system but does not primarily consider the grid component of the community, whereas the microgrid focuses on the electricity system itself. Relying on energy communities alone therefore leaves out this regulatory component.
A CDS, on the other hand, is closer to a microgrid in the sense that the law regulates the electricity system itself. A CDS is a system in which, for specific technical or safety reasons, the production and generation of electricity is done within a geographically confined industrial, commercial or shared service site, which does not supply households with electricity (Directive (EU) 2019/944, art 38). The provision governing CDS can be seen as the legal basis for microgrids that are connected to industrial sites. However, the component of excluding households limits its use for the development of microgrids for those household customers who are interested in microgrids.
By aligning microgrids with energy communities or CDS, NRAs therefore do not endorse a departure from the centralised approach to electricity production and distribution. Aligning microgrids with these two systems only works if energy communities and CDS can operate independently of the centralised grid by allowing voluntary islanding and permitting consumer participation in those systems (Behrendt, 2023). At present, however, there are no legislative amendments foreseen in this regard by the NRAs, which can be confirmed by both their limited concern about the role of the consumer and the assessment of system islanding as demonstrated below.
Consumer Protection
Previous doctrinal research has shown that uncertainties emerge around the role of the electricity consumer when such a consumer combines the roles of consumer, producer and operator of a grid, as could be the case in a microgrid if Member State choose to allow energy communities to manage their own distribution network (Behrendt, 2023). Allowing this is only a right at the discretion of the Member State (Directive (EU) 2019/944, art. 16), and the limited number of NRAs concerned about the role of the electricity consumer can be seen as an indication that NRAs do not intend to give consumers in an energy community this option.
This was discussed in one of the interviews, where NRA representatives indicate that they expect minimal changes in behaviour from household consumers, who are expected to consume electricity primarily within the centralised electricity grid. The interviewees argue that there are no compelling incentives for household consumers to switch to microgrids, as household consumers within distributed energy systems, such as energy communities, benefit from incentives and subsidies that are not available to microgrids, making these alternative options more attractive to household consumers than microgrids. There is a consensus that the costs to households of going off-grid outweigh the benefits.
In contrast, the interviewees do agree that there could be a case for microgrids in the industrial sector. Here they see the potential for more substantial changes in behaviour among large electricity consumers. According to the interviewees, changes in industrial practices can have a more significant impact on the centralised grid, particularly in terms of congestion management and decarbonisation of the electricity mix. Hence, industrial environments are seen as more conducive to the adoption of microgrid solutions in the energy transition.
The lack of concern for the electricity consumer can thus be explained by the absence of motivation to change the role of the consumer to the extent that is technically possible in a microgrid. Of course, just because something is technically possible does not mean that it should be legally permitted. Yet, considering the EUs ambition to put the electricity consumer at the centre of the energy transition (Diestelmeier, 2019), which could be achieved in a microgrid, the question arises why this should not be enabled.
System Islanding
What distinguishes the microgrid from an energy community and a CDS is the capacity to voluntarily ‘island’ itself (Mauger, 2022). Islanding means that the system can operate independently of the centralised electricity grid (Li et al., 2014), and later reconnect to the grid, creating a bi-directional electricity flow. This characteristic enhances the resilience of the microgrid and reduces the dependence on the centralised electricity grid (Fani et al., 2022). However, voluntary grid islanding is legally not allowed at this point in time (Mauger, Roggenkamp, 2021). An explanation for this may be the increased complexity of ensuring the reliability and safety of the centralised electricity system when parts of the system can voluntarily island and cause a disruption to the electricity balance. Nevertheless, fully islanded microgrids do exist, operating based on regulatory sandboxes (which will be discussed below). 5 For that reason, it was enquired in the survey which NRAs support microgrid islanding and which do not. Considering the responses, it confirms previous findings that grid islanding is limited to exceptional circumstances, such as post-blackout situations.
Voluntary islanding of part of the centralised electricity system into a decentralised, self-sufficient network has a significant impact on the stability of the overall electricity system. For a positive impact, such as reducing congestion on the centralised grid and improving energy security for the microgrid (Hirsch et al., 2018), the overall workload for the centralised grid operator, as well as balancing problems, can be expected to increase due to the required communication and coordination with the system operator of the microgrid. Given that the survey responses so far indicate a tendency to support the centralised, public utility grid, and not fully decentralised electricity systems, it is not surprising that this voluntary grid islanding is not allowed.
System islanding can pose challenges for grid stability and safety as sudden disconnection or reconnection of sections of the grid may lead to voltage and frequency deviations (Li et al., 2014). This can potentially even cause blackouts. Hence, uncoordinated islanding may interfere with grid management strategies, making it difficult for system operators to balance supply and demand. 6 Additionally, efforts are made in the EU to create a more interconnected and interoperable electricity grid (Publications Office of the European Union, 2019). Unregulated islanding could hinder these efforts by creating challenges in terms of interoperability between different sections of the grid. However, those risks could be mitigated by an adequate legal framework and network codes specifying the exact conditions on when and where system islanding is allowed. In this regard, Mauger and Roggenkamp (2021) have already analysed the necessary legislative changes and suggest that islanding should not only be limited to post-blackout situations, which would require changes to the technical requirements.
Furthermore, grid stability challenges are not unique to microgrids, but extend to other decentralised electricity systems and their users that create a bidirectional flow of electricity, such as active customers and energy communities providing DR services (Directive (EU) 2019/944, Articles 16 and 17). These services, which are directed towards the centralised grid in response to price signals, offer benefits such as reducing the need for investment in generation, mitigating market power in wholesale markets and preventing over-investment in electricity networks. This is because the aggregator reduces the load on the centralised grid (Schittekatte et al., 2021). However, these services also create bidirectional power flows, which pose similar balancing risks to those posed by bidirectional flows in microgrids, although they are legally permitted. However, despite the regulation of DR through aggregation, it is argued in the literature that ‘traditional suppliers are inherently reluctant to offer DR programmes as these services impact their core business of selling volumes of energy’ (Schittekatte et al., 2021, p. 2). This opens the discussion on how to address the imbalances and lost revenues for suppliers resulting from the actions of independent aggregators. However, there is no consensus within the EU on how to compensate for these impacts (Schittekatte et al., 2021). This raises the question of whether the islanding of microgrids should not be allowed because of the imbalances it can create, or because of the lost revenues if systems are fully islanded. Put more strongly, if the centralised electricity system is able to facilitate these services, it should also be able to facilitate the voluntary islanding of electricity systems, if such islanding is well communicated in advance by the microgrid.
Centralised Grid
The empirical findings reveal that NRAs are primarily focused on maintaining the current operation of the centralised grid and highlight the critical role of the DSO in this context. This is evident when examining the regulatory concerns raised by NRAs and the changes they consider essential for the development of microgrids, which relate to grid balancing and the unbundling regime. This is because the integration of microgrids into the electricity system complicates the ability of the DSO to predict power flows and maintain grid balance. As more electricity is generated independently of the centralised grid, it becomes increasingly difficult to achieve grid stability. In addition, DSOs face investment concerns as they need to ensure that the infrastructure can support bi-directional electricity flows.
In the survey responses, two NRAs in particular highlight the critical role of the DSO in the development and operation of microgrids, raising concerns about path dependency and the need for DSO approval. 7 If DSO approval becomes a bottleneck, microgrid development could be slowed or even stopped. This is because as argued in the literature, distributed generation ‘as well as their different ownership and independent operation might create different operating conditions within the network, namely, reverse power flow, excessive voltage rise, increased fault levels, harmonic distortion and stability problems’ (Basu et al., 2011, p. 4349). Therefore, the deployment of microgrids as a form of distributed generation technology may present operational challenges to the DSO. As a result, DSOs may only support microgrids if the perceived benefits clearly outweigh the development and coordination costs. However, based on survey responses, DSOs currently view these costs as outweighing the benefits, with microgrids primarily appealing to consumers seeking independence from the centralised grid.
Nevertheless, the needs of a country’s distribution system may change over time. In an interview, one NRA explained the close link between DSO functions and the importance of centralised ownership in supporting energy communities. In the current environment, it is not economically attractive for household consumers in this particular Member State to go off-grid, a conclusion supported by a field study carried out by this NRA showing low interest among households in going completely off-grid. However, the high level of congestion in this particular Member State, which affects new customer connections, may change this. The congestion issue may trigger more interest in microgrids, as evidenced by an industrial partner expressing a desire for independence due to faster and more efficient electricity management away from the centralised grid. Therefore, as technology advances and the relative benefits of microgrids increase, demand for these systems may grow, prompting regulatory frameworks to adapt and potentially support the expansion of microgrids. Without this regulatory support, however, such growth is likely to be slower.
Regulatory Sandboxes
At the moment of writing, there is no structural regulatory support for microgrids. In the survey, the respondents that did elaborate on support for microgrid development mentioned the use of regulatory sandboxes and tariff schemes. This confirms what has been stated previously, namely that support is provided on a case-by-case basis outside the boundaries of the regular regulatory framework.
Considering that the development of microgrids is relatively recent, this is not surprising. However, continuing to rely on regulatory exemptions can be expected to lead to higher transaction costs for the development and operation of the system compared to a situation where the regulator provides clear legal rules. This is because of the higher efforts to search for information but also to negotiate the conditions for those regulatory exemptions. Moreover, regulatory exemptions or sandboxes are usually only in place for a limited period of time, which will leave the microgrid developers with legal uncertainty after the end of that period. This issue is now a key issue a microgrid developed in the Netherlands. For the duration of the project, the microgrid is in the hands of the microgrid community, but with the termination of the operation licence based on the regulatory exemption, it is currently unclear whether or not the grid ownership will fall back into the hands of the DSO which is responsible for the area. 8 This shows that regulatory exemptions can help the initial development of a new system such as a microgrid, but it is crucial that lessons are drawn from the experiences under the regulatory exemption so that adequate follow-up measures for structural support are in place when the exemption ends.
Based on the empirical results, structural support does not seem to be underway. In the interviews, both NRAs emphasise their support for energy communities rather than for microgrids. More importantly, both NRAs state that microgrids are currently known at NRA level, but the development of the system is not something that the NRAs are driving or even discussing as an option to structurally integrate in the EU electricity market. Instead, the focus of both NRAs lies in creating solutions within the boundaries of the centralised electricity grid. This suggests that microgrids are mainly addressed at an academic level, but not so much at the regulatory level. Consequently, it seems unlikely that there will be concrete regulatory support for microgrids in the short term.
Nevertheless, regulatory support for microgrids could mature in the longer term, since bottom-up initiatives, such as citizen-led microgrids, may lead to regulatory reform at a later stage. Grassroots initiatives, including microgrids developed by household customers, can potentially drive change (Kooij et al., 2018). Successful microgrids can serve as practical examples of alternative approaches to electricity production and generation, which can provide a compelling case for institutional reform. Community microgrids can also raise public awareness of the energy transition and the role that electricity consumers can play in it. If a grassroots movement gains sufficient momentum and support, regulators may feel compelled to respond to the concerns raised by the community (Gregg et al., 2020). In this process, community microgrids can highlight gaps or shortcomings in existing regulations. By highlighting these gaps, bottom-up initiatives can draw attention to areas where institutional reform is preferred (Gregg et al., 2020). It is therefore important that those bottom-up initiatives have the institutional space to develop (Kooij et al., 2018). Because this institutional space is currently very limited, microgrids are constrained in their ability to professionalise to meet the criteria for funding and market competition, making microgrid development only accessible to a few (Kooij et al., 2018).
Conclusion
To understand the narrative of the NRAs in microgrid development and operation, the central question in this article is: ‘Do National Regulatory Authorities endorse the development and operation of microgrids, and if so, to what extent do they provide regulatory support for the development of this system?’ In response to this question, it is argued that NRAs do not support the development and operation of microgrids and that regulatory support for the system is limited.
The main findings of this exploratory study are that NRAs are generally not supportive of microgrid development, with regulatory support primarily reserved for systems operating within the centralised electricity grid. In particular, NRA support is directed towards CDS and energy communities. These are different from microgrids, mainly because these systems do not operate islanded from the centralised grid, and islanding is not encouraged. In addition, from the perspective of NRAs, the costs of developing microgrids are currently perceived to outweigh the benefits. Key concerns relate to unbundling rules, grid balancing and investment challenges, all of which are of particular concern to the DSO that operates the central utility grid, suggesting a path dependency on DSO approval and NRA support.
Albeit exploratory, these empirical findings, as seen in the Annex, provide enhanced insights into the regulatory outlook for microgrids in the EU. They highlight the preference of NRAs to maintain the traditional top-down approach to the production, generation and distribution of electricity. In this context, it is important to reiterate that the use of microgrids should only be considered as complementary to the public grid. However, given the need to accelerate the energy transition, microgrids have certain advantages that justify their consideration as an option alongside the public grid in cases where the benefits of system development outweigh its costs, which is in part influenced by the applicable legal framework. Given the role that NRAs can play in promoting microgrids, their current narrative could lead to a lock-in situation where the potential benefits of microgrids are not realised in the EU due to a path-dependent focus on the existing infrastructure.
Therefore, a concrete recommendation would be to engage in discussions with regulators and demonstrate how microgrids can complement and enhance existing grid infrastructure. As one of the interviewees pointed out, microgrids are currently mainly debated at an academic level. Therefore, there is a need to bridge the gap between academia and practice. This can be organised, for instance, in the form of public information sessions or roundtable discussions to discuss the benefits and costs of microgrids. Ultimately, such efforts can lead to more informed and comprehensive energy policies that maximise the advantages of deploying distributed power systems alongside the centralised grid.
Supplemental Material
Supplemental material - Microgrids and National Regulatory Authorities in the EU: An Empirical Analysis
Supplemental material for Microgrids and National Regulatory Authorities in the EU: An Empirical Analysis by Jamie Behrendt in Competition and Regulation in Network Industries
Footnotes
Acknowledgements
I would like to thank Edwin Woerdman, Hans Vedder and Lea Diestelmeier for their helpful comments and guidance in writing this article, as well as Lucas Haitsma for his support during the empirical research process.
Ethical Considerations
The Research Ethics Review Committee at the University of Groningen has approved the empirical research process.
Consent to Participate
Respondents gave written consent for review and signature before participating in this research.
Funding
This research did not receive any external funding.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Data Availability Statement
The survey data is provided anonymised in the Annex of the article. The interviews are available on request from the corresponding author. Due to privacy and confidentiality agreements made in line with the University of Groningen, all data provided will be anonymised to protect the identities of participants.
Supplemental Material
Supplemental material is available online.