How decentralized energy networks affect the energy transition

CU Awards - Essay Competition 2021

SECOND PRIZE :  By - Pau Plana Ollé, MSc SELECT Y2 student (PoliTo)


The energy sector is undergoing a period of transformation. This transformation entails big challenges and therefore big opportunities. Nowadays, within the European Commission documents, there is one concept that is becoming more and more popular “Decentralization”. Why and how should energy generation be decentralized.

Let’s start with a brief overview of what is meant by the energy sector. An energy sector is a group of secondary sectors whose outputs are linked to energy vectors, for instance, petroleum, coal, natural gas and electricity. One of the characteristics of today’s energy sector according to the EU is that “… [It] is still built on several parallels, vertical energy value chains, which rigidly link specific energy resources with specific end-use sectors.” (European Commission, 2020). In Figure 1, a visual representation of the current system, and the one envisioned by Europe can be seen.

Figure 1. Representation of the EU energy system - Today vs Envisioned. (European Commission, 2020)
Figure 1. Representation of the EU energy system - Today vs Envisioned. (European Commission, 2020)

Historically the energy sectors, and particularly the electric ones, had been vertically integrated. Thanks to the work of the European Commission this structure has been unbundled. However, as of today, the system remains very linear (top to bottom flows), and its control is heavily centralized for safety reasons. The centralized approach has some advantages such as more predictable behaviours, and easier communication flows between actors. However, with the introduction of new technologies - such as Renewable Energy Sources - and energy vectors - such as Hydrogen-, it seems that the end of centralized systems could be close.

Focusing now on the scope of the decentralization in the electricity sector, first, it is important to understand how the power system is structured. The traditional power systems in Europe work in a “cascade structure”. The power generation units generate power at High voltage and then this power is distributed through the transmission system and the distribution system (low and medium voltages) to the consumers. Figure 2 presents a schematic of the power system. On it can be seen that it is linearly structured, with flows going from generators to loads.

Figure 2. Basic structure of the electric system nowadays. (University of Idaho, 2021)

Furthermore, not only power generation is traditionally connected to high voltage, but also most of the ancillary services needed to have a reliable and secure power system are provided by generators (or loads) connected in the high voltage side of the grid.

The concept of decentralization implies a change in the traditional structure (see Figure 3) since it moves generation units towards the medium and low voltage side of the grid. But not only this, but it also allows loads on the distribution side of the grid to participate in the ancillary services markets that keep the power grid operating.

This idea, that might seem from the future, is already happening. In fact, most of the RESs power plants are connected to medium voltage, and even end-users with some kind of generation technology installed in their houses, such as PV panels, can inject their energy production into the grid.

Figure 3. Schematic representation of a decentralized power system. (Siemens, 2020)

So, why decentralization is a disruptive transformation of the power system? It all lies in the stability, reliability and safety of the power grid. Until now, power generation plants were built with one main purpose in mind, to make revenue thanks to electricity trading. In a decentralized approach, this will still be part of the equation, however new generation units with different interests will be added into the mix.

So far, a generic description of the energy sector, the power system operation, and the decentralization concept together with the challenges it entails have been presented. Now let’s focus on the main benefits and beneficiaries of distributed energy systems. At the core of decentralization, concepts are technologies such as Solar Photovoltaics, Wind power, Energy Storage Systems, Electric Vehicles, Smart-meters, etc. All of these technologies have a shared characteristic: They are scalable technologically and economically speaking.

From the end-user perspective, this means that it is no anymore a dream to have your own power plant and/or storage system at home, leading to monetary savings. What’s more, the introduction of distributed technologies gives multiple opportunities to end-users to manage their energy consumption and generation. The following list shows the basic strategies that prosumers can follow to operate their assets:
• Load optimization: Strategies based on changing your load profile with the objective of reducing the cost of the electricity bill. For instance, peak shaving.
• Self-consumption: In the case that the system can generate enough energy to power the whole house, why optimize when you can directly not consume for the grid?
• Injection to the grid: Simply selling the energy generated into the grid. This option is interesting where feed-in-tariffs are available, otherwise, usually the cost of buying for the grid is higher than the selling price.
• Ancillary services provision: In this case, prosumers participates directly in ancillary services markets asking for money in order to modify their generation/load profile. These services are fundamental for the operation of the grid.

All of the possibilities listed above create an additional value for the end-user, some of them generate savings in the electricity bill while providing the consumer with some energy autonomy, this is the case of Load optimization and Self-consumption. The others instead, so Injection to the gird and Ancillary services provision, create new revenue for the end-user since it is providing a service to the power grid. Figure 4, adds an additional layer of complexity when showing how the different behaviours involve different actors, mainly interacting or not with the grid.

Figure 4. Potential new behaviours of prosumers. (SmartEn, 2020)

Furthermore, an increase in the share of renewable energy in household applications, means at the end of the day an increase of the share of renewable energy in the power grid, fostering the consecution of the decarbonisation goal of the power system.

At this point, and by looking at market trends, it is quite clear that the future of the grid will have a significant mix of decentralized resources. How they will interact with the power system is something that needs to be properly defined by governments and higher institutions such as the European Commission.

Fortunately for the prosumers, the EC has already started to shape the future of electricity markets in the Clean Energy Package e-Directive (EC 2019/944) and e-Regulations (EC 2019/943) (European Commission, 2019). On them, the active participation of distributed technologies in the power grid is highlighted as one of the key enablers for the energy transition, and therefore the Clean Energy Package pushes to adapt the national regulations towards the integration of these new agents -prosumers, energy storage, and aggregators among others.

To summarize, the decentralization of the energy sector is something that is already happening. It entails big challenges for the power systems, but at the same time, it is creating a lot of new opportunities for all the agents involved, from grid operators to consumers. The increase of the share of distributed energy resources, if properly managed, will suppose an improvement of the energy system allowing it to be more secure, reliable, environmentally friendly, and equitable for the people.


[1] European Commission, 2019. Clean Energy Package for all Europeans. [Online] Available at: [Accessed 15 October 2021].
[2] European Commission, 2020. EU Energy System Integration Strategy Factsheet. [Online] Available at: [Accessed 20 October 2021].
[3] Siemens, 2020. Changes in energy systems require a new smart grid infrastructure. [Online] Available at: [Accessed 20 October 2021].
[4] SmartEn, 2020. Smart Energy Prosumers. [Online] Available at: [Accessed 15 October 2021].
[5] University of Idaho, 2021. Principles of Sustainability: Chapter 6 - Energy Sustainability. [Online] Available at: [Accessed 16 October 2021].

Other news