The Italian Regulatory Framework for Developing Smart Distribution Grids

The integration of Dispersed Generation (DG) is by far the most important and challenging issue that modern power systems are facing nowadays, and is the only way of exploiting Renewable Energy Sources (RES) for electric production. This revolution is running particularly fast in Europe, where significant incentive schemes have been promoted by many Member States in order to match the targets decided by the European institutions. As a consequence of the important share of RES already connected (especially to low voltage and medium voltage networks), new technical challenges have to be faced both at a distribution network level and at a transmission system level. Some of these challenges are covered by Smart grids that represent a new framework for improved management of distribution and transmission networks with attention to interoperability, security, resilience problems, and quality of service (QoS). It is recognized that an intelligent use of Information and Communication Technology (ICT), as enabling technology, is the only approach able to solve new problems arising on energy networks due to larger DG penetration, without hindering system security and QoS. The paper focuses on the Italian case and in particular on the Italian regulatory framework for developing Smart Grids, and describes the technical foundations of the regulatory innovations introduced by the Italian energy regulatory authority (Autorita per l'energia elettrica e il gas - AEEG). After a selection process based on cost/benefit assessment, some demonstration projects for Smart Grid proposed by Distribution System Operators have been awarded with special capital cost remuneration (extra WACC of 2% for 12 years, on top of the ordinary WACC equal to 7% for distribution investments). The smart grid demonstration projects founded by AEEG introduce and test a new advanced management of DG in order to avoid the problems coming from reverse power flowing and maintain the necessary level of security, availability and quality of service.