Smart Grids and power system efficiency: regulation instruments and impacts of demand side management.

Summary The physical architecture of power grids and the organizational structures of the power industries that have emerged as a result of reforms have been designed primarily around the characteristics of transmission infrastructure and generation assets. However, the new energy transition challenges, coupled with advances in communication and automation equipment, argue for greater involvement of decentralized generation activities and end consumers. We note that electrical systems are on the verge of major evolutions that share a double characteristic. The first is that these changes will require considerable capital investments to adapt and modernize the distribution networks. The second is that the activation of the downstream part of the electricity chain will release economic efficiency gains that are currently untapped, but will also bring new constraints. Based on this observation, the objective of this thesis is twofold. First, we propose a theoretical analysis of the regulatory instruments that frame and guide the expenditures of network operators. Based on the literature, we seek to characterize the regulatory tools that are best suited to investment in smart technologies. Since it is necessary to confront the theoretical analysis with the facts, we undertake to identify the key economic efficiency gains expected from the generalization of smart grids. We illustrate each of these gains with an empirical study that allows us to compare the results of our theoretical analysis to existing regulation schemes and to formulate a number of recommendations.The second objective of the thesis focuses on the impacts of the diffusion of demand-side management programs. The reasoning adopted is based on two observations. Important benefits are expected from substantial reductions in peak demand, reductions that translate into reduced profit opportunities for producers. The aim is to estimate the gains and losses that can be expected from demand management. To do so, we develop and use an optimization model in which we integrate several interconnected countries with differentiated generation fleets.The thesis shows that the currently dominant regulatory frameworks are limited in their incentive scope to promote efficient investment in the technology, which is likely to delay its introduction. Quantifying the impacts of demand-side management shows that significant efficiencies can be achieved through the generalization of these measures. However, they pose new problems in the remuneration of existing and future capacity adequacy, and highlight the potential antagonism between loss of revenue for the most reactive peak units and the development of low-carbon energies.Clearly, the questions raised by the development of smart grids require an informed political debate, as the electricity industry is essential to our societies. Among the considerable number of issues to be addressed, questions about the financing of investment projects and the inclusion of new sources of flexibility brought about by the adoption of the technology in the liberalized electricity markets will figure prominently.