The Italian smart grid pilot projects: Selection and assessment of the test beds for the regulation of smart electricity distribution

Nowadays grid connected renewable energy sources have reached a level that was not even conceivable just few years ago with serious concerns on power systems' stability and security. The Italian TSO and the Italian regulatory authority for electricity, gas and water system (AEEGSI) pioneered this field, and imposed the participation of distributed generation (DG) into voltage and frequency regulation for reducing the risk of loosing significant power generation during frequency transients. Smart grids are the next step towards DG integration. In 2010, the AEEGSI demonstration phase on smart grids was designed according to an input based incentive scheme and a competitive selection process in order to award a limited number of projects. According to AEEGSI resolution ARG/elt 39/10, the selected smart grid demonstration projects did benefit from an extra remuneration of capital cost (a 2% extra WACC in addition to the ordinary return) for a period of 12 years. All projects are now in the rollout phase and the first data are going to be collected from the field in a real world environment. This paper gives a brief description of the projects and adds information about the selection criteria that allowed identifying what are the benefits that the system stakeholders should expect by the innovation of distribution operation and planning. Furthermore, the procedure used to define a regulatory environment suited for smart grids is described. The main idea is to define the fundamentals of a fair and transparent regulation mechanism based on different levels of smartness and on the identification of some suitable indicators that allow the AEEGSI to establish the expected performances of novel smart grids and, consequently, to define penalties and/or rewards for DSOs. With the aid of some examples the role of indicators is showed. Finally, it must be remarked again that the SG projects are in progress and field data are not yet disposable. This is the reason why the numerical simulations reported in this paper have been developed on a reference network that can represent the behaviour of some of the real SG networks relevant to the projects; such simulations have been performed in order to better quantify the benefits that the stakeholders of the system should expect. When the projects will enter the operation phase the field data collected after the new operational approach will be collected and can be used to verify the simulations hypothesis assumed.