With the ongoing increase of distributed resources created by the development of distributed generation and the electrification of end-use consumption, the distribution networks operation is becoming increasingly challenging. Decarbonization goals have driven the development of more inclusive markets to ensure distributed resources to participate to markets at a level-playing field with respect to traditional resources.

Transmission system operators (TSO) have defined pilot projects to investigate the use of distributed resources in dispatching and balancing services; distribution system operators (DSO) have launched pilots to procure local ancillary services that enable them to move beyond the classic fit&forget approach. This leads to the definition of two new roles of the DSO: the first is the neutral market facilitator role, aimed at integrating distributed resources into services to the TSO; and the second is becoming buyer of local ancillary services in order to avoid non cost effective construction/refurbishment of grid infrastructure.

The role of neutral facilitator is described in this report considering the different evolutionary stages in the Italian context, regulatory developments are analysed, and critical issues of the Traffic Light mechanism introduced by Terna are highlighted, also detailing the benefits and possible improvements. The use of long-term markets and short-term markets for the procurement of ancillary services is investigated, bringing to light the interactions between possible mechanisms and other procurement methodologies.

Finally, the coordination between TSO markets and DSO markets is analysed concerning the management of resources enabled for the provision of both global services and local services; a fundamental aspect for the optimal management of the electricity system as a whole, which, up to now, remains an unexplored field in Italian regulation.

The Report is available on the Italian site