Next-generation Canadian electricity networks: navigating the energy transition with distribution system operators

Integrated and resilient, DSO collaboration may provide the balance the Canadian electricity grid needs to modernize for a brighter future.

Understanding DSOs and their role in an evolving Canadian utilities landscape

A DSO is a real-time system operator for an active distribution network that manages and coordinates distributed generation at the local level, acting as a neutral facilitator to open markets and enabling easy access to the grid.

Most Canadian utilities operate under conventional market structures. DSO models represent a fundamental shift in managing and optimizing energy distribution, offering a range of critical value elements, like the ability to readily integrate solutions or the flexibility to optimize allocation and swiftly respond to variations in energy supply, that differentiate them from more traditional approaches.

As grid pressure builds, Canada’s distribution network operators (DNOs) alone are often overtaxed. Instead, working together with DSOs may help DNOs more effectively deliver on decarbonization targets while meeting the evolving needs of customers. 

This confluence of complexities requires significant change and a clear roadmap for the future. Canada’s traditional utilities are not adequately prepared for growing distributed energy resource (DER) integration. They face challenges in seamlessly managing the rising bidirectional flow of energy between DERs — like EVs, wind turbines and solar farms — and the grid. And, given their historic operations, might be lacking the agility needed to adapt to the change that will be required. A specific set of competencies will be required: objective-aligned stakeholder strategies, massive data analysis and coordination, customer engagement and socialization, investment planning and a deep understanding of network needs.

The following DSO illustration demonstrates what a potential ecosystem and connection points between DERs, grid-edge technologies and stakeholders could look like for a Canadian utility:

An EY Canada report, Next-generation Canadian electricity networks: navigating the energy transition with distribution system operators, discusses the promise of DSO collaboration and some considerations the industry should be thinking about in the move towards decarbonization, including:

• How electric utilities can adapt to integrate DERs and grid-edge technologies for a more customer-centric energy system
• The grid infrastructure and technology investments that will be needed to ensure grid resilience and reliability in a decentralized model
• What will be needed to enhance energy security with the advent of new technologies and the increase in extreme weather events interrupting operations
• What regulatory and policy changes electric utilities should be advocating to lay the groundwork for more distributed energy generation and customer engagement.

Despite the challenges, the benefits are clear — improved operations, lower customer costs, service safety and reliability, and one more step forward in accelerating the energy transition. It will be critical for electric utilities to adapt their models and existing assets to move power, address the risks and invest in change if they are to empower customers to engage in energy management and remain relevant in the electrical evolution.

DSO collaboration is an important opportunity for electric utilities looking to evolve the energy sector in Canada and globally.

More in EY’s latest report - Futureproofing Canada’s electricity networks: navigating the energy transition with distribution system operators