DSO and smart grids policy

DSOs, since they operate networks for which it does not make (economic, practical and environmental) sense to have numerous competing infrastructures, are classified as “natural monopolies” and are, therefore, regulated by national regulatory authorities (NRAs). The rules set by these NRAs vary from EU member state to member state, with some regulatory set-ups supporting the development and deployment of innovative long-term cost-effective solutions such as smart grids more than others. At European level, the Council of European Energy Regulators (CEER) has been looking more closely at the regulatory challenges around smart grid development since 2010.

No EU law covers the entire scope of smart grids, however, several pieces of legislation implemented over the last decade are having a direct impact on the workings of DSOs:

TEN-E Guidelines

The guidelines for a trans-European energy infrastructure Regulation (2013/347/EC) list and rank, according to the objectives and priorities laid down, projects eligible for EU assistance, including smart grids. The text introduces the concept of ‘projects of common interest’ (PCIs) for Europe, which are directly linked to the spending of funds available through the EU’s Connecting Europe Facility (CEF).

Third Energy (liberalisation) Package

The Electricity Directive (2009/EC/72), one of the five pieces of legislation adopted under the package, lays out the common rules for the development of the internal market for electricity (repealing Directive 2003/54/EC). The main consequences of this legislation for DSOs were, firstly, the requirement that vertically integrated energy companies needed to “legally and functionally” unbundle (separate) the network side of the business from the generation side. This is to ensure non-discriminatory access of energy generation companies to the networks. The second major consequence for DSOs is that member states are required to carry out a cost-benefit analysis (CBA) on the roll-out of smart metering, which if positive, means that at least 80% of customers in that member state will have smart meters installed by the year 2020.

20-20-20 Targets

The climate and energy package to 2020 was made up of four initiatives, and together with the Energy Efficiency Directive and Energy Efficiency Plan, form the legal basis for the achievement of the so called 20-20-20 targets, set by member state leaders in 2007. The specific legislative initiatives listed below have forced DSOs to re-think how to continue to perform their core functions while trying to keep network costs down.

Renewable Energy Sources Directive (2009/28/EC) – The RES Directive sets the binding target of 20% share of energy from renewable energy sources by the year 2020 (repealing Directives 2001/77/EC and 2003/30/EC).

Energy Efficiency Directive (2012/27/EC) – The EED sets (non-binding) target for a 20% reduction in overall energy consumption by the year 2020, compared to 1990 levels.

Reform of EU ETS / non-ETS emissions targets – These initiatives revise emissions reductions rules and set a binding 20% reduction target for EU greenhouse gas emissions from 1990 levels.


For direct links to other EU energy legislation, please find here an overview of all secondary EU energy legislation (directives and regulations) that falls under the legislative competence of the European Commission’s DG ENER and that is currently in force.


Key non-legislative texts

Other particularly relevant European institutional documents supporting smart grid development include:






There are also numerous European steering initiatives (EU initiated/funded programmes and initiatives that aim to steer research, policy and funding for smart grid development in Europe).


More information: