Using Component Risk Models to Guide Future Pathways for Risk-Based Performance Regulation

The modernization of regulatory frameworks for electricity distribution grids is essential in the ongoing context of the energy transition. Ensuring efficient, secure, and reliable grids is a complex task that requires more proactive regulatory tools leveraging technological advancement. Component risk models lend themselves as useful tools for providing a forward-looking approach to enhance the proactive management of grid asset risks. While some implementations of component risk models exist today, their full potential has yet to be realized, presenting numerous pathways for future adoption. This paper offers a comprehensive analysis of the transition from corrective to proactive regulation and evaluates the role that component risk models can play in this shift. Additionally, it proposes a roadmap outlining incremental steps towards more adaptive, risk-based regulation. The study provides valuable insights for National Regulatory Authorities and Distribution System Operators on the extensive implications and potential benefits of adopting component risk models in the electricity distribution sector.